What this new series adds to the discussion: 2025 legislation requires a buyer agent to enter into a written representation agreement with their buyer seeking to acquire a fee interest in real estate. But is a commercial tenant’s acquisition of a leasehold interest also targeted?

This three-part series is engineered to fully address every facet of this question commonly asked by our readers and students.

Further, this new tenant representation material has been added to our Certified Buyer Agent (CBA)™ Training available to current and future firsttuesday students without charge.

Any type of real estate, any type of interest

As all real estate practitioners are well aware, new legislation effective at the beginning of 2025 requires a buyer agent to:

  • enter into a written representation agreement and deliver an agency disclosure addendum; and
  • do so when the agent, in expectation of a fee, begins to assist their buyer-client to locate and acquire an interest in property. [Calif. Civil Code §1670.50(a); See RPI Form 103.1 and 103.2]

The written buyer representation agreement (BRA) is entered into by the buyer agent:

  • as soon as practicable (ASAP) after determining the agent is to represent the prospective buyer-client; and
  • always before the buyer signs an offer to acquire an interest in any type of property the buyer agent submits in expectation of a fee. [CC §1670.50(a)]

Though relatively simple on first blush, let’s take a moment to peer deeper into the ramifications of the paradigm for negotiating the buyer broker fee and documenting the representation of a buyer-client.

First point of clarification: These new rules are triggered by a broker’s representation of a buyer for any type of real estate.

Though the vast majority of commentary within the industry pertains only to single family residential (SFR) property, the rules are equally applicable to the representation of a buyer in most other situations too, such as the purchase of:

  • multi-unit residential property with greater than four dwelling units;
  • commercial property;
  • raw land;
  • a ground lease coupled with improvements; and
  • mobilehomes classified as real estate. [CC §2079.13]

Second point of clarification: These new rules involve the representation of a client who seeks to acquire an interest in real estate. Clearly, this covers a fee interest in a property, one type of estate conveyed in property transactions negotiated by agents in exchange for a fee.

But is the acquisition of a leasehold interest also targeted?

Yes! Any bet against this conclusion is a historical loser.

Reading the legal tea leaves

Buyers and tenants both face the same issues of opaque dealings in broker representation and price-fixing when it comes to their agents’ fees. The legislative spirit — intent — behind proper representation and agency duties owed clients applies fully to all broker representations, and thus both the representation of buyer and the representation of tenants.

As a matter of public policy and antitrust laws, tenants need to receive the same certainty of a written representation agreement with negotiated fees as buyers under representation rules. The real estate goals of both buyer and tenant clients are synonymous — the right to use real estate via possession.

Only the extent of the possessory period — and capital contribution — is different. A net lease agreement presents the clearest example of the similarity of the ownerships.

Consider this: Tenants purchase the right to the use of a property when they are granted a leasehold estate (tenancy). Thus, tenants buy a leasehold interest in the property they lease, paid for on an installment plan, called rent, as evidenced by the terms of debt provisions in a lease agreement which conveys the leasehold.

Fundamentally, the issue of acquiring ownership of a possessory interest in real estate — whether fee or leasehold — is this: both require a signed writing by the person conveying the possessory rights granted. Here, the tenant becomes the owner of a leasehold with the exclusive right to possess and use the entire property — without interference by the owner of the fee until the leasehold expires.

The ownership and title to the fee interest in the property, a passive residual right representing their capital invested in the leased property, remains with the landlord. But the landlord has no right to use the property during the period possession is conveyed. Thus, the right to possess the property under the leasehold, with priority over all later landlord activities, has been purchased by the tenant by conveyance of the leasehold estate.

Enter the tenant representation agreement forms.

Like their buyer brethren with broker representation to acquire — own — an interminable right to possession, two variations of an exclusive tenant representation agreement are used by a broker representing a tenant-client. Both versions employ the broker as the consumer’s sole agent, to locate and negotiate the terms and conditions to acquire a leasehold or fee interest in a property.

One version of the form is used when representing individuals to acquire either a fee or leasehold interest. Here, the length of the representation period is capped at three months. [See RPI Form 105.1]

The other version of the form is used when representing entities to acquire a fee or leasehold interest. In this instance, the length of the representation period is fully negotiable and is not capped at three months. [See RPI Form 105.2]

Critically, payment of the broker fee is protected by an enforceable writing no matter which fork on the ownership path the user-client decides to take to attain the right to possession — the fee or a leasehold ownership.

Editor’s note — Likewise, the Agency Law Disclosure is handed to the client prior to their commitment to representation, as a signed attachment to the tenant representation agreement. Both are needed, and signed, to enforce collection of an earned fee from a tenant. Simply attaching the Agency Law Disclosure to the lease agreement or letter of intent (LOI) is too late in the employment process to be functional. [CC §§2079.13(j), 2079.14]

This material has also been added to our Certified Buyer Agent (CBA)™ Training, designed to support a long-delayed enhancement in consumer protection. The CBA Training is available to current and future firsttuesday students without charge, or available à la carte outside of an enrollment for $35.

The CBA™ Training is a multi-media powerhouse, consisting of:

  • digital text written by our on-staff team of California real estate licensees;
  • scripted and fully-acted video which makes the concepts easily understandable and engaging;
  • 100% compliant buyer representation forms to use with buyer-clients, one for individuals and one for entities;
  • audio definitions to help cement the concepts in your memory;
  • interactive Knowledge Check questions to help to test your level of comprehension (and have some fun);
  • marketing materials for client assistance to help you respond fully to buyer-client questions with clarity and confidence; and
  • a full-color companion e-book which pulls all our related writings together in one place. [See RPI e-book Certified Buyer Agent™ Training: Directly Negotiated Representation]