Welcome back! The Spring 2022 edition of the California Department of Real Estate (DRE) Real Estate Bulletin focuses on homebuyer “love letters,” the 2023 continuing education requirements, advertising guidelines and dual agency, among other topics.

Read on for firsttuesday’s digest of this quarter’s most pertinent DRE updates for real estate professionals.

Commissioner’s Update

DRE Commissioner Doug McCauley begins this quarter’s bulletin with a polite, yet firm cautioning against the use of love letters, meaning personalized letters written by a buyer to a seller explaining their interest in the specific property. While these letters may be intended to merely distinguish oneself amongst other interested buyers, they simultaneously run the risk of unconscious bias or discrimination, in conflict with federal fair housing laws.

Along these lines, the DRE reiterated guidance issued by the National Association of Realtors (NAR) and California Association of Realtors (CAR) for agents about the legal and ethical risks and ramifications of love letters and how best to protect themselves and their client’s from violating fair housing laws in this regard.

More recently, the issue of love letters has become more controversial. Oregon state elected to completely ban love letters in real estate transactions in a bill which was supposed to be effective earlier this year.

However, a property rights-friendly nonprofit was granted an injunction in a related lawsuit, preventing the enforcement of Oregon’s love letter law pending the results of the lawsuit. The DRE is following the case closely for its relevance to California Real Estate law.

2023 Continuing Education requirements

Governor Gavin Newsom signed into law Senate Bill (SB) 263 in September 2021, adding new requirements for continuing education (CE) to be effective January 1, 2023. SB 263 does not alter the standard 45 hours needed for license renewal.

In addition to the standard, respective CE course requirements for brokers, officers, and sales agents, licensees will now need to complete:

  • a 2-hour course in implicit bias training; and
  • a 3-hour course on fair housing, with an interactive component, in which the licensee roleplays as both consumer and real estate professional.

Related article:

New law requires implicit bias training for real estate professionals

For renewals or late renewals that fall after the effective date, a 9-hour CE survey course covering the mandatory subjects (or individual courses covering the same mandatory subjects) is also required in addition to the standard 18-hour consumer protection requirement.

The DRE has already begun working with course providers to secure sufficient time for licensees to complete these requirements prior to January 1, 2023. Updates regarding this topic should be posted to the DRE website around July 2022.

Editor’s note — firsttuesday is hard at work producing its own Implicit Bias training. Our course materials take to heart SB 263’s requirements by gamifying the learning experience with video, animation, interactive storytelling, and programming — all created by firsttuesday’s legal research and IT teams.

Broker Supervision regarding advertisements

The DRE also touts the importance of real estate advertising requirements in this month’s Real Estate Bulletin. While these rules apply to all licensees, the DRE specifically wants to remind brokers that they are subject to disciplinary action for their sales agent’s or broker associate’s failure to comply with these requirements. This disciplinary action would not only be for the advertising violation, but also the failure by the broker to reasonably supervise.

As part of reasonable broker supervision, Commissioner’s Regulation 2725(e) mandates the establishment of policies, rules, procedures, and systems to review, oversee, inspect, and manage advertising of any service for which a license is required. The bulletin provides a list of questions to help a broker determine if they’ve reasonably supervised the advertising of their licensees and points the DRE’s Real Estate Advertising Guidelines.

Related video:

Dual Agency concerns

The DRE aggressively investigates complaints involving dual agency. With high prices and limited inventory, the use of a dual agent in real estate transactions has increased. While the use of a dual agent may streamline the transaction process and incentivize a broker or agent with a bigger fee, dual agency carries risks for both the buyer and agent. As such, it needs to be exercised carefully and with thorough communication

California has taken legislative efforts to mitigate the inherent conflict of fiduciary duty present in the use of dual agency, but the potential for consumer harm is still present.

Related article:
Dual agency explained

Subdivision Public Reports

The DRE requires public reports for any new subdivision consisting of five or more lots, units or parcels in California before it’s sale or lease. Relatedly, it is important for licensees to be familiar what is required in these mandated reports. Public reports are intended to provide essential information for buyers.

Exempt from the public report requirement are:

  • subdivisions that consist of fewer than five lots, units or parcels;
  • standard subdivisions located entirely within the limits of a city that will be sold with completed residential structures (please note that even if exempt from the public report requirement, the subdivider must still escrow purchase and option monies or have a purchase money bond on file with DRE in order to retain such funds);
  • subdivisions expressly zoned for commercial or industrial purposes (a mixed-use project where the number of commercial and residential interests is five or more falls within DRE’s jurisdiction);
  • subdivided land offered for sale or lease by a state, local, or public agency; or
  • bulk sales (i.e., builder-to-builder transactions of five or more lots, units, or parcels).

The responsibility of adhering to the requirement and issuance of a public report falls to licensees on either side of the transaction, and failure to do so is subject to disciplinary action. A copy of the report is to be given to any member of the public who asks about it and must be posted publicly and conspicuously in any office where business for the subdivision is being conducted.

Additionally, every prospective buyer is to receive a copy of the report as well as sign a receipt confirming they not only obtained the report but had ample opportunity to read it prior to entering into a purchase contract. The subdivider must keep these receipts for 3 years and use the homebuyer purchase contract approved by the DRE in connection with the subdivision public report requirement.

Licensed contractors

The DRE advises agents to always recommend contractors licensed under the Contractors State License Board (CSLB) for jobs that are $500 or more, as is required under California’s contracting laws. The CSLB issues 45 classifications of licenses that encompass all types of home improvement and construction (i.e., painting or plumbing).

Agents should always ensure their contractor’s license is active and in good standing before recommending them to a client and can do so online using CSLB’s License Check. Similarly, agents can search for licensed contractors to recommend or hire through CSLB’s Find My Licensed Contractor page.

A new classification, B-2 Residential Remodeling, may be of particular interest to agents as B-2 licensees can work on bathroom and kitchen remodels, cabinet replacement, flooring, plumbing and electrical fixtures, and other home improvement projects, so long as the work doesn’t involve structural changes or loadbearing walls.

Other contracting tips by the DRE include:

  • getting at least three written bids to compare cost;
  • making sure the contractor provides a detailed written contract signed by both the homeowner and the contractor (be wary of signing electronic devices; if you do sign one, ask for a paper copy immediately);
  • confirming that the contractor pulls all required building permits;
  • never paying more than 10% down or $1,000, whichever is less (except in cases where the licensee has a blanket performance and payment bond on file with CSLB);
  • avoiding cash payments (pay with a check instead and save copies in a project file);
  • not letting payments get ahead of the work;
  • making sure the building department inspects the completed work; and
  • avoiding making the final payment until you’re satisfied with the job and the building department has completed its inspection.

That’s a wrap on the Spring 2022 Real Estate Bulletin! As always, download the full DRE Bulletin on the DRE website.

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