Assembly Bill (AB) 1289 recently made several changes to real estate disclosure requirements. These changes are effective January 1, 2019.
One decidedly positive change the new law has made is to move legislative language away from the more antiquated terms, “selling agent” and “listing agent” in favor of the clearer and more universally recognized “buyer’s agent” and “seller’s agent.” This will unify the language of the law with common language spoken by principals.
Further, the definition of buyer’s agent has been simplified to simply cover any agent who represents a buyer in a real property transaction. Previously, the definition went into more detail about the agent’s relationships and duties. [Calif. Civil Code §2079.13(n)]
This more easily comprehensible language is also being incorporated in the Agency Law Disclosure. Further, the disclosure will now be more detailed, providing additional instructive information to buyers and sellers. It will also be mandatory for transactions concerning raw land (something which was not previously targeted). [See RPI Form 305]
Editor’s note — Real Estate Publications (RPI), Inc. publishes real estate forms free and legal to use in California. RPI forms will be updated to reflect these changes prior to the effective date. See first tuesday’s RPI Forms page for more information.
Disclosure regarding agency relationship
AB 1289 adds some language to the statutorily required Disclosure Regarding Real Estate Agency Relationship, also known as the Agency Law Disclosure. This form is required for all real property transactions involving a real estate licensee acting as an agent for a buyer or seller. [See RPI Form 305]
A new section entitled Seller and Buyer Responsibilities is added, which now adds:
Either the purchase agreement or a separate document will contain a confirmation of which agent is representing you and whether that agent is representing you exclusively in the transaction or acting as a dual agent. Please pay attention to that confirmation to make sure it accurately reflects your understanding of your agent’s role.
The above duties of the agent in a real estate transaction do not relieve a Seller or Buyer from the responsibility to protect his or her own interests. You should carefully read all agreements to assure that they adequately express your understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional.
If you are a Buyer, you have the duty to exercise reasonable care to protect yourself, including as to those facts about the property which are known to you or within your diligent attention and observation.
Both Sellers and Buyers should strongly consider obtaining tax advice from a competent professional because the federal and state tax consequences of a transaction can be complex and subject to change.
Throughout your real property transaction you may receive more than one disclosure form, depending upon the number of agents assisting in the transaction. The law requires each agent with whom you have more than a casual relationship to present you with this disclosure form. You should read its contents each time it is presented to you, considering the relationship between you and the real estate agent in your specific transaction. [CC §2079.16]
The seller’s agent and buyer’s agent need to obtain a signed acknowledgment that the buyer and seller each received the disclosure. [CC §2079.14]
The seller’s agent needs to provide the Agency Law Disclosure to the seller before entering into a listing agreement. [CC §2079.14(a)]
Previously, the buyer’s agent was required to give this disclosure to the seller as well as the buyer. Under the changes, the buyer’s agent is only required to give the Agency Law Disclosure to the buyer. [CC §2079.14(b)]
The sale of raw land has also been added to the types of transactions which require the Agency Law Disclosure. [CC §§2079.13(j); 2079.14]
Changes to the NHD Statement
The statutorily required Natural Hazard Disclosure (NHD) Statement has been amended to clarify language. [CC §1103.2; See RPI Form 314]
The NHD is used by a seller’s agent to disclose natural hazards affecting a property to prospective buyers for their review on commencement of negotiations.
Similar to the adoption of more common language in the Agency Law Disclosure, the terms “the transferor and the transferor’s agent” has been replaced with the more conversant “the seller and the seller’s agent.” Likewise, the term “transferees” has been replaced with “buyers.”
These changes will clear up any confusion caused by the archaic legalese, helping clients focus on the actual information the NHD provides rather than stumbling over uncommon terms.
Requirements for late disclosures
When any disclosure or significant change to any disclosure is made after the purchase agreement is executed, the homebuyer will have the following periods of time to terminate their offer:
- within three days when the dilatory disclosure was provided in person; or
- within five days when the dilatory disclosure was provided by mail or when the buyer and seller have agreed to conduct the transaction by electronic means. [CC 1103.3(c)]
Previously, the timeline for electronic delivery was absent. Since using online programs to conduct transactions is becoming more common, this clarification will become increasingly more pertinent.
Dual agency prohibitions
Previously, dual agents representing both buyer and seller were specifically prohibited from disclosing to the homebuyer that the seller is willing to accept a lower price than offered or listed. Vice-versa, the dual agent was prohibited from revealing to the seller that the buyer is willing to pay a higher price without the express written consent of the seller or buyer.
This prohibition is now eliminated. Instead, a blanket provision is put in place. Dual agents are now prohibited from disclosing any confidential information to the buyer or seller without their express permission. This includes facts about their clients’ financial positions, motivations or bargaining positions. [CC §2079.16(b)]
While dual agents wear multiple hats and juggle twice as many responsibilities — for the reward of a higher fee — this blanket prohibition on sharing confidential information expands protection for both clients, encouraging a level playing field for buyer and seller both.
Confirming agency
An agent or their broker needs to disclose as soon as practicable which party they represent in the transaction, and any dual agency that may exist. This disclosure may be confirmed in the contract to purchase or sell property, or in a separate form provided at the same time as the purchase contract. [CC §2079.17(a); (b)]
This format of the ubiquitous confirmation provision now needs to be structured as follows:
(Name of Seller’s Agent, Brokerage firm and license number)is the broker of (check one):
[ ] the seller; or
[ ] both the buyer and seller. (dual agent)
(Name of Seller’s Agent and license number) is (check one):
[ ] is the Seller’s Agent. (salesperson or broker associate)
[ ] is both the Buyer’s and Seller’s Agent. (dual agent)
Editor’s note – Astute readers will note the repetition of the word “is.” This is not replicated in the RPI handling of the confirmation provision.
(Name of Buyer’s Agent, Brokerage firm and license number) is the broker of (check one):
[ ] the buyer; or
[ ] both the buyer and seller. (dual agent)
(Name of Buyer’s Agent and license number) is (check one):
[ ] the Buyer’s Agent. (salesperson or broker associate)
[ ] both the Buyer’s and Seller’s Agent. (dual agent) [CC §2079.17(c)]
This change makes more explicit who the broker – and separately the agent – represent in the transaction.
Notification of sex offender registry
The notice of sex offender registry which needs to accompany each lease, rental or purchase agreement for property consisting of one-to-four residential units now also needs to be delivered for the lease of a unit in a multi-family property with more than four dwelling units. [CC §2079.10a(a)]
