Effective January 1, 2015, commercial real estate brokers and salespersons in California will be required to comply with stringent agency disclosure requirements, formerly applicable only to residential real estate brokers, which mandate expressly setting forth their agency role in a transaction (i.e., as the agent for a buyer, seller, tenant, or landlord, or as a dual agent on both sides).
The law (SB 1171) now requires the following specific disclosures and timeframes:
- The listing agent, if any, must provide the disclosure form to the seller/landlord prior to entering into the listing agreement.
- The selling agent must provide the disclosure form to the seller/landlord as soon as practicable prior to presenting the seller/landlord with an offer to purchase (or lease).
- The selling agent must provide the disclosure form to the buyer/tenant as soon as practicable prior to execution of the buyer’s/tenant’s offer to purchase, except that if the offer to purchase is not prepared by the selling agent, the selling agent must present the disclosure form to the buyer/tenant not later than the next business day after the selling agent receives the offer to purchase from the buyer/tenant.
While the only actual modification made in the law was to extend the definition of the term “real property” to include “commercial property,” this change has potentially far-reaching impacts on the actual business practices of brokerage firms and the fiduciary duties of listing and selling brokers and salespersons. California brokers and salespersons should have their agency contracts reviewed to ensure that they are compliant with these new requirements.