.2504231946440.jpg)
California law now requires a written buyer-broker representation agreement for buyer’s brokers in order to receive a commission in real property sales.
The new law applies to all property sales. This includes sales of office, retail, industrial, multi-
family, and single-family properties. However, it doesn’t apply to leases, rental agreements,
state and federal land or loan brokerage services.
The new disclosure requirements of Assembly Bill 2992 are in response to the Burnett Sitzer
antitrust lawsuit against the National Association of Realtors (NAR) and certain brokerages filed in Missouri federal court. This was resolved in a substantial settlement over commission-sharing practices. The plaintiffs claimed that real estate commission rates are too high, the buyers’ representatives are paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, cause inflated commission rates.
AIR CRE, the member-owned platform for Southern Californian Real Estate professionals,
explained that the statute changes the prior model by letting buyers choose and negotiate terms with their broker. This is a change from the previously fixed compensation structures.
Key Aspects of AB 2992
The Requirements of the Buyer-Broker Representation Agreement
First, the bill requires brokers representing buyers to enter into a signed representation
agreement with the buyer “as soon as practicable” and not later than when a buyer submits an offer. A “buyer-broker representation agreement” is defined by the legislation as a written
contract between a buyer of real property and a buyer’s agent by which the buyer’s agent has been authorized by the buyer to provide services set forth in subdivision (a) of Section of the Business and Professions Code §10131(a) for or on behalf of the buyer for which a real estate license is required pursuant to the terms of the contract.
The buyer-broker representation agreement must include, inter alia, the terms related to all of the following:
(1) The real estate broker’s compensation;
(2) The services to be rendered;
(3) The date when compensation is due; and
(4) The date of the contract’s termination.
Also, before the execution of a buyer-broker representation agreement between the buyer and the buyer’s agent, the buyer’s agent must provide the disclosure form required by Civil Code § 2079.14 to the buyer.
The Duration of the Agreement
The bill restricts the length of buyer-broker agreements to three months, except if the buyer is a corporation, LLC, or partnership. In those cases, agreements with these entities can extend beyond the standard term and include renewal options.
A buyer-broker representation agreement can’t renew automatically, and a renewal of a buyer-broker representation agreement must be in writing and be dated and signed by all parties to the agreement. A renewal also can’t last longer than three months from the date the renewal was made.
A buyer-broker representation agreement that is made in violation of this subdivision is void and unenforceable.
Agent Compensation
Any printed or form agreement that initially establishes or is intended to establish, or alters the terms of any agreement that previously established a right to compensation to be paid to a real estate licensee for the purchase of residential real property containing not more than four residential units, or for the purchase of a mobile home must have contain the following
statement in not less than 10-point boldface type immediately preceding any provision of such agreement relating to compensation of the licensee:
Notice: The amount or rate of real estate compensation is not fixed by law. They
are set by each broker individually and may be negotiable between the seller and
broker.
Enforcement
The bill provides that a person licensed pursuant to Division 4 (commencing with § 10000) of
the Business and Professions Code who violates the new law shall be deemed to have violated that individual’s licensing law. As a consequence, a violation may result in disciplinary action from the Department of Real Estate.
Bottom Line
AB 2992 bolsters buyer protections and formalizes real estate agent obligations to foster more transparency and professionalism in real estate transactions.
The law went into effect January 1st .
It’s important for brokers to consult with experienced legal counsel like Eanet Law for questions about compliance and updating their practices and procedures.