New Wood Destroying Pest Q&A
One of the most noticed revisions in the November 2014 California Residential Purchase Agreement and Joint Escrow Instructions (C.A.R. form “RPA”) wasn’t something that was added but something that was removed: the Wood Destroying Pest Inspection and Allocation of Cost Addendum (“WPA”). Many members called the Hot Line asking where to find the reference to the WPA addendum in the new RPA. They were told that there is no WPA reference in the new RPA and, moreover, there is no longer a WPA in zipForm®. The next questions were often “Why was the WPA removed?” (Sellers often agreed to pay for repairs before they knew the actual costs. This approach was inconsistent with the overall RPA approach that the property is sold “as-is” subject to a buyer’s right to conduct inspections and ask for repairs.) And “What can the buyer do now?” (A buyer can use the Repair Request (C.A.R. form “RR”) to ask for either or both section 1 and section 2 clearance once they have an inspection – which they can ask the seller to provide.)
To help answer those and other pest inspection report and repair questions in a form that you can provide to others in your office or to your buyers and sellers C.A.R. has just released a new Q&A titled Wood Destroying Pest & Organisms Inspections, Reports & Repairs.
New Agent Commission Sharing Case
The real estate industry is seeing an increase in the use of teams formed by salespersons within a brokerage. So much so, that a new law was recently enacted allowing the use of team names by salespersons so long as certain requirements are met. (AB 2018, Business and Professions Code §§ 10159.5, 10159.6, and 10159.7) As more teams within brokerages are being formed, the need for a written agreement between members of the team is growing. In the C.A.R. Independent Contractor Agreement (C.A.R. form ICA), it is made clear that the employing broker will divide commissions due among partners and teams according to the written agreement between the members and can withhold payments if there is no written agreement.
A recent case highlights the need for written agreements and broker involvement. In Sanowicz v. Bacal, Second Appellate District, Division Five, February 26, 2015, two salespersons in the same brokerage agreed in both oral and written agreements to split commissions earned from the representation of “joint” clients. At least one of their written agreements was on the C.A.R. Referral Agreement (C.A.R. form “RFA”). While the agents both signed the RFA there was no broker signature. After one of the agents changed offices he closed a deal representing one of the “joint” clients but did not share the commission. The stated defense to not paying, citing Business and Professions Code § 10137, was that a salesperson cannot agree to pay commissions to another salesperson; a salesperson can only be paid by the broker to whom they are licensed and only brokers can agree to share commissions.
The trial court found this to be persuasive and dismissed the case on demurrer. However, the appellate court made it clear in its analysis of § 10137 that, while the Legislature may have limited the manner of payment to the broker, it did not forbid commission sharing agreements between salespersons.
To protect brokers from the exposure of being involved in litigation between agents and also from the time it takes to address these claims even if settled without litigation, brokers may want to insist that all salespersons licensed under them and sharing commissions put their agreements in writing and submit them to the broker.
Living Trusts and Title Insurance
As a part of their estate plans, many owners of real property put their properties into living trusts to avoid probate and to take advantage of the tax benefits available to them. However, many owners, and the attorneys who helped them set up their trusts, are surprised to learn that when they transferred their property into their living trust they may have lost their title insurance coverage. The transfer to the trust is a transfer to a new entity and requires an endorsement (actually available for a very modest cost) to continue coverage under standard coverage title insurance policies. However, some title insurance policies do cover such a transfer as is typical in the CLTA/ALTA “Homeowner’s Policy of Title Insurance.”
The California Residential Purchase Agreement and Joint Escrow Instructions (C.A.R. form RPA) has since 2000 contained a provision in the title paragraph requiring that the buyer be provided a CLTA/ALTA “Homeowner’s Policy of Title Insurance” (paragraph 13E). In 2000, when this provision was first introduced, the “Homeowner’s Policy” was a fairly new product and not well known in the industry. Over the years the product has become more well know and offered more widely.
The “Homeowner’s Policy” is available to homeowners who are natural persons and offers enhanced protections over the standard coverage policy, among them being continued coverage when transferring title into a living trust for estate planning purposes. Additional protections, among many more, include coverage for encroachments, some permit matters, vehicular access to the property, and fraudulent recordings. You can review the policies at the California Land Title Association and American Land Title Association websites.
To protect themselves, buyers should confirm with escrow that the proper title insurance policy is being provided at close.