The two new laws, although touching many sections of the Civil Code and Business and Professions Code, are “clean-up” legislation clarifying and modernizing many of the definitions in the Real Estate law overall.
The primary practical impact for REALTORS® will be in the agency disclosure and confirmation process.
Currently, the Listing Agent (the seller’s agent) is required to provide an agency disclosure to the seller when taking a listing, and the Selling Agent (the buyer’s agent usually) is required to give an agency disclosure to the buyer when writing the offer and an agency disclosure to the seller when the offer is presented. Although this process may have made a good deal of sense in 1986 when the law was first enacted it is one of the most common areas of confusion for real estate agents and their clients, and generates many calls to the Legal Hot Line.
Beginning January 1, 2019, the agency process will be simplified:
- The Seller’s Agent (formerly the Listing Agent) will be required to give an agency disclosure to the seller when taking a listing.
- The Buyer’s Agent (formerly the Selling Agent) will be required to give an agency disclosure to the buyer when writing an offer. The “3rdagency” from the Buyer’s Agent to the seller will no longer be required.
- The agency confirmation language in the purchase contracts will be modified to reflect the change in the nomenclature and to clarify that the brokerage may use the services of both salespersons and broker associates, and to provide room for the new requirement that all of the brokers and agents must be identified, along with their DRE license numbers.
The C.A.R. standard forms will be modified for December release to reflect the new statutory requirements.
TDS and Revocable Trusts. Most sellers of residential real property are required to complete a real estate transfer disclosure statement (TDS). Exemptions from the TDS requirement include court ordered sales, fiduciaries in the administration of estates and trusts, and REO sales. One of the most confusing exemptions has been for trustees. Trustees of trusts are exempt from providing a TDS, except it they are a natural person who is the “sole trustee” of a revocable trust who is the former owner of the property or who has occupied the property within the preceding year. The rationale being that this person is really the “owner” of the property and knows as much about the property as any other owner would know and should therefore complete a TDS.
Revocable trusts are a very common form of ownership for couples and usually both parties of the couple are trustees of the trust . Many callers to the C.A.R. Legal Hotline were confused about this carve out from the TDS requirement. Why are a couple who both live in the property and are both trustees of the revocable trust exempt from giving a TDS when a sole trustee is not?
In a very welcome cleanup, AB 1289 modifies Civil Code section 1102.2 by removing the word “sole”. Effective January 1, 2019, section 1102.2 (d) will read “This exemption [the TDS exemption] shall not apply to a sale if the trustee is a natural person who is a trustee of a revocable trust and he or she is a former owner of the property or was an occupant in possession of the property within the preceding year.”