Effective January 1, 2015 California real estate agency disclosure requirements that previously only applied to residential sales and leases (over a year) now apply to commercial sales and leases as well. With this change in 2015, all agents (licensed real estate brokers and their associates) in all deals (residential and commercial) must reveal in writing which side they represent in transactions and deals.
This means that sellers and potential buyers should receive a very specific agency disclosure form from the agent listing the property in accordance with California real estate law. The exact time at which the document should be provided is set out in the statutes in detail as well. In most cases, law requires that a signed acknowledgement of the disclosure form be obtained as a receipt that the document was provided.
What is Included in the Disclosure Form?
The disclosure form will explain that a broker can represent the seller or the buyer or both at the same time. If representing both seller and buyer at the same time, they are listed as a dual agency. The form explains dual agency and that it is only legal in a real estate transaction if both parties (buyer and seller) understand the arrangement and consent to the deal being managed by a dual agency.
Legal duties and obligations on the part of the real estate agency/brokers involved are also outlined in the documents as pertains to various situations. This is intended to provide potential buyers and sellers (as well as potential lessees and landlords) where the agent’s professional loyalties lie. The obvious need for this type of disclosure requirement evolved from concerns that brokers who represented both sides during a real estate transaction would have conflicts of interest. The law requiring the disclosure document is intended to provide notice to the parties involved in the real estate transaction of the brokers’ loyalties, legal duties regarding disclosure and good faith, etc. It is meant to provide inexperienced parties with protection when participating in a real estate transaction without knowledge of the potential conflict of interest that could lead a broker to act in bad faith during the negotiations.
Conversely, the disclosure form requirement is also a protection for the real estate broker from accusations that could fly at a later time regarding a failure to be up front about the potential for conflict of interest. This is a difficult case to argue when the potential conflict of interest was detailed out in black and white for all to see and consider prior to engaging in the transaction.
Since January 1, 2015, these requirements have applied to commercial real estate sales as well as commercial leases that are one+ years in length.
If you need assistance determining whether or not there is a conflict of interest preventing you from obtaining the best deal possible in a real estate transaction, your next move should be to consult with an experienced real estate attorney at The Law Office of Retz & Aldover LLP.