Many “Clean Up” Changes to Real Estate Laws


Recently, the Legal Department of the California Association of Realtors® (CAR) released a memorandum informing members of changes to a variety of laws that affect real estate transactions in California. These changes were the result of so-called “clean-up legislation” that was sponsored by CAR. They were contained in two bills – AB1289 and AB2884. They affect various sections of the Civil Code and the Business and Professions Code. They become effective January 1, 2019.

Many of the changes are simply matters relating to clarification and/or the introduction of more current or plain language to replace terminology that had become outdated. Some of them, though, will affect actual transactional practices – hopefully in a good way – and will take some getting used to.

Of particular note are changes in the rules regarding agency disclosure and identification.

• Under current law, the requirement of an agency disclosure in a residential transaction is limited to residential properties of less than five units. That limit has been removed; the disclosure is now required on all real property transfers including vacant land.
• It is no longer required that a buyer’s agent present an agency disclosure to the seller. That provision made sense once – when agency disclosures were something new, and it was often likely that disclosure might not have been made to the seller by the listing agent. But now, agency disclosure is so ingrained that the “third disclosure” is just an awkward fifth wheel.
• Agency disclosure is one of the areas where the term “selling agent” and “listing agent” have, respectively, been replaced by “buyer’s agent” and “seller’s agent.”
• The agency confirmation section has been changed in order to clarify roles. Presently there is only one space each for the buyer’s and seller’s agent. That space is meant to be filled in by the firm name, although many agents incorrectly enter their own name there. Now, there are two spaces each for both buyer and seller each. One is for the brokerage firm, including DRE number, and one is for the individual agent and his or her DRE number. Also, the term “dual agent” has been added, to be used where appropriate. The recent CAR memo emphasizes that, if an agent’s firm represents both parties, then even if the buyer and seller are represented by different individual agents, both agents are dual agents.

Among other changes:

• Responsible brokers will no longer by required to maintain physical possession of salespersons’ licenses.
• Salespersons may enter into compensation agreements among themselves (e.g. in referral situations, or by “sharing” a client), but payment must be paid through the responsible broker.
• An agency listing, whereby the seller can still procure their own buyer without owing a commission, is now termed a “seller reserved listing agreement.”

The CAR memo emphasizes that the changes were not intended to create new law, but only to “merely clarify and confirm what the laws were intended to be.” Well, ok, if you say so; but removing the 4-unit limit for required agency disclosures sure sounds like a change.


Leave a Reply