Q: We have received your Weekly Practice Tips on the new Fire Hardening and Defensible Space Advisory, Disclosure and Addendum form “FHDS 5/21” (sent on May 21, 2021) as well as the revised Exempt Seller Disclosure “ESD 6/21” (sent on June 4, 2021) and the Cooperating Broker Compensation Agreement “CBC 6/21” (sent on June 11, 2021). Are there Tips on the other CAR forms that have been revised for June, 2021?
A: Yes. In addition to the two (2) revised CAR forms referenced above, the following nine (9) CAR forms have been revised and will be made available for use the week of June 21, 2021.
AGRICULTURAL ADDENDUM (“AGAD”)
New Paragraph 2M has been added to the CAR AGAD to explain that hemp cultivation has been legalized at the state level but growing cannabis is still a violation of federal law. This new paragraph warns that although growing cannabis is legal in California, a license must be obtained from the California Department of Food and Agriculture and each local jurisdiction is allowed to create its own rules. Buyers are thus advised to consult with qualified California legal counsel – preferably one who specialized in local cannabis law.
PRACTICE TIPS:
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- The AGAD form is designed to be used with contracts for the sale of Improved Properties and not for use with a Vacant Land Purchase Agreement. If an earlier version of the AGAD has been fully signed, it is not necessary to add this Addendum.
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- However, the best practice for Buyers’ Agents is to make sure that the new information contained in Paragraph 2M is provided to the Buyer, preferably before the Buyers have removed their investigation contingency. Paragraph 2M is not really contract language – it is an advisory and thus can be included in an email or any Buyer’s Agent-created disclosure that is delivered to the Buyer.
LEASE LISTING (“LL”)
The LL form includes a list of “Owner Disclosures” in Paragraph 10 that the Owner is to tell the Listing Agent about; the Listing Agent is then obligated to disclose that information to all Prospective Tenants. Paragraph 10 was revised to include two new disclosures: “Death on the Premises” and “Other Material Facts.”
CAR does not have a separate disclosure form for the Owner to complete and give to Prospective Tenants; the Owner’s disclosures must therefore be included in the CAR Residential Lease or Month-to-Month Rental Agreement (“LR”). The two new disclosure items added to the LL have not yet been added to the LR; Listing Agents will need to add those Owner Disclosures to the LR in Paragraph 46 Other Terms and Conditions.
The most significant change to the LL is new Paragraph 14F which explains that unless the Owner and Listing Broker enter into a separate property management agreement, Broker will not have an agency relationship with the Owner once there is a Tenant in place, either at the time the lease is signed or at some other optional point in time such as the completion of the Move-In Inspection. This critical addition will make it clear that the Lease Listing Agent will not be performing any Tenant services once the agency relationship terminates.
PRACTICE TIPS:
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- If the Owner has already signed an earlier version of the LL form, the Broker will need to make a business decision as to whether or not to have the Owner sign the new LL form. If the Owner will not be asked to sign a new LL form, the best practice is to copy the language in Paragraph 14F onto a CAR Amendment to Existing Agreement Terms (“AEA”) to include that provision in the existing listing.
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- Any Owner disclosures made in the LL must be included in the Lease or Rental Agreement whether or not there is a specific question about the disclosed topics in the LR. Alternative approach: Have the Owner complete the PRDS® Landlord Residential Questionnaire and Statutory Disclosure Packet (“LRQ”)
PROPERTY IMAGES AGREEMENT (“PIA”)
The CAR PIA form can be used by Brokers or Agents to enter into an agreement with a Photographer regarding the use of pictures, recordings and videos. The PIA has been updated to include a requirement that the Photographer must comply with all federal laws regulating the use of drones if aerial photography will be used. New Paragraph 7 also includes an indemnification provision to protect the Broker and Agent from claims arising from the use of drones.
PRACTICE TIPS:
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- If a Photographer has signed an earlier version of the PIA, it is not necessary to have the Photographer sign the new PIA form.
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- For more information, see Weekly Practice Tip Use of Drones in Real Estate 03/05/21 which includes a more comprehensive drone indemnification provision that can be added to any Photographer Agreement.
REFERRAL FEE AGREEMENT (“RFA”)
The RFA was revised to use clear language to describe what optional events will trigger the payment of a referral fee. For example: The referring Broker will be paid when the principal who has been referred “Enters or has already entered into Contract to Buy” instead of just “Buys.” This same language has been used to clarify “Sell” and “Lease.”
PRACTICE TIP: If a Referral Agreement is already in place, the new form does not need to be used.
RESIDENTIAL LISTING AGREEMENTS (“RLA”, “RLASR”, & “RLAN”)
CAR has three separate Residential Listing Agreements: the Exclusive Listing Agreement (“RLA” which we strongly recommend that all Brokers use), the Listing Agreement where Seller Can Find Their Own
Buyer (“RLASR”), and the Open Listing Agreement (“RLAN”). The revisions made to the RLA, which are discussed below, were also made to the other two forms.
Since there is no statewide rule on calculating Days on Market, the Seller is advised in Paragraph 7C to discuss that topic with the Agent and then the Seller is given the option of authorizing the Broker to utilize the Coming Soon Status if it is available in the MLS.
Now that the CAR Fair Housing Discrimination Advisory (“FHDA”) form is automatically attached to the 3 Listing Agreements, CAR has added a new paragraph to enable the Seller to give instructions to the Listing Broker on how to handle Buyer Support Letters (aka Buyer “Love Letters”), whether the Buyers provide letters, photographs and/or videos. New Paragraph 10C (1) explains the potential discriminatory effect of Buyer Support letters and that the Broker will not review the content of those communications.
The Seller is then given two optional instructions to let the Broker know what is to be done with those letters:
Paragraph 10C (2)(A) is the default or preferred choice – the Broker is not to present the support letters to the Seller and the Broker can specify that fact in the MLS.
Paragraph 10C (2)(B) authorizes the Broker to present the support letters to the Seller but the Seller is told that the Seller is proceeding against the advice of Broker.
Revised Paragraph 10E expands the list of optional reports that the Broker can order to include Preliminary Report, and Roof, Pool and Septic Inspection Reports.
PRACTICE TIPS:
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- If the Seller has already signed an earlier version of the Residential Listing Agreement, it is not necessary to have the Seller sign the new version of this form.
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- If the Broker wants to have the necessary Seller instructions added to an existing Listing Agreement without signing a new Listing, then use either the Broker Risk Management “Buyer Support Letter Listing Amendment” form that was distributed on October 26, 2020 (see Amendment following this Tip) or use the PRDS® Listing Agreement Addendum -Seller Instructions to Broker re Buyer Support Letters (“LABS”) which is available online.
SELLER PURCHASE OF REPLACEMENT PROPERTY (“SPRP”)
Paragraph 1A was revised to add the possibility of a Seller not just entering into an agreement to acquire replacement property but to find a suitable property to move to. This new addition is especially helpful for people who are going to be renting or moving into a care facility rather than buying another property.
PRACTICE TIPS:
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- If the Seller has already signed an earlier version of the SPRP, it is not necessary to have the Seller sign the new version of this form.
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- The best practice for Listing Agents preparing the SPRP is to check Option 1C so that the sale of the Seller’s Property is contingent on the Seller’s ability to close escrow on the replacement property.
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- As is true with all contingencies, the Seller must act in good faith and make a diligent effort to locate replacement property – the SPRP cannot simply be used by Sellers to change their mind about selling.
STATEWIDE BUYER AND SELLER ADVISORY (“SBSA”)
The revised SBSA now includes an alphabetical Table of Contents on page 1 to make it easier to find any specific topic. Information has been added on fire hardening/defensible space (new Paragraph A-14), wildlife (new Paragraph C-6) and the effect of sea level rise which includes new sources of information for coastal properties (new Paragraph C-7).
PRACTICE TIP: Buyers and Sellers who have already received a prior version of the SBSA do not have to receive the new version.
ATTORNEY-CLIENT PRIVILEGED COMMUNICATION: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2021 06/18/21
LISTING AGREEMENT AMENDMENTSELLER
INSTRUCTIONS TO BROKER RE BUYER SUPPORT LETTERS
The following terms and conditions are hereby incorporated in and made a part of the Residential Listing Agreement (“Listing Agreement”) dated ____________________ on the property known as _______________________________ (“Property”) in which _________________________ is referred to as Broker and _____________________________________ is referred to as Seller.
Seller acknowledges receipt of a copy of the California Association of REALTORS® Fair Housing and Discrimination Advisory which explains the federal and state fair housing laws that Sellers and Real Estate Licensees must comply with or face significant liability exposure. Among other examples of activities that are prohibited, the CAR Advisory warns that when potential buyers provide information about themselves (with or without photographs) these documents, (also known as “Buyer Interest Letters”) could increase the possibility of legal claims against Seller, especially from those potential buyers who were not chosen by the Seller. The potential buyers might allege “conscious or unconscious bias” on the part of the Seller.
Because of the potential liability that Sellers may face as a result of receiving Buyer Support Letters, Broker does not recommend that Seller agree to accept such letters, either before or during the process of reviewing offers.
After reviewing the Fair Housing and Discrimination Advisory, Seller instructs Broker as follows:
□ Seller will NOT accept or review any Buyer Support Letters provided by potential buyers at any time. Broker is instructed to tell other Brokers about that decision including in the MLS if the Property is listed on the MLS. Broker is instructed to return any such letters to whoever submitted those documents.
□ Seller will review any Buyer Support Letters provided by potential buyers at the time Seller reviews offers and thus Seller instructs Broker to present all such letters to Seller that Broker receives. Seller understands, acknowledges and agrees that Seller is proceeding against the advice and recommendation of Broker. Since Seller is choosing to disregard the advice of Broker, Seller is urged to again review the contents of the Fair Housing and Discrimination Advisory, preferably in consultation with Seller’s own qualified California real estate attorney to protect Seller’s interests.
Seller: ______________________________________ Date: __________________
Seller: ______________________________________ Date: __________________
Broker/Agent: _______________________________ Date: __________________