SB1171 Regarding Broker Representative: A Game Changer in CA

Have you ever wondered if your commercial broker has your best interests in mind?

In a recent California case an individual salesperson had procured a listing under his Broker’s umbrella and sold the home to an individual represented by another agent in the same office. The agents did not disclose this fact believing that since the listing had been procured by one agent and it was bought through another agent the second agent did not have a fiduciary responsibility to disclose any “Duel Agency” where an agent represents both parties to a transaction.

However, the courts ruled correctly that the listing is not held by the individual agent but rather the Broker. Therefore any agent/salesperson under contract with the Broker becomes a subagent for any listing held by the Broker. In residential real estate form 2079 has been used in all transactions for many years whereas each party including the buyer, seller and both agents sign a form acknowledging who represents whom. If one agent represents both parties as a duel agent then the one agent and both principals sign and acknowledge the form.

While Duel Agency is legal the facts must be disclosed to the consumer.

While this was the case in residential real estate for decades it wasn’t until the passage of SB1171 in July 2014 and taking effect on January 1, 2015 that commercial brokers were required to have their clients and principal sign a similar form. It has been slow in its implementation but at least commercial buyers/tenants are starting to understand they have the right to be represented and that there are firms that exclusively represent buyers/tenants therefore affording them the best opportunities in their real estate transactions. Further, if an agent works for a “listing house” (meaning any agency that lists property for sale or lease directly from and on behalf of an individual or company/landlord), while he/she may claim to be a “Tenant Rep”, in reality they will always be a duel agent.

On the other hand there remain “heals dug in” folks who insist that listing houses provide the best opportunity for them to procure the best deal. Typically the listing houses are large firms with national coverage who claim since they have agents throughout the country they can handle all transactions as if it were a local deal among other claims.

In fact, the United States Postal Service was condemed by the Office of the Inspector General in 2014 in a 14 page report for hiring a large listing firm to do their real estate nationally. The IG stated that”…the Postal Service should take steps to lessen the potential for “XXXX” Company to engage in transactions that create conflicts of interest.”

The next time you are focusing on a transaction ask your agent the question, “Does your firm represent any owners or landlords?” And be sure your commercial broker presents you with a 2079 disclosure form signed by the Landlord. Protect your interests.