On August 15, 2014, Gov. Jerry Brown signed SB 1171 into law, which requires commercial real estate agents and brokers to provide written disclosure of their agency relationship in a transaction.
While this practice has been mandated for some time in the residential real estate market, this is the first time this statutory requirement has been applied to commercial real estate brokers and agents.
As of January 1, 2015, California commercial real estate brokers and agents will be required to provide written disclosure to clients identifying any possible conflicts of interest. This disclosure must be provided prior to official engagement.
The commercial real estate disclosure form has three options; brokers and agents must check off one:
- Agent represents only the landlord/seller;
- Agent represents only the tenant/buyer; or
- Dual Agency: Agent represents both the landlord/seller and the tenant/buyer.
Taken in conjunction with a recent California appeals court ruling in Horiike v. Coldwell Banker — which found that when there is only one broker involved in a real estate transaction, that broker has a fiduciary duty to both parties — this new law means that commercial brokers and agents working at any large brokerage firm that represents both landlords and tenants (or buyers and sellers) must classify themselves as dual agents if another broker/agent working for the same firm is on the other side of the deal.
Commercial brokers and agents with dual agency status will owe a fiduciary duty to parties on both sides of the transaction, and are prohibited from disclosing confidential information to either party about the other.
The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to email@example.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.