SB 870

This bill 1) revises the law governing the practice of real estate by real estate

brokers and salespersons (real estate practice law) and 2) requires real property

wholesalers to provide certain disclosures to other parties involved in residential

real property transactions.

Changes regarding real estate practice law

Current law regulates the practice of real estate, which can only be practiced

by real estate brokers and real estate salespersons. Real estate brokers and

salespersons (licensees) are licensed by the Real Estate Examining Board, which is

attached to the Department of Safety and Professional Services. A real estate

broker's license may be issued to either an individual or a business entity. The bill

makes various changes to real estate practice law, described in further detail as

follows:

Disclosures

Current law imposes on a real estate firm providing brokerage services to a

party to a transaction the duty to timely disclose in writing all material adverse facts

that the firm knows and that the party does not know or cannot discover through

reasonably vigilant observation, unless the disclosure of a material adverse fact is

prohibited by law. The law defines both “adverse fact” and “material adverse fact.”

Furthermore, each licensee associated with a firm owes the same duties to a party

that the firm owes to that party. Separately, current law contains a requirement that

a licensee disclose to the parties to a real estate transaction any facts known by the

licensee that contradict any information included in a written real estate condition

report. Current law further contains a list of specific types of information that a

licensee is not required to disclose.

The bill 1) harmonizes the disclosure requirement and the duty described

above; 2) clarifies that the “material adverse facts” that licensees have the duty to

disclose do not include anything on the list of specified types of information that

current law provides are exempt from needing to be disclosed; 3) prohibits the board

from promulgating rules that conflict with these provisions or that mandate

additional disclosures; and 4) provides that a licensee that in good faith provides

information attributable to a state or local governmental or quasi-governmental

entity may not be held civilly liable if that information is subsequently determined

to be inaccurate.

Discipline and licenses

The bill makes various changes pertaining to the discipline of licensees,

including the following:

1. The bill requires the board to notify a real estate brokerage firm in writing

as to all investigations and disciplinary proceedings and actions that are related to

a licensee associated with that firm, including the contents of any administrative

warning issued by the board. The bill also provides that if an application for renewal