Commercial Brokers Association

UPDATE: AB 1059 | Dual Agency; Commercial Real Estate

Early 2017, Assemblywoman Gonzalez Fletcher (D-San Diego) introduced legislation to ban dual agency in regards to commercial real estate, sponsored by the Association of Commercial Tenants and Hughes Marina, a commercial real estate consulting company. They faced strong opposition from the California Association of REALTORS®, the California Business Properties Association, and the National Federation of Independent Business. In April 2017, the bill was stalled and set aside.

On January 8th 2018, AB 1059 was brought to the Assembly Committee on Judiciary where it failed to pass. The report states that proposed amendments would remove the outright ban of dual agency in commercial real estate transactions from the bill, but create stricter requirements for dual agency disclosure.

From the report:

Requires real estate licensees to provide an additional disclosure to, and obtain signed consent from, the principals in a commercial real estate transaction as a condition of acting as a dual agent. Specifically, this bill:

1) Prohibits a real estate licensee from acting as a dual agent in a commercial real estate transaction without first providing a specified disclosure form and obtaining the principal’s signed consent, as provided.

COMMENTS: As currently in print, this bill would simply prohibit a real estate broker from acting as a dual agent for both a seller and a buyer in a commercial real estate transaction. The sponsor of the bill, the Association of Commercial Tenants (ACT), believes quite strongly that there is an inherent conflict of interest in dual agency, and small businesses and tenants need greater protections to level the playing field in the commercial real estate industry. Following stakeholder discussions held over the legislative recess, the author now proposes to amend the bill to establish additional disclosure requirements for dual agency in commercial real estate transactions, rather than prohibiting dual agency outright

AB 1059 would enhance the disclosure process in order to inform potential buyers the nature of dual agency early enough in the process. Particularly, this bill would standardize the underlying language of dual agency disclosure, which would allow for uniform implementation in practice. Furthermore, this bill would require an agent to provide written disclosure and obtain consent at the time the licensee is hired to engage in any sort of licensed work related to a potential transaction. This requirement would ensure that disclosure of dual agency to potential tenants occur at an earlier stage of negotiations, as opposed to the end of the transaction process.

Accordingly, proposed amendments to the bill seek to ensure that both principals in a commercial real estate transaction are provided with the existing Section 2079.16 disclosure, as well as the additional disclosure specified by this bill, at an earlier point in time than is currently allowed under law. To that end, the proposed amendments mandate real estate licensees to provide the required agency disclosures “as soon as practicable . . . once the licensee commences licensed activity” for the principal on a commercial property transaction.

See the full text here