October 18th, 2021 at 4:28 pm
Multiple Choice Question: You are a salesperson for Berkshire Hathaway and you would like to use the domain name “homesweethome.com” for your advertisements. Do we have to get the DRE to approve the use of that name as a fictitious business name (or DBA)? Pick the best answer:
A. Yes, because the domain name appears to be the name of a company.
B. No, because it is just a domain name, not the name of a company.
C. The answer depends on how the name is used in advertisements.
D. The answer depends on whether the salesperson’s last name is “Home” or “Sweet.” (more…)
October 11th, 2021 at 3:27 pm
Fact Pattern: A seller is in contract with Buyer #1, and also has a backup contract with Buyer #2. The seller receives a Request for Repair from Buyer #1 asking for a significant credit due to various problems with the property. To help substantiate the problems with the property, Buyer #1 provides the seller with various inspection reports that Buyer #1 ordered and obtained. The seller wants to give the reports to Buyer #2, and negotiate with Buyer #2 concerning such problems, before the seller responds to Buyer #1’s Request for Repair.
Question: Should the seller give the inspection reports to Buyer #2 in the manner contemplated? Yes or No? (more…)
October 4th, 2021 at 3:16 pm
New Defensible Space Law Explained: Starting July 1, 2021, sellers of one-to-four residential unit properties (including condos), that are located in a high or very high fire hazard severity zone, must generally provide their buyer with documentation of compliance with defensible space requirements. Also known as AB 38, this new law does not apply to sellers who are TDS-exempt. Additionally, the documentation of compliance is only required if there is an availability of government-type inspectors as defined, who have been delegated the authority to conduct defensible space inspections and provide compliance statements in the area where the property is located. Sure enough, such authorized inspectors appear to have recently become available through third-party providers as indicated on Cal Fire Department’s Defensible Space webpage (and after you get to that webpage, click the link in the left-hand column for “Additional AB 38 Information”).
Here are some issues to consider concerning this new law:
1. Sellers Have an Easy Out: Sellers can easily avoid getting a defensible space inspection and clearance before close of escrow, by entering into a written agreement for the buyer to get such documentation within one year after close of escrow. It makes sense that sellers would want to shift this responsibility over to their buyers by written agreement. For one thing, there can be a lot to do, from scheduling and obtaining an inspection from an authorized inspector, to doing any brush clearance, vegetation management, and other remedial actions on the property as called out by the inspector, and then getting a statement of compliance, all before close of escrow. Depending on the property and availability of authorized inspectors, the entire process may be simple and straight-forward, or it may take a lot of time, effort, and money, and it may even cause a delay in closing escrow. Another concern is that the RPA requires the property, including landscaping and grounds, to be delivered to the buyer at close of escrow in substantially the same condition as on the date of acceptance. The boilerplate language in the RPA does not allow the seller to make major changes to the landscaping and grounds during escrow, regardless of whether such changes are made to comply with defensible space requirements.
2. How Do Sellers Get That “Easy Out?” The contractual language requiring a buyer to obtain documentation of compliance within one year after close of escrow is set forth in the default language in paragraph 4B(1) of C.A.R.’s Fire Hardening and Defensible Space Advisory, Disclosure, and Addendum (FHDS). If the new law applies to a sales transaction, the seller and listing agent should seriously consider including the FHDS upfront in the seller’s counter offer (SCO or SMCO), rather than wait to get it signed during escrow. Getting the buyer’s signature on the FHDS upfront at contract acceptance is generally a better approach than waiting and wondering whether the buyer will agree to sign the FHDS during escrow. Getting the buyer’s signature upfront should also be relatively easy to do, given that most sellers routinely issue SCOs or SMCOs to their buyers anyway. To add the FHDS upfront, simply check the box for an “Addendum” in paragraph 1D of the SCO or SMCO, insert the acronym “FHDS” in the blank space provided, and attach the FHDS form (but also review item #3 below).
3. Also Counter Out Paragraph 7B(2) of the RPA as Needed: In addition to attaching the FHDS to the SCO or SMCO, a seller and listing agent should also look at how the buyer completed the buyer’s offer for the Allocation of Costs in paragraph 7B(2) of the RPA. The buyer may have checked the box in paragraph 7B(2)(i) requiring the seller to “pay the cost of compliance with any other minimum mandatory government inspections and reports if required as a condition of closing escrow under any Law.” Buyers commonly check that box for properties located in areas with local point-of-sale requirements, such as the City of Los Angeles’s 9A Report or the City of Ventura’s Sewer Lateral Inspection requirement. If the buyer’s offer requires the seller to pay under paragraph 7B(2)(i), the seller’s counter offer should, in an abundance of precaution, provide as follows:
Concerning paragraph 7B of the RPA, Seller shall not pay for nor obtain any defensible space inspection or documentation of compliance before Close of Escrow. Buyer shall comply with such requirements after Close of Escrow (see attached FHDS).
4. Can a Seller Wait Until After Acceptance to Get the FHDS Signed? Sure, but if a seller wants to wait until after contract acceptance to get the FHDS signed, you should, as the BHHS listing agent, keep a paper trail of that instruction from our seller. Simply inform the seller in writing (and get the seller’s written acknowledgment of receipt) that we have no assurance as to whether the buyer will actually sign the FHDS during escrow, and that any such failure to sign may become an issue for the seller. Be sure to add that we strongly recommend that, before proceeding with the transaction, the seller consults with the seller’s own attorney or other professional concerning this matter as the seller deems appropriate. Of course, you don’t need that paper trail if the parties simply agree to the FHDS upfront at contract acceptance.
5. What Could Go Wrong? If the FHDS is not addressed by contract acceptance, one concern for the seller is that a buyer in a pending sales transaction may try to argue that the seller must obtain the documentation of compliance before close of escrow, given that the buyer has not yet agreed to sign the FHDS. That buyer’s argument may be further bolstered if paragraph 7B(2) of the RPA requires the seller to pay for any point-of-sale inspections and reports as a condition of sale under any law. A buyer may conceivably make these arguments if, among other possible situations, the buyer is in a non-contingent sale, but is trying to cancel without losing the buyer’s deposit.
6. Is the New Law a “Point-of-Sale Requirement” or Not? Some legal experts say yes, some say no. Frankly, it doesn’t really matter as long as the parties’ signed contract clearly addresses whether the seller or buyer is responsible for the defensible space requirements. That said, the new law does, at least in my opinion, read like a point-of-sale requirement. However, unlike many other point-of-sale requirements with virtually no exceptions, this particular point-of-sale requirement has a huge exception for parties that enter into a written agreement for the buyer to take on the defensible space responsibilities after close of escrow.
7. It’s Just Like Getting the SIP Form! Considering whether to attach the FHDS to the SCO or SMCO and counter out paragraph 7B(2) of the RPA as needed, is very similar to doing things like negotiating for a seller rent-back using C.A.R.’s Seller License to Remain in Possession Addendum (SIP). The parties can get the SIP signed upfront at contract acceptance, or the parties can wait. But getting the SIP signed upfront means that the parties will have already resolved any issues that may otherwise come up during escrow when parties fail to see eye-to-eye on how to fill in the blank spaces in the SIP form before signing.
8. Can a Seller Get a Pre-Sale Compliance Statement? Yes, with one big caveat. A seller can get the documentation of compliance with the defensible space requirements from an authorized inspector before entering into a sales contract. The big caveat, however, is that, unfortunately, the seller’s documentation of compliance that’s given to a buyer must be dated within the prior 6 months (see paragraph 4B(2) of the FHDS). That 6-month “shelf life” can pose a problem for a seller if it takes more than 6 months after getting the compliance statement to find a buyer who closes escrow. That could happen if, for example, and among other possible situations, the seller ends up falling out of escrow once or twice before finally closing escrow.
9. What’s Best for Our Buyers? As the Berkshire Hathaway buyer’s agent, we should always encourage our buyers to investigate all aspects of the property as they deem appropriate before they close escrow, such as by ordering an inspection by a reputable brush clearance company that knows the local defensible space rules. The RPA, however, does not allow a buyer to make or cause to be made any “inspections by a government building or zoning inspector or government employee, unless required by law” or as authorized by the seller in writing (see last sentence in paragraph 12A of the RPA) (see also item #10 below).
10. Should a Buyer Require the Seller to Get the Compliance Statement? That’s entirely up to the buyer to decide, not us as the BHHS buyer’s agent. Whether the seller or buyer should get the documentation of compliance is essentially a negotiable term between the parties, just like the price, timeframes, and other contract terms. That said, buyers should be fully aware that, depending on the property and grounds, maintaining a defensible space buffer zone may be an ongoing, year-after-year responsibility and concern for homeowners in fire-prone areas, not just something that a buyer considers “one time only” at time of purchase. Our state has been ravaged by wildfires in recent years. Brush clearance, vegetation management, and other defensible space matters can be a difficult and costly, yet ongoing, undertaking for certain homeowners. However, fire prevention is a serious matter of safety, and highly likely to be a part of life for homeowners in fire-prone areas for many years to come. More information about defensible space requirements is set forth at the Cal Fire’s Ready for Wildfire webpage.
11. Why Aren’t Other Brokerages Getting the FHDS Signed Upfront? Well, I guess we will be leading the charge on this one. Regardless of what other brokerages do, we at Berkshire Hathaway want to do our best to help our clients selling and buying homes in fire-prone areas. Getting the FHDS upfront at contract acceptance helps to ensure that no disputes concerning the defensible space requirements will arise during escrow.
12. Reminder on How to Complete the FHDS: Most sellers in current sales transactions will fall under paragraph 4B(1) of the FHDS. That paragraph 4B(1) is the default language as long as none of the next 3 boxes are checked (paragraphs 4B(2), 4B(3), and 4B(4)). A seller should check box 4B(2) if the seller has documentation of compliance from within the last 6 months (see item #8 above). A seller, however, is highly unlikely to check box 4B(3) or 4B(4) as of right now (October 2021), because we generally have no local ordinances concerning documentation of compliance with the defensible space laws (see also item #13 below).
13. There are 2 Separate Laws! Whether to check the boxes in paragraph 4B(3) or 4B(4) of the FHDS has been a great source of confusion for agents and their clients. Generally speaking, a seller should not check either box 4B(3) or 4B(4) as of right now (October 2021), although things may change in the future. The relevant query for checking box 4B(3) or 4B(4) is whether the local city or county has a law requiring a seller (or buyer) to obtain documentation of compliance with defensible space requirements. At the present time, most localities do not. The relevant query for checking box 4B(3) or 4B(4) is not whether the locality has any laws requiring homeowners to do brush clearance, vegetation management, and other defensible space requirements. Most localities do have such requirements for properties in fire-prone neighborhoods.
14. Remember That Things May Change: This is a new law that is just getting rolled out. The new law raises various issues and concerns that may affect our day-to-day real estate practice. The best way for clients and agents to handle the issues presented by the new law may change over time, depending on various moving parts. Hopefully, the C.A.R. standard forms that we use will be revised soon to address some of these issues, and to simplify obtaining upfront a buyer’s agreement to take responsibility for any defensible space requirements.
Additional Resources: The full text of this new defensible space law (AB 38) is set forth at section 1102.19 of the California Civil Code, available at the California Legislative Information website. More information is available from Cal Fire’s Defensible Space webpage. C.A.R. also has a Defensible Space Law (password-protected for C.A.R. members only).
September 27th, 2021 at 2:17 pm
Question: Last week’s Legal Tip was a discussion about how a seller has no legal obligation to comply with a C.A.R. Confidentiality and Non-Disclosure Agreement (CND) that is submitted along with a buyer’s offer. But what if a buyer asks a seller to sign a CND before the buyer will submit an offer? Should the seller sign the CND? (more…)
September 20th, 2021 at 2:46 pm
Fact Pattern: You are the listing agent. You receive a good offer from Buyer #1 on a C.A.R. Residential Purchase Agreement (RPA) with an attached C.A.R. Confidentiality and Non-Disclosure Agreement (CND). The CND requires the seller and listing agent to keep confidential the offered price and terms. The seller has not yet responded to the buyer’s offer. In the meantime, the seller’s cousin has also expressed interest in buying the seller’s house.
Multiple Choice Question: Can the seller share Buyer #1’s offered price and terms with the seller’s cousin? Pick the best answer:
A. No, because Buyer #1’s offer is confidential as a matter of law.
B. No, because Buyer #1’s offer is conditioned upon confidentiality.
C. Yes, if the CND is just attached to the RPA, not incorporated by reference into the RPA.
D. Yes, because the seller has not accepted Buyer #1’s offer. (more…)
