CODE OF ETHICS

As with any new year, there are always changes. This year is no different. Some important changes to the National Association of REALTORS®Code of Ethics and Standards of Practice should be noted. This guide outlines REALTORS®’ revised duties to their clients, customers, the public, and other REALTORS®.

Changes were made throughout the Code to eliminate the term “competitor” and instead replace it with the broader term “real estate professionals.” Specifically, this change is reflected in Article 15, Standard of Practice 15-2, and Standard of Practice 15-3. Article 15 now states, “REALTORS® shall not know knowingly or recklessly make false or misleading statements about other real estate professionals, their businesses or their business practices.” Standard of Practice 15-2 states:

“The obligation to refrain from making false or misleading statements about other real estate professionals, their businesses, and their business practices includes the duty to not knowingly or recklessly publish, repeat, retransmit, or republish false or misleading statements made by others. This duty applies whether false or misleading statements are repeated in person, in writing, by technological means (e.g., the Internet), or by any other means.”

Lastly, Standard of Practice 15-3 is amended to state, “The obligation to refrain from making false or misleading statements about other real estate professionals, their businesses, and their business practices includes the duty to publish a clarification about or to remove statements made by others on electronic media the REALTOR® controls once the REALTOR® knows the statement is false or misleading.”

Further changes were made to Article 17 regarding mediation of disputes. In contractual (as well as certain non-contractual) disputes, the Association governing those disputes can require the disputing parties to mediate prior to submitting the matter to arbitration. The Article goes on to afford the clients of REALTORS® the opportunity to mediate in accordance with the Association’s legal policies. In the past, NAR required the boards and associations to offer mediation to the members, but participation remained voluntary. With the amendment to Article 17, local boards and associations would be able to require mediation prior to arbitration, if the Board of Directors and/or the membership authorizes it.

However, a provision has been added to Standard of Practice 17-2 to state that “Article 17-2 does not require REALTORS® to mediate…when all parties to the dispute advise the Board in writing that they choose not to mediate through the Board’s facilities.” The new language does not relieve REALTORS® of their duty to arbitrate but rather correlates with the already existing language in 17-2. Standard of Practice 17-2 continues to state that Article 17 does not require parties to arbitrate when all parties advise the Board (in writing) that they choose not to arbitrate before the Board.

Lastly, a new Standard of Practice has been added to Article 1 of the Code of Ethics. Standard of Practice 1-16 outlines, in no unspecific terms, that REALTORS® are not to access or use, or permit others to access or use, a listed or managed property on any terms or conditions that are not authorized by the owner or seller. This authorization should be in writing.

Any questions regarding the changes to the Code of Ethics or with compliance in general should be directed to the appropriate Board or to qualified legal counsel.

MODEL MLS RULES AND REGULATIONS

In November 2011, the National Association of REALTORS® Board of Directors met at the REALTOR® Conference and Expo in Anaheim to discuss changes to the Model MLS Rules and Regulations. As of the first of this year, those changes came into effect, many of which are mandatory on the local MLS in order to maintain compliance with existing, already-mandatory policies and to ensure coverage under the National Association master professional liability insurance policy.

One of the more controversial changes, it seems, is the deletion of Section 18.2.10, as well as the deletion of language in Policy Statement 7.58. Both regard Internet Data Exchange (IDX) listings on franchisor’s websites, which gave further rise to questions about social media and IDX. The Board of Directors opted to rescind the language about IDX and franchisors and, according to Robert Freedman at REALTOR.org, “a work group has been tasked to broaden the policy to address listing displays over mobile device and via social media.

Other changes to the MLS Rules and Regulations include an increase in the maximum security deposit that Associations and MLSs can require for lockboxes. Previously, Policy Statement 7.31 stated “the initial deposit shall not be less than $25 nor more than $200.” The maximum figure has now gone up to $300 in order to continue to “establish an awareness of personal liability for such key.” This change in the lockbox deposit amount is also one of the mandatory changes implemented by the National Association of REALTORS®.

Section 2.5, Report Sales to the Service, was amended to include sale prices as part of the status changes that are reported to the multiple listing service by either the listing or cooperating broker. Additional “notes” were added to the section to address the differences in disclosure states and indicates where sale prices of completed transactions are not accessible. In states where complete transactions are not accessible, failure to report sales or sale prices is subject to disciplinary action if the MLS (1) categorizes the sale price information as confidential, and (2) limits the use of sale price information to specific subscribers, participants, customers, clients and governmental bodies (as detailed in Section 2.5). Further, with regards to Virtual Office Websites (VOWs), sale prices are considered confidential in states where actual sale prices of completed transactions are not a part of public records.

Policy Statement 7.75, Reporting Sales to the MLS, follows the same vein as Section 2.5 by including sale prices in the information that must be reported. The notes regarding “disclosure” and “nondisclosure” states also contain the same language as that in Section 2.5.

Policy Statement 7.97 was also adopted by the directors. This section give MLSs discretion to requires participants to disclose if a listed property is bank-owned, real estate owned, or a foreclosure.

It is important to be aware of these changes and be on the lookout for any changes in any local MLS Rules and Regulations. Each Association and/or MLS will announce the specific changes to its MLS. All Associations within CARETS affiliated MLS’ utilize a uniform set of rules. Keep an eye on future Courtside Newsletters or check out our Facebook for updates.

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SB 459: Misclassification of Independent Contractors

Senate Bill 459 amends the California Labor Code, Section 226.8, to prohibit the willful misclassification of an individual as an independent contractor. “Willful misclassification” is defined as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.” The bill prohibits charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation that would have violated the law if the individuals had not been misclassified.

To reflect the seriousness of willfully misclassifying an employee, if the Labor and Workforce Development Agency or a court determines that a violation has taken place, the penalty is $5,000 per incident. If the violator has a pattern or practice of willfully misclassifying employees, the penalty will be no less than $10,000 and could go up to $25,000. The violator will also be ordered to post a notice signed by an officer for one year that states: (1) what the violation was, (2) that their business practices have been changed to avoid committing further violations, (3) that employees who believe they are misclassified may contact the Labor and Workforce Development Agency, and (4) that the notice is posted pursuant to State order. A licensed contractor who is found to have violated Section 226.8 will be reported to the Contractors’ State License Board for disciplinary action.

Additionally, any person who knowingly advises an employer to treat an individual as an independent contractor to avoid employee status may be jointly and severally liable with the employer if the individual is found not to be an independent contractor.

AB 469: Wage Theft Protection Act of 2011

Effective January 1, 2012, Assembly Bill 469 added Section 2810.5 to the California Labor Code, Wage Theft Prevention Act of 2011. Employers are now required to provide non-exempt employees with written notice at the time of hire containing the following specific wage-related and employer information:

1. The rate or rates of pay, the basis for the rate, and whether it is paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime.
2. Any allowances claimed as part of the minimum wage, including meal or lodging allowances.
3. The regular payday.
4. The name of the employer, including any “doing business as” names used by the employer.
5. The physical address of the employer’s main office or principal place of business and a mailing address, if different.
6. The telephone number of the employer.
7. The name, address, and telephone number of the employer’s workers’ compensation insurance carrier.
8. Any other information the Labor Commissioner deems material and necessary.

If any changes are made to this information non-exempt employees must be notified in writing within seven calendar days of change.

The Act also increasess civil penalties for wage violations, such as employers paying less than minimum wage, and increases the statute of limitations. The full text of the Act can be found on the Department of Industrial Relations’ website. The Labor Commissioner is developing a guide/FAQ for employer compliance that should be available this month. It will be found at : http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html

SB 272: Leaves of Absence for Organ and Bone Marrow Donation

Senate Bill 272 amends Labor Code Section 1510 current law regarding leaves of absence for employees who donate an organ or bone marrow to another person. Current law provides a leave of absence for an organ donor of 30 days within a one-year period and a leave of absence for a bone marrow donor of five days within a one-year period. SB 272 clarifies that those are “calendar days” not “business days” and that the one-year time period will begin on the first day of the employee’s leave. The leave of absence will not be considered a break in the employee’s continuous service for the purposes of the right to time off. The employee will still be entitled to coverage under a group health plan. The employer retains its right to negotiate an employee benefit plan that will be better than an existing plan and no rights provided under Section 1510 will be diminished by an employee benefit plan entered into on or after January 1, 2011. The employer may require the employee take up to five days of earned but unused sick leave, vacation, or paid time off for bone marrow donation, or up to two-weeks of earned but unused sick leave, vacation, or paid time off for organ donation. The employee’s leave for donation cannot be taken concurrently with any other leave taken pursuant to the federal Family and Medical Leave Act of 1993 or the Moore-Brown-Roberti Family Rights Act. The leave can, however, be taken in one or more periods, but still cannot exceed the time allotted.

SB 299: Pregnancy Disability Leave

Under current law, it is unlawful for employers to discriminate based on sex or disability or to refuse to allow a female employee disabled by pregnancy, childbirth, or a related medical condition to take a reasonable leave of absence for said conditions. SB 299 amends California Government Code Section 12945 to include that it is also unlawful for an employer to refuse to maintain and pay for coverage under a group health plan for eligible female employees who take leave. However, the premium paid by the employer can be recovered from the employee if: (1) the employee fails to return to work after the term of the leave that the employee is entitled to expires; or (2) the employee fails to return from leave for a reason other than they are on leave under the Moore-Brown-Roberti Family Rights Act; or (3) if the employee is entitled to additional leave due to continuation, recurrence, or onset of a health condition. The amendment makes it unlawful to refuse to accommodate an employee for a condition related to pregnancy, childbirth, or a related condition if she requests the accommodation based on the advice of her healthcare provider.

AB 551: Penalties for Contractor’s Violation of Labor Code

Assembly Bill 551 amends several sections of the Labor Code to increase penalties for violations of various Labor Code provisions regulating contractors and subcontractors on public works contracts.

Section 1775 is amended regarding failure to pay minimum wages: The penalties are increased for contractors and subcontractors who pay less than the minimum per diem wage to their employees. Under existing law, the penalty is $10 to $50 per calendar day. Effective January 1, 2012, the penalty will be $40 to $200 per calendar day. The penalty is determined by the Labor Commissioner based on: (1) whether the employer intended not to pay per diem wage or whether it was a good faith mistake that was promptly rectified, and (2) whether the employer has a prior record of failing to meet prevailing wage obligations. If the employee was employed by a subcontractor, the prime contractor will not be liable for the penalties if the prime contractor: (1) had no knowledge of the subcontractor’s failure to pay prevailing wages; and (2) attempted to take corrective action once becoming aware of the subcontractor’s discrepancy.

Section 1776 is amended regarding contractor and subcontractor payroll records and the inspection of said records. The penalty for not complying with a written request for payroll records within 10 days is $100 each calendar day the contractor or subcontractor is delinquent.

Section 1777.1 is amended to provide that a contractor or subcontractor who is in violation will be unable to bid or perform work on a public works project for a minimum of one year or a maximum of three years. If payroll records are not produced within 30 days of a written request, in addition to the per diem fine, the contractor or subcontractor may be subject to debarment.

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This month, The Giardinelli Law Group, APC summarizes the recently released new and updated C.A.R. Forms.  To read the most recent Courtside Newsletter, click here now.  You can also find copies of previous Courtside Newsletters under the “NEWS/BLOGS” tab of THE GIARDINELLI GROUP, APC website: www.glawgroupapc.com

BY: CASEY MCINTOSH, PARALEGAL

The current session of the California State Legislature recently passed a number of Bills that will affect REALTORS®, real estate agents, and their clients in numerous ways. As these new laws will come into effect in 2012, it is important to be informed now in order to make implementation as easy as possible. The following are simply a few of the new laws and how they will pertain to real estate practitioners when they become effective.

Senate Bill 510: Branch Offices

This piece of legislature will become effective July 1, 2012 and will amend Section 10164 of the Business and Professions Code as it applies to the management of branch offices. Pursuant to existing law, a real estate broker is required to procure a separate license for each branch office maintained by the broker. SB 510 will authorize an employing broker to appoint a branch manager, pursuant to a written contract, and delegate responsibility to oversee and supervise operations and activities of that branch, as specified in the employment contract. The employing broker will also be required to send a written notice to the Department of Real Estate identifying the appointed manager and, should the broker-manager relationship be changed or terminated, the broker will be required to notify the Commissioner of those changes as well. SB 510 also outlines that the appointed manager must have at least two years of full-time real estate experience in the five years prior to appointment, and must not hold a restricted license or be subject to debarment. The Commissioner is authorized to suspend or suspend revoke the license of the appointed licensee for failure to properly oversee and supervise operations.

What This Means for Real Estate Practitioners
This Bill will be of interest to employing/designating brokers in that they now must notify the Department of Real Estate of their designations. However, it is also important to note the higher standard to which the appointed branch manager will be held. SB 510 will create accountability that will extend beyond the employing broker and to the manager of the branch. It is anticipated that Regulations will follow to detail the criteria for this statute.

Senate Bull 53: Escrow Transactions

As of now, real estate brokers engaging in certain escrow activities are required to make certain disclosures and recordings regarding those activities. Beginning on July 1, 2012, Business and Professions Code Section 10141.6, et seq., will be amended regarding real estate brokers who, pursuant to the exemption from the Escrow Law contained in Section 17006 of the Financial Code, engage in escrow activities for five or more transactions in a calendar year or whose escrow activities equal or exceed one million dollars in a calendar year. Within 60 days of the completion of the calendar year, those brokers subject to this section will be required to file a report with the Department of Real Estate documenting the number of escrows conducted and the dollar volume escrow was during the calendar year in which the threshold was met. Those brokers who fail to submit the required documentation will be assessed per diem penalties that will continue to increase until the Department receives the report. Further, if those penalties are not paid, the Commissioner may suspend or revoke the license of the offending broker.

What This Means for Real Estate Practitioners
SB 53 is important as it applies to brokers who may find themselves reaching the statutory limits outlined in B&P Section 10141.6, et seq. It is essential to keep track of any amendments in legislation that may change the way a real estate practitioner conducts business. SB 53 is a bill that goes on to amend other sections of the Business and Professions Code with regards to the Real Estate Law and will thereby interest agents and brokers alike. It can be found in its entirety at www.leginfo.ca.gov.

Senate Bill 837: Changes to Transfer Disclosure Statement

Existing law requires that, “on or before January 1, 2017, a single-family residential property built on or before January 1, 1994, be equipped with water-conserving features…” Such features include low-flow toilets, showerheads, and faucets (pursuant to Civil Code § 1101.3). Beginning January 1, 2012, SB 837 will make amendments to the Transfer Disclosure Statement (TDS) to disclose whether the property is equipped with these water-conserving plumbing features. (CAR will publish a new TDS form in November, 2011 that will contain this disclosure.)

What This Means for Real Estate Practioners
The amendment of Civil Code Section 1102.6 to include the disclosure of water-conserving features is one more item for real estate practitioners to look out for when assisting their clients with the TDS. Whether filling out the form or reviewing it, it is important to note whether these items are checked, so your client either knows what they need to do to the property in the future (as buyers), or, if they are already installed, what is increasing the value of the home (for sellers).

Senate Bill 4: Changes to Notice of Sale

Current law requires lenders to file Notices of Default in the case of nonjudicial foreclosure prior to enforcing the power of sale as a result of a default on an obligation secured by real property. Further, a Notice of Sale is to be given and recorded prior to exercising the power of sale. Effective April 1, 2012, SB 4 will now require additional language on the Notice of Sale notifying potential bidders of the risks and liabilities of bidding at the auction, as well as where they can find additional information regarding these risks. The Notice of Sale will also contain language for the property owner regarding how to obtain information about sale dates and postponements. This information is required to be provided by any means that provides continuous access.

What This Means for Real Estate Practitioners.
The changes in the Notice of Sale do not necessarily affect the salesperson, broker or their business directly, but keeping up with the changes will also help you to keep up with current trends in real estate and potentially the market.

These four bills are not the only new legislature that may affect a REALTOR®, real estate agent, or his or her client. As was aforementioned, it is important to keep track of the new laws and changes to existing laws—even those that do not seem pertinent at this exact moment. As an agent or broker, it is essential to be as informed and well-rounded as possible. Keeping up-to-date on the law will better ensure that this is the case.

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