2013 -- H 5718

=======

LC01792

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO BUSINESSES AND PROFESSIONS - AGENCY RELATIONSHIPS IN

RESIDENTIAL REAL ESTATE TRANSACTIONS

     

     

     Introduced By: Representative Robert D. Phillips

     Date Introduced: February 28, 2013

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. The title of Chapter 20.6 of the General Laws entitled "Agency

1-2

Relationships in Residential Real Estate Transactions" is hereby amended to read as follows:

1-3

     CHAPTER 20.6

1-4

Agency Relationships in Residential Real Estate Transactions

1-5

     CHAPTER 20.6

1-6

RELATIONSHIPS IN RESIDENTIAL REAL ESTATE TRANSACTIONS

1-7

     SECTION 2. Sections 5-20.6-2, 5-20.6-3, 5-20.6-4, 5-20.6-5, 5-20.6-6 and 5-20.6-8 of

1-8

the General Laws in Chapter 5-20.6 entitled "Agency Relationships in Residential Real Estate

1-9

Transactions" are hereby amended to read as follows:

1-10

     5-20.6-2. Definitions. -- As used in this chapter, the following terms shall have the

1-11

following meanings:

1-12

      (1) "Affiliated licensee" means a licensed real estate salesperson or real estate broker as

1-13

defined in section 5-20.5-1 associated with a particular principal broker.

1-14

      (2) "Brokerage" means a principal broker as defined in section 5-20.5-8 and his or her

1-15

affiliated licensees.

1-16

      (3) "Buyer" means a person who acquires or seeks to acquire an ownership interest in

1-17

real estate.

1-18

      (4) "Client" means a buyer, seller, tenant or landlord who has agreed to representation by

1-19

a licensee in a real estate transaction, evidenced by an executed mandatory relationship

2-1

disclosure, to whom a licensee owes the duties set forth in section 5-20.6-5.

2-2

      (5) "Client representation contract" means an express, written contract between a

2-3

principal broker or his or her affiliated licensees and a client that authorizes the principal broker

2-4

or his or her affiliated licensees to act as a client representative for a buyer, seller, landlord, or

2-5

tenant and meets the requirements of section 5-20.6-10.

2-6

      (6) "Confidential information" means the following information:

2-7

      (i) A buyer or tenant's willingness to pay more than the offered price;

2-8

      (ii) A seller or landlord's willingness to accept less than the asking price;

2-9

      (iii) A buyer or tenant's previous offers made to purchase or lease real estate;

2-10

      (iv) A seller or landlord's previous offers received to purchase or lease real estate;

2-11

      (v) Any parties' motivating factors;

2-12

      (vi) Any parties' willingness to agree to other financing terms;

2-13

      (vii) Any facts or suspicions regarding circumstances, other than known material defects

2-14

of a property that a licensee must in all cases disclose, that may psychologically impact or

2-15

stigmatize any real estate; or

2-16

      (viii) Any information about a party's assets, liabilities, income, or expenses.

2-17

      (7) "Customer" means a buyer, seller, tenant, or landlord who has agreed to certain

2-18

assistance by a licensee in a real estate transaction, evidenced by an executed mandatory

2-19

relationship disclosure, to whom a licensee owes the duties set forth in section 5-20.6-4.

2-20

      (8) "Designated client representative" means an affiliated licensee appointed by the

2-21

principal broker or his or her designee to represent a buyer, seller, tenant, or landlord in a real

2-22

estate transaction.

2-23

      The affiliated licensee so designated shall obtain the informed, written consent of the

2-24

buyer, seller, tenant, or landlord with a signed mandatory relationship disclosure pursuant to

2-25

section 5-20.6-8.

2-26

     (9) "Designee" means an associate broker as defined in section 5-20.5-1 whom a

2-27

principal broker authorizes to act on his or her behalf.

2-28

     (9)(10) "Director" means the director of business regulation for the state.

2-29

      (10)(11) "Dual facilitator" means a single licensee who, with the prior written consent of

2-30

both parties assists a seller client and a buyer client in the same transaction subject to the

2-31

limitations set forth in section 5-20.6-6.

2-32

      (11)(12) "Landlord" means a person who leases or attempts to lease his ownership

2-33

interest in real estate to another person.

3-34

      (12)(13) "Lease" means an express written or oral contract between a landlord and tenant

3-35

for the use or occupancy by the tenant of real estate that is owned by another person.

3-36

      (13)(14) "Licensee" means an individual licensed by the director as a real estate broker

3-37

or real estate salesperson pursuant to chapter 5-20.5.

3-38

      (14)(15) "Mandatory relationship disclosure" means a form that describes the

3-39

relationship between a consumer and a principal broker and his or her affiliated licensees that

3-40

meets the requirements of section 5-20.6-8.

3-41

      (15)(16) "Ministerial acts" means acts of an administrative nature that licensees perform

3-42

for client or customers, including, but not limited to, showing property; preparing offers or

3-43

agreements to sell, purchase, exchange, rent, or lease; conveying offers or agreements to the

3-44

parties; and providing information and assistance.

3-45

      (16)(17) "Principal broker" means a real estate broker licensed by the director who is

3-46

designated by the brokerage to be responsible for the supervision and activities of his or her

3-47

affiliated licensees in accordance with this chapter and chapter 5-20.5.

3-48

      (17)(18) "Real estate" refers to vacant land on which a building is intended to be

3-49

constructed for use as one or two (2) residential dwellings or land with physical improvements

3-50

consisting of a house and/or structure comprised of four (4) or fewer residential units.

3-51

      (18)(19) "Sales agreement" means an express written contract signed by the buyer and

3-52

seller for the purchase and sale of the real estate.

3-53

      (19)(20) "Sell," "sale," or "sold" means a transaction for the transfer of real estate from a

3-54

seller to a buyer, including, but not limited to, exchanges of real estate between the seller and

3-55

buyer and transactions involving the creation of a sales agreement.

3-56

      (20)(21) "Seller" means a person who sells or attempts to sell an ownership interest in

3-57

real estate to another person.

3-58

      (21)(22) "Tenant" means a person who acquired or seeks to acquire an interest in real

3-59

estate that entitles him or her to occupy or use a property that is owned by another person.

3-60

      (22)(23) "Transaction coordinator" means a principal broker or his or her designee who

3-61

supervises a real estate transaction in a neutral capacity in which one affiliated licensee represents

3-62

a buyer or tenant as a designated client representative and another affiliated licensee represents a

3-63

seller or landlord as a designated client representative in the same transaction. A transaction

3-64

coordinator does not own any fiduciary duties to any party in a transaction except the duties to

3-65

protect the confidential information of the parties and to properly account for money placed in his

3-66

or her care.

3-67

      (23)(24) "Transaction facilitator" means a licensee who provides assistance to a buyer,

3-68

seller, tenant, or landlord, or both, in a real estate transaction as a neutral facilitator. A transaction

4-1

facilitator does not owe any fiduciary duties to any party in a transaction but does owe the duties

4-2

set forth in section 5-20.6-4.

4-3

     5-20.6-3. Relationships -- Creation and presumption. -- (a) It shall be presumed that

4-4

all licensees in a real estate transaction are neutral transaction facilitators unless, the licensee

4-5

obtains the informed, written consent of a buyer, seller, tenant, or landlord with an executed

4-6

mandatory relationship disclosure to represent that person as a designated client representative.

4-7

      (b) The provisions of this chapter are expressly intended to abrogate the common law of

4-8

agency; no type of agency representation shall be assumed by a brokerage, principal broker,

4-9

licensee, buyer, seller, tenant, or landlord nor shall agency representation be created by

4-10

implication.

4-11

      (c) Types of relationships. - The following types of relationships are recognized:

4-12

      (1) Neutral assistance Assistance as a transaction facilitator to assist one or more

4-13

customers; and

4-14

      (2) Representation of a buyer, seller, tenant or landlord as a designated client

4-15

representative.

4-16

     5-20.6-4. Duties owed by a transaction facilitator to a customer. -- (a) A neutral

4-17

transaction facilitator owes the following duties to a customer:

4-18

      (1) To perform agreed upon ministerial acts timely and competently;

4-19

      (2) To perform these acts with honesty, good faith, reasonable skill and care;

4-20

      (3) To properly account for money or property placed in the care and responsibility of

4-21

the principal broker; and

4-22

      (4) To protect confidential information when assisting customers as a dual facilitator.

4-23

      (b) A licensee acting as a transaction facilitator does not owe any fiduciary duties to a

4-24

customer except those duties specified in paragraph (a).

4-25

     5-20.6-5. Duties owed by a designated client representative to client. -- (a) If an

4-26

affiliated licensee is appointed by the principal broker or his or her designee to represent a buyer,

4-27

seller, tenant, or landlord in a real estate transaction and obtains the written consent of a buyer,

4-28

seller, tenant, or landlord with an executed mandatory relationship disclosure to represent that

4-29

person as a designated client representative, the licensee owes the following legal duties and

4-30

obligations to his or her client:

4-31

      (1) To perform the terms of the client representation contract, if any, with reasonable

4-32

skill and care;

4-33

      (2) To promote the client's best interest in good faith and honesty;

5-34

      (3) To protect the client's confidential information during the relationship and after its

5-35

termination;

5-36

      (4) To perform agreed upon ministerial acts timely and competently;

5-37

      (5) To perform these acts with honesty, good faith, reasonable care and skill; and

5-38

      (6) To properly account for money or property placed in the care and responsibility of

5-39

the principal broker.

5-40

      (b) A principal broker or his or her designee may appoint one or more affiliated licensees

5-41

to act as the designated client representative(s) of a seller or landlord and one or more affiliated

5-42

licensees to act as the designated client representative(s) of a buyer or tenant in the same

5-43

transaction; provided; that, all parties to the transaction receive written notice that an inherent

5-44

conflict of interest may exist when designated client representatives are affiliated with the same

5-45

principal broker.

5-46

      (c) A designated client representative of a seller client or landlord client shall have no

5-47

duty to protect the confidential information of a buyer customer or tenant customer involved in a

5-48

transaction with his or her client. Conversely, a designated client representative of a buyer client

5-49

or tenant client shall have no duty to protect the confidential information of a seller customer or

5-50

landlord customer involved in a transaction with his or her client.

5-51

      (d) In the event that one or more affiliated licensees represent a seller as a designated

5-52

client representative and one or more affiliated licensees represent the buyer as a designated client

5-53

representative in the same transaction, the principal broker or his or her designee shall act in a

5-54

neutral capacity as the transaction coordinator and shall protect the confidential information of all

5-55

parties to the transaction and properly account for funds.

5-56

      (e) No affiliated licensees of the principal broker other than those licensee(s) specifically

5-57

designated to represent the client as a designated client representative shall represent the client or

5-58

owe any other duties except that affiliated licensees not appointed to represent a client in a

5-59

transaction shall have the duty to protect the client's confidential information.

5-60

      (f) All other affiliated licensees of the principal broker not appointed as a designated

5-61

client representative for a party in a real estate transaction may represent another party with

5-62

conflicting interests in the same transaction.

5-63

      (g) The mandatory relationship disclosure shall be presented, explained, and executed at

5-64

the first personal contact with the prospective buyer, seller, tenant, or landlord, or prior to an offer

5-65

to purchase, whichever is first to occur.

5-66

      (h)(g) A designated client representative is exclusively responsible for the performance

5-67

of any duties owed to the client.

6-68

      (i)(h) An appointment of a designated client representative by a principal broker or his or

6-69

her designee to represent a client shall not limit the principal broker's liability or responsibility for

6-70

any breach of duty owed to a client by the designated client representative.

6-71

     5-20.6-6. Dual facilitator. -- (a) A licensee may assist both the buyer client and the seller

6-72

client or tenant client and landlord client in the same transaction only as a neutral dual facilitator.

6-73

      (b) The dual facilitator relationship between the licensee and buyer and seller, or

6-74

between the licensee and tenant client and landlord client, exists solely for the specific transaction

6-75

between the parties. In the event the transaction is not completed or fails to close, then the dual

6-76

facilitator remains the designated client representative for the respective buyer and the seller or

6-77

tenant and landlord in all future, separate transactions where there is no relationship with other

6-78

party.

6-79

      (c) A licensee may be a neutral dual facilitator only after he or she has obtained the

6-80

informed, written consent of his or her principal broker and all parties involved in the transaction

6-81

before presenting an offer to a seller client on behalf of a buyer client or to a landlord client on

6-82

behalf of a tenant client. Such consent shall specifically inform all parties to the transaction of the

6-83

following:

6-84

      (1) The dual facilitator is authorized to assist both parties in a transaction but shall be

6-85

neutral as to any conflicting interests between the parties to the transaction;

6-86

      (2) A dual facilitator shall not have the ability to satisfy fully the duties of loyalty, full

6-87

disclosure, reasonable care and obedience to lawful instructions, but shall still owe a duty to

6-88

protect the confidential information of all parties and a duty to account for funds;

6-89

      (3) Confidential information obtained by a dual facilitator from either party may not be

6-90

disclosed except:

6-91

      (i) If disclosure is expressly authorized;

6-92

      (ii) If such disclosure is required by law;

6-93

      (iii) If such disclosure is intended to prevent illegal conduct; or

6-94

      (iv) If such disclosure is necessary to prosecute a claim against a person represented or to

6-95

defend a claim against the licensee. The duty to protect confidential information shall continue

6-96

after the completion of the transaction; and

6-97

      (4) If a comparative market analysis was prepared for a seller client or a buyer client and

6-98

a dual facilitation situation subsequently arises, the dual facilitator may only provide the

6-99

comparative market analysis to the other party with the prior consent of the party for whom it was

6-100

initially prepared. A dual facilitator shall not be able to prepare a comparative market analysis for

6-101

either party after a dual facilitation situation arises as it may adversely affect one party's

6-102

bargaining position relative to the other party.

7-1

      In the event that either the seller client or buyer client in the case of a sale of property, or

7-2

the landlord client and the tenant client in the case of a rental of property, does not consent to dual

7-3

facilitation, then the principal broker or his or her designee, may, with the consent of the

7-4

party(ies) withholding consent designate another licensee to represent one of the parties as a

7-5

designated client representative.

7-6

      In the event that an affiliated licensee is acting as a dual facilitator, the principal broker

7-7

or his or her designee shall act as a neutral transaction coordinator in the transaction, except as

7-8

required by section 5-20.8-2, and shall protect the parties' confidential information. In the event

7-9

that the clients of a principal broker consent to his or her acting as a disclosed dual facilitator, the

7-10

principal broker may also oversee the transaction as a transaction coordinator.

7-11

     5-20.6-8. Mandatory relations disclosure. -- Mandatory relationship disclosure. -- (a)

7-12

The Rhode Island real estate commission shall approve a mandatory relationship disclosure that

7-13

conforms to the requirements of this section.

7-14

      (b) A licensee shall provide a prospective buyer, seller, tenant, or landlord in a real estate

7-15

transaction with a copy of the mandatory relationship disclosure and shall obtain a signed

7-16

acknowledgement of receipt from the buyer, seller, tenant, or landlord at the first personal contact

7-17

with the prospective buyer, seller, tenant, or landlord, or prior to an offer to purchase or lease,

7-18

whichever is first to occur. If a buyer, seller, tenant, or landlord, refuses to sign an

7-19

acknowledgement of receipt, the licensee shall set forth, sign and date a written declaration of the

7-20

facts of the refusal.

7-21

      (c) The mandatory relationship disclosure shall contain the following information:

7-22

      (1) A list of the types of representation or assistance available to a prospective buyer,

7-23

seller, tenant, or landlord consistent with section 5-20.6-3;

7-24

      (2) A statement that a principal broker and his or her affiliated licensees must disclose

7-25

their relationship as a designated client representative, transaction facilitator, or transaction

7-26

coordinator to the buyer, seller, tenant, or landlord in any transaction;

7-27

      (3) The legal duties and obligations owed to the buyer, seller, tenant, or landlord in each

7-28

type of relationship as set forth in this chapter and chapter 5-20.5;

7-29

      (4) A conspicuous notice that a licensee cannot act as a client representative for a

7-30

prospective buyer, seller, tenant, or landlord unless the licensee obtains the informed written

7-31

consent of a prospective buyer, seller, tenant, or landlord with a signed mandatory relationship

7-32

disclosure;

7-33

      (5) A box for the client or customer to select the type of representation or assistance that

7-34

he or she desires;

8-1

     (6) A box for the client or customer to acknowledge the type of representation or

8-2

assistance that a real estate licensee is offering to the other party in the same transaction.

8-3

      (6)(7) A statement that a principal broker may designate one or more affiliated licensees

8-4

to act as the designated client representative(s) of a seller or landlord and one or more affiliated

8-5

licensees to act as the designated client representative(s) of a buyer or tenant in the same

8-6

transaction; provided, that the licensee obtains the consent from the client being represented;

8-7

      (7)(8) A statement that, when the principal broker or his or her designee appoints

8-8

designated client representatives to represent clients on different sides of a transaction, he or she

8-9

shall: (i) act in a neutral capacity as a transaction coordinator; (ii) protect all parties' confidential

8-10

information; and (iii) properly account for funds;

8-11

      (8)(9) A statement that all affiliated licensees not appointed as a designated client

8-12

representative for the client may represent another party in a transaction with conflicting interests;

8-13

      (9)(10) An explanation of the potential conflicts of interest that exist if a licensee acts as

8-14

a designated client representative in a transaction or a neutral transaction facilitator for more than

8-15

one party in the same transaction;

8-16

      (10)(11) A statement that a principal broker and his or her affiliated licensees must

8-17

disclose their relationship as a designated client representative, transaction facilitator, or

8-18

transaction coordinator to the buyer, seller, tenant, or landlord in any transaction;

8-19

      (11)(12) A statement that the failure of a licensee to give a prospective buyer, seller,

8-20

tenant, or landlord the mandatory relationship disclosure timely or the failure of a licensee to

8-21

obtain any other written consent required by this chapter shall be a violation of Rhode Island real

8-22

estate license law and may subject the licensee to disciplinary action;

8-23

      (12)(13) A statement that if a consumer desires to change the nature of a relationship

8-24

with a licensee from a customer relationship to a client relationship that a licensee's relationship

8-25

with a buyer, seller, tenant, or landlord as a designated client representative must be established

8-26

no later than the preparation of a sales agreement, offer to purchase, or lease; and

8-27

      (13)(14) Written confirmation from each party signing the mandatory relationship

8-28

disclosure that he or she has received, read, and understood this mandatory relationship disclosure

8-29

and has consented to the relationship confirmed above.

8-30

      (d) In all instances, a licensee's relationship with a buyer, seller, tenant, or landlord as a

8-31

designated client representative must be established, and the mandatory relationship disclosure

8-32

executed, no later than the preparation of a sales agreement, offer to purchase, or lease.

     

8-34

SECTION 3. This act shall take effect upon passage.

     

=======

LC01792

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO BUSINESSES AND PROFESSIONS - AGENCY RELATIONSHIPS IN

RESIDENTIAL REAL ESTATE TRANSACTIONS

***

10-1

     This act would provide that a real estate broker or salesperson who provides assistance in

10-2

a real estate transaction shall no longer be deemed a neutral transaction facilitator. This act would

10-3

further provide that the mandatory relationship disclosure form include a box for the customer to

10-4

acknowledge the type of representation that a real estate broker or salesperson is offering to the

10-5

other party in the transaction.

10-6

     This act would take effect upon passage.

     

=======

LC01792

=======

H5718