Report Title:

Real Estate Brokers and Salespersons; Brokerage Relationships

Description:

Describes types of brokerage relationships and establishes rights and duties of parties therein. Appropriates REEF funds for post-legislation educational activities.

THE SENATE

S.B. NO.

109

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to real estate brokers and salespersons.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Chapter 467, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part I. BROKERAGE relationships

§467-A Types of brokerage. (a) Except as otherwise prohibited in this chapter, a brokerage firm and client or customer may establish an agency brokerage or transaction brokerage.

(b) The burden of establishing the brokerage relationship and the terms of the relationship shall be on the party seeking to enforce the brokerage relationship. In the absence of a written agreement, the relationship shall be presumed to be a transaction brokerage.

(c) A licensee shall exercise reasonable skill, diligence, and care in assisting the client or customer in a real estate transaction, consistent with the requirements of this chapter.

(d) No person shall perform brokerage services in the State without the proper real estate license pursuant to section 467-7. The liability of a person who fails to have a required real estate license shall include any liability that would have been imposed had such person been a licensee under this chapter.

§467-B Agency brokerage. (a) A licensee serving in an agency brokerage relationship may:

(1) Provide services to the client in a fiduciary or agency capacity;

(2) Advocate for the client;

(3) Promote the client's interests over the interests of other parties to the transaction; and

(4) Provide other real estate services ancillary thereto, in compliance with all applicable law, including but not limited to licensing requirements.

(b) All licensees providing agency brokerage services shall be designated pursuant to section 467-F(a).

(c) An agency brokerage relationship shall be established by written agreement signed by the principal broker or a broker-in-charge and the client at the earliest reasonable opportunity. The licensee shall not submit or accept any listing agreement, offer or contract for the sale, purchase, rental, or lease of property on behalf of the client without such written agreement. The written agreement (by itself or in documents incorporated therein) shall:

(1) Describe the types of brokerage established by this chapter;

(2) Identify the type of brokerage established with the client;

(3) Identify the names and addresses of the parties to the agreement;

(4) Identify the designated licensees providing services to the client;

(5) Identify the duties to be performed by each party to the agreement;

(6) Identify the property;

(7) With respect to termination:

(A) State that the agreement is terminable at any time upon written notice by a party to the agreement; or

(B) Include a specified termination date and a description of the circumstances under which the agreement may be terminated prior to any stated termination date, including the circumstances set forth in section 467-N;

(8) Specify the amount of compensation or method of determining compensation, if any, to be paid to the brokerage firm, the person who is responsible for payment, and the circumstances that entitle the licensee to receive compensation;

(9) Specify that the brokerage firm, its affiliated licensees, and any affiliate or related person of any such person, shall not receive compensation from any person other than the client, or someone acting on the client's behalf, without the prior written consent of all parties to the transaction;

(10) Specify that the brokerage firm, its affiliated licensees, and any affiliate or related person of any such person, shall disclose in writing any interest such person has, or will have, in the property or transaction, other than compensation disclosed pursuant to paragraph (8);

(11) If the brokerage firm's entitlement to compensation is contingent upon the occurrence of an event that may occur after the agreement is terminated, clearly describe the circumstances under which the brokerage firm will be entitled to compensation;

(12) If the brokerage firm's entitlement to compensation is contingent upon the occurrence of an event that may occur after the agreement is terminated and specific criteria (such as the names of prospects) cannot be identified until the agreement is terminated, specify the time period, not to exceed       days after termination of the agreement, by which the brokerage firm shall identify the specific criteria in writing to the client;

(13) Inform the client that the client shall not be held vicariously liable for the misrepresentations, actions, and omissions of the real estate licensee unless the client approves, directs, ratifies, or participates in such misrepresentation, action, or omission, and as otherwise provided in section 467-O;

(14) Disclose all applicable activities in which the licensee may engage pursuant to section 467-J;

(15) Provide additional disclosures required by law, including without limitation sections 467-F and 467-I, as applicable; and

(16) Include such other provisions not inconsistent with law as the parties may determine.

(d) Except as otherwise agreed in writing, a licensee in an agency brokerage shall:

(1) Perform the terms of any agreement made with the client, which may include ancillary real estate services, in compliance with all applicable law, including but not limited to licensing requirements;

(2) Promote the interests of the client with the utmost good faith, loyalty, fidelity, and honesty;

(3) Seek a price and terms that are acceptable to the client;

(4) Inform the client of any material benefits or risks of a transaction that are actually known by the licensee;

(5) Disclose to the client all adverse material facts actually known by the licensee, including adverse material facts about the buyer or tenant where the client is the seller or landlord, and make all other disclosures required by law;

(6) Ascertain and disclose to the client all material facts regarding the property, except as provided in section 467-14, of which the licensee can reasonably be expected to be aware, that:

(A) Are within the knowledge or control of the licensee;

(B) Can be observed from visible, accessible areas; or

(C) Are required to be disclosed under section 508D-15;

(7) Disclose to the client all adverse material facts actually known by the licensee, including but not limited to:

(A) Any environmental hazards affecting the property that are required by law to be disclosed;

(B) The physical condition of the property;

(C) Any material defects in the property;

(D) Any material defects in the title to the property; and

(E) Any material limitation on any party's ability to perform under the terms of the contract;

(8) Inform the client of the availability of public records regarding the property;

(9) Present in a timely manner all offers to and from the client, when the offer is received prior to the closing of the sale, unless the client instructs the licensee not to submit offers after the client has entered into an agreement;

(10) Keep the client fully informed regarding the transaction;

(11) Identify to the client property for sale;

(12) Provide information on the property to the client;

(13) Identify possible sources of financing to the client, if needed;

(14) Provide pre-printed real estate forms, contracts, leases, and related addenda and exhibits to the client, and act as a scribe in preparing contracts;

(15) Assist the client in complying with the terms and conditions of any contract, including closing the transaction;

(16) Advise the client to obtain expert advice as to material matters about which the licensee knows but the specifics of which are beyond the expertise of the licensee;

(17) Account in a timely manner for all money and property received; and

(18) Comply with all applicable law, including without limitation, applicable fair housing and civil rights provisions, requirements of this chapter, and the rules adopted pursuant to this chapter.

§467-C Transaction brokerage. (a) A licensee serving in a transaction brokerage shall act as a neutral facilitator for the customer and may provide real estate services subject to the restrictions set forth in this section. The licensee shall not:

(1) Provide services to the customer in a fiduciary or agency capacity;

(2) Advocate for the customer; or

(3) Promote the customer's interest over the interests of other parties to the transaction.

(b) A transaction brokerage agreement may be in writing.

(c) At the earliest reasonable opportunity and in any event prior to submitting or accepting any listing agreement, offer or contract for the sale, purchase, rent, or lease of property, the licensee shall provide a written disclosure to the customer. The disclosure shall be provided in the written agreement, by itself or in documents incorporated therein, or by separate document if there is no written agreement, and shall:

(1) Describe the types of brokerage established by this chapter;

(2) Describe the limitations of a transaction brokerage as set forth in subsection (a);

(3) Identify the type of brokerage established with the customer;

(4) Identify the names and addresses of the parties to the agreement;

(5) Identify the designated licensees providing services to the customer;

(6) Identify the duties to be performed by each party to the agreement;

(7) Identify the property;

(8) With respect to termination:

(A) State that the agreement is terminable at any time upon written notice by a party to the agreement; or

(B) Include a specified termination date and a description of the circumstances under which the agreement may be terminated prior to any stated termination date, including the circumstances set forth in section 467-M;

(9) Specify the amount of compensation or method of determining compensation, if any, to be paid to the brokerage firm, the person who is responsible for payment, and the circumstances that entitle the licensee to receive compensation;

(10) Specify that the brokerage firm, its affiliated licensees, and any affiliate or related person of any such person, shall not receive compensation from any person other than the customer or someone acting on the customer's behalf without the prior written consent of all parties to the transaction;

(11) Specify that the brokerage firm, its affiliated licensees, and any affiliate or related person of any such person, shall disclose in writing any interest such person has, or will have, in the property or transaction, other than compensation disclosed pursuant to subsection (c)(9);

(12) If the brokerage firm's entitlement to compensation is contingent upon the occurrence of an event that may occur after the agreement is terminated, clearly describe the circumstances under which the brokerage firm will be entitled to compensation;

(13) If the brokerage firm's entitlement to compensation is contingent upon the occurrence of an event that may occur after the agreement is terminated and specific criteria (such as the names of prospects) cannot be identified until after the agreement is terminated, specify a time period, not exceeding       days after termination of the agreement, by which the brokerage firm shall identify the specific criteria in writing to the customer;

(14) Inform the customer that the customer shall not be held vicariously liable for the misrepresentations, actions, and omissions of the licensee unless the customer approves, directs, ratifies, or participates in such misrepresentation, action, or omission, and as otherwise provided in section 467-O;

(15) Disclose all applicable activities in which the licensee may engage pursuant to section 467-J;

(16) Provide additional disclosures required by law, including without limitation sections 467-F and 467-I, as applicable; and

(17) Include other provisions not inconsistent with law as the parties may determine.

(d) Except as otherwise agreed in writing, a licensee in a transaction brokerage shall:

(1) Perform the terms of any agreement made with the customer (which may include ancillary real estate services) in compliance with all applicable law, including but not limited to licensing requirements, subject to the prohibitions in subsection (a);

(2) State the price and terms that the customer has authorized the licensee to disclose to the other party;

(3) Inform the customer of any material benefits or risks of a transaction which are actually known by the licensee;

(4) Disclose to the customer all adverse material facts actually known by the licensee (including adverse material facts about the buyer or tenant where the customer is the seller or landlord), and make all other disclosures required by law;

(5) Ascertain and disclose to the customer all material facts regarding the property (except as provided in section 467-14) of which the licensee can reasonably be expected to be aware, that:

(A) Are within the knowledge or control of the licensee;

(B) Can be observed from visible, accessible areas; or

(C) Are required to be disclosed under section 508D-15;

(6) Disclose to the customer all adverse material facts actually known by the licensee, including but not limited to:

(A) Any environmental hazards affecting the property that are required by law to be disclosed;

(B) The physical condition of the property;

(C) Any material defects in the property;

(D) Any material defects in the title to the property; and

(E) Any material limitation on any party's ability to perform under the terms of the contract;

(7) Inform the customer of the availability of public records regarding the property;

(8) Present in a timely manner all offers to and from the customer when such offers are received prior to the closing of the sale, unless the customer instructs the licensee not to submit offers after the customer has entered into an agreement;

(9) Keep the customer fully informed regarding the transaction;

(10) Identify to the customer property for sale;

(11) Provide information on the property to the customer;

(12) Identify possible sources of financing to the customer, if needed;

(13) Provide pre-printed real estate forms, contracts, leases, and related addenda and exhibits to the customer, and act as a scribe in preparing contracts;

(14) Assist the customer in complying with the terms and conditions of any contract, including closing the transaction;

(15) Advise the customer to obtain expert advice as to material matters about which the licensee has knowledge, but not specific expertise;

(16) Account in a timely manner for all money and property received; and

(17) Comply with all applicable law, including without limitation, applicable fair housing and civil rights provisions, the requirements of this chapter, and the rules adopted pursuant to this chapter.

(e) A licensee in a transaction brokerage shall not take action on behalf of a party without the party's consent.

§467-D Limitations on licensee's duties. (a) If, pursuant to section 467-B(d)(16) or 467-C(d)(15), the licensee advises the client or customer to obtain expert advice as to material matters about which the licensee has knowledge but not specific expertise, no cause of action shall arise against the licensee pertaining to such material matters.

(b) A licensee owes no duty to any party to the transaction to conduct an independent inspection of the property or of any party's financial condition.

(c) A licensee owes no duty to any party to the transaction to independently verify the accuracy or completeness of any statement made by the party or any qualified third party inspector.

(d) A licensee is not required to disclose to any party to the transaction information relating to the physical condition of the property if a written report regarding the physical condition of the property has been prepared by a qualified third party and provided to the party; provided that a licensee shall disclose to all parties to a transaction any facts actually known by the licensee that were omitted from or that contradict any information included in such report.

(e) A licensee shall not be liable for punitive or exemplary damages for the licensee's failure to perform any of the duties set forth in this section, absent clear and convincing evidence that the licensee acted toward the plaintiff with wilful or wanton conduct, fraud, or malice.

§467-E Change of type of brokerage. The type of the brokerage relationship may be changed by a written agreement that contains the provisions and disclosures required by sections 467-B(c) and 467-C(c), as applicable, and all other disclosures required with respect to the revised relationship.

§467-F Designated licensees. (a) By written agreement signed by the client or customer and either the principal broker or a broker-in-charge, one or more individual licensees associated with the principal broker may be designated to provided brokerage services to the client or customer. In an agency brokerage, all licensees of the brokerage firm shall be deemed to be the designated licensees in the absence of such signed written agreement. Designation is optional in a transaction brokerage relationship.

(b) A designation shall not relieve the principal broker and brokerage firm of their duties to supervise their associated licensees pursuant to section 467-1.6, and shall not limit the vicarious liability of the principal broker and brokerage firm for the misrepresentations, actions, and omissions of their associated licensees.

(c) The knowledge of the client's or customer's designated licensee shall not be imputed to the brokerage firm, the principal broker, or any other associated licensee who is not designated to provide services to the client or customer. Information known to a licensee in a transaction brokerage shall not be imputed to any party to the transaction or to any licensee who does not provide services to the customer and who is not designated to provide services to the customer.

(d) The brokerage relationship established between the client or customer and a designated licensee, including the duties, obligations, and responsibilities of that relationship, shall not extend to the principal broker, brokerage firm, or to any associated licensee who is not designated to provide, and who does not provide, brokerage services to the client or customer. The agreement with the client or customer shall disclose that the brokerage relationship exists only with the designated licensee, and not with the brokerage firm or any real estate licensee that is not a designated licensee. This subsection shall not apply where all licensees of the brokerage firm are deemed designated pursuant to subsection (a).

§467-G Services for multiple parties in one transaction. (a) A principal broker and its associated licensees may provide brokerage services to multiple parties in the same real estate transaction to the extent set forth in this chapter. Subject to section 467-I(b), and unless otherwise restricted by agreement:

(1) Different designated licensees may provide agency brokerage services to multiple parties in the same real estate transaction;

(2) The same licensee may provide transaction brokerage services to multiple parties in the same real estate transaction; and

(3) The same licensee may provide agency brokerage services to one party, and transaction brokerage services to the other party, in the same transaction.

(b) Except as set forth in this section and section 467-R(c), a licensee shall not provide brokerage services to multiple parties in the same real estate transaction.

§467-H Prohibition against subagency. A licensee shall not enter into a subagency relationship.

§467-I Disclosure to other parties; written consent. (a) A licensee who provides services in a real estate transaction shall disclose the capacities in which the licensee provides, or seeks to provide, services to any party to the transaction (e.g., as a licensee acting on behalf of the buyer, tenant, seller, or buyer in an agency brokerage or in a transaction brokerage). The disclosure required by this section may be made directly or through the licensee of the other party.

(b) If a brokerage firm provides services to both parties in a real estate transaction, the principal broker or broker-in-charge shall provide to each client and customer written notification of:

(1) The parties in the transaction for whom any associated licensee is providing services;

(2) The type of brokerage (agency or transaction brokerage) being provided to each party;

(3) The identity of any designated licensee of each party; and

(4) The option of the client and customer to terminate the brokerage relationship if the client or customer does not consent in writing to such arrangement.

(c) The disclosures required by this section shall be made at the earliest reasonable opportunity. If the disclosure is made orally, written disclosure shall be provided within two business days thereafter. Notwithstanding a client's or customer's request for anonymity, the licensee shall disclose the capacity in which the client or customer is receiving services from the licensee.

§467-J Permitted activities with others. In the absence of an explicit agreement to the contrary, a licensee may engage in any of the following activities without being deemed to have breached any duty or obligation to the client or customer:

(1) Show alternative properties not owned by the client or customer to prospective buyers or tenants;

(2) List competing properties for sale or lease;

(3) Show properties in which the client or customer is interested to other prospective buyers or tenants;

(4) Assist competing buyers or tenants in purchasing or leasing a property in which the client or customer is interested; and

(5) Provide real estate services for other parties in the same transaction to the extent provided in section 467-G.

§467-K Non-disclosure of certain information. A licensee shall not disclose any of the following information without the consent of the client or customer:

(1) Whether the client or customer, if the buyer or tenant, is willing to pay more than the price offered;

(2) Whether the client or customer, if the seller or landlord, is willing to accept less than the asking price;

(3) Whether the client or customer will agree to terms other than those offered;

(4) The client's or customer's motivating factors to enter into a transaction; and

(5) Any material information about the client or customer, unless disclosure is required by law or the failure to disclose such information may constitute fraudulent misrepresentation.

§467-L Confidentiality. (a) A licensee shall not knowingly disclose or use confidential information of the client or customer, during or following the termination of the services performed for a client or customer, unless:

(1) The client or customer consents to the disclosure or use;

(2) Disclosure is made to another person who is under a similar duty of confidentiality and who is acting solely on behalf of the client or customer to further the duties to be performed by such person for the client or customer;

(3) Disclosure is required by law;

(4) Disclosure is necessary to prevent the client or customer from committing a crime;

(5) The information is used by the licensee to defend against an accusation of wrongful conduct in a judicial proceeding or in a proceeding before the commission or other governmental body, a professional real estate organization, or a consumer protection organization;

(6) The information is disclosed to the licensee's attorney, accountant, insurer, or other person in connection with services provided to the licensee; provided that that person shall maintain the confidentiality of the information; or

(7) The information is made public or becomes public from a source other than the licensee.

(b) No cause of action shall arise against a licensee for making a required or permitted disclosure or for refusing to disclose confidential information.

§467-M Termination of agreement. (a) The brokerage agreement shall terminate upon:

(1) The closing of a transaction pursuant to the agreement of the parties; or

(2) The earliest of the following dates if a transaction is not closed pursuant to the agreement of the parties:

(A) An expiration date agreed upon by the parties;

(B) A termination date authorized by the agreement;

(C) A termination date established in a reasonable written notice of termination provided by a non-defaulting party for a material breach of the contract pursuant to the agreement, which shall permit a termination of the contract therefor; or

(D) The date established in a written notice of termination issued by either party, in the case of an oral agreement.

(b) If a client or customer is notified that the other party to the transaction is receiving services from a licensee in the same brokerage firm pursuant to sections 467-G and 467-I(b) and does not consent to the arrangement, the client or customer may terminate the agreement upon reasonable written notice.

§467-N Duties after termination. A licensee owes the following duties to the client or customer after termination, expiration, completion, or performance of the brokerage agreement:

(1) To account in a timely manner for all money and property; and

(2) To maintain the confidentiality of the client's or customer's confidential information pursuant to section 467-L.

Except as may otherwise be specified by written agreement, the licensee owes no other duty to the client or customer after termination, expiration, completion, or performance of the brokerage agreement.

§467-O Vicarious liability. Except as otherwise agreed in writing, the client or customer shall not be vicariously liable for any misrepresentation, action, or omission of the licensee retained by the client or customer unless the client or customer approves, directs, ratifies, or participates in the misrepresentation, action, or omission. If the client or customer becomes aware of any misrepresentation, action, or omission by the licensee, the client or customer shall notify the other parties to the transaction. If the client or customer fails to provide prompt notification, the client or customer shall be secondarily liable to the extent that any damages would have been mitigated by prompt notification. The licensee shall remain primarily liable for damages caused by the licensee's misrepresentations, actions, and omissions.

§467-P Common law superseded. This chapter shall supersede state common law regarding real estate brokerage relationships to the extent the common law is inconsistent with the requirements of this chapter. A person seeking to invoke the common law shall have the burden to establish its applicability.

§467-Q Certain rights, duties, and liabilities not affected. Except as expressly set forth in this chapter, nothing in this chapter shall:

(1) Limit the liability of a licensee for any failure by the licensee to provide any disclosures required by law, including without limitation section 467-14:

(2) Limit the liability of a licensee for the licensee's misrepresentation, action, or omission;

(3) Adversely affect a person's right to rescind a real estate transaction;

(4) Limit the liability of a client or customer for any failure by the client or customer to provide any disclosures required by law, including without limitation section 508D;

(5) Limit the liability of a client or customer for the client's or customer's misrepresentation, action, or omission;

(6) Limit the liability between or among clients or customers and licensees in matters involving applicable law, including without limitation, applicable fair housing and civil rights provisions;

(7) Limit the principal broker's or brokerage firm's duty to supervise its associated licensees; or

(8) Shield the principal broker or brokerage firm from vicarious liability for its associated licensees.

§467-R Co-brokerage requirements. (a) In a co-brokerage relationship, the primary broker and co-broker shall each confirm that the client or customer has entered into a written agreement that complies with the requirements of this chapter, that all requisite disclosures to all parties have been provided pursuant to this chapter, and that the client or customer has consented to the appointment of the co-broker, whose name, address, and designated licensee, if any, shall be set forth in the client's or customer's written consent.

(b) When a co-broker is used, the references in this chapter to "broker" shall apply to both the primary broker and the co-broker. For example, pursuant to section 467-I, the licensee shall disclose the identity of both the primary broker and the co-broker.

(c) Section 467-G shall not preclude a primary broker acting in another jurisdiction from providing services to both parties to a transaction pursuant to all applicable laws of the jurisdictions in which the primary broker and parties are located; provided that the primary broker and any other person may not perform any brokerage services in the State for multiple parties except pursuant to section 467-G and in compliance with all Hawaii and federal laws.

For the purposes of this subsection, "jurisdiction" means a state or jurisdiction recognized by the Association of Real Estate License Law Officials, with an equivalent real estate licensing law as determined by the commission.

(d) The primary broker and co-broker shall be jointly and severally liable for compliance by the primary broker, co-broker, and their licensees with all applicable Hawaii and federal laws; provided that nothing herein shall restrict the primary broker, co-broker, client, or customer from determining by agreement who shall be primarily responsible, as between the primary broker and the co-broker, for compliance with applicable Hawaii and federal laws. In the absence of such an agreement:

(1) The primary broker shall be primarily responsible for compliance as to all matters not assigned to the co-broker, and for the acts and omissions of the primary broker and its associated licensees; and

(2) The co-broker shall be primarily responsible for compliance as to the duties assigned to the co-broker, and for the acts and omissions of the co-broker and its associated licensees.

§467-S Burden of proof. Nothing contained in this chapter shall be deemed to shift the burden of proof in any action or proceeding in which a person is alleged to have engaged in fraud, fraudulent misrepresentation, intentional misconduct, or violation of law."

SECTION 2. Chapter 467, Hawaii Revised Statutes, is amended by designating sections 467-1 to 467-30 as follows:

"PART I. GENERAL PROVISIONS"

SECTION 3. Section 467-1, Hawaii Revised Statutes, is amended by adding twenty new definitions to be appropriately inserted and to read as follows:

""Affiliate" of an entity means a person who controls or is controlled by, or is under common control with, the entity, or an individual who is a general partner, principal, officer, director, manager, or owner of       per cent or more of the entity, or a related person of such individual.

"Agency brokerage" means a brokerage in which the licensee is designated to perform one or more agency brokerage services pursuant to section 467-B.

"Agency brokerage services" means any real estate service in which a person (i) provides services to the client in a fiduciary or agency capacity; or (ii) advocates or otherwise promotes one party's interest over the interests of other parties to the transaction; and includes any ancillary real estate service provided in connection with such services.

"Associated licensees" means the licensees who are employed by or associated with the principal broker pursuant to section 467-1.6, and includes brokers and salespersons.

"Broker-in-charge" means an individual broker licensee designated by the principal broker as the broker directly in charge of and responsible to the principal broker for the real estate operations conducted at the principal place of business or a branch office.

"Brokerage firm" means a sole proprietor broker licensee, or a partnership, corporation, limited liability company, or other entity licensed as a broker.

"Brokerage relationship" means an agency brokerage relationship or a transaction brokerage relationship as set forth in section 467-A.

"Brokerage service" means an agency brokerage service or a transaction brokerage service.

"Client" means the seller, landlord, buyer, or tenant for whom the licensee is providing agency brokerage services.

"Customer" means the seller, landlord, buyer, or tenant for whom the licensee is providing transaction brokerage services.

"Co-broker" means a broker who is retained with the client's or customer's written consent by the primary broker to assist the primary broker in performing brokerage services for the client or customer.

"Designated licensee" means a licensee who is designated to provide brokerage services to a seller, landlord, buyer, or tenant pursuant to section 467-F.

"Licensee" means a real estate broker or real estate salesperson licensed pursuant to this chapter.

"Material fact" means any fact, defect, or condition, past or present, that would be expected to measurably affect the value to a reasonable person of the residential real property being offered for sale.

"Primary broker" means the broker in a co-brokerage relationship pursuant to section 467-R who establishes the initial relationship with the client or customer, and who retains the co-broker to assist the primary broker in performing brokerage services to the client or customer.

"Principal broker" means the broker having direct management and supervision of the brokerage firm and its associated licensees pursuant to section 467-1.6.

"Related person" means the spouse or reciprocal beneficiary (or a parent, sibling, or child of the spouse or reciprocal beneficiary), child, grandchild, sibling, parent (or spouse of any thereof) of a person, or an individual having the same home as the person, or a trust or estate of which an individual specified in this paragraph is a substantial beneficiary.

"Subagency" means a relationship in which a person provides brokerage service to a party without disclosing to such party pursuant to section 467-I that the person has, or is seeking to establish, a brokerage relationship with the other party. For example, "subagency" includes a relationship in which a person aids a buyer in locating property without disclosing that such person is providing, or is seeking to provide, brokerage services to the seller.

"Transaction brokerage" means a brokerage in which a licensee performs one or more of the transaction brokerage services pursuant to section 467-C.

"Transaction brokerage service" means any real estate service, excluding (i) service in a fiduciary or agency capacity; or (ii) service which advocates or otherwise promotes one party's interest over the interests of other parties to the transaction."

SECTION 4. There is appropriated out of the real estate education fund the sum of $          , or so much thereof as may be necessary for fiscal year 2005-2006, to conduct post-bill passage educational activities for consumers and licensees. The funds shall be used to employ one full-time temporary real estate brokerage specialist position in the department of commerce and consumer affairs, either an employee of the department or a consultant to the department, and for other related expenses.

The sum appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 6. In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 7. New statutory material is underscored.

SECTION 8. This Act shall take effect upon its approval; provided that section 4 of this Act shall take effect on July 1, 2005.

INTRODUCED BY:

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