Report Title:

Real Estate; Brokerage Relationships

Description:

Adds new chapter governing brokerage relationships to the Hawaii Revised Statutes. Appropriates $ from the Real Estate Education Fund for consumer and licensee educational programs and a real estate brokerage specialist position within the Department of Commerce and Consumer Affairs.

HOUSE OF REPRESENTATIVES

H.B. NO.

107

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO BROKERAGE RELATIONSHIPS.

 

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

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

brokerage relationships

§ -1 Definitions. As used in this chapter:

"Agency brokerage" means a brokerage in which a real estate licensee is designated to perform one or more agency brokerage services.

"Agency brokerage services" means real estate services provided by a brokerage firm:

(1) In a fiduciary or agency capacity; or

(2) In which the interests of one party to a transaction are advocated or otherwise promoted over the interests of other parties to the transaction;

and includes any ancillary real estate service provided in connection with such services.

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

"Associated licensees" means the real estate licensees who are employed by or associated with a brokerage firm and are under the management and supervision of the firm's principal broker.

"Broker in charge" means an individual broker 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, partnership, corporation, limited liability company, or other entity licensed as a broker.

"Brokerage relationship" means a relationship between a brokerage firm and a client or customer in which brokerage services are provided by the firm to the client or customer, and includes an agency brokerage relationship or a transaction brokerage relationship.

"Brokerage service" means assistance in obtaining financing for or negotiating real estate contracts and includes agency brokerage services and transaction brokerage services provided by a real estate licensee.

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

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

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

"Designated licensee" means a real estate licensee who is designated to provide brokerage services to a client or customer by written agreement signed by the client or customer and either the principal broker or a broker-in-charge, or in the absence of a written agreement, any real estate licensee of an agency brokerage.

"Material", when used with reference to a fact, means any fact, defect, or condition, past or present, which 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 who establishes the initial relationship with the client or customer, and who retains a co-broker to assist the primary broker in performing brokerage services for the client or customer.

"Principal broker" means the broker directly in charge of the management and supervision of the brokerage firm and its real estate licensees, and responsible for the real estate operations conducted by a brokerage firm.

"Real estate licensee" or "licensee" means a real estate broker or real estate salesperson licensed under chapter 467.

"Related person" means the spouse, reciprocal beneficiary (or a parent, sibling, or child of the spouse or reciprocal beneficiary), child, grandchild, sibling, parent (or spouse of any thereof) of another individual, or a relationship in which the related person lives in the same home as another individual. "Related person" also means the trust or estate of which an individual is a substantial beneficiary.

"Subagency" means a relationship in which a person provides brokerage services to a client or customer without disclosing that the person has, or is seeking to establish, a brokerage relationship with other parties to the same transaction. "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 real estate licensee performs one or more transaction brokerage services.

"Transaction brokerage service" means any real estate service provided by a brokerage firm, excluding service:

(1) Provided in a fiduciary or agency capacity; and

(2) In which the interests of one party to a transaction are advocated or otherwise promoted over the interests of other parties to the transaction.

§ -2 Types of real estate brokerages. Except as otherwise prohibited in this chapter, a brokerage firm and client or customer may establish the following types of real estate brokerage relationships:

(1) An agency brokerage; or

(2) A transaction brokerage.

§ -3 Agency brokerage. (a) A real estate 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 interest over the interests of other parties to the transaction; and

(4) Provide other real estate services ancillary thereto.

(b) All licensees providing agency brokerage services shall be designated pursuant to section -7(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 principal broker or a broker-in-charge 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 brokerages 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 licensee(s) 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 -15;

(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 will entitle the real estate licensee to receive compensation;

(9) Specify that the brokerage firm, its associated licensees, and any affiliate, 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 associated licensees, and any affiliate shall disclose in writing any interest such person has, or will have, in the property or transaction, other than compensation disclosed pursuant to paragraphs (8) and (9);

(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:

(A) Clearly describe the circumstances under which the brokerage firm will be entitled to compensation; and

(B) If the specific criteria (such as the names of prospects) cannot be identified until the agreement is terminated, then the agreement shall 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;

(12) Inform the client that the client shall not be held vicariously liable for the misrepresentations, actions, or 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 -17;

(13) Disclose all applicable activities in which the licensee may engage pursuant to section -11;

(14) Provide such additional disclosures that must be provided by law, including without limitation section

-7 and section -10, as applicable; and

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

(d) Except as otherwise agreed in writing, a real estate 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 which 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 a 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) Must be disclosed under section 508D-15;

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

(A) Any environmental hazards affecting the property which 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 a property;

(9) Present in a timely manner all offers to and from the client, when such 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 and inform the client of property for sale;

(12) Provide the client with information about the property for sale;

(13) Identify and provide the client with information on possible sources of financing, if needed;

(14) Provide the client with pre-printed real estate forms, contracts, leases, and related addenda and exhibits, 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 and the requirements of this chapter including rules adopted pursuant to this chapter.

§ -4 Transaction brokerages. (a) A real estate 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 herein. Such 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 but need not be in writing.

(c) Written disclosures required. At the earliest reasonable opportunity and in any event prior to submitting or accepting any listing agreement, offer or contract for the sale, purchase, rental 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 brokerages established by this chapter;

(2) Describe the limitations of transaction brokerages 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 licensee(s) 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 -15;

(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 will entitle the real estate licensee to receive compensation;

(10) Specify that the brokerage firm, its associated 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 associated licensees, and any affiliate, shall disclose in writing any interest such person has, or will have, in the property or transaction, other than compensation disclosed pursuant to paragraphs (9) and (10);

(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, the agreement shall:

(A) Clearly describe the circumstances under which the brokerage firm will be entitled to compensation; and

(B) If the specific criteria (such as the names of prospects) cannot be identified until the agreement is terminated, then the agreement shall 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 customer;

(13) Inform the customer that the customer shall not be held vicariously liable for the misrepresentations, actions, or omissions of the real estate licensee unless the customer approves, directs, ratifies, or participates in such misrepresentation, action, or omission, and as otherwise provided in section -17;

(14) Disclose all applicable activities in which the licensee may engage pursuant to section -11;

(15) Provide such additional disclosures that must be provided by law, including without limitation section

-7 and section -10, 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 real estate licensee in a transaction brokerage shall have the following obligations and responsibilities:

(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 section -4(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) Must 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 which 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 offer is 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 and inform the customer of property for sale;

(11) Provide the customer with information about the property for sale;

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

(13) Provide the customer with pre-printed real estate forms, contracts, leases, and related addenda and exhibits, 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 knows but the specifics of which are beyond the expertise of the licensee;

(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, and the requirements of this chapter including rules adopted pursuant to this chapter.

(e) The real estate licensee in a transaction brokerage shall not take action on behalf of a party without such party’s consent

§ -5 Licensee's general duties and liabilities; limitations; unlicensed persons. (a) A licensee shall exercise reasonable skill, diligence, and care in assisting the client or customer in a real estate transaction.

(b) A licensee's duties and liabilities are subject to the following limitations:

(1) If pursuant to section -3(d)(16) or section -4(d)(15), the licensee advised the client or customer 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, no cause of action shall arise against the licensee pertaining to such material matters;

(2) A licensee owes no duty to any party to a transaction to conduct an independent inspection of the property or of any party’s financial condition;

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

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

(5) 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, unless such failure is shown by clear and convincing evidence that the licensee committed fraud, or acted wilfully, wantonly, or with malice.

(c) A person performing brokerage services without a real estate license shall be subject to any liability that would be imposed had the person been licensed under chapter 467.

§ -6 Change of type of brokerage. A brokerage relationship may be revised by written agreement that shall contain the provisions and disclosures required by section

-3(c) and section -4(c), as applicable, and all other disclosures required with respect to the revised relationship.

§ -7 Designated licensees. (a) One or more individual licensees associated with the brokerage firm may be designated to provided brokerage services to the client or customer by written agreement signed by the client or customer and either the principal broker or a broker-in-charge. In an agency brokerage, all licensees of the brokerage firm shall be deemed to be designated licensees in the absence of such signed written agreement. Designation is optional in a transaction brokerage relationship.

(b) The designation of a licensee does not limit the duty of the principal broker and brokerage firm to supervise their associated licensees pursuant to section 467-1.6 and does not limit the vicarious liability of the principal broker and brokerage firm for the misrepresentations, actions, or omissions of their associated licensees.

(c) The knowledge of the designated licensee of a client or customer shall not be imputed to the brokerage firm, the principal broker, or any other associated real estate 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 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(s), and not with the brokerage firm or any real estate licensee that is not a designated licensee. This provision shall not apply where all licensees of the brokerage firm are deemed designated pursuant to subsection (a).

§ -8 Services for multiple parties in one transaction. (a) Except as set forth in this section and section -12(c), a licensee shall not provide brokerage services to multiple parties in the same real estate transaction.

(b) Subject to sections -10(b) and 0, 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.

§ -9 Prohibition against subagency. No real estate licensee shall enter into a subagency relationship.

§ -10 Disclosure to other parties; written consent. (a) Duty to disclose to others. A real estate licensee who provides brokerage services in a real estate transaction shall disclose the capacity or capacities in which the real estate licensee provides, or seeks to provide, services to any party to the transaction (e.g., as a licensee to the buyer, seller, landlord, or tenant 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 cause each client and customer to be notified in writing 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 licensees 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. If the real estate licensee’s client or customer has requested anonymity, the real estate licensee need not disclose the identity of the client or customer, but the real estate licensee must disclose the capacity in which the client or customer is receiving services.

§ -11 Permitted activities with others. A real estate licensee may engage in any of the following activities and shall not thereby be deemed to have breached any duty or obligation to the client or customer, in the absence of an explicit agreement to the contrary. The real estate licensee may:

(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) Serve as a real estate licensee for other parties in the same transaction to the extent provided in section

-8.

§ -12 Co-brokerage requirements. (a) In a co-brokerage relationship, the primary broker and co-broker shall each confirm that:

(1) The client or customer has entered into a written agreement that complies with the requirements of this chapter;

(2) All requisite disclosures to all parties have been provided pursuant to this chapter; and

(3) 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 relationship exists, the references in this chapter to "broker" shall apply to both the primary broker and the co-broker. For example, pursuant to section

-10, the licensee shall disclose the identity of both the primary broker and co-broker.

(c) Section -8 shall not prevent a primary broker acting in another jurisdiction from providing brokerage 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 neither the primary broker nor any other person may perform any brokerage services in this state for multiple parties except pursuant to section -8.

For the purposes of this section, "jurisdiction" means a state or jurisdiction recognized by the Association of Real Estate License Law Officials, with a real estate licensing law equivalent to that of this state, 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 law; however, nothing herein restricts the primary broker, co-broker, or 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 law. In the absence of such an agreement, 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 the co-broker shall be primarily responsible for compliance as to the duties assigned to it, and for the acts and omissions of the co-broker and its associated licensees.

§ -13 Non-disclosure of certain information. The real estate licensee shall not disclose any of the following information without the consent of the client or customer:

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

(2) Whether the client or customer, who is a 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; or

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

§ -14 Confidentiality. (a) A licensee shall not knowingly disclose or use confidential information of the client or customer during or following the termination of the brokerage 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 under similar duty of confidentiality and 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 real estate licensee to defend the licensee against an accusation of wrongful conduct in a judicial proceeding, before the real estate commission or other governmental body, before a professional real estate organization, or before 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 such person shall maintain the confidentiality of the information; or

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

(b) No cause of action shall arise against a licensee acting as a licensee for making any required or permitted disclosure or for maintaining the confidentiality of any information the licensee is not by law permitted to disclose.

§ -15 Termination of agreement. (a) The real estate brokerage agreement shall terminate when:

(1) A transaction is closed pursuant to the agreement of the parties; or

(2) If a transaction is not closed pursuant to the agreement of the parties, the earlier of:

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

(B) Any authorized termination of the agreement;

(C) A date pursuant to the terms of the agreement, which shall include the option of the non-defaulting party to terminate the agreement upon reasonable written notice in the event of a material breach by the defaulting party; or

(D) In the case of an oral agreement, at any time upon written notice by either party to the relationship.

(b) If a client or customer is notified that another party to the transaction is receiving services from a licensee in the same brokerage firm pursuant to section    -8 and section      -10(b) and does not consent to such arrangement, such client or customer may terminate the agreement upon reasonable written notice.

§ -16 Duties after termination. A real estate 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 -14.

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.

§ -17 Vicarious liability of client or customer. Except as otherwise agreed in writing, the client or customer shall not be vicariously liable for the misrepresentations, actions, or omissions of their real estate licensee unless the client or customer approves, directs, ratifies, or participates in such misrepresentation, action, or omission. If the client or customer becomes aware of any misrepresentation, action, or omission by their real estate 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 liable to the extent that any damages would have been mitigated by prompt notification. The real estate licensee shall remain liable for damages caused by the real estate licensee’s misrepresentations, actions, or omissions.

§ -18 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 real estate licensee for any failure by the real estate licensee to provide any disclosures required by law, including without limitation section 467-14;

(2) Limit the liability of a real estate 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 misrepresentations, actions, or omissions;

(6) Limit the liability between or among clients or customers and real estate 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.

§ -19 Burden of proof. (a) The party seeking to enforce a brokerage relationship shall bear the burden of establishing the existence and terms of the brokerage relationship. In the absence of a written agreement, a relationship shall be presumed to be a transaction brokerage relationship.

(b) 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 the law.

§ -20 Common law superseded. This chapter supersedes the state’s common law as applied to real estate brokerage relationships to the extent that common law duties are inconsistent with the duties defined in this chapter. The burden to establish that common law applies shall be on the person seeking to apply common law."

SECTION 2. 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, including the continuation of one full-time temporary real estate brokerage specialist position in the department of commerce and consumer affairs to be hired either as department employee or as a consultant, and other current expenses.

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

SECTION 3. This Act shall apply to all persons performing services of a broker or salesperson in the state; provided that this Act shall not apply to the provision of services pursuant to a transaction entered into prior to the effective date of this Act. Such services shall be governed by prior law, which is continued in effect for that purpose, as if the amendments made by this Act were not in force.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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