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California Real Estate Brokers: Law and Litigation

Winner of the ACLEA Award for Outstanding Achievement in Publications

 

Detailed descriptions of real estate broker responsibilities in both residential and commercial transactions in California. Fully covers the relationship between brokers, salespersons, and their clients in acquiring, selling, and leasing real property.

Winner of the ACLEA Award for Outstanding Achievement in Publications

 

Detailed descriptions of real estate broker responsibilities in both residential and commercial transactions in California. Fully covers the relationship between brokers, salespersons, and their clients in acquiring, selling, and leasing real property. The book comprehensively analyzes:

  • State regulation, licensing, and discipline of brokers and salespersons
  • A broker’s common law and statutory duties
  • Broker responsibilities in short sales and loan modifications
  • Negotiating and modifying property listing agreements
  • Broker liabilities to principals and third parties
  • Trial tactics and strategies, including the use of “standard of care” expert witnesses
  • Defending a broker in administrative and ADR proceedings and at trial
  • Resolving commission disputes
  • In-depth discussion of broker errors and omissions policies
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Winner of the ACLEA Award for Outstanding Achievement in Publications

 

Detailed descriptions of real estate broker responsibilities in both residential and commercial transactions in California. Fully covers the relationship between brokers, salespersons, and their clients in acquiring, selling, and leasing real property. The book comprehensively analyzes:

  • State regulation, licensing, and discipline of brokers and salespersons
  • A broker’s common law and statutory duties
  • Broker responsibilities in short sales and loan modifications
  • Negotiating and modifying property listing agreements
  • Broker liabilities to principals and third parties
  • Trial tactics and strategies, including the use of “standard of care” expert witnesses
  • Defending a broker in administrative and ADR proceedings and at trial
  • Resolving commission disputes
  • In-depth discussion of broker errors and omissions policies

1

Overview of Real Estate Brokerage

Lawrence H. Jacobson

Alexander M. Weyand

  • I. INTRODUCTION
    • A. What Is a Real Estate Broker? 1.1
    • B. Qualifications 1.2
    • C. Brokers and Salespersons 1.3
  • II. APPLICABLE LAW
    • A. Contract Law and Agency Law 1.4
    • B. Regulation of Brokers 1.5
  • III. TRADE ASSOCIATIONS
    • A. National Association of Realtors® 1.6
    • B. NAR Code of Ethics 1.7
    • C. California Association of Realtors® 1.8
    • D. BOMA and ICSC 1.9
    • E. Standard Forms 1.10
  • IV. MULTIPLE LISTING SERVICES
    • A. Purpose 1.11
      • 1. MLS Regulations; Dispute Resolution 1.12
      • 2. Commercial Subscription Services 1.13
    • B. Why Use an MLS? 1.14
  • V. FUNCTIONS OF A BROKER 1.15
    • A. Finding Property 1.16
    • B. Listing Property 1.17
    • C. Evaluating Market Conditions 1.18
    • D. Negotiating Terms 1.19
    • E. Providing Referrals to Other Professionals 1.20
      • 1. Referral Fees Restricted 1.21
      • 2. RESPA 1.22
  • VI. UNAUTHORIZED PRACTICE OF LAW
    • A. Historical Context 1.23
    • B. When Is It "Practicing Law"? 1.24
  • VII. REPRESENTING REAL ESTATE BROKERS
    • A. Extent of Knowledge Required 1.25
    • B. Advising on Business Matters 1.26
  • VIII. BROKER CHECKLIST: DO'S AND DON'TS 1.27

2

Broker Contracts

Todd J. Wenzel

  • I. CONTRACT LAW
    • A. Elements of Broker Contracts 2.1
    • B. Capacity to Contract 2.2
    • C. Mutual Consent 2.3
    • D. Lawful Object 2.4
    • E. Consideration 2.5
    • F. Statute of Frauds and Broker Contracts
      • 1. Written Agreement Required 2.6
        • a. Broker Engagement Agreements 2.7
        • b. Finder Agreements 2.8
        • c. Leases and Purchase Agreements 2.9
      • 2. Contents of Writing
        • a. Employment of Broker 2.10
        • b. Description of Property 2.11
        • c. Execution 2.12
        • d. Amount of Commission Need Not Be Specified 2.13
      • 3. Electronic Transactions Act 2.14
      • 4. No Compensation Without a Writing 2.15
      • 5. Theories of Recovery in Absence of a Writing
        • a. Quasi-Contract 2.16
        • b. Principal's Fraud or Misrepresentation 2.17
        • c. Estoppel 2.18
      • 6. Exceptions 2.19
  • II. LISTING AGREEMENTS 2.20
    • A. Types of Listing Agreements
      • 1. Exclusive Right-to-Sell and Right-to-Lease Agreements
        • a. General Characteristics 2.21
        • b. Specific Characteristics 2.22
      • 2. Exclusive Agency Agreement 2.23
      • 3. Open Listing Agreement 2.24
      • 4. One Party Listing Agreement 2.25
      • 5. Net Listing Provisions 2.26
    • B. Listing Agreement Provisions 2.27
      • 1. Drafting Listing Agreements or Amending Standard Forms 2.28
      • 2. Form: Engagement of Broker; Term of Listing 2.29
      • 3. Form: Transaction Price 2.30
      • 4. Deposit
        • a. Form: Authority to Accept Deposits 2.31
        • b. Form: Handling Deposits 2.32
      • 5. Form: Designating Escrow Holder 2.33
      • 6. Form: Delivery of Possession 2.34
      • 7. Form: Broker's Duties 2.35
      • 8. Form: Broker Cooperation; Submitting Listing to MLS 2.36
      • 9. Broker's Compensation 2.37
        • a. Conditioned on Closing 2.38
        • b. Not Conditioned on Closing 2.39
        • c. Payment From Deposits 2.40
        • d. Payment When Property Owner Deceased 2.40A
        • e. Form: Entitlement to Commission 2.41
        • f. Form: Excluded Parties 2.42
        • g. Form: Transaction After Termination of Listing Agreement (Safety or Protection Clause) 2.43
      • 10. Form: Printed Form Subordinate to Drafted Provisions 2.44
      • 11. Form: Acknowledgment of Receipt; Broker's Acceptance 2.45
      • 12. Alternative Dispute Resolution 2.46
        • a. Mediation 2.47
        • b. Arbitration 2.48
      • 13. Execution; Acknowledgment of Receipt 2.49
      • 14. Representative Capacity Signature Disclosure 2.49A
  • III. BUYER-BROKER AND LESSEE-BROKER AGREEMENTS 2.50
  • IV. LEASES AND PURCHASE AGREEMENTS
    • A. General Characteristics 2.51
    • B. Use of Printed Forms 2.52
    • C. Addressing Broker's Commission 2.53
    • D. Exculpatory Clauses
      • 1. No Exculpation From Intentional Misrepresentation 2.54
      • 2. Effect of Exculpatory "As Is" Provision 2.55
      • 3. Liability of Innocent Principal for Broker's Nondisclosure 2.56
  • V. OPTIONS AND SHORT SALES
    • A. Options 2.57
    • B. Short Sales
      • 1. What Is a Short Sale? 2.58
      • 2. How a Short Sale Works 2.59
      • 3. Additional Broker Duties in Short Sales 2.60
      • 4. Benefits and Drawbacks of Short Sales
        • a. Benefits to Borrower 2.61
        • b. Benefits to Broker 2.62
        • c. Benefits to Lender 2.63
        • d. Drawbacks to Borrower 2.64
        • e. Drawbacks to Broker 2.65
        • f. Drawbacks to Lender 2.66
  • VI. CHECKLIST: LISTING AGREEMENT 2.67

3

Agency: Broker Fiduciary and Statutory Duties

Leslie A. Baxter

Jeffrey H. Belote

Alexander M. Weyand

  • I. SOURCE OF DUTIES 3.1
    • A. Statutory Duties 3.2
    • B. Law of Agency 3.3
      • 1. Agency Defined 3.4
      • 2. "Finder" Distinguished 3.5
      • 3. Formation of Agency Relationship in Real Property Transactions
        • a. Widely Used Standardized Forms 3.6
        • b. Statute of Frauds 3.7
        • c. Statutory Disclosure Requirement 3.8
      • 4. Scope of Authority 3.9
      • 5. Ratification of Authority 3.10
      • 6. When Duty Terminates 3.11
        • a. Duty Does Not Terminate When Agency Is Coupled With Interest 3.12
        • b. Some Duties Survive Closing 3.13
    • C. Private Codes of Ethics 3.14
      • 1. Judicial Notice of Private Association Standards 3.15
      • 2. Private Standards as Basis for Legal Action 3.16
  • II. FIDUCIARY DUTIES
    • A. Basis in Common Law 3.17
    • B. Broker Duties Analogous to Trustee Duties 3.18
    • C. Duty Arises When Agency Created 3.19
    • D. Standard of Care 3.20
  • III. CONFLICT OF INTEREST DUTIES 3.21
    • A. Dual Agency, a Matter of Utmost Care 3.22
      • 1. Dual Agency in Residential Transactions 3.23
      • 2. Dual Agency in Commercial Transactions 3.24
      • 3. Failure to Disclose Dual Agency 3.25
    • B. Unintended Dual Agency 3.26
      • 1. No Commission Necessary to Prove Existence of Agency 3.27
      • 2. How to Avoid an Unintended Agency 3.28
    • C. Multiple Clients 3.29
    • D. Self-Dealing 3.30
      • 1. Broker's Purchase of Client's Property 3.31
        • a. Significant and Meaningful Disclosure and Consent Required 3.32
        • b. Indirect Sales: Parties Related to Broker 3.33
      • 2. Broker's Interest in Property Sold to Client 3.34
    • E. Secret Profits 3.35
      • 1. Exception for Net Listings 3.36
      • 2. Kickbacks, Referral Fees, and Inducements 3.37
  • IV. ADDITIONAL DUTIES OWED TO PRINCIPAL
    • A. Duty to Investigate 3.38
    • B. Duty to Disclose
      • 1. Imposed by Common Law and Statute 3.39
        • a. Materiality 3.40
        • b. Verifying Disclosures 3.41
      • 2. Statutory Disclosure Requirements for Residential Property 3.42
    • C. Duty of Loyalty and Good Faith 3.43
    • D. Duty of Obedience 3.44
    • E. Duty to Be Honest and Truthful 3.45
      • 1. Honest and Truthful Advertising 3.46
      • 2. Puffery Versus Fraud 3.47
    • F. Duty of Reasonable Care
      • 1. Standard of Care 3.48
      • 2. Dealing With Clients Not Proficient in English 3.49
    • G. Duty to Perform With Diligence 3.50
    • H. Duty of Confidentiality 3.51
    • I. Duty to Account 3.52
      • 1. Broker Trust Account 3.53
      • 2. Presumption of Misappropriation 3.54
      • 3. Duty to Account for File 3.55
    • J. Duty to Supervise Salesperson 3.56
      • 1. Corporate Broker 3.57
      • 2. Respondeat Superior 3.58
    • K. Advice Concerning Price and Value
      • 1. Best Price Obtainable 3.59
      • 2. Statements About Price 3.60
      • 3. Speculative Purchases and Resales 3.61
      • 4. Communicating Offers to Property Owner 3.62
      • 5. Investigation of Value 3.63
      • 6. Investigation of Title 3.64
    • L. Verification of Others' Representations 3.65
    • M. Advice on Real Estate Matters 3.66
    • N. No Duty to Advise on Matters Outside of Broker's Expertise 3.67
      • 1. Advice on Tax Considerations 3.68
      • 2. Advice on Legal Matters 3.69
      • 3. Zoning and Permitting 3.70
  • V. DUTIES OWED TO THIRD PARTIES 3.71
    • A. Secret Profits 3.72
      • 1. Public Policy Against Causing Harm to Others 3.73
      • 2. Amount of Secret Profit Not a Factor 3.74
    • B. Duty Not to Misrepresent or Fail to Disclose Facts; Duty Not to Commit Fraud 3.75
      • 1. Materiality of Disclosure 3.76
      • 2. Failure to Disclose 3.77
      • 3. Statutory Disclosures 3.78
      • 4. Broker and Owner Bear Joint and Several Liability 3.79
      • 5. Exculpatory Contract Clauses 3.80
    • C. Duty Not to Commit Negligence 3.81
    • D. Duty Not to Breach Contract 3.82
    • E. Duty to Avoid Discrimination
      • 1. State Laws
        • a. Unruh Civil Rights Act 3.83
        • b. Fair Employment and Housing Act 3.84
        • c. Unlawful Practices 3.85
        • d. Disciplinary Action 3.86
      • 2. Federal Law 3.87

4

Broker Liabilities to Principals and Third Parties

Clifford R. Horner

  • I. INTRODUCTION 4.1
  • II. CONTRACTUAL LIABILITY 4.2
    • A. Existence of a Contract 4.3
    • B. Claimant's Performance or Excuse for Nonperformance 4.4
    • C. Contractual Breach by Broker 4.5
    • D. Resulting Damages 4.6
    • E. Advantages of a Breach of Contract Claim
      • 1. Attorney Fees Clause 4.7
      • 2. Longer Statute of Limitations 4.8
      • 3. Broader Damages 4.9
      • 4. Prejudgment Interest 4.10
  • III. FRAUD 4.11
    • A. Actual Fraud 4.12
      • 1. Intentional Misrepresentation 4.13
      • 2. Negligent Misrepresentation 4.14
      • 3. Nondisclosure 4.15
      • 4. Promissory Fraud 4.16
      • 5. Other Deceptive Conduct 4.17
    • B. Advantages of Pleading Actual Fraud 4.18
      • 1. Punitive Damages 4.19
      • 2. Consumer Recovery Account 4.20
      • 3. Rescission 4.21
      • 4. Recovery of Commission 4.22
      • 5. Judgment Not Dischargeable in Bankruptcy 4.23
      • 6. Additional Damages 4.24
        • a. Fiduciary Fraud 4.25
        • b. Fraud by Nonfiduciary Party 4.26
    • C. Disadvantages of Pleading Actual Fraud 4.27
    • D. Constructive Fraud 4.28
    • E. Advantages and Disadvantages of Pleading Constructive Fraud 4.29
  • IV. NEGLIGENCE 4.30
    • A. Common Negligence Claims 4.31
    • B. Disadvantages of Alleging Negligence Against Broker 4.32
      • 1. Comparative Negligence 4.33
      • 2. Lesser Duty Owed 4.34
    • C. Negligence Claim Against Other Party's Broker 4.35
      • 1. Third Party Disclosures 4.36
      • 2. Honest and Fair Actions 4.37
      • 3. Failure of Due Care 4.38
  • V. BREACH OF FIDUCIARY DUTY 4.39
  • VI. ADDITIONAL TORT THEORIES 4.40
    • A. Civil Conspiracy
      • 1. Liability Theory, Not a Cause of Action 4.41
      • 2. Elements of Civil Conspiracy Claims 4.42
      • 3. Limitations on Conspiracy Claims 4.43
    • B. Intentional Infliction of Emotional Distress
      • 1. Elements of Emotional Distress Claims 4.44
      • 2. Limitations on Emotional Distress Claims 4.45
    • C. Interference With Contract
      • 1. Elements of Interference With Contract Claims 4.46
      • 2. Limitations on Interference With Contract Claims 4.47
    • D. Interference With Prospective Economic Advantage 4.48
      • 1. Elements of Intentional Interference With Prospective Economic Advantage Claims 4.49
      • 2. Elements of Negligent Interference With Prospective Economic Advantage Claims 4.50
      • 3. Limitations on Interference With Prospective Economic Advantage Claims 4.51

5

Principal's Duties, Liabilities, and Defenses

Todd J. Wenzel

  • I. PRINCIPAL'S DUTIES TO BROKER
    • A. Discharge; Performance Under Contract 5.1
    • B. Payment of Compensation 5.2
      • 1. Subagents and Cooperating Brokers 5.3
      • 2. Cooperating Agreements 5.4
      • 3. Listing and Purchase Agreements 5.5
        • a. Under Listing Agreement 5.6
        • b. Under Purchase and Sale Agreement 5.7
    • C. Reimbursement of Appropriate Expenditures 5.8
    • D. No Absolute Right to Reimbursement 5.9
  • II. PRINCIPAL'S LIABILITY TO BROKER
    • A. Failure to Perform: Implied Promise to Perform and Third Party Beneficiary Theories 5.10
    • B. Indemnity Owed to Broker 5.11
  • III. PRINCIPAL'S DEFENSES TO CLAIMS BY BROKER
    • A. Broker's Lack of Authority 5.12
    • B. Actions Beyond the Scope of Agency Contract 5.13
    • C. Broker's Fraud or Misrepresentation 5.14
    • D. Broker's Breach of Agency Contract 5.15
    • E. Broker's Failure to Account 5.16
    • F. Broker's Realization of Undisclosed or "Secret" Profits 5.17
  • IV. PRINCIPAL'S LIABILITY TO THIRD PARTIES FOR BROKER'S ACTIONS
    • A. Principal's General Liability to Third Parties 5.18
    • B. Respondeat Superior 5.19
    • C. Imputed Knowledge 5.20
    • D. Agent's Ostensible Authority to Bind Principal 5.21
    • E. Ratification 5.22
  • V. PRINCIPAL'S DEFENSES TO CLAIMS BY THIRD PARTIES
    • A. Breach of Contract 5.23
    • B. Statute of Limitations 5.24
    • C. Invalid Contract 5.25
    • D. Indefinite and Uncertain Agreement 5.26
    • E. Statute of Frauds 5.27
    • F. Illusory Agreements 5.28
    • G. No Acceptance 5.29
    • H. Broker's Lack of Authority to Bind Principal 5.30
    • I. Equitable Defenses
      • 1. Unclean Hands 5.31
      • 2. Laches 5.32
    • J. Third Party's Duty of Inquiry 5.33
    • K. Legal Capacity to Contract
      • 1. Minors 5.34
      • 2. Mental Incapacity 5.35

6

Alternative Dispute Resolution

Michele K. Trausch

  • I. INTRODUCTION
    • A. Why ADR? 6.1
      • 1. ADR of Real Estate Disputes 6.2
      • 2. Advantages of ADR 6.3
    • B. An Overview 6.4
  • II. STRATEGIC ISSUES
    • A. Specifying the Parties Bound by Contractual ADR Provisions 6.5
    • B. Related Third Parties 6.6
    • C. Unrelated Third Parties 6.7
    • D. Binding Unrelated Parties to ADR Provisions or Stipulation 6.8
    • E. Specifying the Issues Covered by ADR 6.9
      • 1. Judicial Review 6.10
      • 2. Attorney Fees 6.11
      • 3. Tort Claims 6.12
  • III. MEDIATION
    • A. Description of Mediation 6.13
    • B. Selection of the Mediator 6.14
    • C. Effective Mediation 6.15
    • D. Confidentiality of Mediation 6.16
    • E. Contract Provisions for Mediation 6.17
    • F. Special Challenges to Mediating Broker Cases
      • 1. High-End Litigation 6.18
      • 2. Multiple Parties 6.19
      • 3. Emotional Issues 6.20
      • 4. Availability of Insurance Coverage 6.21
      • 5. Difficult Settlement 6.22
      • 6. Taxation Issues 6.23
      • 7. Attorney Fees 6.24
      • 8. Keeping Negotiations Moving When Parties Are Ready to Quit 6.25
      • 9. Documenting the Settlement 6.26
    • G. Form: Mandatory Mediation 6.27
  • IV. ARBITRATION
    • A. Description of Arbitration 6.28
      • 1. Deciding Arbitrability 6.29
      • 2. Review of Arbitration Award 6.30
      • 3. Federal Arbitration Act 6.31
    • B. Contract Provisions for Arbitration 6.32
      • 1. Enforceability 6.33
      • 2. Selection of Arbitrator 6.34
      • 3. Selection of Arbitration Rules 6.35
      • 4. Crafting Rules Specific to Transaction 6.36
      • 5. Discovery in Arbitration 6.37
    • C. Advantages and Disadvantages of Arbitration 6.38
    • D. Form: Arbitration Clause 6.39
  • V. REFERENCE
    • A. Description of Procedure 6.40
    • B. Contract Provisions for Reference; Prohibition on Jury Waivers 6.41
    • C. Judicial Reference 6.42
      • 1. Reference by Contract 6.43
      • 2. Reference by Stipulation 6.44
    • D. Drafting Considerations 6.45
    • E. Advantages and Disadvantages of Reference 6.46
    • F. Form: Reference 6.47

7

Broker Compensation and Claims

Lawrence H. Jacobson

  • I. HOW BROKERS ARE COMPENSATED
    • A. Setting the Commission 7.1
      • 1. General Practice 7.2
      • 2. Buyer Representation Agreement 7.3
      • 3. Pocket Listing 7.4
      • 4. Other Types of Compensation Agreements 7.5
      • 5. Quantum Meruit 7.6
      • 6. Restrictions on Compensation 7.7
    • B. Compensation Disputes 7.8
  • II. NECESSARY ELEMENTS OF A CLAIM FOR COMPENSATION 7.9
    • A. Valid License Required 7.10
      • 1. Salesperson's Right to Compensation 7.11
      • 2. Finder's Right to Compensation 7.12
      • 3. Out-of-State Transactions 7.13
    • B. Compliance With Statute of Frauds
      • 1. Application to Brokers 7.14
      • 2. Application to Finders 7.15
    • C. Broker Must Be Procuring Cause 7.16
      • 1. When the Issue of Procuring Cause Arises 7.17
      • 2. Broker as Procuring Cause 7.18
      • 3. Broker Not Procuring Cause 7.19
      • 4. "Ready, Willing, and Able" 7.20
      • 5. RealPro, Inc. 7.20A
  • III. DISPUTES WITH PRINCIPALS
    • A. Cancellation of Listing Agreement 7.21
    • B. Providing for Payment of Commission 7.22
    • C. Interference With Prospective Business Advantage 7.23
    • D. Recovery Under Safety Clauses 7.24
  • IV. DISPUTES BETWEEN BROKERS 7.25
    • A. Trade Association Policies and Regulations
      • 1. National Association of Realtors® 7.26
      • 2. California Association of Realtors® Dispute Resolution Procedures 7.27
      • 3. Commercial Real Estate Trade Associations 7.28
      • 4. Multiple Listing and Commercial Subscription Services 7.29
      • 5. Board Versus Inter-Board Disputes 7.30
    • B. Nature of Disputes 7.31
    • C. Disputes Not Relating to Fees 7.32
    • D. Alternative Resolution of Commission Disputes
      • 1. Mediation of Broker-Versus-Broker Commission Disputes 7.33
      • 2. Arbitration of Broker-Versus-Broker Commission Disputes 7.34
      • 3. Refusal to Arbitrate 7.35
      • 4. Form: Petition to Compel Arbitration 7.36
      • 5. Form: Memorandum of Points and Authorities in Support of Petition to Compel Arbitration 7.37
        • a. Form: Declaration in Support of Petition to Compel Arbitration 7.38
        • b. Form: Order Compelling Arbitration 7.39
    • E. Discovery 7.40
    • F. Conduct of the Hearing 7.41
    • G. CAR Procuring Cause Guidelines 7.42
    • H. Review of Award 7.43
    • I. Confirmation of Award 7.44
      • 1. Form: Petition for Confirmation of Arbitration Award 7.45
      • 2. Form: Memorandum of Points and Authorities in Support of Petition for Confirmation of Arbitration Award 7.46
      • 3. Form: Declaration in Support of Petition for Confirmation of Arbitration Award 7.47
    • J. Correcting or Vacating an Arbitration Award 7.48

8

Regulation of Brokers

Paula Reddish Zinnemann

Mary E. Work

  • I. REGULATION OF BROKERS 8.1
    • A. Activities Requiring a License 8.2
    • B. Real Estate Advertising 8.3
      • 1. False Advertising 8.4
      • 2. Internet and Fax Advertising 8.5
      • 3. Fair Housing Act 8.6
      • 4. Unruh Act; FEHA 8.7
    • C. Telephone Solicitations
      • 1. Federal and State Regulations
        • a. Do-Not-Call Laws 8.8
        • b. When Laws Apply; Cost to Access 8.9
        • c. Recordkeeping 8.10
      • 2. Federal and State Safe Harbors; Exemptions 8.11
      • 3. Exceptions [Deleted] 8.12
      • 4. Remedies for Failure to Comply 8.13
      • 5. Enforceability of Do-Not-Call List 8.14
    • D. Brokers Distinguished From Finders 8.15
      • 1. RESPA and Referral Fees 8.16
      • 2. Title Companies 8.17
      • 3. Disclosures Related to Residential Mortgages 8.18
    • E. When Is a License Required? 8.19
      • 1. Loan Modifications 8.20
      • 2. Securities Dealers 8.21
      • 3. Exemptions Relating to Particular Persons 8.22
      • 4. Exemptions Relating to Loans and Notes 8.23
    • F. Specialized Licensees
      • 1. Mortgage Loan Brokers 8.24
      • 2. Mortgage Loan Originators (MLOs) 8.24A
      • 3. Disclosure and Regulation 8.24B
        • a. Disclosure Requirements and Limits on Charges 8.25
        • b. Exemption From Usury for Loans Made or Arranged by Broker 8.26
      • 4. Business Opportunity Brokers 8.27
      • 5. Real Estate Syndicate Securities Dealers 8.28
      • 6. Prepaid Rental Listing Service (PRLS) 8.28A
    • G. Licensing Qualifications 8.29
    • H. Corporations and Partners as Licensees
      • 1. Corporate Brokers 8.30
      • 2. Partnerships 8.31
  • II. BROKER'S RELATIONSHIP WITH SALESPERSONS
    • A. Salesperson Licensing and Employment Requirements 8.32
    • B. Character of Relationship and Corresponding Obligations 8.33
      • 1. Relationship Between Broker and Salesperson Under Bus & P C §10032: Employee or Contractor? 8.34
      • 2. As Against Third Parties 8.35
      • 3. Relationship Between Broker and Salesperson Under Common Law and Other Statutory Schemes 8.36
      • 4. Impact on Case Law 8.37
      • 5. Unemployment Insurance 8.38
      • 6. Workers' Compensation 8.39
      • 7. Withholding Income and Social Security Taxes 8.40
      • 8. Tort Liability 8.41
    • C. Documenting Relationship Between Broker and Salesperson 8.42
    • D. Place of Business; Delegation of Supervision of Branch Office or Division 8.42A
  • III. BROKER AS ESCROW AGENT
    • A. License Requirements 8.43
    • B. Decision to Use 8.44
  • IV. OTHER RELEVANT BROKER LEGISLATION
    • A. Large Fines for Unlicensed Activity 8.45
    • B. Advance Fees 8.45A
    • C. Mortgage Origination or Modification 8.45B
    • D. Real Estate Fraud Protection Trust Fund 8.46
    • E. Short Sales 8.47
    • F. Real Estate Recovery Program 8.48
    • G. Branch Manager's Appointment 8.49
    • H. Civil Settlements 8.50

9

Disciplinary Procedures

Paula Reddish Zinnemann

Mary E. Work

  • I. OVERVIEW
    • A. Regulation of Brokers and Sales Associates 9.1
    • B. Duties of the California Real Estate Commissioner 9.2
    • C. California Bureau of Real Estate 9.3
    • D. Criminal Referrals, Civil Actions, and Representation 9.4
    • E. Prevention of Future Harm 9.5
    • F. Conduct Outside Practice 9.6
    • G. Procedures Available in the Disciplinary Process 9.7
    • H. Citations and Fines 9.7A
  • II. STATUTES AND REGULATIONS GOVERNING DISCIPLINARY ACTIONS
    • A. Business and Professions Code 9.8
      • 1. Violation of the Business and Professions Code as Grounds for Discipline 9.9
        • a. Business and Professions Code §10176 9.10
        • b. Business and Professions Code §§10177 and 10177.5 9.11
      • 2. Substantial Relationship 9.12
    • B. California Code of Regulations 9.13
    • C. Statute of Limitations 9.14
    • D. Mitigation and Rehabilitation Evidence 9.15
    • E. Criminal Convictions 9.16
    • F. "Underground" Regulations and the Administrative Procedure Act 9.17
    • G. Out-of-State Laws and Decisions by Other Agencies 9.18
  • III. TYPES OF LICENSING ACTIONS 9.19
    • A. Actions Initiated by CalBRE
      • 1. Action to Revoke or Suspend License 9.20
      • 2. Action to Deny License 9.21
      • 3. Order to Desist and Refrain 9.22
      • 4. Debarment 9.23
      • 5. Payment of Monetary Costs and Restitution 9.23A
    • B. Actions Initiated by Licensee
      • 1. Petition for Reinstatement 9.24
      • 2. Petition for Reconsideration 9.25
  • IV. OVERVIEW OF LICENSE DISCIPLINE PROCESS
    • A. Initial Investigation and Evaluation by Agency 9.26
    • B. Public Disclosure of Investigation 9.26A
    • C. Cost Recovery 9.26B
    • D. Jurisdiction Over a Lapsed or Suspended License 9.27
    • E. Voluntary Surrender of a License 9.28
    • F. Contents of Accusation 9.29
      • 1. The Investigation Report 9.30
      • 2. Amending the Accusation 9.31
      • 3. Filing and Service of Accusation 9.32
    • G. Response to Accusation 9.33
    • H. Default Decision 9.34
    • I. Hearing 9.35
    • J. Decision and Review 9.36
    • K. Consumer Recovery Account 9.37

10

Broker Errors and Omissions Liability Insurance

Timothy R. Sullivan

  • I. INTRODUCTION
    • A. Scope of Chapter 10.1
    • B. Lack of Standardized Language 10.2
  • II. TYPES OF POLICIES 10.3
    • A. Distinguishing "Claims Made" From "Occurrence" Policies 10.4
    • B. Occurrence Policies 10.5
    • C. Claims Made Policies 10.6
    • D. "Claims Made and Reported" Policies 10.7
  • III. CLAIMS AND CLAIMS REPORTING
    • A. The "Whipsaw Nightmare" 10.8
    • B. What Is a "Claim?" 10.9
      • 1. Communications Held to Be a Claim 10.10
      • 2. Communications Held Not to Be a Claim 10.11
      • 3. Potential Claims: Awareness Provision or Discovery Clause 10.12
    • C. Importance of Disclosing Potential Claims When Applying for or Renewing Policy
      • 1. Applications for Insurance 10.13
      • 2. Prior Knowledge Conditions 10.14
      • 3. Prior Notice Exclusions 10.15
    • D. Reporting Requirement 10.16
      • 1. Who Must Provide Notice of a Claim? 10.17
      • 2. Extended Reporting Period 10.18
      • 3. "Retroactive Date" and "Prior Acts" Coverage 10.19
    • E. Notice-Prejudice Rule 10.20
      • 1. No Presumption of Prejudice 10.21
      • 2. Proving Prejudice 10.22
        • a. Prejudice Not Proven 10.23
        • b. Prejudice Proven 10.24
      • 3. Application of Notice-Prejudice Rule to Claims Made Policies 10.25
        • a. View: Notice-Prejudice Rule Applies 10.26
        • b. View: Notice-Prejudice Rule Does Not Apply 10.27
        • c. Possible Basis to Reconcile Divergent Views 10.28
      • 4. Notice-Prejudice Rule Does Not Apply to Claims Made and Reported Policies 10.29
    • F. Equitable Excuse 10.30
    • G. Tail Coverage 10.31
  • IV. INSURING CLAUSE 10.32
    • A. Legally Obligated to Pay 10.33
    • B. Damages 10.34
    • C. Wrongful Acts 10.35
    • D. Personal Injury 10.36
      • 1. Wrongful Eviction 10.37
      • 2. Trespass and Other Torts 10.38
    • E. Professional Services 10.39
  • V. WHO IS AN INSURED 10.40
    • A. Named Insureds and Additional Named Insureds 10.41
    • B. Additional Insureds or Omnibus Insureds 10.42
      • 1. Partnerships 10.43
      • 2. Fictitious Names or "DBA" 10.44
  • VI. EXCLUSIONS 10.45
    • A. Exceptions 10.46
    • B. Burden of Proof 10.47
    • C. Effect of Exclusions on Duty to Defend 10.48
    • D. No Exclusion for Statutory Liability for Inspection and Disclosure 10.49
    • E. Specific Exclusions 10.50
      • 1. Insurance Code §11589.5 Exclusions 10.51
      • 2. Disputes Involving Insured's Fees, Commissions, or Charges 10.52
      • 3. Insured Versus Insured 10.53
      • 4. Failure to Render Professional Services 10.54
      • 5. Bodily Injury, Sickness, Disease, or Death 10.55
        • a. Pure Emotional Distress 10.56
        • b. Emotional Distress Accompanied by Physical Injury or Manifestations 10.57
      • 6. Injury, Disease, or Illness 10.58
      • 7. Physical Injury, Damage to, Destruction of, or Loss of Use of Tangible Property 10.59
      • 8. Activities Involving Property Syndication, Real Estate Investment Trusts, Limited Partnerships, or Similar Investments 10.60
      • 9. Sale or Purchase of Insurance, or Failure to Effect or Maintain Adequate Levels or Types of Insurance 10.61
      • 10. Liability Assumed by Insured Under Any Oral or Written Contract 10.62
      • 11. Activities of Insured as Mortgage Broker, Escrow Agent, Contractor, Developer, Insurance Broker, or Property Manager 10.63
      • 12. Real Property Owned by Insured 10.64
      • 13. Damage to or Reduction in Financial Value of Any Property 10.65
      • 14. Guarantee or Promise of Future Status, Performance, or Valuation 10.66
      • 15. Personal Profit or Advantage to Which Any Insured Is Not Legally Entitled 10.67
      • 16. Claims Arising Out of False Advertising or Unfair or Deceptive Business Practices 10.67A
      • 17. Discrimination 10.68
      • 18. Pollution 10.69
      • 19. Prior Notice Exclusion 10.70
      • 20. Willful Acts 10.70A
      • 21. Claims by Entities in Which Insured Has Interest 10.70B
      • 22. Prior or Pending Litigation 10.70C
  • VII. CLAIMS PROCESS
    • A. Mandatory Written Notice of Claim 10.71
    • B. Contents of Notice 10.72
    • C. To Whom Notice Should Be Sent 10.73
    • D. Notice of Potential Claims 10.74
    • E. Denial of Claim Based on Lack of Timely Notice 10.75
    • F. Waiver of Defects in Notice
      • 1. Insurer's Denial of Coverage 10.76
      • 2. Insurer's Failure to Object 10.77
  • VIII. TENDERING THE DEFENSE
    • A. Definition of "Tender" 10.78
    • B. Consequences of Late Tender 10.79
    • C. Recovery of Pre-Tender Fees 10.80
  • IX. INSURER'S TIME LIMITS TO RESPOND TO NOTICE OF CLAIM OR TENDER OF DEFENSE
    • A. Time Limit to Respond to Notice 10.81
    • B. Time Limit to Respond to Communications From Insured 10.82
    • C. Time Limit to Accept or Deny Claim 10.83
  • X. RIGHTS AND DUTIES PENDING RESOLUTION OF CLAIM
    • A. Insured's Duty of Good Faith and Fair Dealing 10.84
    • B. Insured's Duty of Cooperation 10.85
    • C. Insurer's Right to Examination Under Oath 10.86
      • 1. Insured's Rights Under Ins C §2071.1 10.87
      • 2. Insurer's Duty of Good Faith and Fair Dealing 10.88
    • D. Insured's Duty to Cooperate With Defense 10.89
      • 1. Cooperation Clause 10.90
      • 2. Insured's Breach of Duty 10.91
      • 3. Substantial Prejudice to Insurer 10.92
    • E. Insured's Duty to Refrain From Making Voluntary Payments 10.93
  • XI. INSURER'S DUTY TO INVESTIGATE
    • A. Source of Insurer's Duty to Investigate 10.94
    • B. Scope of Insurer's Duty to Investigate 10.95
    • C. Breach of Duty to Investigate 10.96
  • XII. INSURER'S OPTIONS IN RESPONDING TO NOTICE OF CLAIM OR TENDER OF DEFENSE
    • A. Defending the Insured 10.97
      • 1. Defending With a Reservation of Rights 10.98
        • a. Mixed Causes of Action 10.99
        • b. Failure to Reserve Right to Reimbursement of Defense Fees and Costs 10.100
      • 2. Conflict of Interest and Independent, or Cumis, Counsel 10.101
    • B. Denying Coverage and Refusing to Defend 10.102
    • C. Filing Declaratory Relief Action 10.103
  • XIII. INSURER'S DUTY TO DEFEND
    • A. Duty to Defend Is Broader Than Duty to Indemnify 10.104
      • 1. Duty to Defend When Potential for Indemnity Exists 10.105
      • 2. Comparing Complaint Allegations to Policy Terms 10.106
      • 3. Extrinsic Evidence May Give Rise to Duty to Defend 10.107
      • 4. Considering Effect of Potential Amendment to Complaint 10.108
    • B. Duty Limited to Nature and Kinds of Risks Covered by Policy 10.109
    • C. Duty to Defend Extends to Entire Action 10.110
    • D. Duty to Defend Arises Immediately 10.111
    • E. Reimbursement of Defense Costs 10.112
  • XIV. INSURER'S DUTY TO SETTLE 10.113
    • A. Factors Governing Duty to Settle 10.114
    • B. Insured Must Establish Breach 10.115
    • C. Extent of Duty to Settle in Mixed Action 10.116
    • D. Damages for Breach of Duty to Settle 10.117
  • XV. POLICY LIMITS
    • A. Per Claim and Aggregate Policy Limits 10.118
    • B. Self-Insured Retention Versus Deductible 10.119
    • C. Burning Limits 10.120
    • D. Consent to Settle, or Hammer Clause 10.121
  • XVI. CLAIMS AGAINST INSURER
    • A. Common Law Bad Faith 10.122
    • B. Damages 10.123
      • 1. Emotional Distress 10.124
      • 2. Attorney Fees and Costs 10.125
      • 3. Consequential Economic Loss 10.126
      • 4. Punitive Damages 10.127
        • a. Clear and Convincing Evidence Standard 10.128
        • b. Liability of Corporate Brokers 10.128A
        • c. Proof of Defendant's Financial Condition 10.128B
        • d. Constitutional Standards 10.129
          • (1) First Guidepost: Reprehensibility of Defendant's Conduct 10.130
          • (2) Second Guidepost: Disparity Between Harm Suffered by Plaintiff and Punitive Damages Awarded 10.131
          • (3) Third Guidepost: Difference Between Punitive Damages Awarded and Authorized Penalties 10.132
          • (4) Aggregate Disgorgement of Profits Theory Prohibited 10.133
          • (5) Evidence of Defendant's Net Worth Admissible 10.134
    • C. Duty of Good Faith Is Mutual; No Cause of Action for "Reverse Bad Faith" 10.135
    • D. Genuine Dispute Doctrine 10.136
    • E. No Cause of Action for Breach of Fiduciary Duty 10.137
    • F. Unfair Competition Claims Under Bus & P C §17200 10.138
    • G. Other Statutory Violations 10.139

11

Litigation: Suing and Defending Brokers

Frederic W. Trester

Martha L. Caron

  • I. INTRODUCTION 11.1
    • A. Investigating the Claim 11.2
      • 1. Interviewing the Client
        • a. Claimant 11.3
        • b. Defendant 11.4
      • 2. Reviewing Documents 11.5
        • a. Initial Document List 11.6
        • b. Additional Documents for Residential Transactions 11.7
      • 3. Identification of Witnesses 11.8
      • 4. Investigation of Potential Defendants 11.9
      • 5. Inspection of Property 11.10
    • B. Identifying Potentially Liable Parties
      • 1. Who May Be Liable 11.11
      • 2. Liability Based on Broker's Form of Business
        • a. Corporation 11.12
        • b. Partnerships 11.13
        • c. Sole Proprietorship 11.14
      • 3. Vicarious Liability 11.15
        • a. Tort Liability 11.16
        • b. Assumption of Liability 11.17
  • II. CLAIMS AND DEFENSES 11.18
    • A. Negligence 11.19
      • 1. Broker Duties 11.20
      • 2. Negligent Drafting 11.21
      • 3. Standard of Care 11.22
      • 4. Duties to Third Parties 11.23
    • B. Defenses to Negligence Claims
      • 1. Contractual Disclaimers and Exculpatory Clauses 11.24
      • 2. Comparative Negligence 11.25
      • 3. Obvious Conditions 11.26
    • C. Negligence Per Se 11.27
      • 1. Civil Code §§2079—2079.6: Inspection and Disclosure Duties 11.28
      • 2. Civil Code §§1102—1102.17: Duty to Deliver Transfer Disclosure Statement 11.29
      • 3. Quasi-Contractual Theory 11.30
    • D. Defenses to Negligence Per Se
      • 1. Defenses to CC §2079 Claims
        • a. Inspection Was Reasonably Competent and Diligent 11.31
        • b. Statute of Limitations 11.32
        • c. Comparative Negligence; Open and Obvious Conditions 11.33
        • d. No Duty Owed 11.34
      • 2. Defenses to CC §1102 Claims
        • a. Owner's Failure to Complete TDS 11.35
        • b. No Personal Knowledge; Information Provided by Others 11.36
    • E. Fraud and Deceit 11.37
      • 1. Fraud
        • a. Advantages of Pleading Actual Fraud 11.38
        • b. Disadvantages of Pleading Actual Fraud 11.39
      • 2. Deceit 11.40
        • a. Intentional Deceit 11.41
        • b. Nondisclosure and Concealment 11.42
      • 3. Constructive Fraud 11.43
    • F. Defenses to Fraud Claims 11.44
      • 1. No Justifiable Reliance 11.45
      • 2. Failure to Investigate 11.46
      • 3. Full Disclosure Made 11.47
    • G. Breach of Fiduciary Duty 11.48
      • 1. General Fiduciary Obligation 11.49
      • 2. Dual Agency Issues 11.50
        • a. Unintended Dual Agency 11.51
        • b. Written Disclosure Required in Residential Transactions 11.52
        • c. Broker as Principal 11.53
      • 3. Specific Fiduciary Duties
        • a. Undivided Loyalty 11.54
        • b. Duty of Good Faith 11.55
        • c. Full Disclosure 11.56
        • d. Duty of Inspection 11.57
        • e. Duty to Explain and Counsel 11.58
        • f. Accounting for Funds 11.59
      • 4. Constructive Fraud 11.60
      • 5. Burden of Proof 11.61
    • H. Defenses to Breach of Fiduciary Duty Claims 11.62
      • 1. Statute of Limitations
        • a. Fraud 11.63
        • b. Nondisclosure of Material Fact 11.64
        • c. Time of Commencing Action 11.65
      • 2. Laches 11.66
      • 3. Exculpatory Clauses 11.67
      • 4. "As Is" Clauses 11.68
      • 5. Waiver and Estoppel 11.69
      • 6. Setoff 11.70
    • I. Mitigation 11.71
  • III. COMPLAINT, OBJECTIONS, AND DISPOSITIVE MOTIONS 11.72
    • A. Complaint 11.73
      • 1. Parties 11.74
      • 2. Jurisdiction and Venue 11.75
      • 3. Causes of Action 11.76
      • 4. Damages 11.77
    • B. Anticipating and Making Objections to Complaint
      • 1. Common Bases for Demurrer 11.78
        • a. Another Action Pending 11.79
        • b. Insufficient Facts; Uncertain Claim 11.80
        • c. Statute of Limitations 11.81
        • d. No Contractual Relationship 11.82
      • 2. Common Bases for Motions to Strike 11.83
    • C. Motion for Summary Judgment or Summary Adjudication 11.84
      • 1. Testing the Pleadings 11.85
      • 2. Statute of Limitations 11.86
      • 3. No Factual Dispute 11.87
      • 4. Third Party Liability 11.88
  • IV. CROSS-COMPLAINT FOR INDEMNITY OR CONTRIBUTION 11.88A
  • V. MEASURE OF DAMAGES
    • A. General Rules 11.89
      • 1. Civil Code §3333: Benefit-of-the-Bargain Damages 11.90
      • 2. Civil Code §3343: Out-of-Pocket Damages 11.91
      • 3. CC §1709: Tort Damages 11.92
      • 4. Alternative or Economic Damages 11.93
      • 5. Cost of Repair Not a Damages Measure 11.94
    • B. Application of General Rule
      • 1. Is There a Fiduciary Relationship? 11.95
        • a. Negligent Versus Intentional Misrepresentation 11.96
        • b. Constructive Fraud 11.97
      • 2. Damage Elements Must Be Pleaded and Proved 11.98
    • C. Valuation 11.99
    • D. Additional Damages Recoverable 11.100
      • 1. Amounts Actually and Reasonably Expended 11.101
      • 2. Lost Profits 11.102
      • 3. Punitive Damages 11.103
      • 4. Attorney Fees 11.104
        • a. Attorney Fees Provided for in Underlying Agreements 11.105
        • b. Tort of Another or Prentice Fees 11.106

12

Trial Tactics and Strategies

Martha L. Caron

  • I. INTRODUCTION 12.1
  • II. TRIAL PREPARATION ONCE TRIAL DATE IS SET 12.2
    • A. Calendaring 12.3
    • B. Trial Books 12.4
      • 1. General Trial Binder 12.5
      • 2. Jury Book 12.6
    • C. Experts 12.7
      • 1. Standard of Care Expert 12.8
      • 2. Expert as Pretrial Consultant 12.9
    • D. Timeline Tool 12.10
    • E. Pretrial Discovery 12.11
    • F. Settlement Offers 12.12
    • G. Presentation Software 12.13
      • 1. As Visual and Graphic Tool 12.14
      • 2. As Organizational Tool 12.15
      • 3. Court Procedures 12.16
      • 4. Expert's Presentation 12.17
    • H. Damage Calculations 12.18
  • III. TRIAL PREPARATION WITHIN 30 DAYS OF TRIAL 12.19
    • A. Written Preparation
      • 1. Trial Materials 12.20
      • 2. Drafting Jury Voir Dire 12.21
      • 3. Drafting Jury Instructions 12.22
      • 4. Drafting Verdicts
        • a. Special Verdicts 12.23
        • b. General Verdict With Special Findings 12.24
      • 5. Preparing In Limine Motions 12.25
    • B. Subpoenas
      • 1. Witnesses 12.26
      • 2. Nonparty Documents 12.27
    • C. Experts 12.28
    • D. Exhibits 12.29
  • IV. TRIAL 12.30
    • A. Master Calendar 12.31
    • B. Motions
      • 1. In General 12.32
      • 2. Presenting Motions In Limine 12.33
      • 3. Ongoing Objections and Motions 12.34
    • C. Statement of the Case 12.35
    • D. Voir Dire 12.36
    • E. Jury Instructions Conference 12.37
      • 1. Timing of Conference 12.38
      • 2. Inadvertent Waiver of Objection to Instruction 12.39

13

Standard of Care Experts

Lawrence H. Jacobson

Martha L. Caron

  • I. IS A STANDARD OF CARE EXPERT NEEDED? 13.1
    • A. Selecting the Expert 13.2
      • 1. Qualifications 13.3
      • 2. Prior Contact With Opposition 13.4
      • 3. Timing the Selection 13.5
      • 4. Additional Duties 13.6
      • 5. Professional Witness or Practicing Professional? 13.7
      • 6. Credibility 13.8
      • 7. Expense 13.9
    • B. Ethics Issues of Attorneys Acting as Experts 13.10
      • 1. Trial Counsel Bears Responsibility for Expert 13.11
      • 2. Court-Imposed Professional Standard of Care 13.12
      • 3. Conflict-of-Interest Attorney Experts and Prior Clients 13.13
    • C. Use of the Expert as a Consultant 13.14
  • II. DISCOVERY AND TRIAL
    • A. Disclosure of Expert's Work Product 13.15
      • 1. Use of Discovery Limits 13.16
      • 2. Designation Narrative 13.17
    • B. Deposing the Expert 13.18
    • C. Eliciting or Attacking Expert Testimony at Deposition or Trial 13.19
      • 1. Voir Dire of the Expert 13.20
      • 2. Cross-Examination 13.21
      • 3. Framing the Question 13.22
      • 4. Framing the Opinion 13.23

Selected Developments

August 2017 Update

Case Developments

  • Western Sur. Co. v La Cumbre Office Partners, LLC (2017) 8 CA5th 125 (mistaken designation of individual signing agreement as "managing member" of LLC did not invalidate agreement for lack of authority, in absence of actual knowledge by other party that individual had no authority to execute document). See §§2.2, 2.7, 2.12, 11.12.

  • Jacobs v Locatelli (2017) 8 CA5th 317 (broker seeking commission on listing agreement allegedly signed by authorized joint venture partner was not barred by Statute of Frauds or equal dignities rule defenses; trial court erred in granting demurrer). See §§2.7, 2.12, 3.7, 7.14.

  • Westside Estate Agency, Inc. v Randall (2016) 6 CA5th 317 (Statute of Frauds barred broker from collecting $925,000 commission based on oral listing agreement). See §§2.7, 2.15, 3.7, 4.3, 5.10, 5.12, 5.27, 7.16, 7.21.

  • Horiike v Coldwell Banker Residential Brokerage Co. (2016) 1 C5th 1024 (brokerage whose sales associates represented both buyer and seller in same transaction owed buyer fiduciary duty to learn and disclose all information materially affecting value or desirability of property). See §§3.22, 3.29, 11.20, 11.23, 11.42, 11.50, 11.56.

  • Khan v Shim (2016) 7 CA5th 49 (CC §1717 allows attorney fee award on tort claims voluntarily dismissed before trial so long as parties' fee agreement encompassed tort claims, but not on contract claims). See §§4.7, 11.105.

  • Magno v College Network, Inc. (2016) 1 CA5th 277 (arbitration provision was both procedurally and substantively unconscionable, so unenforceable in its entirety). See §§6.28, 6.33.

  • Sandquist v Lebo Automotive, Inc. (2016) 1 C5th 233 (who decides arbitrability, court or arbitrator, is matter of parties' agreement; determination of whether class arbitration available properly given to arbitrator under agreement at issue). See §§6.29, 6.31.

  • Golden v O'Melveny & Myers LLP (CD Cal, Aug. 3, 2016, No. CV 14—8725 CAS (AGRx) 2016 US Dist. Lexis 103621 (party must oppose arbitration on basis of illegality before participating in process or claim will be deemed forfeited). See §§6.29, 6.31.

  • Scott v Yoho (2016) 248 CA4th 392 (CCP §1295(c)'s 30-day rescission period applies only in arbitration of medical care disputes, thus FAA preempts). See §6.31.

  • Tidwell Enters. v Financial Pac. Ins. Co. (2016) 6 CA5th 100 (insurer has duty to defend subcontractor even though fire occurred after policy expired because there was possibility that subcontractor's negligent construction was cause of fire). See §10.5.

  • Hanover Ins. Co. v Paul M. Zagaris, Inc. (ND Cal, Feb. 23, 2017, No. C 16—01099 WHA) 2017 US Dist Lexis 25654 (when suit against insured includes claims that do not rely on deceptive business practices, insurer has duty to defend despite claims that fall into deceptive business practice exclusion; potential for coverage remains because liability may still exist independent of alleged deception). See §§10.67, 10.105.

  • Swiss Re Int'l SE v Comac Invs., Inc. (ND Cal 2016) 212 F Supp 3d 797 (applying California law to hold "preconceived design to injure" standard relevant only when insured's mental capacity at issue or insured's intent or motive might justify otherwise wrongful act). See §10.70A.

  • Navigators Specialty Ins. Co. v Moorefield Constr., Inc. (2016) 6 CA5th 1258 (although insurer was not obligated to indemnify insured's deliberate act that resulted in third party damage, supplementary payments provision of policy inclued attorney fees and was tied to insurer's duty to defend, not duty to indemnify; duty to defend occurred at time of settlement because there was potential for coverage of claim against insured). See §10.104.

  • Brickman v Mercury Cas. Co. (2016) 2 CA5th 508 (insurer's actions resulting in failure to settle constituted bad faith). See §10.115.

  • Nickerson v Stonebridge Life Ins. Co. (2016) 63 C4th 363 (Brandt fees may be included in calculating ratio of punitive to compensatory damages to determine whether punitive damages exceed due process limits). See §§10.129, 10.131.

New Legislation

  • The exclusion of income realized as a result of debt reduction through mortgage restructuring or mortgage debt forgiveness under the Mortgage Forgiveness Debt Relief Act of 2007 (Pub L 110—142, 121 Stat 1803) was extended to include any discharge of qualified indebtedness before January 1, 2017. See §2.64.

  • Effective January 1, 2018, licensees and brokers must be identified on all solicitation materials and purchase agreements as well as on other first-point-of-contact marketing materials. Bus & P C §10140.6. See §§3.46, 8.3.

  • Following recent amendments to Bus & P C §10016, the term "Real Estate Salesman" has been replaced with "Real Estate Salesperson" throughout the Real Estate Law. See §8.1.

  • Effective January 1, 2018, Bus & P C §10083.2 will require the Bureau of Real Estate (CalBRE) to publically identify any broker who is working under another broker as an "associate licensee" and to identify each responsible broker with whom the licensee is contractually associated. See §8.42.

  • CCP §2034.415 has been added to require that experts noticed under CCP §2025.220 must produce any materials called for in his or her deposition no later than 3 business days before the deposition. See §13.18.

About the Authors

LESLIE A. BAXTER, coauthor of chapter 3 (Agency: Broker Fiduciary and Statutory Duties), received her B.A. from the University of California, Berkeley, her M.P.A. from California State University, Hayward, and her J.D. from the University of California, Hastings College of the Law. Ms. Baxter is a partner at Randick, O'Dea & Tooliatos, LLP, Pleasanton, where she specializes in real estate litigation and land use matters.

JEFFREY H. BELOTE, coauthor of chapter 3 (Agency: Broker Fiduciary and Statutory Duties), received his B.A. from the University of Colorado, Boulder, and his J.D. from the University of San Francisco School of Law. He is a partner of Carroll, Burdick & McDonough LLP, San Francisco, where he is the co-chair of the Real Estate and Construction Litigation Practice Group. Mr. Belote lectured for several years in real estate law and real estate concepts in the Masters Program at Golden Gate University and guest lectured in banking law in the program. Mr. Belote has been a speaker for CEB, the National Business Institute, and the California Land Title Association.

MARTHA L. CARON, coauthor of chapter 11 (Litigation: Suing and Defending Brokers), author of chapter 12 (Trial Tactics and Strategies), and coauthor of chapter 13 (Standard of Care Experts), received her B.A. from Portland State University and her J.D. from the University of California, Davis, School of Law. Ms. Caron formerly served as general counsel of Coldwell Banker Residential Real Estate Services of Northern California and president of the Real Estate Sales and Brokerage Subsection of the State Bar Real Property Section. She practices as an attorney, real estate broker, expert witness, and ADR neutral at Caron & Associates, Oakland.

CLIFFORD R. HORNER, author of chapter 4 (Broker Liabilities to Principals and Third Parties), received his B.S. from California Polytechnic State University, San Luis Obispo, and his J.D. from the University of California, Hastings College of the Law. Mr. Horner specializes in real estate, broker, and business litigation at Horner & Singer, LLP, Walnut Creek.

LAWRENCE H. JACOBSON, coauthor of chapter 1 (Overview of Real Estate Brokerage), author of chapter 7 (Broker Compensation and Claims), and coauthor of chapter 13 (Standard of Care Experts), received his A.B. from the University of California, Los Angeles, and his J.D. from the University of California, Los Angeles, School of Law. Mr. Jacobson has a transactional practice in Beverly Hills with an emphasis on real estate and real estate brokerage matters, and he testifies frequently as an expert witness in these areas.

TIMOTHY R. SULLIVAN, author of chapter 10 (Broker Errors and Omissions Liability Insurance), received his B.A. and his J.D. from the University of Missouri. Mr. Sullivan is of counsel with McCormick, Barstow, Sheppard, Wayte & Carruth, LLP, Fresno, where he represents insurers, insureds, brokers, and salespersons in a variety of insurance-related matters, including bad faith and declaratory relief actions. Mr. Sullivan is also an author of insurance chapters in California Title Insurance Practice (2d ed Cal CEB); California Construction Contracts, Defects, and Litigation (Cal CEB); Office Leasing: Drafting and Negotiating the Lease (Cal CEB); and California Real Property Sales Transactions (4th ed Cal CEB). He is also a member of the State Bar Real Property Section Executive Committee.

MICHELE K. TRAUSCH, author of chapter 6 (Alternative Dispute Resolution), received her B.A. from California State University, Long Beach, magna cum laude, and her J.D. from Golden Gate University. Ms. Trausch specializes in real estate litigation at Hanson Bridgett LLP, San Francisco.

FREDRIC W. TRESTER, coauthor of chapter 11 (Litigation: Suing and Defending Brokers), received his B.A. from the University of Arizona and his J.D., cum laude, from Santa Clara University School of Law. Mr. Trester is a partner of Manning & Marder, Kass, Ellrod, Ramirez LLP, Los Angeles, with an extensive practice in civil litigation and professional liability defense, specializing in architects, engineers, insurance agents, and brokers. He is also a speaker for CEB and the California Bureau of Real Estate.

TODD J. WENZEL, author of chapter 2 (Broker Contracts), chapter 5 (Principal's Duties, Liabilities, and Defenses), and §1.27 (Broker Checklist: Do's and Don'ts), received his B.A. from the University of California, Los Angeles, and his J.D. from the Southwestern University School of Law. Mr. Wenzel practices in real estate transactions and litigation at Ropers, Majeski, Kohn & Bentley, San Francisco. He is a member of the Real Property Section of the State Bar Association.

ALEXANDER M. WEYAND, coauthor of chapter 1 (Overview of Real Estate Brokerage) and chapter 3 (Agency: Broker Fiduciary and Statutory Duties), received his B.A. from the University of California, San Diego, and his J.D. from the University of California, Hastings College of the Law. Mr. Weyand is a shareholder of the Weyand Law Firm, San Francisco, specializing in real estate, technology, business, and environmental litigation.

MARY E. WORK, coauthor of chapters 8 (Regulation of Brokers) and chapter 9 (Disciplinary Procedures), received her B.A. from Loyola Marymount University and her J.D. from the Southwestern University School of Law. Ms. Work was formerly legal counsel with the former California Department of Real Estate (now the California Bureau of Real Estate). She specializes in real estate license defense and real estate regulatory compliance. Ms. Work has offices in Manhattan Beach.

PAULA REDDISH ZINNEMANN, coauthor of chapter 8 (Regulation of Brokers) and chapter 9 (Disciplinary Procedures), received her J.D. from the University of West Los Angeles School of Law. She was the Commissioner of the former Department of Real Estate from 1999 to 2004 under Governor Gray Davis. Ms. Zinnemann is a past chairperson of the Real Property Section of the Los Angeles County Bar Association (LACBA) and past chairperson of the Real Estate Brokerage and Escrow Subsection of LACBA's Real Property Section. She specializes in real property law in Los Angeles.

About the 2017 Update Authors

MICHAEL D. ABRAHAM (chapter 6) received his B.S. degree from the University of California, Berkeley, his M.C.P. degree from the University of California, Berkeley, and his J.D. degree from the University of California, Hastings College of the Law. He is a principal at Bartko Zankel Bunzel, San Francisco, where he litigates on behalf of local, national, and international clients concerning real estate transactions, lease disputes, complex commercial litigation matters, antitrust issues, privacy issues, class actions, arbitrations, and other ADR.

LESLIE A. BAXTER (chapters 3 and 12) received her B.A. degree from the University of California, Berkeley, her M.P.A. degree from California State University, Hayward, and her J.D. degree from the University of California, Hastings College of the Law. Ms. Baxter is a partner at Randick, O'Dea & Tooliatos, LLP, Pleasanton, where she specializes in real estate litigation and land use matters.

CLIFFORD R. HORNER (chapters 4 and 11) received his B.S. degree from California Polytechnic State University, San Luis Obispo, and his J.D. degree from the University of California, Hastings College of the Law. Mr. Horner specializes in real estate, broker, and business litigation at Horner & Singer, LLP, Walnut Creek.

LAWRENCE H. JACOBSON (chapters 1, 7, and 13) received his A.B. degree from the University of California, Los Angeles, and his J.D. degree from the University of California, Los Angeles, School of Law. Mr. Jacobson has a transactional practice in Beverly Hills with an emphasis on real estate and real estate brokerage matters, and he testifies frequently as an expert witness in these areas as well as on legal malpractice and legal ethics.

TIMOTHY R. SULLIVAN (chapter 10) received his B.A. and J.D. degrees from the University of Missouri. Mr. Sullivan is a partner at McCormick, Barstow, Sheppard, Wayte & Carruth, LLP, Fresno, where he represents insurers, insureds, brokers, and salespersons in a variety of insurance-related matters, including bad faith and declaratory relief actions. Mr. Sullivan is an author of insurance chapters in California Title Insurance Practice (2d ed Cal CEB); California Construction Contracts, Defects, and Litigation (Cal CEB); California Property Insurance: Law and Litigation (Cal CEB); Office Leasing: Drafting and Negotiating the Lease (Cal CEB); and California Real Property Sales Transactions (4th ed Cal CEB).

TODD J. WENZEL (chapters 2 and 5) received his B.A. degree from the University of California, Los Angeles, and his J.D. degree from the Southwestern University School of Law. Mr. Wenzel practices in real estate transactions and litigation at Gaw, Van Male, LLP, Napa. He is a member of the Real Property Section of the State Bar Association.

MARY E. WORK (chapters 8 and 9) received her B.A. degree from Loyola Marymount University and her J.D. degree from the Southwestern University School of Law. Ms. Work is principal of Mary Work, PC, in Manhattan Beach. Before entering private practice in 2004, Ms. Work was a prosecutor with the former California Department of Real Estate (now the California Bureau of Real Estate). Her practice is focused on advising and representing professionals who face licensing or regulatory problems. She currently serves as an advisor to the executive committee of the Real Property Section of the State Bar and is a member of the California Association of Realtors (CAR) Legal Affairs Forum. She has been a speaker and panel member on numerous occasions for the State Bar of California Real Property Section, the CAR Legal Affairs Forum, and various local boards of realtors. Ms. Work is also a co-author of the Brokers chapter in California Real Property Sales Transactions (4th ed Cal CEB).

PAULA REDDISH ZINNEMANN (chapters 8 and 9) received her J.D. degree from the University of West Los Angeles School of Law. Ms. Zinnemann specializes in real property law in Los Angeles. She was the Commissioner of the former Department of Real Estate from 1999 to 2004 under Governor Gray Davis. She is a past chairperson of the Real Property Section of the Los Angeles County Bar Association (LACBA) and a past chairperson of the Real Estate Brokerage and Escrow Subsection of LACBA's Real Property Section.

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