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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 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 Department 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 DRE
      • 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
      • 4.  Matter Previously Resolved by Court  11.47A
    • 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 2018 Update

Administrative Developments

  • Effective July 1, 2018, the California Bureau of Real Estate (CalBRE) was returned to the status of a department within the California state government. The Department was renamed the Department of Real Estate (DRE) and placed within the oversight of the Business, Consumer Services, and Housing Agency. See SB 173 (Stats 2017, ch 828). This change is reflected through this book. See Alerts in §§1.1, 8.1, 9.3, 9.11.

  • The National Association of Realtors© (NAR) has updated the NAR Code of Ethics and Standards of Practice and its NAR Code of Ethics and Arbitration Manual (NAR 2018). See §§1.1, 1.6–1.7, 3.14–3.16, 3.19, 3.45, 3.47, 3.60, 3.63, 3.66–3.67, 3.69, 4.37, 7.26, 8.3, 11.9, 11.22, 13.9.

  • The California Association of Realtors© (CAR) has updated its California Code of Ethics and Arbitration Manual (CAR 2018). See §§1.8, 3.14, 7.26–7.27, 7.30, 7.34, 8.3.

  • In January 2018, the Department of Real Estate published an update of its Guidline for Unlicensed Assistants. See §8.2.

  • In May 2018, the Department of Real Estate published an update of its License Disclosure Requirements for Advertising. See §8.3.

  • In May 2018, the California Supreme Court issued an order approving new and amended Rules of Professional Conduct, which will become effective on November 1, 2018. Visit the California State Bar website (http:www.calbar.ca.gov) to see the previous and current rules. For specific rules discussed in this book, see §§11.4, 11.19, 13.9, 13.11.

Case Developments

  • Thompson v Asimos (2016) 6 CA5th 970 (real estate broker who collaborated with consulting firm handling deals involving property housing Internet infrastructure admittedly breached independent contractor agreements by failing to register consulting firm with Department of Real Estate). See §§4.5, 8.19.

  • Jensen v U-Haul Co. (2017) 18 CA5th 295 (defendant lessor of rental truck could not compel arbitration against injured plaintiffs who were lessee’s employee and employee’s spouse). See §6.6.

  • Sprunk v Prisma LLC (2017) 14 CA5th 785 (affirming denial of motion to compel arbitration when substantial evidence supported conclusion that employer’s delay in moving to compel arbitration until after ruling on class certification was strategic decision to attempt to win case by defeating class before seeking to arbitrate). See §6.28.

  • Aanderud v Superior Court (2017) 13 CA5th 880 (delegation of arbitrability to arbitrator rather than courts must be “clear and unmistakable” and not revocable under state contract defenses such as fraud, duress, or unconscionability). See §6.29.

  • Admiral Ins. Co. v Superior Court (2017) 18 CA5th 383 (finding “prior notice” provision to be “integral part” of insuring agreement itself). See §10.14.

  • Centurion Med. Liab. Protective Risk Retention Group Inc. v Gonzalez (CD Cal 2017) 296 F Supp 3d 1212 (enforcing requirement that notice of claim under insurance policy be provided within 20 days after receipt by insured). See §§10.16, 10.27, 10.29.

  • Great Am. Ins. Co. v Quintana Homeowners Ass’n (ND Cal 2018) 291 F Supp 3d 1003 (insuring language was not limited to “damages,” but required insurer to pay “loss” defined as “total amount ... any Insured becomes legally obligated to pay as the result of all Claims”). See §10.34.

  • Energy Ins. Mut. Ltd. v Ace Am. Ins. Co. (2017) 14 CA5th 281 (mapping and marking underground installations are “professional services” covered by insurance policy). See §10.39.

  • Bigler-Engler v Breg, Inc. (2017) 7 CA5th 276 (punitive damages awards “generally are not allowed to exceed 10 percent of the net worth of the defendant”). See §10.134.

  • Ayala v Dawson (2017) 13 CA5th 1319 (collateral estoppel barred tenant’s claim of fraudulent inducement against landlord and purported broker, when theory was rejected in separate unlawful detainer action). See §11.47A.

  • PGA W. Residential Ass’n v Hulven Int’l, Inc. (2017) 14 CA5th 156 (trial court erred in overruling demurrer brought by sham corporation owned and controlled by property owner trying to shield equity from creditors). See §11.63.

  • Monster, LLC v Superior Court (2017) 12 CA5th 1214 (jury trial on amount of attorney fees to be awarded is proper when fees are sought as form of contract damages). See §11.105.

  • Mountain Air Enters. v Sundowner Towers (2017) 3 C5th 744 (prevailing buyers in contract dispute were entitled to attorney fees under option agreement even though raising that agreement as affirmative defense did not trigger attorney fee provision in agreement). See §11.105.

New Legislation

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

  • Effective January 1, 2018, Bus & P C §10083.2 requires the DRE to publicly 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.

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 2018 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 & Miller, 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 Budde Law Group, Walnut Creek, 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 Law Group, PC, 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 Wenzel Law, 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).

 

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