00 CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 29(L&C) 01 "An Act relating to real estate licensees and real estate transactions; and providing for 02 an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 05 to read: 06 LEGISLATIVE FINDINGS AND INTENT. (a) The legislature finds that 07 (1) the application of the common law of agency to the relationships between 08 real estate licensees and persons who are sellers, lessors, buyers, or lessees of real property 09 has resulted in misunderstandings and consequences that are contrary to the best interests of 10 the public; 11 (2) the real estate industry has a significant effect on the economy of the state; 12 and 13 (3) it is in the best interest of the public to codify in statute the relationships 14 between real estate licensees and persons who are sellers, lessors, buyers, or lessees of real 01 property. 02 (b) It is the intent of the legislature for this Act to govern the relationships between 03 real estate licensees and sellers, lessors, buyers, and lessees in real property transactions. 04 * Sec. 2. AS 08.88.071 is amended by adding a new subsection to read: 05 (d) The commission may investigate a violation of a provision of 06 AS 08.88.600 - 08.88.695 by a real estate licensee and take administrative action 07 under (a)(3) of this section if the commission has reason to believe that a violation has 08 occurred. 09 * Sec. 3. AS 08.88.391(a) is amended to read: 10 (a) A real estate licensee who has a conflict of interest relating to a real estate 11 transaction shall disclose that conflict of interest to [AT THE TIME OF INITIAL 12 SUBSTANTIVE CONTACT WITH] the persons adversely affected by the conflict 13 [PRINCIPALS] or their real estate licensees [AGENTS OF THE PRINCIPALS] and 14 confirm the conflict of interest in writing to the persons adversely affected by the 15 conflict [PRINCIPALS] or their real estate licensees [AGENTS OF THE 16 PRINCIPALS] involved in the transaction as soon as possible after the conflict is 17 identified [INITIAL SUBSTANTIVE CONTACT]. 18 * Sec. 4. AS 08.88.396 is amended by adding a new subsection to read: 19 (f) This section applies only to acts that occur before the effective date of this 20 subsection. 21 * Sec. 5. AS 08.88.401(g) is amended to read: 22 (g) A person who violates this section or [,] AS 08.88.161 [, OR 08.88.396] is 23 guilty of a class A misdemeanor. 24 * Sec. 6. AS 08.88 is amended by adding new sections to read: 25 Article 4A. Licensee Relationships and Duties. 26 Sec. 08.88.600. Licensee relationships. (a) A real estate licensee who 27 provides real estate services to one party in a real estate transaction represents only 28 that party unless the parties to the transaction agree otherwise in writing. 29 (b) A real estate licensee may not provide real estate services to more than one 30 party in the same real estate transaction, except that 31 (1) a licensee may represent one party to the transaction while 01 providing specific assistance to an unrepresented party to the transaction; 02 (2) a licensee may act as a neutral licensee under (c) of this section; 03 (3) a licensee may also be a party to the transaction; or 04 (4) the parties to the transaction may agree otherwise in writing. 05 (c) A real estate licensee may provide specific assistance to both the seller and 06 buyer, or both the lessor and lessee, in the same real estate transaction as a neutral 07 licensee if the licensee complies with AS 08.88.610. 08 (d) A real estate licensee who works for a real estate broker may represent or 09 provide specific assistance to a person in a real estate transaction even if the broker or 10 another licensee who is working for the broker represents or provides specific 11 assistance to another person in the same transaction. The broker shall designate which 12 licensee, including the broker, is the designated licensee for the seller or lessor and 13 which licensee, including the broker, is the designated licensee for the buyer or lessee. 14 Sec. 08.88.605. Additional licensee relationship provisions. (a) A real 15 estate licensee may provide real estate services to a party in separate real estate 16 transactions under different licensee relationships if the licensee complies with 17 AS 08.88.600 - 08.88.695 when establishing the relationship for each transaction. 18 (b) The authorization under (a) of this section includes acting as a real estate 19 licensee for a party in one real estate transaction and at the same time not representing 20 that party in a different real estate transaction involving that party. 21 Sec. 08.88.610. Authorization of neutral licensee relationship. (a) Before 22 a real estate licensee begins acting as a neutral licensee, the real estate licensee may 23 obtain preauthorization from a person to act as a neutral licensee in the person's real 24 estate transaction by obtaining the written consent of the person. 25 (b) If preauthorization is not obtained under (a) of this section, when a buyer 26 or lessee expresses an interest to the licensee in acquiring or leasing real estate and the 27 licensee is representing the seller or lessor of the property, the licensee shall obtain 28 written consent to act as a neutral licensee before the licensee shows the real estate. 29 Sec. 08.88.615. Duties owed by licensee in all licensee relationships. (a) 30 Unless additional duties are agreed to in a written document signed by the person, and 31 regardless of the type of licensee relationship in which the real estate licensee is 01 acting, a real estate licensee owes the following duties to each person to whom the 02 licensee provides specific assistance: 03 (1) the exercise of reasonable skill and care; 04 (2) honest and good faith dealing; 05 (3) the presentation of all written offers, written notices, and other 06 written communications to and from the person in a timely manner regardless of 07 whether the real estate is subject to an existing contract for sale or lease or the person 08 is already a party to an existing contract to buy or lease real estate; 09 (4) except as provided in (b) and (c) of this section, the disclosure of 10 all material information known by the licensee and not apparent or readily 11 ascertainable to the person regarding the physical condition of real estate if the 12 information substantially adversely affects the real estate or a person's ability to 13 perform the person's obligations in the real estate transaction or if the information 14 would materially impair or defeat the purpose of the real estate transaction; 15 (5) accounting in a timely manner for all money and other property 16 received from or on behalf of the person; 17 (6) before the licensee provides specific assistance to the person, or 18 when entering into a contract with the person to provide specific assistance, providing 19 a pamphlet issued by the commission that outlines the duties of the types of licensee 20 relationships identified under AS 08.88.600; 21 (7) before the licensee provides specific assistance to the person, 22 obtaining from the person a document signed by the person that discloses the 23 licensee's relationship with the person; 24 (8) in addition to the document provided under (7) of this subsection, 25 providing to the person when the person signs an offer in a real estate transaction 26 handled by the licensee a written statement that states whether the licensee represents 27 the buyer, represents the seller, represents the lessee, represents the lessor, or provides 28 specific assistance to both the buyer and the seller or both the lessee and the lessor as a 29 neutral licensee; the statement must be contained in a separate paragraph entitled 30 "Licensee Relationships" in the contract between the buyer and seller or the lessee and 31 lessor, or in a separate document entitled "Licensee Relationships." 01 (b) The disclosure requirements of (a)(4) of this section do not require the real 02 estate licensee to disclose a fact or suspicion that the real estate or neighboring real 03 estate is or was the site of a murder, suicide, or other death, rape or other sexual crime, 04 assault or other violent crime, robbery, burglary, illegal drug activity, gang-related 05 activity, political activity, religious activity, anticipated development, alleged 06 supernatural activity, or another act, occurrence, or use that does not adversely affect 07 the physical condition of or title to the real estate. 08 (c) The disclosure requirements of (a)(4) of this section may not be construed 09 to imply a duty to investigate a matter that the licensee has not agreed to investigate. 10 Sec. 08.88.620. Duties owed by licensee representing a person. Unless 11 additional duties are agreed to in a written document signed by the person represented 12 by the licensee, a real estate licensee who represents the person owes the person the 13 following duties in addition to the other duties imposed by AS 08.88.615: 14 (1) not taking action that the licensee knows is adverse or detrimental 15 to the interest of the represented person in a real estate transaction; 16 (2) disclosure of a conflict of interest to the represented person in a 17 timely manner; 18 (3) advising the represented person to obtain expert advice on a matter 19 that relates to the real estate transaction that is beyond the licensee's expertise; 20 (4) not disclosing confidential information from or about the 21 represented person without written consent, except under a subpoena or another court 22 order, even after termination of the licensee's relationship with the represented person; 23 (5) if the represented person is a seller or a lessor, unless otherwise 24 agreed to in writing, making a good faith and continuous effort to find a buyer or 25 lessee for the real estate of the seller or lessor, except that a licensee is not required to 26 seek additional offers to buy or lease the real estate while the real estate is subject to 27 an existing contract for sale or lease; and 28 (6) if the represented party is a buyer or a lessee, unless otherwise 29 agreed to in writing, making a good faith and continuous effort to find real estate for 30 the buyer or lessee, except that a licensee is not obligated to 31 (A) seek additional real estate to buy or lease for the buyer or 01 lessee while the buyer or lessee is a party to an existing contract to buy or lease 02 real estate; or 03 (B) show to the buyer or lessee real estate for which there is not 04 a written agreement to pay compensation to the licensee. 05 Sec. 08.88.625. Waiver of duties. A real estate licensee or a person to whom 06 a licensee provides specific assistance may not waive the duties identified under 07 AS 08.88.615 and 08.88.620, except as otherwise allowed under AS 08.88.620(5) and 08 (6). 09 Sec. 08.88.630. Duties not owed by licensee. Unless agreed otherwise, a real 10 estate licensee does not owe a duty to a person with whom the licensee has established 11 a licensee relationship to 12 (1) conduct an independent inspection of the real estate that is the 13 subject of the licensee relationship; 14 (2) conduct an independent investigation of a person's financial 15 condition; or 16 (3) independently verify the accuracy or completeness of a statement 17 made by a party to a real estate transaction or by a person reasonably believed by the 18 licensee to be reliable. 19 Sec. 08.88.635. Acts not amounting to adverse or detrimental acts or 20 conflicts of interest. (a) If a licensee shows real estate not owned or leased by the 21 seller or lessor to prospective buyers or lessees or lists competing properties for sale or 22 lease, this activity does not by itself constitute action that is adverse or detrimental to 23 the seller or lessor or create a conflict of interest under AS 08.88.391. 24 (b) The representation of more than one seller or lessor by the same licensee 25 or by different licensees working for the same real estate broker in competing 26 transactions involving the same buyer or lessee does not by itself constitute action that 27 is adverse or detrimental to the sellers or lessors or create a conflict of interest under 28 AS 08.88.391. 29 (c) If a licensee shows real estate in which the buyer or lessee is interested to 30 other prospective buyers or lessees, this activity does not by itself constitute action 31 that is adverse or detrimental to the buyer or lessee or create a conflict of interest 01 under AS 08.88.391. 02 (d) The representation of more than one buyer or lessee by the same licensee 03 or by different licensees working for the same real estate broker in competing 04 transactions involving the same seller or lessor does not by itself constitute action that 05 is adverse or detrimental to the sellers or lessors or create a conflict of interest under 06 AS 08.88.391. 07 (e) Acting as a neutral licensee in compliance with AS 08.88.600 - 08.88.695 08 does not by itself constitute action that is adverse or detrimental to a seller, lessor, 09 buyer, or lessee or create a conflict of interest under AS 08.88.391. 10 (f) A real estate licensee who discloses confidential information to the 11 licensee's broker for the purpose of seeking advice or assistance for the benefit of the 12 person to whom the licensee is providing specific assistance does not breach the 13 licensee's duty of confidentiality to the person. 14 Sec. 08.88.640. Designated licensee relationship. (a) Unless the broker is 15 the designated licensee, the relationship, including the duties, obligations, and 16 responsibilities of the relationship, established between a person and a designated real 17 estate licensee does not extend to the real estate broker for whom the designated 18 licensee is working, to another real estate licensee who works for the same real estate 19 broker, or to an owner of the business that employs the real estate broker. The extent 20 or limitations of the relationship between the broker with the designated licensee shall 21 be disclosed to the parties to a real estate transaction. 22 (b) A real estate broker may have a different designated licensee working for a 23 seller or lessor and for the buyer or lessee in the same real estate transaction. Having a 24 different designated licensee working for a seller or lessor and for the buyer or lessee 25 in the same real estate transaction does not create dual agency or a conflict of interest 26 for the real estate broker or for a licensee employed by the same real estate broker. 27 (c) A designated real estate licensee may represent or provide specific 28 assistance to a person who is a seller or lessor in one real estate transaction while 29 representing or providing specific assistance to the person as a buyer or lessee in 30 another real estate transaction. 31 (d) Unless the broker is the designated licensee, when a designated licensee 01 represents or provides specific assistance as a designated licensee to a person in a real 02 estate transaction, the knowledge received by the designated licensee while 03 representing or providing specific assistance to the person is not imputed to the real 04 estate broker for whom the designated licensee works, to another real estate licensee 05 employed by or under contract to the broker, or to an owner of the business that 06 employs the real estate broker. 07 (e) This section may not be construed to limit the responsibility of a real estate 08 broker, or of an owner of a business that employs the real estate broker, to supervise 09 designated licensees who work for the broker or who work for the business that 10 employs the broker, or to shield the broker or business from vicarious liability for the 11 acts of the designated licensees. 12 Sec. 08.88.645. Duties of neutral licensee. (a) Unless additional duties are 13 agreed to in a written document signed by the neutral licensee and the seller, buyer, 14 lessor, or lessee, the duties of a neutral licensee are limited to the duties established for 15 real estate licensees under AS 08.88.615 and the following duties: 16 (1) not to take action that the neutral licensee knows is adverse or 17 detrimental to the interest of the persons to whom the neutral licensee provides 18 services in the real estate transaction; 19 (2) to disclose a conflict of interest in a timely manner to all parties to 20 whom the licensee provides specific assistance; 21 (3) to advise all parties to whom the licensee provides specific 22 assistance for the transaction to obtain expert advice on a matter relating to the 23 transaction that is beyond the expertise of the neutral licensee; 24 (4) not to disclose without written consent confidential information 25 from or about any of the parties to whom the licensee is providing specific assistance 26 to another party to whom the licensee is providing specific assistance in the 27 transaction, except under a subpoena or another court order, even after the relationship 28 with the party terminates; 29 (5) not to disclose without the consent of the person to whom the 30 information relates 31 (A) that the buyer or lessee is willing to pay more than the 01 price offered for the real estate; 02 (B) that the seller or lessor is willing to accept less than the 03 asking price for the real estate; or 04 (C) that the seller, buyer, lessor, or lessee will agree to 05 financing terms other than those terms offered. 06 (b) A neutral licensee does not violate the duties of a neutral licensee if, with 07 written consent, the neutral licensee engages in the following conduct in a good faith 08 effort to assist in reaching final agreement in a real estate transaction: 09 (1) analyzing, providing information on, or reporting on the merits of 10 the transaction to each party; 11 (2) discussing the price, terms, or conditions that each party would or 12 should offer or accept; or 13 (3) suggesting compromises in the parties' respective bargaining 14 positions. 15 Sec. 08.88.650. No imputation of knowledge resulting from neutral 16 licensee relationship. In a neutral licensee relationship, the knowledge or information 17 of the licensee about one client is not imputed to other clients or to other licensees 18 who work for the same real estate broker. 19 Sec. 08.88.655. Compensation. (a) A real estate broker may be compensated 20 by any party to a real estate transaction, by a third party, or by one or more of the 21 parties to the transaction splitting or sharing the compensation. 22 (b) The payment of compensation to a real estate broker may not be construed 23 to establish a relationship between the broker and the party who pays the 24 compensation. 25 (c) If a real estate licensee provides specific assistance or enters into a 26 personal service contract to act as a real estate licensee for a person, or if a seller and 27 buyer, or a lessor and lessee, enter into a contract to sell, buy, or lease real estate, the 28 real estate licensee shall disclose which party the licensee anticipates will be paying 29 compensation to the real estate brokers in the real estate transaction. 30 (d) A real estate licensee shall include in a contract to sell, buy, or lease real 31 estate a statement indicating which party is paying compensation to the real estate 01 brokers in the real estate transaction. 02 Sec. 08.88.660. Duration of relationship. (a) A licensee relationship with a 03 buyer, lessee, seller, or lessor begins when the licensee represents or provides specific 04 assistance to the buyer, lessee, seller, or lessor and continues until the earliest of the 05 following events occurs: 06 (1) the licensee completes the representation or specific assistance; 07 (2) the relationship term agreed on by the buyer, lessee, seller, or 08 lessor terminates; 09 (3) the licensee and the parties to the relationship terminate the 10 relationship by mutual agreement; or 11 (4) a party to the relationship terminates the relationship by giving 12 notice to the other party. 13 (b) The termination of a relationship under (a)(3) or (4) of this section only 14 terminates the licensee relationship and does not affect other contractual rights of the 15 parties to the licensee relationship. 16 (c) Except as otherwise agreed to in writing, a licensee does not owe a further 17 duty to a buyer, lessee, seller, or lessor after termination of the licensee relationship, 18 except for the duties of accounting for all money and other property received during 19 the relationship and not disclosing confidential information. 20 Sec. 08.88.665. Vicarious liability. A seller, buyer, lessor, or lessee is not 21 liable for an act, error, or omission of a real estate licensee that arises out of the 22 licensee relationship, 23 (1) unless the seller, buyer, lessor, or lessee participated in or 24 authorized the act, error, or omission and then only to the extent of the participation or 25 authorization; or 26 (2) except to the extent that the seller, buyer, lessor, or lessee benefited 27 from the act, error, or omission, and a court determines that it is highly probable that 28 the person claiming damages for the act, error, or omission would be unable to enforce 29 a judgment against the licensee. 30 Sec. 08.88.670. Imputed knowledge and notice. (a) Unless otherwise 31 agreed to in writing, a seller, buyer, lessor, or lessee is not considered to have 01 knowledge or notice of a fact known by a real estate licensee of the seller, buyer, 02 lessor, or lessee unless the fact is actually known by the seller, buyer, lessor, or lessee. 03 (b) Unless otherwise agreed to in writing, a real estate licensee does not have 04 knowledge or notice of a fact that is not actually known by the licensee. 05 Sec. 08.88.675. Common law abrogated. The common law of agency 06 related to real estate licensee relationships in real estate transactions is expressly 07 abrogated to the extent inconsistent with AS 08.88.600 - 08.88.695. 08 Sec. 08.88.680. Causes of action. (a) A person may not bring an action 09 against a neutral licensee for making a disclosure that is required or permitted under 10 this chapter. 11 (b) In a civil action for the failure of a licensee to comply with the provisions 12 of AS 08.88.600 - 08.88.695, the plaintiff's remedy is limited to the recovery of actual 13 damages. This subsection does not limit a person's ability to take any other action or 14 pursue any other remedy to which the person may be entitled under other law. 15 Sec. 08.88.685. Policies, guidelines, and requirements. (a) A broker shall 16 adopt a written policy that identifies and describes the relationships in which the 17 broker and the real estate licensees who work for the broker may engage with a seller, 18 buyer, lessor, or lessee. The broker shall make the written policy available to the 19 commission and to members of the public on request. 20 (b) The commission shall adopt regulations that establish 21 (1) guidelines to assist a broker to adopt the written policy required by 22 (a) of this section; 23 (2) the contents of the pamphlet to be issued by the commission and 24 provided under AS 08.88.615(a)(6); and 25 (3) requirements for a broker's supervision of the real estate licensees 26 who work for the broker. 27 Sec. 08.88.690. Exemptions. A real estate licensee is exempt from the 28 signature requirements of AS 08.88.600 - 08.88.695 when the licensee provides 29 specific assistance to 30 (1) a corporation that issues publicly traded securities; 31 (2) a business that has a net worth in the previous calendar year of 01 $2,000,000 or more, if the business requests the exemption from the licensee; or 02 (3) a governmental agency; in this paragraph, "governmental agency" 03 means a department, division, public agency, political subdivision, or other public 04 instrumentality of the state or federal government, including the University of Alaska, 05 the Alaska Railroad Corporation, the Alaska Housing Finance Corporation, the Alaska 06 Industrial Development and Export Authority, and other public corporations. 07 Sec. 08.88.695. Definitions. In AS 08.88.600 - 08.88.695, 08 (1) "compensation" includes a commission; 09 (2) "confidential information" means information from or concerning a 10 person that 11 (A) the licensee acquired during the course of the licensee's 12 relationship as a licensee with the person; 13 (B) the person reasonably expects to be kept confidential; 14 (C) the person has not disclosed or authorized to be disclosed 15 to a third party; 16 (D) would, if disclosed, operate to the detriment of the person; 17 and 18 (E) the person is not obligated to disclose to the other party in a 19 real estate transaction; 20 (3) "designated licensee" means 21 (A) a real estate licensee who works for a real estate broker and 22 represents or provides specific assistance to a person in a real estate transaction 23 when another licensee who is working for the same broker represents or 24 provides specific assistance to an unrepresented person in the same transaction; 25 or 26 (B) a real estate broker who represents or provides specific 27 assistance to a person in a real estate transaction when another licensee who is 28 working for the broker represents or provides specific assistance to another 29 person in the same transaction; 30 (4) "neutral licensee" means a real estate licensee who 31 (A) provides specific assistance to both the buyer and the 01 seller, or both the lessor and the lessee in a real estate transaction; and 02 (B) does not represent either party; 03 (5) "personal services contract" includes a listing, a fee agreement 04 between brokers and sellers, buyers, lessors, or lessees, a management contract with 05 property owners, or any other agreement by which a broker agrees to perform a duty 06 with respect to real estate for an agreed upon fee or commission; 07 (6) "real estate services" means services related to a real estate 08 transaction; 09 (7) "represent" means to provide real estate services to a person if the 10 services are not limited to specific assistance; 11 (8) "specific assistance" 12 (A) means 13 (i) asking questions regarding confidential information 14 for a real estate transaction; 15 (ii) showing pieces of real estate selected for a buyer's 16 or lessee's specific needs or desires; 17 (iii) preparing a written offer for a real estate 18 transaction; or 19 (iv) entering into a personal services contract; 20 (B) does not include 21 (i) hosting an open house; 22 (ii) casual conversation regarding real estate; 23 (iii) receiving calls or electronic inquiries from the 24 licensee's signs, advertisements, or Internet site; 25 (iv) providing information regarding a piece of real 26 estate; 27 (v) setting an initial appointment to show a piece of real 28 estate; 29 (vi) receiving unsolicited information from a buyer or 30 lessee before or after disclosure of a real estate relationship. 31 * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to 01 read: 02 TRANSITIONAL PROVISIONS: PAMPHLET; REGULATIONS. The Real Estate 03 Commission shall proceed to adopt the regulations required by AS 08.88.685(b), enacted by 04 sec. 6 of this Act. The Real Estate Commission may proceed to adopt other regulations 05 necessary to implement this Act. A regulation adopted under this section takes effect under 06 AS 44.62 (Administrative Procedure Act) but not before the effective date of the law 07 implemented by the regulation. 08 * Sec. 8. Sections 1 - 6 of this Act take effect January 1, 2005. 09 * Sec. 9. Section 7 of this Act takes effect immediately under AS 01.10.070(c).