The Contracts Strategy Seminar, held on March 6, 2025, delved into key updates on buyer representation agreements under new California law, helping you stay ahead of industry changes and safeguard your commissions effectively. Expert speaker from Mashian Law Group, Bryan Mashian – provided valuable insights to help our Contracts users learn how to protect their commissions, draft conflict-free, enforceable agreements and navigate exclusive vs. non-exclusive arrangements with confidence.
Contracts Seminar Q&A
Q: Can we utilize this agreement for out-of-California transactions?
A: The AIR CRE agreements were created to be used in California according to the specifics of AB 2992. It is not recommended it be used in other states.
Q: Do we have to send this signed agreement to the seller’s side?
A: No. There is no requirement to share the agreement with the Seller or the Seller’s broker.
Q: Does this need to be signed along with the Letter of Intent or the Purchase Agreement?
A: It needs to be signed as soon as is practicable, but no later than when an offer to purchase is made.
Q: Does the Buyer-Broker Representation Agreement apply to business opportunities?
A: If the real estate is included in the purchase of the business, then the Buyer-Broker Representation Agreement must be signed for the real estate component of the sale.
Q: Can you have the Buyer-Broker Agreement apply to only one property? Or does it have to be a blanket agreement?
A: It can apply to one property or it can apply to a “type” of property (i.e., a building between 10,000 square feet and 25,000 square feet, in the cities of…). Both means of identifying a property can be used in one single agreement.
Q: As the listing broker, how do we deal with an attorney who represents themself as the buyer?
A: No differently than you would any other buyer.
Q: Are we assuming that the Seller will not pay a commission to the Buyer’s agent/broker and now only pays the Listing agent/broker?
A: No, the Seller can still pay the Buyer’s Broker’s commission as was done before the enactment of AB 2992.
Q: What if a broker places limitations within a geographic area with building size requirements? i.e. Any building of 25,000 square feet in the South Bay and the buyer ends up buying a building that does not meet that description, can the buyer get out of paying the commission?
A: The buyer is free to use other brokers for properties which do not fit the characteristics listed in the representation agreement. So, the buyer would not owe the broker compensation for buying a property that is not described in the representation agreement. If, however, the buyer submits an offer through the broker for a property whose characteristics vary from those set forth in the representation agreement, then the broker may be entitled to a commission as Section 2.1 provides as follows: “A Property for which Buyer makes an Offer to Purchase shall be deemed to satisfy Property Characteristics, even if such characteristics vary from Property Characteristics stated in this Agreement.”
Q: With the advent of this Buyer Representation agreement requirement, why would a Listing Broker disclose any compensation available to the Buyer Broker rather than have the Buyer’s Broker include a Seller Credit to the Buyer in their purchase offer?
A: The listing broker should disclose the compensation that is available to the buyer’s brokers to incentivize these brokers to make offers, which helps expedite the sale of the property; that ultimately benefits the listing broker as well.
Q: If the Buyer-Broker agreement is not signed in the proper timeframe, can the Seller refuse to pay the agreed Buyer-Broker commission in the executed PSA?
A: Yes.
Q: Can or should a procuring agent ask a listing agent if or what the procuring fee is? Should the listing agent disclose if there is a procuring fee per a listing agreement? Should that information be shared by the procuring agent to the Buyer? And, is there a scenario where the listing agent can or should advertise that there is a procuring fee?
A: The buyer’s broker can and should inquire from the listing broker about the amount of compensation that is being offered to the buyer’s broker. The listing broker should disclose the compensation that is available to buyer’s brokers to incentivize these brokers to make offers, which helps expedite the sale of the property; that ultimately benefits the listing broker as well. The buyer’s broker should disclose to the buyer the amount of the buyer’s broker’s compensation. The listing agent can legally advertise the amount of compensation offered to buyer’s brokers to facilitate the buyer’s broker’s efforts in selling the property.
Q: What happens if the Buyer refuses to accept 3.3?
A: Then, before signing the agreement, the buyer’s broker needs to decide whether or not to represent the buyer if the scenario addressed in Section 3.3 occurs. In other words, when the buyer intends for the seller to pay the buyer’s broker’s compensation, but the seller refuses to do so, then how will this impasse be resolved. Will the broker allow the buyer to purchase the property and forego any compensation or will the buyer be prohibited from buying the property unless the broker is paid.
Q: Can the procuring broker be paid more by the seller than what is listed in the Buyer-Broker Representation Agreement?
A: AB 2992 does not address this situation and does not prohibit the buyer’s broker from being paid more than the amount provided in the representation agreement, but the buyer’s broker should be mindful of the duty to disclose its compensation to the buyer.
Q: For the 90-day durational limit, can the term start at “close of Escrow for 1031 exchange down leg” and END of term be 90-days from that date? For example, if we signed the Exclusive Buyer rep agreement today, but have it start upon close of escrow of the down leg that is approximately June 1, 2025, and would end August 31, 2025.
A: AB 2992’s durational limits do not prohibit a start date that is in the future or tied to the occurrence of an event. In an exclusive representation agreement, keep in mind that California Business and Professions Code Section 10176(f) requires that an exclusive agreement must contain a “definite, specified date of final and complete termination”.
Q: If a listing offers 3% to the buyer’s broker, but the buyer’s broker agreement only requires 2%, what happens to the extra 1%? Can the listing broker request to see the buyer’s broker agreement to verify the commission amount?
A: If the buyer’s broker’s compensation is less than the maximum required under the listing agreement, seller does not have to pay the maximum and the disposition of the “unused” commission portion would be governed by the listing agreement.
Q: If a Buyer contacts the listing broker directly and wants to have the listing broker submit an offer, is the Buyer Broker Agreement required?
A: Yes. This situation is a dual agency and the buyer-broker representation agreement is still required.
Q: For listing agreements, are automatic renewals also no longer allowed? I understand they’re not permitted for buyers.
A: With exclusive seller listing agreements Business and Professions Code Section 10176(f) requires that an exclusive agreement must contain a “definite, specified date of final and complete termination”.
Q: Since buyers typically do not pay commissions to their agents, how will a 3% commission impact a $2,500,000 loan? The commission amounts to $75,000 – can this be included in the loan amount?
A: AB2992 does not prohibit the buyer’s broker’s compensation from being included in the amount of the loan that the buyer will be obtaining to buy the property.
Q: Section 1.7 only specifies “a period of time.” Where in the document is the term “Protection” explicitly defined?
A: The definition is in Section 1.7, which is referenced in Sections 4.2 and 4.3.
Q: What if someone refuses to sign the agreement?
A: Then the broker should not represent this buyer since proceeding without a signed representation agreement violates licensing law and possibly subjects broker to discipline (Civil Code 1670.50(e)).
Q: Should the pre quoted commission change (get reduced) during negotiations, what would be the effect?
A: The parties should sign an amendment to the representation agreement to confirm the new commission amount.