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S1027..........................................by COMMERCE AND HUMAN RESOURCES
REAL ESTATE BROKERS - Amends existing law to provide that real estate
brokerages and licensees are required to disclose only those adverse material
facts that are actually known; to delete language requiring brokerages and
licensees to conduct certain investigations; to provide that brokerages and
licensees owe no duty to conduct independent inspections of property, to
independently verify certain statements or representations or to conduct
independent investigations relating to a party's financial ability; and to
revise provisions relating to the vicarious liability of clients, licensees
and brokerages.
01/24 Senate intro - 1st rdg - to printing
01/27 Rpt prt - to Com/HuRes
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-seventh Legislature First Regular Session - 2003
IN THE SENATE
SENATE BILL NO. 1027
BY COMMERCE AND HUMAN RESOURCES COMMITTEE
1 AN ACT
2 RELATING TO THE IDAHO REAL ESTATE BROKERAGE REPRESENTATION ACT; AMENDING SEC-
3 TION 54-2086, IDAHO CODE, TO PROVIDE THAT BROKERAGES AND THEIR LICENSEES
4 ARE REQUIRED TO DISCLOSE ONLY THOSE ADVERSE MATERIAL FACTS THAT ARE ACTU-
5 ALLY KNOWN AND TO MAKE A TECHNICAL CORRECTION; AMENDING SECTION 54-2087,
6 IDAHO CODE, TO PROVIDE THAT BROKERAGES AND THEIR LICENSEES ARE REQUIRED TO
7 DISCLOSE ONLY THOSE ADVERSE MATERIAL FACTS THAT ARE ACTUALLY KNOWN, TO
8 DELETE LANGUAGE REQUIRING THAT BROKERAGES AND THEIR LICENSEES CONDUCT CER-
9 TAIN INVESTIGATIONS, TO PROVIDE THAT UPON REQUEST BY A CLIENT OR SELLER
10 BROKERAGES AND THEIR LICENSEES SHALL REQUEST CERTAIN PROOF RELATING TO A
11 PROSPECTIVE BUYER'S FINANCIAL ABILITY TO PURCHASE REAL PROPERTY AND TO
12 PROVIDE THAT BROKERAGES AND THEIR LICENSEES OWE NO DUTY TO CONDUCT INDE-
13 PENDENT INSPECTIONS OF PROPERTY, TO INDEPENDENTLY VERIFY CERTAIN STATE-
14 MENTS OR REPRESENTATIONS OR TO CONDUCT INDEPENDENT INVESTIGATIONS RELATING
15 TO A PARTY'S FINANCIAL ABILITY; AND AMENDING SECTION 54-2093, IDAHO CODE,
16 TO REVISE PROVISIONS RELATING TO THE VICARIOUS LIABILITY OF CLIENTS,
17 LICENSEES AND BROKERAGES.
18 Be It Enacted by the Legislature of the State of Idaho:
19 SECTION 1. That Section 54-2086, Idaho Code, be, and the same is hereby
20 amended to read as follows:
21 54-2086. DUTIES TO A CUSTOMER. (1) If a buyer, prospective buyer, or
22 seller is not represented by a brokerage in a regulated real estate transac-
23 tion, that buyer or seller remains a customer, and as such, the brokerage and
24 its licensees are nonagents and owe the following legal duties and obliga-
25 tions:
26 (a) To perform ministerial acts to assist the buyer or seller in the sale
27 or purchase of real estate;
28 (b) To perform these acts with honesty, good faith, reasonable skill and
29 care;
30 (c) To properly account for moneys or property placed in the care and
31 responsibility of the brokerage;
32 (d) To disclose to the buyer/customer all adverse material facts actually
33 known or which reasonably should have been known by the licensee;
34 (e) To disclose to the seller/customer all adverse material facts actu-
35 ally known or which reasonably should have been known by the licensee;.
36 (2) A nonagent brokerage and its licensees owe no duty to a
37 buyer/customer to conduct an independent inspection of the property for the
38 benefit of that buyer/customer and owe no duty to independently verify the
39 accuracy or completeness of any statement or representation made by the seller
40 or any source reasonably believed by the licensee to be reliable.
41 (3) A nonagent brokerage and its licensees owe no duty to a
42 seller/customer to conduct an independent investigation of the buyer's finan-
43 cial condition for the benefit of that seller/customer and owe no duty to
2
1 independently verify the accuracy or completeness of statements made by the
2 buyer or any source reasonably believed by the licensee to be reliable.
3 SECTION 2. That Section 54-2087, Idaho Code, be, and the same is hereby
4 amended to read as follows:
5 54-2087. DUTIES TO A CLIENT. If a buyer or seller enters into a written
6 contract for representation in a regulated real estate transaction, that buyer
7 or seller becomes a client to whom the brokerage and its licensees owe the
8 following agency duties and obligations:
9 (1) To perform the terms of the written agreement with the client;
10 (2) To exercise reasonable skill and care;
11 (3) To promote the best interests of the client in good faith, honesty
12 and fair dealing including, but not limited to:
13 (a) Disclosing to the client all adverse material facts actually known or
14 which reasonably should have been known by the licensee;
15 (b) Seeking a buyer to purchase the seller's property at a price, and
16 under terms and conditions acceptable to the seller and assisting in the
17 negotiation therefor; or
18 (c) Seeking a property for purchase at a price and under terms and condi-
19 tions acceptable to the buyer and assisting in the negotiation therefor;
20 (d) For the benefit of a client/buyer: conducting a reasonable investiga-
21 tion of the property and material representations about the property made
22 by the seller or seller's agent, or when appropriate, advising the client
23 to obtain professional inspections of the property or to seek appropriate
24 tax, legal and other professional advice or counsel;
25 (e) For the benefit of a client/seller: upon request by a client/seller,
26 requesting reasonable proof of a prospective buyer's financial ability to
27 purchase the real property which is the subject matter of the transaction.
28 This duty may be satisfied by any appropriate method suitable to the
29 transaction or, when deemed necessary by the real estate licensee, by
30 advising the client to consult with an accountant, lawyer, or other pro-
31 fessional as dictated by the transaction.
32 (4) To properly account for moneys or property placed in the care and
33 responsibility of the brokerage; and
34 (5) To maintain the confidentiality of specific client information as
35 defined by and to the extent required in this chapter, and as follows:
36 (a) The duty to a client continues beyond the termination of representa-
37 tion only so long as the information continues to be confidential client
38 information as defined in this chapter, and only so long as the informa-
39 tion does not become generally known in the marketing community from a
40 source other than the brokerage or its affiliated licensees;
41 (b) A licensee who personally has gained confidential client information
42 about a buyer or seller while associated with one (1) broker and who later
43 affiliates with a different broker remains obligated to maintain the cli-
44 ent confidentiality as required by this chapter;
45 (c) If a brokerage represents a buyer or seller whose interests conflict
46 with those of a former client, the brokerage shall inform the second cli-
47 ent of the broker's prior representation of the former client and that
48 confidential client information obtained during the first representation
49 cannot be given to the second client. Nothing in this section shall pre-
50 vent the brokerage from asking the former client for permission to release
51 such information;
52 (d) Nothing in this section is intended to create a privileged communica-
53 tion between any client and any brokerage or licensee for purposes of
3
1 civil, criminal or administrative legal proceedings.
2 (6) A brokerage and its licensees owe no duty to a client to conduct an
3 independent inspection of the property, and owe no duty to independently ver-
4 ify the accuracy or completeness of any statement or representation made
5 regarding a property unless the brokerage or its licensees had actual knowl-
6 edge of the inaccurate or incomplete statement or representation. A brokerage
7 and its licensees owe no duty to conduct an independent investigation of
8 either party's financial ability to complete a real estate transaction.
9 SECTION 3. That Section 54-2093, Idaho Code, be, and the same is hereby
10 amended to read as follows:
11 54-2093. VICARIOUS LIABILITY ABOLISHED. (1) A client, as defined in this
12 act, whether buyer or seller, shall not be liable for a wrongful act, error,
13 omission or misrepresentation of his broker/representative, his broker's
14 licensees, or subagent unless the client had actual knowledge of or reasonably
15 should have known of the wrongful act, error, omission or misrepresentation.
16 (2) A licensee or brokerage engaged in representation of a client shall
17 be entitled to rely upon representations made by a client and shall not be
18 liable for a wrongful act, error, omission or misrepresentation of made by the
19 client or of made by any subagent unless the licensee or brokerage had actual
20 knowledge or reasonably should have known of the wrongful act, error, omission
21 or misrepresentation.
22 (3) Nothing in this section shall be construed to diminish or limit any
23 of the broker's or licensee's responsibilities under chapter 20, title 54,
24 Idaho Code, or the rules promulgated thereunder.
STATEMENT OF PURPOSE
RS 12652
The purpose of this legislation is to more appropriately define the role of a real
estate salesperson in a real estate transaction. The legislation removes code language that
creates indefinite standards of practice as they relate to disclosure of information and
inspection of real property, and affirms that a real estate salesperson may rely on
statements made by the client unless the salesperson actually knows that the statement is
false.
FISCAL IMPACT
There is no fiscal impact.
Contact Person:
Name: Alex LaBeau
Idaho Association of REALTORS
342-3585
S1027