CPEA
1. Seller's Property Condition Disclosure Statement Now Required
Sellers must provide a fully completed property condition disclosure statement before buyers are contractually obligated. This ensures buyers have all the necessary information, promoting informed decision-making and reducing potential disputes.
The new law mandates seller disclosures for better transparency and consumer protection. Sellers must provide buyers a signed and completed property condition disclosure statement before the buyer becomes contractually obligated to purchase a property. This applies to all residential sales, including bank-owned properties and estates.
2. Designated Agency Now Allowed
Designated agency, which enables a brokerage to appoint different agents to represent both the seller and the buyer with full fiduciary duties at the client's request, is now permissible.
This law allows for a fifth type of agency in the state of New Jersey—designated agency. The definitions for each type of agency (seller’s agent, buyer’s agent, disclosed dual agent, transaction broker, and now designated agent) are set forth in the Consumer Information Statement. Once updated by the New Jersey Real Estate Commission, the revised Consumer Information Statement will be available here.
Designated agency allows for different licensees within the same brokerage firm to represent either party—one licensee to represent the seller as the “seller’s designated agent” and one licensee to represent the buyer as the “buyer’s designated agent” in the same transaction.
To engage in Designated Agency, a brokerage firm must first obtain the informed written consent of the seller and the buyer.
New and updated forms are forthcoming to the New Jersey Realtors® Forms Library.
Creation of “Designated Agency”
- A Designated Agent works only for the party they were appointed to represent by their broker. Designated agency occurs when a broker appoints/designates different licensees within the same brokerage firm to represent two different parties: one licensee to represent the seller as ‘seller’s designated agent’ and a different licensee to represent the buyer as ‘buyer’s designated agent’ in the same transaction. To engage in Designated Agency, a brokerage firm must first obtain the informed written consent of the seller and the buyer.
- In the context of Designated Agency, the designating broker oversees the transaction and acts as a dual agent for the seller and buyer. The designating broker remains neutral about any conflicts of interest between the seller and buyer, maintains confidentiality and may not advocate or negotiate on behalf of a seller or buyer to the disadvantage of the other. Instead, the designating broker supervises the designated agents to ensure each designated agent is maintaining the agent’s full range of fiduciary duties which are ordinarily owed by a licensee who represents solely the seller as “Seller’s Agent”, and by a licensee who represents solely the buyer as “Buyer’s Agent”.
3. Brokerage Services Agreements Required
All real estate licensees will be required to use brokerage agreements, which outline services they will provide to all clients over the course of a respective transaction.
Brokerage services agreement means a written agreement between a brokerage firm and principal (i.e. the seller or buyer) that appoints a brokerage firm to represent the principal as an agent (i.e. seller’s agent, buyer’s agent, disclosed dual agent or designated agent) or work with a buyer or seller as a transaction broker. Broker services agreements include, but are not limited to, sale and rental listing agreements; buyer/lessee representation agreements; and transaction broker, dual agency and designated agency agreements.
- At a minimum, a brokerage services agreement must include: (a) the term of the agreement, (b) the name of the brokerage firm, (c) whether the agency relationship is exclusive or non-exclusive, (d) whether the principal consents to dual agency or designated agency, if the opportunity arises, (e) whether the principal consents to the broker acting as a disclosed dual agent, if necessary, (f) the brokerage’s compensation and how it’s calculated, and (g) a statement that broker compensation is fully negotiable and not set by law.
4. Signage Required at Open Houses
Listing agents will be required to explicitly disclose who they represent at open houses in the form of signage either at the entrance or sign-in sheet for all attendees to see.
The sign must state that the agent represents the seller only and has no relationship with the prospective buyer unless:
- The buyer does not have an exclusive buyer agency agreement with another firm, or
- The buyer agrees to the seller's agent becoming a disclosed dual agent or designated agent.
The sign must clearly read:
- “ATTENTION PROSPECTIVE PURCHASERS - PLEASE READ THIS SIGN CAREFULLY. This is to advise you that the agent who is conducting this Open House REPRESENTS THE SELLER AND IS REQUIRED BY LAW TO PROMOTE THE INTERESTS OF THE SELLER. ANY INFORMATION YOU GIVE THIS AGENT IS NOT CONSIDERED CONFIDENTIAL under New Jersey law and could be disclosed to the Seller of this property. You, as the Buyer, are entitled to have someone represent you as a Buyer’s Agent if you are interested in this property. The duties of a Buyer’s Agent include helping you evaluate the property, prepare an offer on the property and negotiate in your best interests. If you, as the Buyer, are already exclusively represented by a Buyer’s Agent, you are required to disclose this representation on the sign-in sheet. If you, as the Buyer, are not already exclusively represented by a Buyer’s Agent, please be advised that the Open House agent is not precluded from being a disclosed dual agent or designated agent and can enter into any relationship with you as explained in the Consumer Information Statement.”
5. Compensation Disclosure Changes in Multiple Listing Services
Sellers’ agents can no longer disclose compensation in Multiple Listing Services or notify MLSs about cooperative compensation, if prohibited by MLS policy.
6. New CE Requirement Added
Licensees must complete continuing education classes every two years to stay informed and best serve their clients. One course on agency will be added to New Jersey Real Estate Commission continuing education requirements.
The new law requires licensees complete continuing education classes every 2 years to stay informed and best serve their clients
- Course Requirements/Guidelines are as follows:
- 50-60% of courses must cover core topics [Agency, Disclosure, Legal issues, 2 hours of Ethics, Fair housing, Rules and regulations, Real estate licensee safety, Financial literacy and planning, Other core topics prescribed by the New Jersey Real Estate Commission]
- One hour of instruction equals one credit.
- At least one hour of fair housing and housing discrimination
- One course on agency
Frequently Asked Questions
*As of 10/08/24*
The guidance we’ve received thus far from NAR is that they recommend cooperative compensation for a broker’s listings should be communicated via common marketing methods. By way of example, this can mean a broker’s website, signs, flyers, social media posts, or communicating directly with the buyer broker. The whole point here is to avoid any type of aggregate site where multiple brokers are providing their offers of cooperative compensation.
MLS Participants may augment MLS data or data feeds with offers of compensation for their own listings-meaning, listings of their own brokerage. They may not include offers of compensation for listings of other, competing brokers.
Yes. Brokerage services agreements with a buyer should contain all terms required by RECPEA. Active agreements can either be amended or a separate disclosure can be executed to satisfy the requirements.
If the listing agreement specifies the offer of compensation will be made on an MLS that prohibits the display of offers of compensation, then the listing broker should work with the seller to amend the listing agreement to make it clear the listing broker will not make an offer of compensation on an MLS that prohibits such an offer, and to determine whether the seller instructs the listing broker to make an offer of compensation outside of an MLS.
There’s no requirement in the RECPEA or under NAR’s proposed settlement agreement for buyer agency agreements be provided to the seller.
That is a question of office policy, but there is no prohibition against the broker or manager acting as a designated agent for a buyer or a seller. That being said, licensees should be cautious as to the fiduciary duties they owe to their respective clients in the context of designated agency and keep in mind the role of the brokerage firm and the ‘designating broker’—which act as a neutral third party and oversee the transaction as a disclosed dual agent.
Disclosed dual agency is separate from designated agency. Designated agents exist under the confines of disclosed dual agency but do not replace it. While dual agency can be maintained if a party prefers it, buyers and sellers may opt for designated agents if they want someone who owes full fiduciary duties to each of them. Upon obtaining informed written consent from both parties, a ‘designating broker’ may appoint one licensee affiliated with the brokerage as “Seller’s Designated Agent” to work with a seller as a “Seller’s Agent”, and a different licensee affiliated with the brokerage as “Buyer’s Designated Agent” to work with the buyer as a “Buyer’s Agent” in the same transaction. The brokerage firm, including the ‘designating agent’, acts as a disclosed dual agent.
Yes, effective August 1, 2024, the brokerage can be compensated by both parties, a buyer and a seller, in the context of disclosed dual agency and designated agency. Therefore, as of August 1, the regulation prohibiting dual agents from being compensated by both the buyer and the seller is eliminated.
Yes, the New Jersey Real Estate Commission released an updated Consumer Information Statement on August 1. You can download it here.
Yes, a buyer can ask for a concession or a credit as part of the offer, which is subject to negotiation with the seller. This can be towards the closing costs for the buyer, but concessions listed on the MLS cannot be tied to the payment of a commission to the buyer's agent.
No, there is no requirement for a listing agreement to be shown to the buyer's agent, just as there is no requirement for a buyer's agent to show the buyer's agency agreement to the listing agent. It can be done if agreed upon but is not mandatory.
Best practice is to include all issues of compensation in a comprehensive brokerage services agreement with the consumer—in the listing agreement with the seller, and similarly, for the buyer's side, in the buyer representation agreement.
Yes, if you are working with the tenant to find a property, you need a tenant representation agreement. The key is whether you are working with a tenant under one of New Jersey’s real estate business relationships. If you are simply passing along an offer to the landlord without working with the tenant, then you do not need a tenant representation agreement.
No, there is no obligation for the seller's agent to have a buyer agency agreement with an unrepresented buyer. There is no prohibition of unrepresented buyers in such cases.
Yes, you may augment MLS data or data feeds with offers of compensation to buyer brokers or other buyer representatives for your own listings on your own brokerage’s website. The key is to avoid communicating offers of compensation for competing brokers’ listings and not creating, facilitating, or supporting any non-MLS mechanism (including by providing listing information to an internet aggregator’s website for such purpose) for making offers of compensation to buyer brokers or other buyer representatives.
There is no specific form created for this situation yet. However, there is a possibility of creating such a form to ensure everything is documented in writing going forward.
There is no specific "insurance" for this since there is no protection from a lawsuit against the broker for negligence or misrepresentation unless the seller indemnifies the broker. That being said, pursuant to N.J.A.C. 11:5-6.4(b), a licensee has a duty to make a reasonable effort to ascertain all material information concerning the physical condition of the property. This includes asking the seller questions about the property and conducting a visual inspection to make sure material information the seller provides is accurate.
However, if a licensee repeats or relies on a seller’s misrepresentation, the licensee may be liable for punitive (treble) damages and/or attorneys’ fees under the Consumer Fraud Act unless the licensee can prove that the licensee (1) had no actual knowledge that seller’s representation was false, misleading or deceptive, and (2) made a “reasonable and diligent inquiry” to ascertain if the information provided by seller was false, misleading or deceptive. N.J.S.A. 56:8-19.1.
The best way for a licensee to invoke this protection is to show that the licensee relied upon a Seller’s Property Condition Disclosure Statement (that was completed by the seller) and that seller’s misrepresentation was not readily observable during the visual inspection. Therefore, when a licensee relies upon a Seller’s Property Condition Disclosure Statement when doing a visual inspection of the property and signs it at the bottom, the licensee will no longer be liable for punitive damages and/or attorney’s fees under the Consumer Fraud Act if the licensee unknowingly repeats a false, misleading or deceptive statement made by seller.
No. In this case, the brokerage is only working for the seller, and not the buyer so there is no need to enter into a written agreement with the buyer.
For additional information please visit NAR’s Consumer Guide: Open Houses and Written Agreements, and https://www.nar.realtor/videos/window-to-the-law/how-open-houses-are-affected-by-the-nar-settlement.
No, the buyer broker may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.
A seller may instruct their listing agent not to accept offers from unrepresented buyers (or from represented buyer, or buyers working with a transaction broker). As long as there is informed consent from the seller, it’s up to the seller to as to the offers the seller accepts. Regarding obligations for the listing agent when it comes to unrepresented buyers, those responsibilities are set forth in the RECPEA. These duties include dealing with all parties fairly and keeping them informed, but you do not have fiduciary obligations to an unrepresented buyer unless they hire you and execute a brokerage services agreement to that effect.
The listing agent should tell the buyer to get a buyer’s agent or have an attorney prepare the offer. If the buyer provides something in writing, like an offer on a napkin or in an email, it must be submitted to the seller. However, the listing agent should avoid filling in the contract for an unrepresented buyer, as it could jeopardize the deal if the buyer later claims they did not understand the contract.
In transactions involving designated agency, the brokerage firm, including the ‘designating broker’, acts in the capacity of a disclosed dual agent. The brokerage firm and the designating broker are the neutral third party that oversees the transaction and makes sure that the licensee acting as designated agent for seller and the other licensee acting as designated agent for buyer are fulfilling their fiduciary duties to their respective clients. In order for a designated agency relationship to take effect, the brokerage firm must obtain the informed written consent of both, seller and buyer, in the transaction.
Pursuant to the New Jersey Realtors® Exclusive Buyer Agency Agreement (Form #121), the list of properties shown by the buyer’s agent should be sent to the buyer within 10 days to protect the buyer’s agent under the law. There is no specific format required, but it must be in writing.
No, commercial transactions are exempt from the Consumer Information Statement requirement under the RECPEA.
It depends on the brokerage services agreement you are using. In the New Jersey Realtors® standard agency and tenancy agreements, attorney fees would be permissible should there be a breach.
To be compliant with the National Association of REALTORS® proposed settlement agreement, beginning on August 17, 2024, licensees working with sellers and buyers must disclose in conspicuous language that broker commissions are not set by law and are fully negotiable.
In addition to including this disclosure in brokerage services agreements (i.e. listing agreements and written buyer agreements), the conspicuous statement must also be included on all pre-closing disclosure forms that pertain to broker representation services (or, if the form is government-specified, be accompanied by a document containing the conspicuous statement). Examples of pre-closing disclosure forms which must contain the conspicuous statement include, but are not limited to, the Consumer Information Statement, Informed Consent to Disclosed Dual Agency and the Informed Consent to Designated Agency.
New Jersey Realtors® is updating its pre-closing disclosure forms to comply with this requirement and is creating an addendum to accompany any such pre-closing disclosure forms which do not have the conspicuous statement included.
For additional information on the topic please review Settlement FAQ #57 and 79, on https://www.nar.realtor/the-facts
Yes. A transaction broker must have a written brokerage services agreement when they work with a buyer. A transaction broker who facilitates a transaction for a buyer is considered to be “working with” a buyer. Therefore, a transaction broker who is facilitating a transaction solely for a seller and provides an unrepresented buyer with access to the property will not be considered to be “working with” a buyer and therefore a written agreement would not be necessary.
New Jersey Realtors® Library of Forms currently does not have a transaction broker agreement available for members to use but is in the process of creating one. Please note that effective August 1, 2024, transaction brokers working with buyers have the responsibility to utilize brokerage services agreements and to continue complying with all laws and regulations.
Note: the “working with” language is intended to distinguish licensees who provide brokerage representation or services for the buyer —such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer —from licensees who simply market their services or just talk to a buyer— like at an open house or by providing an unrepresented buyer access to a house they have listed.
For additional information, please review NAR’s FAQs, specifically #80-85, https://www.nar.realtor/the-facts
Yes, there are consumer guides from the National Association of Realtors®.
Click here for the Open House and Written Agreements Consumer Guide
Click here for the Realtors® Duty to Put Client Interests Above Their Own Consumer Guide
No, according to NAR’s guidance, even when a buyer instructs their Realtor® that they do not want to see any properties where there is no offer of cooperative compensation, a Realtor® is required by MLS policy to make the buyer aware of such properties. This is because when working with a buyer, a Realtor® has a duty to make the buyer aware of all listings that meet their specifications. After that, the buyer can instruct their Realtor® as to which specific properties the buyer wants to tour, which the buyer does not want to tour, and for which properties the buyer wants to write an offer to purchase.
Additionally, it is important to remember that even if a seller is not offering cooperative compensation to buyer’s broker in the listing information, a buyer may always authorize their Realtor® to include in the written offer to purchase a provision asking the seller to offer compensation to buyer’s broker. Please keep in mind that such instruction must be memorialized in buyer’s written brokerage services agreement.
For additional information, please visit https://www.nar.realtor/the-facts and watch https://www.nar.realtor/videos/window-to-the-law/how-non-filtering-rules-apply-to-offers-of-compensation.
DISCLAIMER: New Jersey REALTORS® makes no warranty, express or implied, as to the accuracy of the responses, which the New Jersey REALTORS® has made good faith efforts to have up to date as of the latest date displayed above.
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