Risk Management Forum Tackles Everything from Sober Living Homes to Cybercrimes
The purpose of the forum was to provide information about what risks are inherent in which kinds of real estate–related business situations and what can best be done to avoid those risks.
By Sherri Butterfield
WRITER AND EDITOR
Last year, 2016 President Wayne Woodard decided that Orange County REALTORS® (OCR) needed a Risk Management Committee. The twofold purpose of this committee would be to educate brokers, managers, and general counsel and to provide information to other OCR committees as appropriate.
Because this new committee would be navigating in somewhat uncharted waters, Wayne asked Bob Hunt to be its chair. Bob is a graduate of Princeton with a master’s degree in philosophy from UCLA and, for a time, was an associate professor of philosophy at the University of Redlands, where he taught both ethics and logic.
For nearly four decades, Bob has been deeply involved in the real estate industry. Over the years, he has been a director of the California Association of REALTORS® (C.A.R.) and has chaired C.A.R.’s Standard Forms, Strategic Defense Advisory, and Legal Affairs Forum Committees. Currently, Bob serves as a trustee of C.A.R.’s Legal Action Fund.
“The first myth of risk management is that it exists,” observes Bob. “Risk avoidance might be a better term. We want to provide information regarding the ongoing and, especially, newly discovered and/or created legal risks that members face in the course of doing business and what can best be done to avoid those risks.”
Toward this end, on May 11, the committee staged a Risk Management Forum covering a wide variety of topics that ranged from sober living homes to cybercrimes. What follows are some of the ideas offered by committee members during that forum.
Sober Living Homes:
The bright line rule in terms of disclosure is that, if there are six residents or fewer, the home must be treated as a private residence, and affirmative disclosure may result in some liability. Even though you are not required to disclose, you can respond to an affirmative question from a potential buyer. What people are really concerned about are nuisance issues—noise, traffic, people coming and going at all hours of the day and night. Alert your seller to the antidiscrimination statutes and focus on describing specific nuisance situations.
C.A.R. is sponsoring Assembly Bill 1569 (Cabellero). Under the provisions of this bill, if a prospective or current tenant requests a disability-related reasonable accommodation to keep an animal and the disability is not apparent, the property owner or manager could request verification of the need for the animal from a qualified third party. The ideal situation would be a written prescription from a physician who has met in person with the patient. Currently, you can ask what service the animal provides but not what the disability is. Incidentally, under existing state and federal law, you are prohibited from charging a higher security deposit to a tenant with a companion or service animal.
Cal BRE License Rules:
In 2015, the California Bureau of Real Estate (Cal BRE) made changes to allow salespersons to use team names as along as (1) the team has at least two members, (2) the team name includes the surname of at least one member of the team, and (3) the team name does not imply independence as a separate company or stand-alone broker. On August 16, 2016, the Bureau added the requirement that all general advertising include the team member’s name and real estate license number and that the responsible broker’s name and identity be displayed in type that is equally as large as that used for the name of the team member.
Water Fixture Replacement:
The law requires installation of water-conserving plumbing fixtures in single-family homes built in California before 1994. You can obtain advice regarding fixture flow level from a plumber, an inspector, or a contractor. The law is not a point-of-sale requirement: you do not have to retrofit, but you must disclose. Be aware that local laws passed before July 2009 (in cities like Los Angeles, San Diego, and San Francisco) requiring retrofit of plumbing fixtures remain in effect and that state law allows a locality to pass more restrictive requirements at any time.
Best Disclosure Practices:
The Transfer Disclosure Statement (TDS) should be filled out by the seller in the seller’s own handwriting. Make sure all boxes are checked and that answers are explained. An incomplete TDS may provide the buyer with a reason to rescind the contract. Remember to check the box that indicates if the seller is occupying or not occupying the property. And enter the date completed.
The most important form to protect you and your broker is the Agent’s Visual Inspection Disclosure (AVID). The AVID should be filled out by the seller’s agent. Do not use adjectives or adverbs. It is not a marketing piece. Do recommend further inspection if, for example, the floor is uneven or there are other noticeable problems. The AVID is not required by California law, but lenders may ask for it.
The profitability of cybercrimes has eclipsed both bank robbery and drug sales. During 2016, cybercrimes resulted in losses of $2.3 billion across the United States. Hacking almost always starts with a phishing email. Let your mouse hover over the email address. Avoid filling out forms in email messages that ask for personal information. Log onto the official website; don’t link to it from an unsolicited email. Hackers harvest email addresses and then send emails to home buyers telling them to reroute payment. Talk to your clients before the bad guys do. Caution them not to trust any email instructing them to send or wire money anywhere. Make a telephone call to your client before any wire activity.
Business Email Compromise:
The problem of business email compromise is ongoing and everchanging. Russians don’t have money to buy tanks and planes, but they do have money to buy computers. Counsel your clients in person. Tell them that the threat is real. If it happens to you while money is being transferred or if a payment is involved, notify an officer of the bank. Ask him or her to recall the payment. To stay a step ahead of the bad guys and avoid becoming a victim, update your computer and your phone frequently.
Last year, Governor Brown signed into law Assembly Bill 551 (Nazarian), which requires that landlords provide their tenants with information about the appearance of bed bugs, their life cycle, the common signs of bed bug infestation, and the steps that can be taken to treat and control bed bugs in rental housing and that tenants and landlords work together to resolve any existing bed bug issue in an equitable manner.
This Risk Management Forum was recorded and can be viewed at www.ocar.org/rmf.