By SD Metro Staff

Gov. Jerry Brown has signed a real estate broker agency disclosure bill that its originator — Jason Hughes, President and CEO of Hughes Marino — said will create more transparency in the commercial real estate industry. Hughes said he conceived the idea two years ago and asked state Sen. Ben Hueso (D-San Diego) to sponsor it. It is SB 1171.

The measure stipulates that, effective Jan. 1, 2015, commercial real estate salespersons and brokers will need to provide, in writing, their exact proposed agency role in future transactions. The disclosure will need to be signed by the potential client priorto moving forward with any representation.

“It was quite an experience to actually conceive and facilitate getting a new law passed,” said Hughes. “I’m very proud of it — as it will create more consumer transparency in an industry that’s been operating for decades as landlords’ marketing arms. Now when you think you’re getting non-conflicted real estate representation, it will actually be true.”

“It astounded me that commercial real estate salespersons and brokers were not required to provide written disclosure to their clients about any conflicts of interests they may have — or who the brokers were actually representing,” Hughes said. “In residential real estate, agents are required by law to provide such disclosure immediately prior to engaging with a client. However, brokers for commercial transactions had no such requirement. What resulted was a tremendous amount of conflicted representation, which almost always adversely affected companies who were buying or leasing commercial space.”

According to the new law, the written disclosure must fall into one of three statements: (1) Agent represents only the landlord/seller; (2) Agent represents only the tenant/buyer; or (3) Dual Agency: agent represents both the landlord/seller and the tenant/buyer. There will be a Dual Agency definition immediately below the three choices stating that a Dual Agent is not allowed to provide any confidential information between the two parties, unless written consent is obtained. Breach of this confidentiality will have legal consequences for the broker.

This article originally appeared in the SD Metro Daily Business Report.