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2019 Q&A Revisions

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The "Small Claims Court" Q&A has been revised.

The 2019 New Laws have been updated to provide clarification regarding when a broker is required and recommended to provide sexual harassment prevention training pursuant to SB 1343. A new section entitled “Who is Required to Take the Training?” has been added as follows:

Who is Required to Take the Training?

Question: I am a broker with five sales agents who are independent contractors. Are the independent contractors  required to take the sexual harassment training?

Answer: Currently, no.  But if you have any employees at all, even just one employee, then the employee(s) would have to take the training.  Additionally, regulations are pending which could require the independent contractors to take this training as well, if adopted. 

Bottom Line requirements and recommendations:

  • For employee training. If you have five or more employees or even five or more salespersons or brokers even if independent contractors, then by January 1, 2020, all employees must have taken the training.
  • For sales agent training. Although it appears the law does not require sales agents or brokers retained as independent contractors to take the training,  proposed regulations which may be adopted in 2019, could expand the requirement to include independent contractors.  In any event, since a different law expands liability for licensees in a professional relationship with their clients (See the “Civil Liability” section above), it is highly recommended that sales agents, too, take the training even if retained as independent contractors.
  • For supervisor training. If you have five or more employees or even five or more independent contractors (sales persons or broker associates), then by January 1, 2020, all “supervisory employees” must have taken the supervisor training. Please note that many supervisor/office managers are employees, and if so, they would be required to take the training.

As a risk management precaution, we strongly recommend that the responsible broker take the supervisory training along with all other persons who supervise agents or employees. This will include anyone who is in a position to hire, fire, reward or discipline an employee or independent contractor licensee, or who has the responsibility of directing an employee or independent contractor licensee. This recommendation applies regardless of how many employees or independent contractors have been retained.

Question: Can I see a copy of the proposed regulations that will expand the definition of employee to include persons providing services pursuant to contract?

Click here to view the Fair Housing & Housing Council Proposed Final Text of Employment Regulations Regarding Definitions; Harassment and Discrimination Prevention and Correction; and Training

 

The "Residential Listing and Commission Agreements" Q&A has been updated as follows:

  • All references to the formerly named "Residential Listing Agreement - Agency" (Form RLAA) have been deleted, and instead, the new name, the "Residential Listing Agreement Seller Reserved" (Form RLASR) is used.
  • Question 3 was added to explain the reason for the name change. The new name provides a better description of the purpose of the form and was changed as part of the Real Estate Clean-Up Law.

 

The "Loan Estimate and Closing Disclosure" Q&A has been updated.

  • Question 12 adds a chart indicating when a lender is permitted to change the loan estimate charges based upon actual charges, by how much and under what conditions.

 

The Q&A “Homeowner’s Associations: A Guide for REALTORS” has been updated as follows:

  • Question 35 has been added explaining that the owner of each separate interest is responsible for repairing, replacing, or maintaining it unless otherwise provided in the declarations.
  • Question 36 has been added explaining that in regard to an exclusive use common area appurtenant to a separate interest, it is the owner of the separate interest who is responsible for maintaining the appurtenant exclusive use common area (unless stated otherwise in the declarations) but it is the association that is responsible for repairing and replacing it (unless stated otherwise in the declarations).
  • Question 37 has been added explaining that the declaration will likely to distinguish between the responsibilities of “maintaining” and “repairing” an exclusive use common area. But no matter how detailed the declarations are, questions will inevitably arise that cannot be fully answered by the declarations.

 

The “Condominium and Other Common Interest Development Disclosures” Q&A has been revised as follows:

  • Question 10 has been added indicating the renamed HOA disclosure forms that can be used in requesting disclosure documents from the HOA. They are as follows: The HOA Information Request form (HOA-IR); Charges for Required HOA Documents (HOA-RS); and Charges for Other HOA Documents (HOA-RN).
  • Question eleven has been added explaining that under the C.A.R. purchase agreements the seller has three days to request from the HOA the mandatory and contractually required disclosures.
  • Question 12 has been added explaining the purpose and use of form “Buyer Home Owner Association Advisory (Form BHAA).” It is an optional form which may be provided to the buyer by either their own agent or the listing agent. It advises buyers of property subject to an HOA of the importance of a thorough review of HOA documents which will govern, affect and, in some cases, may limit their current and future use of the property.

 

The "REO Transactions" Q&A has been updated and re-posted. The following changes have been made:

Question 22(a) has been added to discuss the duty of an REO to maintain a vacant residential property.

Question 45 details various unfavorable terms for buyers that REO lenders may include into a sales contract.

 

The Right Business Entity for the RE Professional: FAQ & Chart” has been updated as follows:

Question 24 has been added explaining that a designated broker is not required to maintain both their individual broker’s license and the corporate broker’s license. But in that case, that broker would still be subject to all duties and responsibilities of a licensed broker including keeping current on all continuing education requirements. (B&P Code 10159).

Question 25 has been added explaining that in the event of death or incapacity of the designated broker of a corporation, the corporation may continue to perform licensed activities, but it must submit an application to the DRE for a new designated officer before midnight of the 10th business day after the event so that it may continue to operate until formal approval is received. (B&P Code 10158).

 

The "Team Name" Q&A has been updated. Question 17 has been added to explain that teams cannot be formed across brokerages (based upon the remarks of the DRE Commissioner in August of 2018).  

 

The "California Homeowner Bill of Rights" (HBOR) article has been updated. On January 1, 2018 certain provisions of the HBOR expired. However, effective January 1, 2019, Senate Bill 818 largely reinstated the HBOR in its pre-January 1, 2018 version without any sunset provisions.

Additionally, the article discusses similar federal protections for financially distressed homeowners under the Real Estate Settlement Services Act, which are in some cases superior to those offered by the HBOR. 

 

The Q&As “The 2018 Tax Reform Law Chart”; “Tax Cuts and Jobs Act – In Brief”; and “Tax Cuts and Jobs Act – Highlights and In Depth” have been updated to reflect IRS and Department of the Treasury final regulations and guidance issued on January 18, 2019.

Brokers and Agents May Be Eligible for the QBI Deduction Above Thresholds

Previously, real brokers and agents with were not eligible for the QBI deduction if their taxable income was above $157,500 for single filers and $315,000 for joint filers, after which there is a phase out over a range of $50,000 (or $100,000 for joint filers). Now they may be. Above the thresholds, the QBI deduction can be based upon the “wage and capital” exemption. Specifically, the available deduction is determined by taking the greater of:

  • 50% of the W-2 wages paid by the business, or
  • The total of 25% of the W-2 wages paid by the business plus 2.5% of the cost basis of the tangible depreciable property of the business at the end of the year.

This is a basic explanation and there are other considerations, particularly if the broker or agents have multiple qualified businesses. They must consult their tax advisor to give guidance on eligibility andhow to file for the deduction. 

Safe Harbor Enables Many Rental Real Estate Owners to Claim Deduction

Guidance from the IRS and the Department of the Treasury includes a notice on a proposed revenue procedure providing a safe harbor for certain real estate enterprises that may be treated as a trade or business for purposes of the QBI deduction

The proposed revenue procedure, included in Notice 2019-07, allows individuals and entities who own rental real estate directly or through a disregarded entity to treat a rental real estate enterprise as a trade or business for purposes of the QBI deduction if certain requirements are met.  Taxpayers can rely on this safe harbor until a final revenue procedure is issued.
  
For details on this deduction, including answers to frequently-asked questions, as well as information on other TCJA provisions, visit IRS.gov/taxreform.

 

The "Transfer Disclosure Statement Exemptions" Q&A has been revised as follows:

Question #2 has been updated to reflect the change in the law as of January 1st, 2019, which eliminates the Transfer Disclosure Statement (“TDS”) exemption for multiple trustees where the trust is revocable. There is no trust exemption if the trustee – or trustees – is a natural person who is a trustee of a revocable trust and he or she is a former owner of the property or was an occupant in possession of the property within the preceding year. Thus, in the vast majority of circumstances, a trustee or trustees of a revocable trust will have to complete and deliver a TDS.

 

The "Transfer Disclosure Statement Law" Q&A has been revised as follows:

Question #5 has been updated to reflect the change in the law as of January 1st, 2019, which eliminates the Transfer Disclosure Statement (“TDS”) exemption for multiple trustees where the trust is revocable. There is no trust exemption if the trustee – or trustees – is a natural person who is a trustee of a revocable trust and he or she is a former owner of the property or was an occupant in possession of the property within the preceding year. Thus, in the vast majority of circumstances, a trustee or trustees of a revocable trust will have to complete and deliver a TDS.

Questions #14 and #17 have been revised to reflect the change in the law as of January 1st, 2019, explicitly requiring delivery of a “completed” TDS and the listing agent’s visual inspection. Specifically, the timing of the right to cancel is triggered by completion of sections I, II AND III (the Listing Agent’s visual inspection portion) of the TDS and delivery to either the buyer or the buyer’s agent.

Questions #16, #20, and #22 have been revised to reflect the change in the law as of January 1st, 2019, which will allow for electronic delivery of the TDS, and specifies that the buyer has a five day rescission right after delivery in electronic form (if the parties have agreed to conduct the transaction by electronic means).

 

The "Unlawful Detainer: The Eviction Process" Q&A has been revised as follows:

Question #7 has been added. It explains how to count a three day notice under current law. It highlights in red that starting September 1, 2019, weekends and judicial holidays will not be counted at all as part of the three-day period. For example, if a 3-day notice is served on Thursday, then Friday would be day 1. Saturday and Sunday would not be counted. Monday would therefore be day 2 and Tuesday day 3. The tenant would have through Tuesday to pay their rent.

Question #19 has been revised. For tenants who occupy a property that has been foreclosed upon, the right to receive a 90-day notice of termination and a special information notice (C.A.R. Form NTAF), and for the survival of full-term lease rights are current protections under California law but are due to expire at the end of 2019. However, the federal “Protecting Tenants at Foreclosure Act,” on which the California law was modeled, was permanently reauthorized on May 24, 2018.  The Protecting Tenants at Foreclosure Act contains nearly identical tenant protections to the California law with the exception of providing the special information notice.

 

The "Real Estate Licensee’s Duty to Inspect Residential Property" Q&A has been revised as follows:

Question #17 has been added to state that commencing January 1, 2019, whenever a TDS is required then a buyer retains a right to cancel based upon delivery of the listing agent’s visual inspection.

Question #18 has been added to state that the cancellation right is based only upon the delivery of the listing agent’s visual inspection.

Question #19 has been added to state that commencing January 1, 2019, the TDS, and the attached visual inspection whether on the third page of the TDS or on a separate AVID form, are specifically authorized by law to be delivered electronically.

Question #20 has been added to state that the buyer will have three days to cancel if the inspection is delivered in person, or five days if delivered by mail or electronically (assuming it is not delivered in advance of execution of the purchase agreement).

Question #21 has been added to state that the cancellation right based upon delivery of the visual inspection is not waivable.    

 

The "Natural Hazard Disclosure Statement" Q&A has been updated as follows:

Question #9 has been added to indicate that commencing, January 1, 2019, the NHD Statement may be delivered electronically. (Cal. Civil Code Sec. 1103.3(c)).  If delivered electronically, the buyer will have five days to cancel the purchase agreement if delivered after execution of the offer to purchase.  

 

The "Presentation of Offers" Q&A has been updated as follows:

Question #9 has been revised. Commencing January 1, 2019, both the obligation of the buyer’s agent to deliver the agency form (AD) to the seller, and the right of the buyer’s agent to deliver the agency form by certified mail when not dealing on a face-to-face basis with the seller, have been eliminated.

 

The "Agency Disclosure and Confirmation; and Agency Law Summary Chart" Q&A has been revised. As part of the 2019 real estate clean-up law, significant changes were made to the agency disclosure form and the confirmation of agency. These changes go into effect on January 1, 2019. The revised Q&A highlights these changes as follows:

The agency disclosure form

  • The “3rd agency” has been eliminated.
  • Plain language is used on the agency form. “Selling agent” is now “Buyer’s agent.” “Purchaser” is now “Buyer.” “Associate licensees” are now “salespersons and broker associates.”
  • The buyer’s responsibility to exercise reasonable care to protect themselves has been strengthened.         
  • All properties are subject to the agency law. The prior exemption for 5+ rentals has been eliminated.
  • “Confidential information” in a dual agency will now include facts regarding the buyer’s or seller’s financial position, motivations, bargaining position or other personal information that may impact price. This information may not be disclosed without express permission.

Confirmation of agency form changes

In addition to changes to the agency form, the C.A.R. real estate clean-up law also changed the confirmation of agency form which will now require:

  • The names of each agent
  • Their status as representing either the buyer or seller or as dual agents, and
  • Their license numbers

This information will be included in the confirmation along with the same information regarding the brokerage firm. The phrase “Agent” used to indicate the brokerage firm has been eliminated.

The Q&A includes a sample of the new confirmation form as it appears on the first page of the purchase agreement. It warns that in filling out the confirmation, if the brokerage firm is indicated as a dual agent, then all other agents must likewise be indicated as dual agents.

 

The "Summary Disclosure Chart" has been revised to indicate that commencing January 1, 2019, the “third” agency form (AD) given to the seller from the buyer’s agent is no longer required.

 

The "Changing Offices: Transfer of Listings, Buyers, and Procedures" Q&A has been revised to reflect changes in the law introduced as part of the C.A.R. sponsored real estate clean-up law. As of January 1, 2019, a responsible broker will no longer be required to physically hold a sales agent’s license. Nor will a sales agent be required to obtain back from a former broker their license, mark out the name and address of the former broker, and write in the name and address of their new responsible broker. Instead, following existing practice, notice of a change of broker affiliation or office address will be provided to the Real Estate Commissioner in a manner specified by the Commissioner which at present relies primarily on the elicensing system or by use of DRE form RE 214 (Salesperson Change Application). Questions #1, #2, #3 and #5 have been modified in light of the new law.

 

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