On August 1, 2024, New Jersey’s Real Estate Consumer Protection Enhancement Act went into effect. This legislation was designed to enhance consumer protections and transparency in New Jersey real estate transactions. In this article, we’ll examine some key provisions of this new law and how it affects the rights of home buyers and sellers in New Jersey.
Buyers of residential properties are now entitled to receive signed property condition disclosure statements before they can be bound by a sales contract. The statement must disclose any material information they have about the physical condition of the property that is “not apparent or readily ascertainable to a buyer.” This includes, for example, information about foundation issues, plumbing leaks, roof damage, or faulty wiring. You can find a full copy of the disclosure statement on the NJ Division of Consumer Affairs’ website. The 117-question form contains a nine-question flood risk addendum, which must be provided to buyers of residential and commercial properties alike.
All licensed real estate brokers must provide written brokerage service agreements that clearly outline the services they will provide to all clients. This includes services related to real estate sales, rental listings, representation of buyers and lessees, and more. In the past, such agreements were required only between sellers and sellers’ agents.
Service agreements should include the term of the agreement, whether the relationship is exclusive, how the broker’s compensation will be calculated, and a statement that compensation is fully negotiable. It should also indicate whether the client consents to the broker acting as a designated or dual agent, that is, whether the brokerage may, in some capacity, represent both buyer and seller in a transaction.
While all parties to a contract should always make sure they understand the contract’s terms, buyers should be especially alert to how this change affects the homebuying process. Before signing a service agreement with a brokerage firm, make sure you understand any requirement for exclusivity and the conditions under which the firm is entitled to collect a commission. Buyers and sellers alike should be sure they understand the terms for terminating the agreement in the event they’re dissatisfied with their services and want to shop around for a new representative. Breaching your service agreement could result in significant unexpected costs.
The law creates a new type of real estate agent in New Jersey. Previously, these included the following:
It’s important to be aware of the differences between these types of relationships before you sign any service agreement. If you consent to dual agency, you are giving up the right to a representative who works solely on your behalf in the transaction and is obligated to put your best interest first.
A designated agent relationship allows different agents within the same brokerage firm to represent the buyer and the seller in a transaction. In this case, one agent would be the seller’s designated agent and another would be the buyer’s designated agent. As noted above, brokerage firms must obtain written consent of the parties for this type of relationship. The designating firm may not advocate for or negotiate on behalf of either party and must remain neutral toward any conflicts of interest that arise between the two. The brokerage is responsible for supervising each designated agent, ensuring they are upholding their fiduciary duties to their respective clients.
The act includes a provision requiring specific postings at open house events to notify buyers of their right to representation. The event host must post a sign, either at the home’s entrance or with a sign-in sheet, that clearly advises prospective buyers that they represent only the seller and have no relationship with prospective buyers, unless they meet these conditions:
The language prescribed by the act advises prospective buyers that they are entitled to be represented by a buyer’s agent, whose duty it is to help evaluate the property, prepare an offer, and negotiate in their best interests.
The law prohibits seller’s agents from submitting information related to a seller’s authorization of compensation sharing to a multiple listing service (MLS) if that information is prohibited by the service and thus would prevent the listing from being displayed. This helps ensure that buyers have access to all available listings, regardless of how commissions are structured. The provision is intended to prevent conflicts of interest and promote fair marketing practices.
New Jersey’s Real Estate Consumer Protection Enhancement Act makes some significant changes to how real estate transactions and relationships with brokers and agents work. If you believe your agent or broker has violated the act, or if you’d like help understanding your service agreement, the attorneys at the Mark | Lavigne Law Firm can help. We’re dedicated to protecting New Jersey consumers and ensuring they’re fairly compensated when they’ve been subjected to unscrupulous business practices.