Risk Management

Kathy Mehringer
Broker of Record, Compass

Today, it is common practice for property owners, as well as tenants, to record and maintain detailed video surveillance of both the interior and exterior of the property. While it should go without saying, it is important to note that our behavior should be governed accordingly. 

Not because we're being watched but because it's the right thing to do. When we're in someone's home, we have a sacrosanct responsibility and should always keep that at the forefront of our minds and remain mindful of that responsibility in everything that we say and do while touring or showing property.

When visiting properties with buyers,  they need to understand the ground rules up front which include but are not limited to:

• Children must be supervised by their parents AND;

• Cannot be allowed to run wild in the home or on the property.  

• There is no good reason for anyone to touch the  seller's possessions OR;

• Intrude on their privacy by peeking into drawers and other private areas.

Remind buyers before a property tour that there is a strong likelihood that there will be surveillance in and around the property;  caution that they should be mindful not only of their actions but also of their words. Here are a few tips to keep in mind:

• Be conscious of your conversations and activities. When hosting open houses, conducting showings, or viewing properties listed for sale, assume you are being watched and recorded, both inside and outside the home.

• Avoid inappropriate behavior.  Avoid engaging in activities such as (i) eating or touching food/drinks, (ii) sitting or lying on furniture, (iii) opening drawers or cupboards, and (iv) while this one is hard to believe - keep in mind, the pool is not there for prospective buyers' enjoyment.  Not even for a quick “toe dip” on a hot day!

• Refrain from commenting on the home or occupants. Avoid making comments about the property, its condition,  perceived value,  or the people who live there.

• Understand the seller's discretion on surveillance disclosure. Paragraph 11 of the Residential Listing Agreement ("RLA") includes language stating that persons visiting the property may not be aware of audio or visual recording devices installed by the seller. 

• Remember: “Integrity is Doing the Right Thing Even When No One is Watching.”

***NOTE: The decision to post a notice disclosing the existence of security devices is at the discretion of the seller.

Disclaimer: This article is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the author and publisher are not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.  Articles which appear in this publication are an informational service to members.  Their contents are the opinions of the authors alone and do not necessarily represent those of SDAR.  

Jacqueline A. Oliver
Attorney/Broker/Member of the Risk Management Committee
 

Knowledge and understanding of the BUYER REPRESENTATION AND BROKER COMPENSATION AGREEMENT (“BRBC”) is key to avoiding disputes about Broker compensation; however, a signed BRBC is only part of equation. Consistent standards of practice by the agent help reduce the chance of administrative actions as well as civil disputes. This Article examines the mechanics of the BRBC and best practices in using the BRBC.
 

Why is the BRBC a useful tool? The BRBC is the best way to comply with both the NAR Settlement Buyer Compensation rules and with CA AB 2992. The NAR Settlement requires agents to obtain a written compensation agreement between a Broker and a Buyer before showing any properties or writing any offers. CA AB2992 requires agents to obtain a written representation agreement between a Broker and a Buyer “as soon as practicable,”* with a deadline no later than when a buyer submits an offer. (* Look for the DRE to redefine this language to align with the NAR settlement more closely.)
 

Both the NAR settlement and AB2992 require the representation agreement to include the following terms:

• Written authorization for the Broker/agent to act on the Buyer’s behalf

• Clearly defined compensation

• A list of services provided by the Broker/Agent

• A termination date not to exceed 90 days

Additionally, the BRBC can be Exclusive or Nonexclusive. This distinction is addressed later in this Article.

Is there another written agreement for the same purpose? The law does not require the Broker to utilize the CAR BRBC. Some brokers may choose to write their own compensation agreements, but the BRBC includes protective terms vetted by CAR attorneys.

While there is no guarantee that a client will recall the same “facts” as the Broker/agent, there are ways by which an agent can significantly reduce their risks when obtaining signatures on a BRBC. Multiple signed BRBCs, by the same Buyer with different Buyer agents, invite conflicts between Buyers, Sellers, Listing Agents and/or Buyer agents. Before showing property or writing an offer, the Agents should confirm in writing that the Buyer has not previously signed a BRBC with another agent. If the Buyer signed a BRBC, the Agent should inquire whether the prior BRBC was Exclusive or Nonexclusive.

As mentioned earlier, an Agent should first ask whether the Buyer is “working” with another agent before asking the Buyer to sign any forms. Next, the Agent should ask whether the Buyer signed a BRBC agreement with the other Agent. In some cases, a Buyer says they have seen other properties with various agents, and they do not know what they signed since there were so many forms.
 

EXCLUSIVE BRBC, NON-EXCLUSIVE BRBC & THE BCA TO ADVISE THE PARTIES

The BRBC representation can either be Exclusive or Nonexclusive. Nonexclusive representation is the default on the BRBC unless the Exclusive representation box is both checked and initialed. The Buyer might ask and often does ask “what does Exclusive or Nonexclusive mean?”

The Exclusive BRBC is an agreement that the Buyer will pay the Broker compensation during the term of the BRBC (not to exceed 90 days or any extension) if the Buyer closes on a property that fits the Buyer’s parameters set out in the BRBC regardless of whether the Broker represents the Buyer in the transaction. Parameters include the type of property (single family residence, condominium, townhouse, vacant land, etc.), the location of the property and any Buyer’s priorities (for example, with or without a pool, stairs or no stairs, lot size, age, style.)

The Non-Exclusive BRBC allows Buyers to view properties with various Brokers and if the Buyer closes on a property that fits the criteria set out in the BRBC and the Broker was “involved” in the transaction, the Buyer owes compensation to the Broker. Broker involvement is more than simply providing a list of properties to a Buyer. Broker involvement is established by the Broker’s specific acts in assisting the Buyer in the purchasing process such as finding property, showing property and writing offers.

In either case (Exclusive v. Non-Exclusive), the Buyer may owe compensation to more than one Broker based on the BRBC. Whether the failure to pay compensation becomes a dispute depends on the Broker. Some Brokers will negotiate lower compensation to settle a dispute and to resolve the matter. Other Brokers might continue to battle in a “he said she said” fashion.

Confirming client communications in writing can reduce the risk of litigation and possible administrative claims. Buyers often claim ignorance so, for risk management purposes, Brokers/Agents should retain emails, letters, or texts as proof of advice and counsel to the Buyer. To memorialize the Broker’s advice about the BRBC, the agent can send an email or text such as “This confirms our conversation today about the Buyer Representation Broker Compensation Agreement (“BRBC”). You told me you did (or did not) sign an Exclusive BRBC with another Broker/Agent. You understand that if your BRBC is Exclusive, and you choose to work with another Broker/Agent, you may be obligated to pay compensation to multiple brokers. I also advised you to consult an attorney if you need a legal opinion.”

The Broker Compensation Advisory (BCA) offers a convenient way to confirm the impact of the BRBC. It all boils down to who pays the compensation. Everyone knows that “compensation is negotiable” so Agents should do their best to explain, confirm and negotiate well.

Finally, when showing a property at an Open House or when a Buyer wants the Listing Agent to show a property, the Listing Agent can avoid representation of the Buyer by using a Buyer Non-Agency Agreement (CAR form “BNA”). A good practice would be for an agent to not only explain the BNA but also explain the BRBC so that the Buyer can make an informed decision on which form to sign. It is crucial to confirm the Buyer understands both forms and makes an informed and independent decision on which form to sign.

Disclaimer: This article is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the author and publisher are not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.  Articles which appear in this publication are an informational service to members.  Their contents are the opinions of the authors alone and do not necessarily represent those of SDAR.

How AI Is Transforming Real Estate: Smart Agents, Smarter Tech
by Robert Schantz, Managing Broker, Keller Williams Realty San Diego Metro

Artificial Intelligence (AI) is no longer a futuristic buzzword-it’s now a driving force in real estate, fundamentally changing how agents engage with clients, manage data, and run their businesses. From crafting compelling listing descriptions to predicting market shifts, AI-powered tools are giving REALTORS® new ways to boost productivity, personalize service, and stay ahead in a rapidly evolving industry.

But with every leap in technology comes new responsibilities. As brokers and agents, it’s vital to understand where AI can add value-and where it can introduce risk. Adapting to these changes isn’t just smart; it’s essential for staying competitive.
 

AI in Action: Tools Powering Today’s Real Estate Agent

Faster, Better Listing Descriptions
AI writing assistants like ChatGPT and Jasper can generate engaging property descriptions in seconds. By inputting details such as square footage, amenities, and location, agents receive multiple drafts to personalize and fine-tune. This frees up valuable time for marketing strategy and client outreach.

Smarter Lead Generation & Follow-Up
Platforms such as CINC and Offrs use AI to score and nurture leads, automatically sending personalized messages, qualifying prospects, and even booking appointments. These systems use natural language processing to create authentic-feeling interactions, helping agents focus on the most motivated buyers and sellers.

Data-Driven Market Insights
AI-powered analytics tools like Lone Wolf and Top Producer can sift through vast amounts of real estate data-sales trends, neighborhood activity, migration patterns-to reveal emerging opportunities. Predictive analytics can help agents spot shifts in demand before they become obvious, giving clients a competitive edge.

Virtual Staging & Visualization
Solutions like Style to Design use AI to create virtual staging, allowing buyers to visualize spaces with different décor or layouts. This enhances listings and helps properties stand out online.

Red Flags: Where AI Can Go Wrong

Misinformation & Hallucinations
AI sometimes generates content that sounds convincing but is factually incorrect-whether it’s a property feature, a market stat, or a legal detail. Always review and verify every AI-generated description or report before sharing with clients.

AI Is Not a Legal Advisor
Never use AI to interpret contracts, summarize HOA documents, or provide legal advice. These tasks require human expertise and, when needed, legal counsel. Even the most advanced AI is no substitute for professional oversight.

Data Privacy & Security
Many AI platforms store or process any information you enter, including client details. Avoid uploading sensitive or personal information to public AI tools. Always review a platform’s data policy and ensure compliance with privacy regulations.

Fair Housing & Copyright Risks
AI models are trained on vast datasets that may include biased language or copyrighted content. Always review descriptions for inclusive, compliant language and originality to avoid fair housing violations and copyright infringement.

SEO Limitations
While AI can speed up content creation, websites relying solely on AI-generated material may see reduced search engine visibility. Search engines reward unique, value-added content. Use AI to assist-not replace-your original marketing efforts.

Best Practices for Ethical & Effective AI Use

• Review Everything: Never assume AI outputs are accurate. Proofread, fact-check, and personalize all content.

• Protect Client Data: Avoid entering personal or sensitive information into public or free AI platforms.

• Stay Human: Use AI to create efficiency, not distance, in your client relationships. Personal connection remains irreplaceable.

• Know Your Tools: Read terms of use and privacy policies before adopting any AI system.

• Use Specific Prompts: The more detailed your instructions, the better the AI output.

• Invest in Training: Stay updated on new AI tools and best practices as technology evolves.

• Embed AI Thoughtfully: Integrate AI into your core business processes, but don’t let it replace your expertise or judgment.

Looking Ahead

As AI continues to evolve, REALTORS® who embrace these tools will be best positioned to thrive. Remember: AI can streamline processes and uncover new opportunities, but it should always complement-not replace-the professionalism, accuracy, and personal connection that define great real estate service. Let’s lead our industry with both innovation and responsibility.

Ready to explore AI in your real estate business? Start small, stay curious, and always put your clients first.

Disclaimer: This article is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the author and publisher are not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.  Articles which appear in this publication are an informational service to members.  Their contents are the opinions of the authors alone and do not necessarily represent those of SDAR

Protecting Sellers from Investor-Buyer Pitfalls
By Robert Muir, Attorney

Investor—or “flipper”—buyers are increasingly common in today’s real estate market. While they can represent legitimate opportunities, these buyers often employ complex purchase structures, unusual contract language, or low earnest money deposits that may expose sellers to unnecessary risks. The following recent case study highlights the red flags agents and sellers should be aware of when evaluating an investor’s offer, particularly when no agent is representing the seller.

Case Study: A Seller Approached by an Investor

A seller was referred to our office to review a purchase agreement from an “investor” buyer. No real estate agent was involved in the transaction. After reviewing the standard CAR Residential Purchase Agreement (RPA) submittted, we advised the seller not to proceed due to several concerns that raised potential legal and financial risks.

Key Red Flags Identified

1. Complex LLC Ownership Structure
The buyers presented themselves as purchasing through an LLC, which another LLC owned. This layering of entities is unusual and suggests an attempt to shield personal liability. Further investigation showed that the individual signing on behalf of the LLC was not listed in the Secretary of State’s records.

2. “Or Assignee” Language
The buyer’s name in the RPA was followed by “or assignee,” implying the right to transfer the contract to another party without the seller’s consent. This tactic is often used in “wholesale” contracts to assign the contract while in escrow, leaving sellers uncertain about the true buyer. While the RPA contains assignment rules, inserting “or assignee” creates ambiguity over whether the seller’s consent is needed.  This should always be clarified in a counter offer.

3. Litigation History
A simple court record search revealed that the buyer had sued three sellers in recent months, apparently in disputes where sellers attempted to cancel contracts. While agents are not obligated to investigate a buyer’s background, advising clients to conduct basic due diligence—or referring them to legal counsel—can be prudent when red flags appear.

4. Low Earnest Money Deposit
The earnest money deposit offered was only 1%, far below the typical 3%. An unrepresented seller may not recognize this as unusually low, but such a small deposit makes it easier for a buyer to walk away with little consequence.

5. Misunderstanding of “As Is”
The handwritten language in the RPA stated that the property was being purchased “As Is.” While this clause is already standard in the RPA, sellers often misinterpret it to mean they can skip mandatory disclosures. Even in “As Is” transactions, sellers remain obligated to comply with all disclosure requirements.

Lessons for Agents and Sellers

This case ended well: the seller avoided entering into a potentially problematic deal and returned to the referring agent to list the property properly. However, many sellers mistakenly believe they can accept an offer and later rely on an attorney review period to cancel if issues arise. In reality, there is no automatic three-day right to cancel, as there is in some consumer contracts. If legal review is desired, it must happen before signing.

Summary

Investor buyers and flippers will likely remain active participants in the market, but their tactics can create significant risks for unrepresented sellers. By helping clients identify potential warning signs—such as layered LLCs, assignment clauses, low deposits, or a buyer’s litigation history—agents can provide critical protection and guidance. 

Encouraging sellers to seek legal review before committing to an agreement, especially when agents are not involved, helps ensure sellers avoid costly disputes and also helps agents fulfill their role as trusted advisors in an increasingly complex marketplace.

Robert Muir is a long-time member of SDAR’s Risk Management Committee.  He can be reached at muirlaw.com  

Disclaimer: This article is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the author and publisher are not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.  Articles which appear in this publication are an informational service to members.  Their contents are the opinions of the authors alone and do not necessarily represent those of SDAR.  

Kathy Mehringer
Broker of Record -  Compass

Virtual Staging & Digitally Altered Images (CA AB 723)

Effective Date: January 1, 2026

The Big Picture: What's Changing?
Starting January 1, 2026, a new California law (AB 723) requires a new level of  transparency when "digitally altered images"  are used in real estate advertising. This includes common and powerful tools like virtual staging.

The goal is to continue using this technology to showcase a property's potential while leading with the transparency and integrity that our brand stands for. 

This guide outlines our simple, compliant best practices when using AI or training agents to use AI:

Think of it as the Two-Part Rule:
When you use a "digitally altered image" in advertising, you must do two things:

1. Disclose: Add a "reasonably conspicuous" disclosure stating the image has been digitally altered.

2. Show the Original: On any website(s) the broker or agent controls (such as the MLS, Compass.com, and agent/property website(s)), you must also upload the original, unaltered version of the same photo to ensure the consumer is made aware of the accurate and current features/amenities of the property.

What Images Need a Disclaimer?
This law applies when you use any software (including AI) to add, remove, or change elements of the property itself.

DISCLOSURE IS REQUIRED FOR:

• Virtual Staging: Digitally adding furniture, rugs, or art to an empty room.

• Digital Renovation: Changing the texture or color of walls, cabinets, or flooring.

• Offending Object Removal: Editing out power lines, utility poles, wall or floor cracks, or perhaps an adjacent building.

• Landscaping Changes: Making a brown lawn green, adding mature trees when none exist, or digitally adding a pool or other amenities.

DISCLOSURE IS NOT REQUIRED FOR:

• Standard Photo Adjustments that do not change the property's physical condition.

• Examples: Adjusting brightness or lighting, color correction (to make it look more true to life), white balance, sharpening, cropping, or straightening angles.

The Litmus  Test: 

• Are you making the photo look better, or are you making the property look different to make it appear better than it is ? 

• If you're changing the property, you must disclose and add the true-to-life image(s).

Important News:  CRMLS does not allow digitally altered  images other than  “virtual staging,” per MLS rule 11.5 (c) 
Please see a brief summary of  Rule 11.5(c) below:

• Altered Images: Users may not alter photos to modify structural elements, flooring, walls, hardscape, or views, including via AI or photo-editing software. Unless the property will be delivered with  AI enhancements at the close of escrow.

• Virtual Staging/Alteration: If a photo is altered or virtually staged, it must be labeled as such (e.g., "virtually staged") in the description, and the original, unaltered photo should be included.

• Permitted Edits: Standard photo enhancements, such as lighting, color correction, and cropping, are allowed, provided they do not misrepresent the property.

• Compliance: Violations of this rule regarding media misrepresentation are subject to the CRMLS Citation Policy. 

Note: Verify applicable rules with your local MLS. 

Best Practice: Try The "Carousel Method."
This may be the simplest and most effective way to comply with  the law on  MLS, Broker, and agent-controlled websites.

1. The Altered Image: Post your virtually staged or altered photo first. 

2. The Original Image: Immediately after the altered photo (as the next photo in the carousel), upload the original, unaltered version of the same shot.

3. Caption the Original: In the photo caption for the original, unaltered image, label it clearly: "Original Photo" or "Unaltered Image."

4. The Law Also Permits: The use of a link or  QR code to lead the consumer to the “Unaltered Image."

5. Image Collage, Reels, or other Video Imaging: Be mindful that this law, while very specific to digital alterations, does not replace or eliminate General Law in California regarding advertising and true picture to the public, not to mention the NAR Code of Ethics and a variety of MLS Rules. 

5. Sample Disclaimer Language (For Photo Captions)
Use these straightforward disclaimers in the public caption for the altered image:

• For Virtual Staging:
  "Virtually Staged. Some elements have been digitally added."

• For Landscaping/Views:
  "Digitally Enhanced. Landscaping, views have been altered."

• For Digital Renovations (Paint, Flooring, New or Updated Amenities, etc.):
  "Digitally Altered finishes ( e.g. paint/flooring) shown are not as is."

• For General Use/Object Removal:
   "This image has been digitally altered."

The Bottom Line
Following this law — including the disclosure language and the use of the "Carousel Method" — to display the property's actual condition protects you, your client, and Compass from claims of misrepresentation or false advertising and allows the   continued use of  powerful marketing tools while leading with integrity.

“When in doubt, disclose and show the actual/original image.”

Telephone Consumer Protection Act (“TCPA”)
Kathy Mehringer
Broker of Record Compass

Introduction: Did you know that  E&O insurance is not likely to cover TCPA violations? In that case, the agent would be responsible for all associated costs if a lawsuit is threatened or filed.  This document is intended to provide a summary of key points regarding the Telephone Consumer Protection Act (TCPA). It outlines the Act's purpose, scope, requirements, restrictions, enforcement, and potential penalties. Please consult with your Broker of Record or Legal Counsel for specific information on how TCPA  violations may impact you.

Purpose and Scope:

• The Telephone Consumer Protection Act (“TCPA”), enacted in 1991, regulates and restricts the use of automated technology to initiate outbound telephone communications and marketing solicitations to individuals whose numbers are on any local or national Do Not Call (“DNC”) registries without advanced consent.

• It applies to voice calls, voice messages, SMS (text) messages, and facsimile transmissions.

• It addresses the use of artificial voices/pre-recorded messages or auto dialers, as well as calls or texts initiated by an individual for marketing purposes to a number on a DNC list.

• There is a four-year statute of limitations for TCPA violations.

• Please see link to the  National Do Not Call Registry https://telemarketing.donotcall.gov/ 

• Brokerage firms should maintain a record/registry of all consumer requests  NOT to be contacted.

Key Requirements and Restrictions:

• Prior Express Written Consent: The TCPA generally requires prior express written consent to contact consumers using automated technology or to contact someone on a DNC registry. Simply collecting phone numbers may not be sufficient proof of consent.

  • A phone number listed on a “For Sale By Owner” listing is not sufficient to confer consent to be contacted for marketing purposes. 

  • The same logic applies to MLS "Entry Only" listings

• Do Not Call (DNC) Registry: While there's a DNC registry for residential telephone numbers, it doesn't apply if you have prior express written consent.  It is a violation of the TCPA to contact a consumer for marketing purposes whose number appears on a DNC registry, regardless if you use automated technology or not. 

• Business Transaction Exception: If you've conducted a business transaction or service, you have an 18-month window to contact the consumer unless they tell you not to.

• Withdrawal of Consent: If a consumer withdraws their consent or requests that you not call again, you must comply and document this request, log the request in the Brokerage internal registry. 

• Open House Sign-In Registers: Include language to your sign-in sheets that states: “by providing my contact information, I agree to be contacted for marketing purposes about this property or other listing/purchase opportunities.” 

Enforcement and Penalties:

• Statute of Limitations: There's a four-year statute of limitations for TCPA violations.

• Statutory Damages: Statutory damages are $500.00 per violation.

• Class Action Lawsuits: One person can file a class action lawsuit for TCPA violations, which can result in millions of dollars in legal fees and settlements.

• Multiple Violations: There may be as many as three violations for each call.

• Significant Settlements: There have been substantial settlements for TCPA violations, such as the DeShay v. Keller Williams Realty, Inc. $40 million settlement in 2023.

• Breaking News: The parent company of Coldwell Banker, Realogy Holdings Corp., has agreed to a $20 million class action lawsuit settlement to resolve claims it violated the federal Telephone Consumer Protection Act (TCPA) with unsolicited phone calls.

Final Thoughts: Adherence to TCPA regulations is crucial for avoiding significant financial penalties, legal battles, and reputational damage. E&O insurance is not likely to cover TCPA violations. In that case, the agent would be responsible for costs, in the event a lawsuit is threatened or filed, they have contacted someone on the DNC registry or fail to honor "stop" requests. Purchasing leads from third parties without checking them against the DNC lists is not advisable.

Disclaimer: This article is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the author and publisher are not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.  Articles which appear in this publication are an informational service to members.  Their contents are the opinions of the authors alone and do not necessarily represent those of SDAR.  

Property Management: Concepts, Compliance, and Commitment

By Cheryl Chase-Berkson, Broker and Jane Rheinheimer, Attorney
 

In the fast-moving world of real estate, property management often works behind the scenes, quietly ensuring smooth operations, adherence to legal requirements, and tenant satisfaction. At its best, property management is a strategic partnership resting on three  pillars: concepts, compliance, and commitment. These aren’t just buzzwords — they define the difference between mediocre management and professional excellence. Our industry goals in real estate are to be top-shelf professionals, our goal when performing property management duties should be the same.  

1. Concepts: The Foundation of Property Management

At its core, property management is the art and science of protecting and enhancing an asset — for both the property owner and the community it serves. This work requires more than basic logistical know-how. Strong, educated, and decisive management is built on a framework of critical concepts:
 

Asset stewardship: Managing a property as if it were your own. As a property manager, you are the “eyes” on your owner’s property to advise and assist the owner in making the best decisions for the care of their investment property. An investment property is an “investment at risk” just like any other asset investment. Your fiduciary responsibility is to make sure your owners understand this truth.  There will be times when funds are needed to pay for maintenance and repair issues, and there will be times when there is no rental income due to vacancies. Again,  it is your duty as the property manager to explain these realities to the client in order to manage expectations.

Client trust:  Trust requires acting in the best interest of the property owner, maintaining transparency and communication. The interest of the client is  your top priority, not your interests, your opinions, or your monetary agenda. When a client believes  you have their best interest at heart, shown by your actions and words, trust is achieved. When it comes to communication, more is always better than less. 

Tenant relationships: With tenants, the property manager should cultivate mutual respect, address concerns promptly, and provide a sense of home. You are to give fair, honest, and professional service to tenants, stressing  openness, and prompt communications. Landlord-tenant law in California tends to strongly favor tenants. A thorough understanding of current law is essential.  Joining educational organizations which promote and inform members of these laws as well as research on your own must be a  priority.
 

Financial clarity: The property manager is responsible for accurate reporting, responsible budgeting, and  consistent collection practices. Property management companies are highly regulated by the DRE, especially on how trust funds are handled. Trust funds must be held in designated accounts through  “DRE approved banks.”  Consult the DRE website for a list of acceptable banking institutions.  Having monthly 3-way reconciliations of all trust accounts and being able to “open your books” at any time is essential.  Sloppy practices including not disbursing funds on time, putting off bank reconciliations, and careless bookkeeping can result in legal and licensing disaster.

The concepts described above guide everything from lease/contract preparation to vendor/  tenant selection. They are principles shaping not only what we do, but how we do it.

2. Compliance: Navigating the Legal Landscape

Property managers today must be fluent in a complex web of laws, codes, and ordinances — all of which can vary by city, county, state, and property type. Compliance isn’t optional; it’s a non-negotiable requirement that protects clients, tenants, and the broader community.

Key areas of compliance include:

• Understanding who and who cannot conduct property management services. Check with the DRE website.

• If a licensed salesperson conducts PM services, they must obtain the permission of their company broker. Conducting PM services without letting the broker know creates potential legal exposure for both you and the broker. Whatever you do under your broker’s license (whether the broker is aware of your activities or not), extends liability for your actions to the broker as well.  Transparency with your broker is  crucial , even if you are managing your own rentals and  even if you are a “broker-associate” within a company other than your own. Keep in mind that nearly all real estate errors and omissions policies specifically exclude property management activities.

• If you are a licensed real estate broker, you can open your own property management company and conduct property management services. If you choose to go this route, it is imperative that you bind a separate policy of property management errors and omissions insurance and other pertinent insurance coverages (general liability, workers’ compensation, etc.), depending on the scope of your business. You will need to designate and maintain a trust account with a DRE-approved banking institution. This will need to be a true trust account in which you cannot comingle funds. You will need to pay your municipal business tax fees, decide whether or not to operate under a fictitious business name, decide whether or not to incorporate, and decide whether you need to lease business premises for your property management activities. It is important to consult competent accounting and legal professionals as needed when deciding whether to open a property management company under your own broker’s license. 

• Other Factors  to Understand and Explain to Your Clients

• Fair Housing and ADA regulations

• Local rent control and eviction laws

• Property maintenance codes and safety standards

• Costs of project management services and other offered services.

• Know and understand compliance issues and new laws, communicating them to clients for their education too.  Check out CAR’s June 2025 New Laws & Forms 

A single lapse — intentional or not — can jeopardize an owner’s investment, jeopardize your license, and expose everyone to potential legal risk from third parties and administrative agencies. Successful property managers prioritize the investment  in ongoing education to stay up to date with changing laws. We don’t just follow rules; we build systems that uphold them. 

Three foundational thoughts: 1) Treat others the way you want to be treated; 2) Whatever decision you make when doing property management, make sure you can defend the decision if you are standing in front of a judge; 3) Make clients aware fees are always negotiable.

3. Commitment: The Ethical Core of Property Management Work

You can’t regulate integrity, nor can integrity be bought. Being meticulous in the way you conduct yourself and your business  will lead to success, client retention, a robust referral network, an excellent professional reputation, and peace of mind. Commitment is the part of property management that goes beyond contracts and compliance — it’s where ethics, values, and culture come into play. 
 

For you and your team that means:

• Doing what’s right even when it’s not required and when it hurts or causes loss

• Treating every resident with dignity and respect

• Making decisions with fairness, not just financial viewpoints. 

• Own up to mistakes, everyone makes them.  Apologize and fix it

• Focus on long-term trust over short-term gain. 

Commit to peaceful resolutions, eliminate drama and emotion, always do what is right.  You know what that is.

We often say: “Our handshake is our word.” Increasingly, that level of personal accountability is rare.  It is what sets apart truly professional property managers.

Conclusion: Raising the Bar

The public’s perception of property management is often shaped by myths or bad experiences — but those of us in the profession know better. Done right, property management is a meaningful calling that blends expertise, law, and heart,  creating lasting business and personal relationships as you  help others achieve their investment goals. 

As REALTORS® and industry professionals, it is our responsibility  to continue to elevate the standards of property management by grounding ourselves in solid concepts, uncompromising compliance with the DRE, local, state, and federal laws, and unwavering commitment to the legacy we create along the way. When we do, everyone wins — from the investor to the resident, to the tenant, and the reputation of our entire industry.

Disclaimer: This article is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the author and publisher are not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.  Articles which appear in this publication are an informational service to members.  Their contents are the opinions of the authors alone and do not necessarily represent those of SDAR.  

Navigating Post-Closing Occupancy: RLAS vs. SIP in California Real Estate
By Robert Schantz and Richard Woods, Attorneys and
Members of the Risk Management Committee

For California real estate agents, managing post-closing occupancy arrangements is a critical skill that demands precision and an understanding of the legal distinctions between different agreements. Allowing a seller to remain in a property after the close of escrow can seem straightforward, but it creates significant legal implications for both buyers and sellers. This article clarifies the differences between the Residential Lease After Sale (RLAS) and the Seller in Possession (SIP) agreements, highlighting the essential legal and practical risks agents must consider.
 

What’s the Difference Between RLAS and SIP?

Residential Lease After Sale (RLAS)
The Residential Lease After Sale (RLAS) form is used when a seller needs to remain in the property for 30 days or more after the close of escrow. This agreement unequivocally establishes a landlord-tenant relationship under California law.

Key legal consequences include:

• Buyer as Landlord: The buyer immediately becomes subject to the California Civil Code §§ 1940-1954.05, which governs residential tenancies.

• Habitability Requirements: Under Civil Code § 1941.1, the buyer must maintain the property in habitable condition.

• Eviction Protections and "Just Cause" Ordinances: If the seller fails to vacate, the buyer must follow formal eviction procedures, possibly under California’s Tenant Protection Act of 2019 (AB 1482) or local “just cause” eviction laws.

• Rent Control and Local Ordinances: The RLAS may subject the buyer to rent control or tenant protections depending on city ordinances (e.g., Los Angeles Rent Stabilization Ordinance or San Francisco Rent Ordinance).

• Security Deposit Regulation: The lease is subject to Civil Code § 1950.5, which regulates the collection, use, and return of security deposits.

Seller in Possession (SIP)

The Seller License to Remain in Possession Addendum (SIP) is used when a seller remains in the property for 29 days or less. The SIP is a license agreement, not a lease.

Key distinctions:

• No Tenancy Created: Because a SIP is a license, it typically does not invoke tenant protections under California Civil Code. 

• Delivery of Possession Fee: This fee is not considered a security deposit and is returned within five days after possession is delivered, provided no damage or delay occurred.

• Eviction Process Differentiated: If a seller remains past the SIP period, the buyer may pursue an unlawful detainer for a licensee, but this remains a civil legal process, albeit typically faster than a full eviction.

• Limited Legal Protections for Occupant: Since a tenancy is not formed, the seller has fewer rights to contest removal, assuming the license is lawfully revoked.

Legal Advantages and Disadvantages

RLAS

Legal Advantages
Offers clearer rules and protections under established landlord-tenant law. Eviction process is well defined

Legal Disadvantages
Involves stricter landlord obligations, may trigger rent control laws, requires proper habitability, and imposes eviction constraints.
 

SIP

Legal Advantages
Involves stricter landlord obligations, may trigger Avoids creation of tenancy; shorter term, less regulatory burden. Quicker to regain possession if properly documented. control laws, requires proper habitability, and imposes eviction constraints.

Legal Disadvantages
Less legal clarity if occupant holds over; court may recharacterize as tenancy if SIP terms are vague or violated.
 

Relevant case law:

• Granberry v. Islay Investments (1995) 9 Cal.4th 738: Reaffirmed the broad application of landlord obligations, including habitability.
• People ex rel. Dept. of Transp. v. Naegele Outdoor Advertising Co. (1979) 89 Cal.App.3d 751: Distinguished licenses from leases and held that licenses can be revoked unless a tenancy is inferred from the conduct of parties.
• Courts may reclassify SIP as a lease if facts support a landlord-tenant relationship (e.g., ongoing rent payments, extended occupancy beyond 29 days, buyer’s conduct).

Legal Obligations and Liabilities

Buyer (New Owner / Landlord or Licensor)

• RLAS: Must maintain habitability, comply with rent control, process eviction through legal channels.

• SIP: Must act promptly if holdover occurs; may still need legal action for possession.

• Insurance Risk: Homeowners insurance may not cover post-close damage caused by occupants. Landlord or commercial liability insurance may be required.

Seller (Occupant / Tenant or Licensee)

• RLAS: Subject to tenancy laws, must pay rent and vacate on agreed date; risks eviction if in breach.

• SIP: Must vacate within license period or risk legal removal; may be liable for damages or delay fees.

Real Estate Agents

• Duty of Disclosure: Agents must disclose risks of post-closing occupancy and advise clients to use appropriate agreements (RLAS/SIP).

• Standard of Care: Failure to use proper forms or mischaracterization of post-close occupancy could result in professional negligence claims.

• Limitation of Role: Agents should not draft custom occupancy terms or offer legal advice. When in doubt, refer to legal counsel.

Why This Matters: You’re Creating a Legal Occupancy Right

Once escrow closes and title transfers, the buyer becomes the property owner and (often unknowingly) a landlord. This applies even with a short SIP agreement.

Agents often believe these are “simple agreements,” but the reality is:

• You are structuring a tenancy (or a license to occupy that can escalate to a tenancy dispute).
• The buyer cannot access their own home without proper notice, even if they own it.
• Standard homeowner's insurance policies may not cover tenant-caused damage or landlord liabilities.
• Disputes post-close can quickly become costly litigation matters, not just minor inconveniences.

REALTOR® Code of Ethics and Professional Standards

The NAR Code of Ethics includes several standards applicable here:

• Article 1: “REALTORS® protect and promote the interests of their client.” This includes anticipating and advising on occupancy risks.

• Article 13: “REALTORS® shall not engage in the unauthorized practice of law.” Do not create custom lease terms or mischaracterize the legal effect of RLAS vs SIP.

• Article 9: REALTORS® must ensure that contracts and agreements are in writing, clear, and that all parties receive copies.

A failure to properly explain or document occupancy terms, or to use the correct form, could trigger ethics complaints, professional discipline, or civil liability.

How Real Estate Agents Should Advise Their Clients

If Representing the Buyer:

• Educate Your Buyer: Have a frank discussion: “You are becoming a landlord. Are you prepared for the responsibilities and potential risks that come with this?

• Recommend Professional Consultations: Strongly advise them to speak with their insurance provider to ensure proper coverage (e.g., landlord liability, vacancy clauses) and possibly legal counsel for complex situations or if they have questions about their new landlord obligations.

• Set Access Expectations: Ensure they clearly understand they cannot access the property post-close without proper notice to the seller, even though they own it.

• Confirm Security Deposit/Fee Handling: Verify the existence and proper handling of any security deposit (for RLAS) or "Delivery of Possession Fee" (for SIP) according to legal requirements.

• Document Acknowledgment: Use a Buyer Acknowledgment of RLAS or SIP Occupancy form (or a similar internal disclosure) to document that you have educated your client and they understand the implications.

• Highlight Local Ordinances (RLAS): If using an RLAS, emphasize that state and local rental ordinances (including rent control and "just cause" eviction) apply, and they must comply with these.

• Advise that title does not mean immediate possession if a post-close occupancy agreement exists.

• Recommend landlord insurance (for RLAS) or occupancy rider (for SIP).

• Ensure security deposits or fees are handled lawfully.

• Emphasize compliance with local rent control or “just cause” laws if using RLAS.

• Provide written disclosures (e.g., Buyer Acknowledgment of Post-Close Occupancy)

If Representing the Seller:

• Set Realistic Expectations: Clearly communicate: “You no longer own the home after close, even if you’re still living there. You are now a tenant or licensee.”

• Avoid Informal Agreements: Strictly advise against informal or vague post-close arrangements. Always use the proper C.A.R. forms.

• Explain Consequences of Failure to Vacate: Explain that failing to vacate on time can trigger serious legal action, financial penalties, and damage to their credit.

• Advise on Occupancy Terms: Advise on appropriate rent amounts, proper handling of deposits/fees, and their liability for property condition during the occupancy period.

• Encourage Move-Out Insurance: Suggest they look into "move-out" insurance or rider to their existing policy, if available, to cover potential liability during the post-close occupancy.

• Advise the client they become tenant or licensee, not owner, after close.

• Discourage “handshake deals.” Always use C.A.R. forms (RLAS or SIP).

• Explain risks of holdover and possible litigation.

• Recommend consultation with legal counsel before requesting extended occupancy.

• Document the occupancy agreement and confirm the condition requirements at move-out.

Avoiding Common Mistakes

Skipping the Paperwork: Always use the proper C.A.R. form (RLAS or SIP). Never rely on emails, verbal agreements, or even general escrow instructions alone. These forms provide the necessary legal framework and protections.

Not Documenting Terms Clearly: Every detail should be in writing: exact rent amount, security deposit/delivery fee amount, precise move-out date, penalties for holdover, and specific terms for buyer access. Ambiguity breeds disputes.

Assuming It’s “Just a Few Days”: Even 3 days of unauthorized occupancy post-close can become a major legal issue if the seller refuses to vacate, creating significant headaches and costs for the buyer.

Failing to Consult Legal Counsel: REALTORS® are experts in real estate transactions, but they are not attorneys. When in doubt about legal interpretations, complex scenarios, or potential disputes, always refer your clients to qualified legal counsel. This protects your clients and limits your own liability.

Final Thoughts

Your role as a California REALTOR® extends beyond just facilitating the sale. By accurately understanding and properly utilizing the RLAS and SIP agreements, and by proactively educating your clients on the associated risks and responsibilities, you can effectively guide them  through the complexities of post-closing occupancy, mitigate legal exposure, and ensure a smoother transaction for all parties involved. 

Careful form selection, thorough documentation, and ethical diligence are key to avoiding costly disputes and maintaining client trust and compliance with both law and professional standards.

Disclaimer: This article is designed to provide accurate and authoritative information regarding the subject matter covered. It is offered with the understanding that the author and publisher are not engaged in rendering professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.  Articles which appear in this publication are an informational service to members.  Their contents are the opinions of the authors alone and do not necessarily represent those of SDAR.