California’s New Requirements for Buyer-Broker Representation Agreements

As of Jan. 1, 2025, California law mandates a written buyer-broker representation agreement for buyer’s brokers to receive a commission in real property sales. The new law applies to sales of all property types, including office, retail, industrial, multifamily and single-family properties. The new law does not apply to leases, rental agreements, state and federal land or loan brokerage services.

The new mandates are the result of Assembly Bill 2992, which was introduced in response to the Burnett Spitzer antitrust lawsuit against the National Association of Realtors (NAR) and certain brokerages, which led to a substantial settlement over commission-sharing practices. The settlement required real estate licensees to have a written agreement with a buyer before showing properties listed on the Multiple Listing Service (MLS). AB 2992 expands this requirement to all properties, whether it is listed on an MLS or not, and also imposes several additional requirements.

Key Provisions of AB 2992

Compensation: The bill mandates that compensation be clearly defined in the agreement, but it does not require the buyer to directly pay it, meaning the buyer’s broker may still get paid by the seller either directly or through the seller’s broker. The agreement can specify compensation as a percentage, fixed fee or hourly rate, as agreed upon by the parties.

Enforcement: The bill provides that a person licensed pursuant to Division 4 (commencing with Section 10000) of the Business and Professions Code who violates the new law shall be deemed to have violated that person’s licensing law. Accordingly, noncompliance may lead to disciplinary action from the Department of Real Estate.

Implications for Buyers and Agents

AB 2992 is intended to benefit both consumers and real estate professionals by creating a more transparent and accountable market. By expanding protections beyond MLS-listed properties and extending the requirements to all real estate licensees, the law ensures a consistent standard of care. Additionally, the three-month limit on agreements is likely to foster ongoing communication and active engagement between agents and their clients, creating stronger and more effective partnerships.

Brokers should consult with legal counsel on compliance and updating procedures, practices and forms. Given that noncompliance with certain of the new law’s requirements could lead to rescission and potential licensing law violations, brokers are well-advised to carefully review the new law to avoid liability.

THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING CALIFORNIA’S NEW REQUIREMENTS FOR BUYER-BROKER REPRESENTATION AGREEMENTS. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.