A Step in the
Right Direction

“SB 1171 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 should actually be true.”

- Jason Hughes, ACT Co-Founder

A Historic Victory for Tenants

Championed and directed from concept to fulfillment by Hughes Marino President and CEO Jason Hughes; SB 1171, California’s commercial real estate broker agency disclosure law, helped to bring transparency and protection to commercial real estate buyers and tenants for the first time. The bill was signed into law by Governor Brown in 2014, and went into effect on January 1, 2015.

Before entering any agreement to purchase or lease, licensed brokers and salespersons are required to provide the buyer/tenant with a disclosure form indicating:

  • Agent represents only the landlord/seller
  • Agent represents only the tenant/buyer
  • Dual Agency: Agent represents both the landlord/seller and the tenant/buyer

An additional provision in the statute dictates that a dual party agent may not disseminate confidential information between their clients without written permission.

SB 1171 was a historic turning point for the commercial real estate industry, and for the first time placed tenants and buyers interests ahead of sellers and landlords. This simple yet profound belief was the fundamental charge for ACT. Regulations governing commercial real estate transactions bring a labyrinth of complexity, and ACT was created to provide expertise, insight and information to tenants and buyers.

While SB 1171 was a step forward, what remains undone and is a critical priority for ACT, is to eliminate the duplicitous Dual Agency status. Stemming from a November 2016 ruling in California’s State Supreme Court (Horiike vs. Coldwell Banker), the Court found dual agency to be fraught with conflicts of interest. Given the brokerage industry’s support of landlords, this has created a seriously disadvantaged outcome for companies leasing and purchasing commercial space.

Additionally, the fiduciary responsibility of the broker to their client is non-existent in the dual model, because of the inability to provide transparent information to each represented party – rendering them a messenger rather than advisor. While the landlords are experts in their field, tenants, without unbiased and non-conflicted representation, are rendered pawns and disadvantaged to the superior informed and expertly represented landlord. It is vital to preserve this client/broker trust, and legislation to do just that by shuttering Dual Agency is a necessity. Ultimately, this new regulation will remove brokerage firms from the business of seller/landlord and buyer/tenant representation in the same transaction.

ACT is working for the tenant and buyer in spearheading this initiative. Leadership is confident that the commercial real estate environment will change for the better with legislative action, first in California and then nationally.

For more information about SB 1171, click here
Read the full text of the entire law here

“We consider the passing of SB 1171 to be a victory for all of the hardworking business owners in the state, who deserve the opportunity to receive unbiased representation when selecting the next space to house their business.”