June 2024 New & Revised C.A.R. Forms: Part II

As discussed in Volume I, there many changes being made to the forms by the “settlement” of the Stitzer/Burnett case in the C.A.R. forms.    However, there are also numerous changes to C.A.R.’s transactional forms that are being implemented for release on June 25, 2024. These changes touch on the landlord-tenant relationship, buyer and seller transactional forms, buyer and seller questionnaires, and more. This Volume II will note some of those revisions most relevant to our readers.

1. Residential Purchase Agreement (“RPA”)

Here, C.A.R. is incorporating more changes to a Form that has already undergone significant changes   over the last several years. There are some more changes to the form such as the choice to provide a Wildlife Disclosure Report (that is now a permanent fixture in the form) and the addition of language clarifying that sellers are not responsible for holes left after removing pictures from the walls. (Paragraph 7B.) More significantly, starting in 2025, buildings with three or more units must have an inspection of exterior balconies, stairs, and walkways. Anticipating this change, the RPA now mentions the new Wooden Balcony and Stairs Addendum (“WBSA”); located in paragraph 11N. While not a legal requirement until 2025, it may be prudent for sellers to begin using the form and obtaining the relevant inspections as a matter of practice. In the most significant change to the RPA, new insurance contingencies have been included. Specifically, there is now a separate contingency for buyers to satisfy regarding insurance availability and cost. (See Paragraphs 3L(4); 8D; & 12D [incorporating these changes].)

The RPA also has new language permitting escrow holders to provide the relevant portions of the Buyer Representation Agreement (“BRA”) to a seller who has agreed to pay all or part of the escrow fees. (Paragraph 11A.) These changes also make clear escrow has a duty to provide principals on both sides with a closing statement related to the payment of compensation. Readers should also be aware that the Real Estate Broker paragraphs have been revised to refer to the Cooperating Broker Compensation (“CBC”) form.  This change was made to the RPA to establish whether there is any compensation between the brokers, instead of using the MLS as a default.

2. Buyer Financial and Personal Information (“BFPI”)

This is a new voluntary form coming into use that provides information to the buyer’s agent to help them analyze their clients financial ability to purchase certain property. It details the amount and source of the down payment, maximum loan amount, type of financing and whether the buyer currently rents or owns, the buyer’s experience with real estate transactions, and whether the buyer is a real estate licensee. Critically, the information on this form is confidential. As readers know, all of this information is essential to the bargaining process between the buyer and seller, and Realtors® must acquire written permission from their principals before revealing this type of information to remain in compliance with the N.A.R Code of Ethics.

3. Buyer Homeowners’ Association Advisory (“BHAA”)

Here, the BHAA was adjusted in two respects. First, incorporating the upcoming balcony, stair, and sidewalk inspection requirements coming into effect in 2025, new language was added discussing the applicability of the new laws to condominium units. Second, language was also added to advise parties that there can often be insurance difficulties that affect homeowner’s associations.

4. Buyer Identification of Preferences and Priorities (“BIPP”)

This is a new non-mandatory form intended to replace the former Buyer Material Issues (BMI) form. BIPP is designed to help the buyer’s agent understand the factors that are important to the buyer in determining which properties to present and potentially make an offer on. It allows the buyer to identify their preferences related to a variety of factors including, but not limited to, price range, number of bedrooms, number of bathrooms, single verses multi-family, the school district, whether the property has environmentally friendly features, and if there are any accessibility features on the property. Similar to the BFPI form discussed above, the information in this form is also confidential, and buyer’s agents should be diligent in ascertaining what certain buyers are comfortable with disclosing in the negotiation process. This form allows such information to be documented to the client’s specific file.

5. Property Management Agreement (“PMA”)

The PMA is being altered by adding a new paragraph 3I(2), that designates whether the property managed is exempted from the one-month security deposit limitation in place as of July 1, 2024. (Civ. Code, § 1950.5(c)(4)(A)(i)-(ii).) For further discussion of the new one-month security deposit law change, among others, you can access our “Real Estate Law Updates 2024: What Realtors® Need to Know" article published earlier this year. (Giardinelli & Greenman, TYLER LAW LLP, 2024 California Real Estate Law Update: What REALTORS® Need to Know - Tyler Law LLP.)

6. Residential Lease After Sale (“RLAS”)

Here, we have more adjustments based on the new law (effective as of July 1, 2024) limiting security deposits to one-month’s rent maximum. First, the form added the limitation in paragraph 5A. Second, the form incorporated a new Security Deposit Exemptions Disclosure and Addendum (“SSDA”) which allows the user to document whether the owner is exempt from the one-month limitation and/or whether the tenant is a service member, which makes the one-month limitation mandatory even if the owner otherwise qualifies for an exemption.

7. Seller Property Questionnaire (“SPQ”)

A question has been added to paragraph 6K of the SPQ to address the new law regarding balcony, stairway, and other elevated wood structures on buildings with more than three units. Further emphasizing safety/compliance, the form also added paragraph 7E to ensure conformance of any led-based paint renovation to the applicable EPA regulations. As was previously discussed in our New Law 2024 article mentioned above, “flipper” owners, as of July 1, 2024, must now disclose a list of improvements made to a property, the name and contact information of the relevant contractors under certain circumstances. (See Giardinelli & Greenman, 2024 California Real Estate Law Update: What REALTORS® Need to Know - Tyler Law LLP [discussing when the disclosures apply in more detail].)

Some of the more routine changes to the SPQ form include the addition of paragraph 8B that addresses solar systems; the addition of 8E to clarify if dwelling units have separate meters and whether they are permitted as an Accessory Dwelling Unit (“ADU”); and, finally the additions of paragraphs 18D and 18E which provide notice if the property is currently occupied by tenants, and if not, how the vacancy arose.

8. Short-Term Rental Agreement (“STRA-SA”)

Here, the previous iteration of this form was not consistent with California law when dealing with the realities of terminating a short-term rental agreement. Fixing this issue, the new iteration specifically notes that a short-term renter can cancel the rental within 24-hours and have their deposit refunded. Qualified by the carve out in the law which allows the deposit to be kept if cancellation occurs within 72-hours of the scheduled commencement of the rental. This is another new law that we have previously addressed in the “New Laws 2024” article relating to real estate. (Civ. Code, §§ 1748.40 and 1780.80 et seq.; Giardinelli & Greenman, 2024 California Real Estate Law Update: What REALTORS® Need to Know - Tyler Law LLP.)

9. Wooden Balcony, Stairs and Other Elevated Elements Addendum (“WBSA”)

While the new law requiring inspections of wooden balconies, stairs and other elevated elements is not in effect until 2025, the WBSA is the new form that is now mentioned in the RPA (see discussion above concerning other changes to the RPA). This addendum will help the seller to facilitate delivering a copy of the inspection report to the buyer along with other necessary documents in the transaction.