AB-1059 is a new bill introduced to the California State Assembly this year. It was written by California Representative Lorena Gonzalez Fletcher D – San Diego. The bill aims to outlaw dual agency brokerage representation in California commercial real estate transactions. This bill was written in a response to the recent California Supreme Court ruling on the residential real estate case Horike v. Coldwell Banker where the Supreme Court stated that dual agents have an inherent conflict of interest.
This bill is being opposed by the AIR Commercial Real Estate Association which is a non-profit representation of all parties, and I am a former president of the organization. Tim Hayes is the AIR Executive Director leading the fight for the opposition with a petition on the MoveOn.org website. He states in the petition that AB-1059 will negatively impact the overall economy, especially small business owners who lease or buy real estate.
According to Hayes, the bill may increase fees paid to the brokerage industry for small business owners. The tenant/buyers will no longer be able to work with any broker they choose. The tenant buying commercial real estate will be forced to work with another broker from a firm other than the listing firm or represent themselves. As a result, it may create higher transaction fees and could stifle small businesses ability to close transactions. These increased costs will be passed on to the tenants and have little effect on the landlords and sellers. Third party only brokerage firms will be the recipient of additional commission fees for services that are not wanted but are mandated by law, Hayes said in the petition.
In addition, the Building Owners and Managers Association of California (BOMA California) is against the bill. Matthew Hargrove of BOMA California said, “We oppose it. It’s a terrible bill.”
Commercial real estate brokers who only represent tenants and sellers are pushing for the bill to pass. A new non-profit called The Association of Commercial Tenants (ACT) has created a website to provide educational support, legislative guidance and industry unification in support of AB-1059. Their goal is to make dual agency illegal in California and across the United States for commercial real estate transactions.
We will see what happens when the bill is voted on; however, the bill is now a 2-year-bill being held in the judiciary committee. There will be no action taken on it this year. It has some complications that need to be worked through, the Office of Assembly Woman Lorena Gonzalez Fletcher said.