I am very pleased to inform you that REBNY, NYSAR and I have successfully requested that the New York Department of State – Division of Licensing (“DOS”) create an exception concerning what constitutes “substantive contact” under Real Property Law §443 (“Agency Disclosure Law”). The attached letter from the DOS (to view the letter please click here) offers the opinion that a real estate broker does not need to provide the New York State Agency Disclosure Form (“ADF”) to a consumer when the consumer is in the presence of the consumer’s own real estate broker.
In rendering this opinion, the DOS focuses on the provisions of the Agency Disclosure Law which require a real estate broker to provide an ADF to a consumer when the real estate broker has “substantive contact” with such consumer. Because “substantive contact” is not defined by the Agency Disclosure Law, the DOS relies on legislative intent and the common definitions of “substantive” and concludes that, when a real estate broker comes in contact with a consumer who is accompanied by the consumer’s real estate broker, such contact is not “substantive.”
This opinion is in direct response to an email that I sent to the DOS expressing my concern that an unintended consequence of the Agency Disclosure Law was that prospective purchasers would be provided with an ADF by the seller’s real estate broker even when the prospective purchaser was accompanied by his or her own real estate broker. It is my contention that this interpretation of the Agency Disclosure Law results in the prospective purchaser receiving the ADF numerous times and likely results in conditioning the prospective purchaser to simply reject the receipt of the ADF.
It is important to note that the DOS specifically states that the ADF must be provided by a real estate broker who has substantive contact with a consumer in the following scenarios: (i) if the consumer is unrepresented by a real estate broker, (ii) if the consumer is represented by a real estate broker but the real estate broker is not present at the time of the contact, (iii) if the real estate broker that is accompanying the consumer is acting as a landlord/seller or (iv) if the real estate broker that is accompanying the consumer is acting as a dual agent.
The DOS further cautions that the Agency Disclosure Law always requires a real estate broker to make it clear which party the real estate broker is representing in a transaction. Thus, even if a real estate broker has contact with a consumer who is accompanied by the consumer’s real estate broker, the real estate broker must still verbally disclose who the real estate broker is representing in the transaction. For example, if the seller’s real estate broker has contact with a prospective purchaser at a showing and the prospective purchaser is accompanied by a real estate broker, the seller’s real estate broker is still be required to verbally inform the prospective purchaser that the real estate broker represents the seller.