| Photo by Avi Waxman on Unsplash
TRENTON, NJ — New Jersey Governor Phil Murphy recently signed Bill S3192/A4454, officially known as the Real Estate Consumer Protection Enhancement Act. This new law, effective from August 1, 2024, aims to enhance transparency in real estate transactions and provide greater protection for consumers across the state.
Assemblyman Roy Frelman and Assemblywoman Eliana Pintor sponsored the bill.
Under the bill, new responsibilities will be added to current law for those who assist consumers in buying or selling a property, such as a brokerage firm, buyer’s agent, seller’s agent, dual agent, designated agent, and transaction brokers. The legislation also clarifies who is considered a buyer’s agent versus a seller’s agent and what the agreement between these two groups includes.
“A4454 ensures New Jersey residents have access to stronger consumer protections in both residential and commercial real estate transactions,” said Assemblyman Freiman. “By standardizing broker agreements and promoting continued education for licensees, we cultivate trust and integrity in the real estate market, supporting residents throughout the process, and assisting them in achieving their homeownership goals.”
This bill is in response to a Missouri federal jury’s decision in October 2023, which found that the National Association of Realtors® (NAR) and other companies broke the law by making home sellers pay the commission for both their own real estate agent and the buyer’s agent. This practice made buying a home more expensive. Though the NAR initially tried to appeal, the association entered a settlement. As part of this settlement, all realtors, including 58,000 New Jersey licensees, must use buyer agency agreement forms.
“Real estate is one of the most significant purchases for both homeowners and businesses looking to establish roots in a community,” said Assemblywoman Pintor Marin (D-Essex). “By creating a standard, we are protecting New Jerseyans, ensuring they have clear representation and a strong understanding of the process.”
Key provisions
Some key provisions of the legislation include:
- Sellers must provide a fully completed property condition disclosure statement before buyers are contractually obligated. This ensures buyers have all necessary information, promotes informed decision-making, and reduces potential disputes.
- The designated agency, which enables a brokerage to appoint different agents to represent both the seller and the buyer with full fiduciary duties at the client’s request, is now permissible.
- All real estate licensees must use brokerage agreements, which outline the services provided to clients during a transaction.
- Listing agents must explicitly disclose who they represent at open houses through signage.
- Seller’s agents can no longer disclose compensation in Multiple Listing Services or notify MLSs about cooperative compensation if it is prohibited by MLS policy.
- Licensees must complete continuing education classes every two years, including an agency course.
Penalties for non-compliance
The legislation imposes penalties for non-compliance with its provisions. Specific penalties depend on the nature and severity of the violation. Real estate professionals and consumers must understand and follow the law to ensure fair and transparent transactions.
Violations may result in civil penalties, varying based on the specific offense. These penalties serve as a deterrent and encourage compliance. Real estate licensees (agents, brokers, etc.) who fail to adhere to the law may face disciplinary actions by the New Jersey Real Estate Commission. These actions can include fines, license suspension, or revocation.
Also, buyers or sellers who suffer harm due to non-compliance may seek legal remedies, such as damages or rescission of the transaction. Non-compliance can damage a licensee’s professional reputation and affect their ability to attract clients and conduct business.
