California Sets New Limits on Listing Agreements

With the goal of protecting homeowners from deceptive practices, Governor Newsom has recently signed Assembly Bill 1345.  The law limits the length of listing agreements for homeowners to 24 months.  The legislation, effective January 1, 2024, created additional protections for homeowners as it relates to encumbrances as well.  The law is designed to foster fair competition in the real estate market and protect the equity and authority of homeowners.

The new law prohibits entering into and/or the recording of any exclusive listing agreement for the sale of residential real estate, including pre-agreements, exceeding 24 months. Furthermore, it renders any such agreement void and unenforceable. Automatic renewals of exclusive listing agreements are also prohibited, requiring written and dated renewals signed by all parties involved. The renewal period is capped at 12 months, curbing the potential for extended obligations by homeowners without their informed, written consent. Licensed individuals found in violation of the new law will be subject to discipline by the Department of Real Estate.

Like most laws, this one, as the similar ones passed in other states, resulted from concerns over actions by a small faction of brokerages wherein long-term agreements were being entered into with homeowners that restricted their rights.  Though consideration was being paid, the ultimate result was concerning and lead to a significant push back in favor of consumer protection.  Thanks to AB 1345, homeowners are restored in their authority relative to selection and discernment relative to their agents.