In October of 2023, a federal jury in the case of Sitzer/Burnett v. Nar, et al., levied a $1.78 billion damages verdict against multiple real estate brokerage companies and the National Association of Realtors, based on a finding that the plaintiff class had been harmed when the defendants conspired to fix commissions being paid by sellers (such as the plaintiff class) in violation of Federal Antitrust law.
In response to the Sitzer/Burnett decision, the New Jersey legislature adopted the New Jersey Real Estate Consumer Protection Enhancement Act, which took effect on August 1, 2024. The Act provides significant protections for consumers in residential real estate transactions and commercial real estate transactions by implementing accountability measures, increasing transparency, and imposing greater penalties for noncompliance, amongst other notable requirements.
Some of the key provisions of the Act, as well as how those provisions impact buyers, sellers, and other transaction stakeholders are as follows:
- Mandatory Buyer Representation Agreements – Real Estate brokers are required to have a Buyer Representation Agreement in place before they show a potential buyer a property or otherwise represent a prospective purchaser in a negotiation/transaction. This Agreement outlines the responsibilities and fiduciary duties of the Buyer’s broker, details how his/her compensation will be paid, and authorizes the broker to legally represent the buyer throughout the transaction.
- Fair Housing Enhancements – The Act improves fair housing practices, with strengthened protections against discrimination based on race, color, religion, sex, national origin, disability, and familial status. The Act also requires continued training and education for real estate professionals on fair housing laws, and the requirements thereof.
- Seller's Property Condition Disclosure – Sellers must now provide a completed and signed Seller's Property Condition Disclosure form, disclosing any known defects or issues with the property such as, but not limited to: water damage, infestations, structural issues, or any other material facts that could affect a buyer’s decision to purchase a property.
- Agent Responsibilities – The Buyer’s broker is required to obtain the Seller’s Property Condition Disclosure and provide the document to the prospective buyer before he/she becomes contractually obligated to buy/sell. Real estate professionals are also required to disclose all known existing material information or those upon which “a reasonable effort to ascertain the information would have revealed to their principal and when appropriate to any other party to the transaction concerning the physical condition of the property that is for sale.”
- Disclosures at Open Houses – Seller’s agents are required to post a disclosure of their representation at Open Houses, clearly indicating whom they represent. This disclosure helps potential Buyers understand the role of the Seller’s/Listing agent and that he/she represents the seller’s interest (and not that of the potential purchaser) in a potential transaction.
- Inspection and Appraisals – Sellers must provide potential purchasers’ reasonable access to inspection reports and appraisals. Buyers are also provided with added protections, such as sufficient time to conduct thorough inspections and appraisals, without fear or risk of losing deposits.
- Consumer Education Programs: The Act establishes certain consumer education programs, designed to educate potential homebuyers (and sellers) about their rights and the real estate transaction process.
- Stricter Penalties for Non-Compliance: Tougher penalties are in place to deter fraudulent and misleading practices, such as fines, suspension of licenses, and the threat of legal action.
The New Jersey Real Estate Consumer Protection Enhancement Act provides greater protections for consumers in real estate transactions with increased transparency (such as comprehensive disclosure requirements), accountability and compliance requirements for real estate agents, and stricter penalties for noncompliance. Ultimately, the Act should help the New Jersey real estate market become a more trustworthy environment.
Whether you are purchasing or selling real estate or have questions about the New Jersey Real Estate Consumer Protection Enhancement Act, the Real Estate and Land Use Team at Semeraro & Fahrney, LLC is here to answer your questions and guide you through the process. Contact us today at 973-988-5070.
