Adapting to New Rules: How the “NJ Real Estate Consumer Protection Act” Impacts Commercial Brokers

What Happened:

In July 2024, the New Jersey Real Estate Consumer Protection Enhancement Act (the “Act”) was signed into law, taking effect on August 1, 2024. This new law introduces several important requirements for real estate transactions, including for commercial real estate brokers. The Act mandates written agreements between brokers and sellers in commercial real estate transactions, specifying key elements that must be included in these agreements. Commercial brokerage firms must stay informed about these new requirements and ensure their practices and agreements comply with the updated regulations.

Why You Need to Know About This:

The Act is designed to enhance consumer protection, improve transparency, and reduce disputes in real estate transactions. It outlines specific requirements for brokerage services agreements, specifically when a broker represents a seller in a commercial real estate transaction. The information that must be present in these agreements includes, but is not limited to, the following:

• The terms of the agreement;

• Whether the agency relationship is exclusive or nonexclusive, and the agreement must include an option for the seller to select if the relationship is exclusive or nonexclusive;

• Details on the brokerage firm’s compensation, how it will be calculated, and if the compensation will be shared with another brokerage firm that may represent another party to the transaction.

  
  

The above requirements only apply to commercial transactions when a brokerage firm represents a seller in a transaction. The Act specifically states that a brokerage services agreement shall not be required between a brokerage firm and a buyer in a commercial real estate transaction. However, it is good practice for the buyer broker to obtain a written confirming the amount of its fee.

The Act also provides that in a commercial real estate transaction, a brokerage firm may act as a disclosed dual agent in a transaction but only with the informed consent of both parties, such consent being provided in writing and signed by both buyer and seller.

Understanding these changes is crucial for all parties involved in real estate transactions in New Jersey. Real estate professionals must adapt their practices and documentation to comply with the new law.

What You Should Do Now:

Stay Proactive: Commercial real estate brokers should update their agreements, disclosure forms, and procedures to comply with the new regulations. By staying informed and consulting with legal counsel, you can navigate these changes effectively, avoid potential liabilities, and maintain smooth commercial transactions in New Jersey.