Governor Signs Consumer Notice Relief Law
By Jennifer Shockley
Real estate licensees no longer have to provide Consumer Notice in a sale or lease of “commercial” property when the buyer or seller is a representative of a corporation or partnership, according to new legislation which becomes effective on January 25, 2007.
Gov. Edward G. Rendell signed into law House Bill 2631 (Gannon, R-Delaware) on October 27. Act 125 of 2006 amends the Real Estate Licensing and Registration Act (RELRA) to address delivery of the Consumer Notice in commercial transactions.
“The new law provides relief from having to give the Consumer Notice when we engage in substantive conversations with representatives of corporate entities,” says Paul Garvey, a commercial broker in Philadelphia.
No changes have been made to the requirement that the Consumer Notice be delivered in connection with residential transactions or in commercial transactions where the licensee is working with an individual rather than a corporate entity.
Ellen Renish, legislative committee chair, notes that PAR has worked for more than two years to provide commercial practitioners relief. The legislation originally would have required the Consumer Notice only in transactions involving one to four residential units but concerns were raised that under that approach sole proprietors of small businesses would not receive the Consumer Notice.
The law provides that vacant land is not commercial property if the only thing that can be done with the land is to build fewer than five residential dwelling units. For example, if the land is zoned purely for residential use and the minimum lot size in the area is such that there is only room for fewer than five units, then the Consumer Notice must be provided. If the same size parcel were to have mixed-use zoning, then the Consumer Notice would not be necessary because the land would not be suitable “only” for dwelling units.
“Although we would have liked to exempt all commercial transactions from the Consumer Notice,” Renish said, “we compromised in order to ensure protection for the small business owner.”
Act 125 makes no changes to the file retention provisions under RELRA and the Rules and Regulations of the Real Estate Commission. The Consumer Notice must still be kept for at least six months in situations that do not result in the consummation of a transaction. For transactions that are consummated, all files related to the transaction (including a signed Consumer Notice) must be kept for at least three years. REALTORS® are encouraged to further discuss file retention with their legal counsel or accountant.
See the Legal Update for more details.
When to Use Consumer Notice
1. Is the consumer an individual?
If yes, REALTORS® must always give the Consumer Notice regardless of the property being sought. If no, ask question two.
2. Is the consumer looking for (or selling) property containing one to four residential dwelling units?
If yes, REALTORS® must always give the Consumer Notice regardless of who the consumer is. If no, ask question three.
3. Is the consumer looking for (or selling) vacant land suitable only for constructing one to four residential dwelling units?
If yes, then REALTORS® need to give the Consumer Notice.