HomeMy WebLinkAboutAuthorize the Sale of City-Owned Real Property Located at 15 City of Huntington Beach
File #: 19-1042 MEETING DATE: 10/21/2019
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Oliver Chi, City Manager
PREPARED BY: Kellee Fritzal, Deputy Director of Economic Development
Subiect:
Authorize the Sale of City-Owned Real Property Located at 15311 Pipeline Lane for $2,744,000
Statement of Issue:
Authorize the sale of City-owned real property located at 15311 Pipeline Lane (Pipeline Property) to
Steve Chalabian and Jackie Jernigan in the amount of Two Million Seven Hundred Forty-Four
Thousand Dollars ($2,744,000). The City will also pay applicable escrow and commission fees.
Financial Impact:
The City's total costs to acquire the Pipeline Property was $2,748,176. As currently structured, the
proposed sale of the Pipeline Property will result in approximately $2,656,400 net revenue to the city
(this includes the City paying the estimated escrow costs of $19,000 and commission costs of
$68,600).
The City has a tenant renting space at the Pipeline Property which has earned $12,481 in rent
revenue to the City. Factoring rent in the proposed sale of the Pipeline Property will result in a
cumulative estimated net loss of$79,295.
Proceeds from the sale of the property will be used to reimburse the City for the initial purchase of
the Pipeline Property. Those funds include the Redevelopment Dissolution Assignment (Fund 100),
the Community Development Block Grant Rehabilitation Loans (Fund 215), the Community
Development Block Grant Program Reallocations & Cumulative Project Savings (Fund 239), and
Residual Receipts (Fund 233).
Recommended Action:
A) Authorize the sale of the Pipeline Property to Steve Chalabian and Jackie Jernigan for
$2,744,000; and
B) Authorize and allocate funds for the payment of escrow fees associated with the transaction
for an amount not to exceed $19,000; and
C) Authorize and allocate funds for the payment of associated commission fees in an amount not
City of Huntington Beach Page 1 of 3 Printed on 10/16/2019
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File #: 19-1042 MEETING DATE: 10/21/2019
to exceed 2.5% of the property sale price ($68,600) payable to Lee Associates, to be paid from
the proceeds of the sale or Residual Receipts Fund 233; and
D) Authorize the City Manager to request a 45-day period to allow for current tenants to vacate
the site prior to the close of escrow; and
E) Authorize the City Manager, with the approval as to form by the City Attorney Office, to
execute any and all necessary documents to consummate the real estate transaction.
Alternative Action(s):
Do not approve the Purchase and Sale Agreement and provide staff with additional direction.
Analysis:
On April 18, 2019, the City Council authorized the purchase of real property located at 15311 Pipeline
Lane, for use as a possible homeless navigation center. After coordinating outreach meetings related
to the matter, the City heard significant concerns from the business community regarding use of the
Pipeline Property for the proposed shelter use. Based on the feedback received, on October 7,
2019, the City Council directed that staff look for alternative locations for a shelter locations, and to
proceed with the disposition of the Pipeline Property.
Based on that direction, staff solicited and received a written offer from a commercial real estate
agent representing Steve Chalabian and Jackie Jernigan to purchase the Pipeline Property for
$2,744,000. Initially, the proposed purchase offer from the buyer included a provision that the City
pay a broker fee of 3% as part of the transaction. After further negotiation, the broker agreed to lower
his commission by 0.5%, for a total fee of 2.5%. In addition, the proposed sale of the property would
include a 50%-50% split of all escrow fees.
Given this overall transaction framework, if approved, the sale of the Pipeline Property would result in
a net loss to the City of approximately $79,295, as follows:
■ The City initially acquired the property for $2,744,000, and in addition, paid a total of$4,176 in
escrow fees, for a total cost of $2,748,176.
■ Pursuant to the terms of the proposed property sale now, the $2,744,000 that the City would
receive from the transaction would be reduced by $87,600 to account for related escrow and
commission costs (escrow costs are estimated at $19,000, while commission fee costs are
estimated at $68,600). This would result in the sale providing the City with net proceeds
estimated at $2,656,400.
■ During the time that the City has owned the property, tenants have paid the City a total of
$12,481 in rent.
■ The total net loss to the City based on the above factors would be approximately $79,295.
Environmental Status:
Not applicable
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File #: 19-1042 MEETING DATE: 10/21/2019
Strategic Plan Goal:
Non-Applicable - Administrative Item
Attachment(s):
1. Letter of Understanding to Purchase 15311 Pipeline Lane
City of Huntington Beach Page 3 of 3 Printed on 10/16/2019
poweret+q Legistari6A
p EE p BRAD SCHNEID ER
SVP/PRINCIPAL
ASSOCIATES
License 018876 13
COMMERCIAL REAL ESTATE SERVICES +1 949 724 4708Tel
+1 949 623 6304 Fax
License ID# 01197433 bschneider@lee-associates.com
www.lee-associates.com
August 23, 2019
Kellee Fritzal
Deputy Director
Office of Business Development
2000 Main Street, 5th Floor
Huntington Beach, CA 92648
RE: LETTER OF UNDERSTANDING TO PURCHASE
15311-15323 PIPELINE LANE
HUNTINGTON BEACH,CA 92649
Kellee:
Lee & Associates, Newport Beach has been authorized by Steve Chalabian and Jackie Jernigan and/or
permitted assignee, to submit this proposal outlining the preliminary terms and conditions for the
purchase/sale of the above-mentioned property. Please note the terms presented below are intended
for discussion purposes only, are non-binding, and may be amended or withdrawn at any time.
1. PROPERTY: A multi-tenant industrial building approximately 11,200 square
feet located at 15311-15323 Pipeline Lane, Huntington Beach.
2. PURCHASE PRICE: Two Million Seven Hundred and Forty-Four Thousand Dollars
($2,744,000.00) at close of escrow:
3. DEPOSITS: Buyer to deposit One Hundred Thousand and 00/100 Dollars
($100,000.00) upon opening of escrow. By 5:00 p.m. local time
on the thirtieth (30th) calendar day after opening of escrow, the
deposit will become non-refundable upon buyer waiving all
contingencies on the 301h calendar day. Should Buyer choose not
to proceed prior to 5:00 p.m. local time on the thirtieth (30th)
calendar day, Buyer may cancel escrow at Buyer's sole and
absolute discretion and it shall provide unilateral instructions to
Escrow Holder, where upon escrow shall be canceled and the
deposit and any other funds or instruments deposited into escrow
by Buyers shall be promptly returned to Buyer, and neither party
shall have any further right, liability or obligation with respect to
the purchase and sale of the property of escrow, which shall be
held in an interest-bearing account during the due diligence period.
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Kellee Fritzal August 23, 2019
Page 2
4. OPENING OF ESCROW: Upon mutual acceptance of this letter,Seller shall draft a Purchase
and Sale Agreement/Escrow Instructions incorporating the terms
of this Letter. Escrow shall be deemed open when the following
has been completed:
A. A mutually executed Purchase and Sale Agreement/Escrow
Instructions(the "Purchase Agreement") has been deposited
into escrow.
B. Buyer has placed Initial Deposit into escrow, as defined
above.
5. TITLE/ESCROW: Title and Escrow shall be handled by First American Title (Kim
Cosenza) and Trans-National Escrow (Diana Wood). Seller shall
provide a Standard Owners Policy of Title Insurance (CLTA) for the
property, and Buyer shall have the option to pay for the
incremental upgrade from a standard policy to the extended policy
coverage. All other fees, as customary, shall be split equally
between the Seller and the Buyer.
6. CLOSE OF ESCROW: Escrow shall close fifteen (15)days from removal of contingencies.
7. BUYER'S CONTINGENCIES: Buyer's obligation to perform on the purchase shall be subject to
its satisfaction of the following Contingencies, which are for
Buyer's benefit only(the "Contingencies"). In the event,any of the
following Contingencies are not satisfied by 5:00 p.m. PST on the
thirtieth (30th) day after opening of escrow, Buyer may, at its sole
option,either waive such Contingencies or terminate the Purchase
Agreement. If Buyer elects to terminate the Purchase Agreement
pursuant to this section, the Initial Deposit shall be returned to
Buyer(less one-half(1/2)of title and escrow cancellation charges).
Failure of Buyer to notify Seller or Escrow Holder in writing within
the applicable time limit that any of the following Contingencies
has not been satisfied, shall be deemed to be satisfaction of the
Contingency:
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Kellee Fritzal August 23, 2019
Page 3
A. Inspection of the Property including, but not limited to HVAC
and Roof.
B. Existing Reports and Leases: Within five (5) days after
opening of escrow, Seller will deliver to Buyer soils report,
existing leases, building plans, copies of all permits and
current utility bills,Tenant Estoppel Certificates,disclosure of
any litigation,violations or noncompliance matters affecting
the property, City conditions of approval report and final
parcel map.
C. Preliminary Title: Seller shall provide Buyer, within five (5)
days after opening of escrow, a current preliminary title
report for the project.
D. Phase I Report: Buyer to obtain a Phase I Environmental
Report.
E. Existing Tenant: Prior to Buyer waiving it's Contingencies,
the existing tenant shall vacate the property and remove the
spray booth, repair any roof penetrations due to the spray
booth removal, and leave the Property in broom swept
condition.
All contingencies shall expire thirty (30) days "from the opening of
escrow" and once the existing tenant vacates the property. Seller
shall supply all items requested within five (5) business days from
opening.
8. BROKERAGE: Brad Schneider of Lee & Associates — Newport Beach, Inc.
represents the buyer in this transaction. Lee & Associates —
Newport Beach, Inc. shall be paid a 2.5% commission of the
purchase price by the seller.
9. TERMS OF OFFER: The foregoing may be accepted by Buyer by executing and
returning letter to Seller on or before 5:00 p.m. on Wednesday
October 30,2019.
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Kellee Fritzal September 5,2019
Page 4
THIS LETTER IS INTENDED SOLELY AS A PRELIMINARY EXPRESSION OF GENERAL INTENTIONS AND IS TO
BE USED FOR DISCUSSION PURPOSES ONLY. THE PARTIES AGREE THAT THIS LETTER IS NOT INTENDED
TO CREATE ANY AGREEMENT OR OBLIGATION BY EITHER PARTY TO NEGOTIATE A DEFINITIVE
AGREEMENT AND IMPOSES NO DUTY ON EITHER PARTY TO CONTINUE NEGOTIATIONS. THE PARTIES
INTEND THAT NEITHER SHALL HAVE ANY CONTRACTUAL OBLIGATIONS TO THE OTHER WITH RESPECT
TO THE MATTERS REFERRED HEREIN UNLESS AND UNTIL A DEFINITIVE AGREEMENT HAS BEEN FULLY
EXECUTED AND DELIVERED BY THE PARTIES. PRIOR TO DELIVERY OF A DEFINITIVE EXECUTED
AGREEMENT, AND WITHOUT ANY LIABILITY TO THE OTHER PARTY, EITHER PARTY MAY(1) PROPOSE
DIFFERENT TERMS FROM THOSE SUMMARIZED HEREIN, (2) ENTER INTO NEGOTIATIONS WITH OTHER
PARTIES,AND/OR(3) UNILATERALLY TERMINATE ALL NEGOTIATIONS WITH THE OTHER PARTY HERETO.
We look forward to your response. Please call me with any questions.
Sincerely,
1
Brad Schneider
Senior Vice President/Principal
+1 949 724 4708
AGREED AND ACCEPTED:
BUYER: SELLER:
STEVE CHALASIAN AND JACKIE JERNIGAN,OR NOMINEE
By: By.
Title: NA'A%-tAr Title: e i'T y &,l AN jN& j>
Date: g 123 Date: to
DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIP(As required by the Civil Code)
When you enter into a discussion with a real estate agent regarding a real estate transaction,you should from the outset understand
what type of agency relationship or representation you wish to have with the agent in the transaction.
SELLER'S AGENT("Seller"includes both a vendor and a lessor)
A Seller's agent under a listing agreement with the Seller acts as the agent for the Seller only.A Seller's agent or a subagent of that
agent has the following affirmative obligations:
To the Seller:A Fiduciary duty of utmost care,integrity,honesty and loyalty in dealings with the Seller.
To the Buyer and the Seller:
(a) Diligent exercise of reasonable skill and care in performance of the agent's duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known
to, or within the diligent attention and observation of, the parties.An agent is not obligated to reveal to either party any
confidential information obtained from the other party that does not involve the affirmative duties set forth above.
BUYER'S AGENT("Buyer"includes both a Purchaser and a lessee)
A selling agent can,with a Buyer's consent,agree to act as agent for the Buyer only.In these situations,the agent is not the Seller's
agent,even if by agreement the agent may receive compensation for services rendered,either in full or in part from the Seller.An
agent acting only for a Buyer has the following affirmative obligations:
To the Buyer:A fiduciary duty of utmost care,integrity,honesty and loyalty in dealings with the Buyer.
To the Buyer and the Seller:
(a) Diligent exercise of reasonable skill and care in performance of the agent's duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known
to,or within the diligent attention and observation of,the parties.
An agent is not obligated to reveal to either party any confidential information obtained from the other party that does not involve
the affirmative duties set forth above.
AGENT REPRESENTING BOTH SELLER AND BUYER(including lessor and lessee)
A real estate agent,either acting directly or through one or more associate licensees,can legally be the agent of both the Seller and
the Buyer in a transaction,but only with the knowledge and consent of both the Seller and the Buyer.
In a dual agency situation,the agent has the following affirmative obligations to both the Seller and the Buyer:
(a) A fiduciary duty of utmost care,integrity,honesty and loyalty in the dealings with either the Seller or the Buyer.
(b) Other duties to the Seller and the Buyer as stated above in their respective sections.
In representing both Seller and Buyer,the agent may not,without the express permission ofthe respective party,disclose to the other
party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered.
The above duties of the agent in a real estate transaction do not relieve a Seller or Buyer from the responsibility to protect his or her
own interests.You should carefully read all agreements to assure that they adequately express your understanding of the transaction.
A real estate agent is a person qualified to advise about real estate.If legal or tax advice is desired,consult a competent professional.
Throughout your real property transaction you may receive more than one disclosure form,depending upon the number of agents
assisting in the transaction.The law requires each agent with whom you have more than a causal relationship to present you with this
disclosure form.You should read its contents each time it is presented to you,considering the relationship between you and the real
estate agent in your specific transaction.This disclosure form includes the provisions of Sections 2079.13 to 2079.24,inclusive,of
the Civil Code set forth on page 2(or a separate page).Read it carefully.
Disclosure Provided By: Disclosur eceived By:
Lee&Associates-Newport Beach
BRE Licensed:01197433
Signed By: Steve Chalabian—an -
[Check on m Buy r ❑ Seller ❑ Lessee ❑ Lessor]
Date: 'L � Q
Signed By: Brad Schneider Signed By:
Salesperson B E Licen a M 01887613 [Check one❑ Buyer ❑ Seller ❑ Lessee ❑ Lessor]
Date: 2 1&1 Date:
NOTE:
•When the listing brokerage company also represents Buyer/Lessee:The Listing Agent shall have one Agency Disclosure form signed
by Seller/Lessor and a second Agency Disclosure form signed by Buyer/Lessee.
•When Seller/Lessor and Buyer/Lessee are represented by different brokerage companies:(i)the Listing Agent shall have one Agency
Disclosure form signed by Seller/Lessor and (ii) the Buyer's/Lessee's Agent shall have one Agency Disclosure form signed by
Buyer/Lessee and either that same or a different Agency Disclosure form presented to Seller/Lessor for signature prior to presentation
of the offer.If the same form is used,Seller/L ssor may sign here:
Signed�: Date:
[Check one❑ Seller ❑ Lessor]
148
DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIP
CNIL CODE SECTIONS 2079.13 THROUGH 2O79.24
2079.13 As used in Sections 2079.14 to 2079.24,inclusive,the following terms have the following meanings:
(a)"Agent"means a person acting under provisions of Title 9(commencing with Section 2295)in a real property transaction,and includes a person who is licensed
as a real estate broker under Chapter 3(commencing with Section 10130)of Part 1 of Division 4 of the Business and Professions Code,and under whose license a
listing is executed or an offer to purchase is obtained.(b)"Associate licensee"means a person who is licensed as a real estate broker or salesperson under Chapter
3(commencing with Section 10130)of Part 1 of Division 4 of the Business and Professions Code and who is either licensed under a broker or has entered into a written
contract with a broker to act as the brokers agent in connection with acts requiring a real estate license and to function under the broker's supervision in the capacity
of an associate licensee.The agent in the real property transaction bears responsibility for his or her associate licensees who perform as agents of the agent.When
an associate licensee owes a duty to any principal,or to any buyer or seller who is not a principal,in a real property transaction,that duty is equivalent to the duty owed
to that party by the broker for whom the associate licensee functions.(c)"Buyer`means a transferee in a real property transaction,and includes a person who executes
an offer to purchase real property from a seller through an agent,or who seeks the services of an agent in more than a casual,transitory,or preliminary manner,with
the object of entering into a real property transaction."Buyer"includes vendee or lessee.(d)"Commercial real property"means all real property in the state,except
single-family residential real property,dwelling units made subject to Chapter 2(commencing with Section 1940)of Title 5,mobile homes,as defined in Section 798.3,
or recreational vehicles,as defined in Section 799.29,(e)'Dual agent"means an agent acting,either directly or through an associate licensee,as agent for both the
seller and the buyer in a real property transaction.(f)"Listing agreement"means a contract between an owner of real property and an agent,by which the agent has
been authorized to sell the real property or to find or obtain a buyer.(g)"Listing agent"means a person who has obtained a listing of real property to act as an agent
for compensation.(h)"Listing price"is the amount expressed in dollars specified in the listing for which the seller is willing to sell the real property through the listing
agent(i)"Offering price"is the amount expressed in dollars specified in an offer to purchase for which the buyer is willing to buy the real property.0)"Offer to purchase"
means a written contract executed by a buyer acting through a selling agent that becomes the contract for the sale of the real property upon acceptance by the seller.
(k)"Real property"means any estate specified by subdivision(1)or(2)of Section 761 in property that constitutes or is improved with one to four dwelling units,any
commercial real property,any leasehold in these types of property exceeding one year's duration,and mobile homes,when offered for sale or sold through an agent
pursuant to the authority contained in Section 10131.6 of the Business and Professions Code.(1)"Real property transaction"means a transaction for the sale of real
property in which an agent is employed by one or more of the principals to act in that transaction,and includes a listing or an offer to purchase.(m)'Sell,'"sale,"or
"sold"refers to a transaction for the transfer of real property from the seller to the buyer,and includes exchanges of real property between the seller and buyer,
transactions for the creation of a real property sales contract within the meaning of Section 2985,and transactions for the creation of a leasehold exceeding one year's
duration.In)"Seller'means the transferor in a real property transaction,and includes an owner who lists real property with an agent,whether or not a transfer results,
or who receives an offer to purchase real property of which he or she is the owner from an agent on behalf of another."Seller'includes both a vendor and a lessor.(o)
"Selling agent"means a listing agent who acts alone,or an agent who acts in cooperation with a listing agent,and who sells or finds and obtains a buyer for the real
property,or an agent who locates property for a buyer or who finds a buyer for a property for which no listing exists and presents an offer to purchase to the seller.(p)
"Subagent"means a person to whom an agent delegates agency powers as provided in Article 5(commencing with Section 2349)of Chapter 1 of Title 9.However,
"subagent"does not include an associate licensee who is acting under the supervision of an agent in a real property transaction.
2079.14 Listing agents and selling agents shall provide the seller and buyer in a real property transaction with a copy of the disclosure form specified in Section
2079.16,and,except as provided in subdivision(c),shall obtain a signed acknowledgement of receipt from that seller or buyer,except as provided in this section or
Section 2079,15,as follows:(a)The listing agent,if any,shall provide the disclosure form to the seller prior to entering into the listing agreement,(b)The selling agent
shall provide the disclosure form to the seller as soon as practicable prior to presenting the seller with an offer to purchase,unless the selling agent previously provided
the seller with a copy of the disclosure form pursuant to subdivision(a).(c)Where the selling agent does not deal on a face-to-face basis with the seller,the disclosure
form prepared by the selling agent may be furnished to the seller(and acknowledgement of receipt obtained for the selling agent from the seller)by the listing agent,
or the selling agent may deliver the disclosure form by certified mail addressed to the seller at his or her last known address,in which case no signed acknowledgement
of receipt is required.(d)The selling agent shall provide the disclosure form to the buyer as soon as practicable prior to execution of the,buyer's offer to purchase,
except that if the offer to purchase is not prepared by the selling agent,the selling agent shall present the disclosure form to the buyer not later than the next business
day after the selling agent receives the offer to purchase from the buyer.
2079.15 In any circumstance in which the seller or buyer refuses to sign an acknowledgement of receipt pursuant to Section 2079.14,the agent,or an associate
licensee acting for an agent,shall set forth,sign,and date a written declaration of the facts of the refusal.
2079.16 Reproduced on the reverse side of this form.
2079.17 (a)As soon as practicable,the selling agent shall disclose to the buyer and seller whether the selling agent is acting in the real property transaction
exclusively as the buyer's agent,exclusively as the seller's agent,or as a dual agent representing both the buyer and the seller.This relationship shall be confirmed in
the contract to purchase and sell real property or in a separate writing executed or acknowledged by the seller,the buyer,and the selling agent prior to or coincident
with execution of that contract by the buyer and the seller,respectively.(b)As soon as practicable,the listing agent shall disclose to the seller whether the listing agent
is acting in the real property transaction exclusively as the seller's agent,or as a dual agent representing both the buyer and seller.This relationship shall be confirmed
in the contract to purchase and sell real property or in a separate writing executed or acknowledged by the seller and the listing agent prior to or coincident with the
execution of that contract by the seller.(c)The confirmation required by subdivisions(a)and(b)shall be in the following form.
(DO NOT COMPLETE SAMPLE ONLYI is the Agent of(check one):❑the seller exclusively;or❑the buyer exclusively
Name Listing Agent(Brokerage Firm)
(DO NOT COMPLETE SAMPLE ONLY) is the Agent of(check one):❑the seller exclusively;or O the buyer exclusively;or❑both the seller and buyer
Name Listing Agent(1f not same a5 the listing Agent)
(d)The disclosures and confirmation required by this section shall be in addition to the disclosure required by Section 2079.14.
2079.18 No selling agent in a real property transaction may act as an agent for the buyer only,when the selling agent is also acting as the listing agent in the
transaction.
2079.19 The payment of compensation or the obligation to pay compensation to an agent by the seller or buyer is not necessarily determinative of a particular agency
relationship between an agent and the seller or buyer.A listing agent and a selling agent may agree to share any compensation or commission paid,or any right to
any compensation or commission for which an obligation arises as the result of a real estate transaction,and the terms of any such agreement shall not necessarily be
determinative of a particular relationship.
2079.20 Nothing in this article prevents an agent from selecting,as a condition of the agent's employment,a specific form of agency relationship not specifically
prohibited by this article if the requirements of Section 2079.14 and Section 2079.17 are complied with.
2079.21 A dual agent shall not disclose to the buyer that the seller is willing to sell the property at a price less than the listing price,without the express written
consent of the seller.A dual agent shall not disclose to the seller that the buyer is willing to pay a price greater than the offering price,without the express written
consent of the buyer.This section does not alter in any way the duty or responsibility of a dual agent to any principal with
respect to confidential information other than price.
2079.22 Nothing in this article precludes a listing agent from also being a selling agent,and the combination of these functions in one agent does not,of itself,make
that agent a dual agent
2079.23 A contract between the principal and agent may be modified or altered to change the agency relationship at any time before the performance of the act
which is the object of the agency with the written consent of the parties to the agency relationship.
2079.24 Nothing in this article shall be construed to either diminish the duty of disclosure owed buyers and sellers by agents and their associate licensees,subagents,
and employees or to relieve agents and their associate licensees,subagents,and employees from liability for their conduct in connection with acts governed by this
article or for any breach of a fiduciary duty or a duty of disclosure.
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