New Brokerage “Coming Soon”

By Stephen L. Fussell, Senior Consumer Protection Officer

The Commission’s Regulatory Affairs Division (formerly Legal Division) has experienced increased call volume recently regarding the use of “Coming Soon” sign riders attached to “For Sale” signs. The two primary questions asked by callers are, “Does ‘Coming Soon’ mean that the property is currently listed, but not yet available for showings?” and “Does it mean that the property is not yet listed, but will be listed soon?”

A broker is required by Commission rule to enter into a written brokerage agreement with a seller-client before marketing the seller-client’s property. Thus, a broker is permitted to place a “For Sale” sign (with or without sign riders) on a property only if a written brokerage agreement is in effect that authorizes the placement of a sign on the seller-client’s property.

If the seller-client wants the broker to begin marketing the property immediately to generate interest by prospective buyers, but the property is not yet ready to be shown, then this information should be specified in the brokerage agreement and in any advertising media, including an MLS system. If the seller is unwilling to enter into a written brokerage agreement, then the broker is prohibited from marketing the property in any manner including the placement of a “Coming Soon” sign.

There is another issue arising from the use of “Coming Soon” sign riders.  Example: a broker places a “For Sale” sign with a “Coming Soon” sign rider on a property and then three weeks later, the broker replaces the “Coming Soon” rider with a “Sold In 2 Days” sign rider.  The use of the “Sold in 2 Days” rider suggests that the property had only been listed for two days.  If this is true, then the broker may have violated the Commission rule by placing the “For Sale” sign on the property before entering into a written brokerage agreement with the seller.

If the broker properly listed the property before putting the “For Sale” sign on the property, then it was a misrepresentation for the broker to put a “Sold in 2 Days” rider on the sign, because the property had been listed for approximately three weeks before a contract was signed. In this scenario, the broker could use a sign rider indicating “Sold In 3 Weeks” or “Sold 2 Days After Available For Showings” (if this is a true statement).

Remember, before you place a “For Sale” or “For Rent” sign on any property, you must first enter into a written brokerage agreement with the property owner. As long as the agreement contains a definite expiration date and the anti-discrimination language specified in the Commission rule, the remaining terms of the agreement are negotiable by the broker and the seller-client. Moreover, as soon as a brokerage agreement expires or is terminated, you must cease all marketing efforts and remove all signs, lock boxes and other marketing materials.

When advertising with signs, newspapers, magazines or digital media (i.e. the MLS system, Web sites, etc.), brokers must exercise care to ensure that the advertising contains accurate information.  While the Commission does not object to the use of sign riders including the “Coming Soon” sign riders, brokers must be careful to use them in a manner which is not misleading and which complies with the Commission’s rules.  Brokers are not eligible to receive compensation from transactions that arise from the improperly established agency relationships.  Don’t put your license or your livelihood in jeopardy by failing to comply with the rules.

This article came from the May 2013-Vol44-1 edition of the bulletin.

Handling Accounting of Trust Money Now Explained in Three New Rules

To facilitate understanding and application of Commission rule A. 0107, Handling and Accounting of Funds, the Commission has divided it into three new rules effective April 1, 2013 as follows:

Rule A. 0107 has been repealed effective April 1, 2013.

Division of the rule into three shorter rules separates the two essential functions of trust account management: (1) the handling of funds being held in trust for others and (2) the accounting of funds from receipt to distribution. Addressed separately are the specialized requirements arising when trust money belongs to property owners’ associations.

The processes and procedures for the handling of trust money (now A. 0116) have not been revised.

The methods of accounting for trust money (now A. 0117) have been expanded to include guidance and definitions about the use of personal funds, requirements concerning monthly bank reconciliations, and extension of the time for a broker to respond to a client’s request for records from five to 10 days.

Rules relating to trust money belonging to property owners’ associations (now A. 0118) include a new provision limiting the responsibilities of broker/property owners who receive trust money belonging to an association in their capacity as an association officer for which they receive no compensation.

The fiduciary responsibilities of brokers in the handling of funds belonging to others are defined in Rule A. 0116. In general:

□ All monies received by a broker must be deposited within three banking days in a trust or escrow account (with certain exceptions including receipt by a provisional broker or non-resident commercial broker, funds in a form other than currency, and custody of checks or other negotiable instruments payable to a seller for an option or due diligence fee).

□ If the account bears interest, written authorization is required from all parties having an interest in the money.

□ In the event of a dispute over the disposition of any deposit (excepting residential tenant security deposits held by a broker), a broker must retain the deposit in a trust or escrow account until receiving written release from the disputing parties or a court order or transfer the funds to the Clerk of Superior Court.

□ Transfers of earnest money deposits for closings are prohibited more than 10 days prior to the anticipated settlement date.

□ Disbursements from a trust or escrow account must not exceed the account’s balance.

□ A broker must comply with the Real Estate License Law and Commission rules in managing trust money and may not convert trust money for personal use, apply trust money to purposes other than that for which intended, or assist others in their conversion or misapplication of the funds.

Of the three rules, the one describing accounting requirements is the longest and most complex (A. 0117). It lists the records a broker must create and maintain when managing trust money and describes the specific information those records must contain.

In general, the rule prescribes the following:

□ Brokers must maintain records showing ownership of trust money from deposit into a trust or escrow account through final disbursement. These records must be sufficient to verify the records’ accuracy and proper use of the account.

□ All records must be designated a “Trust Account” or “Escrow Account”.

□ Trust account records consist of:

• Bank statements

• Memoranda (e.g., checks, journals, ledgers, and other evidence) of payments from a trust or escrow account.

• Deposit tickets for sales and rental transactions.

• Separate ledgers for each transaction, property or property owner, and company funds held in a trust account.

• General journal, check register or check stubs with entries in chronological order.

• Payment records for each property or interest.

• Copies of checks (front and back), receipts for cash payments, contracts and closing statements.

• Copies of leases, security deposit checks, property management agreements and statements and receipts for cash payments.

• Copies of covenants, bylaws, minutes, management agreements and periodic statements relating to the management of property owner associations.

• Copies of invoices, bills and contracts paid from a trust account.

□ Records are to be maintained so as to create a clear audit trail.

□ Records are to include worksheets showing reconciliations of trust or escrow accounts monthly.

□ Specific records acquired when a broker acts as agent for the landlord of a residential property used for vacation rentals must be maintained.

□ A broker must respond to a client’s request for copies of any records within 10 days (changed from five days under the old rule, A. 0107) following receipt of the request.

□ All trust or escrow account records must be made available for inspection by the Commission.

The Commission provides education in accounting procedures when handling trust money through its Basic Trust Account Procecures course which is given alone or in conjunction with the Broker-in-Charge Course.

Further information is provided from a three-part tutorial in handling rental deposits and disbursements on the Law/Rules page of the Commission Web site and in the Trust Account Guidelines section of the Commission booklet, North Carolina Real Estate License Law and Commission Rules. The Guidelines are also available on the Law/Rules page of the Web site.

The third rule, A. 0118, requires that the funds of a property owners’ association (POA) are deposited into and maintained in a trust or escrow account dedicated exclusively for trust money belonging to a single POA and may not be commingled with funds belonging to other associations or persons or parties. An exemption is granted for brokers receiving trust money from POA’s when they are officers of the associations in which they are property owners.

This article came from the May 2013-Vol44-1 edition of the bulletin.

Educators Terry Farr, Julia Iden Receive 2013 Conference Awards

Real estate instructors, school officials and publisher representatives attended the 2013 Real Estate Educators Conference in Raleigh March 4 and 5 at the Hilton North Raleigh/Midtown. The Real Estate Commission-sponsored meeting drew 198 participants from across the state,

Carmel Streater, DREI and specialist in real estate research and education from Baton Rouge opened the conference with the keynote address, A Common Sense Approach to Teaching Adults. Streater emphasized the importance of goal setting, intense preparation, and ruthless self-evaluation to improving instructor performance.

Following the keynote presentation, Larry Outlaw, Director of Education and Licensing, discussed Commission activities and initiatives during the past year.

During the first day’s luncheon, the North Carolina Real Estate Educators Association (NCREEA) held its spring meeting, officiated by President Kim Stotesbury.

Commission Chairperson Benjamin Cone, III, presented the Commission’s Billie J. Mercer Excellence in Education Award  to Terry E. Farr. This award is presented annually in memory of former Commission member and chairperson, Billie J. Mercer, who was especially dedicated to the cause of real estate education. The names of all award winners are engraved on the Mercer Award cup on display in the Commission’s lobby.

Commission members Laura Bromhal, Cindy Chandler, Everett “Vic” Knight, and S. R. “Buddy” Rudd were in attendance for the award presentation.

NCREEA Immediate Past President Dana Rhodes  presented  the association’s “Program of the Year” award to Julia Iden for her continuing education elective course, The Art of the Short Sale, and its “Educator of the Year” award to Terry Farr.

Commission Education and Examination Officer Anita Burt opened the afternoon session with a discussion of Perspectives on Performance, which examined  license examination performance statistics and included a visual demonstration of the impact of separate scoring resulting from the two-part real estate license examination.

A panel of real estate educators composed of Oscar Agurs, Terry Farr, Corean Hamlin and Terry Wilson shared teaching tips for successfully mastering some of the license examination’s more difficult topics.

The first day’s program concluded with a presentation by Commission Education and Licensing Officer Bruce Moyer on the various smartphone applications currently used by real estate practitioners.

On day two of the conference, Continuing Education Officer Pamela Rorie gave a brief Continuing Education Update, discussing new procedures for course reporting and other information for sponsors and instructors. Legal Education Officer Patricia Moylan summarized revised Commission Rules and proposed topics for the 2013-14 Update  and BICAR courses.

Phyllis Atkins-Kinard, Account Executive with Strategic Connections, a Certified Education Consultant for SMART Technologies, demonstrated the use and capabilities of the SMART Board™ interactive whiteboard.

The conference concluded with the  Legal Issues, Hot Topics, and Open Forum featuring Commission Regulatory Affairs Director Janet Thoren and Assistant Director Charlene Moody, who discussed various real estate topics and answered conference participants’ questions.

The Commission thanks North Carolina’s real estate educators for their continued interest and support, and congratulates Terry E. Farr and Julia Iden for their achievements.

This article came from the May 2013-Vol44-1 edition of the bulletin.

Rule Changes Effective April 1

Changes to Commission rules relating to trust account management, broker price opinions, the real estate license renewal fee, the license activation form, and fees relating to timeshares became effective April 1.

Two additional rules changes relating to brokers-in-charge and the Real Estate Education and Recovery Fund are effective May 1.

Trust Accounts – The former single rule, A. 0107, was repealed and rewritten into three new rules (See this issue of the Real Estate Bulletin, page 6.)

Broker Price Opinions – These rules replace the temporary rules implementing License Law changes and are effective October 1, 2012. (See the October 2012 Real Estate Bulletin.)

Real estate license fee – The fee has been raised from $40 to $45. A decline in Commission revenues resulting from the decline in licensees necessitated the increase. The Commission cut operating expenses and increased efficiencies to maintain current operations without a fee increase for more than 10 years.

License activation form – Electronic filing of notifications of supervision and requests for license activation requiring only the broker or broker-in-charge’s signature are now permitted. The rule was also amended to add satisfaction of postlicensing education deficiency as one of the requirements for license activation.

Timeshare fees – The rules permit changes in various registration and renewal fees.

Effective May 1, 2013

Broker-in-Charge (BIC) – Major revisions eliminate the 10-day period for the filing of a BIC declaration; clarify that the Commission designates a BIC after eligibility is determined; clarify the delivery address requirements for a broker-in-charge of multiple firms at the same office; eliminate the requirement that a BIC provide statements to the Commission about work performed by a broker under the BIC’s supervision; and require a former BIC to take the 12-hour Broker-in-Charge Course when BIC status is terminated.

Real Estate Education and Recovery Fund – Updates references to “Real Estate Recovery Fund” to reflect its current statutory name and establishes factors to be considered by the Commission when consolidating cases.

This article came from the May 2013-Vol44-1 edition of the bulletin.

Richard Sullivan Appointed To Real Estate Commission

Richard L. Sullivan of Raleigh has been appointed by then Governor Beverly E. Perdue to the North Carolina Real Estate Commission, it was announced by Miriam J. Baer, Executive Director.

Sullivan succeeds Jerry A. Mannen, Jr., of Wilmington for the three-year term ending July 31, 2015.

Sullivan is a founding partner of Capitol Counsel LLC, which provides public affairs, government relations and business development services to a broad range of Fortune 500 companies and leading trade associations. Capitol Counsel has offices in Raleigh and Washington, DC.

Sullivan serves or has served on the Boards of Advisors or Boards of Directors of Union Dime Investment Services of Washington, DC, Boland  Advisory Services of Washington, DC, and Bethesda, Maryland, Sense Technologies of Charlotte, American Traffic Solutions of Tempe, Arizona, Box Canyon Capital of Raleigh and Titan Capital of New York.

Sullivan was a member of the North Carolina Economic Development Board from 2009 to 2013, Finance Chair and Treasurer of the Democratic Governors Association from 2011 to 2013, Co-Chair of former Governor Perdue’s Transition team, and a member of President Bill Clinton’s China PNTR White House Working Advisory Group.

He received a J.D. Degree from Georgetown University Law Center and a B.A. from the University of South Carolina.

This article came from the May 2013-Vol44-1 edition of the bulletin.

Update Course, Bicar Topics

To assist licensees in helping their clients and customers in sales transactions understand when the parties “have a deal,” i.e., are under contract, one of the primary topics of next year’s Update Course will be a review of offer and acceptance, the effect of oral and written negotiations, the scope of a broker’s authority to bind the principal, the purpose and distinction between the due diligence fee and earnest money deposit, and a broker’s obligations in handling those monies under Commission rules.

Another hot topic, based on inquiries, has been a broker’s duties to his seller/lessor when seeking the owner’s permission to publish property information in the MLS and in selecting other aggregators to whom the information may be released. These duties, as well as a broker’s responsibility for the accuracy of the information once it is disseminated to various outlets, will be reviewed.

New Commission rules, most of which became effective April 1, 2013, will be summarized, as well as important new or revised laws that impact real estate brokerage.  Additional topics that will be briefly addressed include: why surveys remain important to buyers and the interaction between surveys and owner’s title insurance coverage; an agent’s duty of confidentiality to a principal and breaches thereof; and possibly a review of selected disciplinary cases and the process.

2013-2014 BICAR Course

Risk management will be one topic in next year’s BICAR course with the primary focus being on advertising pitfalls and fair housing matters. The materials will provide examples using actual broker advertisements and will include fact summaries of current fair housing actions being prosecuted and recent court decisions.

Changes in the Broker-in-Charge rule, both those effective Spring, 2013, as well as anticipated revisions, will be discussed, as well as other selected BIC duties and disciplinary cases involving brokers-in-charge.

This article came from the May 2013-Vol44-1 edition of the bulletin.

Annual Renewal Period Begins May 15; Take Time Now to Renew Your License

The familiar blue and white postcard reminding you to renew your real estate license may already have reached your mailbox, or your reminder email may have arrived in your inbox. Either way, the reminder is your “cue” to visit the Commission’s Web site, www.ncrec.gov, login, and renew your license.

We encourage you to renew early to avoid any oversight which will cause a change in your status on June 30 to expired. The license renewal fee is $45, a $5 increase, and the first increase in more than 10 years.

There are two ways to renew your license: 1) go to the Commission’s Web site on or after May 15 and log into your record using your personal identification number (PIN). Your PIN has been set as the last four digits of your Social Security Number unless you have changed it; or 2) return the blue and white postcard with your check so that it reaches the Commission office prior to the June 30 deadline. Please reference your license number on your check.

Because the June 30 deadline falls on Sunday this year, if mailing your renewal, please allow enough time so that it is received in plenty of time.

The quickest, most efficient way to renew is online using your Visa, MasterCard or Discover card.  You will receive an immediate confirmation which you may print out for your records.

The Commission staff updates all licensee records on July 1. If your renewal was not received by the deadline, your record will be updated to reflect your status as expired. You are reminded that no licensee may perform any act or service which requires a real estate license (including the listing, selling, leasing or showing of real estate) while a license is on an expired status.

If you fail to renew by the June 30 deadline, you may reinstate your license by paying a $55 reinstatement fee between July 1 and December 31. Failure to reinstate by December 31 will result in your having to file a new application and fee and obtain a background report.  In addition, you may be required to take additional education or pass the license examination.

You may renew prior to completing your continuing education requirements. However, to maintain active status, you must complete eight hours of continuing education consisting of the mandatory Update and one elective by June 10 of each license period.

If you are a broker-in-charge or broker-in-charge eligible, in addition to the Update, you must take the Broker-in-Charge Annual Review course (BICAR) annually. Otherwise, you will lose your BIC eligibility. Brokers-in-charge are also responsible for ensuring that licensees under their supervision have renewed their licenses and completed the proper continuing education.

Changes in Rule A. 0110 require that a broker-in-charge who loses designation or eligibility must 1) first have a license on active status; 2) meet the experience requirements for designation; and, 3) take the 12-hour Broker-in-Charge Course before re-designation. (This course cannot be used as an elective to meet the requirement for active status.)

This article came from the May 2013-Vol44-1 edition of the bulletin.

Disciplinary Actions – February 2013-V43-3

TONY J. ALEXANDER (Charlotte) – By Consent, the Commission revoked the broker license of Mr. Alexander effective February 1, 2013. The Commission found that Mr. Alexander, as qualifying broker and broker-in-charge of a real estate brokerage firm, failed to maintain the firm’s trust account records in compliance with Commission rules, failed to perform reconciliations and had a negative bank balance in the firm’s trust account. The Commission also found that Mr. Alexander failed to remit owner proceeds and tenant security deposits, sent multiple NSF checks to parties, and allowed unlicensed individuals to perform property management without supervision.

DENNIS L. BEAN (Camden) – The Commission accepted the voluntary surrender of the broker license of Mr. Bean for a period of one year effective January 10, 2013. The Commission dismissed without prejudice allegations that Mr. Bean violated provisions of the Real Estate License Law and Commission rules. Mr. Bean neither admitted nor denied misconduct.

JEFFREY M. BUCHANAN (Charlotte) – By Consent, the Commission revoked the broker license of Mr. Buchanan effective January 10, 2013. The Commission found that Mr. Buchanan, acting as qualifying broker and broker-in-charge of a real estate brokerage firm, engaged in property management and failed to make timely accountings or forward rental proceeds to their landlord client. The Commission also found that Mr. Buchanan, after the landlord client terminated his property management agreement, failed to return tenant security deposits or forward the funds to the new property management company, issued rental proceeds checks to clients from an account not designated as trust or escrow, and refused to produce trust account and transaction records upon the request of a Commission representative.

LILLIE F. BYRD (Clinton) – By Consent, the Commission suspended the broker license of Ms. Byrd for a period of six months effective December 1, 2012. One month of the suspension was active, ending December 31, 2012. The Commission found that Ms. Byrd owns a residential property which she advertised for rent; that a potential tenant, an African-American woman, inquired about renting the property for a short time and was informed that the property was already rented and unavailable; that immediately thereafter an individual of Caucasian race inquired about the status of the property, and Ms. Byrd advised the individual that it was available for rent and arranged to show the individual the home. The Commission also found that the African-American woman believed that she was discriminated against because of race, that Ms. Byrd contended that her decision to deny the rental to the African-American woman was due to the undesirable, short term of the requested tenancy, and that Ms. Byrd and the African-American woman reached a conciliatory agreement through the North Carolina Human Relations Commission, without either party admitting any wrongdoing.

CAROLINA COUNTRY REALTY, INC. (Fairview) – By Consent, the Commission revoked the firm license of Carolina Country effective November 14, 2012. The Commission found that Carolina Country’s trust accounts were in substantial noncompliance with Commission rules and that client funds from the trust accounts were misappropriated for the personal benefit of a principal of the firm.

ROBIN M. CRABEL (Littleton) – By Consent, the Commission revoked the broker license of Ms. Crabel effective January 1, 2013. The Commission found that Ms. Crabel, acting as broker-in-charge of a real estate brokerage firm, used trust monies for personal expenses and collected insurance premiums from vacation tenants without actually purchasing the insurance as represented.

CROWN REALTY GROUP, LLC (Charlotte) – By Consent, the Commission revoked the firm license of Crown Realty Group effective January 10, 2013. The Commission found that Crown Realty Group, a real estate brokerage firm engaged in property management, failed to make timely accountings or forward rental proceeds to its landlord client. The Commission also found that Crown Realty Group, after the landlord client terminated their property management agreement, failed to return tenant security deposits or forward the funds to the new property management company, issued rental proceeds checks to clients from an account not designated as trust or escrow, and refused to produce trust account and transaction records upon the request of a Commission representative.

GREENPOINT REALTY, LLC (Charlotte) – By Consent, the Commission revoked the firm license of Greenpoint Realty effective February 1, 2013. The Commission found that Greenpoint Realty failed to maintain the firm’s trust account records in compliance with Commission rules, failed to perform reconciliation and had a negative bank balance in the firm’s trust account. The Commission also found that Greenpoint Realty failed to remit owner proceeds and tenant security deposits, sent multiple NSF checks to parties, and allowed unlicensed individuals to perform property management without supervision.

SANDI MICHELLE KEHOE (Jacksonville) – By Consent, the Commission revoked the broker license of Ms. Kehoe effective December 12, 2012. The Commission found that Ms. Kehoe, while representing various clients as a listing agent, forged the signatures on at least two listing agreement extensions without the knowledge or consent of her seller-clients and continued to market the properties following the actual expiration of the listings. The Commission noted that no monetary damage was caused by Ms. Kehoe’s conduct.

JO ANNE RILEY LOMBARDO (Greensboro) – By Consent, the Commission suspended the broker license of Ms. Lombardo for a period of nine months effective December 1, 2012. Three months of the suspension were active with the remainder stayed for a probationary period of six months. The Commission found that Ms. Lombardo, acting as listing agent for the sale of a condominium unit, failed to discover and disclose that the North Carolina Department of Transportation planned to build a freeway within several feet of the property with no plans for a buffer wall and that the property would lose trees and overflow parking to the freeway project. The Commission also found that the buyer, after closing, learned that the property would soon be affected by the construction of the six-lane “Urban Loop” Freeway.

DONALD MORROW (Kure Beach) – By Consent, the Commission suspended the broker license of Mr. Morrow for a period of one year effective August 1, 2012. The Commission found that Mr. Morrow engaged in real estate investment with an unlicensed individual through entering into contracts for the sale of property with no earnest money deposits, then assigning the contracts to purchasers for a fee. The Commission also found that Mr. Morrow identified his unlicensed LLC as listing agent on a contract even though he had never entered into a listing agreement with the seller and listed himself as selling agent on another form although he had no buyer agency agreement with the buyer. The Commission finally found Mr. Morrow is not a licensed attorney but prepared legal filings for sellers including letters of administration and a surety bond.

ON LAKE GASTON ASSOCIATES, INC. (Littleton) – By Consent, the Commission revoked the firm license of On Lake Gaston Associates effective February 1, 2013. The Commission found that the broker-in-charge of On Lake Gaston Associates used trust monies for personal expenses and collected insurance premiums from vacation tenants without actually purchasing the insurance as represented.

JOHN DUNCAN POWERS, JR. (Fayetteville) – The Commission accepted the voluntary surrender of the broker license of Mr. Powers for a period of two years  effective December 13, 2012.  The Commission dismissed without prejudice allegations that Mr. Powers violated provisions of the Real Estate License Law and Commission rules. Mr. Powers neither admitted nor denied misconduct.

DONNA BEAVER PRICE (Fayetteville) – By Consent, the Commission suspended the broker license of Ms. Price for a period of two months effective January 1, 2013. The Commission found that Ms. Price maintained trust accounts she assumed after purchasing another firm and that a Commission audit of the trust accounts revealed a shortage in the rental account, an overage in the security deposit account, and a failure by Ms. Price to reconcile monthly the bank statements to the ledger or journal of the rental account. The Commission also found that Ms. Price was managing rental properties without written agreements with the owners and was managing a homeowners’ association without a written agreement, instead using the authority to manage the properties and the homeowners’ association granted to the former firm that she acquired.

ALFRED SAMUELS (Huntersville) – By Consent, the Commission permanently revoked the broker license of Mr. Samuels effective December 12, 2012. The Commission found that Mr. Samuels, who was also licensed as a mortgage broker by the North Carolina Commissioner of Banks, participated in a series of transactions between 2005 and 2008 in which he acted as a promoter and mortgage broker in a scheme with a builder to sell houses by offering hidden kickbacks to buyers and promoters who recruited buyers. The Commission further found that Mr. Samuels, in February 2012, pled guilty to a Bill of Information in the United States District Court to conspiracy to commit mortgage fraud and money laundering conspiracy.

CAROL A. SCHAUBERT (Hickory) – By Consent, the Commission suspended the broker license of Ms. Schaubert for a period of three years effective October 1, 2012. One month of the suspension was active with the remainder stayed for a probationary period ending October 31, 2017. The Commission found that Ms. Schaubert, when visiting a client at the client’s home, removed medication prescribed for the client by the client’s doctor and consumed some of the medication. The Commission also found that Ms. Schaubert was charged in district court with and pled guilty to one count of misdemeanor larceny; that Ms. Schaubert was ordered to complete 16 hours of drug and alcohol education courses of the NC Substance Abuse Services; and that Ms. Schaubert received a deferred prosecution with the criminal charges to be dismissed with the completion of the required terms.

SUSAN D. SEAY (Kitty Hawk) – The Commission accepted the voluntary surrender of the broker license of Ms. Seay for a period of two years effective November 1, 2012. The Commission dismissed without prejudice allegations that Ms. Seay violated provisions of the Real Estate License Law and Commission rules. Ms. Seay neither admitted nor denied misconduct.

STEPHEN M. SERVAIS (Fairview) – By Consent, the Commission revoked the broker license of Mr. Servais effective November 14, 2012. The Commission found that Mr. Servais’s trust accounts were in substantial noncompliance with Commission rules and that Mr. Servais paid various personal expenses and otherwise misappropriated trust funds for his personal benefit.

SHANTA SETTY (Clemmons) – By Consent, the Commission suspended the broker license of Ms. Setty for a period of three months effective January 1, 2013. The Commission then stayed the suspension upon certain conditions. The Commission found that Ms. Setty listed and sold lots in a subdivision and failed to provide purchasers with the subdivision street disclosure statement required by law, which would have disclosed that the streets had not been accepted to be maintained by the North Carolina Department of Transportation (NCDOT). The Commission noted that a Home Owners Association of the subdivision now has responsibility for the subdivision roads, but has applied to the NCDOT to dedicate the roads to the state and have the state maintain said roads.

ARTHUR SKILLMAN, III (Fayetteville) – The Commission suspended the broker license of Mr. Skillman for 24 months effective December 1, 2011. The Commission found that Mr. Skillman told a prospective buyer that Mr. Skillman would use the buyer’s money to acquire real property for the buyer, but did not use the money to acquire real property; that Mr. Skillman failed to account to the buyer for the money; that Mr. Skillman failed to account to the buyer in two real estate transactions for the money received from the buyer to purchase real property and failed to communicate with the buyer about the progress and outcomes of the transactions Mr. Skillman undertook in the buyer’s behalf; and that Mr. Skillman failed to make his trust account records available for inspection by the Commission and failed to respond to Commission correspondence.

SOUTHEASTERN PROPERTY MANGEMENT, INC. (Reidsville) – By Consent, the Commission reprimanded Southeastern Property Management effective September 1, 2012. The Commission found that the Southeastern Property Management engaged in deficit spending in the amount of $14,600 out of liabilities of $35,000. The Commission also found that the firm’d checks failed to consistently identify the purpose of the disbursements or reference to property/owner ledgers and in their journals. The Commission noted that Southeastern Property Management has refunded the accounts and has instituted procedures to bar deficit spending.

BENJAMIN JOHN VILOSKI (Oak Island) – The Commission permanently revoked the broker license of Mr. Viloski effective December 13, 2012. The Commission found that Mr. Viloski, who was also a licensed North Carolina attorney, was convicted in a U.S. District Court of New York of nine out of 20 criminal charges and was later sentenced and ordered committed to federal prison to serve 60 months of imprisonment per guilty count, to be served concurrently. The Commission also found that the North Carolina State Bar entered an Order of Disbarment against Mr. Viloski after Mr. Viloski admitted in writing to allegations made in a Civil Complaint against him by the North Carolina State Bar.

JACQUELINE W. WORSHAM (Greensboro) – By Consent, the Commission reprimanded Ms. Worsham effective November 14, 2012. The Commission found that Ms. Worsham, acting as broker-in-charge of a property management firm, failed to supervise agents and maintain trust accounts in compliance with Commission rules. The Commission also found that the firm, without Ms. Worsham’s knowledge, charged numerous clients inflated fees by altering or increasing the amount billed on maintenance invoices for work performed on client rental properties, and that the inflated or altered invoices were billed to clients without their knowledge or permission.

This article came from the Feburary 2013-Vol43-3 edition of the bulletin.

How to Start a Real Estate Firm

[Note: This article is not intended to cover every possible issue that a broker will or should consider when starting a firm. It does provide guidance for many of the basic issues that will commonly arise.]

You are an active broker and have your broker-in-charge designation and have thought about starting your own firm for a long time and have decided that now is the time to do it. Here are some things to consider when doing so.

Types of Firms

Sole Proprietorship: If your firm will be a sole proprietorship, then no additional real estate license will be required.  If the name of your firm will not include your last name, then you must register the name of your firm with the Register of Deeds in each county where you intend to do business and retain the Assumed Name Certificate(s) in your records. For example, if your name is Jordan Greentree and your firm name will be Greentree Properties, then you will not have to register your firm name with the Register of Deeds because the name of your firm includes your last name. However, if you desire to call your firm Awesome Real Estate Consultants, then you must register this assumed name at the Register of Deeds in the counties where you will engage in real estate brokerage services.

Corporation, Subchapter S-Corp, LLC, Partnership:  If your firm will be a corporation, subchapter S-corp, or LLC, then you will need to contact the Corporations Division of the Secretary of State’s office and set up the company. (See Firm License Application form for instructions on licensing a partnership.) After establishing the company with the Secretary of State (for which you may call upon the assistance of a lawyer), you must obtain a real estate broker license for the firm by submitting a firm license application to the Commission. Firm license application forms are available on the Commission’s website. If you are setting up a firm for the sole purpose of receiving sales commissions, you must still obtain a license for the firm before receiving any such sales commissions.

Trust Accounts

If you intend to collect trust monies (i.e. earnest money, rents, security deposits, etc.), you must set up a trust or escrow account designated as such.  This means that you must visit a federally insured depository institution lawfully doing business in North Carolina and set up a basic checking account in the name of your firm. The title or subtitle of the account must include the words, “Trust Account” or “Escrow Account”, and these words must appear on the signature cards, checks and deposit tickets. The broker-in-charge of the firm must account for all trust account monies in accordance with Commission rules. This includes performing a complete trust account reconciliation on a monthly basis. If you have not taken the Commission’s Basic Trust Account Course, we recommend that you do so before handling trust monies. You are not required to have a trust or escrow account unless you are holding trust monies.

Location

If you choose to operate your firm from your home or any other non-commercial setting, make sure that there are no zoning regulations or restrictive covenants which prohibit you from operating a real estate business from that location.

Signage

The Commission has no specifications for the size or shape of signs for a real estate office. For Sale and For Rent signs should clearly indicate the name of the firm so that prospective buyers and tenants will know that the sign and the telephone number on the sign belongs to a real estate broker.

Broker-in-Charge Declaration

If you actively engage in real estate brokerage activities, hold trust monies or have at least one associate, you must declare yourself Broker-In-Charge. You must have at least two years of real estate brokerage experience within the previous five years to be eligible to declare yourself broker-in-charge. You may do this by completing and submitting a Broker-In-Charge Declaration form available on the Commission’s website (www.ncrec.gov). If you have set up your firm for the sole purpose of receiving sales commissions and have no associates or trust monies, then you are not required to declare yourself broker-in-charge.

Associates

If you hire a provisional broker to work at your firm, you must actively supervise him or her. Therefore, you must provide a work space from which the provisional broker can conduct his or her business under your supervision. If you hire a full broker to work at your firm, the full broker may conduct his or her business from any location provided, however, make sure that they deliver to you all agency agreements, transaction documents and trust monies in a timely manner. Full brokers must visit or at least communicate with their corporate offices on a regular basis to inquire about mail, because the Commission corresponds with active licensees at their business addresses. Make sure that any broker you hire has a current, active license.

Continuing Education and License Renewal

As a broker-in-charge, you will be responsible for assuring that every broker associated with your firm completes eight (8) hours of continuing education by June 10 of each year and renews his or her license by June 30 of each year. Brokers who allow their licenses to expire or become inactive must cease all real estate brokerage activities immediately.

Forms

The only trade or business forms provided by the Real Estate Commission are the Residential Property Disclosure Statement and the Working With Real Estate Agents brochure. All other forms are available through the North Carolina Association of REALTORS®. If you are not a member of NCAR, you may contact the North Carolina Bar Association for any forms they have jointly-created or consult an attorney to draft any documents that you need.

This article came from the Feburary 2013-Vol43-3 edition of the bulletin.

Surrendering Disputed Funds to Clerk of Court

Are you carrying old escrow funds in your trust accounts?  Perhaps turning over these monies to the clerk of court might be the remedy for you. This method is best used when the parties refuse to come to an agreement yet fail to initiate legal action to determine rightful ownership.

Under N.C.G.S. 93A-12, a real estate broker or attorney holding disputed monies may deposit these funds with the clerk of court in the county where the property is located after properly notifying the persons claiming ownership of the funds. (Residential security deposits are specifically not allowed to be disposed of in this manner.)

Notification is satisfied by providing written notice directly to the person claiming ownership or by mailing the notice by first-class mail to the person at his or her last known address. This allows the parties claiming ownership to renew their interest in the dispute and possibly resolve the claim.

The broker must wait 90 days following notification to the parties before attempting to deposit the funds with the clerk and must certify that the 90-day time period has passed. Once the broker deposits the monies with the clerk, his responsibility over the disputed funds is over.

Thereafter, either party may file a special proceeding with the clerk to recover the funds. The clerk of court is responsible for determining the rightful ownership of the monies and disbursing accordingly. If no such proceedings are filed within one year of the deposit, the funds shall be deemed unclaimed and will be turned over to the Escheat Fund of the State Treasurer.

The “Certificate of Notice & Deposit of Disputed Funds” form is available at the Commission’s website: http://www.ncrec.gov/Forms/Misc/945.pdf.

This article came from the Feburary 2013-Vol43-3 edition of the bulletin.