NANCY B. BRADY (Pinnacle) – The Commission accepted the voluntary surrender of the broker license of Ms. Brady for a period of five years effective March 19, 2014. The Commission dismissed without prejudice allegations that Ms. Brady violated provisions of the Real Estate Law and Commission rules. Ms. Brady neither admitted nor denied misconduct.
MICHAEL KENNETH BROOKS (Charlotte) – By Consent, the Commission revoked the broker license of Mr. Brooks effective March 19, 2014. The Commission found that Mr. Brooks, acting as property manager for clients of his own sole proprietorship, failed to designate himself as broker-in-charge; that Mr. Brooks managed several properties without the knowledge or consent of the broker-in-charge of the firm with which he was affiliated; that Mr. Brooks failed to maintain trust accounts for security deposits and rents he collected while managing properties through his sole proprietorship; and that Mr. Books failed to respond to multiple letters of inquiries from the Commission.
LYNETTE MARIE GAVALIER (Chapel Hill) – By Consent, the Commission reprimanded Ms. Gavalier effective February 1, 2014. The Commission found that Ms. Gavalier listed a property and mistakenly advertised it on her Web site with photos of a neighboring subdivison’s amenities, which included an indoor lap pool and a fitness area; that a buyer who was out of the country during negotiations, but was present for the closing, closed on the property; that the amenties for the property subdivision did not include an indoor pool and the exercise area was different than the one represented on her Web site.
RONALD CLIFFORD HALSTEAD (Murphy) – By Consent, the Commission suspended the broker license of Mr. Halstead for a period of six months effective February 1, 2014. One month of the suspension was active with the remainder stayed for a probationary period of five months. The Commission found that Mr. Halstead, acting as a dual agent in a real estate transaction, failed to inform the closing attorney or lender that the buyers had signed a separate promissory note to pay the seller a sum of money in addition to the property sales price; and that the separate promissory note was not reflected on the HUD-1 settlement statement.
FREDERICK P. HILTZ (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Hiltz for a period of two years effective April 1, 2014. The Commission then stayed the suspension for a probationary period of three years. The Commission found that Mr. Hiltz, acting as broker-in-charge of a property management firm, managed a homeowners’ association and was authorized by the association to initiate foreclosure proceedings against an owner for non-payment of dues; that Mr. Hiltz discovered recording issues which could prevent the mortgage deed of trust from attaching to the subject property and that Mr. Hiltz failed to disclose this fact to his client, leading the association to approve Mr. Hiltz’s request to bid on the property on his own behalf; and that Mr. Hiltz directed the foreclosure attorney to issue revenue stamps indicating that the property had been purchased at full market value of $50,000 when it had actually been purchased for $10,000. The Commission also found that Mr. Hiltz reimbursed the association’s foreclosure attorney fees in 2010 following the sale but did not pay the $8,663 dues owed by the foreclosed owner until January 2012.
HILTZ MANAGEMENT CO. INC. (Charlotte) – By Consent, the Commission suspended the firm license of Hiltz Management Co. for a period of two years effective April 1, 2014. The Commission then stayed the suspension for a probationary period of three years. The Commission found that the broker-in-charge of Hiltz Management Co., a property management firm, managed a homeowners’ association and was authorized by the association to initiate foreclosure proceedings against an owner for non-payment of dues; that the firm’s broker-in-charge discovered recording issues which could prevent the mortgage deed of trust from attaching to the subject property and that the firm’s broker-in-charge failed to disclose this fact to his client, leading the association to approve the firm’s broker-in-charge’s request to bid on the property on his own behalf; and that the firm’s broker-in-charge directed the foreclosure attorney to issue revenue stamps indicating that the property had been purchased at full market value of $50,000 when it had actually been purchased for $10,000. The Commission also found that the firm’s broker-in-charge reimbursed the association’s foreclosure attorney fees in 2010 following the sale but did not pay the $8,663 dues owed by the foreclosed owner until January 2012.
STANLEY BERNARD JONES (Raleigh) – Following a hearing, the Commission suspended the broker license of Mr. Jones for a period of two years effective September 24, 2013. Three months of the suspension were active with the remainder stayed through the end of the suspension period on certain conditions to be satisfied by June 1, 2014. The Commission found that Mr. Jones failed to retain adequate trust account records and failed to safeguard trust monies in his possession; that Mr. Jones performed activities constituting the unauthorized practice of law, including the creation and amendment of a real estate contract; that Mr. Jones commingled his principal’s money with his own and failed to deposit money he received in a fiduciary capacity into a trust account; that Mr. Jones failed to obtain a written property management agreement with his landlord client; that Mr. Jones advertised properties for lease as a provisional broker without the consent of his BIC; that Mr. Jones failed to retain records of rental transactions; and that Mr. Jones operated a sole proprietorship without designating a BIC.
ASHLEY PARKER LANCE (Charlotte) – By Consent, the Commission suspended the broker license of Ms. Lance for a period of two years effective April 1, 2014. The Commission then stayed the suspension on certain conditions. The Commission found that Ms. Lance, acting as an associate broker of her real estate brokerage firm and under the direct supervision and orders of her broker-in-charge, met with clients without providing or reviewing the Working With Real Estate Agents brochure. The Commission also found that Ms. Lance utilized form lease with option to purchase contracts that violate North Carolina law and Commission rules.
PETER C. MACE (Pinehurst) – By Consent, the Commission suspended the broker license of Mr. Mace for a period of six months effective April 1, 2014. The Commission then stayed the suspension on certain conditions. The Commission found that Mr. Mace, acting as a real estate developer and real estate broker, failed to disclose material facts related to the sale of residential property in which he had an ownership interest.
NANCY BRADY REALTY, INC. (Pinnacle) – The Commission accepted the voluntary surrender of the broker license of Nancy Brady Realty for a period of five years effective March 14, 2014. The Commission dismissed without prejudice allegations that Nancy Brady Realty violated provisions of the Real Estate Law and Commission rules. Nancy Brady Realty neither admitted nor denied misconduct.
PEARTREE PROPERTY MANAGEMENT (Elizabeth City) – The Commission accepted the permanent surrender of the firm license of Peartree Property Management effective April 16, 2014. The Commission dismissed without prejudice allegations that Peartree Property Management violated provisions of the Real Estate Law and Commission rules. Peartree Property Management neither admitted nor denied misconduct.
RENTAL PROPERY MANAGEMENT, INC. (Wilson) – By Consent, the Commission suspended the firm license of Rental Property Management for a period of three years effective March 1, 2014. The Commission then stayed the suspension for a probationary period of three years on certain conditions. The Commission found that the broker license of Rental Property Management went on inactive status in July 2011 and the firm continued operating without a designated broker-in-charge and qualifying broker until March 2012; that the Commission conducted an audit of the firm’s trust accounts and found a shortage of $21,300 in the tenant security deposit account and $11,800 in the rental accounts; that the firm failed to maintain rents and tenant security deposits in a trust account; that the firm failed to maintain trust account records in compliance with the Real Estate License Law and Commission rules; that the firm engaged in deficit spending; and that in March 2013, the firm again engaged in brokerage services without a designated broker-in-charge or qualifying broker after its qualifying broker and broker-in-charge left the company.
MARIO ROBERTO RUIZ-CEA (Kernersville) – By Consent, the Commission reprimanded Mr. Ruiz-Cea effective Mach 1, 2014. The Commission found that Mr. Ruiz-Cea represented a buyer client in a real estate transaction, but failed to enter into a written buyer agency agreement with his buyer client; that Mr. Ruiz-Cea failed to provide his client with the Working With Real Estate Agents brochure; that in April 2013, Mr. Ruiz-Cea submitted an offer to purchase on behalf of his buyer client for a property, the seller responded with a counter offer, and Mr. Ruiz-Cea affirmed his buyer client’s acceptance without first obtaining his client’s signature on the contract.
DEBRA C. SWAIN (Elizabeth City) – The Commission accepted the permanent surrender of the broker license of Ms. Swain effective April 16, 2014. The Commission dismissed without prejudice allegations that Ms. Swain violated provisions of the Real Estate Law and Commission rules. Ms. Swain neither admitted nor denied misconduct.
CRAIG STEVEN STURDIVANT (Sanford) – By Consent, the Commission suspended the broker license of Mr. Sturdivant for a period of six months effective March 1, 2014. The Commission then stayed the suspension on certain conditions. The Commission found that Mr. Sturdivant acted as the president of a real estate brokerage and property management firm; that a buyer entered into a 20-year contract for deed in July 2008 to purchase a property from the firm; that the buyer paid the firm a $10,000 down payment and $1,000 monthly payments; that the lender foreclosed on the property in July 2011; and that another agent in the firm continued to collect the monthly payments from the buyer until January 2012.
This article came from the May 2014-Vol45-1 edition of the bulletin.
By Stephen L. Fussell, Senior Consumer Protection Officer
One of the most frequent types of complaints the Commission receives from consumers alleges that material facts were omitted or misrepresented. As you know, a material fact is any information that would affect a reasonable person’s decision to buy, sell or lease. Brokers are required to disclose material facts to all interested parties. Moreover, a broker representing the owner of a property offered for sale or lease has an added duty to discover as well as disclose material facts.
When investigating a complaint in which it is alleged that a broker omitted or misrepresented a material fact, the Commission assesses what the broker knew or reasonably should have known about the fact in question. To determine what a broker actually knew, we review transaction documents and written communications and interview persons involved either directly or indirectly with the transaction.
To determine what a broker reasonably should have known, we examine public records and ascertain whether the broker has taken relevant courses or has had access to publications, such as the Commission’s Real Estate Bulletin, that would have educated the broker on the topic in question. We also consider whether the material fact was common knowledge.
What is common knowledge? It is knowledge that is widely or generally known to everyone or nearly everyone in a community. For example, it is common knowledge in the real estate brokerage community that a person must obtain a real estate license from the Real Estate Commission and maintain the license on current, active status in order to engage in real estate brokerage activities and be eligible to receive compensation for those activities.
In order to acquire common knowledge, brokers should thoroughly familiarize themselves with the area(s) in which they work. This may be accomplished by reading local newspapers, watching local TV news, conducting online research, attending continuing education courses, talking to other local brokers, etc. In other words, a broker should become an expert on his or her market area. This is important for all transactions, especially those in which the parties are not familiar with the area and brokers become the primary source of information.
Brokers who receive opportunities to handle transactions outside of their areas of expertise should either partner with or refer the opportunities to brokers with knowledge and experience in such areas. Brokers who undertake to handle transactions in unfamiliar areas will be held responsible for any adverse consequences that arise as a result of ignorance and/or incompetence. North Carolina General Statute §93A-6(a)(8) authorizes the Commission to pursue disciplinary action against a broker who is unworthy or incompetent and acts in a manner which endangers the public.
Brokers cannot use common knowledge as a defense for omitting material facts. In other words, a broker cannot claim that a prospective buyer or tenant should have known about a material fact in an attempt to relieve the broker of his or her duty to disclose it. Brokers must disclose all material facts including those considered common knowledge. For the protection of the broker and all parties, it is best to make such disclosures in writing.
Prospective buyers, sellers, landlords and tenants depend upon their agents to inform and guide them in making good decisions. Brokers can only accomplish this if they acquire and then share relevant knowledge with their clients and customers. Brokers should therefore strive to be aware of common knowledge as well as all other property-specific and area-specific knowledge necessary to carry out their duties effectively.
Examples of Common Knowledge
• A plan by the North Carolina Department of Transportation (“NCDOT”) to construct or widen a roadway that has been publicized on the NCDOT’s website (www.ncdot.gov/projects/), in local newspapers, and/or on local TV;
• A city’s plan to annex an area which will double the annexed area’s property taxes and which has caused much debate in public hearings and in local media;
• The fact that when a strong Nor’easter hits some coastal communities, there is increased risk of beach erosion causing loss of dunes, street flooding, and damage to ocean-front homes;
• The fact that a storm drainage system in a neighborhood is inadequate to handle the abundance of storm water produced by thunderstorms causing widespread flooding when the citizens in the neighborhood have filed a highly-publicized lawsuit against the city to get the city to take corrective action;
• The designation of a large commercial property as a Superfund site by the Environmental Protection Agency along with significant publicity that no cleanup efforts have been undertaken; and
• The location of a train station through which loud freight trains routinely pass during the early hours of the morning, where local residents have complained publicly for many years.
This article came from the May 2014-Vol45-1 edition of the bulletin.
As the Bulletin was going to press, the Commission’s newly designed Web site was being launched for the first time. Months in the making, the site has a new look and new features to facilitate its use by licensees and the general public.
Overall, users will experience faster and easier navigation among the site’s various pages and an improved search function which locates information wherever it is located on the site.
The Home page, shown here, features drop-down menus for Licensing, Education, Commission, Publications, Resources, Consumers and Forms. In the middle of the page are links to frequently accessed information relating to Rule/Law Changes, Licensees (licensee search databases), and What’s New (Commission actions and activities).
The site is best visited with the use of the Google Chrome or Foxfire Mozilla browsers, but will work well with any other.
A new feature, FAQ’s, provides commonly asked questions and answers by category (such as Applying for a license, Continuing Education, Legal General, Landlord/Tenant).
In addition, the site has been designed for display on mobile devices, automatically scaling to accommodate different screen proportions.
Users can tour the full range of the site’s features and information through a special video available from the Home page.
This article came from the February 2014-Vol44-3 edition of the bulletin.
As a knowledgeable broker, you can be of great assistance to your buyers with these three critical points when they encounter “Due Diligence” for the first time in the Offer to Purchase and Contract.
□ Due Diligence Fee: Explain how this fee is affected by and results from negotiation involving many dynamic variables, including the length of the period, the amount of due diligence to be performed, and the cost and desirability of the property. Discuss those variables most pertinent to the circumstances of the property with the buyers.
□ Due Diligence Process: Help buyers with the list of inquiries so that it is complete and then guide them in determining the length of the due diligence period, especially when an apppraisal and loan are involved.
□ Due Diligence Period Expiration “Warning”: Go over the “Warning” text in paragraph 4 of Form 2-T so that your buyers understand they have a path out of the contract when they act in time if difficulties arise.
This article came from the February 2014-Vol44-3 edition of the bulletin.
The Offer to Purchase and Contract form (North Carolina Association of REALTORS®/North Carolina State Bar Association Form 2-T) defines “Due Diligence” under Terms and Definitions at Paragraph 1(h) on the second page. An expanded explanation of the term and the effects of its use follow:
Q: What is “Due Diligence”?
A: “Due Diligence” is the buyer’s opportunity to engage in a process of further investigation of the property and the transaction as described in the Offer to Purchase form within a period of time agreed to by the seller and buyer.
Q: What might the buyer investigate during “Due Diligence”?
A: The buyer will want to inquire about anything bearing on a decision to either move forward with the contract or to terminate it. Paragraph 4 of Form 2-T outlines many, but not all, common considerations of the “Due Diligence” process such as home, pest, and septic inspections, property survey, appraisal, title search, loan qualification and application, repair negotiation, etc.
Q: How much time is allowed for the “Due Diligence” Process?
A: The amount of time is negotiable but the period begins with the effective date of the contract. Paragraph 1(j) of Form 2-T will state the period’s agreed upon ending date. Buyers should be certain to negotiate enough time to fully complete their inquiries – especially as related to appraisal and loan approval and any repairs discovered during property inspections.
Q: What is the “Due Diligence” Fee?
The fee, if any, is negotiated and paid by the buyer to the seller for the right to conduct “Due Diligence”. The amount of the fee may be influenced by such matters as the market for the property, number of days on the market, personal circumstances of buyer and seller, and the length of the “Due Diligence” period.
Q: Is there a limit to the repair items the buyer can ask the seller to perform?
A: No. The buyer is free to ask for any number of things; however, the seller is not obligated to agree to any of them. Repairs, if any, are completely negotiable.
Q: If the buyer is not satisfied with the seller’s response, or lack thereof, to repair requests, what can the buyer do?
A: The buyer can terminate the contract or agree to move forward without the repairs.
Q: Must the repairs be completed by the seller before the end of the “Due Diligence” period?
A: No, but the seller is required to complete any repairs in a good and workmanlike manner prior to the settlement date. Failure by the seller to complete the repairs could result in a breach of the contract. (See paragraph 8(k) and (l) of Form 2-T).
Q: Must the seller allow the buyer to inspect the property to verify the repairs have been completed even if the “Due Diligence” period has expired?
A: Yes. The buyer has the right to verify the repairs have been completed satisfactorily, during or after the “Due Diligence” period. The buyer also has the right to do a final walk-through. The seller’s failure to permit the buyer to verify repairs or to do a final walk-through is a breach of the contract.
Q: What happens at the end of the “Due Diligence” period?
A: The buyer must make a decision to move forward with the contract or to terminate, so it’s a good idea to discuss progress with the buyer as the end of the period approaches. There is a “Warning” to the buyer in paragraph 4 of Form 2-T advising termination if the seller does not agree to a requested extension of the “Due Diligence” period. The buyer’s loss of the right to terminate for any or no reason then places the earnest money at stake. To avoid any misunderstandings, provide any extension agreed to by the seller to the buyer in writing.
Q: If the buyer decides to terminate the contract under the “Due Diligence” clause, must the seller agree?
A: No. It is the buyer’s sole decision to make, assuming it is made during the “Due Diligence” period and not afterward. The termination is a notification to the seller, and must be in writing, but the buyer does not need the consent of the seller. It is a unilateral decision made by the buyer for any reason or no reason at all. The buyer typically gets back the earnest money but not the “Due Diligence” fee, unless otherwise negotiated.
This article came from the February 2014-Vol44-3 edition of the bulletin.
A new broker-in-charge for a firm that has trust accounts becomes responsible for those accounts from the date the BIC declaration form is signed. Before taking over as BIC of a firm with existing trust accounts, you should first ensure that the accounts are properly reconciled and fully funded. The following are some steps to take to get you started “on the right foot”:
At a minimum, the following trust account records should be present for each trust or escrow account maintained by the previous broker-in-charge:
□ Receipts for cash payments of trust funds □ Deposit tickets □ Cancelled checks □ Journal or check stubs □ Sales transaction ledgers and/or property or owner ledgers for rentals □ Monthly bank reconciliations □ Monthly ledger trial balance
Obtain the most current trust account bank reconciliation.
The most current trust account bank reconciliation should have been prepared by the previous BIC for the prior month, taking into consideration that the company may not receive the monthly trust account bank statement until several days into the current month. If the accounts have not been reconciled, you must do so immediately.
Examine the most recent trust account reconciliation for correctness and accuracy.
• Make sure that the beginning bank balance on the bank reconciliation agrees with the ending balance on the trust account bank statement. Check the math for accuracy.
• Also check to be sure that the reconciled trust account bank balance on the bank reconciliation agrees with the journal balance and/or check stub balance as of the same cutoff date.
• Verify that any deposits-in-transit on last month’s bank reconciliation have cleared the bank.
• Examine the outstanding checks for checks older than three months.
• Make sure there is a trial balance of the ledgers prepared as of the same cut-off date as the reconciled trust account bank balance. The total on the trial balance should agree with the trust account reconciled bank balance and with the journal and/or check stubs of the same cutoff date. Verify that there are ledgers for each line item on the trial balance.
• Examine the ledgers to determine the nature of funds on deposit, such as earnest money deposits, landlord rents, tenant security deposits or owner reserves. Are there unidentified funds in the account?
• Are there any ledgers with negative balances indicating deficit spending (spending more on a particular owner than what that owner has on deposit)? If so, this must be corrected immediately.
Examine transaction files.
• Review open sales transaction files to ascertain if required documents such as listing agreement, buyer agency and dual agency agreements (if applicable), Residential Property and Owners’ Association Disclosure Statements and Working With Real Estate Agents acknowledgments are in the files and completed properly.
• Do the offers state that the firm is holding the earnest money deposit? If so, are there ledgers for each of the sales transactions where the firm is holding earnest money?
• Are there copies of the earnest money deposit checks and due diligence checks?
Review rental property management files to make certain they contain required documents.
Property management files should include:
• Property management agreements.
• Property management statements accounting to the owner for rents. (These may be kept in the firm’s trust accounting software. If so, a hard copy need not be in the owner’s file as long as the statements are accessible.)
• Copies of invoices, bills and contracts paid from the trust account for the rental owner.
• Lease agreements.
• Security deposit checks received after April 1, 2013. (Commission rules changed on April 1, 2013 to require the retention of copies of security deposit checks.)
Verify the vendor list to ensure all are legitimate.
• Do any vendors have a post office box and no physical address?
• Are there disbursements to vendors for round figures?
• Are there work orders and invoices for each disbursement to a vendor?
• Does the firm have staff in-house maintenance?
• Are there receipts for purchases and expenditures?
• Are there work orders and documentation (pictures, receipts, etc.) for maintenance performed?
• Do invoices fully document repairs and maintenance performed?
If you have problems performing the above procedures yourself, you may want to consider hiring an outside accountant or CPA to assist you. Make sure that the accountant or CPA you hire understands the Commission rules.
If you decide to become a BIC of a firm with inadequate trust account records, you must immediately perform these procedures and correct any deficiencies! You don’t want any problems you inherit from the previous broker-in-charge to carry over and continue into your tenure as the broker-in-charge.
If further assistance is needed, do not hesitate to contact the Commission.
This article came from the February 2014-Vol44-3 edition of the bulletin.
The Commission receives an average of 1,500 complaints each year that cover every aspect of real estate brokerage plus unrelated issues such as criminal convictions. So, what should you do if a complaint is filed against you?
• First, don’t panic. The Commission does not automatically assume that the allegation(s) in a complaint are true. Real estate brokers are considered innocent until proven guilty. However, to fulfill its mission to protect the interests of consumers, the Commission investigates each complaint to determine whether there has been any wrongdoing by a licensee.
• Second, if you receive a Letter of Inquiry from the Commission regarding a complaint, you must respond within fourteen (14) days of its receipt. If you need more time, contact the staff member who sent you the letter and ask for an extension of time to respond. Staff will usually be able to accommodate reasonable requests.
• Third, when responding to a Letter of Inquiry, provide a factual description of the transaction or incident described in the complaint and provide copies of relevant documents to support your statements. The Commission has the authority to expand investigations beyond the allegations described in complaints and may ask you for information and/or documentation regarding other aspects of a transaction or matter. You should fully answer the Letter of Inquiry before the deadline.
• Fourth, you may hire an attorney to represent you in responding to a Letter of Inquiry or when meeting with an Auditor/Investigator; however, it is not a requirement. If you are unsure about whether to obtain legal representation, you may want to discuss your situation with an attorney before deciding.
Cases which cannot be investigated by a Letter of Inquiry or where the broker fails to respond are assigned to a field investigator who performs face-to-face interviews, audits trust accounts and gathers information and documentation that may be needed to evaluate a complaint.
After receiving your written response to the Commission’s inquiry, it is evaluated to determine any need for additional information and/or further investigation. Once the file provides a clear understanding of the facts, or in the case of a field investigation, after the report is completed, a decision is made to close the file with or without a warning or to forward the case to the members of the Commission to order its closing or to order an evidentiary hearing. Only Commission members can order a hearing against a broker or licensed firm. If the file is closed, you and the complaining witness will receive notification in writing of the decision.
When the Commission orders a hearing, the case is assigned to a staff attorney to prosecute on behalf of the Commission and you (or your attorney, if you have one) will be contacted to discuss your options for settling the matter.
If a settlement cannot be reached, then the Commission will hold the hearing. The Commission Chair (or Vice Chair) presides over the hearing and the members sit as the fact finder/jury. After evidence is presented by the Commission’s staff attorney and by you (or your attorney), the Commission members will decide whether the evidence warrants disciplinary action and, if so, the appropriate action (reprimand, suspension, or revocation).
All disciplinary actions are published in the Commission’s Real Estate eBulletin, which is sent by email monthly, and distributed to the North Carolina Association of REALTORS®, the Better Business Bureau in the area where the violation occurred, and the local board.
The Commission retains records of complaints filed against its licensees, and under state law, those files are public records. In the event that someone contacts the Commission to inquire about complaints filed against a broker, the Commission’s staff will report the number of cases and their disposition, and will provide copies if requested to do so.
When a case is closed without any disciplinary action, the Commission’s staff informs callers that the evidence of a violation was insufficient to warrant disciplinary action and that the mere fact that a complaint was filed does not necessarily mean that a broker engaged in misconduct.
In summary, the Commission takes an objective, open-minded approach to investigating each complaint. Only cases involving sufficient, admissible evidence of a violation of the Real Estate License Law (Chapter 93A of the North Carolina General Statutes) or the Commission’s rules result in disciplinary action. If a broker has not committed a violation, there is nothing to fear from a complaint. Moreover, conducting your business with a focus on integrity and customer service will go a long way toward protecting you from ever receiving a complaint.
If you are a residential broker without commercial brokerage experience or a commercial broker without residential brokerage experience, you will face considerable challenges if you choose to cross the professional line into the other realm.
Most of the real estate laws and Commission rules will apply, as the adjacent article explains, but the day-to-day conduct of business involving, say, a three-bedroom home compared with a three-story office building will differ greatly.
Any residential broker who wishes to venture into commercial real estate or vice versa, should consider partnering with an experienced broker in the new field to better learn both the business and how best to represent clients.
This article came from the February 2014-Vol44-3 edition of the bulletin.
Some commercial brokers have been surprised to learn that the Real Estate License Law (Chapter 93A of the North Carolina General Statutes) and the Commission’s rules apply to commercial brokers as well as residential brokers. While there are some laws and rules that apply only in residential transactions, in general, most apply to both residential and commercial brokers alike. Here is a brief review of some important laws and rules that apply to everyone.
Any person or firm must first obtain a real estate license to engage in commercial or residential real estate brokerage activities. Commercial or residential real estate firms other than sole proprietorships must obtain separate firm licenses. An out-of-state broker who wishes to engage in commercial transactions in North Carolina may choose to either obtain a North Carolina broker license or a limited non-resident commercial broker license requiring affiliation with a resident North Carolina broker.
In both commercial and residential sales transactions:
• Brokers must review the Working With Real Estate Agents brochure with prospective buyers and sellers at first substantial contact. (Note: The brochure is not required for leasing transactions. Although the North Carolina Association of REALTORS® (NCAR) has created a form for use by its members in commercial leasing transactions, use of NCAR’s form is not required by the Commission.)
• A commercial or residential listing agent must enter into a written listing agreement before beginning to market a seller’s property, including placing a “For Sale” sign on a seller’s property.
• A commercial or residential buyer agent must enter into a written buyer agency agreement no later than the point at which a buyer-client is ready to write an offer. Dual agency is permitted only after obtaining the advance, written authorization of all parties or sets of parties. Any broker who fails to properly establish his or her agency relationship in writing in a transaction is prohibited by law from receiving any compensation either directly or indirectly from the transaction.
Similarly, in commercial or residential leasing transactions:
• Brokers who represent landlords must enter into written property management agreements before beginning to market or manage the landlords’ properties.
• Brokers who represent a commercial or residential tenant must enter into a written agency agreement with the tenant no later than the point at which the tenant is ready to negotiate or sign a lease. Dual agency requires the advance, written authorization of all parties. Brokers, who represent landlords or tenants without written agency agreements, are prohibited from receiving compensation from those transactions.
Commercial and residential brokers must also handle trust monies in accordance with the Commission trust account rules, disclose material facts, retain transaction records for three years, and furnish all parties with copies of agency agreements and contracts.
This article is not intended to address all of the rules, but to remind both commercial and residential brokers of some of the Commission’s requirements. When in doubt about any of the Commission’s rules, brokers should contact the Commission’s office and a member of our staff will be glad to provide more information and/or clarification.
This article came from the February 2014-Vol44-3 edition of the bulletin.
The two main topics for the 2014-2015 Update Course for the licensing year beginning July 1 will be (1) electronic signatures and electronic record-keeping, and (2) property management issues.
Specifically addressed in the course will be the requirements and considerations of electronic signatures and how to maintain electronic record-keeping.
Discussion of issues relating to property management will cover:
• Any significant recent revisions to landlord-tenant law;
• Rule A.0109(a) and (b) in connection with kickbacks from service providers or inflated invoices that include a fee for broker;
• The Commission’s position relating to fees to reserve a rental unit pending lease execution; and
• Fair housing relating to requests for accommodations/modifications, what an owner/agent may ask a tenant to verify, and reasonable restrictions.
Other Update Course topics include:
• revised rules and new or revised laws that impact real estate brokerage;
• working with an unrepresented buyer as Seller agent only when the broker’s company has the listing;
• the extent of a broker’s duty to discover and disclose the status of public vs. private streets, challenges with discovery, and related issues;
• consideration of when a broker promotes brokerage services or properties utilizing “social media”;
how to keep a current and active license.
This article came from the February 2014-Vol44-3 edition of the bulletin.