And the difference is, a broker license is something every individual and business entity needs to perform real estate brokerage services like sales or property management in North Carolina. The broker real estate license for individuals and firms is administered by the Real Estate Commission and must be renewed yearly on or before June 30 through the Commission. For more information on the broker and/or firm license go to the Commission’s website, www.ncrec.gov.
A state privilege license is also required to do certain types of business activities within North Carolina. This license is personal and is not issued in the name of a firm or corporation. Individual real estate brokers are specifically required to obtain a privilege license under NCGS §105-41(a)(8); however, a licensed broker who is also a licensed appraiser is only required to get one privilege license which will cover both activities. The state privilege license is governed by the Department of Revenue and must also be renewed yearly by July 1. There are a few, very limited exemptions from the state privilege license requirement which can be found under NCGS §105-41(b). In order to apply for a privilege license, you must go to the Department of Revenue’s website, http://www.dor.state.nc.us/downloads/privilege.html. Once this state privilege license has been granted, you must pay an annual tax on July 1st. This tax is not prorated and there are penalties for failure to pay.
NCGS §160A-194, effective July 1st, 2015, limited the authority of cities to require an additional license for persons holding a license issued by an occupational licensing board. Brokers should still confirm with their city or county whether any other additional local permits are needed to conduct business in that location. Go to your city or county website for further information.
Remember: Before conducting real estate brokerage services you must: (1) obtain an individual and/or firm license from the NC Real Estate Commission; AND (2) obtain a state privilege license from the NC Department of Revenue. Once you have these licenses, mark your calendar to renew your broker license by June 30 of each year and to renew your privilege license and pay the yearly tax by July 1st.
This article came from the October 2016-Vol47-2 edition of the bulletin.
By Bruce W. Moyer, Director, Education and Licensing
The ARELLO® Education Certification Committee has selected the North Carolina Real Estate Commission’s Broker-in-Charge Update Course, Commercial Version 2015-2016 for a Continuing Education Award. The award will be presented at the Annual Conference in Vancouver, BC on September 23, 2016.
The awards are presented each year in recognition of outstanding systems and educational programs that contribute to the real estate industry, promote public protection and might be adapted to benefit licensees and consumers in other ARELLO® member jurisdictions. Courses are evaluated on the basis of concept, methodology, quality and benefits to the targeted audience.
The Broker-in-Charge Update Course, Commercial Version 2015-2016, represents a collaborative, public-private partnership between the Commission and two commercial real estate professionals to create a commercial version of the Broker-in-Charge Update course. For the previous 15 years, Ms. Cindy Chandler, CCIM, CRE, Commission Member and Mr. Garth Dunklin, JD, CCIM, CRE, have modified the Commission’s annual Update courses to target a historically underserved segment of the active brokerage community (commercial brokers) by providing dynamic commercial brokerage curriculum content and examples. This course emphasizes practical information and education that can be immediately used in commercial real estate brokerage practice.
This course provides multiple benefits for attending brokers. Among these are direct and specific answers to difficult and complicated questions regarding new settlement disclosures, sales of vacation rentals, changes in Commission rules, contracts, and addenda (both residential and commercial), real estate agent safety, licensing and education reviews, handling complaints, handling trust monies, and broker-in-charge requirements, all from a commercial brokerage perspective.
The North Carolina Real Estate Commission would like to thank the ARELLO® Education Certification Committee for their time in reviewing and awarding the 2016 Continuing Education Award for the Broker-in-Charge Update Course, Commercial Version 2015-2016.
This article came from the October 2016-Vol47-2 edition of the bulletin.
Garret J. Rider of Apex, a second-year law student at the University of North Carolina School of Law, is the recipient of the 2016 Allan R. Dameron Legal Internship Award. Commission Chair Cindy S. Chandler and Vice Chair (now Chair) George Bell presented the award at the Commission’s July meeting. The Internship is awarded annually in memory of and tribute to former Commission Chair Dameron for his dedicated service in protecting the interests of consumers.
This article came from the October 2016-Vol47-2 edition of the bulletin.
By Frederick A. Moreno
Deputy Legal Counsel
FAA adopts rules effective August 29, 2016 for small drones in commercial use.
On August 29, 2016, new federal rules went into effect for the operation of small Unmanned Aircraft Systems (“sUAS”) in the National Airspace System (“NAS”). These rules, referred to as “Part 107”, have been added to Title 14 of the Code of Federal Regulations, which governs aviation. These rules DO NOT apply to sUAS that are being flown strictly for hobby or recreational use which are considered Model aircraft. Part 107 regulations focus on the personnel, equipment, and operation of sUAS being flown in the NAS for anything other than hobby or recreational use. Such activities include research and development, aerial photography, education and academic uses.
Personnel
Under the new rules, a pilot’s license is no longer required to operate sUAS. Now, a person can instead obtain a remote pilot certificate issued by the Federal Aviation Administration (“FAA”). To qualify for a remote pilot certificate, a person must: pass an initial aeronautical knowledge test, be vetted by the Transportation Security Administration (“TSA”), and be at least 16 years of age. Thereafter, a pilot must pass a recurrent aeronautical knowledge test every twenty-four (24) months. In lieu of taking the test, a person may demonstrate their aeronautical knowledge by holding an active pilot’s license, completing a flight review within the previous twenty-four (24) months, and completing an online training course provided by the FAA. A person may not operate the sUAS if they know or have reason to know that they have a physical or mental condition that could interfere with its safe operation. The person operating the sUAS is required to understand airspace classifications and requirements.
Equipment
To be considered an sUAS, the aircraft must weigh less than fifty-five (55) pounds, including everything that is onboard or otherwise attached to the aircraft. Prior to operation, the sUAS must first be registered with the FAA. The operator must also keep up with the maintenance and repair schedule of the sUAS, is required to keep certain documents and records regarding the aircraft, and must make these documents and records available to the FAA upon request. Furthermore, the operator is required to verify that the aircraft is in a condition of safe operation prior to flight.
Operation
Most of the new rules deal with the operation of the sUAS. Some of these new rules are:
Most of the restrictions above are waivable if the applicant demonstrates that the operation can safely be conducted under the terms of a certificate of waiver.
The above rules are some of the new provisions that are now in effect. For a complete summary of the rules, see: https://www.federalregister.gov/documents/2016/06/28/2016-15079/operation-and-certification-of-small-unmanned-aircraft-systems.
Caution to Brokers
Even though you may be licensed to operate the aircraft and it is properly registered with the FAA, you could still be violating local and State laws regarding privacy by operating the sUAS. Therefore, you should be knowledgeable about local and State laws regarding photography, transportation of goods, or any other intended uses of the sUAS.
This article came from the October 2016-Vol47-2 edition of the bulletin.
Three North Carolina brokers received scholarships from the Commission at its July meeting for academic excellence in real estate courses.
Anne Wilson Hult, Swansboro, received the Blanton Little Memorial Scholarship from then Commission Chair Cindy S. Chandler and then Vice Chair (now Chair) George Bell.
Michael William Stearns, Charlotte (left), received the Phillip T. Fisher Scholarship, which was presented by Fisher, Commission Executive Director from 1981 to 2010.
Zoltan Desi, Etowah, not present, received the Joe Schweidler Memorial Scholarship. Little and Schweidler were former Secretary-Treasurers.
Winners received reimbursement of course tuition fees. Desi and Hult were selected by the North Carolina Association of REALTORS® for achievement in the Graduate Realtor® Institute (GRI) program. Stearns was selected by the North Carolina chapter of the Council of Real Estate Specialists for achievement in the Certified Residential Specialists (CRS) program.
This article came from the October 2016-Vol47-2 edition of the bulletin.
The North Carolina Real Estate Commission monitors applicant performance on the license examination and regularly reports this information to schools and instructors. In particular, the Commission uses information about the performance of applicants who are taking the license examination for the first time in order to assure that quality instruction is being provided in prelicensing courses by schools and instructors. The most recent performance record for each school can be found on the Commission’s website at https://www.ncrec.gov/Pdfs/Schools/LicExamPerfRep.pdf.
The overall examination performance for all first-time candidates taking the comprehensive real estate examination for the license year July 1, 2015 – June 30, 2016 was 54%. The Commission congratulates each of the following schools and instructors for achieving an outstanding examination performance record of 80% or higher during the most recent annual reporting period. The Commission recognizes that to have students perform at such a level on the license examination requires a combination of high quality instruction and high course completion standards.
School
Alamance Community College, Graham; Lenoir Community College, Kinston; Pitt Community College, Greenville; Carteret Community College, Morehead City; Gaston College, Dallas; Weichert, Realtors-Mark Thomas Properties Real Estate School, Durham; Terry Farr Real Estate School, Fayetteville; Cape Fear Community College, Castle Hayne; Sandhills Community College, Pinehurst.
Instructors
Kandyce Ellis, Michelle Fordham, Larry Lee, Elizabeth O’Neal, James Weese, Christine Darden, Violet Harrington, Jo Ann LaVecchia, Ben Wirtz, Leslie Hughes, Laurel Pettys, Christopher Bartlett, Allan Nanney, Jr.
This article came from the October 2016-Vol47-2 edition of the bulletin.
ALL AMERICAN ASSOCIATES REALTY LLC (Hubert) – By Consent, the Commission permanently revoked the firm license of All American Associates Realty effective July 20, 2016. The Commission found that All American Associates Realty failed to provide monthly statements and receipts justifying expenses to property owners; that All American Associates Realty failed to deposit and maintain security deposits and rental proceeds in a trust account; that All American Associates Realty failed to maintain trust account records in compliance with Commission Rules; that All American Associates Realty failed to respond to letters of inquiry sent by Commission staff; and that All American Associates Realty failed to provide transaction records to Commission staff for inspection.
TRACY LEE ANDERSON (North Wilkesboro) – By Consent, the Commission suspended the broker license of Mr. Anderson for a period of 24 months effective June 22, 2016. Three months of the suspension will be active with the remainder stayed for 21 months. The Commission found that Mr. Anderson timely reported his January 2015 North Carolina felony conviction of Possession of Marijuana; that Mr. Anderson received thirty-six (36) months of supervised probation, was ordered to complete 40 hours of community service and was required to undergo a substance abuse assessment; that Mr. Anderson timely reported his February 2016 Texas felony convictions of Possession of Marijuana and Possession of a Controlled Substance, which stemmed from the same incident above; that Mr. Anderson received a forty-eight (48) month term of community supervision on a deferred judgment and was ordered to pay $5,000 in fines and costs; and that Mr. Anderson currently does not have any pending criminal charges.
RANDY A. BARNES (Wilson) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Barnes effective June 22, 2016. The Commission dismissed without prejudice allegations that Mr. Barnes violated provisions of the Real Estate License Law and Commission rules. Mr. Barnes neither admitted nor denied misconduct.
VICTOR ALAIN BARREIRO (Durham) – By Consent, the Commission suspended the broker license of Mr. Barreiro for a period of 12 months effective July 1, 2016. The Commission then stayed the suspension for a probationary period ending July 1, 2017. The Commission found that Mr. Barreiro on July 30, 2013, was convicted of Reckless Driving to Endanger; that on March 5, 2015, Mr. Barreiro pleaded guilty to Misdemeanor Domestic Violence Protective Order Violation; and that Mr. Barreiro failed to disclose both the conviction and the guilty plea to the Commission within 60 days.
WILBUR L. BECK, JR. (Fayetteville) – By Consent, the Commission suspended the broker license of Mr. Beck for a period of 18 months effective March 1, 2016. Three months and 13 days were active with the remainder stayed for a probationary period ending September 1, 2017. The Commission found that Mr. Beck conducted property management and real estate brokerage services through a sole proprietorship; that Mr. Beck was previously reprimanded by the Commission in other cases for failure to maintain records of all receipts and disbursements of others in such a manner as to create a clear audit trail; that in and around 2015, a trust account audit showed a shortage of at least $29,000 in Mr. Beck’s trust account; and that Mr. Beck failed to timely remit rental proceeds to his landlord-client and failed to maintain accurate records in accordance with Commission trust account rules. The Commission noted that Mr. Beck has since fully funded the shortage in the trust account to the satisfaction of the Commission and has agreed not to act as broker-in-charge or have signature authority of a trust account in the future.
SPENCER T. BENSCH (Matthews) – By Consent, the Commission suspended the broker license of Mr. Bensch for a period of 18 months effective September 1, 2016. Six months of the suspension are active with the remainder stayed. The Commission found that Mr. Bensch, in and around July 2015, and acting as an on-site real estate broker for a licensed builder, forged the builder’s initials on a page in the offer to purchase; then substituted the original page, which contained a range of construction completion dates with the forged page; and that Mr. Bensch stated that his purpose in substituting the forged page was to assist the buyer in school registration. The Commission noted that Mr. Bensch volunteered his commission to compensate the buyer for relocation costs due to the extended completion date and the buyer has been fully reimbursed.
BURCH PROPERTY MANAGEMENT LLC (Fayetteville) – By Consent, the Commission permanently revoked the firm license of Burch Property Management effective July 1, 2016. The Commission found that Burch Property Management, through its qualifying broker and broker-in-charge, failed to maintain trust account records in accordance with the Real Estate License Law and Commission rules, failed to safeguard trust money belonging to others, engaged in deficit spending from the trust account, failed to provide trust account documentation to Commission staff despite numerous requests, and failed to remit tenant security deposits in a timely manner.
CAROLINAS METRO REALTY LLC (Charlotte) – By Consent, the Commission reprimanded Carolinas Metro Realty effective July 1, 2016. The Commission found that in October 2014, a broker licensed in South Carolina, but not in North Carolina, affiliated with the firm and represented that she would obtain a North Carolina license by the end of 2014; that the broker was never licensed in North Carolina, yet, between October 2014 and May 2015, the unlicensed broker showed and leased rental properties in North Carolina; and that the firm received and held $27,932.50 in rental commissions for the broker in anticipation of licensure. The Commission noted once the firm was informed that the broker could not be paid the commissions even after licensure in North Carolina, it reimbursed the full amount.
PASQUALE CARUSO (Hubert) – By Consent, the Commission permanently revoked the broker license of Mr. Caruso effective July 20, 2016. The Commission found that Mr. Caruso failed to provide monthly statements and receipts justifying expenses to property owners; that Mr. Caruso failed to deposit and maintain security deposits and rental proceeds in a trust account; that Mr. Caruso failed to maintain trust account records in compliance with Commission Rules; that Mr. Caruso failed to respond to Letters of Inquiry sent by Commission staff; and that Mr. Caruso failed to provide transaction records to Commission staff for inspection.
COMPASS BUILDING & REALTY LLC (Mooresville) – The Commission accepted the permanent voluntary surrender of the firm license of Compass Building & Realty effective August 17, 2016. The Commission dismissed without prejudice allegations that Compass Building & Realty violated provisions of the Real Estate License Law and Commission rules. Compass Building and Realty neither admitted nor denied misconduct.
PATRICK S. CRAWFORD (Raleigh) – By Consent, the Commission suspended the license of Mr. Crawford for a period of 24 months effective October 1, 2016. The Commission then stayed the suspension for a probationary period from October 1, 2016 through September 30, 2018. The Commission found that Mr. Crawford, acting as the qualifying broker and broker-in-charge of a real estate brokerage firm, managed an occupied residential building (“the property”) and also acted as co-listing agent during its sale; that in September 2014, during the due diligence period, a water test was performed on the well which tested positive for coliform bacteria and the buyer requested copies of current leases for the tenants of the property; that some of the tenant leases contained the phrase “do not drink” where it mentioned water as the utility; that this phrase was written into the leases by Mr. Crawford, unbeknownst to the property owner; that the buyer later terminated the purchase contract; that Mr. Crawford failed to notify the tenants and failed to notify the property owner of the September 2014 well water test; and that the property owner did not begin treatment of the well until January 2016.
LINDA CAROL EPLEY (Maysville) – By Consent, the Commission reprimanded Ms. Epley effective October 1, 2016. The Commission found that in January 2014, Ms. Epley listed property she and her husband owned for sale. Ms. Epley filled out the North Carolina Residential Property Owners’ Association Disclosure Statement by making “no representation.”
STEPHEN ALBERT EPLEY (Maysville) – By Consent, the Commission reprimanded Mr. Epley effective October 1, 2016. The Commission found that in January 2014, Mr. Epley listed property he and his wife owned for sale. Mr. Epley filled out the North Carolina Residential Property Owners’ Association Disclosure Statement by making “no representation.”
FOXFIRE REALTY SERVICES LLC (Foxfire Village) – By Consent, the Commission suspended the firm license of Foxfire Realty Services for a period of 18 months effective July 1, 2016. The Commission then stayed the suspension for a probationary period ending January 1, 2018. The Commission found that on August 29, 2014, one of firm’s property owner clients died and from September 2014 until March 2015 the firm collected rental proceeds from the deceased’s properties and deposited them into its operating account; that Foxfire Realty Services paid the balance of the deceased’s rental proceeds to the attorney for the estate in March 2015; and that Foxfire Realty Services failed to maintain its trust account and trust account records in compliance with the Real Estate License Law and Commission rules.
LOWELL RUSSELL GASAWAY (Whittier) – The Commission accepted the permanent voluntary surrender of the broker license of Mr. Gasaway effective June 22, 2016. The Commission dismissed without prejudice allegations that Mr. Gasaway violated provisions of the Real Estate License Law and Commission rules. Mr. Gasaway neither admitted nor denied misconduct.
MARY CATHERINE KELLY (Apex) – By Consent, the Commission reprimanded Ms. Kelly effective September 20, 2016. The Commission found that Ms. Kelly was the agent for the buyers of a residential property in August 2013, and some of the wells of the homes in the neighborhood had recently tested positive for TCE, a known carcinogen; that the well of the subject property was tested and did not show the presence of TCE; that, nevertheless, the North Carolina Department of Environment and Natural Resources allowed a company, Aqua, to construct a water main extension to all of the homes in the neighborhood and allowed owners to connect to those facilities at a discounted rate of $500 before November 2013; that the listing agent for the subject property attached the well test results and the letter from Aqua about the connection deadline to the MLS listing; that Ms. Kelly reviewed these documents, but failed to deliver them to her buyer clients; that Ms. Kelly maintains that she told her buyer clients that the well on the property was not contaminated and that water was available at the street, but the buyers do not recall this conversation; and that after closing, the buyers were informed by their neighbors about the contaminated wells in the neighborhood and now must pay $1,700 to connect to the Aqua utilities since they missed the deadline for the discounted rate.
LEATHERWOOD RENTALS INC (Ferguson) – By Consent, the Commission suspended the firm license of Leatherwood Rentals for a period of 12 months effective April 1, 2016. The Commission then stayed the suspension for a probationary period of 12 months. The Commission found that Leatherwood Rentals failed to maintain trust account records, in compliance with Commission Law and rules; that Leatherwood Rentals earned a commission for selling security deposit insurance but failed to disclose the commission to either renters or the firm’s property owner clients; that Leatherwood Rentals deposited trust monies into an interest bearing account but failed to first obtain written authorization from its property owner clients; that the vacation rental agreements used by Leatherwood Rentals did not contain a recitation of the rights and obligations of tenants and firm as required by the Real Estate License Law and improperly identified the bank at which rental payments were deposited; and that the management agreements utilized by Leatherwood Rentals did not contain required anti-discrimination language and did not include a broker’s license number.
PAMELA J. MCCLURE (Pelham, Alabama) – By Consent, the Commission suspended the broker license of Ms. McClure for a period of six months effective July 1, 2016. One month of the suspension was active with the remainder stayed. The Commission found that Ms. McClure, a licensed North Carolina real estate broker, in and around June 2015, acting as a broker-in-charge failed to actively and directly supervise two provisional brokers affiliated with her firm; that Provisional Broker A lives approximately 395 miles from Ms. McClure’s North Carolina firm and Provisional Broker B lives approximately 100 miles from Respondent’s North Carolina firm; that Ms. McClure herself resides in Georgia, 100 miles from the North Carolina firm; that Ms. McClure failed to respond to multiple Letters of Inquiry and mostly communicates with brokers and staff via telephone and drop box; and that Ms. McClure failed to maintain her firm’s transaction files in full compliance with Commission rules.
MARIO ANTONIO MITCHELL (Charlotte) – By Consent, the Commission reprimanded Mr. Mitchell effective July 1, 2016. The Commission found that on January 22, 2015, the Virginia Department of Professional and Occupational Regulation (DPOR) revoked Mr. Mitchell’s Virginia real estate license and imposed a fine of $2,250. The Commission noted that the basis of the DPOR’s action was a business deal in which Mr. Mitchell was a principal and Mr. Mitchell’s failure to update his personal information not for his actions as a real estate broker.
ALMETTA WANETTA MOORE (Fayetteville) – By Consent, the Commission permanently revoked the broker license of Ms. Moore effective July 1, 2016. The Commission found that Ms. Moore, acting as the qualifying broker and broker-in-charge of Burch Property Management failed to maintain trust account records in accordance with the Real Estate License Law and Commission rules, failed to safeguard trust money belonging to others, engaged in deficit spending from her firm’s trust account, failed to provide trust account documentation to Commission staff despite numerous requests, and failed to remit tenant security deposits in a timely manner.
GARY RICHARD NUNES (Burnsville) By Consent, the Commission suspended the broker license of Mr. Nunes for a period of 18 months effective January 13, 2016. The Commission found that Mr. Nunes conducted property management services and was qualifying broker of a licensed real estate brokerage firm; that from July 1, 2014, until September 11, 2015, Mr. Nunes operated the firm, maintained money belonging to others in trust accounts, and advertised services without a broker-in-charge; that Mr. Nunes failed to maintain trust account records compliant with Commission rules; and that Mr. Nunes’ vacation rental agreements did not comply with the North Carolina Vacation Rental Act.
BECKIE LEE PAHNER (Foxfire Village) – By Consent, the Commission suspended the broker license of Ms. Pahner for a period of 18 months effective July 1, 2016. The Commission then stayed the suspension for a probationary period ending January 1, 2018. The Commission found that Ms. Pahner acted as the qualifying broker and broker-in-charge of a licensed real estate brokerage firm; that, on August 29, 2014, one of Ms. Pahner’s property owner clients died and from September 2014 until March 2015, Ms. Pahner collected rental proceeds from the deceased’s properties and deposited them into her operating account; that Ms. Pahner paid the balance of the deceased’s rental proceeds to the attorney for the estate in March 2015; and that Ms. Pahner failed to maintain her firm’s trust account and trust account records in compliance with the Real Estate License Law and Commission rules.
PATRICK PROPERTIES INC. (Raleigh) – By Consent, the Commission suspended the license of Patrick Properties for a period of 24 months effective October 1, 2016. The Commission then stayed the suspension for a probation period from October 1, 2016 through September 30, 2018. The Commission found that Patrick Properties managed an occupied residential building (“the property”) and also acted as co-listing agent during its sale; that in September 2014, during the due diligence period, a water test was performed on the well which tested positive for coliform bacteria and the buyer requested copies of current leases for the tenants of the property; that some of the tenant leases contained the phrase “do not drink” where it mentioned water as the utility; that this phrase was written into the leases by the agent, unbeknownst to the property owner; that the buyer later terminated the purchase contract; that Patrick Properties failed to notify the tenants and failed to notify the property owner of the September 2014 well water test; and that the property owner did not begin treatment of the well until January 2016.
PROPERTY MANAGEMENT EXPERTS, INC. (Charlotte) – By Consent, the Commission permanently revoked the firm license of Property Management Experts effective July 21, 2016. The Commission found that Property Management Experts managed a property and at the end of the tenant’s initial term placed the tenant on a month-to-month lease despite the client’s request for an 8-month lease; that in November 2013, the landlord gave notice of termination to Property Management Experts via email and requested that the tenant security deposit (“TSD”) be returned; that, despite multiple requests, Property Management Experts failed to return the TSD until February of 2014; that, furthermore, Property Management Experts deducted the agreed-upon early termination fee of $270 from the TSD; that an audit was performed on Property Management Experts’ trust accounts and the auditor found: that some accounts were not designated to be “trust” or “escrow”, despite containing rent deposits and property owner disbursements; evidence of previous shortages; that Property Management Experts failed to maintain ledgers, journals, a check register, and failed to make monthly reconciliations; and evidence of comingling. The Commission noted that, at the time of the audit, the balances in the trust accounts were adequate to cover the security deposits balance because a large deposit was made into the account three days before the auditor’s scheduled visit.
RAINA EUNICE PURVIS fka RAINA EUNICE PELZER (Charlotte) – By Consent, the Commission suspended the broker license of Ms. Purvis for a period of 24 months effective July 21, 2016. The Commission then stayed the suspension on certain conditions for a probationary period from July 21, 2016 through July 20, 2018 and prohibited Ms. Purvis from acting as a broker-in-charge and engaging in property management for a period of three years. The Commission found that Ms. Purvis, acting as the qualifying broker and broker-in-charge of a licensed real estate firm, managed a property and, at the end of the tenant’s initial term, placed the tenant on a month-to-month lease despite the client’s request for an 8-month lease; that in November 2013, the landlord gave notice of termination to Ms. Purvis via email and requested that the tenant security deposit (“TSD”) be returned; that, despite multiple requests, Ms. Purvis failed to return the TSD until February of 2014; that, furthermore, Ms. Purvis deducted the agreed-upon early termination fee of $270 from the TSD; that an audit was performed on Ms. Purvis’ trust accounts and the auditor found: that some accounts were not designated to be “trust” or “escrow”, despite containing rent deposits and property owner disbursements; evidence of previous shortages; that Ms. Purvis failed to maintain ledgers, journals, a check register, and failed to make monthly reconciliations; and evidence of comingling. The Commission noted that, at the time of the audit, the balances in the trust accounts were adequate to cover the security deposits balance because Ms. Purvis made a large deposit into the account three days before the auditor’s scheduled visit.
CHASITY RENEE ROBBINS (Lexington) – By Consent, the Commission suspended the broker license of Ms. Robbins for a period of three months effective May 1, 2016. The Commission found that Ms. Robbins entered into a listing agreement on April 16, 2015 to sell lakefront property and agreed to advertise the property on the MLS and on the Internet; that Ms. Robbins failed to deliver the listing agreement to her broker-in-charge and failed to enter the property on the MLS system until June 25,2016; that Ms. Robbins failed to respond to two Letters of Inquiry sent by Commission staff and failed to respond to attempts by Commission staff to communicate with her by telephone and mail.
CHRISTINA MARIE SERAFINO (Cary) – By Consent, the Commission reprimanded Ms. Serafino effective September 20, 2016. The Commission found that Ms. Serafino represented out-of-state buyers of a property; that an inspection was performed for the property which revealed that the home was clad in hardboard siding rather than fiber cement, as advertised on the MLS; that Ms. Serafino failed to notify the listing agent of the difference in siding as indicated on the MLS; that the home was actually clad in hardboard siding as well as some fiber cement siding; that Ms. Serafino agreed to verify that the repair requests were completed prior to closing; and that Ms. Serafino performed a walk-through on the day of closing, but failed to review all receipts for work performed and failed to retain all copies of receipts received for her files.
ANU SHARMA (Greensboro) – By Consent, the Commission reprimanded Mr. Sharma effective September 1, 2016. The Commission found that Mr. Sharma, in and around November 2015, acted as a property manager and collected rental proceeds and tenant security deposits through an unlicensed firm; that Mr. Sharma collected rents in cash, but failed to provide a receipt or deposit the funds within three days; that Mr. Sharma failed to provide monthly statements to landlord-clients; that Mr. Sharma failed to designate himself as a broker-in-charge; and that Mr. Sharma failed to maintain a personal ledger or trial balance in compliance with Commission rules. The Commission noted that Mr. Sharma has signed a Cease and Desist Agreement on behalf of his unlicensed firm and has stopped performing property management services.
KELLY R. SMITH (Raleigh) – The Commission accepted the voluntary surrender of the broker license of Ms. Smith for a period of two years effective April 20, 2016. The Commission dismissed without prejudice allegations that Ms. Smith violated provisions of the Real Estate License Law and Commission rules. Ms. Smith neither admitted nor denied misconduct.
JONATHAN LEE WASHINGTON (Greensboro) – By Consent, the Commission revoked the broker license of Mr. Washington effective June 1, 2016. The Commission found that Mr. Washington, acting as the broker-in-charge of his own sole proprietorship, converted earnest money deposits for personal expenses; that Mr. Washington admits that he often used the earnest money deposits to cover his personal expenses; that a records inspection completed by a Commission representative found negative account balances, a number of cash withdrawals, and checks made payable to cash from Mr. Washington’s escrow account; that Mr. Washington failed to maintain trust account records and client funds in compliance with Commission rules including failure to maintain and deposit funds in a designated trust account and failing to maintain transaction records; and that the records that Mr. Washington did maintain showed forms signed incorrectly with inaccurate dates.
WESLEY DENNIS WHITSON (Ferguson) – By Consent, the Commission suspended the broker license of Mr. Whitson for a period of 12 months effective April 1, 2016. The Commission then stayed the suspension for a probationary period of 12 months. The Commission found that Mr. Whitson, acting as broker-in-charge of a real estate brokerage firm, failed to: maintain trust account records in compliance with Commission Laws and rules; that Mr. Whitson earned a commission for selling security deposit insurance but failed to disclose the commission to either renters or the firm’s property owner clients; that Mr. Whitson deposited trust monies into an interest bearing account but failed to first obtain written authorization from its property owner clients; that the vacation rental agreements used by Mr. Whitson did not contain a recitation of the rights and obligations of tenants and firm as required by the Real Estate License Law and improperly identified the bank at which rental payments were deposited; and that the management agreements utilized by Mr. Whitson did not contain required anti-discrimination language and did not include a broker’s license number.
This article came from the October 2016-Vol47-2 edition of the bulletin.
By Elizabeth W. Penney, Information Officer
Earnest money is an important part of nearly all residential real estate contracts and not something that buyers like to lose. Many brokers do not understand or thoroughly explain to their buyer clients why earnest money may not be returned to a buyer if the buyer cannot obtain loan approval and thus cannot close.
Commonly, a buyer will agree on the Offer to Purchase and Contract standard form to a “due diligence period” within which to secure financing, conduct inspections of the property to be purchased, and inquire about any other matters important to the buyer. Within that period, established in the contract with the seller usually by a negotiated payment of a due diligence fee, the buyer may for any reason or no reason terminate by giving written notice of termination prior to the period’s expiration.
The “due diligence period” replaced a financing contingency in the Offer to Purchase and Contract form (developed by the North Carolina Association of REALTORS© and the North Carolina Bar Association) when it was revised in 2011. Brokers familiar with the older form may overlook or forget this change which, in effect, removed the ability to obtain financing as a contingency; instead, the buyer’s contingency became the period of time within which to inquire about the property and obtain financing. That period should be of sufficient length to enable completion of the buyer’s inquiries. If additional time is needed, it must be negotiated with the seller. Otherwise, the “due diligence period” expires without the buyer having terminated and the buyer is then unable to close, the contract provides that earnest money paid by the buyer belongs to the seller.
Under the standard form the buyer pays a fee in order to have a due diligence period. Termination before the end of the due diligence period will yield return of earnest money, but not the due diligence fee. During the due diligence period, the buyer should take the necessary steps to feel confident that their loan is going to be approved. A prequalification letter is not a loan guarantee, and buyers should be advised of the risk of moving forward after the due diligence period ends.
Ideally, buyer should consult with their lender prior to signing the offer and the buyer and broker should be confident that the due diligence period provided will allow sufficient time. The buyer’s lender should provide feedback so that the buyer is comfortable in deciding whether to terminate or proceed with the transaction. The standard form contract clearly states the loan is not a condition of the contract.
Moving forward after due diligence implies that the buyer is confident that the loan will be funded and puts the earnest money at risk if the buyer later terminates. Brokers must explain to their buyer clients about the due diligence process and the buyer’s risk if they continue past due diligence.
Offer to Purchase and Contract Standard Form
Section 1, Paragraphs h, i, j
(h) “Due Diligence”: Buyer’s opportunity during the Due Diligence Period to investigate the Property and the transaction contemplated by this Contract, including but not necessarily limited to the matters described in Paragraph 4 below, to decide whether Buyer, in Buyer’s sole discretion, will proceed with or terminate the transaction.
(i) “Due Diligence Fee”: A negotiated amount, if any, paid by Buyer to Seller with this Contract for Buyer’s right to conduct Due Diligence during the Due Diligence Period. It shall be the property of Seller upon the Effective Date and shall be a credit to Buyer at Closing. The Due Diligence Fee shall be non-refundable except in the event of a material breach of this Contract by Seller, or if this Contract is terminated under Paragraph 8(l) or Paragraph 12, or as otherwise provided in any addendum hereto. Buyer and Seller each expressly waive any right that they may have to deny the right to conduct Due Diligence or to assert any defense as to the enforceability of this Contract based on the absence or alleged insufficiency of any Due Diligence Fee, it being the intent of the parties to create a legally binding contract for the purchase and sale of the Property without regard to the existence or amount of any Due Diligence Fee.
(j) “Due Diligence Period”: The period beginning on the Effective Date and extending through 5:00 p.m. on______________________________________________________________________________________________TIME BEING OF THE ESSENCE with regard to said date.
This article came from the May 2016-Vol47-1 edition of the bulletin.
By Jean Wolinski-Hobbs, Auditor/Investigator
The Real Estate Commission continues to receive complaints related to misrepresentations concerning bedrooms and septic permit disclosure despite the issue’s coverage in Update courses and Bulletin articles. Brokers can be disciplined for making a willful or negligent misrepresentation, whether in listing advertisements or other representations.
This article reviews four types of septic systems: municipal, community, on-site, or the combination of on-site septic and municipal, and outlines considerations for brokers when preparing advertisements or disclosures.
If a property is in an older neighborhood or if there are red flags such as a depression in the yard, or stones marking a tank and the seller indicates that the home is served by the municipal system, a broker should verify that information. Even if a property is connected to a municipal system, the homeowner is typically responsible for the sewer line running from the street to the property. Damage to this line from tree roots or otherwise is not usually covered by homeowners insurance. Verification of municipal connection can be obtained from either the city or county, depending on the property location. If the property is serviced fully by the municipality, the broker’s investigation will be complete.
Combination systems with municipal system connection may no longer have a permit on file. Brokers should be aware that city or county responsibility ends where the septic system connects to the municipal system. Issues with a pump connected to the septic tank, root damage to pipes in the yard or any other problem that occurs on the owner’s land will be left to the homeowner, potentially at considerable cost.
A broker should be careful not to advertise a property as having more bedrooms than the number permitted by the septic system permit. Although state law requires that on-site septic permits be maintained until they are no longer in use, there are a few counties where the records were not kept initially.
Issues in locating records can arise when the original septic permits recorded under the original builder or owner’s name and that information is unknown. In those instances, given the difficulty of verifying the permitted number of bedrooms, a broker should research tax records. If the property appears to have four bedrooms but the tax records indicate three bedrooms, that could indicate a septic permit’s limit. Ultimately, in cases when the permit cannot be located, brokers should disclose what they know: namely, that the property has an on-site septic system but the system permit was not located.
One concern with misrepresenting a property as having more bedrooms than the system permits is that the system could be overused and eventually fail. The health department can then prohibit further use of the system in order to prevent possible contamination of groundwater and to protect public health. If the system is repairable, lower occupancy limits can be imposed.
The Commission regularly reviews cases where brokers knowingly advertise properties as having more bedrooms than the permit allows but try to qualify it. For example, a broker advertises that the property has six bedrooms but in the property remarks discloses that the septic permit allows only three bedrooms. Such advertising is still deceptive and encourages overuse of the system by suggesting allowable occupancy by more people than the septic system was designed to handle.
Brokers should take reasonable steps to ensure that they are discovering and disclosing the correct sewage system utilized by any home they are listing. If the home is connected to an on-site septic system, then the property should be represented as having the amount of bedrooms as indicated on the permit. Buyer’s agents should be alert to any red flags and perform their own due diligence if there are concerns about the representations.
This article came from the May 2016-Vol47-1 edition of the bulletin.
By Pamela R. Rorie, Continuing Educator Officer
Real estate instructors, school officials and publisher representatives braved cold and icy conditions to attend the Commission’s 2016 Real Estate Educators Conference in Cary on February 15-16 at the Embassy Suites. Despite the inclement weather, the annual event drew an enthusiastic crowd of approximately 180 participants.
Commission Chair Cindy Chandler welcomed the group and introduced other Commission members attending the day-and-a-half conference. Commission Executive Director Miriam Baer initiated the morning session with a State of the Commission presentation, which highlighted “front burner” issues and described recent accomplishments and future projects.
Bruce Moyer, Director of Education and Licensing, and Janet Thoren, Director of Regulatory Affairs and Legal Counsel, jointly presented The Road Ahead, which informed educators of actions to be taken as a result of findings by the Instructor Task Force, and plans to substantially change the format of the North Carolina Real Estate Manual, and restructure Commission rules governing education programs.
Corean Hamlin, Education and Licensing Officer, explained the importance of specific and student-focused learning objectives in Are We There Yet? GPS for Your Classroom. Deborah Carpenter, Education and Examination Officer, recognized with Certificates of Achievement prelicensing schools and instructors whose students had exhibited outstanding performance on the license examination for the past year.
The North Carolina Real Estate Educators Association (NCREEA) held its spring meeting during the first-day luncheon and NCREEA President Arvil Price presented the Association’s “Program of the Year” award to Deborah Long for her continuing education elective course, You’ve Been Served: Real Estate Lawsuits That Changed the Business.
Chandler and Price jointly presented the Commission’s newly established Larry A. Outlaw Excellence in Education Award and the Association’s Educator of the Year award to educator and attorney Mel Black. The Outlaw award was established in memory of the late Commission Director of Education and Licensing who retired in 2014 after 35 years of service. Commission Vice Chair George Bell and former Chair Everett “Vic” Knight were also in attendance for the presentation.
Moyer began the afternoon session with comments relating to state-specific exam topics and other issues associated with the licensing exam and Hamlin explained the process of reviewing requests to waive the examination requirement. The first day concluded with a presentation by Moyer about the Instructor Performance Improvement Plans and a Continuing Education Update from Continuing Education Officer Pamela Rorie, who recounted the growth and improvements in the continuing education program over the past 22 years and announced the topics for the General and Broker-in-Charge Update (GENUP and BICUP) courses for the 2016-2017 license year.
Dr. Lawrence J. Fabrey, Senior Vice President of Psychometrics with Applied Measurement Professionals, Inc., opened the conference’s second day with an overview of the company’s history and a discussion of revisions to the licensing exam.
The conference concluded with a Case Studies & Open Forum conducted by members of the Commission Regulatory Affairs Division: Director Thoren, Assistant Director Charlene Moody, Deputy Legal Counsel Fred Moreno, Associate Legal Counsel II Eric Mine, and Associate Legal Counsel I Robert Patchett, who presented various application and disciplinary case scenarios and answered questions from the audience.
The Commission thanks North Carolina’s real estate educators for their continued interest and support, and congratulates Deborah Long and Mel Black for their achievements.
This article came from the May 2016-Vol47-1 edition of the bulletin.