“Between Two Firms” – A Regulatory Affairs Division Case Study

By Charlie Moody, Assistant Director, Regulatory Affairs Division

In a recent case, Commission staff received two complaints against a qualifying broker/broker-in-charge and his two firms.

The first complaint was related to the failure of the broker to withdraw a listing upon request of the client and the failure of the broker to deliver a copy of the executed listing agreement to his client.

This seemed like a relatively minor situation and even the complaining witness expressed his wish to withdraw the complaint once it had the desired effect, which was to get the broker to remove the property from the MLS.

However, the second complaint came in with yet another client alleging that the broker had failed to provide him with a copy of the executed listing agreement. That second complaint created the appearance of a pattern.

Also, the second complaint alleged that the broker rented the client’s property and failed to provide the client with a copy of the lease and even more importantly failed to turn over trust funds to the owner-client. Interviews of the broker, tenant and other witnesses were conducted and documentation collected by an investigator.

The broker’s transaction file for the first client contained only an MLS printout and the signed listing agreement. The broker could produce only an incomplete and unsigned listing agreement for the second transaction. Even the tenant didn’t get a copy of the signed lease from the broker.

The first page of the lease agreement, which the tenant was able to produce, named the wrong firm as the property manager. The named firm was licensed, with the broker designated as the qualifying broker, but there was no  designated broker-in-charge, making the firm ineligible to conduct sales or property management.

The broker’s excuse was that this was just a mistake and the named firm  was not conducting brokerage.  In fact, the investigator discovered the firm was actually conducting property management out of a separate office and the broker had two trust accounts as well as  property management agreements and leases in place and signed by the broker.

The broker also gave conflicting information about what he had done with the tenant security deposit and first months’ rent, and had no  documentary evidence to show the investigator where the money went. The broker expressed much confusion and lack of memory about many of these events. The Commission permanently revoked all three licenses.

 Lessons learned?

If you agree to be qualifying broker of a firm, you are responsible for ensuring that the firm has a broker-in-charge before doing any brokerage activity. If you conduct brokerage activity, deliver agency agreements to your clients and maintain a complete transaction file including the Working With Real Estate Agents brochure. If you collect funds, deposit those funds in a trust account and document receipt and disbursement. Documentation may also help when your memory doesn’t.

This article came from the February 2018-Vol48-3 edition of the bulletin.