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Disciplinary Actions

JAYNE A. ANDERSON (OCEAN ISLE BEACH) – By Consent, the Commission suspended the broker license of Anderson for a period of 12 months, effective June 10, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Anderson listed a vacant lot for sale in Brunswick County and had in her possession a copy of the Soil Evaluation that showed the lot did not perc. Anderson noted in the MLS that there was a Soil Evaluation but failed to attach the results or disclose that the lot did not perc.

JEFFREY S. BEISER (CHARLOTTE) – By Consent, the Commission suspended the broker license of Beiser for a period of 12 months, effective June 6, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that, acting as broker-in-charge of a sole proprietorship, Beiser listed a residential property for sale which went under contract with a buyer. Following their home inspection, the buyer terminated the contract and Beiser received a copy of the home inspection report via email.  Beiser failed to open or forward the home inspection report to his seller-client. Beiser re-listed the subject property, which went under contract with a second buyer who also had a home inspection performed. This buyer’s home inspection report noted the same issues with the subject property as the previous home inspection report. The subsequent buyer terminated during the due diligence period. Beiser then re-listed the subject property with an updated disclosure form reflecting the home inspection findings and a copy of the inspection report was added to the listing.

KARMEN K. BODGE (ELIZABETH CITY) – By Consent, the Commission reprimanded Bodge, effective June 1, 2023.  The Commission found that Bodge was the Director of New Agent Training for a firm during the subject transaction. Bodge became aware that the transaction was an all-cash transaction with a provisional broker acting as dual agent.  Bodge failed to adequately supervise the provisional broker regarding a proof-of-funds letter submitted by the buyers that was not reliable.   

JASON T. CHURCHMAN (WILMINGTON) – By Consent, the Commission suspended the broker license of Churchman for a period of 12 months, effective June 10, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Churchman represented a buyer purchasing a vacant lot. The listing agent advertised that the lot could be developed and represented that there was county water and sewer available on the street, but that the utilities ended at the house to the right of the subject property. Churchman failed to pursue further information from the Listing Agent or county about the perc test or the availability of the water and sewer prior to the buyer going under contract or closing.

ERIC M. CORNELISON (HIGH POINT) – By Consent, the Commission suspended the broker license of Cornelison for a period of 6 months, effective June 15, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Cornelison, acting as broker-in-charge, supervised a provisional broker who submitted an offer containing confusing language regarding the conveyance of a refrigerator, resulting in a later dispute. Cornelison assisted in negotiating a payment from the listing agent to the buyer but failed to adequately supervise the provisional broker during the transaction, leading to the provisional broker accepting a cash payment from the listing agent which she delivered to her buyer-client without informing the lender or closing attorney.

URIAH L. DORTCH (RALEIGH) – By Consent, the Commission suspended the broker license of Dortch for a period of 6 months, effective June 15, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Dortch listed property he had under construction with a listing broker. The property was advertised as having city water. Dortch had started construction of a well after being informed that city water was not available. Dortch failed to disclose to the listing agent that the subject property would utilize a private well. After the property went under contract, the buyers learned that the property would be served by a well. Dortch offered to terminate and refund all deposits but the buyers chose to close. 

KENNETH R. EDWARDS, JR. (ROCKINGHAM) – By Consent, the Commission suspended the broker license of Edwards for a period of 12 months, effective June 1, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Edwards represented the buyers of the subject property and failed to disclose the possibility of a 4-lane bypass planned by the North Carolina Department of Transportation that could affect the subject property.

JOHN K. GRAYSON (SOUTHPORT) – By Consent, the Commission suspended the broker license of Grayson for a period of 12 months, but stayed the suspension following a 6 month active suspension.  The Commission found that Grayson advertised and leased properties managed by Property Management Services, Inc. through Discovernchomes.com.  Grayson failed to affiliate with the firm and to obtain written agency agreements with owners. Beginning in 2018 and into early 2019, Grayson advertised and leased one such property to a tenant on a month-to-month basis. Grayson failed to inform the owners that the property had been rented for March 2019.  When the owners notified Grayson of their intention to use the unit during the month of March, Grayson attempted but failed to relocate the tenant to another unit.  Grayson then tried to force the tenant to vacate the property by misrepresenting to security personnel and others that the tenant was trespassing and did not have a lease.

JOSHUA T. GREENWALD (CHARLOTTE) – By Consent, the Commission suspended the broker license of Greenwald for a period of 12 months, effective June 6, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Greenwald listed a residential property for sale, which contained multiple units, that was being advertised as income producing property. The property owner requested that Greenwald not allow showings to take place and to not inform the tenants of the sale until contract formation, so as not to disturb their quiet enjoyment. For this reason, Greenwald failed to measure the subject property or have it professionally measured, instead relying on the rent rolls of the current property management company. Greenwald advertised the subject property as having 3,352 square feet of living area. The property went under contract with a buyer whose appraisal showed the subject property as having 2,872 square feet, a difference of 480 square feet or a 15.4% difference. When presented with this information, Greenwald immediately corrected his listing to reflect the correct square footage. The buyer then terminated the contract when he and the seller could not agree on a price change to the contract.

ADRIENNE H. HAGERMAN (GREENSBORO) – By Consent, the Commission suspended the broker license of Hagerman for a period of 6 months, effective June 15, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Hagerman, as a provisional broker representing a buyer client, submitted an offer that contained confusing language regarding the conveyance of a refrigerator, resulting in a later dispute. Hagerman negotiated a payment from the listing agent for the removed refrigerator. Hagerman accepted a cash payment from the listing agent and failed to deliver the cash to her broker-in-charge, but instead immediately delivered the cash to her buyer client.  Hagerman failed to inform the lender or closing attorney about the negotiated payment prior to closing.

KATHERINE R. HICKMAN (CHARLOTTE) – By Consent, the Commission reprimanded Hickman effective June 6, 2023. The Commission found that Hickman acted as the agent for the buyer in the purchase of residential real property. During this transaction, a number of material issues with the subject property were discovered through various inspections. The seller and buyer agreed to a reduced price without any repairs being made prior to closing. The new owner then made some cosmetic updates to the subject property’s interior, but otherwise did not address other material issues. Hickman then listed the subject property and failed to disclose the outstanding material issues. The subject property went under contract two separate times with both buyers terminating during the due diligence period when their respective home inspections discovered similar material issues with the subject property. The Commission notes that both buyers have been refunded their respective due diligence fees and expenses, and the property was removed from the sales market.

TAMARA L. HILL (RALEIGH) – By Consent, the Commission reprimanded Hill effective June 15, 2023. The Commission found that Hill acted as the buyer’s agent for the purchase of a property and received a home inspection report that noted material issues with a deck and electrical system. Months after the purchase, the buyers informed the Hill they had carried out a variety of improvements to the property and Hill believed this included addressing the issues noted in the inspection report.  Hill later acted as a listing agent for the sale of the same property but failed to disclose the issues found earlier or to .confirm that repairs had been made. The buyers’ inspection report noted the same problems with the deck and electrical system and was almost identical to the 2020 inspection. The parties agreed to a price reduction and the buyer closed on the subject property.

BALA K. KAMUJU (CARY) – By Consent, the Commission suspended the broker license of Kumuju for a period of 12 months, effective June 1, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Kumuju, as broker-in-charge of a licensed firm, was unaware that a broker associated with his firm conducted brokerage during a time when her license was on inactive status for failing to complete continuing education.  Kumuju failed to renew his firm’s license and it was expired for 10 days before being renewed.  Kumuju recreated and backdated 5 of 10 agency agreements provided to the Commission as he could not locate originals.

KRIS & ASSOCIATES PROPERTY MANAGEMENT (CARY) – By Consent, the Commission suspended the firm broker license for a period of 12 months, effective June 1, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that the Firm was unaware that a broker associated with the Firm was conducting brokerage during a time when her license was on inactive status for failing to complete continuing education. The Firm failed to renew its license and was expired for 10 days before renewing.  The Firm’s broker-in-charge recreated and backdated 5 of 10 agency agreements provided to the Commission as it did not have originals.

LAKE WYLIE MARKET CENTER LLC (CHARLOTTE) – By Consent, the Commission reprimanded the firm effective June 15, 2023.  The Commission found that the Firm represented an out of state buyer purchasing property sight-unseen.  The Firm, through its affiliated broker, failed to ensure that the buyer agency agreement included accurate dates and was completed prior to a transaction closing. The Firm has instituted additional policies and procedures for reviewing document compliance.

JOHN M. LEES (RALEIGH) – By Consent, the Commission suspended the broker license of Lees for a period of 6 months, effective June 15, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Lees acted as the listing agent on behalf of a licensed seller for the sale of a home under construction. Lees advertised that the property would have city water and a septic system although the seller had started construction of a well and had been informed that city water was not available. After the property went under contract, the buyers learned that the property would be served by a well. The seller offered to terminate and refund all deposits but the buyers chose to close. 

BRUCE W. MOYER (CHARLOTTE) – The Commission accepted the voluntary surrender of the real estate education approvals of Moyer effective June 14, 2023. The Commission dismissed without prejudice allegations that Moyer violated provisions of the Real Estate License Law and Commission Rules. Moyer neither admitted nor denied misconduct.

CARLOS OROZCO (CHARLOTTE) – By Consent, the Commission suspended the broker license of Orozco for a period of 18 months, effective June 6, 2023.  The Commission then stayed the suspension following a 3 month active suspension period. Orozco is also prohibited from acting as, or becoming broker-in-charge eligible for a period of 5 years. The Commission found that Orozco represented a buyer in a residential purchase transaction for a property that was advertised as a 4-bedroom home. A few days after going under contract, the listing agent emailed Orozco a copy of the septic permit, which only allowed for a 2-bedroom home. Orozco failed to inform his buyer-client of the septic information. Orozco’s buyer-client closed on the subject property and then hired Orozco to list the subject property for sale a few months later. Orozco at this time advertised the subject property as a 4-bedroom home, despite being in possession of the 2-bedroom septic permit, and failed to disclose this material issue at the time one offer was made on the subject property.

DAVID OWENS (TARBORO) – Following a hearing, the Commission revoked the broker license of Owens effective June 13th, 2023, with no right to reapply for reinstatement for a period of two years. The Commission found that Owens was convicted of Felony Death by Motor Vehicle, as well as Driving While Impaired and was sentenced to 55-78 months in the North Carolina Department of Adult Corrections.

JORDAN E. STEPANSKY (WAYNESVILLE) – By Consent, the Commission suspended the broker license of Stepansky for a period of 12 months, effective June 15, 2023.  The Commission then stayed the suspension in its entirety. The Commission found that Stepansky represented buyer-clients in a residential transaction and failed to thoroughly review the seller-provided home inspection report and discuss it with the buyer-clients.  Stepansky failed to discuss incorporating the cost of a UV filter for the well into the sales price with the buyer-clients prior to discussing it with the lender and preparing a contract amendment form. Stepansky failed to discover a square footage discrepancy of 16%.  

Diversity, Equity, and Inclusion Updates: United States Attorney’s Office Hosts “United Against Hate” Outreach Program

The United States Attorney’s Office (USAO), Eastern District of North Carolina hosted “United Against Hate”, a community outreach program on Wednesday, June 20th. The event featured representatives from the USAO civil and criminal division, FBI, State and local law enforcement, Legal Aid of NC, and other State and local agencies/organizations and served to educate the community on how to identify and report hate crimes.

One event panel highlighted the stories of victims of Fair Housing violations which resulted in both a criminal conviction and a civil settlement. In the case of the criminal conviction, the defendant was sentenced to 28 months in federal prison for using racial slurs and threatening the lives of a Black family, which is a criminal violation of the Federal Fair Housing Act. The civil settlement involved employees of a non-profit that administered a federal housing program who were alleged to have sexually harassed several women, including asking for sexual favors in exchange for Section 8 housing vouchers, which is a violation of the Federal Fair Housing Act. The non-profit and former employees involved were ordered to pay a $2.7 million settlement to the women named in the lawsuit, a fund for other victims who have yet to come forward, and attorneys’ fees.

This event was a part of the USAO’s larger United Against Hate Initiative, which was established in 2022 to build stronger relationships of trust between members of the public, law enforcement, community organizations, and other government agencies in an effort to stop unlawful acts of hate and to improve reporting of such crimes.

To learn more about any of the initiatives or cases mentioned in this article refer to the links below:

USAOs United Against Hate Initiative 

Legal Aid of NC Fair Housing Criminal Conviction

Legal Aid of NC Fair Housing Civil Settlement

It’s Renewal Time!

Have you renewed your license? If not, do you know how to renew your license?

When do I renew?

The annual period for renewal of your real estate license began at midnight on May 15 and continues until 11:59 pm on June 30.

How do I renew?

  1. Go the Commission’s homepage, www.ncrec.gov.
  2. Click on Renew My Broker License.
  3. Enter your license number and PIN (password). Your PIN will be the last four digits of your Social Security number unless you have changed it.
  4. Verify your contact information, and update information if needed.
  5. Provide the “Employee Misclassification” disclosure and certification.
  6. If you are a Broker-in-Charge, you will be required to disclose information regarding your trust account(s) and any criminal convictions or disciplinary actions that have occurred within the previous year, if applicable.
  7. Pay the $45 renewal fee by Visa, MasterCard, Discover, American Express, or PayPal.

How much is the renewal fee?

The renewal fee is $45.00. You may pay by Visa, MasterCard, Discover, American Express, or PayPal.

Will I get a receipt?

Yes. A printable confirmation of renewal will appear on your screen when the process is complete.

Will the Commission mail me a new pocket card?

No. A link to download your new digital pocket card will appear on your screen when the process is complete. You may print a copy of the pocket card if you prefer to have a paper copy.

I haven’t completed CE, yet. Can I still renew?

Yes. Be sure to renew your license by June 30, even if you do not complete your continuing education by June 10. If you don’t renew, your license will expire.

Can I pay my renewal fee by check?

No. Per Commission Rule 58A .0503, you must renew online.

Can I call the Commission office and pay by phone?

No. Per Commission Rule 58A .0503, you must renew online.

Can I go to the Commission office and pay in person?

If you come to the Commission office, you may renew and pay online, using a computer in our lobby. No cash or checks will be accepted, even in person.

What will happen if I don’t renew by June 30?

If you do not renew your license online by 11:59 pm on June 30, your license will expire. To reinstate an expired license, you must pay a $90 fee between July 1 and December 31. Failure to reinstate the former license by December 31 will result in your having to submit a new application, including application fee and criminal background report. You will also be required to take additional education and/or pass the state license examination. https://www.ncrec.gov/Licensing/Reinstatement

NOTE: If you are a BIC or BIC Eligible and your license expires or changes to inactive status on July 1, you will automatically lose BIC Eligible status and, in turn, BIC designation (if applicable). If that happens, and you wish to regain BIC Eligible status, you must (1) return the license to active status; (2) meet the experience requirements for BIC designation; (3) take the 12-hour Broker-in-Charge Course before re-designation if it has not been completed within the previous 12 months; and (4) complete and submit the Request for BIC Eligible Status and/or Designation form (REC 2.25). Do NOT take the 12- hour BIC Course before your license is on active status! Refer to Rule 58A. 0110 for detailed instructions regarding regaining BIC Eligible status and BIC designation.

NOTE: If a BICs license expires or goes inactive, all affiliated brokers will lose their affiliation with the brokerage. Although affiliated full brokers will remain on active status at their home address, provisional brokers will be marked inactive. Once a BIC has completed the requirements for an active license, regained BIC Eligible status, and designated themselves as BIC of the brokerage, they must re-affiliate all brokers again with the brokerage using Form 2.08, License Activation and Affiliation.

Questions about the renewal process?

If you have questions about the renewal process, please watch the Commission’s Renewal Video which is posted in the Video Library or email us at LS@ncrec.gov.

Reminder:The article, “Renewing Your Real Estate License is a SERIOUS Matter” was published in the May eBulletin to remind brokers to renew their license and the firm’s license if they are the QB.

Reminder: June 10 is IMPORTANT!

Have you taken your CE courses for the 2022-2023 license year? Do you know which courses you need to take?

The CE deadline for all real estate licensees is June 10 and brokers must ensure they complete their annual continuing education requirements to maintain an active real estate license.

Rule 58A .1702 requires provisional brokers and non-BIC brokers to take the General Update course and one Commission-approved elective. BICs and BIC Eligible brokers must take the BICUP (Broker-in-Charge Update) course and one Commission-approved elective each year in order to maintain BIC Eligible status as well as an active license status.

If you are a BIC or BIC Eligible broker and you take the General Update course and an elective, you will maintain an active license but you will lose BIC Eligible status (and, in turn, BIC designation) on July 1st. Instead, if you are a BIC or BIC-eligible, be sure to take the BIC Update.

If a BIC loses their BIC designation because their license expires, goes inactive, or because they fail to complete the proper CE, all brokers affiliated with the BIC lose that affiliation and any affiliated provisional brokers will also go on inactive status. All brokers will then have to be reaffiliated after the BIC regains the BIC designation.

License Record

All brokers should log into their license record on the Commission’s website to check their license status before registering for a CE course. To access your license record:

  1. go to www.ncrec.gov;
  2. click on Licensing;
  3. click on Licensee Login;
  4. enter your License Number and your Password (your Password is the last four digits of your SSN if you have not changed it); and
  5. click on View/Update License Record.

After you log in, you will see the View/Update Information page. This page will show whether you currently hold BIC Eligible status. If you do, Yes will appear beside BIC Eligible status. If you do not currently hold the status, No will appear beside BIC Eligible status.

CE Course Search

Brokers have the ability to take Update and elective courses in a variety of formats.  Update courses are offered in person and via synchronous distance learning (aka, “live online” instruction using Zoom or similar technologies).  Elective courses are also offered via distance courses (self-paced online courses). Update courses are not allowed to be offered as self-paced online courses.

To search for in-person and “live-online” CE Update and elective courses:

  1. go to www.ncrec.gov;
  2. click on the Education menu;
  3. click on Search CE Course Schedules; and
  4. click on Search Providers.

To search for providers that offer self-paced, online CE elective courses:

  1. go to www.ncrec.gov;
  2. click on the Education menu; and
  3. click on List of Distance CE Providers.

Lastly, please ensure you complete the appropriate CE based upon your license status prior to June 10, to prevent having an inactive license on July 1 due to incomplete education.

For more information or to ask a question, contact the Education and Licensing Division at LS@ncrec.gov.

Concerns When “Showing Agents” Are Not Affiliated with Your Brokerage

By Len Elder, Director of Education and Licensing Division

A current trend involves listing and buyer agents hiring licensees not affiliated with their brokerage to show a property to a buyer. Sometimes the showing agents are hired and paid directly by brokers affiliated with a firm other than the listing or buyer agent’s firm. Sometimes showing companies such as Showami.com, ShowforME.com, or Instashowing.com are used.

There are a number of concerns for the brokers involved on both sides of this practice when the brokers are not affiliated with the same firm. Here are the top ten:

  1. What is the agency role of the showing broker? The showing agents are probably not operating under a valid existing agency agreement. They have not been hired by or authorized to work on behalf of the buyer. The buyer agency agreement (whether oral or written) is with the buyer agent’s affiliated firm of which the showing agent is not a part. Because all representation in North Carolina must be by express agreement, such relationships create compliance issues with the provisions of Rule 58A .0104(a) of the North Carolina Real Estate Commission rules.

Some brokers have suggested that the showing agent is acting as a seller subagent. We previously provided a relevant eBulletin article on this matter, Getting Agency Representation Right: Clarifying the Practice of Seller Subagency. It is questionable whether the showing brokers have met the appropriate requirements to legally practice subagency. Even assuming the showing agent is a subagent of the seller, has the buyer been advised that everything the buyer said during the showing would have to be reported back to the listing agent and/or seller? We doubt that showing agents are operating in this fashion.

Commission Rule 58A .0104(c) requires that brokers in every real estate sales transaction at first substantial contact with a prospective buyer or seller provide and review the Working with Real Estate Agents Disclosure. Brokers have never been able to assert that they are exempt from agency disclosure because an agent with a different firm already provided the disclosure to the consumer. In instances where the showing agent is not affiliated with either the listing firm or the firm representing the buyer, it is imperative that the showing agent comply with the agency disclosure requirement. This is particularly true when the situation that arises creates confusion with the buyer about the role of the showing agent.

To prevent the buyer from employing the showing agent rather than continuing to work with the hiring broker, some showing agents are being required to enter into restrictive agreements. As an example, some of the companies that provide showing agents forbid the showing agent from entering into an agency relationship with the buyer and require that the showing broker respect the presumed exclusive nature of the buyer’s relationship with the hiring broker.

In North Carolina, the only way that brokers can create an exclusive buyer agency agreement is to have a written agreement. Many brokers in NC initially work with buyers on an oral basis. This is permitted under the rule, but Rule 58A .0104(a) prohibits any broker working under an oral agency agreement from binding the buyer for a period of time or restricting the buyer’s right to work with other agents. Brokers cannot mutually agree with each other, or with an outside third party, to act in a way that is contrary to the Commission’s rules.

Some showing agent agreements actually contain language that prohibit the showing agent from making any comments, disclosures, or representations to the buyer about material defects. Brokers cannot by private agreement with each other or with an outside company limit their fiduciary obligations required by state law.

It appears that in many transactions, a broker from one firm directly pays either a set amount or an hourly amount to a broker from another firm. Depending upon the particular facts of the transaction, such an arrangement may be in violation of Commission Rule A .0120(b) which states: An affiliated broker shall not be paid a commission or referral fee directly by anyone other than their current BIC or the person who served as their BIC at the time of the transaction. For brokers to comply with the Rule, the fees earned for providing brokerage services must be distributed through the showing broker’s BICs.

Commission Rule 58A .0109 prohibits a broker from paying an unlicensed person or entity compensation for brokerage services. When a broker enters into an agreement to pay a third party company fees to retain a showing agent, that third party company must be a licensed brokerage. Showing fees are compensation for brokerage activity, because NC rules and statutes prevent unlicensed people from showing the property of another for sale for compensation. Even unlicensed assistants in direct employ of a licensed brokerage cannot show property in sales transactions. Is the third party company that the broker is paying to obtain showing services properly licensed in North Carolina? If not, the broker is probably violating Commission Rules.

Because showing fees are compensation for brokerage services, Commission Rule 58A .0109 also requires full and complete disclosure to, and consent of, the principals in the transaction. This means that the showing agent would need proof of disclosure and consent from one of the principals in the transaction prior to receiving any compensation for showing a property. Has the showing agent provided this disclosure and obtained this consent?

Most Errors & Omissions insurance policies do not extend coverage to brokers who are not affiliated with the insured brokerage. Likewise, most policies do not provide coverage to a broker when they are working outside of the scope of their affiliated brokerage. If there is an injury to a buyer, damage to the property, breakage of an item, water damage from a faucet left on, or theft because the property was not secured, there would likely be no E&O coverage. Brokers and Brokers-in-Charge are urged to carefully review their E&O policies to better understand the liability of using a non-affiliated broker as a showing agent.

Commission Rule 58A .0506(a) requires that provisional brokers be affiliated with a Broker-in-Charge in order for their license to be on active status and that they be directly supervised by the BIC with whom they are affiliated. With the limited exception of co-listing and co-selling in a team scenario, provisional brokers are prohibited from dual affiliation. This means that they cannot provide brokerage services outside of BIC supervision and their affiliation.

  1.  Are the brokers involved in the showings affiliating themselves with an unlicensed entity in order to provide brokerage services?

We already know that the showing of properties belonging to another for compensation is a licensed brokerage activity. Before brokers affiliate themselves with an entity that is going to pay them to show homes, brokers should make certain that the entity with whom they are affiliating is licensed. All entities in North Carolina that engage in brokerage services are required to comply with the firm licensing provisions of Commission Rule 58A. 0502.

There are a lot of pitfalls and liabilities that can be created when a broker uses a showing agent that is not affiliated with their brokerage. Brokers and Brokers-in-Charge are urged to carefully consider all of the above issues to ensure compliance with North Carolina statutes and Commission rules. Brokers-in-Charge are also urged to take the time and thought necessary to create written policies and procedures for their office regarding the use of non-affiliated showing agents.

Pitfalls in Property Management

This article will outline several of the common pitfalls that brokers may face when offering property management services.

Material Fact Disclosures

One of the biggest misunderstandings in property management is the idea that leasing is not the same as buying or selling real estate and, therefore, the same rules about material facts do not apply. This is false. Property managers have the same duty to discover and disclose material facts to potential tenants as do brokers involved in a sales transaction. Material facts are defined as:  information that could affect a reasonable person’s decision to buy, sell or LEASE.

Some common examples of issues that arise as material facts in a sales and/or lease transaction are:

  1. Septic systems. Are you advertising a home with a 3 bedroom septic permit with more bedrooms than the permit allows? What does the local municipality set as the occupancy limit?
  2. Disclosing HOA rules and covenants. Can a tenant park his work truck/van that has the business advertised on that vehicle? Can a tenant park on the street? Can a tenant install a satellite dish or have an above ground pool? Are there restrictions on the number and/or type of pets? Are there rental restrictions on the property affecting short term rentals like AirBnB & VRBO, or long term rentals?
  3. Are there flooding issues in the yard when it rains? Have there been structural issues in the home (e.g. moisture in the crawlspace, termites, truss repairs, fire)?
  4. Are you advertising the availability of high speed or fiber internet without having confirmed this with a provider?

Misrepresentation of a material fact can lead to a finding that a property manager has violated multiple sections of the License Law (NCGS § 93A-6) and can lead to disciplinary action.

Security Deposits

Tenant security deposits continue to be an issue for property managers who must be knowledgeable on the proper use of the deposit in order to make proper and timely decisions regarding disbursement of the deposit. The Tenant Security Deposit Act in NCGS § 42-51 outlines the permitted uses of the deposit, including, among other items, damage to the property, costs of re-renting a property if the tenant breaks the lease, and costs of storing a tenants belongings after eviction. NCGS 42-52 specifically states that normal wear and tear is not damage.

The question often arises about whether a lease provision will supersede GS 42-51. If the lease states, for example, upon move out the tenant must mow the lawn, replace all air filters and burned out bulbs, and clean the unit or the landlord will charge this against the deposit, can the deposit be used to cover these costs? As noted above, these items would generally be considered normal wear and tear rather than “damage” and therefore cannot be deducted from the security deposit. Whether these costs constitute a breach of the lease is a civil matter and the landlord or property manager should go to court to recover costs for items covered in the lease which are not specifically allowed in NCGS 42-51.   

So what should a property manager do if the landlord is insistent on charging for items against the deposit that the manager knows are not permitted? The manager should document their conversations with the landlord-client and may send the landlord the deposit. They must also inform the tenant that the landlord is in possession of the deposit and the disposition of the deposit is between the tenant and the landlord at this point. 

Keep in mind, however, that NCGS § 42-55 provides that the willful failure by a landlord to comply with the deposit notice requirements of the Tenant Security Deposit Act VOIDS the landlord’s right to retain any portion of the tenant security deposit. A property manager whose landlord-client insists on retaining tenant security deposits for “damages” about which the manager disagrees may want to consider whether they should retain that landlord-client in future.   

Communication

Problems of communications between property managers and tenants or landlords remain the leading cause of complaints filed against property managers. One of the most common issues is the work order request. Most Property Management Agreements (PMAs) have some language that allows a property manager to complete work that costs less than a certain dollar amount and requires landlord approval for all work over that amount. However, a property manager still has a duty to disclose to the landlord all repairs or other work that is done to their property. The property manager must save all receipts for such work and must disclose to the landlord and get consent for any fees charged by the property manager that are in addition to the vendor cost.

The biggest frustration tenants face is not knowing what is going on. The manager may be waiting for a required approval for work from a landlord or they may be getting multiple bids from vendors. Maybe the vendor is waiting for parts to come in. Whatever the delay, giving updates to the tenant and explaining the process would help them understand that their issue is not being ignored. For tenants who are waiting for something to be fixed so they can fully enjoy the home, it is a big deal. Communication on both ends is key!

Reminder: It is HERE!

Did you know that the 2023 edition of the North Carolina Real Estate Manual is now available for purchase in digital and print versions? This Manual includes assessments, revised comic strips that display agency relationships between brokers and consumers, and a database of sample contract forms.

The digital version of the Manual was first introduced by the Commission in 2019 and is routinely updated when there are changes in License Law and Commission rules.

Licensees who wish to access the digital version of the Manual must register for a subscription. A one-time $25.00 fee provides two full years of access.  

To access the digital version of the Manual:

  1. go to www.ncrec.gov;
  2. click on Publications;
  3. click on NC Real Estate Manual; and
  4. click Register for Digital Subscription.

NOTE: Once a licensee has registered for a digital subscription, they automatically receive access to the Manual.

To access the digital version of the Manual after purchase:

  1. go to https://rem.ncrec.gov;
  2. click on Sign In;
  3. enter your username and password that you used to register for the Manual; and
  4. click on the horizontal bars in the upper left to access the chapters.

Licensees who wish to order a print version of the Manual must pay $40.00.

To order a print copy of the 2023 edition of the Manual:

  1. go to www.ncrec.gov;
  2. click on Publications;
  3. click on NC Real Estate Manual; and
  4. click Order Here; and
  5. click NC Real Estate Manual 2023 edition.

NOTE: Per Rule 58H. 0205(b), Postlicensing courses shall utilize the current edition of the North Carolina Real Estate Manual. For more information about the NC Real Estate Manual, contact the Education and Licensing Division at LS@ncrec.gov.

Diversity, Equity, and Inclusion Updates

Interested in learning more about the North Carolina Real Estate Commission’s diversity, equity, and inclusion (DEI) programs and initiatives? Have a program that you’d like the North Carolina Real Estate Commission’s DEI Officer to present at? Using the request for program presenter form, on the Commission’s website, you may request to have the Commission’s DEI Officer present at your event. There are no fees to have the Commission’s DEI officer present, nor are gifts expected or accepted. Click here to learn more about the parameters for requesting the Commission’s DEI Officer as a presenter and to submit the request form.

Staff Appearances

Brian Heath, Consumer Protection Officer, spoke at the eXp Realty meeting on May 3.

Bruce Rinne, Information Officer, spoke at the Premier Sotheby’s International Realty meeting on May 3.

Charlie Moody, Assistant Director of Regulatory Affairs, spoke at the RRAR Realtor Giving Network meeting on May 5.

Sheryl Graham, Consumer Protection Officer, spoke at the Goldsboro Wayne County Association of Realtors meeting on May 17.

Minerva Mims, Diversity Equity Inclusion Officer, spoke at the Raleigh Regional Association of REALTORS meeting on May 18.

Current Stats: Monthly Licensee Count as of May 1, 2023