Check Allowed Occupancy Limits Before Advertising Property

By Peter B. Myers, Information Officer 

Each year, the Commission receives numerous complaints related to various types of misrepresentation by brokers. One common type of misrepresentation involves overstating the number of bedrooms or allowed occupancy limits of properties, whether they are being advertised for sale or for rent. Either way, a broker’s advertisement must NOT overstate or exceed the allowed limits and design parameters of the property’s sewage disposal system or occupancy permitted by the local municipality. In other words, be sure to check the limits imposed by the septic permit, specifically the number of bedrooms the septic permit allows, and occupancy limits of the local municipality.

When residential properties are built and served by on-site septic systems, the local permit department typically evaluates the site and determines the maximum number of bedrooms allowed based on the design of the system and the land’s ability to percolate wastewater into the ground. That’s why the evaluation was historically referred to as a “perc” test. The results of the test determine the maximum number of bedrooms allowed on the site.

Brokers must be aware of both bedroom and occupancy limitations in the sale, resale, and rental of properties with on-site sewage disposal systems. The Real Estate Commission expects all brokers to possess the skills and knowledge to accurately represent facts about such properties regarding the number of bedrooms and/or  maximum occupancy. The septic permit generally can be checked by making a phone call to the local permit department or by checking the department’s website. Checking the permit is especially important when there has been an addition or remodel to the property to increase the original number of bedrooms. A broker should not assume permits were issued for the construction. If the actual number of bedrooms in the property exceeds the number of bedrooms allowed on the septic permit, the listing broker may NOT represent the dwelling as having any more bedrooms than are indicated on the septic permit, even if there is a disclaimer made.

Many municipalities have occupancy limits for residential dwellings.  For properties being advertised for rent, the occupancy level is generally calculated by multiplying the number of bedrooms on the septic permit by two, based on a maximum of two occupants per bedroom. The maximum is, of course, calculated regardless of the actual number of beds the landlord might have set up inside the dwelling. Therefore, claiming a three-bedroom property “sleeps 12” because it has six sets of bunk beds is a misrepresentation if the local municipality limits occupancy to two persons per bedroom. If the licensee overstates the maximum occupancy in a rental home, the tenants might over-occupy the dwelling and overload the septic system, causing the system to fail.  Such system failure could result in not only the contamination of surrounding groundwater but also the potential condemnation of the property, not to mention costly repairs that would have to be made by the property owner.

Brokers must take reasonable steps to discover and disclose material facts and to ensure everything being advertised is correct, including the septic information. That means checking the number of bedrooms on the permit and calculating the maximum occupancy based municipality requirements. Buyer’s agents should also be alert to problems and red flags related to the septic system and septic permit, and whether the imposed limits match the actual number of bedrooms in the dwelling. It might be necessary for the buyer’s agent to verify the information advertised by the listing agent, and to therefore potentially alert the buyer client of problems.

In some cases, the permit department might not keep records permanently or the records might not be available for other reasons. In that case, it is reasonable to advertise based on the existing number of bedrooms but with the disclosure that the permit records are not available and therefore certain assumptions have been made by the listing agent.  Both listing and buyer agents should be able to explain to their clients the value of obtaining a septic permit and what information such permits provide.  Disclosures must always be made so that the potential buyer is made aware of material facts before the potential buyer makes an offer.

CAVEAT: Real Estate License Law prohibits misrepresentation, omission, or concealment of material facts; a course of misrepresentation through false advertising; and improper, dishonest, or fraudulent conduct. Willful or negligent misrepresentation of the occupancy design limits of a property’s on-site sewage disposal system violates the Real Estate License Law and may result in disciplinary action by the Commission.

This article came from the February 2017-Vol47-3 edition of the bulletin.

Miriam Baer Elected ARELLO® President

Miriam J. Baer, Executive Director of the Commission, has been elected President of the Association of Real Estate License Law Officials (ARELLO^® for a one-year term beginning in January 2017.

ARELLO^® is an international organization dedicated to promoting better administration and enforcement of real estate license and regulatory laws by its members.

During her 29 years with the Commission, Baer held numerous positions with ARELLO^®, including Senior District Vice President, member of the Board of Directors, and Chair of various committees.

ARELLO^® membership is organized into five districts with four comprised of the 50 states, U.S. territories, Bahamas and Bermuda, and Canadian provinces and one of members from Europe, Africa, Asia, Australia, and the Far East.

Working committees, the Board of Directors, and the Executive Committee carry out the organization’s mission to support jurisdictions in the administration and enforcement of real estate license laws and to promote excellence in real estate regulation.

Baer is the fifth person affiliated with the Commission to serve as President of ARELLO^®. Mary Frances Whitley, former Director of Administration, served as President in 2007; Phillip T. Fisher, former Executive Director, in 1991; A. P. “Red” Carlton, former Commission member and Chair, in 1985; and Joseph Schweidler, Commission  Secretary-Treasurer, in 1972.

This article came from the February 2017-Vol47-3 edition of the bulletin.

Corean Hamlin Named Education and Licensing Director

Corean E. Hamlin has been named Director of Education and Licensing for the Commission, effective December 14, 2016.

Hamlin joined the Commission as Education and Licensing Officer in 2014.

Hamlin holds a Master’s Degree from UNC-Greensboro and the Distinguished Real Estate Instructor (DREI) designation from the Real Estate Educators Association.

After a decade as a professional educator in other industries, Hamlin entered the real estate business, joining her family’s Asheville-based real estate firm as a residential sales broker in 2003.  From 2007-2014, Hamlin served as Instructor, Education Director, and Communication Director for the Asheville Board of Realtors®. She taught real estate prelicensing, postlicensing, and continuing education courses at Cumbie and Trull School of Real Estate from 2010-2014.

The primary responsibility of the Director of Education and Licensing is to plan and direct the Commission’s education, examination, and licensing programs and operations statewide.

This article came from the February 2017-Vol47-3 edition of the bulletin.

Commission Members Reappointed

In October 2016, then Governor Pat McCrory reappointed three members of the Commision for terms ending July 31, 2019: George Bell, Chair, of Winston-Salem; Leonard H. “Tony” Craver, Jr., of Durham; and Anna Gregory Wagoner of Winston-Salem.

This article came from the February 2017-Vol47-3 edition of the bulletin.

Patrice Willetts Appointed To Commission

Patrice Willetts of Wilmington was appointed to the North Carolina Real Estate Commission on October 12, 2016 by then Governor Pat McCrory for a term ending July 31, 2018.

Willetts succeeds Everett “Vic” Knight of Raleigh.

A broker with The Property Shop of the Carolinas in Wilmington, Willetts, formerly from New York and with 30 years of experience as a REALTOR^®, is a former president of the Wilmington Regional Association of REALTORS^® and the North Carolina Association of REALTORS^®.

She has been a member of the Wilmington Board of Adjustment and currently serves on the City of Wilmington/UNCW Community Relations Task Force.

Willetts is an approved instructor for the North Carolina Real Estate Commission and for the National Association of REALTORS^®.

A past president of the Wilmington Rotary Club, she was active with the Honor Flight program that works to take WWII Veterans to Washington, DC, to visit their memorial and Paws4people, which provides service dogs to veterans and children with medical needs.

The North Carolina Real Estate Commission is responsible for the regulation of approximately 100,000 real estate brokers and and firms in the state.

This article came from the February 2017-Vol47-3 edition of the bulletin.

Disciplinary Actions

JAMES MICHAEL BANKS (Raleigh) – By Consent, the Commission reprimanded Mr. Banks effective January 1, 2017. The Commission found that Mr. Banks, acting as the listing agent for the sale of a single-family residence, represented to his buyer that repairs were complete when the potential buyer discovered that repairs had not, in fact, been made prior to closing.

WANDA T. CANADY (Wallace) – By Consent, the Commission permanently revoked the broker license of Ms. Canady effective December 14, 2016. The Commission found that Ms. Canady, acting as the qualifying broker and broker-in-charge of a licensed real estate firm engaged in property management, failed to provide all of the requested trust account documentation requested by the Commission, failed to perform trust account reconciliations, failed to maintain a general ledger, and failed to maintain a trust account journal; that Ms. Canady could not account for all rents and security deposits received by the firm and failed to deposit all rent payments and security deposits received in cash into the trust account; and that Ms. Canady admitted to spending entrusted funds on expenses, other than for which the funds were intended, which led to deficit spending and a shortage in excess of $80,000 in the trust account

JOSEPH TREVOR CHERRY (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Cherry for a period of 24 months effective September 1, 2016. The Commission found that Mr. Cherry, acting as the broker-in-charge and qualifying broker of a licensed real estate brokerage firm, managed a property (“property A”) from which he collected from the tenant $295 extra each month in rent and $100 each month for use of the washer and dryer from the tenant without the knowledge of the owner landlord; that Mr. Cherry charged the owner landlord for repairs made to the dryer and did not receive approval from owner landlord for repairs exceeding $150, in violation of the management agreement; that Mr. Cherry also managed four  properties for another landlord owner (“property B”) and spent in excess of $250 on repairs without receiving approval from landlord owner, in violation of the management agreement; that Mr. Cherry was paid twice for some repairs that were already paid; and failed to give an accounting to the landlord owner within the time required by the management agreement; that an audit discovered that Mr. Cherry failed to maintain all records as required by Commission rules and evidence of deficit spending and comingling of funds in his firm’s trust accounts; and that Mr. Cherry failed to deposit cash into a trust account within three banking days of receipt. The Commission notes that Mr. Cherry’s trust accounts are now fully funded.

DOROTHY M. COLESTOCK (Murphy) – By Consent, the Commission suspended the broker license of Ms. Colestock for a period of 12 months effective November 1, 2016. The Commission then stayed the suspension for a probation period from November 1, 2016 through October 31, 2017. The Commission found that Ms. Colestock, acting as the qualifying broker and broker-in-charge of a licensed real estate brokerage firm, had posting errors in the firm’s trust account software accounting system going as far back as 2006 that were never corrected; that this caused an inaccurate set of books which led to deficit spending on at least two occasions; that Ms. Colestock’s firm managed both long term rentals as well as vacation rentals, yet did not maintain a subsidiary ledger for those accounts; that no personal funds ledger was used to account for funds used to cover bank service charges; and that Ms. Colestock acted as a dual agent in one transaction, but was unable to provide a copy of the buyer agency agreement to Commission staff. The Commission notes that no evidence of a shortage was found in the accounts and Ms. Colestock’s firm has transferred all of its remaining rentals to another licensed firm and that Ms. Colestock has affiliated with another licensed firm to engage solely in sales transactions.

JONATHAN H. ELLIOT (Fayetteville) – Following a hearing, the Commission permanently revoked the broker license of Mr. Elliot effective December 1, 2016. The Commission found that Mr. Elliot, acting as broker-in-charge of a sole proprietorship, failed to respond to Letters of Inquiry sent by the Commission; that Mr. Elliot failed to provide owner ledgers for the properties he was managing, copies of cancelled checks, or a trial balance; that Mr. Elliot paid “bonus” checks based on 25% of the total rent payments mandated in leases to an unlicensed company as compensation for getting leases signed by tenants; that Mr. Elliot failed to list a property for sale for the owner as required under the listing agreement and placed a tenant in the subject property without the knowledge of the property owner;  that Mr. Elliot collected rent from the tenant monthly for over two years and placed this money in his trust account; that Mr. Elliot never disbursed this money to the property owner and the balance owed to the owners in this account ballooned to over $20,000; that Mr. Elliot did not have a property management agreement with the owner; that the owner was unaware of a tenant being in the property because Mr. Elliot failed to provide owner statements during the tenancy and failed to provide the owner with a copy of the lease; that checks written on the trust account failed to identify the subject property, property owner, and the purpose for the disbursement; that Mr. Elliot failed to maintain copies of the canceled checks and the deposit slips failed to identify the purpose for the deposit; that Mr. Elliot failed to maintain a personal funds ledger and the account lacked an audit trail; that Mr. Elliot’s previously licensed firm was administratively dissolved by the North Carolina Secretary of State on July 21, 2011 and that Mr. Elliot failed to notify the Commission of this and the firm continued to operate until October 1, 2015, when the firm’s license was cancelled by the Commission; and that Mr. Elliot declared himself broker-in-charge of a sole proprietorship under the same name as the formerly licensed firm.

MITCHELL LEE EUDY (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Eudy for a period of five months effective November 1, 2016. The Commission then stayed the suspension for a probationary period until March 31, 2017. The Commission found that Mr. Eudy, on May 27, 2015, entered into an Exclusive Right to Sell listing agreement for a property; that the listed property contained a small cemetery and Mr. Eudy was aware at the time of the listing agreement that there was a cemetery located on the property; that Mr. Eudy failed to disclose the cemetery to potential buyers of the property; that Mr. Eudy asserts that he directed the sellers to inform the buyers of the existence of the cemetery; and, the buyers assert that they were not made aware of the cemetery prior to closing.

FREEDOM REALTY INC. (Murphy) – By Consent, the Commission suspended the firm license of Freedom Realty for a period of 12 months effective November 1, 2016. The Commission then stayed the suspension for a probationary period from November 1, 2016 through October 31, 2017. The Commission found that Freedom Realty had posting errors in the trust account software accounting system going as far back as 2006 that were never corrected; that this caused an inaccurate set of books which led to deficit spending on at least two occasions; that Freedom Realty managed both long term rentals as well as vacation rentals, yet a subsidiary ledger for those accounts was not maintained; that no personal funds ledger was used to account for funds used to cover bank service charges; and that Freedom Realty acted as a dual agent in one transaction, but was unable to provide a copy of the buyer agency agreement to Commission staff. The Commission notes that no evidence of a shortage was found in the accounts and that the firm has transferred all of its remaining rentals to another licensed firm and that Broker has affiliated with another licensed firm to engage solely in sales transactions.

CHARLES LESLIE GIEZENTANNER III (Asheville) – By Consent, the Commission suspended the broker license of Mr. Giezentanner for a period of one month effective January 1, 2017. The Commission found that, on June 29, 2016, Mr. Giezentanner was convicted of a Level 2 DWI and DWLR After Impaired Revocation Notice; that Mr. Giezentanner failed to report the conviction; and that Mr. Giezentanner failed to respond to three Letters of Inquiry.

GOLDEN KEY REALTY INC d/b/a RCA REALTY (Wallace) – By Consent, the Commission permanently revoked the firm license of Golden Key Realty effective December 14, 2016. The Commission found that Golden Key Realty, engaged in property management, failed to provide all of the requested trust account documentation requested by the Commission, failed to perform trust account reconciliations, failed to maintain a general ledger, and failed to maintain a trust account journal; that Golden Key Realty could not account for all rents and security deposits it received and failed to deposit all rent payments and security deposits received in cash into the trust account; and that Golden Key Realty’s broker-in-charge admitted to spending entrusted funds on expenses, other than for which the funds were intended, which led to deficit spending and a shortage in excess $80,000 in the firm’s trust account.

PATRICIA OLIVIA GONZALEZ (Fayetteville) – By Consent, the Commission suspended the broker license of Ms. Gonzalez for a period of 18 months effective September 1, 2016. The Commission found that Ms. Gonzalez, acting as broker-in-charge and qualifying broker of her firm, failed to perform monthly reconciliations of her firm’s trust accounts and that one trust account was overdrawn twice in 2014, indicating a shortage; that Ms. Gonzalez was unable to produce the ledgers for individual properties and/or property owners, despite multiple requests; and that Ms. Gonzalez’ firm was administratively dissolved by the North Carolina Department of the Secretary of State in September 2015 and Ms. Gonzalez failed to notify the Commission.

KEVIN J. MCVICKER (Durham) – By Consent, the Commission reprimanded Mr. McVicker effective December 1, 2016. The Commission found that Mr. McVicker, in 2015, was affiliated with a licensed firm for which his wife was broker-in-charge/qualifying broker; that in August 2015, the firm and Mr. McVicker’s wife were revoked by Consent  by the Commission for, among other things, failure to maintain funds in a trust account, conversion of trust monies, and failure to provide transaction records to a Commission representative; that during the investigation bank records obtained by a subpoena showed trust monies and rents were deposited into a personal account held by Mr. McVicker and his wife and that Mr. McVicker wrote checks for personal expenses from the same account; that Mr. McVicker submitted a new firm application, designating himself as a broker-in-charge on the same day that his firm’s broker license was revoked; and that Mr. McVicker agreed to supply transaction and account records but failed to do so in a timely manner.

PATRICK KEVIN MONAGHAN (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Monaghan for a period of four months effective November 1, 2016. The Commission then stayed the suspension for a probationary period ending March 1, 2017. The Commission found that in May 2015 Mr. Monaghan, acting as the broker-in-charge of Northpoint Asset Management, entered into a residential property management agreement for property; that according to the agreement, the monthly rent was to be $1000; that in July 2015, Mr. Monaghan procured tenants who agreed to rent the property for $140/month and, in exchange for the low rent, perform renovations, a violation of North Carolina Landlord and Tenant Law; that the lease contained no description of the work tenants were to complete in exchange for the lower rent; that the lease provided by Mr. Monaghan included a late fee beyond the statutory limit; that Mr. Monaghan collected a security deposit in excess of the statutory limit; that an addendum to the lease permitted Mr. Monaghan to use tenants’ security deposit for costs not permitted and allowed the tenant security deposit to be disbursed during the tenancy in violation of Landlord and Tenant Law; and that Mr. Monaghan failed to inform the tenants and property owner which bank held the security deposit.

NORTHPOINT ASSET MANAGEMENT LLC (Charlotte) – By Consent, the Commission suspended the firm license of Northpoint Asset Management for a period of four months effective November 1, 2016. The Commission then stayed the suspension for a probationary period ending March 1, 2017. The Commission found that Northpoint Asset Management in May 2015, entered into a residential property management agreement for property located in Charlotte, NC; that according to the agreement, the monthly rent was to be $1000; that in July 2015, Northpoint Asset Management procured tenants who agreed to rent the property for $140/month and, in exchange for the low rent, perform renovations, a violation of North Carolina Landlord and Tenant Law; that the lease contained no description of the work tenants were to complete in exchange for the lower rent; that the lease provided by Northpoint Asset Management included a late fee beyond the statutory limit; that Northpoint Asset Management collected a security deposit in excess of the statutory limit; that an addendum to the lease permitted Northpoint Asset Management to use tenants’ security deposit for costs and allowed the tenant security deposit to be disbursed during the tenancy in violation of Landlord and Tenant Law; that Northpoint Asset Management failed to inform the tenants and property owner which bank held the security deposit.

CHRISTINA L. PITZ (Surf City) – By Consent, the Commission reprimanded Ms. Pitz effective January 2, 2017. The Commission found that Ms. Pitz, acting as a listing agent, failed to obtain a copy of a septic permit to verify the number or bedrooms allowed by the septic system despite being informed that her seller-clients did not know whether the septic system was permitted as a four-bedroom house; that the buyers closed on the house under the impression it was permitted as a four-bedroom house instead of a three-bedroom house; and that the buyers discovered the discrepancy while performing remodeling work on the house and had to purchase a septic system to accommodate four-bedroom house. The Commission noted that Ms. Pitz has reached a settlement with the buyers for an undisclosed sum.

PROPERTY ADMINISTRATORS, INC. (Greensboro) – By Consent, the Commission suspended the firm license of Property Administrators for a period of 18 months effective September 30, 2016. The Commission found that Property Administrators failed to prepare monthly reconciliations and failed to maintain ledgers and deposits in full compliance with Commission rules such that a clear audit trail could not be determined; and, that an audit of both trust accounts was performed and showed overages in both accounts.

RSK MOUNTAIN RESORT LLC (Blowing Rock) – By Consent, the Commission suspended the firm license of RSK Mountain Resort for a period of 36 months effective January 1, 2017. The Commission found that RSK Mountain Resort changed its legal name, but failed to notify the Commission; that from 1999 to 2016, RSK Mountain Resort operated under a name other than the name on its license; that RSK Mountain Resort regularly deposited trust money belonging to others into its operating account; that RSK Mountain Resort did not enter or maintain proper agency agreements in both sales and property management transactions; that RSK Mountain Resort failed to provide vacation rental agreements to tenants; and failed to maintain its trust account records in compliance with the Real Estate License Law and Commission Rules.

KATIE ELIZABETH SINGLETON (Surf City) – By Consent, the Commission reprimanded Ms. Singleton effective October 13, 2016. The Commission found that Ms. Singleton was convicted in district court of Level III DWI on June 30, 2016, and was sentenced to 12 months of supervised probation and required to complete 72 hours of community service. The Commission noted that Ms. Singleton timely reported the conviction to the Commission and is in compliance with the court’s order.

KARYN B. SPREEMAN (Hendersonville) – By Consent, the Commission suspended the broker license of Ms. Spreeman for the period of 18 months effective December 1, 2016. Two months of the suspension shall be active with the remainder stayed for a probationary period from February 1, 2017 through June 1, 2018. The Commission found that Ms. Spreeman listed a vacant lot for sale under a listing agreement which expired on July 31, 2015; that on September 9, 2015, Ms. Spreeman submitted an offer to purchase the lot, on behalf of a prospective buyer, to the seller; that Ms. Spreeman told her buyer client that the seller verbally accepted the offer and sent the offer in the mail to the seller for signature; that the seller claims she never verbally accepted the offer; that on September 8, 2015, Ms. Spreeman signed the seller’s name on a document which gave the buyer authorization to obtain septic and/or well permits on behalf of the seller; that Ms. Spreeman did not have written authorization from the seller or a power of attorney document allowing her to sign on the seller’s behalf; that the seller’s land was then clear cut and permits were pulled by the buyers; and that the seller later rejected the buyer’s offer and the company that performed the work, on the buyer’s behalf, filed a lien against seller for over $7,000. The Commission notes that Ms. Spreeman has paid the lien which has now been released.

KENNETH L. TARBUTTON (Blowing Rock) – By Consent, the Commission suspended the broker license of Mr. Tarbutton for a period of 36 months effective January 1, 2017. The Commission found that Mr. Tarbutton, acting as the qualifying broker and broker-in-charge of a licensed real estate brokerage firm, changed the legal name of the firm, but failed to notify the Commission; that from 1999 to 2016, the firm operated under a name other than the name on its license; that Mr. Tarbutton acted as the broker-in-charge of two offices, his sales office and rental management office, that were not in the same physical location; that Mr. Tarbutton regularly deposited trust money belonging to others into his firm’s operating account; that Mr. Tarbutton did not enter or maintain proper agency agreements in both sales and property management transactions; that Mr. Tarbutton failed to provide vacation rental agreements to tenants; and failed to maintain his firm’s trust account records in compliance with the Real Estate License Law and Commission Rules.

ROBERT CRAIG THRIFT, JR. (New Bern) – The Commission accepted the voluntary surrender of the broker license of Mr. Thrift for a period of 10 years effective November 9, 2016. The Commission dismissed without prejudice allegations that Mr. Thrift violated the Real Estate License Law and Commission rules. Mr. Thrift neither admitted nor denied misconduct.

RICHARD TOCADO (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Tocado for a period of one month effective October 1, 2016. The Commission found that Mr. Tocado, in and around 2014, acted as a buyer agent in a new construction real estate transaction; that Mr. Tocado, in order to secure the transaction, offered to rebate $3,000 of his commission to the buyer-client; that Mr. Tocado disclosed the rebate to the original lender, but failed to disclose it to the second lender until the day of closing, which would delay the closing by three days; that rather than delay closing, Mr. Tocado and the buyer-client agreed that Mr. Tocado would donate the $3,000 to the buyer-client’s favorite charity; and that after closing, Mr. Tocado failed to make the agreed donation.

TREVOR CHERRY REAL ESTATE LLC (Charlotte) – By Consent, the Commission suspended the firm license of Trevor Cherry Real Estate for a period of 24 months effective September 1, 2016. The Commission then stayed the suspension for a probationary period from September 1, 2016 through August 31, 2018. The Commission found that Trevor Cherry Real Estate managed a property (“property A”) from which it collected from the tenant $295 extra each month in rent and $100 each month for use of the washer and dryer from the tenant without the knowledge of the owner landlord; that Trevor Cherry Real Estate charged the owner landlord for repairs made to the dryer and did not receive approval from owner landlord for repairs exceeding $150, in violation of the management agreement; that Trevor Cherry Real Estate  also managed four  properties for another landlord owner (“property B”) and spent in excess of $250 on repairs without receiving approval from landlord owner, in violation of the management agreement; that Trevor Cherry Real Estate was paid twice for some repairs that were already paid; and failed to give an accounting to the landlord owner within the time required by the management agreement; that an audit discovered that Trevor Cherry Real Estate failed to maintain all records as required by Commission rules and evidence of deficit spending and comingling of funds in its trust accounts; and that Trevor Cherry Real Estate failed to deposit cash into a trust account within three banking days of receipt. The Commission notes that Trevor Cherry Real Estate’s trust accounts are now fully funded.

DAVID J. WELSH (Boone) – The Commission accepted the voluntary surrender of the broker license of Mr. Welsh for a period one year effective December 14, 2016. The Commission dismissed without prejudice allegations that Mr. Welsh violated Commission rules and the Real Estate License Law. Mr. Welsh neither admitted nor denied misconduct.

MARY S. WILSON (Greensboro) – By Consent, the Commission suspended the broker license of Ms. Wilson for a period of 18 months effective September 30, 2016. The Commission then stayed the suspension on certain conditions. The Commission found that Ms. Wilson, acting as broker-in-charge of a licensed real estate brokerage firm, failed to prepare monthly reconciliations and failed to maintain ledgers and deposits in full compliance with Commission rules such that a clear audit trail could not be determined; and that an audit of both trust accounts was performed and showed overages in both accounts.

This article came from the February 2017-Vol47-3 edition of the bulletin.

Commission Education Rules Simplified; New Subchapter H Effective July 1

By Melissa A. Vuotto, Rulemaking Coordinator

At its January 2017 meeting, the Commission adopted the proposed education reform rules. Under this rulemaking action, the 94 education rules found in Subchapters C and E will be repealed and replaced by 36 newly adopted rules located in the new Subchapter H – Real Estate Education. Subject to the Rules Review Commission’s approval, this rulemaking action will be effective July 1, 2017.

The Commission’s primary intent of this rulemaking action is to eliminate redundant rules, create a unified subchapter for all educators, and incorporate many of the Commission’s Instructor Development and Improvement Task Force recommendations.

The new rules are grouped into four sections within Subchapter H:

Section .0100 – General/ Definitions rule;

Section .0200 – Real Estate Schools;

Section .0300 – Approved Instructors; and

Section .0400 – Continuing Education.

By streamlining the education rules, it is the Commission’s goal to improve the understanding each rule, ease the process of searching for a particular rule, and increase the quality of real estate education in North Carolina.

Thank you to all who attended the public hearing on December 13, 2016, and submitted written comments. The Commission considered comments and  rule revisions at its meeting on January 18, 2017. Revisions are indicated at www.ncrec.gov under ‘Licensing Law and Rule Changes.’ If you would like to receive notifications of any rulemaking proceeding, you can sign up at www.ncrec.gov/Home/Subscribe or by contacting Melissa A. Vuotto, Commission Rulemaking Coordinator.

This article came from the February 2017-Vol47-3 edition of the bulletin.

Commission Elects George Bell, Chair, Robert J. Ramseur, Jr., Vice Chair

George Bell of Winston-Salem has been elected Chair and Robert J. Ramseur, Jr., of Raleigh, Vice Chair, of the North Carolina Real Estate Commission for the term beginning August 1, 2016, announced Miriam J. Baer, Executive Director.

Bell is Principal Broker and Broker-In-Charge of the Bell First Group, a real estate brokerage firm, and president of George Bell Productions, Ltd., a real estate education firm serving real estate brokers across North Carolina.

Bell entered the real estate business in 1978, following graduation from East Carolina University with a BS in Business Administration, with concentrations in real estate and banking.

Bell was inducted into the North Carolina Association of REALTORS® Hall-of-Fame in 2014, and served as the 2010 president of the Winston-Salem Regional Association of REALTORS® and its 2009 REALTOR®-of-the-Year.

In 2012, he received the Billie J. Mercer Excellence in Education Award from the North Carolina Real Estate Commission and the Educator of the Year Award from the North Carolina Real Estate Educators Association (NCREEA). He is a past president of the both the state and international Real Estate Educators Associations.

Ramseur is a partner at the law firm of Ragsdale Liggett PLLC and chair of its real estate department. His practice focuses on residential and commercial real estate transactions, real estate financing and development, tax and entity structuring, lease negotiations and drafting and real estate litigation.

Licensed to practice law in North Carolina in 1996, Ramseur formed his own firm in 1997 and merged his practice with Ragsdale Liggett in 2001. He is licensed to practice in all  state courts, the District Court of the United States for the Eastern District of North Carolina), and the U.S. Supreme Court.

He is past president of the Wake County Real Property Lawyers Association, past co-chair of the Joint Forms Task Force for the North Carolina Bar Association and North Carolina Association of REALTORS®, and past president of the Real Estate Lawyers Association of North Carolina, Inc., a trade association with over 350 members.

A native of Raleigh, Ramseur graduated with honors from Needham B. Broughton High School and received a Bachelor of Arts in History, cum laude, from Wake Forest University in 1992 and a law degree from Wake Forest in 1995.

Active in civic and charitable activities, he is a past president of the Rotary Club of the Capital City and the Board of Directors of Raleigh’s Theatre In The Park and participates each year as a fund raising volunteer for the Triangle Area YMCA.

This article came from the October 2016-Vol47-2 edition of the bulletin.

Commission Proposes New, Revised Rules

The Commission approved rulemaking at its August meeting.  The proposed rules shall have an effective date of July 1, 2017, except for rules 21 NCAC 58A .0511 and .0512, which will have an effective date of July 1, 2018.  The following is a summary of the proposed amendments and rule adoptions:

Section A .0100 Real Estate Brokers – General Brokerage:

21 NCAC 58A .0101 – Proof of Licensure – The amendments are proposed to allow the use of electronic pocket cards as proof of licensure and to merge the requirements of A .0509, to submit a $5 duplicate license fee, into this Rule.

21 NCAC 58A .0103 – Broker Name and Address – The amendments are proposed to add a requirement that brokers changing their name of record must show legal proof of such name change; to comply with S.L. 2016-100 (SB 124) the Assumed Business Act recently passed by the General Assembly; and to clarify the use of an unlicensed person’s name as a tradename.

21 NCAC 58A .0106 – Deliver of Instruments – The amendments are proposed to clarify a broker’s responsibility to deliver information regarding the identity of current or former tenants to property owner clients.

Section A .0300 – Application for Licensure:

21 NCAC 58A .0302 – Filing and Fees – The amendments are proposed to comply with S.L. 2016-117 (HB 728) that increased the broker’s application fee from $30 to $100.

21 NCAC 58A .0304 – Equivalent Experience Qualifications for Applicants – The amendments are proposed to clarify Prelicensing education waiver requirements.

Section A .0500 – Licensing:

21 NCAC 58A .0502 – Business Entities – The amendments are proposed to clarify that the qualifying broker is affiliated with the firm so that they receive notice if a broker-in-charge were to withdraw their designation and to require brokers to disclose the banking institution where their trust accounts will be held.

21 NCAC 58A .0503 – License Renewal; Penalty for Operating While License Expired – The amendments are proposed to require brokers to disclose the banking institution where their trust accounts are held each time they renew their license and any criminal convictions or disciplinary actions within the previous year.

21 NCAC 58A .0505 – Reinstatement – The amendments are proposed to comply with S.L. 2016-117 (HB 728) that changed a broker’s reinstatement application fee to an amount equal to two times the license renewal fee instead of the previous reinstatement fee of $55 and to clarify the requirements for a broker to reinstate a license.

21 NCAC 58A .0509 – Duplicate License Fee – The amendments are proposed to merge this Rule into A .0101, Proof of Licensure, and to repeal this Rule.

21 NCAC 58A .0511 – Licensing of Persons Licensed in Another Jurisdiction – The amendments are proposed to create a temporary practice permit for military spouses pursuant to N.C.G.S. § 93B-15.1.

21 NCAC 58A .0512 – Death or Incapacity of Sole Proprietor

The adoption of a rule is proposed to create a succession plan if a broker were to become deceased or become incapacitated while serving as a broker-in-charge of a sole proprietorship.

21 NCAC 58A .1905 – Waiver of 90-Hour Postlicensing Education Requirement

The adoption of a rule is proposed to clarify the Postlicensing education waiver requirements.

This article came from the October 2016-Vol47-2 edition of the bulletin.

CFPB to Ease Access To TRID Closing Disclosure

ARELLO® (Association of Real Estate License Law Officials) Reprinted courtesy of ARELLO Boundaries magazine

The Consumer Financial Protection Bureau CFPB) recently issued proposed amendments to its TILA-RESPA Integrated Mortgage Disclosure forms and rules, one of which is intended to clarify that lenders are permitted to provide the required Closing Disclosure to real estate agents.

The new disclosures (commonly referred to as “TRID”, but dubbed “Know Before You Owe” by the CFPB) replaced the previous disclosure forms required in all “federally-related” mortgage transactions, including the “HUD-1” settlement statement, with the CFPB’s residential mortgage Loan Estimate and Closing Disclosure forms.

Since the implementation of the TRID rules nearly a year ago, many real estate agents have experienced difficulties in obtaining copies of completed Closing Disclosure forms from lenders. The issue involves lender concerns about potential liabilities arising under the privacy provisions of the federal Graham-Leach-Bliley Act (GLBA), which prohibit lenders from disclosing customers’ “nonpublic personal information” (NPI) to nonaffiliated third parties without providing customers with notice and an opportunity to opt-out of such disclosure.

[The Closing Disclosure has also raised questions in some state real estate regulatory jurisdictions whose licensing laws require brokers to ensure that transaction parties receive a closing statement. [See, Real Estate Bulletin February 2016]

In its proposed rulemaking notice the CFPB acknowledges that prior to implementation of the TRID rules, the Real Estate Settlement Procedures Act and its implementing regulations required settlement agents to issue a HUD-1 form to lenders, borrowers, sellers, and their agents. The CFPB also recognizes that many transaction participants rely on shared information to complete residential transactions; including real estate agents, loan officers, settlement agents and others. Consequently, the CFPB proposes to amend its rules to acknowledge that, in accordance with applicable exceptions to the privacy requirements of the GLBA, it is “usual, appropriate, and accepted” for creditors and settlement agents to provide the combined or separate Closing Disclosure to transaction parties and their real estate brokers or other agents. This will be accomplished by incorporating the CFPB’s previous informal guidance on the subject into the official rule commentaries to clarify that the lender, at its discretion, “may make modifications to the Closing Disclosure form to accommodate the provision of separate Closing Disclosure forms to the consumer and the seller…”. The commentaries will also explain the methods by which creditors can separate buyers’ and sellers’ information for that purpose.

Other changes proposed by the CFPB include:

“Total of Payments” Tolerances: The TRID rules changed the previous “total of payments” disclosure calculation so that it did not make specific use of the finance charge. The CFPB now proposes to include tolerance provisions that return the calculation to what it was prior to implementation of the TRID rules.

Housing Assistance Lending: The CFPB proposes to promote housing assistance by amending the current partial exemption from the disclosure requirements for certain housing assistance loans, to allow charges for recording fees and transfer taxes.

Cooperatives: Currently, the TRID rules only cover transactions secured by real property, as defined under state law. Buyers of units in a cooperative, however, become a shareholder in a corporation that owns the property. Some states treat cooperative units as personal property, while others treat them as real property. The CFPB proposes to extend the TRID rules to cover all cooperative units, thereby simplifying compliance.

The CFPB is seeking public comment on the proposals, which include numerous other technical changes to the disclosure forms and rules. Comments are due Oct. 18, 2016 and may be submitted by several means including electronically via www.regulations.gov.

This article came from the October 2016-Vol47-2 edition of the bulletin.