Bulletin Search

Real Estate Education and Recovery Fund Reimburses Victims

At its December 14, 2016 meeting, the Commission approved a payment totaling $3,100 out of the Real Estate Education and Recovery Fund to one applicant who suffered financial loss due to the misconduct of Alicia A. Christian.

By Consent, the Commission ordered permanent revocation of the real estate license of Ms. Christian effective October 15, 2014.

At its October 13, 2016 meeting, the Commission approved payments of $46,006.89 to six applicants who suffered financial losses due to the misconduct of Rebecca L. Niemchak.

The Commission, following a hearing, ordered the permanent revocation of the broker license of Rebecca L. Niemchak effective October 24, 2014.

At its May 5, 2016 meeting, the Commission approved payments of $75,000 to 17 applicants who suffered financial losses due to the misconduct of Cheryl B. Wilkins.

By Consent, the Commission ordered the permanent revocation of the broker license of Cheryl B. Wilkins effective November 12, 2014.

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

Heed this Advice About Surveys, Titles, and Transaction Planning

Real estate brokers involved in the purchase or sale of property near the NC/SC state line should advise their clients to get a survey, or at least some professional location of their property in relation to the state line, if there is any question at all about whether the property has been affected by the re-survey.

Anyone involved with properties affected by the re-survey should be sure to discuss title issues and the necessary certifications of title in detail with professionals who are knowledgeable about the many legal issues involved in these titles, whether the property is now all in North Carolina or is still partially in South Carolina, or vice versa.

Planning for transactions involving affected properties should take place much farther in advance than usual, as such transactions may require dual title examinations, dual recordings, potential delays and very importantly may affect TRID disclosures.

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

North Carolina/South Carolina Boundary Re-Surveyed Effective January 1, 2017

By Will Martin, NC REALTORS® Legal Counsel

NOTE: Much of the following information has been taken from a memo from the Real Property Section of the NC Bar Association and the NC Land Title Association. The full memo is available on the Bar Association’s website and may be viewed at http://www.ncbar.org/media/727134/nc_sc_boundarymemonovember2016.pdf.

In 1995, North and South Carolina created a Joint Boundary Commission to research and tweak the 334-mile border between them. The original border was established in the 1700s, but over many decades, the landmarks for the original boundary have disappeared or become corrupted. What people thought was the state line in some counties wasn’t the actual state line. People have developed, conveyed and improved properties based on an erroneous assumption of the location of the legal boundary.

After 20 years of negotiations, surveys, and research, the governments of the two states reached an agreement about where the state border lies. The boundary has been re-surveyed based on historical monumentation and research back to original colonial records. Effective January 1, 2017, some parcels (or portions of larger tracts) previously believed to be in South Carolina are now confirmed to be in North Carolina, and vice versa.

The re-survey could affect properties in any of the counties along the NC/SC boundary from Polk County east (including a portion of Polk County).  Although some counties may not have very many properties that show the line incorrectly, a case-by-case determination will need to be made by an attorney reviewing a property’s title.

A “Notice of Affected Parcel” based on taxpayer listings has or will be recorded in the office of the Register of Deeds of each county, along with the re-survey maps. The Notice should contain certain information concerning each parcel potentially affected by the boundary certification, including the following:

The recording reference for the final survey of the confirmed boundary.

The names of the record owners of the affected parcel.

The property address of the affected parcel.

A tax parcel identification number or other applicable identifier for the affected parcel used by a county tax office, if available.

A brief description of the affected parcel, if available.

The Notice should be indexed in the names of all record owners of the affected parcels (or at least the names of the taxpayers identified in the county’s property tax rolls).

Information regarding the surveys is available on-line at the office of the North Carolina Geodetic Survey at http://www.ncgs.state.nc.us/Pages/County-and-State-Boundaries.aspx. These surveys do not indicate owners or tracts. They only show the location of the monuments of the border found. Surveyors will have access to these surveys to be able to identify them on the ground when they do a survey.

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

GENUP, BICUP Topics Include Radon, Property Management

Property management, radon, and protecting confidential consumer information are among the topics for the General Update Course (GENUP) and the Broker-in-Charge Update Course (BICUP) for the 2017-2018 license year beginning July 1. 


Property Management – changes in the Vacation Rental Act and the Landlord/Tenant statutes; HUD guidelines concerning use of criminal records in leasing; duties of a broker/owner (“unintended property manager”); and surcharges paid to brokers on service/repairs.

Radon – in conjunction with the North Carolina Radon Program of the Department of Health and Human Services (DHHS).

Protecting Confidential Consumer Information – broker’s duty to protect client/consumer confidential information; identity theft; scam alerts; use of email; Craig’s List; etc.

License Law and Rule Updates – application and reinstatement fee increases and rules relating to registering assumed names and delivery of instruments, and Consumer Finance Protection Bureau updates including the release of closing disclosures to brokers.


All GENUP topics plus three-way trust account reconciliation, BIC duty to supervise, and breaking issues and updates.

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

HUD Issues Guidance on Use of Criminal Background Checks

By Janet  B. Thoren, Legal Counsel

Diligent property managers often run criminal background checks on prospective tenants before allowing them to lease a landlord’s property.   In April 2016, HUD issued guidance on how the Fair Housing Act (“the Act”) impacts the use of such a background check by all providers of housing, including property managers.  When designing a process for screening tenants, it is important for brokers to consider this guidance and how the use of such background checks might violate fair housing laws.

Before getting into the HUD guidelines, there are a few terms brokers should recognize and understand.  The Act includes the following seven protected classes:  race, color, religion, national origin, sex, disability, and familial status.  A landlord or property manager may not discriminate against anyone in one or more of the protected classes.   Another term, “disparate impact”, is often used in housing discrimination cases and refers to a policy or practice that is neutral on its face, but its application actually has a discriminatory impact on a protected class.

The use of a criminal background check as part of a tenant screening process seems to be a neutral process as long as it is required of all potential tenants, not just certain ones selected by the landlord or property manager.  However, HUD has determined that due to higher than average incarceration rates among certain races relative to their percentage of the total population, and when compared to incarceration rates of other races, the use of criminal background checks to deny housing may actually cause a disparate impact on certain races and therefore be discriminatory.

What does all of this mean for a landlord or property manager? First, criminal background checks should only be used for a non-discriminatory business objective, and there cannot be an alternative to the background check that is less discriminatory.  There should be some evidence that the background checks actually accomplish the goal.  Does a refusal to rent to individuals with criminal convictions actually mean fewer criminal acts or property destruction in the properties being managed?  A blanket prohibition against anyone with any type criminal record likely would not survive a charge of discrimination.  There are a couple of exceptions.   The Fair Housing Act specifically states that landlords do not have to make housing available to persons with convictions for the manufacture or distribution of controlled substances.  Just remember, though, other drug-related convictions are not specifically exempt from fair housing requirements.  In addition, project-based HUD subsidized properties must prohibit anyone subject to a lifetime registration requirement under a state government sex offender registration program.

For anything outside the exceptions, HUD suggests that landlords and property managers should consider the following factors when using criminal background checks for prospective tenants:

Do not consider charges or arrests that did not result in conviction.  Arrest records should not be used as a basis for denying an applicant for housing.  Such a record does not indicate that the applicant actually engaged in any criminal activity.  Remember – innocent until proven guilty.

Do not have a blanket policy against renting to anyone with any type of criminal conviction.  Explain to landlord-clients the dangers of such a policy and advise them to use a more tailored approach.

Consider the type of conviction.  Look at the nature and severity of each conviction.  A shoplifting conviction should not carry the same weight in a housing decision as a conviction for distributing cocaine.  While fishing without a license is not good, an applicant participating in that type of activity will likely be a lesser risk to residents and property than someone selling drugs, which often brings more dangerous people and illegal drugs into the neighborhood.

Consider the timing of the conviction. How long ago did the event happen and how long ago was the conviction?  Research tends to show that the likelihood that a person with a prior criminal conviction will commit another offense decreases over time.  HUD offers no insight into how long might be a reasonable period to consider, so consider a reasonable amount of time that you feel you can defend if challenged.

Consider each offense individually.  Create an assessment plan that is fair and takes into account mitigating factors such as the surrounding events, the age of the individual at the time, rehabilitation efforts, and the rental history of the individual.  In other words, each instance should be reviewed on a case-by-case basis and narrowly tailor any refusals.

As a property manager, you have a duty to discuss these issues with your landlord clients and create a program that will help keep you and your clients out of trouble and will allow all housing applicants fair access to available housing.  To see the HUD guidelines in full, use the link below.


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

Respa, Refferals, You

By Sarah E. Herman, Consumer Protection Officer

A  pest control company solicits real estate brokers to join what they refer to as a “Preferred Broker Program.” Among other listed benefits of becoming a Preferred Broker, the company offers all broker participants quarterly pest control services at their personal homes at no charge. In order to receive the free pest control, the broker must refer their buyer clients to the pest control company for the completion of lender-required pest inspections.

The question posed to the Commission’s legal staff was whether this type of program is in violation of the Real Estate Settlement Procedures Act (RESPA).  RESPA prohibits kickbacks and unearned fees in any real estate transaction involving a federally related mortgage loan. The kickback provision is generally referred to as RESPA’s “Section 8.”

Section 8 prohibits anyone, including real estate brokers, from “…accept[ing] any fee, kickback, or thing of value…” as “…part of, a real estate settlement service involving a federally related mortgage loan…” 12 U.S. Code Chapter 27 § 2607(a).

A “thing of value” is any payment, advance, funds, loan, service, or other consideration with more than nominal value.

“RESPA also defines the term “Settlement service” as any service provided in connection with a real estate settlement for which the buyer or seller will pay. These services  include, but are not limited to, the following:

When a lender requires a buyer to have a pest inspection as part of the loan qualification process, the inspection is considered a settlement service. On the other hand, if a seller independently chooses to have a pest inspection as part of the listing process, and pays for that service separately from the settlement process, it is not related to the real estate settlement and is not considered a settlement service.

If a broker receives a quarterly pest control from the pest control company at no cost, a service that would typically have an associated cost, they have received a “thing of value.”  And if that broker receives that thing of value for referring a client to the pest control company to do a lender-required pest inspection, there is very likely a RESPA violation.

Even if the broker is referring a client to the pest control company for services unrelated to a closing and there is no apparent problem with RESPA, the broker must fully disclose their arrangement with the pest control company to their client per Commission Rule A .0109.

As you can see from the example above, whether a referral is prohibited under RESPA depends greatly on the specific transaction.  If you are confronted with a business referral program, use the following fill-in-the-blank sentence as a test to determine whether the program may be in violation of RESPA:  As part of this program, I will receive _________, which will enrich or benefit me or my firm, in exchange for referring clients to _________ for services related to a real estate settlement.  If you can fill in these blanks, the safest course is to consider the program a no-go.

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

rec·on·cile: to make peace, adjust Reconcile Trust Accounts Monthly

By Marcia M. Waldron,  Auditor/Investigator

If you keep any funds related to a real estate transaction, an easy way to make some peace in your life is to reconcile your trust account records on a monthly basis.

While many see this as a daunting task, once the process is set up and completed properly, it does not need to be difficult or time consuming. However, reconciling does need to be a priority. There are so many seemingly mundane tasks in our life that, if ignored, lead to large and costly problems. If you don’t brush your teeth, you have pain and costly dental bills (or worse); if you don’t service your car, the repairs can be astronomical; if you don’t balance (reconcile) your Trust Account on a regular basis, the result can be missing client/tenant funds, the  loss of your real estate license, and even criminal charges.

So begin with the basics: Step 1 is to reconcile your bank statement to your Trust Account  or your ‘Books’; this might be your general ledger cash account, your trust account journal,  a check register, or even your checkbook for your trust account. Stated simply, you are resolving differences between the bank and your Books: errors (yours or the bank’s), bank charges or interest earned, and timing differences. To minimize timing differences, always use the bank statement ending date, ideally, the last day of the month, as your cut-off date for your Books. This is the same process used to balance a personal checkbook.

Always begin the process by marking (or ‘ticking’) each cleared item either by hand or using software. You can’t skip this first step of checking each matching item on your Books and each matching item on your bank statement.  All unticked entries are your adjustments (i.e., your reconciling items).  Post interest earned, bank charges, and other reconciling items to your Books, then adjust the bank statement balance for bank errors (if any). If all reconciling items haves been addressed (and your beginning bank balance was reconciled to the Books), this formula will be correct:

Ending Bank Balance + Deposits in Transit Outstanding Checks = Your Book Balance.

Once the bank statement has been reconciled to the Books, you are ready for step 2, which is balancing the reconciled figures from Step 1 to the Property Trial Balance (this is your client liability balance). The Property Trial Balance itemizes whose funds you are holding; that is, the monies being held in trust belonging to other people. It is an accounting of every dollar in the Trust Account by the tenant or client; this is a critical report since every dollar held in a Trust Account needs to be identifiable by owner. The Property Trial Balance is created by listing of each of your property (or owner) ledgers and their month-end balance (assuming month-end is the cut-off).

As long as reconciliations are being performed monthly, it will be only the current month’s transactions (or prior period adjustments, if any) that need to be reviewed to locate discrepancies.  If reconciliations have not been performed in the past, the first reconciliation could be a long process, but it is essential to have this reconciliation on file (as required by Real Estate Commission Rule A.0117 (e)).

If you want an easier – or even seamless – reconciliation, improve the record keeping. Think of bank reconciliation as a monthly report card on the state of your accounting records. With the possible exception of credit card processing fee issues or large high volume firms, if your bank reconciliation process is difficult, chances are good that improvements are needed in your accounting.

Key Points

The Commission offers a Basic Trust Account Procedures Course multiple times throughout the year; go to www.ncrec.gov to view the class schedule and register online.


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

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.