Real Estate’s 12 Most Common Enforcement Issues
June 22, 2018 |
This week the Division of Real Estate issued its first newsletter since the Winter of 2016. Of note is a list of the 12 most common enforcement issues before the Division and recommendations on avoiding them. The list will aid brokers and salespersons in identifying areas of exposure in their practice and provide an opportunity to take steps to assure they are compliant with license law. The top 5 list along with tips are discussed below:
1. NOT ADVERTISING PROPERLY
As most agents know, all salesperson names have to be equally prominent with the brokerage’s name in all advertising. Included is the requirement that team names also be equally prominent with the brokerage’s name. There are administrative rules that deal specifically with how agents and teams may advertise, which should be consulted prior to spending resources on an advertising campaign.
2. Salespersons operating outside their brokerage
Commonly agents do not realize that they cannot run a property management practice separately from their list/sell services for a brokerage. All services agents perform for clients (whether list/sell or property management) has to be through the brokerage with which the agent is affiliated.
3. Licensees suborning unlicensed activity
If a broker permits a salesperson to run a property management practice outside the brokerage (see number 2 above) then the broker can also be charged with suborning unlicensed activity. In other words, the broker is allowing the salesperson to “act like a broker” (in personally running the property management practice on their own) “without being licensed as a broker.” All brokers would be well served to periodically remind agents that all services agents provide to clients need to be through (not outside of) the brokerage.
4. Noncompliant trust accounts
Brokers know that they need a trust account, but mistakes occur in setting it up and properly tracking receipts and disbursements. License law requires brokers to track the date the funds are received, the party from whom funds are received, the amount received, the date deposited, the check number and date of disbursement and two whom disbursed. Also if a brokerage manages property and holds security deposits and rents, they are required to maintain a separate property management trust account.
5. Allowing unaccompanied access to the property
These lock box cases involve an agent giving a client or other party the code to access a property on their own. In one such case a buyer made improvements to a bank owned property (buyer got the code from the buyer’s agent) to pass a FHA inspection. When the deal didn’t close, the bank declined to return the buyer’s improvements and the buyer complained. In another case a buyer (who was also a licensed appraiser) got the code from an agent and smoked marijuana in the home. This bright-line rule is simple, agents should never permit unaccompanied access to a property.