Real-Life Disciplinary Issues: Best of the Legal Hotline

Sometimes real estate professionals don’t always follow the rules… and they get caught. PAR’s legal team presented examples of real-life State Real Estate Commission disciplinary cases during their webinar, Best of the Legal Hotline: And They Got Caught!, covering topics including property management, advertising, bad behavior and more.

Property Management

“Property management is a topic that is very high on the Real Estate Commission’s radar right now,” said Desiree Brougher, PAR’s assistant general counsel. “Some of the issues that we see are licensees — or non-licensees, as it were — being unlicensed in general, but still doing property management.”

She noted that there have been a number of cases in which unlicensed individuals illegally held themselves out as property managers, and others where licensees affiliated with one broker tried to do property management with a second broker even though their license wasn’t with that second broker. In one recent case, a licensed brokerage opened a separate property management company that should have been licensed but wasn’t. That broker was fined about $13,000 in fines and costs and had to get that second brokerage licensed.

Other property management-related issues include being unaware of local requirements, such as municipal registration, and doing property management on the side or under a different brokerage because their broker does not allow agents to practice property management.

Advertising

PAR’s Legal Hotline gets plenty of calls with questions concerning advertising, many of which are based on brokers and agents who haven’t reviewed relevant rules and regulations or are making decisions based on incomplete or inaccurate information they’ve received from others.

Hotline attorneys reviewed two cases in which agent advertisements either didn’t have the name and phone number of their brokerages or had them smaller than the agent’s name and contact information. In one case the broker and agent were sanctioned with a combined $3,400 in fines and costs. In a second, the broker and agent were fined a total of $7,500, with both required to take additional remedial education.

Your Own Worst Enemy

Sometimes real estate agents end up being their own worst enemy.

In a recent but not yet finalized case, an agent listed their own personal property for sale through their brokerage as the listing agent. Years prior, they had a septic inspection of their property which likely showed issues with the system. However, the agent did not include this info in the seller disclosure form. The seller (a licensee) only informed the buyer of the septic problem once the agreement of sale had been signed.

The proposed penalty for this case was a license suspension for three years (with the right to reapply for a probationary license after six months), three hours of ethics education and a seven-hour new agent general module. However, the penalty was rejected as too lenient.

“Remember, you are still a licensee,” PAR Chief Legal Officer Hank Lerner said. “You still have to follow all the rules, and if you do not follow those rules, you can be sanctioned as a licensee, not just as a seller.”

Return of Deposits

When money is put in escrow and is being held by a broker, the Real Estate Licensing and Registration Act says it can be returned if there’s no dispute or if there’s a written agreement for the release of the funds.

“If the parties have a dispute that is unresolved, the buyer and seller are allowed to have a contract term in their agreement of sale that says how the money will be returned,” Lerner added.

In a recent case, a listing broker held the deposit in escrow. The buyer terminated the sale, but the seller wanted the deposit, and the seller’s attorney wrote a letter to the broker telling them not to release the funds. No release was signed, and no mediation or litigation was filed by either party. The buyer requested the money according to the terms of paragraph 26(C) of the Agreement of Sale, but the listing broker refused to release it. The penalty was a public reprimand and $466 for investigative costs.

“This decision reminds brokers that our agreements are written for a reason,” said Clouser. “Words matter. What you have in an agreement of sale matters, and in this case, it did cost the broker by not following what the agreement stated.”

Bad Behavior

In real estate, sometimes there’s just bad behavior that can easily be avoided – and the attorneys covered several cases showing that the real estate commission takes those behaviors seriously. In one case, a salesperson stayed in a property for several hours after an open house for a “romantic rendezvous” that also ended up with a police visit and damage to several rooms in the home ($8,000 fine plus 30 hours of remedial education for broker; agent discipline still pending). In two other cases, agents were sanctioned for inappropriate and insulting emails accidentally sent to a client (about $1,600 fine and costs) and for sending texts with racial slurs to a client (about $4,500 fines and costs plus remedial education).

Clouser closed her portion by noting that licensees need to be aware of their obligation to report criminal convictions or plea agreements to the commission within 30 days. The commission website contains a list of the types of convictions that could affect one’s license, but it’s important to remember that even if the conviction itself would not affect a license, you could be sanctioned simply for not reporting.

“When it comes to doing your part,” Lerner said, “you need to remember that as soon as you say the words, ‘Someone needs to do something,’ you are someone. You are a person. As a licensee, as an agent, as a broker, as a Realtor®, you have a voice in this process.”

“At the end of the day, if there’s a behavior that’s that bad, if there’s a behavior that’s that concerning, something that is clearly not being addressed through any other means that you’ve attempted, file the complaint,” he stressed. Licensee complaints can be filed through the PALS system.

To hear more about the disciplinary cases and legal issues discussed, view the webinar recording on PAR’s website.