Unit 13

commercial e-mail message

"any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service."

Americans with Disabilities Act

(ADA) protects anyone with a handicap and includes mental illness, AIDS, blindness, hearing impairment, mental retardation, and mobility impairment. A handicap is defined as any physical or mental impairment that substantially limits one or more major life activities; having a record of such an impairment; or being regarded as having such an impairment.

California Fair Employment and Housing Act (FEHA)

- Covers ER with 5 or more employees - protects groups in CA: marital status, sexual orientation, deomestic partnerships, gender identity, lawful off duty conduct, religious dress practice

indefinite duration

A freehold estate is an estate of ownership with an...

Types of Brokerage Ownership

A real estate broker may set up the brokerage in a variety of ways, such as sole proprietorship, partnership, corporation, or Limited Liability Company (LLC).

eight-digit license identification

A real estate licensee must disclose his or her eight-digit license identification number on all solicitation materials and on real property purchase agreements when acting as an agent in those transactions. [B&P Code §10140.6 & Reg. 2773]. However, if the solicitation materials also include the name the salesperson's employing broker, the license number of the employing broker does not need to be included on the solicitation materials.

REALTOR®

A registered trademark of the NATIONAL ASSOCIATION OF REALTORS. It is used by brokers and salespersons who hold active membership in the association.

statutory employee

According to common-law rules, some independent contractors are treated as employees by statute (statutory employees) if they are in certain categories.

license status

Active, Inactive, expired

transactional e-mail messages

E-mails sent as part of an ongoing commercial transaction, called transactional e-mail messages, are excluded from the Act. An e-mail sent to a client concerning an existing listing or sales transaction is a transactional e-mail message and is exempt from the rules. Types: • Facilitating or confirming an existing commercial transaction • Giving notice about product updates or upgrades • Providing notice about certain changes in a subscription, membership, account, or loan • Providing warranty information, product recall information, or safety or security information with respect to a commercial product or service used or purchased by the recipient • Providing information directly related to an employment relationship in which the recipient is currently involved

statutory non employees

In fact, since 1982, real estate licensees have been classified by the IRS

1968 U.S. Supreme Court Case of Jones v. Mayer

Jones v. Mayer prohibits discrimination based on race by upholding the 1866 Civil Rights Act and the 13th Amendment to the U.S. Constitution prohibiting slavery.

statutory non employee

Licensed real estate agents are classified by the IRS as statutory nonemployees. The statutory nonemployee classification was created in 1982. That is why many brokers are unaware that their associate-licensees are classified as statutory nonemployees by IRS definition rather than as independent contractors. • The salesperson or broker-salesperson must be duly licensed; • The salesperson or broker-salesperson must be compensated on the basis of the number of sales closed and commissions earned—not on the basis of the number of hours worked; and • There must be a written contract between the broker and the salesperson providing that the salesperson will not be treated as an employee for federal tax purposes. 26 USC §3508

Regulation 2781 Prohibits Blockbusting

Licensees are prohibited from creating fear, alarm, or transmitting written or oral warnings regarding the present or prospective entry of one or more persons of another race, color, sex, religion, ancestry, marital status, or national origin into an area or neighborhood.

Broker's Responsibility

Maintain an office: An active broker must maintain an office in California (home office is acceptable) to transact business and display licenses. [B&P §10162]. A broker may conduct business only at the address listed on his or her license. Follow Proper Procedure When Employing Salespeople: A broker must have written agreements with his or her sales associates, whether licensed as a salesperson or as a broker-associate. The agreement must be dated and signed by the parties and cover material aspects of the relationship between the parties, including supervision of licensed activities, duties, and compensation. [Reg. 2726]. Maintain Valid Real Estate Licenses: Everyone (broker and all sales associates) performing activities requiring a real estate license for compensation must have a valid real estate license. [B&P Code §10130]. Therefore, the broker should monitor the expiration dates and license status of their salespersons and broker associates on the Department of Real Estate's website. Supervise Sales Associates: A broker must exercise reasonable supervision of his or her associate licensees (both sales associates and broker associates). To do this, the broker must establish policies and procedures for their sales associates to follow. [Reg. 2725]: • Handling transactions requiring a real estate license. • Reviewing documents which may have a material effect upon the rights or obligations of a party to the transaction. • Filing, storage, and maintenance of such documents. • Handling of trust funds. • Advertising of any service for which a license is required. • Familiarizing salespersons with the requirements of federal and state laws relating to the prohibition of discrimination. Retain record: A licensed broker must retain the records of a real estate transaction at the main office for 3 years. This includes copies of all listings, purchase agreements, canceled checks, trust account records, correspondence, email, and other documents that are part of the transaction. Handle Trust Funds: Agents must handle, control, and account for these trust funds according to specific legal guidelines. Noncompliance with the law can result in unfavorable business consequences. Proper Handeling of trust funds: Trust funds must be placed into the hands of the owner of the funds, into a neutral escrow depository, or into a lawful trust account no later than 3 business days following receipt of the funds by the broker or the broker's salesperson. Commingling: Trust funds may not be commingled (mixed) with funds belonging to the broker. Measure Profitablitiy: Real estate brokerage firms are in business to provide a service and to be profitable. The owner of the firm needs to know how much money is available to operate the business. Additionally, the broker needs to know how much each sales associate must produce to cover office expenses. Two quick ways the broker can determine profitability are the company dollar and the desk cost.

Housing Financial Discrimination Act

The Holden Act; California law effective January 1, 1978, that prohibits all financial institutions from discriminating in real estate loan decisions based on location or other property characteristic unless decision can be shown to have been based on sound business practice

Fair Housing Act

The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status, and national origin requires businesses, such as real estate brokers and real estate lenders, to display the Equal Housing Opportunity Poster that depicts the equal housing logo Actions Prohibited: • Refusing to rent housing • Refusing to sell housing • Treating applicants differently from one another for housing • Treating residents differently from one another in connection with terms and conditions • Advertising a discriminatory housing preference or limitation • Providing false information about the availability of housing • Harassing, coercing, or intimidating people from enjoying or exercising their rights under the act • Blockbusting: persuading an owner to sell or rent housing by saying that people of a particular race, religion, etc., are moving into the neighborhood • Imposing different loan terms for purchasing, constructing, improving, repairing, or maintaining a residence • Denying use of, or participation in, real estate services such as brokers' organizations or multiple-listing services

employment agreement

The real estate law requires that every broker must have a written employment agreement with each of his or her salespeople, whether they are licensed as a salesperson or as a broker under a broker-associate arrangement. Although the employment agreement does not have to be on a form approved by the Commissioner, it must cover the important aspects of the employment relationship, including supervision of licensed activities, licensee's duties, and the compensation arrangement.

1866 Civil Rights Act

This federal law prohibits discrimination based on race in all property transactions. However, it was basically ignored until 1968.

California Civil Code (Section 54-55.1)

This section of the Civil Code prohibits discrimination in the rental, leasing, or sale of housing accommodations to the blind, visually handicapped, deaf, or otherwise physically disabled. It also precludes restrictions on seeing-eye dogs and signal dogs from no pet clauses.

employee

Under common-law rules, anyone who performs services for a company is the company's employee (common-law employee) if the company can control what will be done and how it will be done.

commercial email message

Unsolicited e-mail messages sent by a real estate agent to people on a mailing list for the purpose of offering that agent's services • A legitimate return e-mail and a physical postal address • A clear and conspicuous notice of the recipient's opportunity to opt-out or decline to receive any future messages • Opt out mechanism active for at least 30 days after the transmission of the message • Clear and conspicuous notice that the message is an advertisement or solicitation

S corporation

a corporation that operates like a corporation but is treated like a partnership for tax purposes. It avoids the double tax feature of a corporation because any gains and losses pass directly to the shareholders.

partnership

a form of business in which two or more persons join their money and skills in conducting the business. The Department of Real Estate does not issue partnership licenses. However, a partnership may perform acts for which a real estate broker license is required, as long as every partner has a real estate broker license. Just like a sole proprietorship, the broker-owners of a partnership are jointly and severally liable for all business debts.

corporation

a legal entity whose rights in business are similar to that of an individual. It exists indefinitely and has centralized management in a board of directors. Its shareholder liability is limited to the amount of the individual investment and its corporate stocks are freely transferred. If permitted by its articles of incorporation, a corporation may take title to real estate. Due to its indefinite duration, a corporation may not hold title as a joint tenant. The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax.

joint and several liability

a legal term used in reference to a debt, in which each debtor is responsible for the entire amount of the debt. Partnerships file an annual information tax return. All partnership income, expenses, gains, and losses pass through to the individual partners and are reported on their personal income tax returns.

trade association

a voluntary nonprofit organization of independent and competing business units engaged in the same industry or trade, formed to help solve industry problems, promote progress, and enhance service.

sole proprietorship

an unincorporated business owned by one individual. Since it is owned and operated by one person, it is used frequently to set up a real estate brokerage office. The owner is personally and fully liable for all business debts. This means that personal property could be taken to pay business debts. The broker reports all debts and reports any income or loss directly on his or her personal income tax return.

CAN-SPAM Act of 2003

became effective on January 1, 2004 and regulates commercial e-mail messages. The CAN-SPAM Act defines a commercial e-mail message as "any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service." E-mails sent as part of an ongoing commercial transaction, called transactional e-mail messages, are excluded from the Act. An e-mail sent to a client concerning an existing listing or sales transaction is a transactional e-mail message and is exempt from the rules.

commission split

certain percentage of the commission that comes to the brokerage from your sales. Usually, a new agent can count on a 50-50 split at first. That means the broker gets 50% and you get 50% of the commission on any sale you make. For example, if the agreed-upon commission split is 50-50, and the commission paid to the brokerage on one of your sales was $6,000, the broker gets $3,000, and you get $3,000. Usually commissions will be cash, but they can be anything agreed upon by the listing broker and the principal.

Unruh Civil Rights Act (enacted in 1959)

covers illegal discrimination in all business establishments—including real estate companies. The act specifically outlaws discrimination in housing and public accommodations based on sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation. [C.C. §51(b)]. It is particularly important for real estate licensees to be aware of the discriminatory practices of steering, blockbusting, and redlining. Important Provisions in the Unruh Act § 51 This is the primary provision of the law stating that business establishments cannot discriminate based on certain categories. § 51.2 Business establishments cannot discriminate in the sale or rental of housing based upon age, with the exception of senior housing (62 or older). § 51.8 Prohibits a franchisor from discrimination in the granting of franchises. In effect, it prohibits the equivalent of redlining in the granting of franchises just as the law prohibits redlining in other areas of the real estate business. § 53 Outlaws restrictive racial covenants and other covenants that attempt to bar the transfer of real property based on anything that would constitute discrimination under §51.

independent contractor

doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who participate in an independent trade, business, or profession in which they offer their services to the public. Real estate licensees are not listed.

commission

fee for services rendered usually based on a certain percentage of the sales price of a property. The amount is not set by law and must be decided between the employing broker and each employed sales associate. You, as a sales associate, will receive your share of the commission from your broker when a transaction for which you are responsible closes.

brokerage

generally means an activity involving the sale of something through an intermediary who negotiates the transaction for payment. In the case of a real estate brokerage, the product is real property, with the broker as negotiator and agent of the principal, expecting a commission at the end of the negotiation. A licensed broker creates this business to bring together parties (brokering) who want to make transactions in real estate. The broker who creates the firm is the broker-owner of the real estate brokerage and sets all the policies of the firm. But a broker does not have to own a brokerage firm to be in business—a broker can even work from home.

solicitation materials

include business cards, stationery, websites owned or controlled by the licensee, advertising fliers, and other promotional materials designed to solicit a professional relationship between the licensee and a consumer. Solicitation material does not include promotional materials (e.g., refrigerator magnets), advertisements in print or electronic media (e.g., radio, cinema and television ads, and the opening section of streaming video and audio), and "For Sale" signs.

IRS classification

independent contractor, statutory employee, statutory nonemployee, and employee.

limited liability company (LLC)

is an alternative business entity that has characteristics of both corporations and limited partnerships. Owners of LLCs are referred to as members. The LLC offers its members the advantage of limited personal liability (like a corporation) and a choice of how the business will be taxed. Members can choose for the LLC to be taxed as a separate entity (like a corporation) or as a partnership-like entity in which profits are passed through to partners and taxed on their personal income tax returns.

trust funds

money, or anything of value, received from the buyer by an agent on behalf of a seller. Examples of trust funds are cash, a check used as a deposit for a purchase, or a personal note made payable to the seller. Do not confuse other monies such as commissions, general operating funds, and rents and deposits from broker-owned real estate with trust funds.

real estate board

or association is made up of members who share an interest in the business of real estate. Usually, members who join a local association of realtors automatically become members of the California Association of REALTORS® (C.A.R.) and the National Association of REALTORS® (NAR). C.A.R. performs the same function as NAR, but on the state level. The purpose of a real estate association is to bring together people in the real estate business, encourage professional conduct, protect the public from irresponsible licensees, and do anything in its power to upgrade the reputation and dignity of the real estate business.

blockbusting

or causing panic selling, is the illegal practice of telling people that property values in a neighborhood will decline because of a specific event, such as the purchase of homes by minorities.

autodialer

refers to equipment that can generate and dial telephone or cell phone numbers randomly or sequentially. Using an autodialer is an acceptable business practice provided you follow a few simple rules. First, the autodialer cannot place calls after 9:00 p.m. and before 8:00 a.m. Secondly, if a salesperson or broker uses an autodialer, the call must be connected to a live sales associate within two seconds after the recorded greeting has finished.

employment status

refers to the relationship between a salesperson and his or her broker—as an employee or self-employed. The compensation earned depends primarily on the salesperson's employment status. Generally, salespeople classified as employees earn a salary and salespeople categorized as self-employed earn a commission. Often, new self-employed licensees negotiate a 50/50 commission split with their broker.

Do-Not-Call/Do-Not-Fax

rules are forcing real estate agents to try new methods of prospecting. We will discuss prospecting using the telephone, cell phone, fax, and e-mails.

ethics

set of principles or values by which an individual guides his or her own behavior and judges that of others. The professional behavior set forth in real estate law is a course that a licensee must follow.

desk cost

shows how much each sales associate must earn to cover expenses. It is calculated by dividing the total operating expenses of the firm by the number of licensed sales associates. A profit margin for the broker is not included as an operating expense.

Comingling

strictly prohibited by real estate law and may be punished by revocation or suspension of a real estate license. Examples of Commingling • Personal or company funds are deposited into the trust fund bank account. This violates the law even if separate records are kept. • Trust funds are deposited into the licensee's general or personal bank account rather than into the trust fund account. • Commissions, fees, or other income earned by the broker and collected from the trust account are left in the trust account for more than 25 days from the date they were earned.

ephemeral nature

text messages, instant messages, or tweets.

company dollar

the amount a broker has left after all commissions have been paid.

redlining

the illegal use of a property's location to deny financing.

cold calling

the practice of making unsolicited calls to people you do not know in order to get new business.

prospecting

the process of identifying potential customers. The majority of sales associates prospect by cold calling or sending text through mailings, faxes, or e-mails.

Goodwill

the value of all favorable attributes that relate to a company that are not attributable to any other specific asset

real estate sign regulation

• A city or county may ban all signs on publicly owned property. • A city or county cannot ban signs on privately owned property. • A city or county may impose reasonable restrictions on the time, place, and manner of displaying signs regardless of whether it is on privately or publicly owned property.

trust funds handled as expected

• An offeror's check held uncashed by the broker before an offer is accepted may be held uncashed after acceptance only upon written authorization from the offeree. • The offeror's check may be given to the offeree only if both expressly authorize it in writing. • All or part of an offeror's deposit may not be refunded by an agent or subagent of the seller without the express written permission of the offeree to make the refund.

Brokerage Activities Performed by Licensees

• Prospecting for listings • Selling and marketing the properties • Negotiating transactions between buyers and sellers • Arranging financing • Closing transactions

Activities Prohibited by Regulation 2780

• Refusing to list and show properties to selected people • Processing some applications more slowly than others • Stating to some people that property is not available when it is • Using special codes on applications • Actively discouraging other licensees from working with minorities • Charging more for the cleaning or security deposit to some applicants • Assisting other licensees to discriminate

Senior Citizen Housing exemptions

• The housing is provided under a state or federal program specifically designed and operated to assist the elderly. • The housing is intended for and solely occupied by people 62 years or older. • The housing is intended and operated for occupancy by at least one person 55 years or older in each unit. • 80% of the units are occupied by at least one person 55 years or older. • The housing has significant facilities and services to meet the physical or social needs of older persons. • The policies and procedures demonstrate the intent to provide housing for persons 55 years or older.