Chapter 12: Virginia Real Estate Laws and Real Estate Board Rules

VREB Composition

-9 members -7 licensed brokers or salespersons with 5 consecutive years experience -2 citizens Terms are four years. Board elects chairman from membership.

Prohibited Acts

-Providing substantially inaccurate or incomplete information to the Board -Holding multiple licenses -Retaking the exam without cause -Signing without knowledge of the applicant's activity or unreasonably refusing to sign an experience verification form -Felony convictions -Misdemeanor convictions -Failing to report criminal convictions (within 30 days of plea or conviction) -Violating fair housing laws -Violating and/or failing to report violations of other states' license laws -Failing to safeguard the public interest -Improper, fraudulent, or dishonest conduct

Transaction Recovery Fund (TRF)

1) Assessments: New licensees must pay a $20 fee to the TRF. If the balance falls below $400,000, the Board may assess (notice by mail, 45 days to respond) all licensees for up to an additional $20 over 2 years. Failure to pay results in a second notice (with another 30 days to pay). Failure to pay after a second notice results in automatic suspension of the licensee's license until payment is received. 2) Earned Interest: Used for administration costs, accrued to fund, research and education, or restoring shortages.

Advertising Restrictions

1) Broadly Defined: includes any medium 2) Supervision: all firm advertising must be supervised by the principal or supervising broker and must include the firm's name 3) Advertising Disclosures: differ depending who and where one advertises 4) Personal Interest Disclosures: ads must specify that the owner is a real estate agent & if they own or has an ownership interest in the property. Interest must be disclosed in contract in writing 5) Prohibited Advertising Conduct: cannot imply property is for sale by owner; fail to include the firm's licensed name on signs located at place of business; advertise property without owner/landlord's consent; fail to identify nature of services provided; fail to include firm's name on any advertisement

Principal Broker Duties

1) Ensure compliance 2) Receive Board communication 3) Keep records--for 3 years in one location 4) Supervise advertising 5) Manage escrow accounts

Compensation

1) Former Salespersons: Brokers may compensate former (transferred) salespersons for any commission earned while affiliated with that broker. 2) Client Referral Fees: Only brokers (not salespersons) may pay referral fees and split commissions with other brokers or firms. 3) Service Referral Fees: Except as otherwise prohibited by RESPA, all active licensees (salesperson or broker) may accept referral fees or services required by a sales contract (inspection, survey), as long as the fee is acknowledged in writing by the person who pays for the service before that service is requested (failure to properly receive consent is a violation). 4) Transaction Information Referral Fees: All active licensees (salesperson or broker) may accept referral fees for non-protected transaction information (property, parties, finances), as long as they obtain the written consent of their principal broker. 5) Net Listings: Prohibited in VA

Actively Engaged

A broker or salesperson having active licensure with a licensed real estate firm or sole proprietorship and active for an average of at least 40 hours per week. Applies to the broker experience requirement (salesperson for 36 of 48 months).

Application Deadline

A license application must be submitted within 12 months of passing the state exam or else the applicant must retake exam.

Concurrent Broker's License

A license for brokers seeking to be active in multiple firms (only brokers may be active in multiple firms). Must pay a fee, submit an application, and provide verification that they have notified the principal broker of each firm.

Associate Broker

A licensed broker other than the person designated as principal broker at a firm.

Limited Service Agent

A licensee who acts for or represents a client pursuant to a brokerage agreement that provides that the limited service agent will not provide one or more of the duties of a standard agent. Has obligations agreed upon by the parties in the brokerage agreement, as well as some disclosure obligations required by law.

Principal to a Transaction

A party to a real estate transaction, including without limitation: a seller or buyer, a landlord or tenant, or an option or optionee. Under VA Law the listing/selling broker, or both, are not principals to the transaction by virtue of their brokerage relationship.

Main Office Supervision

A supervising broker, who may be the principal broker or any other designated broker, must exercise reasonable supervision over real estate brokerage services performed by all licensees assigned to the main office. If designated, the supervising broker must provide his name and license number to the Board.

Brokerage Agreement

A written agreement establishing the brokerage relationship between a client and a licensee which must state whether the licensee will represent the client as an agent (standard or limited service) or as an independent contractor.

Transferring Individual Licenses

Active licensees (brokers and salespersons) may transfer licenses from one firm to another by applying to the Board and paying a fee.

Disclosure of Interest

All active licensees must make disclosure (to the parties) if they have an interest in a real estate transaction. Licensees are interested if they, a family member, or their firm owns or has an interest in the subject property.

Appeal

All disciplinary rulings may be appealed to the Virginia Court of Appeals and higher. However, there is no appeal of suspensions for failing to pay transaction recovery fund assessments or for revocations due to transaction recovery fund payments.

Minimum Qualifications for Firm Licenses

All firms except those owned by single licensed broker with a single location must be separately licensed and must also be registered to do business in VA.

Names

All firms may operate under fictitious names. However, licensed (single) broker owners must first register their legal name with the Board, along with their fictitious name and their residential and business addresses.

Principal Brokers

All firms must have 1 principal broker whose license is in good standing (if it is a broker owned firm then it will be the broker-owner).

Board Inquiries

All licensees (a salesperson or broker, active or inactive) must respond to Board inquiries (a question or records request) for any information within 21 days -Unless it is a request for financial records, which would be due in 10 days.

Delivery of Instruments

All licensees must deliver copies of all signed documents as soon as practical, notify all parties of any material changes to documents, & return any held documents upon request.

Improper Dealing

All licensees must treat clients and customers fairly and honestly.

Renewing Licenses

All licenses (firm & individual, active & inactive) must be renewed every 2 years by the license holder. Done by paying a renewal fee and completing all mandatory education.

Branch Offices

All must be licensed (and supervised by a broker), even if owned by a single licensed broker. Branch licenses must be posted at the licensed branch office.

PLE for New Salespersons

All new salespersons (active or inactive) must complete 30 hours of post license education (PLE) within the initial year of licensure.

All Other Firms

All other firms owned by multiple brokers, non-brokers, or organized as a corporation, partnership, association, or limited liability company (LLC) must have a firm license (in addition to individual licenses). Must also be authorized to do business in Virginia by the Virginia State Corporation Commission. -Branch Offices: Must be licensed & supervised by a broker. Branch licenses must be posted at the licensed branch office. -Names: Non-broker owned firms must be licensed in the company's legal name (which may be fictitious).

License Required

All persons and some firms must be licensed if, on behalf of another person for a fee, they: sell or offer to sell real estate; buy or offer to sell real estate; negotiate the purchase or exchange of real estate; or rent, lease, or negotiate a lease for real estate.

Post Licensing Education (PLE)

All salespersons must complete 30 hours within initial year of licensure.

Disclosure of Brokerage Relationship

Before real estate service is provided in a residential transaction, all active licensees (salesperson or broker) must make written disclosure of whom the licensee represents. The disclosure must be provided upon having a substantive conversation with unrepresented non-clients about a specific property (disclosure may be oral when first triggered, but must be written by date of service).

Salesperson Pre-License Education

Before taking the State license exam, must pass an approved course (60 hours).

Broker Pre-Licensing Education

Before taking the State license exam, must pass at least 180 hours in: -Real Estate Brokerage - at least 45 credit hours -2 other board approved mandatory courses -Board approved electives Must be actively licensed salesperson for 36 of 48 preceding application.

Electronic Media Disclosures

Both individual and firm ads must include the firm name, city, and the state (Virginia) of the firm. Individual ads must also include the licensee's name. All disclosures must be viewable on the main page or no more than one click away from the main page.

Sole Proprietor (Principal Broker Owner)

Brokerage firm that does not require a firm license, as long as the individual broker/owner is licensed. Principal broker owners may operate under legal or fictitious names as approved by the Board.

Sole Proprietor (Non-Principal Broker Owner)

Brokerage firm that requires a firm license, but which may be owned by an unlicensed individual under specified circumstances.

Exchange of Broker License

Brokers may exchange their current license for a lower type by applying and paying a fee. The previous license will cease to exist.

Firm Location

Cannot operate on residential property unless the business office is separated from the living quarters (separate entrances). Virginia residents (brokers) must maintain at least 1 location in Virginia.

Inactive Status

Describes a broker or salesperson who is not under the supervision of a principal or supervising broker, not active with a firm, and prohibited from performing any acts of brokerage.

Agency Disclosure

Dual and designated agency/representative disclosures must be properly written and conspicuous (or on standardized forms). This written consent must be timely obtained from both buyers (before receiving an offer) and sellers (before presenting an offer).

Branch Office Management

Each branch must be licensed and a single location must be designated as the "main" location.

Supervising Broker

Either the broker appointed by the principal broker to supervise associate brokers and salespersons (could be the principal broker), or the broker appointed by the principal broker to supervise a designated agent/representative.

License Reinstatement

Expired licenses may be reinstated for up to 1 year following expiration (within 30 days by paying renewal fee; 31 days to 1 year by paying extra reinstatement fee).

Firm Conduct

Firms must properly seek and maintain firm and individual licenses.

Broker Owned Sole Proprietor

Firms owned by a single licensed broker with a single location -Do not need a license

Minimum Qualifications for Individual Licenses

High school diploma or eq; 18 yrs or older; good standing with other jurisdictions where licensed; must pass pre-license course; must disclose certain misdemeanors that occurred within 5 years of application and any felony convictions in lifetime; must submit set of fingerprints to the Virginia Central Criminal Records Exchange -Broker candidates must have experience as an active licensed salesperson for 36 of the preceding 48 months before applications.

Death or Disability of Principal Broker

If a firm's principal broker dies or becomes incapacitated, the Board may approve an unlicensed person to conclude the firm's business for up to 180 days.

Investigation

If the Board decides to investigate, it must notify the accused licensee & their principal broker. A committee then interviews witnesses, examines evidence, and reports to the Board who then decides whether to dismiss or prosecute the case.

Payments to Consumers

In order to receive reimbursement from the TRF, consumers must: -Obtain a final judgment from a VA court against a licensee for improper or dishonest conduct (which caused a monetary loss) -Fail to receive full compensation from that final judgment -Exhaust all other attempts to receive full compensation -File a timely claim with the Board (within 12 months of final judgment), which includes an affidavit (describing actions of licensee and steps taken by consumer for reimbursement).

Conventional Media Disclosures

Includes newspapers, magazines, and flyers (not electronic). -Must always include firm's name -Individual ads must include licensee's name -Business cards must include the firm name, licensee's name, and contact information

License by Reciprocity

Intended for those already licensed in another state. Brokers must be actively engaged for 36 of the 48 months prior. Must pass state portion of exam and pay application fee.

Initial Licenses

Intended for those without a license in any state. 1) Active Status: License issued to one who is affiliated with a broker. The Board issues active licenses directly to the applicant's principal broker, who must make the license publicly available at the main office. Licenses belong to the Board. 2) Inactive Status: License issued to one who is not affiliated with a broker. Cannot engage in any acts requiring a license; must apply for active status within 3 years or re-qualify, subject to Board's discretion.

Applying for Business Entity Salesperson Licenses

License available to salespersons and/or associate brokers who are associated with a firm, but who want to reduce personal liability and obtain tax advantages (sales teams) by forming a business entity (corporation, partnership, limited liability company). -An individual can choose whether to operate under a business entity salesperson license. If a group wants to operate as a real estate team however, they must obtain a business entity salesperson license before working as a unit at the brokerage firm. -Owners or officers who are active participants must hold a license (salesperson, associate broker).

Reporting Changes

License changes must be reported within either 10 or 30 days depending; termination of the principal broker must be reported in 3 days. 10 days: 1) Change in Status (a change in active or inactive status; termination or voluntary separation) 2) Termination of Salesperson or Associate Broker 3) Voluntary Inactivation 30 days: 1) Change in Personal Information 2) Change in Firm Information

Standard Agent

Licensee who acts for or represents a client in an agency relationship (other than as a limited service agent) in a residential transaction.

Independent Contractor

Licensee who enters into a brokerage agreement with a client, which specifically states that the licensee is acting as an independent contractor and not as an agent. Has the obligations agreed upon by the parties in the brokerage agreement, as well as some of the duties (but not all) that a standard agent has towards a client.

Misrepresentation/Omission

Licensees are prohibited from making any misrepresentations or omissions related to a transaction. -Bait & switch tactics -Failing to disclose material facts -Failure to identify persons holding deposits -Making false statements

Fictional Names

Licensees may be licensed under fictional or professional names so long as the legal name is properly registered with the Board.

License Lapse

Licenses not timely reinstated (over 1 year from expiration) will lapse. Once lapsed, licensee must reapply for an initial license.

License Expiration

Licenses not timely renewed (every 2 years) will expire.

Minimum Qualifications for Business Entity Salesperson License

May apply for a separate "business entity" salesperson's license which permits them to work under a principal broker as a business entity and to benefit from the accompanying limitations on personal liability. -Required for teams

VREB Authority Under Other Real Estate Laws

May enforce the Virginia Fair Housing Act in cases involving real estate licensees and their employees; may promulgate real estate forms if specifically directed by the state legislature; has authority to administer the Virginia Real Estate Transaction Recovery Fund.

VREB Lack of Authority

May not arbitrate dispute between licensees; may not establish commission rates or standardized agreements (such as sales contracts).

VREB Authority

May only regulate the real estate profession as authorized by the Virginia legislature. Licensing Oversight: -Rulemaking -Licensing -Enforcement -Education

Conflicts of Interest

Must be avoided. Include: -Undisclosed or dual agency -Working for another firm without written permission -Performing real estate services outside of the brokerage firm

Continuing Education

Must complete at least 16 credits of continuing education every renewal period (2 years). Salespersons are required to complete 16 credits, while brokers are required to complete 24 credits.

Persons Limited

No TRF payments may be made to: -Any licensee or his personal representative -Spouses & children of guilty licensees, or their personal representative -Banks and lenders -Construction and development companies

Non-Residents

Non-residents applying for a Virginia License must file an irrevocable consent to suits and services (agreement which allows the Board to receive notice of any in-state lawsuit on the licensee's behalf).

Regulant

One (salesperson or broker) who is regulated by the board.

Applicant

One who applies to the board for a real estate license.

Licensee

One who is licensed (salesperson, broker, or firm) by the Board.

Improper Commissions

Only principal broker may distribute compensation and may not compensate an unlicensed person for acts of real estate.

Firm

Partnership, association, corporation, limited liability company, or sole proprietorship (principal broker owner) engaged in the sale of real estate on behalf of others for profit. Firms must be licensed (unless the firm is a sole proprietor-principal broker owner).

Client

Person who has entered into a brokerage relationship with a licensee.

License Exemptions

Persons and firms do not require a license solely because they: -Sell their own property -Act without compensation under a power of attorney -Resolve client issues as a licensed attorney -Follow a court order (bankruptcy, will, trusts, estates) -Auction property -Merely show rental property (rental agents) Sole properietor-broker firms with a single location do not require a firm license (but the principal broker must be licensed).

Escrow Accounts

Principal broker is primarily liable for escrow accounts, but the supervising broker or any other licensee with escrow account authority may be disciplined for the following violations: -Commingling: illegal practice of mixing escrow and non-escrow funds -Conversion: appropriation (stealing) of escrow money or property -Borrowing Against Accounts: cannot disburse money or property from one escrow account to cover another -Acknowledging Receipt: licensees must acknowledge receipt of escrow funds or property in the subject contract. -Reporting Violations: all licensees must report known escrow violations. Principal brokers must report to board within 3 business days of forming a reasonable belief that any violation occurred.

Accounting

Principal or supervising broker must account for, and timely remit (within a "reasonable time"), all monies held for parties (including escrow funds).

Board Requests

Principal or supervising broker must submit records to the Board within 10 days of the Board's request.

Retention Period

Principal or supervising brokers must keep records of all real estate transactions (including escrow activity) for 3 years from date of closing, contract ratification if there was no closing, termination of contract, or conclusion of the licensee's involvement.

Supervision

Supervising brokers must provide reasonable and adequate supervision of all subordinate licensees under their charge. May appoint another broker to assist in this process, but the supervising broker remains responsible for proper supervision. The Board considers the following to be reasonable and adequate supervision: 1) General availability 2) Specific availability to review and approve documents 3) The availability of training and procedures on escrow deposits, fair housing, advertising, negotiating and drawing contracts and agreements, unlicensed individuals, agency relationships, regulatory updates, property disclosures, and other matters 4) Compliance with all laws and regulations 5) Brokerage agreements should include the supervising broker's name and contact information

Long-Distance Supervision

Supervising brokers that are more than 50 miles from a branch office must provide quarterly certifications to the Board stating that they have complied with the rules of supervision.

Damages Limited

TRF payments are limited to actual damages only (including attorney fees and court costs, but not pain and suffering or punitive damages) that were not reimbursed by the final judgment against the licensee or in any subsequent actions. Limited in: 1) Single transactions: Max TRF payment to a single aggrieved party in a single transaction is $20,000. Maximum to multiple parties is $50,000. 2) Multiple Transactions: Max TRF payment to a single in multiple transactions (over a 2 year period) is $20,000 per guilty licensee. Max to multiple parties is $100,000.

Standards of Conduct

The Board may discipline (fine, suspend, revoke) any licensee (active or inactive) for not abiding by the following conduct: -Firm Conduct -Disclosures -Financial Records & Escrow Management -Board Inquiries

Complaints

The Board may investigate misconduct based on a written complaint from any person (client, customer, other licensee) or by exercise of its own discretion.

Suspending Payments

The Board may suspend (withhold) payment from an otherwise unqualified party if it believes more claims are forthcoming (within 1 year for the same licensee), or if claims threaten to overwhelm the fund (until fund is replenished).

Board

The Virginia Real Estate Board, or VREB.

Prosecution

The accused may either admit guilt and voluntary agree to the proposed punishment, or dispute the allegations through an informal trial (AKA: informal fact-finding conference). Board may impose fines up to $2,500 per violation and/or suspended or revoke the licensee's license. -Board must prosecute violations within 1 year of discovery, but cannot prosecute beyond 5 years of occurrence (statute of limitations).

Brokerage Relationship

The contractual relationship between a client and a licensee.

Licensee Consequences

The license of a guilty licensee is automatically revoked if payment from the TRF is made (licensee may only reapply after reimbursing the TRF with interest). The licenses of those who fail to pay TRF assessments in a timely manner are automatically suspended.

Main Office Records

The principal broker must keep and make these records publicly available at the main firm office: -Firm License (different from a branch license) -Principal Broker's License -Salesperson and associate broker licenses of all who are active at the main location and branch locations -Must also keep all financial records from all locations in one location (branch or main office).

Active Status

The status of a broker or sales associate who maintains a current, valid license for the purpose of actively engaging in the real estate business.

Branch Office Records

The supervising broker must post the following records in a conspicuous place at the branch office: -Branch office license -List of assigned licensees (not the actual licenses, which must be kept at the main office)

VREB vs Trade Organizations

Trade organization membership and standards are voluntary and do not affect licensure; VREB rules and orders are mandatory.

Real Estate Team

Two or more individuals who work together as a unit within the same brokerage firm, represent themselves to the public as such unit, and designate themselves by a fictitious name. At least one member must be a licensee.

Certification of Firm's Compliance with Law

When submitting the renewal of any firm or sole proprietor license, the principal or supervising broker must certify that he or she has audited the operations, policies, and procedures of the firm to assure compliance with the license law and the Board regulations.

Principal Broker

individual broker who must be designated by each firm to assure compliance with the VA license law, to receive communications from the Board, and to supervise affiliated licensee and firm activity.