Level 6: Violations of License Law, Penalties, and Procedures

Alen received a judgement against a broker: $5,000 compensatory damages; $4,000 punitive damages; and $3,000 in court costs and attorney fees. Alen made a claim to the Recovery Fund, which was accepted. At maximum, how much money will Alen receive from the fund?

$5,000

Payment from the Recovery Fund for claims arising out of the same real estate transaction is limited to how much?

$50,000

Summary of Deadlines

-20 days for subject of complaint to give written response to complaint -10 days for complaint to be kept confidential after probable cause is found -30 days for probable-cause panel to make decision after receiving DBPR's report -21 days for subject of complaint to fill out the Election of Rights form -14 days of notice to be given to subject of complaint before a hearing -30 days for final order to become effective after being filed -30 days from subject's receipt of final order to appeal

Suspension

-A license can be suspended for up to 10 years. -A second suspension (for either the same violation or a different one) can result in revocation. -During a suspension, a licensee must still keep up with renewal requirements.

A civil suit can be undertaken if:

-An unlicensed person practices real estate. The civil penalty for the unlicensed practice of real estate ranges from $500 to $5,000. -A licensee commits fraud in a real estate transaction. -An injured individual wants to recover money they paid to a licensee. -An injured individual wants to deny commission to a person not entitled to that commission.

Revocation

-permanent It means that a licensee can never practice real estate again.* This is the heaviest punishment FREC can hand down.

-maximum penalty is one year incarceration and $1,000 fine -Elsa provides inaccurate, out-of-date rental information lists to prospective tenants who pay for those lists.

1st degree misdemeanor

-maximum penalty is 60 days incarceration and $500 fine -Broker Belle operates under a trade name without properly notifying FREC.

2nd degree misdemeanor

After being filed, when does a final order becomes effective?

30 days

-Sheila steals a licensing exam. -maximum penalty is five years incarceration and $5,000 fine

3rd degree felony

A complaint is legally sufficient if it contains ultimate facts* that allege a violation of any of the below:

A Florida statute A current, adopted DBPR rule A current, adopted FREC rule

Breach of Trust (475.25, F.S.)

A breach of trust is the breaking of a promise or obligation, and can be done through action, omission, default, or nonperformance.

A broker is accused of a license law violation. The broker, who was about to retire anyway, does not want to go through the hearing process. She turns her license in to the DBPR instead. What description BEST fits the broker's actions?

A licensee can choose to give up their real estate license in lieu of discipline. Voluntary relinquishment for permanent revocation means the licensee is out of the real estate business forever.

An agent receives a citation from the DPBR and wants to dispute it. What should he do?

A licensee who receives a citation has 30 days to accept or reject the alleged violation. If the licensee wants to dispute it, they must file a written objection.

What is a stay of enforcement?

A licensee will file for a stay of enforcement to ensure that the final order against them is not implemented until their appeal is over.

Material Fact (689.25, F.S.)

A material fact is a fact that, if known, could cause someone to take a different course of action or make a different decision regarding the property to be purchased. -Leaky roof -Problems with the heating, cooling, or plumbing systems -Age of property and systems -Mold, mildew, lead paint, asbestos, radon, and other environmental hazards

The Panel: Who They Are

A probable-cause panel consists of two people: -At least one must be a current member of FREC. The other panel member can be a former member of FREC, but they must still hold an active real estate license. -At least one must hold an active real estate license. Combinations might include: -One current, unlicensed FREC member and one former, licensed FREC member -One current FREC member and one former FREC member, both licensed -Two current FREC members, one licensed, one unlicensed

Zelda is the subject of an investigation. She has not disputed the allegations of material fact. What kind of hearing does her case proceed to?

An informal hearing

Commingling (83.49, F.S.; 475.452, F.S.)

As you'll recall, commingling is the illegal act of mixing personal funds with a client's funds. Let's say a broker placed a client's escrow deposit into his business operating account. That broker has commingled funds.

Broker Bart places some of a client's funds into his personal account. He then uses some of that money to pay for a new air-conditioning unit in his home. Which action is commingling, and which is conversion?

Bart commingled when he placed client funds in his personal account. He committed conversion when he used the commingled money to buy an air-conditioning unit.

Definition of a Complaint

Before we get into the process... what's a complaint? A complaint is a claim against a real estate professional for an alleged violation. A complaint will be investigated if it is: Filed in writing Legally sufficient

There are seven general steps in the complaint process. They are:

Complaint is filed. Complaint is investigated. Probable cause is determined. Formal complaint is issued if there is probable cause. Formal or informal hearing takes place. Final order is issued. Judicial review (i.e. an appeal) can be sought.

Concealment (475.25, F.S.; 475.42, F.S.)

Concealment is withholding information or a material fact. In other words, it's when a license holder doesn't disclose something that they should disclose.

Culpable Negligence (475.25, F.S.)

Culpable negligence is negligent conduct that is not intentional but involves a disregard of the consequences that will likely result. For instance, a broker might be found culpably negligent if they are careless with their supervisory duties.

Molly, an agent, has been advertising properties in a deceptive, misleading way. FREC decides to fine her the maximum penalty amount. How much is the FREC administrative fine?

FREC can impose a maximum fine of $5,000 per violation.

Failure to Account or Deliver (475.25, F.S.)

Failure to account or deliver is the failure to deliver personal property (such as money, legal documents, or commission) to the person entitled to receive it.

The DBPR has filed a formal complaint against Marcel. Marcel does not want to go through the hearing process, but he also doesn't want to opt for voluntary relinquishment for permanent revocation. What is a good option for Marcel?

He should try to settle

Seth receives a notice of noncompliance. What penalties will he receive?

If Seth receives a notification of noncompliance, it means he has committed a minor violation for the first time. This violation does not result in economic or physical harm or adversely affect the public health, safety, or welfare. If Seth does not correct the minor violation within 15 days after being notified, he may be issued a citation.

Suspension or Revocation of Broker's License

If a broker's license is suspended or revoked, their sales associates' licenses go on involuntary, inactive status. If the broker is part of a partnership or corporation, and the partnership or corporation correctly reorganizes after the broker's punishment, the sales associates can try to register with a new employer there.

Jill, an agent, receives a formal (administrative) complaint against her. What MUST have happened prior to her receiving the complaint?

If the DPBR finds that probable cause exists, the probable-cause panel will tell the DPBR to file a formal (administrative) complaint against the accused licensee.

Bob, a licensee, is under investigation by the DPBR. Bob receives an Election of Rights form along with the administrative complaint. On the form, he chooses to dispute the allegations. This means Bob will face:

If the licensee disputes the allegations in the complaint, their case must be heard by an administrative law judge in a formal hearing.

Innocent misrepresentation occurs when:

Innocent misrepresentation occurs when the licensee makes a statement they believe is true, but is actually false.

A complaint in Florida has been filed, in writing. What else needs to be true for the complaint to be investigated?

It must be legally sufficient

The DBPR can choose to designate certain violations as appropriate for an informal process conducted by neutral third party to settle the complaint. What is this informal process called?

Mediation

Misrepresentation (475.25, F.S.)

Misrepresentation is a statement, written or spoken, that is false or misleading. There are varying degrees of misrepresentation: -Innocent misrepresentation: Innocent misrepresentation occurs when a licensee makes a statement they believe is true, but is actually false. -Negligent misrepresentation: Negligent misrepresentation occurs when the licensee fails to disclose significant property issues due to ignorance. It's when they should have known something, or should have done something, but didn't out of sloppiness or carelessness. -Fraudulent misrepresentation

Moral Turpitude (475.25, F.S.)

Moral turpitude is conduct that goes against justice, honesty, good morals, or custom. It can also mean depraved, base behavior. In Florida, examples of moral turpitude include: -Embezzlement -Larceny -Robbery -Manslaughter by culpable negligence -Bookmaking (i.e., illegal gambling)

Conversion (61J2-14.008, F.A.C.)

Remember, conversion is a license holder's personal use or misuse of money belonging to others. For instance, let's say a broker used client funds to pay for her son's college tuition payment. That's stealing! Don't do it.

A buyer gives a broker a $40,000 earnest money deposit, which the broker uses illegally. The buyer sues the broker. The court awards the buyer $50,000 (the original $40,000 deposit, plus $10,000 for punitive damages). The broker has insufficient assets to cover that amount, however, so the buyer requests relief from the Florida Real Estate Recovery Fund. How much can the buyer receive from the Fund?

Remember, the Fund will not reimburse for punitive damages. So, the buyer will receive $40,000.

Justin, a broker, is being investigated for a criminal offense. The DBPR does not notify him of the investigation. Evaluate this situation.

The DBPR does not have to notify the subject of an investigation if the violation is a criminal offense. Otherwise, the DBPR does have to notify the subject that they are being investigated.

A broker complied with an EDO. However, the seller sued the broker, and won. In the judgement, the broker was ordered to pay $8,000 (actual damages), $5,000 (punitive damages), and court costs ($2,000). The seller's attorney fees were $3,000. The broker's attorney fees were also $3,000. The broker made a claim to the Recovery Fund, which agreed to reimburse. What is the maximum amount the Fund will reimburse?

The Recovery Fund would reimburse up to $16,000: $8,000 (actual damages) + courts costs ($2,000) + seller's attorney fees (because he won; $3,000) + broker's attorney fees ($3,000). Remember that the fund never covers punitive damages.

Leticia is a broker who works as a property manager. For a fee, she gives a list of rentals to a prospective tenant. This list is out-of-date in terms of fees and amenities. Evaluate Leticia's behavior.

The failure to provide accurate and current rental information for a fee is a first-degree misdemeanor. It is punishable by a fine of up to $1,000 and/or imprisonment of up to one year.

The Panel: What They Do

The panel reviews the DBPR's investigative report and the subject's written response to the complaint (if they've sent one). Once the panel receives the DBPR's report, they have 30 days to make a decision. They can, however, ask for an extension. Person will receive reprimand

A sales associate did not disclose to a potential buyer that the property had been treated for mold. Evaluate this situation.

The sales associate committed concealment by not disclosing a material fact.

A sales associate forgot to present an offer to her client. The client ended up accepting a worse offer. When the client found out she could have received more money, she was very angry. What violation did the sales associate commit?

The sales associate didn't intend to injure her client, but she should have known better. That's culpable negligence!

Fraud (475.25, F.S.)

The third type of misrepresentation is the most serious kind. Most of us are familiar with fraud, or the wrongful or criminal deception intended to result in financial or personal gain. Fraudulent misrepresentation occurs when a licensee intentionally attempts to prevent a buyer from finding out about a material fact. This occurs when a licensee purposefully conceals a known defect.

What are the three possible outcomes of the deliberations of a probable-cause panel?

The three possible outcomes of the deliberations of a probable-cause panel are: no probable cause and case is dismissed; no probable cause and a reprimand is sent; probable cause and a formal administrative complaint is filed.

An agent receives $500 cash as earnest money. The agent then deposits the cash into her personal checking account and writes a check from that account to the broker. Are the agent's actions legal?

This is an example of commingling, which is the illegal act of mixing a client's funds with personal funds. Motive does not matter; this act is always illegal.

A broker is the property manager for a three-unit property that rents for $1,500 per unit. The broker collects the monthly rent and then uses part of that $4,500 for emergency repairs on his car. The broker's friend lends him the money to pay the property owner the entire $4,500 of rent. Evaluate the broker's actions.

This is an example of conversion, as the broker is using funds that should have been escrowed for his own personal use. This behavior is illegal.

A sales associate signed a contract in the name of the seller she was representing. The sales associate believed that she knew the seller wanted to sign, and that it was urgent to obtain a signature. The seller did not know the sales associate had signed the contract, and he had not authorized it. Did the sales associate commit a breach of trust? Why or why not?

This was a breach of trust, because seller trusted the sales associate to follow his directions. Because she acted without his permission, she violated his trust.

Several individuals make claims to the Real Estate Recovery Fund against a single real-estate licensee. The claims stem from different transactions. What is the maximum amount the fund could reimburse for these claims against the licensee?

Total payments for claims based on judgments against a single real estate licensee cannot exceed $150,000. So, even if there are multiple claims, the total payment cannot exceed that amount.

Matthew does not hold a real estate license. However, he performs activities that require a license. Describe the nature of his crime.

Unlicensed activity, including providing real estate services for compensation without a real estate license, is a third-degree felony.

-best option for denial and recovery of compensation -can happen simultaneously with criminal and administrative penalties

civil suits