Unit 13

Disclosure of Real Estate Affiliations

-Because the franchise, network, or other parent real estate company with which a broker is affiliated is not part of the license name, Section 35.285 of the Regulations requires that the Commission be notified of this affiliation.

Posting Suspension Notices. Relicensure after revocation (RELRA Section 501; Regulations Section 35.251)

A revocation of a license lasts for at least five years from the date revocation begins. -After the five-year period, the individual may petition the Commission for relicensure. -If the Commission authorizes relicensure, the individual shall comply with prevailing, current licensing requirements before the license is issued.

The Bureau of Professional and Occupational Affairs

Created a Charging Unit in 2006 to provide better, timelier, and more efficient processing of complaints that has been the case in the past. -This unit makes prosecutorial decisions, including negotiated consent agreements and recommendations for formal actions by prosecutors, and decisions to dismiss complaints.

In Practice

Individuals must have the appropriate license before engaging in any activity for which a license is required. Otherwise, they are in violation of the law and can be subject to disciplinary action by the Commission. Unlicensed activity is one of the most frequent violations of the Act.

The Real Estate Commission

- Is empowered by RELRA to enforce the act and its rules and regulations. - When a complaint alleging a violation of the act and/or the regulations is received, the bureau of professional and occupational affairs conducts an investigation to determine if a violation has occurred. -The commission is authorized to suspend or revoke a license or registration certificate and/or levy fines up to $1,000. -Generally, the nature and severity of the violation(s) are considered. -Before the commission can take any disciplinary action, the accused party must be given an opportunity to have a hearing. -Section 701 of the RELRA states the manner in which a hearing before the commission shall be conducted.

The Real Estate Recovery Fund

- Was established to provide a means for aggrieved persons to collect judgments awarded in civil court. -These judgments must result from civil suits against real estate licensees for fraud, deceit, or misrepresentations in a real estate transaction. -Judgments involving the sale of a campground or a campground membership salesperson cannot be recovered from this fund. -The aggrieved party must first exhaust all other avenues to collect the judgment before applying to the fund. -To collect from the fund, aggrieved persons must : 1.show that they are not a spouse or personal representative of the spouse of the licensee, 2. that a final judgment was awarded, 3. that all reasonable remedies have been exhausted to collect the judgment. 4. that the application is being made within one year of the termination of the proceedings (including appeals). -The maximum amount that may be paid from the fund for any one claim is $20,000 and $100,000 per licensee. -If $100,000 is insufficient to settle the claims against a licensee, the $100,000 must be distributed according to the same ratio as the respective claims. -If the balance in the Real Estate Recovery Fund is insufficient to satisfy any claim or portion of the claim, the Commission must satisfy unpaid claims plus accumulated interest at the rate of 6% per year once the fund is reestablished. -Monies for the fund are collected from licensees. -When the fund was originally established in 1980, each licensee paid $10 into the fund when the licenses were renewed. -Subsequently, any person to whom a license is issued and who has not previously contributed to the fund pays $10. -According to Section 802 of the RELRA, the Commission may assess an additional fee (not to exceed $10 per licensee) if the fund drops to $300,000 or less to bring the fund's balance up to $500,000. -The fees are paid into the state treasury and are allocated exclusively for the purposes of the fund. -The money must be invested, and interest and dividends must accrue to the fund. -The license of the person involved in a claim is automatically suspended as of the date a payment is made from the fund. -The license cannot be reinstated until the licensee repays the amount of the claim plus interest at 10% per year. -The Commission can also take action in an attempt to recover monies paid out of the fund.

Withdrawal of Funds

-A broker must retain all funds in the escrow account until the transaction is consummated or terminated. -Consummation is simple to identify if, in the case of an agreement of sale, the sale proceeds through to settlement and the seller delivers title. -However, there are situations following the signing of an agreement of sale in which a dispute arises between the parties and the sale does not proceed to closing. -The broker is not permitted to determine who gets the money in the event of a dispute. If the parties do not sign documents authorizing the release of escrow funds, the broker must retain the escrow money until the dispute is resolved and the parties agree as to whom the deposit money belongs. -If resolution of the dispute appears remote without legal action, the broker may, following 365 days' notice to the parties, petition the county court to interplead the rival claimants. -The broker may not appropriate any part of the earnest money as compensation as the broker's commission.

Duties When Selling or Leasing Own Real Estate

-Once licensed, brokers and salespersons must comply with all requirements of the Act and Section 35.288 of the Regulations when selling or leasing their own property. -They must disclose their license status to a prospective buyer or tenant before the person enters into an agreement with the licensee. -Licensees also must disclose that they are licensed when advertising their own properties for sale or rent.

Inactive Licenses

-A license becomes inactive when an individual voluntarily relinquishes a license, sometimes referred to as putting a license in "escrow," or when an individual fails to properly renew a license. -When a license is inactive, the person is prohibited from performing the activities for which the license was issued. -A license may be reactivated by submitting the proper forms and required fees within five years of the date the license became inactive. -Brokers and salespersons must obtain 14 hours of continuing education before they can reactivate a license. -An individual who does not reactivate a license within five years must retake the appropriate examination in order to be issued a license.

Advertising and Solicitation

-A licensee may not advertise, solicit prospective buyers or tenants, or place a For Sale or For Rent sign on a property without the written consent of the owner. -A rental listing referral agent may not publish information about a rental property if the lessor or property manager expressly states that the property is not to be included in the inventory list prepared by the rental listing referral agent.

Harassment

-According to Section 35.302 of the Regulations, a licensee, whether acting on behalf of a prospective buyer or not, must not solicit the sale or other disposition of real estate with such frequency as to amount to clear harassment of the owner of the property. -This includes personal contact or the use of telephone, mail, or other advertising.

Ethical Marketing. -Advertisement of Lotteries, Contests, Prizes, Certificates, Lots, and Gifts

-According to Section 604 of the RELRA and 35.306 of the Regulations, advertisements for the solicitation or sale of real estate that employ lotteries or contests or that offer prizes, certificates, gifts, or free lots must contain -a description of each prize, certificate, gift, or lot offered; -the prerequisites for receiving the awards; -the limitation on the number of awards; -the fair market value (not suggested retail value) of each award; and -the odds of winning or receiving the award. *If the awards are offered through the mail, the licensee must maintain records that contain the number of awards that were made and the names and addresses of both the individuals who receive and do not receive them. -The Commission requires that disclosures be made if a possibility exists that a particular award is not available and prohibits advertising an award that is not available for distribution. -The description of an award cannot be misleading, and a statement of value and odds must be printed in a clear and conspicuous manner. -If the prizewinner must pay any fees, such as dealer preparation, shipping, handling, or insurance, these must be disclosed. *Advertising Sales Volume, Market Position, and Number of Offices - According to Section 35.307 of the Regulations, advertising by a broker about "sales volume" or "production" can refer only to closed transactions. -These are listings or sales that have gone to settlement or when a fully executed deed has been delivered. -An advertisement by a broker about production or position in the "market" must identify the municipality that the market comprises. -An advertisement about the number of offices that the broker operates must refer only to offices that have been issued branch office licenses.

Qualified association

-Act 14 of 2009 allows real estate licensees who work for the same broker to form qualified associations for the purpose of receiving compensation from their broker. -The broker of record may pay commissions or compensation to this association. -The formation must be reported to the Commission within 30 days. -The qualified association may consist of a corporation, limited liability partnership, limited partnership, or limited liability company. -It may not hold a real estate license, may not suggest in any manner that it provides real estate services, and must be owned only by licensees affiliated with the same broker. -If the owner dies, it may continue for up to 18 months.

Builder-Owner Salesperson

-Although Pennsylvania does not require builders to be licensed in Pennsylvania, some individuals employed by builders of single and/or multifamily dwellings must be licensed. -Sections 201 of the RELRA and 35.201 of the Regulations define a builder-owner salesperson as an individual who is a full-time employee of a builder-owner of single-family and multifamily dwellings and who performs one or more of the following activities: 1.Lists for sale, 2.sells, or offers for sale real estate of the builder-owner 3. Negotiates the sale or exchange of real estate of the builder-owner. 4.Leases or rents real estate of the builder-owner 5.Collects or offers or attempts to collect rent for the real estate of the builder-owner. -The applicant must be at least 18 years of age, be employed by the builder-owner (who is not licensed), and complete a written examination prior to licensure. There is no education requirement. For more information, see Sections 551 and 552 of the RELRA and 35.226 and 35.274 of the Regulations.

Act 48 of 1993

-Authorizes the Bureau of Professional and Occupational Affairs to adopt a schedule of civil penalties that may be imposed by investigators and inspectors for lesser violations of the RELRA and Regulations. -When these violations are discovered during the routine inspection of a real estate office or proprietary school or during the investigation of a complaint, a citation can be issued and the licensee can admit fault and pay the predetermined penalty. -This procedure is intended to free the Real Estate Commission's resources to concentrate on more serious offenses. Of course, a licensee can refuse to accept the citation and pursue the rights of due process previously described.

License Renewal

-Before the end of each license period, the Commission establishes procedures for submitting documentation and fees to renew a license. -Licensees are notified by postal mail that their licenses must be renewed and are provided renewal instructions approximately 90 days prior to the expiration of the license period. -Renewal applications are available for download on the Commission's website, and can be completed and mailed or faxed to the Commission. -Licenses can also be renewed online.

Supervised property management activities

-Per Section 35.287 of the Regulations, any real estate licensee involved in property management activities must be directly supervised and controlled by the employing broker. -The licensee (salesperson or associate broker) is not permitted to independently negotiate the terms of a lease or execute a lease on behalf of the lessor.

Branch Offices

-If a broker or cemetery broker intends to maintain more than one place of business, the licensee must obtain an additional license for each office location. -A branch office license, including its address, must be obtained before any office is opened. -This license is issued in the same name under which the broker or cemetery broker is licensed to conduct business at the main office. -A branch office shall meet the same requirements as the main office. -The broker or broker of record is responsible for the activities of all licensees in each office. -Branch offices may not be operated in a manner that permits a licensee to carry on business for the person's sole benefit. -If the broker delegates the duties of supervising and directing an office (as manager), the person assuming these duties must be an associate broker. -The broker, however, is still ultimately responsible for the activities in a branch office. -In addition to the branch office license, the broker must maintain a list of licensees employed by or affiliated with the broker at the branch office out of which each licensee works. -The current license of the broker and all licensees employed by or affiliated with the broker must be maintained at the main office. -The practical reality of the real estate business is that the licensed office is not the only place where licensees work. -Because of mobile technology, a considerable amount of work related to the business is done off site, which may be anywhere licensees can use their computers, cell phones, and other portable electronics. -However, that mobility does not permit licensees to represent their homes or other locations as a branch office. -The Real Estate Commission recommends that brokers establish policies and procedures that address offsite working arrangements to ensure that licensees comply with the Act and the Commission's rules.

Responsibility for Deposits

-If a sales deposit is tendered (offered) by a buyer to the listing broker rather than the selling broker, the listing broker assumes the escrow duty. -If the sales deposit is tendered by a buyer to the selling broker, the selling broker assumes responsibility. -In a co-brokerage transaction, local practice or custom often determines which broker holds the deposit money. -In many areas, that is the listing broker. However, the selling broker may hold the deposit if the buyer tenders the money to the selling broker without prior knowledge about who the listing broker is or that the listing broker intends to hold the deposit money. -The selling broker may deliver the deposit to the listing broker for escrow, in which case the buyer must be given written notice that the selling broker intends to do this. -The listing broker then assumes the responsibility for the funds. -Regardless of the brokers' arrangements, it is imperative that the parties to the transaction are fully informed and agree to the escrow arrangement. -Absent any arrangement, the broker who receives the funds is the one responsible for escrow.

Panic Selling

-In Section 35.303 of the Regulations, panic selling is defined as frequent efforts to sell residential real estate in a particular neighborhood due to fear of declining real estate values when that fear is not based on facts relating to the intrinsic value of the real estate; federal law describes this conduct as blockbusting. -The Commission regards an attempt by a licensee to bring about panic selling in order to gain profit as an act of bad faith under Section 604 of the RELRA. -Proof of systematic solicitation of sales listings may be considered sufficient, but not conclusive, evidence of an attempt to bring about panic selling.

Agent Duties

-In addition to the duties generally required of a licensee, the RELRA prescribes specific duties that are required when a licensee is an agent. -The Act also describes duties of a transaction licensee, a relationship in which the licensee is not acting as an agent or advocate of the principal. -The legal references are as follows: Section 606b of the RELRA—Duties of seller's agent Section 606c of the RELRA—Duties of buyer's agent Section 606d of the RELRA—Duties of dual agent Section 606e of the RELRA—Duties of designated agent Section 606f of the RELRA—Duties of transaction licensee

Associate Broker

-Is an individual who has met the broker license requirements but who is employed by a broker of record. -Associate brokers may not employ other licensees or engage in the real estate business in their own name or from their own place of business. -An associate broker's license is required to manage a branch office on behalf of a licensed broker of record.

Continuing education

-Licensed brokers and salespersons are required to satisfy a 14-hour continuing education requirement during each two-year period in order to renew the license. -The purpose of continuing education is: 1. to maintain and increase competency to engage in licensed activities; 2. keep licensees abreast of changes in laws, regulations, practices, and procedures that affect the business; 3. and better ensure that the public is protected from incompetent licensees. -The continuing education requirement applies only to brokers and salespersons. -All new salespersons licensed after December 1, 2007, must complete the mandated seven-hour general module and an additional seven hours of either the residential module or the commercial module. -Any salesperson who was granted a standard salesperson's license between December 1, 2009, and November 30, 2011, must complete the same 14 hours in order to renew the salesperson license by May 31, 2012. -After brokers and salespersons have renewed one time, they may choose any electives that total at least 14 hours. -Licensees can satisfy continuing education requirements either by participating in traditional instructor-led classroom instruction or by engaging in some form of distance learning. -Distance education is defined as real estate instruction delivered in an independent or instructor-led format during which the student and the instruction are separated by distance and sometimes time. -Distance education providers and the course offerings must be approved and are regulated by the Commission. -Licensees are required to keep documentation of approved coursework they have completed during the license period to satisfy the renewal requirement. -It is not necessary for the licensee to send paper transcripts or records to the Commission when the license is renewed. -The licensee may, however, be requested to provide documentation as evidence of completion of the continuing education requirement as part of a post-renewal audit program instituted with the 2008 renewal period. -Substantial penalties are imposed on individuals who attempt to renew without completing required continuing education.

Section 702 of the RELRA

-Limits the disciplinary action that may be taken against an employing broker when disciplinary action is taken against a licensee employed by that broker. -If it appears from evidence at a hearing that the employing broker had actual knowledge of a violation or permitted a course of dealing that violates the law, the commission may suspend or revoke the employing broker's license or levy (impose) a fine. -A "course of dealing" constitutes prima facie evidence of knowledge on the part of the employer. -If these conditions do not exist, the commission may find that the broker failed to properly supervise the licensee and take a lesser disciplinary action.

Section 604 of the RELRA

-Lists specifically prohibited acts. Common violations include misrepresentation, mishandling escrow funds, inappropriately paying commissions, and misleading advertising. Licensees who engage in a prohibited act may be fined or have their licenses suspended or revoked.

For easy reference, a summary of the prohibited acts follows:

-Making any substantial misrepresentation -Making any false promise to influence, persuade, or induce a person into a contract when the licensee could not or did not intend to keep the promise Pursuing a continued and flagrant course of misrepresentation or making false promises through any licensee or any medium of advertising Using misleading or untruthful advertising; using any trade name or insignia of a real estate association of which the licensee is not a member Failing to comply with all escrow requirements Failing to preserve records relating to any real estate transaction for three years following consummation of the transaction Acting for more than one party in a transaction without the knowledge of and consent in writing from all parties Placing a For Sale or For Rent sign on or advertising any property without the written consent of the owner Failing to voluntarily furnish a copy of any contract to all signatories at the time of execution Failing to specify a definite termination date that is not subject to prior notice in any listing agreement Inducing any party to a contract to break that contract for the purpose of substituting a new one, when the substitution is motivated by personal gain of the licensee Accepting a commission or other valuable consideration from any person except the licensed broker who is the employer Paying of a commission by a broker to anyone other than the broker's licensed employee or another broker Failing to disclose in writing to the owner the licensee's interest in purchasing or acquiring an interest in a property listed with the licensee's office Being convicted in court of, or pleading guilty or nolo contendere to, forgery, embezzlement, obtaining money under false pretenses, bribery, larceny, extortion, conspiracy to defraud, or any felony Violating any rule or Regulation of the Commission Failing to provide a disclosure required by this Act or any other federal or state law imposing a disclosure obligation on licensees in connection with real estate transactions In the case of a broker, failing to exercise adequate supervision over the activities of the employed licensees Failing to provide information requested by the Commission as the result of a formal or informal complaint Soliciting or selling real estate by offering free lots, conducting lotteries or contests, or offering prizes for the purpose of influencing a purchase by deceptive conduct Paying or accepting, giving, or charging an undisclosed commission, rebate, or compensation on expenditures for a principal Performing any act that demonstrates bad faith, dishonesty, untrustworthiness, or incompetency Performing any act for which an appropriate license is required if such license is not currently in effect Violating any provision of the Pennsylvania Human Relations Act, such as accepting a listing with the understanding that illegal discrimination is to be practiced, giving false information for the purpose of discriminating, making a distinction in location of housing or dates of availability for the purpose of discriminating Violating the Pennsylvania statutes relating to burial grounds (if a cemetery company registrant) Violating Sections 606 and 608 of the RELRA Failing as a broker, campground membership salesperson, or time-share salesperson to comply with the requirements for handling deposits or other monies

Purpose of License Laws

-Real estate license laws protect the public by ensuring a standard of competence and professionalism in the real estate industry. -The laws achieve this goal by: *establishing basic requirements for obtaining a real estate license and, in many cases, requiring continuing education to keep a license; *defining activities for which a license is required; *describing acceptable standards of conduct and practice for licensees; *enforcing those standards through a disciplinary system. -The purpose of these laws is not merely to regulate the real estate industry. -Their main objective is to ensure that the rights of purchasers, sellers, tenants, and landlords are protected from unscrupulous or sloppy practices. -The laws are not intended to prevent licensees from conducting business successfully, to restrain trade, or to interfere in legitimate transactions. -Laws cannot create an ethical or moral marketplace. -But by establishing minimum levels of competency and limits of permitted behavior, laws can make the marketplace more honest.

Rental Management Account

-Rents that a broker receives as a property manager for a lessor must be deposited into a rental management account. -This account is separate from the broker's escrow account (in which security deposits are held) and the general business accounts.

Unlicensed Activity

-Section 301 of the RELRA states that it is unlawful for any unlicensed individual or entity to engage in any activity for which licensure is required. -It is also unlawful for unlicensed persons to advertise or in other ways represent that they are engaged in an activity for which licensure is required. -A current license must be held at the time a service is offered as well as at the time the service is rendered. -Because unlicensed persons are not entitled to compensation, they are prohibited from entering into a civil suit to recover payment. -Any person who engages in activity for which licensure is required or employs an individual or entity that does not possess a current license is subject to criminal penalties, according to Section 303 of the RELRA. -This includes situations in which a license has been suspended or revoked. -The first conviction for unlicensed activity is a summary offense and involves payment of a fine not to exceed $500 and/or imprisonment not to exceed three months. A second or subsequent offense is a felony of the third degree and involves payment of a fine between $2,000 to $5,000 and/or imprisonment for one to two years.

Document Procedures

-Section 35.281 of the Regulations requires that licensees who act in a representative capacity in a real estate transaction ensure that all sale or lease contracts, commitments, and agreements regarding the transaction are in writing. -All parties to a contract must receive a copy of executed agreements, and the broker is responsible for maintaining copies of records pertaining to any transaction for at least three years following consummation of the transaction. -When no transaction results from a brokerage relationship, the signed acknowledgment portion of the Consumer Notice that was provided must be retained for six months. -The broker also is required to produce the records for examination by the Commission upon written request.

Misleading Advice, Assurances, and Representations

-Section 35.282 of the Regulations states that licensees may not give assurances or advice concerning any aspect of a real estate transaction that they know is incorrect, inaccurate, or improbable. - This includes information it is reasonable to believe that a licensee should know. - Licensees may not knowingly be a party to a materially false or inaccurate representation in a written document regarding a real estate transaction when acting in a representative capacity.

Conflict of Interest

-Section 35.283 of the Regulations states that licensees must disclose any ownership interest they have in a property involved in a real estate transaction in which they are participating. -It also says that a broker who manages rental property may not accept commission, rebate, or profit on expenditures made for the lessor without the owner's written consent. -The Regulations intend to ensure that licensees protect the interests of the people they are supposed to be serving and not use their position for personal profit. -The Regulations also require that if a licensee represents more than one party in a transaction (dual agency), all parties must give written consent to the multiple representation. -This consent intends to ensure that the parties are aware that conflicts can arise when the licensee is representing two opposite parties in the same transaction.

Reporting Crimes and Disciplinary Actions

-Section 35.290 of the Regulations states that a licensee shall notify the Commission of a conviction or pleading of guilty or nolo contendere to a felony or misdemeanor. -The report must be made within 30 days of the verdict or plea. -If a licensing authority in another jurisdiction takes disciplinary action, the licensee must notify the Commission in Pennsylvania within 30 days of that action.

Rental listing referral services

-Section 35.335 of the Regulations provides language that must be included in a rental listing referral agreement. -The agreement must include in bold print the following statement: "We are a referral service only. We are not acting as real estate salespersons or brokers. We do not guarantee that the purchaser will find a satisfactory rental unit through our service. Our only purpose is to furnish the purchaser with lists of available rental units."

Operation of Real Estate Business

-Section 601 of the RELRA requires each resident licensed broker, cemetery broker, and rental listing referral agent to maintain a fixed office, the address of which shall be included in all applicable licenses. -Section 35.242 of the Regulations requires that the office be devoted to the transaction of real estate business and be arranged to permit business to be conducted in privacy. -If the office is located in a private residence, the entrance to the office shall be separate from the entrance to the residence.

Cemetery salesperson

-Sections 201 of the RELRA and 35.201 of the Regulations define a cemetery salesperson as an individual who is employed by a broker or cemetery broker for the exclusive purpose of engaging in the specialized field of cemetery lot sales, as described for the cemetery broker. -The cemetery salesperson must be at least 18 years of age and submit a sworn affidavit from the employing broker or cemetery broker attesting to the applicant's good reputation and that the broker will actively supervise and train the applicant. -There is no education or examination requirement for licensure. For more information, see Sections 541 and 542 of the RELRA and Section 35.225 of the Regulations.

Document Procedures (cont.)

-Section 604(5) of the RELRA and Sections 35.321 through 35.328 of the Regulations set forth detailed requirements for handling escrow funds. -Brokers are responsible for depositing funds they receive that belong to others (for example, earnest money and security deposits) into an escrow account in a federally insured or state-insured bank or depository pending consummation or termination of the transaction. -A salesperson or associate broker who receives a deposit or any escrow money must immediately turn the funds over to the employing broker. -The broker must deposit these funds by the end of the business day following their receipt by the broker. -However, if the funds are in the form of a check in connection with an offer to buy or lease real estate, then the broker may hold the check until the offer is accepted, at which time the check must be deposited into the trust account by the end of the next banking day. -If the offer is not accepted, then the broker (salesperson or associate broker) can return the uncashed check to the buyer or lessee. -The escrow account must be used exclusively for escrow purposes. -The broker may not commingle these monies with the broker's business or personal funds; nor may the broker misappropriate money that should be held in escrow with the broker's business or personal funds. -However, the broker is permitted to deposit personal money into the escrow account to cover service charges assessed by the banking institution on the account. -If escrow money is expected to be held for more than six months, the broker is encouraged to deposit the funds into an interest-bearing account. -The interest follows the principal amount of the escrow funds, unless the parties state otherwise in the agreement. -The broker's duty to escrow cannot be waived or altered by agreement between the parties to the transaction. -The account is established in the name of the broker as it appears on the license, with the broker being designated as trustee of the account. -The broker may give written authority to an employee to make deposits and authority to a licensed employee to make withdrawals. -However, the broker remains responsible for seeing that the requirements of the regulations are met. -Records must be maintained, including the name of the party from whom the money is received; the name of the party to whom the money belongs; and the dates the money is received, deposited, and withdrawn. -These records are subject to inspection by the Commission.

Promotional Land Sales

-Section 605 of the RELRA requires that any person who proposes to engage in real estate transactions of a promotional nature in Pennsylvania, regardless of whether the property is located within or outside Pennsylvania, first register with the Commission. -The Act specifies the information that must be submitted for the Commission to grant approval before the property can be promoted. -Promotional real estate is an interest in property that is part of a promotional plan that offers real estate through advertising by mail, newspaper, or periodical, or by radio, television, telephone, or other electronic means. -Promotional real estate does not involve fewer than 50 lots or shares or land areas of less than 25 acres. -The registration is not required if the promotional property is already registered with the Department of Housing and Urban Development under the Interstate Land Sales Full Disclosure Act.

Time-share and campground membership contracts

-Section 609 of the RELRA gives purchasers of time-share and campground memberships the right to cancel a purchase. -The cancellation right exists until midnight of the fifth day following the date on which the purchaser executed the contract. -The provisions of this section of the Act apply to time-share and campground memberships located in Pennsylvania as well as outside the state if the purchase contract was executed by the purchaser in Pennsylvania. -The right-to-cancel notice must be printed conspicuously in boldface type immediately above the signature of the purchaser and be separately initialed. -The right of cancellation must not be waivable by any purchaser nor can the purchaser be held liable for any damages resulting from exercising this right. -The statement required by Section 609 of the RELRA is as follows: "You, the purchaser, may cancel this purchase at any time prior to midnight of the fifth day following the date of this transaction. If you desire to cancel, you are required to notify the seller, in writing, at [address]. Such notice shall be given by certified return receipt mail or by any other bona fide means of delivery which provides you with a receipt. Such notice shall be effective upon being postmarked by the U.S. Postal Service or upon deposit of notice with any bona fide means of delivery which provides you with a receipt." -Within 10 days after receipt of a notice of cancellation, all payments made under the contract must be refunded to the purchaser and an acknowledgment that the contract is void must be sent to the purchaser. -Any promotional prizes, gifts, and premiums issued to the purchaser by the seller shall remain the property of the purchaser.

Broker

-Sections 201 of the RELRA and 35.201 of the Regulations define a broker as an individual or entity (corporation, partnership, or association) who, for another and for a fee, commission, or other valuable consideration, performs one or more of the following acts: -Negotiates with or aids a person in locating or obtaining for purchase, lease, or acquisition any interest in real estate. -Negotiates the listing, sale, purchase, exchange, lease, time-share, financing, or option for real estate -Manages real estate -Acts as a real estate consultant, counselor, agent, or house finder -Undertakes to promote the sale, exchange, purchase, or rental of real estate (does not apply to an individual or entity whose main business is advertising, promotion, or public relations) -Undertakes to perform a comparative market analysis Attempts to perform any of these acts.

Campground Membership Salesperson

-Sections 201 of the RELRA and 35.201 of the Regulations define a campground membership salesperson as an individual who, either as an employee or independent contractor, sells campground memberships under the supervision of a broker. -Campground memberships are interests (other than in fee simple or by lease) that give the purchaser the right to use a unit of real property for the purpose of locating a recreational vehicle, trailer, tent, tent trailer, pickup camper, or other similar device on a periodic basis. -This right is conveyed by a membership contract. -The applicant must: 1. be at least 18 years of age, 2. complete 15 hours of instruction in specific topics, 3. complete no less than 30 days of onsite training at a campground membership facility prior to licensure. -For more information, see Sections 581 and 582 of the RELRA. -The broker is responsible for further training and supervising of the licensee. -Licensed salespersons, brokers, and time-share salespersons do not need a separate license to sell campground memberships.

Cemetery Broker

-Sections 201 of the RELRA and 35.201 of the Regulations define a cemetery broker as an individual or entity who engages in the business in the capacity of a broker, exclusively within the limited field of business that applies to cemetery lots, plots, and mausoleum spaces or openings. -The cemetery broker is responsible for the business activities and maintenance of an office in the same manner as a licensed broker. -Sections 531, 532, and 533 of the RELRA and 35.224 and 35.273 of the Regulations describe the requirements and procedures for licensure. -The cemetery broker must obtain 60 hours of instruction as approved by the Commission, be engaged for three years (or equivalent) as a salesperson or cemetery salesperson (as determined by the Commission), and pass a written examination prior to licensure.

Rental Listing Referral Agent

-Sections 201 of the RELRA and 35.201 of the Regulations define a rental listing referral agent as an individual or entity who owns or manages a business that collects rental information for the purpose of referring prospective tenants to rental units. -This licensee does not lease or show property but rather sells lists of available rentals. -Section 35.289 of the Regulations describes requirements for compiling the list of rentals and verifying their availability for a prospective tenant. -The applicant must satisfy licensing requirements that are similar to those for a salesperson licensee; however, the rental listing referral agent is not affiliated with a broker. -A rental listing referral agent is responsible for maintaining an office under the same requirements as a broker and cemetery broker. For more information, see Sections 561 of the RELRA and 35.227 and 35.275 of the Regulations.

Salesperson

-Sections 201 of the RELRA and 35.201 of the Regulations define a salesperson as an individual who is employed by a licensed broker of record to do one or more of the following: -Sell or offer to sell real estate, or list real estate for sale -Buy or offer to buy real estate -Negotiate the purchase, sale, or exchange of real estate -Negotiate a loan on real estate -Lease or rent real estate or offer to lease or rent real estate. -Collect, offer, or attempt to collect rent for the use of real estate. -Assist a broker in managing property -Perform a comparative market analysis -The activities for which a salesperson is licensed are performed under the supervision and responsibility ultimately of the employing broker. -Employment is defined in the Act to include independent contractors. -Regardless of how salespersons are treated for income-tax purposes, they are still accountable to the broker under the license law and are considered employees of the broker. -Activities involving the public that are customary in selling real estate must be performed by licensees. -These activities include showing properties, preparing and presenting offers, preparing listing information, soliciting listings, hosting open houses for the public, and disseminating any real estate information to the public. -Unlicensed people (including unlicensed personal assistants) may not perform activities for which a license is required, including telemarketing. -They may, however, host open houses that are not conducted for the public (such as open house tours for licensees) and communicate, but not interpret or explain, property information to the licensees. -A salesperson must be at least 18 years of age, complete 60 hours of real estate as prescribed by the Commission, and pass both portions of the examinations prior to being issued a license (RELRA Sections 521-522; Regulations Sections 35.223, .272).

Time-Share Salesperson

-Sections 201 of the RELRA and 35.201 of the Regulations define a time-share salesperson as an individual who, either as an employee or independent contractor, sells time-shares under the supervision of a broker. -Time-share is the right, however evidenced or documented, to use or occupy one or more units on a periodic basis according to an arrangement allocating use and occupancy rights of that unit or units between other similar users. -A time-share salesperson must be at least 18 years of age, complete 30 hours of instruction in specific topics, and complete not less than 30 days of onsite training at a time-share facility prior to licensure. - For more information, see Sections 591 and 592 of the RELRA. -The broker is responsible for further training and supervising the licensee. -Licensed salespersons and brokers do not need a separate license to sell time-shares.

General Ethical Responsibilities

-Subchapter E in the Regulations, "Standards of Conduct and Practice," lists a number of responsibilities for licensees. -Many of the requirements relate to issues that are raised in Section 604 of the RELRA, which addresses prohibited practices. -In addition to items that have already been discussed relating to escrow deposits and real estate documents, a number of other very important issues are discussed in Subchapter E.

Exclusions

-The Act and the Commission's rules recognize that certain individuals and entities can be appropriately excluded from licensure. -Sections 304 of the RELRA and 35.202 of the Regulations establish the following exclusions from requirements for licensure: -Owners of real estate performing activities associated with the ownership, lease, or sale of their own property. -To prevent this exclusion from being used to circumvent licensure, the exclusion does not extend to more than five partners in a partnership or officers of a corporation or to other employees. -Employees of a public utility acting in the ordinary course of the utility-related business under provisions of Title 66 of the Pennsylvania Consolidated Statutes, with respect to negotiating the purchase, sale, or lease of property. -Officers or employees of a partnership or corporation whose principal business involves the discovery, extraction, distribution, or transmission of energy or mineral resources. -This exclusion applies to the purchase, sale, or lease of real estate during the conduct of this business. -An attorney-in-fact who renders services under a properly executed and recorded power of attorney from the owner or lessor of real estate. -The power of attorney cannot be used to circumvent licensure (the Commission has determined that granting a power of attorney to an unlicensed person to manage property circumvents the intent of the Act). Also excluded are attorneys-at-law who receive a fee but do not represent themselves as brokers for rendering services within the scope of the attorney-client relationship. -A trustee in bankruptcy, administrator, executor, trustee, or guardian who is acting under the authority of a court order, will, or trust instrument. -The elected officer or director of any banking institution, savings institution, savings bank, credit union, or trust company operating under federal or state laws involving only the property owned by these institutions. -An officer or employee of a cemetery company who, as incidental to principal duties, shows cemetery lots without compensation. -A cemetery company or cemetery owned by a bona fide church, religious congregation, or fraternal organization (this applies to the requirement for registration). -An auctioneer, licensed under the Auctioneers' License Act, while performing duties at a bona fide auction. -Any person employed by an owner of real estate for the purpose of managing or maintaining multifamily residential property as long as this person is not authorized to enter into leases on behalf of the owner, negotiate terms or conditions of leases, or hold money belonging to tenants other than on behalf of the owner. -As long as the owner retains authority to make all such decisions, the employees may show apartments and provide information about rental rates, building rules and regulations, and leasing qualifications. -The elected officer, director, or employee of any banking institution, savings institution, savings bank, credit union, or trust company operating under federal or state laws, when acting on behalf of the institution in performing appraisals or other evaluations of real estate in connection with a loan transaction.

Relationships Between Licensees and Consumers

-The Act permits licensees to form several different kinds of working relationships with consumers. -Most often, the licensee will have an agency relationship with the consumer. -An agency relationship is defined as "a relationship whereby the broker or licensees in the employ of the broker act as fiduciaries (trust) for a consumer of real estate services by the express authority of the consumer of real estate services. -" Furthermore, "an agency relationship is not to be presumed (supposed )and that it will exist only as set forth in a written agreement between the broker and the consumer of real estate services acknowledged by the consumer." -The following definitions explain the permissible roles for a licensee in a real estate transaction: -Consumer—A person who is the recipient of any real estate service. -Principal—A consumer of real estate services who has entered into an agency relationship with a broker. -Seller agent—Any licensee who has entered into an agency relationship with a seller of real estate. -Subagent—A broker, not in the employ of the listing broker, who is engaged to act for or cooperate with the listing broker in selling property as an agent of the seller. A subagent is deemed (considered) to have an agency relationship with the seller. -Listing broker—A broker engaged as a seller's agent, dual agent, or transaction licensee to market the property of a seller/landlord. -Dual agent—A licensee who acts as an agent for the buyer and seller or lessee and landlord in the same transaction. -Designated agent—One or more licensees designated by the employing broker with the consent of the principal to act exclusively as agent(s) on behalf of the principal to the exclusion of all other licensees within the broker's employ. -Transaction licensee—A licensed broker or salesperson who provides communication or document preparation services or performs acts described under the definition of broker or salesperson for which a license is required, without being an agent or advocate of the consumer.

Internet Advertising and Web Pages

-The Commission has developed policy to guide advertising procedures on the internet. -The policy applies to licensed firms and licensees advertising or marketing on an internet site and using internet electronic communication, including email, email discussion groups, websites, and message forums. -Information that must appear includes the following: *The firm's name as registered on the license. If the internet activity is a licensee's, the firm's name must appear along with the licensee's name. *The city and state/province where the firm's (and licensee's) office is located. Although not required, stating the country is strongly recommended. *The regulatory jurisdiction(s) in which the firm holds a broker license. If the internet activity is a licensee's, the jurisdiction(s) where the licensee holds a broker or salesperson license must be included. Also, although not required, stating the license number(s) is strongly recommended. -When marketing or advertising on the internet, this information must appear on each page of the site. -For electronic communication, the information is to be included on the first or last page of the communication.

Licensing Procedures

-The Department of State issues licenses and registration certificates to individuals who meet the requirements established by the Act. -The State Real Estate Commission approves proprietary real estate schools, sets fees subject to review under applicable Pennsylvania law, and prescribes the subject matter for written examinations required for licensure. -The Department of State contracts with an independent testing agency to oversee the administration of licensing examinations. -The Commission prescribes the form for license applications and is authorized to investigate the accuracy of the information submitted. -Inaccurate or untruthful information could result in denial of an application or disciplinary action against any license the individual currently possesses. -The license period for all real estate licenses currently begins June 1 and ends the last day of May in each even-numbered year (a two-year license period). -When a license is first issued, it expires on the last day of May of the current license period. -A license is considered active once the license is issued and remains properly renewed.

Licensure, Activities, and Procedures

-The RELRA defines activities relating to real estate for which licensure is required and the procedures for obtaining those licenses. -Real estate is defined as any interest or estate in land, whether corporeal, incorporeal, and freehold or nonfreehold, situated in this Commonwealth or elsewhere, including leasehold interests, time-share and similarly designated interests. -The sale of mobile homes is considered a transfer of a real estate interest if the sale is accompanied by the assignment of a lease or sale of the land on which the mobile home is situated. -At present, the Department of State may issue 10 separate licenses. -Individuals must possess a reputation for honesty, trustworthiness, integrity, and competence. -In addition to meeting requirements for specific licenses, including appropriate fees, applicants must provide details of a conviction, plea of guilty or nolo contendere to a felony or misdemeanor, and any sentence imposed. -The Real Estate Commission also requires that applicants include a criminal record check completed by the Pennsylvania State Police with their license application. -The criminal record check must be dated within 90 days of submission of the license application.

Consumer Notice

-The broker ultimately determines the role or roles that the licensees employed by that broker are permitted to assume. -Section 35.336 of the Regulations requires licensees to provide a disclosure summary called a Consumer Notice to all consumers at the first contact where a substantive discussion about real estate occurs. -The purpose of the notice is to advise consumers of all business relationships permitted by the Act. -By describing the various relationships, the notice helps consumers make informed decisions when engaging the services of a licensee.

Business Name

-The business name is the name under which a broker, cemetery broker, or rental listing referral agent license is issued (an individual or a business entity). -The business name becomes the name under which business is conducted. -The name designated on the license must be displayed prominently and in a permanent fashion outside all offices. -Any time the name of the business is represented, it must appear exactly as it appears on the license.

The Commission annually elects a chairman from its members.

-The commissioners are appointed by the governor and confirmed by the senate for five-year staggered terms. -Commissioners are compensated on a per diem basis, as stipulated in the Act. Staff is employed by the Bureau of Professional and Occupational Affairs to support the Commission's activities. -The Commission usually meets in Harrisburg, and its regularly scheduled business meetings are open to the public. -The Commission conducts formal and informal hearings relating to complaints filed against licensees. -The Commission is also required to hold public meetings to solicit suggestions, comments, and objections about real estate practices from members of the public. -These meetings are held in Philadelphia, Harrisburg, Pittsburgh, and elsewhere in the state. -The major provisions of the Act and the Commission's regulations are in effect as of this text's publication. -However, the Act and the regulations can be amended at any time.

Other Disclosures

-The document requirements that have been referenced so far are ones that affect the most common real estate transactions. -However, consumers in all transactions are entitled to proper disclosures. -The RELRA and the Regulations provide for disclosures that are applicable to the following specialized services or types of real estate.

Broker of record

-The regulations define the broker of record as the individual broker responsible for the real estate transactions of a partnership, association, or corporation licensed as a broker. -Only one individual may be recognized as the broker of record, regardless of the number of offices the firm operates. -The broker of record is also known as the employing broker. -Within 15 days of death or incapacity of the broker of record, an authorized party must notify the Commission and appoint another qualified person to serve as the broker or broker of record.

Pennsylvania's first real estate license law

-Was adopted May 1, 1929, and was amended (adapted) numerous times to reflect changes in the industry. -On February 19, 1980, the current law, known as the Real Estate Licensing and Registration Act (RELRA), was adopted. -The RELRA is a statutory law; is the Pennsylvania law that protects the public interest by governing real estate practices and the activities of licensees. -Enacted by the state legislature and signed into law by the governor. -The State Real Estate Commission (The agency established by the Pennsylvania Real Estate Licensing and Registration Act to administer this law and supervise the activities of licensees.) does not have the authority to amend or modify the Act; that can be done only by the state legislature!!!

Business Name

-When advertising a property for sale or rent, the broker's business name as it appears on the license must appear in the ad; "blind ads" (advertisements by a broker without including the broker's business name) are prohibited. -Advertising by a broker's licensees must include the business name of the employing broker. -The business name of the broker and the broker's phone number must appear in the same size type or prominence as that of the employee if that employee's name and phone number(s) appear. -If a licensee uses a nickname, that name must be filed with the Real Estate Commission.

Deadlines for Deposits

A broker is responsible for depositing the funds in escrow by the end of the next business day following receipt. -In the case of multiple office firms, the deadline applies to receipt by the office out of which the account is administered. -If the money has been offered in the form of a check when an offer to purchase or lease is made, the broker may, with written permission from both the buyer and the seller, refrain from depositing the money pending acceptance of the offer. -In this case, the broker must deposit the funds within one business day following acceptance of the offer.

Out-of-State Licenses and License Reciprocity

An individual who holds a license issued by another jurisdiction and wants to engage in real estate in Pennsylvania may do so by satisfying certain requirements prescribed by the Commission's Rules and Regulations. -Because real estate practices today are more global in nature, state laws are being amended around the country to streamline licensing procedures among states (ARELLO's goal is to eventually achieve universal licensure). -In Pennsylvania, Act 58 of 2003, which was signed into law December 30, 2003, authorized the Commission to enter into reciprocal licensing agreements with other states. -A list of states with which those agreements exist can be found on the Commission's website. -The intent of reciprocity agreements is to allow licensees from one state to engage in licensed activities in other states. -Reciprocal licenses are not intended to replace or circumvent a state's licensing requirements when the principal place of business is located in that state. - A licensee whose principal place of business changes to the state where the reciprocal license is held must obtain the standard license from that state and may be required to pass an examination or satisfy other requirements prescribed for that license.

RELRA Section 202 established the State Real Estate Commission to administer the Act

And supervise the activities of licensees in Pennsylvania. -Section 404 of the RELRA authorized the Commission to promulgate Rules and Regulations Real estate licensing authority orders that govern licensees' activities; they usually have the same force and effect as statutory law. ("Regulations") that implement and further define the statutory law. -Rules and Regulations of the State Real Estate Commission are found in Chapter 35, Title 49 (Professional and Vocational Standards of the Department of State) of the Pennsylvania Code. -The Rules and Regulations provide procedures for administering the law and set operating guidelines for licensees. -The Regulations have the same force and effect as the law. -Both the law and the Regulations are enforced through fines and the denial, suspension, or revocation of licenses. -Civil and criminal actions can be brought against violators in serious cases.

The State Real Estate Commission

Functions under the Bureau of Professional and Occupational Affairs within the Pennsylvania Department of State. -Is comprised of 11 members that include: - the commissioner of the Bureau of Professional and Occupational Affairs. -the director of the Bureau of Consumer Protection or a designee, -three members who represent the public at large (known as public members), -five members licensed as real estate brokers (in the real estate business for at least 10 years), -one member licensed as a broker or cemetery broker (having been licensed at least five years and sold cemetery lots for at least 10 years)

General Duties of Licensees

Licensees have certain duties or obligations whether or not the licensee is acting within the scope of an agency relationship. -Section 606.1 of the RELRA and Section 35.292 of the Regulations state that a licensee owes the following duties to all consumers: -Reasonable professional skill and care -Honest dealings in good faith -Presentation, in a timely manner, of all written offers, notices, and communications to and from the parties to a transaction, except when otherwise waived -Compliance with the Real Estate Seller Disclosure Act -An accounting, in a timely manner, for all money and property received from or on behalf of any consumer to a transaction -Proper information at the initial interview -Timely disclosure of any conflicts of interest -Guidance regarding the use of expert advice for matters that are beyond the licensee's expertise (including the use of attorneys for legal advice) -Information about the status of the transaction -Information regarding tasks that must be completed to satisfy an agreement or condition for settlement, regarding document preparation, and regarding compliance with laws pertaining to real estate transactions -Timely presentation of all offers and counteroffers, unless otherwise directed in writing -Disclosure of any financial interest (including a referral fee or commission) in a service, such as financial title, transfer and preparation services, insurance, construction, repair or inspection, at the time a service is recommended or the licensee learns that the service will be used -Information gained during the course of the agency relationship may not be revealed or used after the termination of the agency relationship.

Broker (cont.)

Licensure requirements (Sections 511, 512, and 513 of the RELRA and 35.221, 35.222, and 35.271 of the Regulations) -An applicant for a broker license must -Be at least 21 years of age; -Be a high school graduate or equivalent; -Have completed 240 hours (16 credits) of real estate instruction as prescribed by the Commission (instruction required for the salesperson license does not qualify for broker licensure); -Have been engaged as a licensed real estate salesperson for at least three years or have experience and/or education that the Commission considers equivalent (the Commission uses a "point system" as a guide for evaluating the experience of an applicant); -pass both portions of a written examination within three years of the date of the license application (examinations consist of two portions: the national exam, which is general real estate information relating to the licensed practice, and the state exam, which covers the Act and the Commission's regulations); and -Submit a written application including the name and address under which the applicant will do business and recommendations attesting to the applicant's reputation for honesty, trustworthiness, integrity, and competence.

Information about licensing procedures

Real estate activities, and current laws and regulations may be obtained from the State Real Estate Commission at P.O. Box 2649, Harrisburg, PA 17105-2649, at 717-783-3658, or on the Commission's website.

Civil Penalties

Section 305 of the RELRA provides that, in addition to other remedies or criminal penalties permitted, the Commission may levy (impose) a civil penalty of up to $1,000 against any current licensee who violates the Act or any person who practices real estate without being properly licensed.

Cemetery associate broker

Section 35.201 of the Regulations defines a cemetery associate broker as an individual who is employed by another cemetery broker or broker. This individual has the same relationship with the employing broker as an associate broker.

Change of Address; Change of Employment

Section 603 of the RELRA states that no associate broker or other underlying licensee (associate cemetery broker, salesperson, time-share salesperson, campground membership salesperson, or cemetery salesperson) may be employed by any broker other than the broker designated on the license. -Section 604 prohibits any licensee from receiving compensation from anyone other than the employing broker. -A broker is permitted to pay a commission, fee, or other valuable consideration only to licensees employed by the broker, another licensed real estate broker (as in cooperating transactions), and a principal in a real estate transaction (buyer or seller) as long as written disclosure is provided to all principals. -If a broker's office is removed from the location designated in the license, all licensees working at that location may make application to the commission designating the new location of the office. -This application must be filed before the removal or within 10 days thereafter. -A current license will be issued at the new location (as long as it is an approved office) for the unexpired license period. -When a licensee changes employment from one broker to another, the licensee may notify the commission no later than 10 days after the intended date of change, return the current license, and pay the required fee. -When the new broker acknowledges the employment, a new license will be issued. -A copy of the change of employment notification serves as the temporary license until the new license is received. -The applicant is responsible for notifying the Commission if the new license is not received within 30 days.

Section 35.291 of the Regulations

States that a broker or cemetery broker whose license is suspended must return the license to the Commission and prominently post a Commission-approved notice of the suspension at the public entrance of the main office and any branch offices. Failure to post the notice is grounds for further disciplinary action.

Real Estate Documents and Escrow Requirements

The Act and the Regulations prescribe mandatory language that must appear in certain written documents licensees use. -The purpose is to ensure that consumers are properly informed about their rights in a transaction and that certain procedures are properly disclosed. - Except for the Consumer Notice, the Commission does not require the use of any specific form for the document. -The legal references are as follows: Section 608a of the RELRA and Sections 35.331 and 35.332 of the Regulations prescribe information that must appear in any written agreement between a broker and a principal, or between a broker and consumer, describing services to be rendered and fees to be paid. -Section 608b of the RELRA and Section 35.333 of the Regulations prescribe mandatory provisions that must appear in an agreement of sale or sales contract and, if the agreement is conditioned on the ability of the buyer to obtain a mortgage, language that must be included in mortgage contingencies. -Section 608c of the RELRA prescribes the disclosure statement that must appear in a comparative market analysis. -Section 608d of the RELRA provides for disclosures that must appear in an agreement of sale used by cemetery brokers. -Section 35.284 of the Regulations provides for pre-agreement disclosures that must be presented to a buyer and a seller at an initial interview. -Section 35.334 of the Regulations provides for estimates of cost and return that must be prepared by the licensee before buyers and sellers execute an agreement of sale. -Section 35.336 of the Regulations provides a specific format and language that must appear in the Consumer Notice, which describes all the types of business relationships between licensees and consumers that are permitted in real estate sales transactions. -Section 35.337 provides the notice to be used in the lease of residential or commercial property; Section 35.338 does likewise for time-share estates. -Because of the importance of the specific requirements, they will be discussed in detail when the contracts and documents are presented in a later unit.