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 Spring 2012     

IN THIS ISSUE
Disciplinary Action: West Patrick Property Solutions
Paperless Licensing Launched
Who Can "Sit" at an Open House?
FAQs for Open Houses
Using "Coming Soon" Signs
Home Improvement Referrals

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MREC TAKES ACTION AGAINST LICENSEES OF FREDERICK COMPANY  

 

During the spring and summer of 2011, the Commission received numerous complaints from consumers who had contracted with West Patrick Property Solutions based in Frederick, Maryland. The complainants alleged that a salesperson affiliated with the company failed to deposit security deposits, rental income and utility payments in the company escrow account. The Commission's Assistant Director, Steve Long, headed up a thorough investigation of the complaints. As a result, the Commission awarded the complainants approximately $80,000 in total from the Guaranty Fund to compensate them for their losses. These complainants submitted claims for less than $3000, and the Commission processed the claims by issuing Proposed Orders that were uncontested by the licensee. There are an additional 16 complaints being scheduled for hearing where the claims are in excess of $3000.

The salesperson entered into a Consent Agreement with the Commission, in which she acknowledged that she failed to account for or remit money that belonged to someone else, and that she received the funds in her capacity as property manager and pursuant to the terms of the property management agreement. She agreed that those actions were in violation of �17-322 (b) (22), Business and Professions Article, Maryland Annotated Code. The salesperson further agreed in the Consent Order that she waives her right to a hearing before an Administrative Law Judge, as well as any further proceedings before the Commission to which she may be entitled in this matter, and any rights to appeal the Consent Order. She also agreed to a revocation of her license and to never reapply for a Real Estate Commission license.

The broker also entered into a Consent Agreement with the Commission, in which she admitted failing to exercise reasonable and adequate supervision over the provision of real estate brokerage services by another individual on behalf of the broker, pursuant to �17-322 (b) (27), Business and Professions Article, Maryland Annotated Code. The broker also agreed to pay a civil penalty of $2500.   

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DIVISION PERSONNEL 

Harry Loleas, Interim Commissioner, Occupational and Professional Licensing

Janet Morgan, Outreach Coordinator

COMMISSIONERS

John Nicholas D'Ambrosia, Chair, Industry Member, Charles County
Anne S. Cooke, Vice Chair, Industry Member, Howard County
Marla S. Johnson, Industry Member, Frederick County
Juan Mu�oz, Consumer Member, Montgomery County
Robin L. Pirtle, Consumer Member, Montgomery County
Nancy R. Simpers, Industry Member, Cecil County
Jeff Thaler, Consumer Member, Worcester County
Georgiana S. Tyler, Industry Member, Baltimore City
Colette P. Youngblood, Consumer Member, Prince George's County
 

MREC STAFF  

Katherine F. Connelly, Executive Director
Steven Long, Assistant Executive Director
Patricia Hannon, Education Administrator
Charlene Faison, Licensing Supervisor
Jennifer Grimes, Investigator
Celestine Hall, Reception/Education
Robert A. Hall, Investigator
Brenda Iman, Paralegal
Darchelle Lanteon, Licensing
Jack Mull, Investigator
Robert J. Oliver, Investigator
William F. Reynolds, Investigator
Patrick Richardson, Auditor
Lucinda Rezek Sands, Paralegal
Charlotte Streat-Thornton, Complaints & Education
John West, Complaint Intake Administrator 
MESSAGE FROM THE EXECUTIVE DIRECTOR

Katherine Connelly

 

Katherine ConnellyGreetings. Welcome to the initial 2012 issue of The Commission Check. In this issue, we'll cover some very useful topics and practice issues that come up frequently for real estate professionals. Please be sure to read the article about paperless licensing, because it affects every single salesperson and broker with a Maryland license. In November, we sent out an email notification to brokers to announce the change in license distribution, and we began using the new system at the beginning of December. Once you've read the article, you'll know just how important it is to update your email address with the Commission. Another article we hope you'll read carefully is about the growing practice of engaging agents from other brokerages to conduct open houses as a favor or for a fee. We have also prepared a set of FAQs on the subject of agency as it relates to open houses. Finally, we've included an important reminder about what the Code of Maryland Regulations has to say about the use of "coming soon" signs on properties that do not yet have a signed listing agreement.

We hope you find the entire issue of The Commission Check to be informative and valuable to your practice. As always, if you have any comments or suggestions about subject areas for the newsletter, please email me at [email protected].

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DON'T BLAME THE POSTAL SERVICE! (YOUR LICENSE ISN'T IN THE MAIL...)

� Janet Morgan 2012In an effort to improve our services, the Commission instituted a new process for the issuance of Real Estate Commission licenses on December 1, 2011. We will no longer be printing and mailing real estate licenses to licensees through regular mail. The Commission has created a web-based application that will allow brokers and designated branch office managers to print licenses and pocket cards. Whenever a licensee makes a change to his or her license that would necessitate the issuance of a new license, e.g., renewal of license, name change, business address change or transfer, the broker or branch office manager will receive an email notification from the Commission. The email will specify the name of the licensee who has a license available for printing. The email will also contain specific instructions for logging into the web licensing portal, and the URL for the licensing portal. After the license is printed, the broker or branch office manager may delete the license from the portal by following the instructions found on the web licensing portal. The PDF of the license will remain on the licensing portal for 60 days unless deleted.

As with all new processes, several minor problems have arisen. The biggest problem we have found is that some brokers have been deleting the license from the portal before confirming that the license has actually been printed. This usually occurs when the license is being printed on a shared printer that is not in the same general location as the person who is attempting to print the license. We are urging all brokers and branch office managers to verify the license has printed before deleting it. Should you accidentally delete the license, please contact the Commission and the PDF will be reactivated. If you experience any other problems, please contact Assistant Director Steve Long at [email protected] or 410-230-6351.

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WHO CAN "SIT" AT AN OPEN HOUSE?

There is a growing trend in the real estate marketplace, and unfortunately it's a risky one. The Commission has been alerted to an increasing practice of licensees engaging other agents to conduct open houses on their behalf, and the other agents are not affiliated with the same brokerage as the listing agent. Sometimes, it's just a favor for a busy professional, and sometimes the listing agent offers to pay a fee for the service. But either way, the practice can carry some severe legal consequences for everyone involved.

According to the Maryland Real Estate Brokers Act, a real estate salesperson or associate broker may only provide services through his or her own brokerage. So if an agent from another brokerage conducts the open house, that agent is considered unlicensed for the purposes of the Act. The legal ramifications are numerous and can be very detrimental:
  • The unlicensed agent who conducts the open house may be found guilty of a criminal misdemeanor under two provisions of the law, and if convicted, would face up to a year's imprisonment or a fine up to $5,000, or both. Those penalties are for a first offense and may be imposed for both areas of violation. For second and third offenses, the fines increase to $15,000 and $25,000, respectively.
  • The listing agent would be liable for violating the same provisions of the law and subject to the same disciplinary actions. Also, the payment of compensation to the unlicensed agent would constitute an additional violation and carry the same penalties.
  • The broker or branch office manager could also be charged with failure to provide reasonable and adequate supervision of the agents or associate brokers involved in the conduct of the open house.
  • In addition to criminal actions, there are also civil actions that can be taken by the Real Estate Commission against those involved. The Commission is authorized to suspend or revoke the real estate licenses of the parties, and can assess a civil penalty up to $5000 for each violation.
There are very specific duties that another broker's agent or unlicensed person can perform in connection with an open house. Please take a moment to download "Guidelines for the Use of Unlicensed Employees" for a list of those duties that may be performed, as well as a list of duties that are prohibited by Maryland law. If you do find that you need someone else to assume your open house duties for you, then please use licensed agents from your company only. Just because you both may be affiliated with the same franchise organization doesn't necessarily mean that you work for the same broker.

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FREQUENTLY ASKED QUESTIONS ---
OPEN HOUSES

The Maryland Real Estate Commission is pleased to present this set of Frequently Asked Questions regarding agency and open houses. These FAQs represent the majority of inquiries we receive about how to conduct an open house without running into problems with other agents or with the buyers and sellers they represent. If you have questions that aren't addressed in these FAQs, please contact us.

Q. If a licensee affiliated with the listing broker meets a prospective buyer at a seller's open house, and the buyer is not interested in that property, may the licensee tell the prospective buyer that he or she can help the buyer find a property and give the buyer the licensee's contact information?

A. A licensee, while conducting an open house, and during any follow-up with the consumer after the open house, must communicate clearly to the consumer that the licensee is representing only the seller and may not discuss other homes (except as to how the subject property compares favorably with other homes). Only if the licensee has done everything possible to interest the consumer in purchasing the property, and the consumer clearly states that he or she has no interest in purchasing the property, may a licensee offer to exchange contact information and to assist the consumer at a time after the open house, for the express purpose of representing the consumer as buyer's agent in locating and negotiating the purchase of another property and/or acting as a seller's agent for the listing of the consumer's home.

Q. Given the guidance above, may a seller give permission for a licensee to discuss other potential properties at an open house?

A. No. The requirement that the licensee work to protect and promote the interests of the seller is a responsibility imposed under the real estate law and regulations. The fact that a seller may give permission to a licensee to ignore or waive the protection does not relieve a licensee of obligations and responsibilities imposed upon him or her by the law. While conducting the open house, the licensee has a fiduciary duty to the seller and the legal obligation to promote and protect the interests of the seller for whom he or she is conducting the open house.

Q. May a licensee advertise multiple open houses together in the same advertisement? How about including information about other listings on the information sheet about the open house?

A. A licensee may advertise multiple open houses together in the same advertisement with the prior consent of all owners.

The information sheet is intended to assist in marketing that particular property. Information about other listings should be included only if that information promotes or assists the interests of the seller for whom the licensee is conducting the open house.

Q. Is a licensee required to provide the "Understanding Whom Real Estate Agents Represent" form to every prospective buyer who enters an open house?

A. No. The form does not have to be provided to every prospective buyer who enters the open house.

This issue was discussed in the Commission's Newsletter of Fall 2009. There the Commission stated:

If a prospective buyer starts to look around, but does not ask any questions or engage the licensee in conversation, the licensee does not need to provide the Agency Disclosure form. If the prospective buyer begins to ask the licensee questions or disclose possibly confidential information, however, the licensee must then provide him or her with the form before continuing the discussion.

Q. If a licensee holds an open house for the listing agent, meets a prospective buyer, and later becomes the buyer's agent, may the licensee represent the buyer in the purchase of the house at which they met when it was open?

A. Yes, but only if the licensee does not disclose to the buyer any confidential information regarding the seller. Before commencing representation of the buyer, the licensee must ensure that the seller and buyer have each signed the Consent to Dual Agency form, and that the broker (or the broker's designee) as the dual agent has designated the licensee as the intra-company agent representing the buyer in the transaction.

Q. If a licensee has an existing buyer agency relationship, holds the open house for the listing agent, and discovers it's a perfect house for the licensee's buyer client, can he or she still represent his or her current client?

A. Given that the licensee was not the listing agent, and does not disclose to the buyer any confidential information regarding the seller, the licensee may represent his or her current client in the purchase as long as the seller and buyer consent in writing to dual agency.  In addition, the broker (or the broker's designee) as dual agent designates the listing agent as intra-company agent acting on behalf of the seller and the licensee as the intra-company agent acting on behalf of his or her buyer.

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HAVE YOU SEEN THIS SIGN OR ONE LIKE IT?

istock coming soon sign
Recently, the Commission has received inquiries about the advertising of properties when there is not a signed listing agreement. Advertising a property as "Coming Soon" without a signed listing agreement is a violation of the Code of Maryland Regulations (COMAR) 09.11.01.12, which states: "All residential listing contracts, listing real property for sale, rental, lease, or exchange, either exclusive or open, shall be in writing and signed, and a copy of the contract shall be given to the seller or owner before the licensee advertises, shows, or offers the property."

Some licensees are of the understanding that they may advertise the property as "coming soon" because the seller has agreed to list the property but has not yet returned the signed listing agreement to the broker. Others have expressed that the seller has agreed to list the property after cleaning or making repairs to the property. However, neither of those circumstances is an acceptable reason for advertising a property without possessing a signed listing agreement.

Be advised that COMAR is very clear: You cannot advertise a property without having a signed listing agreement. You could be subject to regulatory charges.

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REFERRALS TO CONTRACTORS PART II: FURTHER CLARIFICATION OF WHAT YOU NEED TO KNOW

In the last issue of The Commission Check, we urged licensees to ensure that any referrals they made to clients for home-related contractors were only for licensed individuals. We provided links to the list of services that require a valid MHIC license to be performed, and for the licensing boards of other building tradespersons.

We would like to further clarify the importance of actively searching for the status of a contractor's license before making any type of referral to a consumer or your client. If the person or business you recommend turns out to be unlicensed, it can cause serious problems for both your client and for you. As we explained, if the job were to go wrong, your client would not have access to monetary relief from the Home Improvement Commission's Guaranty Fund. That fund is maintained only for licensed home improvement contractors. Additionally, the Commission has always held the position that if you recommend a person who does not have a valid, current license, then you have not met your duty of care to your client. Failing to adhere to the standards set forth in �17-532 of the Maryland Real Estate Brokers Act is a civil offense, and the Commission is authorized to suspend or revoke your license, and can assess a civil penalty up to $5000 for each violation.

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Department of Labor, Licensing and Regulation / Maryland Real Estate Commission
500 N. Calvert Street / Baltimore, MD 21202