Download Chapter 5 - ATP Realty Inc

Florida Real Estate Principles,
Practices & Law 38th Edition
Linda L. Crawford
Copyright © 2015 Kaplan, Inc.
All rights reserved.
Chapter 5
Real Estate Brokerage Operations
Brokerage Offices
• Active brokers must have an office
– Enclosed room—stationary construction
• Privacy to conduct negotiations
– Brokers must keep records in office
• Books, real estate transaction files
– If zoning allows, office may be in broker’s residence
– May have offices in another state
– Sales associates may NOT open an office of their own
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Branch Office
• Broker must register
each branch office
– Temporary shelter in a
subdivision being sold by
broker is NOT a branch
office unless sales
transactions are
concluded at location
– Branch office
registrations are Not
transferable
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Office Signs
Little Mo Realty
Murl H. Crawford
Licensed Real Estate Broker
• Trade name (if used)
• Broker’s name
• Words “Licensed Real Estate Broker” or
“Lic. Real Estate Broker”
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Associates Names on Entrance Sign
• Names of sales associates and broker
associates are optional
– If included
• Associate names must be below names of brokers
• Include title next to each name, such as sales associate
• Line or space must separate associate names from
broker names
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Brokerage Entity Signs
Kellogg Real Estate, Inc.
Sandi M. Kellogg
Licensed Real Estate Broker
• If the brokerage entity is a partnership, corporation,
or limited liability partnership/company sign must
contain
•
•
•
Name of firm or corporation
Name of at least one active broker
Words, “Licensed Real Estate Broker”
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Advertising
• Advertising must inform people they are
dealing with a licensee or a brokerage firm
• Must include name of brokerage firm
• Blind advertising
– Fails to disclose name of brokerage firm and includes
only P O box, telephone number and/or street
address
– Blind advertising is illegal
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Names of Licensees in Advertising
• Must use last name as registered with FREC
when including personal name in an ad
• Yard signs and classified ads must include
registered name of the brokerage firm
• Promotional materials
– Name of brokerage firm
– Sales associate’s name may also appear
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Internet Advertising
• Point of contact information The means to contact
the brokerage firm or a licensee including
– Mailing address, street address, e-mail address,
telephone or fax number
• Brokerage name must appear adjacent to or
immediately above/below point of contact
information
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“For Sale By Owner”
• Licensees may sell
their own property
“by owner”
– Can advertise property
and include personal
contact information
– Should disclose that
seller is licensed
before beginning
negotiations and in the
contract
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Telephone Solicitation
• Telephone solicitation initiation of a call for
the purpose of encouraging purchase or
investment in property, goods or services
• Making telephone calls to obtain listings or
buyers is telephone solicitation
• Regulated by state and federal law
– Calling hours restricted
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Telephone Solicitation Regulation
Florida Law
Federal Law
• No Solicitation List
• Maintained by Dept
of Agriculture &
Consumer Services
• $10,000 fine
• For-sale-by-owner
exception (Federal
law supersedes state
law)
• National do-not-call
registry
• $11,000 fine
• No exception for
FSBOs (must check
registry)
• Florida list added to
national registry
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Exceptions to National Do-Not-Call List
• When representing a potential buyer may
call a FSBO seller, provided the buyer is
interested in the property
• May contact individuals with whom
associate had an established business
relationship for up to 18 months
• May contact a customer for three months
after a business inquiry
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Fax Solicitations
• Unsolicited fax ads are prohibited
• Requirements to send fax
advertisements
1.
2.
3.
4.
Established business relationship
Voluntarily received fax number
Clearly state opt-out procedures
Honor opt-out requests within 30 days
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Escrow or Trust Accounts
• Escrow (trust) account An account for
the deposit of money the broker holds in
trust for others
• Deposit Money delivered to a licensee in
connection with a real estate transaction
– Earnest money deposit can be cash or anything
that can be converted into money
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Timely Deposit of Escrow Funds
Sales Associates
Deliver to broker no
later than end of the
next business day
Brokers
Deposit in escrow
account no later than
end of the third
business day
– Broker’s time starts
after sales associate
receives the deposit
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Example of Escrow Deposit
• Sales associate received earnest money
deposit on Wednesday
• Sales associate must deliver deposit to
broker no later than Thursday
• Broker must deposit in escrow account no
later than Monday (no holidays)
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Escrow Check Payable to Sales Associate
• Have buyer write a new check payable to
broker’s escrow account
• If not practical endorse check and write,
“For deposit only to (name of escrow)”
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Postdated Checks and Insufficient Funds
• Obtain seller’s approval before accepting
• Broker must secure check until payable and
then immediately deposit in escrow
• Checks returned for insufficient funds
– Broker is not responsible if the broker made a
timely deposit
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Acceptable Depositories
• Broker-held escrow accounts
–
–
–
–
Florida commercial bank
Credit union
Savings (and loan) association
Broker must be a signatory on broker-held
accounts
• Florida-based title company or Florida
attorney (broker is not the escrow agent)
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Title Company/Attorney Escrow Accounts
• Indicate title company (or attorney) name,
address, and telephone number on contract
• Within 10 business days after deposit is due,
broker must make written request to title
company (attorney) for verification of receipt of
deposit
• Within 10 business days after broker made
written request, provide seller’s broker with a
copy of written verification
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Interest-Bearing Escrow Accounts
• Written permission from all parties before
placing in interest-bearing account
• Written authorization who is entitled to
interest
• Broker, if authorized, may receive interest
earned
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Record Keeping
• Brokers must keep business records, books,
and accounts in compliance and available
for DBPR audit
• Must preserve records for five years and
two years beyond court proceeding
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Money to Maintain Escrow Account
• Brokers may place $1,000 personal or
brokerage funds in a sales escrow account
• Brokers may place $5,000 personal or
brokerage funds in property management
escrow account
• Escrow accounts must be reconciled each
month
• Broker must review, sign and date monthly
reconciliation
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Misappropriation of Escrow Funds
• Trust funds must be kept in a separate
account
• Commingle
The illegal practice of mixing another’s
funds with broker’s money
• Conversion
Unauthorized control or use of another
person’s property
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Notice and Settlement Procedures
• Broker must not disburse escrow funds until
transaction closes or with agreement of the
parties
• Broker has conflicting demands
– When buyer and seller make demands regarding
disbursing of escrow funds that are inconsistent
with each other and cannot be resolved
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Conflicting Demands
– Must notify FREC in
writing within 15
business days of
receiving conflicting
demands
– Begin settlement
procedure within 30
business days of
receiving conflicting
demands
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Settlement (escape) Procedures
• Mediation Informal, nonbinding process,
negotiated settlement
• Arbitration Binding judgment by third party (prior
consent of parties)
• Litigation
– Interpleader – broker has no financial claim
– Declaratory judgment – judge declares each party’s rights
to funds
• Escrow disbursement order (EDO)
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Escrow Disbursement Order (EDO)
• Commission issues a determination of who
is entitled to disputed funds
• Funds must be held in brokerage escrow
account
• Must inform FREC within 10 business days if
dispute is settled or it goes to court
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Exceptions to Notice and Settlement
Procedures
Brokers are
not required to
notify FREC or
start a
settlement
procedure in
these
situations
• Sale of HUD-owned
property
• Timely notice to
cancel a residential
condominium
contract
• Failure to satisfy
the financing clause
in a contract
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Good-Faith Doubt
• Broker doubts either party’s intention to act
in good faith according to the contract
• Notify the FREC in writing within 15
business days of having the doubt
• Begin a settlement procedure within 30
days of having the doubt
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Rental Information and Lists
• If rental information provided under contract is
not current or accurate, consumer may demand
within 30 days of contract date a return of fee
• If consumer does not obtain a rental, entitled
to receive a return of 75% of the fee paid, if
demand is made within 30 days of contract
date
• Failure to provide accurate and current rental
information for a fee is first-degree
misdemeanor
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Antitrust Laws
• Antitrust laws protect competition and
ensure against restraint of trade
– Sherman and Clayton Antitrust Acts
– Federal Trade Commission
• It is illegal to
– Fix commissions or fees for services (pricefixing)
– Conspire to split up market areas to avoid
competition (market allocation)
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Broker’s Commission
• Established by agreement between broker
and party who agrees to pay
– Negotiable
• Liens on residential property for nonpayment of
commission
– Only allowed if broker is given that authority in a
contract
– Otherwise seek civil judgment
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F.S. 475, Part III
• Commercial Real Estate Sales Commission Lien Act
• Gives broker lien rights on seller’s net proceeds
from sale of commercial property
• Not lien rights on the real property
• Brokerage agreement (listing contract) must clearly
state broker’s lien rights
• Effective date of the lien is date of recording
commission notice
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F.S. 475, Part IV
• Commercial Real Estate Leasing
Commission Lien Act
• Gives broker lien rights for commission
earned for leasing commercial real estate
– If landlord agreed to pay commission, lien is
against landlord’s interest in the real property
– If tenant agreed to pay commission, lien is on
tenant’s leasehold estate
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Sales Associate’s Commission
• Must be paid by
associate’s employer; not
directly by buyer or seller
• Associate’s split
determined by agreement
with employer
• Associates may not
operate independently
• With broker’s written
authorization, closing
agent may prepare check
payable to associate for
associate’s share of
commission (no blanket
authorizations)
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Kickbacks, Rebates, Unearned Fees
Referral fees for non-real estate services
– Buyer and seller must be fully informed
– Must not violate RESPA (Illegal for closing
services, title searches, appraisals, etc.)
– Person receiving kickback must be properly
licensed if applicable (e.g., mortgage loan
originator license)
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Referral Fees for Real Estate Services
• Licensees may share their commission with
the buyer or seller in that transaction (with
full disclosure)
• May not share commission with any other
unlicensed person
• May not pay an unlicensed person for
referral of real estate business (finder’s fee
of up to $50 to a tenant exception)
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Change of Employer
• Sales associate license ceases to be in force
when associate changes employer
• DBPR must be notified within 10 days after
change to new employer
• Associate may not conduct real estate services
until registered under new employer
• Fiduciary relationship between associate and
broker
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Membership in Organizations
Licensees cannot
use term Realtor®
unless a member of
NAR
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Brokerage Business Entities
• Chapter 475 defines
broker to include
anyone who is
general partner,
officer or director of
brokerage
partnership or
corporation
• Chapter 475 prohibits
a person licensed as
a sales associate or
broker associate from
registering as a
general partner,
officer or director of a
brokerage entity
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Business Entities That May Register as
Real Estate Brokers
• Sole Proprietorship
• Partnerships
– General
– Limited
• Limited Liability
Partnership (LLP)
• Corporation
• Limited Liability
Company (LLC)
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Sole Proprietorship
•
•
•
•
Owned by one person
Owner must hold active broker license
Trade name must be registered with DBPR
Owner liability
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General Partnership
• Two or more persons engaging in business
together
• Created by written, oral, or implied
agreement
• Each is liable for partnership debts and can
bind other partners in contracts
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Real Estate Brokerage General Partnership
• Register partnership with the DBPR
• At least one partner must be an active broker
• Partners who deal with public and perform real
estate services must be active brokers
• Sales associates may not be general partners
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Limited Partnership
• Created by written instrument filed with FL
Dept. of State
• One or more general partners and one or
more limited partners
• Limited partners make investment of cash
or property – not services
• Limited partners have limited liability
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Real Estate Brokerage Limited Partnership
• Register limited partnership with the DBPR
• General partners who perform real estate
services must be active brokers
• At least one general partner must be active
broker
• All other general partners must register with
DBPR
• Sales associates may not be general partners
• Limited partners do not register with DBPR
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Ostensible Partnership
• Quasi partnership
• When the actions of two or more persons
create the appearance that a partnership
exists
– Each may be liable for other person’s debts and
torts
• Subject to license suspension
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Limited Liability Partnership (LLP)
• Protection from personal liability
• Partners are not subject to limitations
imposed on limited partners in a traditional
limited partnership
• Name of registered limited liability
partnership must include in name
– Registered limited liability partnership or LLP at
end of name
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Corporations
• An artificial person or legal entity created by
law
– File articles of incorporation with FL Dept. of
State
– Foreign corporation is organized under laws of
another state; may do business in Florida
– Domestic corporation incorporated in Florida
– Managed by board of directors & officers
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Real Estate Brokerage Corporation
• Register corporation with the DBPR
• At least one officer or director must be an active
broker
• Active and inactive brokers and unlicensed people
may serve as officers and directors
– Must be active brokers to perform real estate services
• Unlicensed officers and directors register with the
DBPR
– Sales associate may not be officer or director
– Sales associate may be shareholder
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Death of Only Active Broker
• If only active broker of a brokerage partnership or
corporation dies, resigns, or is removed from office,
the vacancy must be filled within 14 calendar days
• No new brokerage business may be conducted until
a new active broker is registered with DBPR
• Failure to timely replace broker results in
cancellation of the registration and licensees
become involuntary inactive
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Limited Liability Company (LLC)
• Best features of a corporation and a
partnership
– Protection from personal liability
– IRS treats LLC as a partnership for tax purposes
– Income is taxed only once, as in a partnership
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Business Entities That May NOT Register
• Corporation sole – church organization
• Joint venture – temporary business
arrangement
• Business trust – involves entity’s own property
• Cooperative association – involves own
property
• Unincorporated association – example is
property owners in a subdivision
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Trade Names
• Business name other than the legal name of
the person doing business
• T/A “trading as”
• D/B/A “doing business as”
• Fictitous name refers to the name registered
with the Dept of State
• Associates must have licenses issued in their
legal names (not under a trade name)
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Personal Assistants
Unlicensed
Licensed
• Administrative tasks
• May not perform duties
requiring a license
• May not be paid a
commission
• Licensee who employs
unlicensed assistants
• Can perform services of
real estate
• Must be registered with
employing broker
• Broker must pay licensed
assistant for brokerage
activities
– Must comply with state
and federal employment
laws
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