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REAL ESTATE BULLETIN N o r t h C a r o l i n a R e a l E s t a t e C o m m i s s i o n V o l u m e 4 7 • F e b r u a r y 2 0 1 7 • N u m b e r 3 NORTRTH CACARAROROLINANA REREREALAL ESTATATATATE COMMISSION ESSE QUAUAMAM VIDERI In This Issue Education Rules................................1 Patrice Willetts Appointed..............1 Corean Hamlin E&L Director............1 Check Occupancy Limits.............. 4 Reconcile Accounts Monthly......... 5 Criminal Background Checks....... 6 RESPA, Referrals, You.......................7 Education Rule Diagrams............ 8 Carolinas’ Border Re-Survey........... 9 Disciplinary Actions......................12 Patrice Willetts Appointed To Commission Patrice Willetts of Wilmington was appointed to the North Carolina Real Estate Commission on October 12, 2016 by then Governor Pat McCrory for a term ending July 31, 2018. Willetts succeeds Everett “Vic” Knight of Raleigh. A broker with The Property Shop of the Carolinas in Wilmington, Willetts, formerly from New York and with 30 years of experience as a REALTOR®, is Commission Members Reappointed In October 2016, then Governor Pat McCrory reappointed three mem-bers of the Commision for terms end-ing July 31, 2019: George Bell, Chair, of Winston-Salem; Leonard H. “Tony” Craver, Jr., of Durham; and Anna Greg-ory Wagoner of Winston-Salem. At its January 2017 meeting, the Commission adopted the proposed edu-cation reform rules. Under this rulemaking action, the 94 education rules found in Subchapters C and E will be repealed and replaced by 36 newly ad-opted rules located in the new Subchapter H - Real Estate Education. Subject to the Rules Review Commission’s approval, this rulemaking action will be effective July 1, 2017. Corean Hamlin Named Education and Licensing Director Commission Education Rules Simplified; New Subchapter H Effective July 1 By Melissa A. Vuotto, Rulemaking Coordinator The Commission’s primary intent of this rulemaking action is to eliminate re-dundant rules, create a unified subchap-ter for all educators, and incorporate many of the Commission’s Instructor Development and Improvement Task Force recommendations. The new rules are grouped into four sections within Subchapter H: • Section .0100 – General/ Defini-tions rule; • Section .0200 – Real Estate Schools; • Section .0300 – Approved Instruc-tors; and • Section .0400 – Continuing Educa-tion. By streamlining the education rules, it is the Commission’s goal to improve the understanding each rule, ease the process of searching for a particular rule, and increase the quality of real es-tate education in North Carolina. Thank you to all who attended the public hearing on December 13, 2016, The proposed education re-form rules may be reviewed on the Commission’s website: https://www. ncrec.gov/Pdfs/Rules/Education_ Reform_Rulemaking_Post.pdf. Diagrams of the organization of the current and reformed rules ap-pear on page 8 of this Bulletin. Corean E. Hamlin has been named Director of Education and Licensing for the Commission, ef-fective December 14, 2016. Hamlin joined the Commission as Edu-cation and Licensing Officer in 2014. Hamlin holds a Master’s Degree from UNC-Greensboro and the Distin-guished Real Estate Instructor (DREI) designation from the Real Estate Educa-tors Association. After a decade as a professional edu-cator in other industries, Hamlin en-tered the real estate business, joining her family’s Asheville-based real estate firm as a residential sales broker in 2003. From 2007-2014, Hamlin served as Instructor, Education Director, and Communication Director for the Ashe-ville Board of Realtors®. She taught real estate prelicensing, postlicensing, and continuing education courses at Cumb-ie and Trull School of Real Estate from 2010-2014. The primary responsibility of the Director of Education and Licensing is to plan and direct the Commission’s education, examination, and licensing programs and operations statewide. (See Education, page 3) (See Willetts, page 3) 2 Real Estate Bulletin February 2017 REAL ESTATE BULLETIN Published as a service to real estate licensees to promote a better understanding of the Real Estate License Law and Commission rules, and proficiency in real estate practice. The articles published herein shall not be reprinted or reproduced in any other publication without specific refer-ence being made to their original publication in the Com-mission’s Real Estate Bulletin. NORTH CAROLINA REAL ESTATE COMMISSION 1313 Navaho Drive P. O. Box 17100 Raleigh, North Carolina 27619-7100 Phone (919) 875-3700 www.ncrec.gov Roy Cooper, Governor COMMISSION MEMBERS George Bell, Chairman Winston-Salem Robert J. Ramseur, Jr., Vice Chairman Raleigh Cindy S. Chandler Charlotte Leonard H. “Tony” Craver, Jr. Durham Judy F. Greenhill Hickory Thomas R. Lawing, Jr. Charlotte James Sherrill Fayetteville Anna Gregory Wagoner Winston-Salem Patrice Willetts Wilmington EXECUTIVE Miriam J. Baer Executive Director Paula L. Ricard Chief Financial Officer ADMINISTRATION Wendy C. Harper Human Resource/Office Manager Jake A. Gore Chief Technology Officer Robert L. Forshaw Publications Officer EDUCATION AND LICENSING Corean E. Hamlin Director Deborah B. Carpenter Education/Examination Officer Brenda Hollings Information Services Officer Patricia A. Moylan Legal Education Officer Pamela R. Rorie Continuing Education Officer Matthew A. Wentz License Application Analyst REGULATORY AFFAIRS Janet B. Thoren Director, Legal Counsel Charlene D. Moody Assistant Director, Legal Counsel Frederick A. Moreno Deputy Legal Counsel Robert A. Patchett Associate Legal Counsel I Michael B. Gray Chief Auditor/Investigator D. Scott Schiller Financial Fraud Investigator Bart H. Allen Sr. Auditor/Investigator M. Spier Holloman Sr. Auditor/Investigator Marcia M. Waldron Auditor/Investigator Jamila G. Wilson-Davis Auditor/Investigator Jean A. Wolinski-Hobbs Auditor/Investigator Stephen L. Fussell Sr. Consumer Protection Officer Sarah E. Herman Consumer Protection Officer Glenn M. Wylie Consumer Protection Officer Peter B. Myers Information Officer Elizabeth W. Penney Information Officer Melissa A. Vuotto Rulemaking Coordinator Editor-In-Chief Miriam J. Baer Editor Robert L. Forshaw S taff U pdate Appearances People Miriam J. Baer, Executive Director, spoke to the Triangle Chapter of the Na-tional Association of Residential Proper-ty Managers and the Risk Management Committee of NC REALTORS®. Janet B. Thoren, Director, Regulatory Affairs Division and Legal Counsel, spoke to the Annual Business and and General Membership Meeting of the Outer Banks Association of REALTORS®. Frederick A. Moreno, Deputy Le-gal Counsel, spoke to the Greenville- Pitt Association of REALTORS®. Sarah E. Herman, Consumer Pro-tection Officer, spoke to the Allen Tate Company in Charlotte. Glenn W. Wylie, Consumer Pro-tection Officer, spoke at the Property Management Seminar and to the gen-eral membership of the Fayetteville Re-gional Association of REALTORS®. Peter B. Myers, Information Of-ficer, spoke to the Albemarle Area As-sociation of REALTORS®, Century 21 Patriot in Fayettetille, the Cleveland County Association of REALTORS®, the Greensboro Regional REALTOR® Association, the Harnett Council of REALTORS®, Trademark Residential in Raleigh, and Weichert REALTORS® - Team Metro in Hickory. Elizabeth W. Penney, Information Officer, spoke to the Central Carolina Association of REALTORS®. Miriam Baer Elected ARELLO® President Miriam J. Baer, Executive Director of the Commission, has been elected President of the Association of Real Estate License Law Officials (ARELLO® for a one-year term beginning in January 2017. ARELLO® is an international organization dedicated to promoting better administration and enforcement of real estate license and regulatory laws by its members. During her 29 years with the Commission, Baer held numerous positions with ARELLO®, including Senior District Vice Presi-dent, member of the Board of Directors, and Chair of various committees. ARELLO® membership is organized into five districts with four com-prised of the 50 states, U.S. territories, Bahamas and Bermuda, and Canadian provinces and one of members from Europe, Africa, Asia, Aus-tralia, and the Far East. Working committees, the Board of Directors, and the Executive Com-mittee carry out the organization’s mission to support jurisdictions in the administration and enforcement of real estate license laws and to pro-mote excellence in real estate regulation. Baer is the fifth person affiliated with the Commission to serve as President of ARELLO®. Mary Frances Whitley, former Director of Admin-istration, served as President in 2007; Phillip T. Fisher, former Executive Director, in 1991; A. P. “Red” Carlton, former Commission member and Chair, in 1985; and Joseph Schweidler, Commission Secretary-Trea-surer, in 1972. Real Estate Bulletin February 2017 3 February 15-16 March 15-16 April 12-13 May 10-11 June 14-15 All meetings, unless otherwise noted, begin at 9:00 a.m. and are held in Raleigh in the Commission’s Conference Room at 1313 Navaho Drive (27609). Occasionally, circumstances necessitate changes in meeting times and locations. C alendar C ommission Broker-in-Charge and Basic Trust Account Procedures Courses Register online at the Commission Web site, www.ncrec.gov, under Education/Course Registration. Broker-in-Charge Course (Two days) Day 1: 1 - 5 p.m.; Day 2: 8:30 a.m. - 5:30 p.m. Asheville Western Carolina University Biltmore Park February 21-22 May 16-17 Kannapolis NC Research Campus, Kannapolis March 1-2 April 18-19 May 22-23 Greensboro Deep River Event Center April 5-6 Raleigh McKimmon Center February 13-14 March 21-22 May 3-4 June 5-6 Wilmington Best Western Coastline Center May 8-9 Basic Trust Account Procedures (Commission Offices, Raleigh) (All classes 1 - 5 p.m.) Raleigh Commission Offices 1313 Navaho Drive, Raleigh February 13 April 10 June 7 See Commission Web site to confirm course dates. a former president of the Wilmington Regional Association of REALTORS® and the North Carolina Association of REALTORS®. She has been a member of the Wilmington Board of Adjustment and currently serves on the City of Wilm-ington/ UNCW Community Relations Task Force. Willetts is an approved instruc-tor for the North Carolina Real Estate Commission and for the National As-sociation of REALTORS®. A past president of the Wilming-ton Rotary Club, she was active with the Honor Flight program that works to take WWII Veterans to Washing-ton, DC, to visit their memorial and Paws4people, which provides service dogs to veterans and children with med-ical needs. The North Carolina Real Estate Commission is responsible for the regu-lation of approximately 100,000 real estate brokers and and firms in the state. and submitted written comments. The Commission considered comments and rule revisions at its meeting on January 18, 2017. Revisions are indicated at www.ncrec.gov under ‘Licensing Law and Rule Changes.’ If you would like to receive notifications of any rulemaking proceeding, you can sign up at www. ncrec.gov/Home/Subscribe or by con-tacting Melissa A. Vuotto, Commission Rulemaking Coordinator. Willetts (Continued from page 1) Education (Continued from page 1) Follow us on 4 Real Estate Bulletin February 2017 Each year, the Commission receives numerous com-plaints related to various types of misrepresentation by brokers. One common type of mis-representation involves overstating the number of bedrooms or allowed occu-pancy limits of properties, whether they are being advertised for sale or for rent. Either way, a broker’s advertisement must NOT overstate or exceed the allowed limits and design parameters of the property’s sewage disposal system or oc-cupancy permitted by the local municipality. In other words, be sure to check the limits imposed by the septic permit, specifically the num-ber of bedrooms the septic permit al-lows, and occupancy limits of the local municipality. When residential properties are built and served by on-site septic systems, the local permit department typically evalu-ates the site and determines the maxi-mum number of bedrooms allowed based on the design of the system and the land’s ability to percolate waste-water into the ground. That’s why the evaluation was historically referred to as a “perc” test. The results of the test de-termine the maximum number of bed-rooms allowed on the site. Brokers must be aware of both bed-room and occupancy limitations in the sale, resale, and rental of properties with on-site sewage disposal systems. The Real Estate Commission expects all brokers to possess the skills and knowl-edge to accurately represent facts about such properties regarding the number of bedrooms and/or maximum occupan-cy. The septic permit generally can be checked by making a phone call to the local permit department or by check-ing the department’s website. Checking the permit is especially important when there has been an addition or remodel to the property to increase the original number of bedrooms. A broker should not assume permits were issued for the construction. If the actual n u m b e r of bed-rooms in the property exceeds the num-ber of bedrooms allowed on the septic permit, the listing broker may NOT represent the dwelling as having any more bedrooms than are indicated on the septic permit, even if there is a dis-claimer made. Many municipalities have occupan-cy limits for residential dwellings. For properties being advertised for rent, the occupancy level is generally calculated by multiplying the number of bedrooms on the septic permit by two, based on a maximum of two occupants per bed-room. The maximum is, of course, cal-culated regardless of the actual number of beds the landlord might have set up inside the dwelling. Therefore, claiming a three-bedroom property “sleeps 12” because it has six sets of bunk beds is a misrepresentation if the local municipal-ity limits occupancy to two persons per bedroom. If the licensee overstates the maximum occupancy in a rental home, the tenants might over-occupy the dwell-ing and overload the septic system, caus-ing the system to fail. Such system fail-ure could result in not only the contami-nation of surrounding groundwater but also the potential condemnation of the property, not to mention costly repairs that would have to be made by the property owner. Brokers must take rea-sonable steps to discover and disclose material facts and to ensure everything being adver-tised is correct, including the sep-tic information. That means check-ing the number of bedrooms on the permit and calculating the maximum occupancy based municipality require-ments. Buyer’s agents should also be alert to problems and red flags related to the septic system and septic permit, and whether the imposed limits match the actual number of bedrooms in the dwelling. It might be necessary for the buyer’s agent to verify the information advertised by the listing agent, and to therefore potentially alert the buyer cli-ent of problems. In some cases, the permit depart-ment might not keep records perma-nently or the records might not be available for other reasons. In that case, it is reasonable to advertise based on the existing number of bedrooms but with the disclosure that the permit records are not available and therefore certain assumptions have been made by the listing agent. Both listing and buyer agents should be able to explain to their clients the value of obtaining a septic permit and what information such per-mits provide. Disclosures must always be made so that the potential buyer is made aware of material facts before the potential buyer makes an offer. CAVEAT: Real Estate License Law prohibits misrepresentation, omission, or concealment of material facts; a course of misrepresentation through false ad-vertising; and improper, dishonest, or fraudulent conduct. Willful or negligent misrepresentation of the occupancy de-sign limits of a property’s on-site sewage disposal system violates the Real Estate License Law and may result in disciplin-ary action by the Commission. Check Allowed Occupancy Limits Before Advertising Property By Peter B. Myers, Information Officer Real Estate Bulletin February 2017 5 I f you keep any funds related to a real estate transaction, an easy way to make some peace in your life is to reconcile your trust ac-count records on a monthly basis. While many see this as a daunting task, once the process is set up and com-pleted properly, it does not need to be difficult or time consuming. However, reconciling does need to be a priority. There are so many seemingly mundane tasks in our life that, if ignored, lead to large and costly problems. If you don’t brush your teeth, you have pain and costly dental bills (or worse); if you don’t ser-vice your car, the repairs can be astronomi-cal; if you don’t balance (recon-cile) your Trust Account on a regular basis, the result can be missing client/tenant funds, the loss of your real estate license, and even criminal charges. So begin with the basics: Step 1 is to reconcile your bank statement to your Trust Account or your ‘Books’; this might be your general ledger cash account, your trust account journal, a check register, or even your checkbook for your trust account. Stated simply, you are resolving differences between the bank and your Books: errors (yours or the bank’s), bank charges or inter-est earned, and timing differences. To minimize timing differences, always use the bank statement ending date, ide-ally, the last day of the month, as your cut-off date for your Books. This is the same process used to balance a personal checkbook. Always begin the process by marking (or ‘ticking’) each cleared item either by hand or using software. You can’t skip this first step of checking each matching item on your Books and each matching item on your bank statement. All un-ticked entries are your adjustments (i.e., your reconciling items). Post interest as a monthly report card on the state of your accounting records. With the pos-sible exception of credit card processing fee issues or large high volume firms, if your bank reconciliation process is dif-ficult, chances are good that improve-ments are needed in your accounting. Key Points • The only way to ensure that a suffi-cient balance of funds is on hand to cover your client liability is to rec-oncile on a monthly basis. Retain a worksheet for each monthly r e c o n c i l i a - tion showing the balancing of the Bank Statement, the Books (the cash account), and the Property Trial Balance. • While not an NCREC re-quirement, an important best practice is to perform this three way reconciliation within 48 hours of the receipt of your bank state-ment. There will be fewer reconciling items; errors and/or missing monies, if any, will be identified quickly. • For property management companies handling vacation rentals, there is a fourth step of reconciling the subsid-iary ledgers to the property (or own-er) ledgers. • If you aren’t already performing this reconciliation, start today. If you need an extra incentive, just read ‘the back of the Bulletin.’ • The broker in charge is responsible for the safeguarding of trust monies. While the reconciliation and book-keeping can be delegated, the fidu-ciary responsibility remains with the BIC: remember, ‘The Buck Stops with the BIC.’ • The Commission offers a Basic Trust Account Procedures Course mul-tiple times throughout the year; go to www.ncrec.gov to view the class schedule and register online. earned, bank charges, and other recon-ciling items to your Books, then adjust the bank statement balance for bank errors (if any). If all reconciling items haves been addressed (and your begin-ning bank balance was reconciled to the Books), this formula will be correct: Ending Bank Balance + Deposits in Transit – Outstanding Checks = Your Book Balance. Once the bank statement has been reconciled to the Books, you are ready for step 2, which is balancing the reconciled figures from Step 1 to the Property Trial Balance (this is your client liability bal-ance). The Property Trial Balance item-izes whose funds you are holding; that is, the monies being held in trust belonging to other people. It is an accounting of every dollar in the Trust Account by the tenant or client; this is a critical report since every dollar held in a Trust Account needs to be identifiable by owner. The Property Trial Balance is created by list-ing of each of your property (or owner) ledgers and their month-end balance (as-suming month-end is the cut-off). As long as reconciliations are being performed monthly, it will be only the current month’s transactions (or prior period adjustments, if any) that need to be reviewed to locate discrepancies. If reconciliations have not been per-formed in the past, the first reconcili-ation could be a long process, but it is essential to have this reconciliation on file (as required by Real Estate Commis-sion Rule A.0117 (e)). If you want an easier – or even seam-less – reconciliation, improve the record keeping. Think of bank reconciliation rec·on·cile: to make peace, adjust Reconcile Trust Accounts Mo n t h ly By Marcia M. Waldron, Auditor/Investigator 6 Real Estate Bulletin February 2017 Diligent property managers of-ten run criminal background checks on prospective ten-ants before allowing them to lease a landlord’s property. In April 2016, HUD issued guidance on how the Fair Housing Act (“the Act”) impacts the use of such a background check by all pro-viders of housing, including property managers. When designing a process for screening tenants, it is important for brokers to consider this guidance and how the use of such background checks might violate fair housing laws. Before getting into the HUD guide-lines, there are a few terms brokers should recognize and understand. The Act includes the following seven pro-tected classes: race, color, religion, na-tional origin, sex, disability, and familial status. A landlord or property manager may not discriminate against anyone in one or more of the protected classes. Another term, “disparate impact”, is of-ten used in housing discrimination cas-es and refers to a policy or practice that is neutral on its face, but its application actually has a discriminatory impact on a protected class. The use of a criminal background check as part of a tenant screening process seems to be a neutral process as long as it is required of all potential tenants, not just certain ones selected by the landlord or property manager. However, HUD has determined that due to higher than average incarcera-tion rates among certain races relative to their percentage of the total popu-lation, and when compared to incar-ceration rates of other races, the use of criminal background checks to deny housing may actually cause a disparate impact on certain races and therefore be discriminatory. What does all of this mean for a landlord or property manager? First, criminal background checks should only be used for a non-discriminatory business objective, and there cannot be an alternative to the background check that is less discriminatory. There should be some evidence that the background checks actually accomplish the goal. Does a refusal to rent to individuals with criminal convictions actually mean fewer criminal acts or property destruc-tion in the properties being managed? A blanket prohibition against anyone with any type criminal record likely would not survive a charge of discrimination. There are a couple of exceptions. The Fair Housing Act specifically states that landlords do not have to make housing available to persons with convictions for the manufacture or distribution of controlled substances. Just remember, though, other drug-related convictions are not specifically exempt from fair housing requirements. In addition, project-based HUD subsidized proper-ties must prohibit anyone subject to a lifetime registration requirement under a state government sex offender registra-tion program. For anything outside the excep-tions, HUD suggests that landlords and property managers should consider the following factors when using criminal background checks for prospective ten-ants: • Do not consider charges or arrests that did not result in conviction. Arrest records should not be used as a basis for denying an applicant for housing. Such a record does not indicate that the applicant actually engaged in any criminal activity. Remember - inno-cent until proven guilty. • Do not have a blanket policy against renting to anyone with any type of criminal conviction. Explain to landlord-clients the dangers of such a policy and advise them to use a more tailored approach. • Consider the type of conviction. Look at the nature and severity of each conviction. A shoplifting conviction should not carry the same weight in a housing decision as a conviction for distributing cocaine. While fish-ing without a license is not good, an applicant participating in that type of activity will likely be a lesser risk to residents and property than some-one selling drugs, which often brings more dangerous people and illegal drugs into the neighborhood. • Consider the timing of the convic-tion. How long ago did the event happen and how long ago was the conviction? Research tends to show that the likelihood that a person with a prior criminal conviction will com-mit another offense decreases over time. HUD offers no insight into how long might be a reasonable pe-riod to consider, so consider a reason-able amount of time that you feel you can defend if challenged. • Consider each offense individually. Create an assessment plan that is fair and takes into account mitigating fac-tors such as the surrounding events, the age of the individual at the time, rehabilitation efforts, and the rental history of the individual. In other words, each instance should be re-viewed on a case-by-case basis and narrowly tailor any refusals. As a property manager, you have a duty to discuss these issues with your landlord clients and create a program that will help keep you and your clients out of trouble and will allow all housing applicants fair access to available hous-ing. To see the HUD guidelines in full, use the link below. https://portal.hud.gov/hudportal/ documents/huddoc?id=HUD_OGC-GuidAppFHAStandCR. pdf HUD Issues Guidance on Use of Criminal Background Checks By Janet B. Thoren, Legal Counsel Real Estate Bulletin February 2017 7 A pest control company so-licits real estate brokers to join what they refer to as a “Preferred Broker Pro-gram.” Among other listed benefits of becoming a Preferred Broker, the com-pany offers all broker participants quar-terly pest control services at their per-sonal homes at no charge. In order to receive the free pest control, the broker must refer their buyer clients to the pest control company for the completion of lender-required pest inspections. The question posed to the Commis-sion’s legal staff was whether this type of program is in violation of the Real Estate Settlement Procedures Act (RE-SPA). RESPA prohibits kickbacks and unearned fees in any real estate transac-tion involving a federally related mort-gage loan. The kickback provision is generally referred to as RESPA’s “Sec-tion 8.” Section 8 prohibits anyone, in-cluding real estate brokers, from “… accept[ing] any fee, kickback, or thing of value…” as “…part of, a real estate settlement service involving a federally related mortgage loan…” 12 U.S. Code Chapter 27 § 2607(a). A “thing of value” is any payment, advance, funds, loan, service, or other consideration with more than nominal value. “RESPA also defines the term “Set-tlement service” as any service provided in connection with a real estate settle-ment for which the buyer or seller will pay. These services include, but are not limited to, the following: • title searches, • title examinations, • the provision of title certificates, • title insurance, • services rendered by an attorney, • the preparation of documents, • property surveys, • the rendering of credit reports or appraisals, • pest and fungus inspections, • services rendered by a real estate agent or broker, • the origination of a federally relat-ed mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans), and • the handling of the processing, and closing or settlement. When a lender requires a buyer to have a pest inspection as part of the loan qualification process, the inspection is considered a settlement service. On the other hand, if a seller independently chooses to have a pest inspection as part of the listing process, and pays for that service separately from the settlement process, it is not related to the real es-tate settlement and is not considered a settlement service. If a broker receives a quarterly pest control from the pest control company at no cost, a service that would typi-cally have an associated cost, they have received a “thing of value.” And if that broker receives that thing of value for referring a client to the pest control company to do a lender-required pest inspection, there is very likely a RESPA violation. Even if the broker is referring a cli-ent to the pest control company for ser-vices unrelated to a closing and there is no apparent problem with RESPA, the broker must fully disclose their arrange-ment with the pest control company to their client per Commission Rule A .0109. As you can see from the example above, whether a referral is prohibited under RESPA depends greatly on the specific transaction. If you are con-fronted with a business referral pro-gram, use the following fill-in-the-blank sentence as a test to determine whether the program may be in violation of RESPA: As part of this program, I will receive _________, which will enrich or benefit me or my firm, in exchange for re-ferring clients to _________ for services related to a real estate settlement. If you can fill in these blanks, the safest course is to consider the program a no-go. RESPA Referrals You By Sarah E. Herman Consumer Protection Officer ...whether a referral is prohibited under RESPA depends greatly on the specific transaction. 8 Real Estate Bulletin February 2017 Subchapter 58C Prelicensing Education C .0100 Schools 7 Rules C .0200 Private Schools 20 Rules C .0300 Pre/Post Courses 12 Rules C .0600 Pre/Post Instructors 8 Rules Current Education Rules Subchapter 58E Continuing Education E .0100 Update Course 5 Rules E .0200 Update Course Instructors 6 Rules E .0300 Elective Courses 10 Rules E .0400 General Sponsor Requirements 11 Rules E .0500 Course Operational Requirements 15 Rules Subchapter 58H Real Estate Education H .0100 General 1 Rule Definitions H .0200 Schools 15 Rules Private Schools Public Schools Prelicensing Courses Postlicensing Courses H .0300 Instructors 6 Rules Prelicensing Instructors Postlicensing Instructors Update Course Instructors H .0400 Continuing Education 14 Rules Sponsors Elective CE Instructors Elective CE Courses Update Courses Proposed Education Rules Reorganization of Education Reform Rules The 94 Commission rules relating to education in Subschapters C and E of the Administrative Code are being replaced by 36 rules in a new Subchapter H adopted by the Commission at its January meeting. The reform and reorga-nization are subject to Rules Commission Review approval and, if approved, take effect July 1, 2017. As shown in the lower diagram, the rules are grouped under four sections: General, Schools, Instructors, and Continuing Education. GENUP, BICUP Topics Include Radon, Property Management Property management, radon, and protecting confidential con-sumer information are among the topics for the General Update Course (GENUP) and the Broker-in- Charge Update Course (BI-CUP) for the 2017-2018 license year beginning July 1. GENUP Property Management – changes in the Vacation Rental Act and the Landlord/Tenant statutes; HUD guidelines con-cerning use of criminal records in leasing; duties of a broker/ owner (“unintended property manager”); and surcharges paid to brokers on service/repairs. Radon – in conjunction with the North Carolina Radon Pro-gram of the Department of Health and Human Services (DHHS). Protecting Confidential Con-sumer Information – broker’s duty to protect client/consumer confi-dential information; identity theft; scam alerts; use of email; Craig’s List; etc. License Law and Rule Updates - application and reinstatement fee increases and rules relating to registering assumed names and delivery of instruments, and Consumer Finance Protection Bureau updates including the release of closing disclosures to brokers. BICUP All GENUP topics plus three-way trust account reconcilia-tion, BIC duty to supervise, and breaking issues and updates. Real Estate Bulletin February 2017 9 NOTE: Much of the following in-formation has been taken from a memo from the Real Property Section of the NC Bar Association and the NC Land Title Association. The full memo is available on the Bar Association’s website and may be viewed at http://www.ncbar.org/me-dia/ 727134/nc_sc_boundarymemono-vember2016. pdf. In 1995, North and South Caro-lina created a Joint Boundary Commission to research and tweak the 334-mile border between them. The original border was estab-lished in the 1700s, but over many de-cades, the landmarks for the original boundary have disappeared or become corrupted. What people thought was the state line in some counties wasn’t the actual state line. People have devel-oped, conveyed and improved proper-ties based on an erroneous assumption of the location of the legal boundary. After 20 years of negotiations, sur-veys, and research, the governments of the two states reached an agreement about where the state border lies. The bound-ary has been re-surveyed based on histori-cal monumentation and research back to original colonial records. Effective Janu-ary 1, 2017, some parcels (or portions of larger tracts) previously believed to be in South Carolina are now confirmed to be in North Carolina, and vice versa. The re-survey could affect properties in any of the counties along the NC/ SC boundary from Polk County east (including a portion of Polk County). Although some counties may not have very many properties that show the line incorrectly, a case-by-case determina-tion will need to be made by an attorney reviewing a property’s title. A “Notice of Affected Parcel” based on taxpayer listings has or will be record-ed in the office of the Register of Deeds of each county, along with the re-survey maps. The Notice should contain certain information concerning each parcel po-tentially affected by the boundary certifi-cation, including the following: • The recording reference for the final survey of the confirmed boundary. • The names of the record owners of the affected parcel. • The property address of the affected parcel. • A tax parcel identification number or other applicable identifier for the affected parcel used by a county tax office, if available. • A brief description of the affected parcel, if available. The Notice should be indexed in the names of all record owners of the af-fected parcels (or at least the names of the taxpayers identified in the county’s property tax rolls). Information regarding the sur-veys is available on-line at the office of the North Carolina Geodetic Sur- North Carolina/South Carolina Boundary Re-Surveyed Effective January 1, 2017 By Will Martin, NC REALTORS® Legal Counsel vey at http://www.ncgs.state.nc.us/Pages/ County-and-State-Boundaries.aspx. These surveys do not indicate owners or tracts. They only show the location of the monuments of the border found. Surveyors will have access to these sur-veys to be able to identify them on the ground when they do a survey. Broker Numbers As of January 1, 2017, there are 98,681 brokers and firms licensed by the Real Estate Commission in the following categories: Active Brokers 61,352 (Active Provisional Brokers 6,859) Inactive Brokers 26,061 (Inactive Provisional Brokers 5,850) Firms 11,268 Brokers-in-Charge 16,218 Heed this Advice About Surveys, Titles, and Transaction Planning Real estate brokers involved in the purchase or sale of property near the NC/SC state line should advise their clients to get a survey, or at least some professional location of their property in relation to the state line, if there is any question at all about whether the property has been affected by the re-sur-vey. Anyone involved with prop-erties affected by the re-survey should be sure to discuss title issues and the necessary certifications of title in detail with professionals who are knowledgeable about the many legal is-sues involved in these titles, whether the property is now all in North Carolina or is still partially in South Carolina, or vice versa. Planning for transactions involving affected properties should take place much farther in advance than usual, as such transactions may require dual title examinations, dual recordings, potential delays and very importantly may affect TRID disclosures. 10 Real Estate Bulletin February 2017 Free Publications Quantity Questions and Answers on: Fair Housing Tenant Security Deposits Condos and Townhouses Residential Subdivisions and Planned Communities Purchasing Coastal Real Estate in North Carolina Renting Residential Real Estate N.C. Military Personnel Residential Lease Termination C o m m i s s i o n P u b l i c a t i o n s How to Order: ONLINE: www.ncrec.gov (Publications page) FAX: 919-877-4227 MAIL: NC Real Estate Commission, ATTN: Publications, P. O. Box 17100, Raleigh NC 27619-7100 NAME ______________________________________ ADDRESS ____________________________________ CITY/STATE/ZIP _______________________________ TELEPHONE_______________EMAIL_____________ Please allow 7 days from receipt of order for delivery. Purchase Publications Quantity Totals Residential Square Footage Guidelines ($.65 per copy) $ Working With Real Estate Agents ($.25 per copy) $ Questions and Answers on: Home Inspections ($.25 per copy) $ Earnest Money Deposts ($.25 per copy) $ Real Estate Closings ($.25 per copy) $ Offer and Acceptance ($.25 per copy) $ Order form to PURCHASE Publications Order form for FREE Publications Purchase Publications Quantity Totals Owning Vacation Rental Property ($.25 per copy) $ Broker-in-Charge Guide ($10 per copy) $ North Carolina Real Estate License Law and Commission Rules ($4 per copy) $ Real Estate Agent Safety Guide ($.25 per copy) $ Issues and Answers ($10 per copy) $ Amount Enclosed $ How To Order: Mail or fax this form. Credit card: MasterCard or Visa only. Please do not remit cash. Online: www.ncrec.gov Select Publications on the Home page. Phone: 1-866-833-5785; Fax 1-919-833-4649 Mail to: Commission Publications, P. O. Box 28151, Raleigh, NC 27611 NAME________________________________________________ ADDRESS_____________________________________________ CITY/STATE/ZIP________________________________________ TELEPHONE___________________EMAIL__________________ NAME_________________________________________________ ADDRESS______________________________________________ CITY/STATE/ZIP_________________________________________ TELEPHONE________________EMAIL_____________________ Billing address if different from shipping address Credit card orders must be a minimum of $1.00. Signature: __________________________________________ Please allow 7 days from receipt of payment for delivery. MasterCard Visa Security Code 3-digit code on card back Exp Date Free Publications Quantity Trato Con Agentes de Bienes Raíces (Working With Real Estate Agents) Preguntas y Respuestas sobre: (Questions and Answers On:) Vivienda Justa (Fair Housing) El Depósito de Seguridad del Inquilino (Tenant Security Deposits) Alquiler de Inmuebles para Vivienda (Renting Residential Real Estate) Real Estate Licensing in North Carolina Residential Property Disclosure Statement Mineral and Oil and Gas Rights Mandatory Disclosure Statement Available Online { Real Estate Bulletin February 2017 11 2015-2016 Edition NORTH CAROLINA REAL ESTATE MANUAL The North Carolina Real Estate Manual, published by the Real Estate Commission, is a comprehensive reference addressing real estate law and brokerage practice, the North Carolina Real Estate License Law and Commission rules. It serves as the authorized textbook for the real estate broker postlicensing courses and is highly recommended for licensees, attorneys, instructors and anyone else engaged or interested in real estate law and brokerage practice. The 2015-2016 edition covers a wide variety of topics including the new Mineral and Oil and Gas form and portions of the new federal Loan Estimate and Closing Disclosure docu-ments to replace the HUD-1 and GFE as well as coverage of revisions to standard forms. The files on the Web site and on disk are “READ ONLY” and may not be printed or changed. Mailing address: North Carolina Real Estate Manual P. O. BOx 28151 Raleigh, NC 27611 eMail: manual@cesmail.com Fax: 1-866-867-3746 CustoMer serviCe: 1-866-833-5785 Order Form NORTH CAROLINA REAL ESTATE MANUAL NAME ADDRESS CITY/STATE/ZIP Telephone Email NAME ADDRESS CITY/STATE/ZIP Signature: MasterCard Visa Discover QUANTITY ITEM PRICE* TOTAL Single Manual $49.00* $___________ Additional Manuals (on same order) $44.00* $___________ Manual on CD-ROM $20.00* $___________ Manual-on-Web Subscription (Access free up to 5x; register on Web site) $20.00* $___________ *All prices include taxes, shipping and handling. Also available in digital form: The Real Estate Manual on CD-ROM provides digital, searchable files in Portable Doc-ument File format (PDF) which can be read by free Acrobat Readers across all platforms. Online subscriptions permit online access to the Manual and expire upon publication of a new edition. (Users of older computers may prefer the CD-ROM for faster load times). CD-ROM ONLINE SUBSCRIPTION TO ORDER: Online at the Commision’s Web site, by mail, or fax. Credit cards accepted are MasterCard and Visa. Shipping Address (NOT P.O. BOX) Free access to Manual on Web site up to 5X. Register on Web site. Please allow 7 days from receipt of payment for delivery. Exp Date Security Code (3-digit code on reverse side of card) MasterCard/Visa/Discover Billing Address (if different from Shipping Address) NORTH CAROLINA REAL ESTATE MANUAL 2015-2016 Edition Patrick K. Hetrick Patricia A. Moylan Larry A. Outlaw Published By The North Carolina Real Estate Commission Hetrick Moylan Outlaw 2015-2016 Edition ISBN 978-0-9704907-9-7 North Carolina Real Estate Manual North Carolina Real Estate Manual 2015-2016 Edition ©2015 North Carolina Real Estate Commission ISBN 978-0-9864465-0-4 North Carolina Real Estate Commission P. O. Box 17100 Raleigh, NC 27619-7100 www.ncrec.gov 12 Real Estate Bulletin February 2017 Penalties for violations of the Real Estate License Law and Commission rules vary depending upon the particular facts and circumstances present in each case. Due to space limitations in the Bulletin, a complete description of such facts cannot be reported in the following Disciplinary Action summaries. D isciplinary A ction Don’t Forget! Write your real estate broker license number on all agency agreements. Continued JAMES MICHAEL BANKS (Raleigh) – By Consent, the Commission reprimand-ed Mr. Banks effective January 1, 2017. The Commission found that Mr. Banks, acting as the listing agent for the sale of a single-family residence, represented to his buyer that repairs were complete when the poten-tial buyer discovered that repairs had not, in fact, been made prior to closing. WANDA T. CANADY (Wallace) – By Consent, the Commission permanently revoked the broker license of Ms. Canady effective December 14, 2016. The Com-mission found that Ms. Canady, acting as the qualifying broker and broker-in-charge of a licensed real estate firm engaged in property management, failed to provide all of the requested trust account documenta-tion requested by the Commission, failed to perform trust account reconciliations, failed to maintain a general ledger, and failed to maintain a trust account journal; that Ms. Canady could not account for all rents and security deposits received by the firm and failed to deposit all rent payments and secu-rity deposits received in cash into the trust account; and that Ms. Canady admitted to spending entrusted funds on expenses, oth-er than for which the funds were intended, which led to deficit spending and a shortage in excess of $80,000 in the trust account JOSEPH TREVOR CHERRY (Char-lotte) – By Consent, the Commission sus-pended the broker license of Mr. Cherry for a period of 24 months effective September 1, 2016. The Commission found that Mr. Cherry, acting as the broker-in-charge and qualifying broker of a licensed real estate brokerage firm, managed a property (“prop-erty A”) from which he collected from the tenant $295 extra each month in rent and $100 each month for use of the washer and dryer from the tenant without the knowl-edge of the owner landlord; that Mr. Cherry charged the owner landlord for repairs made to the dryer and did not receive approval from owner landlord for repairs exceed-ing $150, in violation of the management agreement; that Mr. Cherry also managed four properties for another landlord owner (“property B”) and spent in excess of $250 on repairs without receiving approval from landlord owner, in violation of the manage-ment agreement; that Mr. Cherry was paid twice for some repairs that were already paid; and failed to give an accounting to the landlord owner within the time required by the management agreement; that an audit discovered that Mr. Cherry failed to main-tain all records as required by Commission rules and evidence of deficit spending and comingling of funds in his firm’s trust ac-counts; and that Mr. Cherry failed to de-posit cash into a trust account within three banking days of receipt. The Commission notes that Mr. Cherry’s trust accounts are now fully funded. DOROTHY M. COLESTOCK (Mur-phy) – By Consent, the Commission sus-pended the broker license of Ms. Colestock for a period of 12 months effective Novem-ber 1, 2016. The Commission then stayed the suspension for a probation period from November 1, 2016 through October 31, 2017. The Commission found that Ms. Colestock, acting as the qualifying broker and broker-in-charge of a licensed real es-tate brokerage firm, had posting errors in the firm’s trust account software accounting system going as far back as 2006 that were never corrected; that this caused an inaccu-rate set of books which led to deficit spend-ing on at least two occasions; that Ms. Cole-stock’s firm managed both long term rentals as well as vacation rentals, yet did not main-tain a subsidiary ledger for those accounts; that no personal funds ledger was used to account for funds used to cover bank service charges; and that Ms. Colestock acted as a dual agent in one transaction, but was un-able to provide a copy of the buyer agency agreement to Commission staff. The Com-mission notes that no evidence of a shortage was found in the accounts and Ms. Cole-stock’s firm has transferred all of its remain-ing rentals to another licensed firm and that Ms. Colestock has affiliated with another licensed firm to engage solely in sales trans-actions. JONATHAN H. ELLIOT (Fayetteville) – Following a hearing, the Commission permanently revoked the broker license of Mr. Elliot effective December 1, 2016. The Commission found that Mr. Elliot, acting as broker-in-charge of a sole proprietorship, failed to respond to Letters of Inquiry sent by the Commission; that Mr. Elliot failed to provide owner ledgers for the properties he was managing, copies of cancelled checks, or a trial balance; that Mr. Elliot paid “bo-nus” checks based on 25% of the total rent payments mandated in leases to an unli-censed company as compensation for get-ting leases signed by tenants; that Mr. Elliot failed to list a property for sale for the own-er as required under the listing agreement and placed a tenant in the subject proper-ty without the knowledge of the property owner; that Mr. Elliot collected rent from the tenant monthly for over two years and placed this money in his trust account; that Mr. Elliot never disbursed this money to the property owner and the balance owed to the owners in this account ballooned to over $20,000; that Mr. Elliot did not have a property management agreement with the owner; that the owner was unaware of a ten-ant being in the property because Mr. Elliot failed to provide owner statements during the tenancy and failed to provide the owner with a copy of the lease; that checks written Real Estate Bulletin February 2017 13 Licensees Must Report Convictions Commission Rule A.0113 requires any licensee who is convicted of a misdemeanor or felony or who has disciplinary action taken against him or her by any occupational licensing board to file a report with the Real Estate Commission. The reporting requirement includes convictions for driving while impaired (“DWI”). The report must be filed within sixty (60) days of the final judgment or board action. If you have questions about this rule, please call the Commis-sion’s Regulatory Affairs Division at 919-875-3700 for more infor-mation. Your Pocket License Card is your ticket for admission to Continuing Education classes. Allow at least 10 days to process a replacement request or purchase and download a replacement immediately from the Commission’s Web site. Continued on the trust account failed to identify the subject property, property owner, and the purpose for the disbursement; that Mr. El-liot failed to maintain copies of the canceled checks and the deposit slips failed to identify the purpose for the deposit; that Mr. Elliot failed to maintain a personal funds ledger and the account lacked an audit trail; that Mr. Elliot’s previously licensed firm was ad-ministratively dissolved by the North Caro-lina Secretary of State on July 21, 2011 and that Mr. Elliot failed to notify the Commis-sion of this and the firm continued to oper-ate until October 1, 2015, when the firm’s license was cancelled by the Commission; and that Mr. Elliot declared himself broker-in- charge of a sole proprietorship under the same name as the formerly licensed firm. MITCHELL LEE EUDY (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Eudy for a period of five months effective November 1, 2016. The Commission then stayed the suspen-sion for a probationary period until March 31, 2017. The Commission found that Mr. Eudy, on May 27, 2015, entered into an Ex-clusive Right to Sell listing agreement for a property; that the listed property contained a small cemetery and Mr. Eudy was aware at the time of the listing agreement that there was a cemetery located on the property; that Mr. Eudy failed to disclose the cemetery to potential buyers of the property; that Mr. Eudy asserts that he directed the sellers to inform the buyers of the existence of the cemetery; and, the buyers assert that they were not made aware of the cemetery prior to closing. FREEDOM REALTY INC. (Murphy) – By Consent, the Commission suspended the firm license of Freedom Realty for a period of 12 months effective November 1, 2016. The Commission then stayed the suspension for a probationary period from November 1, 2016 through October 31, 2017. The Commission found that Free-dom Realty had posting errors in the trust account software accounting system going as far back as 2006 that were never cor-rected; that this caused an inaccurate set of books which led to deficit spending on at least two occasions; that Freedom Realty managed both long term rentals as well as vacation rentals, yet a subsidiary ledger for those accounts was not maintained; that no personal funds ledger was used to ac-count for funds used to cover bank service charges; and that Freedom Realty acted as a dual agent in one transaction, but was un-able to provide a copy of the buyer agency agreement to Commission staff. The Com-mission notes that no evidence of a shortage was found in the accounts and that the firm has transferred all of its remaining rentals to another licensed firm and that Broker has affiliated with another licensed firm to en-gage solely in sales transactions. CHARLES LESLIE GIEZENTANNER III (Asheville) – By Consent, the Commis-sion suspended the broker license of Mr. Giezentanner for a period of one month ef-fective January 1, 2017. The Commission found that, on June 29, 2016, Mr. Giezen-tanner was convicted of a Level 2 DWI and DWLR After Impaired Revocation Notice; that Mr. Giezentanner failed to report the conviction; and that Mr. Giezentanner failed to respond to three Letters of Inquiry. GOLDEN KEY REALTY INC d/b/a RCA REALTY (Wallace) – By Consent, the Commission permanently revoked the firm license of Golden Key Realty effec-tive December 14, 2016. The Commission found that Golden Key Realty, engaged in property management, failed to provide all of the requested trust account documenta-tion requested by the Commission, failed to perform trust account reconciliations, failed to maintain a general ledger, and failed to maintain a trust account journal; that Golden Key Realty could not account for all rents and security deposits it received and failed to deposit all rent payments and security deposits received in cash into the trust account; and that Golden Key Realty’s broker-in-charge admitted to spending en-trusted funds on expenses, other than for which the funds were intended, which led to deficit spending and a shortage in excess $80,000 in the firm’s trust account. PATRICIA OLIVIA GONZALEZ (Fayetteville) – By Consent, the Commis-sion suspended the broker license of Ms. Gonzalez for a period of 18 months effec-tive September 1, 2016. The Commission found that Ms. Gonzalez, acting as broker-in- charge and qualifying broker of her firm, failed to perform monthly reconciliations of her firm’s trust accounts and that one trust account was overdrawn twice in 2014, in-dicating a shortage; that Ms. Gonzalez was unable to produce the ledgers for individual properties and/or property owners, despite multiple requests; and that Ms. Gonzalez’ firm was administratively dissolved by the North Carolina Department of the Secre-tary of State in September 2015 and Ms. Gonzalez failed to notify the Commission. KEVIN J. MCVICKER (Durham) – By Consent, the Commission reprimanded Mr. McVicker effective December 1, 2016. The Commission found that Mr. McVicker, in 2015, was affiliated with a licensed firm for which his wife was broker-in-charge/ qualifying broker; that in August 2015, the firm and Mr. McVicker’s wife were revoked by Consent by the Commission for, among 14 Real Estate Bulletin February 2017 Commission Speakers Available Real Estate Commission staff members are available to speak to your local board, office or special group. You can re-quest a presentation relating to a specific subject or a general discussion on topics of interest to those attending. To schedule a speaker, submit the “Request for Program Presenter” form available on the Commission’s website, www. ncrec.gov. Please allow at least four weeks prior to your group’s meeting. Continued other things, failure to maintain funds in a trust account, conversion of trust monies, and failure to provide transaction records to a Commission representative; that during the investigation bank records obtained by a subpoena showed trust monies and rents were deposited into a personal account held by Mr. McVicker and his wife and that Mr. McVicker wrote checks for personal expens-es from the same account; that Mr. McVick-er submitted a new firm application, desig-nating himself as a broker-in-charge on the same day that his firm’s broker license was revoked; and that Mr. McVicker agreed to supply transaction and account records but failed to do so in a timely manner. PATRICK KEVIN MONAGHAN (Charlotte) – By Consent, the Commis-sion suspended the broker license of Mr. Monaghan for a period of four months ef-fective November 1, 2016. The Commis-sion then stayed the suspension for a proba-tionary period ending March 1, 2017. The Commission found that in May 2015 Mr. Monaghan, acting as the broker-in-charge of Northpoint Asset Management, entered into a residential property management agreement for property; that according to the agreement, the monthly rent was to be $1000; that in July 2015, Mr. Monaghan procured tenants who agreed to rent the property for $140/month and, in exchange for the low rent, perform renovations, a violation of North Carolina Landlord and Tenant Law; that the lease contained no de-scription of the work tenants were to com-plete in exchange for the lower rent; that the lease provided by Mr. Monaghan included a late fee beyond the statutory limit; that Mr. Monaghan collected a security deposit in excess of the statutory limit; that an adden-dum to the lease permitted Mr. Monaghan to use tenants’ security deposit for costs not permitted and allowed the tenant security deposit to be disbursed during the tenancy in violation of Landlord and Tenant Law; and that Mr. Monaghan failed to inform the tenants and property owner which bank held the security deposit. NORTHPOINT ASSET MANAGE-MENT LLC (Charlotte) – By Consent, the Commission suspended the firm license of Northpoint Asset Management for a pe-riod of four months effective November 1, 2016. The Commission then stayed the suspension for a probationary period end-ing March 1, 2017. The Commission found that Northpoint Asset Management in May 2015, entered into a residential prop-erty management agreement for property located in Charlotte, NC; that according to the agreement, the monthly rent was to be $1000; that in July 2015, North-point Asset Management procured tenants who agreed to rent the property for $140/ month and, in exchange for the low rent, perform renovations, a violation of North Carolina Landlord and Tenant Law; that the lease contained no description of the work tenants were to complete in exchange for the lower rent; that the lease provided by Northpoint Asset Management included a late fee beyond the statutory limit; that Northpoint Asset Management collected a security deposit in excess of the statutory limit; that an addendum to the lease per-mitted Northpoint Asset Management to use tenants’ security deposit for costs and allowed the tenant security deposit to be disbursed during the tenancy in violation of Landlord and Tenant Law; that Northpoint Asset Management failed to inform the ten-ants and property owner which bank held the security deposit. CHRISTINA L. PITZ (Surf City) – By Consent, the Commission reprimanded Ms. Pitz effective January 2, 2017. The Commission found that Ms. Pitz, acting as a listing agent, failed to obtain a copy of a septic permit to verify the number or bed-rooms allowed by the septic system despite being informed that her seller-clients did not know whether the septic system was permitted as a four-bedroom house; that the buyers closed on the house under the im-pression it was permitted as a four-bedroom house instead of a three-bedroom house; and that the buyers discovered the discrep-ancy while performing remodeling work on the house and had to purchase a septic sys-tem to accommodate four-bedroom house. The Commission noted that Ms. Pitz has reached a settlement with the buyers for an undisclosed sum. PROPERTY ADMINISTRATORS, INC. (Greensboro) – By Consent, the Real Estate Education and Recovery Fund Reimburses Victims At its December 14, 2016 meet-ing, the Commission approved a pay-ment totaling $3,100 out of the Real Estate Education and Recovery Fund to one applicant who suffered finan-cial loss due to the misconduct of Ali-cia A. Christian. By Consent, the Commission or-dered permanent revocation of the real estate license of Ms. Christian ef-fective October 15, 2014. At its October 13, 2016 meeting, the Commission approved payments of $46,006.89 to six applicants who suffered financial losses due to the misconduct of Rebecca L. Niemchak. The Commission, following a hearing, ordered the permanent re-vocation of the broker license of Re-becca L. Niemchak effective October 24, 2014. At its May 5, 2016 meeting, the Commission approved payments of $75,000 to 17 applicants who suf-fered financial losses due to the mis-conduct of Cheryl B. Wilkins. By Consent, the Commission ordered the permanent revocation of the broker license of Cheryl B. Wilkins effective November 12, 2014. Real Estate Bulletin February 2017 15 January 1, 2017. The Commission found that Mr. Tarbutton, acting as the qualifying broker and broker-in-charge of a licensed real estate brokerage firm, changed the le-gal name of the firm, but failed to notify the Commission; that from 1999 to 2016, the firm operated under a name other than the name on its license; that Mr. Tarbutton acted as the broker-in-charge of two offices, his sales office and rental management of-fice, that were not in the same physical loca-tion; that Mr. Tarbutton regularly deposited trust money belonging to others into his firm’s operating account; that Mr. Tarbut-ton did not enter or maintain proper agency agreements in both sales and property man-agement transactions; that Mr. Tarbutton failed to provide vacation rental agreements to tenants; and failed to maintain his firm’s trust account records in compliance with the Real Estate License Law and Commis-sion Rules. ROBERT CRAIG THRIFT, JR. (New Bern) – The Commission accepted the vol-untary surrender of the broker license of Mr. Thrift for a period of 10 years effective November 9, 2016. The Commission dis-missed without prejudice allegations that Mr. Thrift violated the Real Estate License Law and Commission rules. Mr. Thrift nei-ther admitted nor denied misconduct. RICHARD TOCADO (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Tocado for a peri-od of one month effective October 1, 2016. The Commission found that Mr. Tocado, in and around 2014, acted as a buyer agent in a new construction real estate transaction; that Mr. Tocado, in order to secure the transaction, offered to rebate $3,000 of his commission to the buyer-client; that Mr. Tocado disclosed the rebate to the original lender, but failed to disclose it to the second lender until the day of clos- KARYN B. SPREEMAN (Hender-sonville) – By Consent, the Commission suspended the broker license of Ms. Spree-man for the period of 18 months effective December 1, 2016. Two months of the suspension shall be active with the remain-der stayed for a probationary period from February 1, 2017 through June 1, 2018. The Commission found that Ms. Spreeman listed a vacant lot for sale under a listing agreement which expired on July 31, 2015; that on September 9, 2015, Ms. Spreeman submitted an offer to purchase the lot, on behalf of a prospective buyer, to the seller; that Ms. Spreeman told her buyer client that the seller verbally accepted the offer and sent the offer in the mail to the seller for signature; that the seller claims she never verbally accepted the offer; that on Sep-tember 8, 2015, Ms. Spreeman signed the seller’s name on a document which gave the buyer authorization to obtain septic and/or well permits on behalf of the seller; that Ms. Spreeman did not have written authoriza-tion from the seller or a power of attorney document allowing her to sign on the seller’s behalf; that the seller’s land was then clear cut and permits were pulled by the buyers; and that the seller later rejected the buyer’s offer and the company that performed the work, on the buyer’s behalf, filed a lien against seller for over $7,000. The Commis-sion notes that Ms. Spreeman has paid the lien which has now been released. KENNETH L. TARBUTTON (Blow-ing Rock) – By Consent, the Commission suspended the broker license of Mr. Tar-button for a period of 36 months effective If you are a BIC or BIC eligible, to maintain your BIC status you must take the Broker-in-Charge Update Course (BICUP) + an Elective. Do not take the General Update Course - it will not satisfy your BIC CE requirements. Continued Brokers Should Ask Closing Attorneys to Not Disburse Proceeds Without Confirming Disbursement Instructions Brokers are urged to encourage closing lawyers in each transaction not to disburse proceeds other than as specifically authorized in a written document signed by the seller. There have been instances of hackers diverting funds from real estate transactions, i.e., criminals hacked into a real estate broker’s com-puter database and monitored email traffic to learn about an impending clos-ing. They send an email to the lawyer instructing the lawyer to wire the seller’s proceeds to a bank account other than the one originally identified. That email comes from an address that looked like the broker’s. The lawyer wires the seller’s proceeds to the criminals’ account. By the time the lawyer learns of this crime, the criminals have wired the funds to a foreign bank account. Commission suspended the firm license of Property Administrators for a period of 18 months effective September 30, 2016. The Commission found that Property Adminis-trators failed to prepare monthly reconcilia-tions and failed to maintain ledgers and de-posits in full compliance with Commission rules such that a clear audit trail could not be determined; and, that an audit of both trust accounts was performed and showed overages in both accounts. RSK MOUNTAIN RESORT LLC (Blowing Rock) – By Consent, the Com-mission suspended the firm license of RSK Mountain Resort for a period of 36 months effective January 1, 2017. The Commis-sion found that RSK Mountain Resort changed its legal name, but failed to notify the Commission; that from 1999 to 2016, RSK Mountain Resort operated under a name other than the name on its license; that RSK Mountain Resort regularly depos-ited trust money belonging to others into its operating account; that RSK Mountain Resort did not enter or maintain proper agency agreements in both sales and prop-erty management transactions; that RSK Mountain Resort failed to provide vacation rental agreements to tenants; and failed to maintain its trust account records in com-pliance with the Real Estate License Law and Commission Rules. KATIE ELIZABETH SINGLETON (Surf City) – By Consent, the Commis-sion reprimanded Ms. Singleton effective October 13, 2016. The Commission found that Ms. Singleton was convicted in dis-trict court of Level III DWI on June 30, 2016, and was sen-tenced to 12 months of supervised proba-tion and required to complete 72 hours of community ser-vice. The Commission noted that Ms. Single-ton timely reported the conviction to the Commission and is in compliance with the court’s order. 16 Real Estate Bulletin February 2017 43,000 copies of this public document were printed at a cost of .219 per copy North Carolina Real Estate Commission P. O. Box 17100 Raleigh, NC 27619-7100 PRSRT STD U.S. POSTAGE PAID HICKORY, NC PERMIT NO. 104 U.PERMIT PRSRT STD U.S. POSTAGE PAID HICKORY, NC PERMIT NO. 104 U.PERMIT Scan the code below to access the Commission website from your mobile devices. **Attention** BIC’s and BIC eligible brokers! Please update your re-cord to include your cur-rent phone number. You can designate your phone number as “public” or “pri-vate.” Log on to your record at www.ncrec.gov and pro-vide your phone numbers! Broker Login ing, which would delay the closing by three days; that rather than delay closing, Mr. To-cado and the buyer-client agreed that Mr. Tocado would donate the $3,000 to the buyer-client’s favorite charity; and that af-ter closing, Mr. Tocado failed to make the agreed donation. TREVOR CHERRY REAL ESTATE LLC (Charlotte) – By Consent, the Com-mission suspended the firm license of Trevor Cherry Real Estate for a period of 24 months effective September 1, 2016. The Commis-sion then stayed the suspension for a pro-bationary period from September 1, 2016 through August 31, 2018. The Commission found that Trevor Cherry Real Estate man-aged a property (“property A”) from which it collected from the tenant $295 extra each month in rent and $100 each month for use of the washer and dryer from the tenant with-out the knowledge of the owner landlord; that Trevor Cherry Real Estate charged the owner landlord for repairs made to the dryer and did not receive approval from owner landlord for repairs exceeding $150, in violation of the management agreement; that Trevor Cherry Real Estate also managed four properties for another landlord owner (“property B”) and spent in excess of $250 on repairs without receiving approval from landlord owner, in violation of the management agreement; that Trevor Cherry Real Estate was paid twice for some repairs that were already paid; and failed to give an accounting to the landlord owner within the time required by the management agreement; that an audit discovered that Trev-or Cherry Real Estate failed to maintain all records as required by Commission rules and evidence of deficit spending and comingling of funds in its trust accounts; and that Trevor Cherry Real Estate failed to deposit cash into a trust account within three banking days of receipt. The Commission notes that Trevor Cherry Real Estate’s trust accounts are now fully funded. DAVID J. WELSH (Boone) – The Commission accepted the voluntary sur-render of the broker license of Mr. Welsh for a period one year effective December 14, 2016. The Commission dismissed without prejudice allegations that Mr. Welsh vio-lated Commission rules and the Real Estate License Law. Mr. Welsh neither admitted nor denied misconduct. MARY S. WILSON (Greensboro) – By Consent, the Commission suspended the broker license of Ms. Wilson for a period of 18 months effective September 30, 2016. The Commission then stayed the suspension on certain conditions. The Commission found that Ms. Wilson, acting as broker-in- charge of a licensed real estate brokerage firm, failed to prepare monthly reconcilia-tions and failed to maintain ledgers and de-posits in full compliance with Commission rules such that a clear audit trail could not be determined; and that an audit of both trust accounts was performed and showed overages in both accounts.
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Description
Title | Real estate bulletin |
Date | 2017-02 |
Description | Volume 47, Number 3 (February 2017) |
Digital Characteristics-A | 2.2 MB; 16 p. |
Digital Format | application/pdf |
Pres File Name-M | pubs_serial_realestatebulletin201702.pdf |
Full Text | REAL ESTATE BULLETIN N o r t h C a r o l i n a R e a l E s t a t e C o m m i s s i o n V o l u m e 4 7 • F e b r u a r y 2 0 1 7 • N u m b e r 3 NORTRTH CACARAROROLINANA REREREALAL ESTATATATATE COMMISSION ESSE QUAUAMAM VIDERI In This Issue Education Rules................................1 Patrice Willetts Appointed..............1 Corean Hamlin E&L Director............1 Check Occupancy Limits.............. 4 Reconcile Accounts Monthly......... 5 Criminal Background Checks....... 6 RESPA, Referrals, You.......................7 Education Rule Diagrams............ 8 Carolinas’ Border Re-Survey........... 9 Disciplinary Actions......................12 Patrice Willetts Appointed To Commission Patrice Willetts of Wilmington was appointed to the North Carolina Real Estate Commission on October 12, 2016 by then Governor Pat McCrory for a term ending July 31, 2018. Willetts succeeds Everett “Vic” Knight of Raleigh. A broker with The Property Shop of the Carolinas in Wilmington, Willetts, formerly from New York and with 30 years of experience as a REALTOR®, is Commission Members Reappointed In October 2016, then Governor Pat McCrory reappointed three mem-bers of the Commision for terms end-ing July 31, 2019: George Bell, Chair, of Winston-Salem; Leonard H. “Tony” Craver, Jr., of Durham; and Anna Greg-ory Wagoner of Winston-Salem. At its January 2017 meeting, the Commission adopted the proposed edu-cation reform rules. Under this rulemaking action, the 94 education rules found in Subchapters C and E will be repealed and replaced by 36 newly ad-opted rules located in the new Subchapter H - Real Estate Education. Subject to the Rules Review Commission’s approval, this rulemaking action will be effective July 1, 2017. Corean Hamlin Named Education and Licensing Director Commission Education Rules Simplified; New Subchapter H Effective July 1 By Melissa A. Vuotto, Rulemaking Coordinator The Commission’s primary intent of this rulemaking action is to eliminate re-dundant rules, create a unified subchap-ter for all educators, and incorporate many of the Commission’s Instructor Development and Improvement Task Force recommendations. The new rules are grouped into four sections within Subchapter H: • Section .0100 – General/ Defini-tions rule; • Section .0200 – Real Estate Schools; • Section .0300 – Approved Instruc-tors; and • Section .0400 – Continuing Educa-tion. By streamlining the education rules, it is the Commission’s goal to improve the understanding each rule, ease the process of searching for a particular rule, and increase the quality of real es-tate education in North Carolina. Thank you to all who attended the public hearing on December 13, 2016, The proposed education re-form rules may be reviewed on the Commission’s website: https://www. ncrec.gov/Pdfs/Rules/Education_ Reform_Rulemaking_Post.pdf. Diagrams of the organization of the current and reformed rules ap-pear on page 8 of this Bulletin. Corean E. Hamlin has been named Director of Education and Licensing for the Commission, ef-fective December 14, 2016. Hamlin joined the Commission as Edu-cation and Licensing Officer in 2014. Hamlin holds a Master’s Degree from UNC-Greensboro and the Distin-guished Real Estate Instructor (DREI) designation from the Real Estate Educa-tors Association. After a decade as a professional edu-cator in other industries, Hamlin en-tered the real estate business, joining her family’s Asheville-based real estate firm as a residential sales broker in 2003. From 2007-2014, Hamlin served as Instructor, Education Director, and Communication Director for the Ashe-ville Board of Realtors®. She taught real estate prelicensing, postlicensing, and continuing education courses at Cumb-ie and Trull School of Real Estate from 2010-2014. The primary responsibility of the Director of Education and Licensing is to plan and direct the Commission’s education, examination, and licensing programs and operations statewide. (See Education, page 3) (See Willetts, page 3) 2 Real Estate Bulletin February 2017 REAL ESTATE BULLETIN Published as a service to real estate licensees to promote a better understanding of the Real Estate License Law and Commission rules, and proficiency in real estate practice. The articles published herein shall not be reprinted or reproduced in any other publication without specific refer-ence being made to their original publication in the Com-mission’s Real Estate Bulletin. NORTH CAROLINA REAL ESTATE COMMISSION 1313 Navaho Drive P. O. Box 17100 Raleigh, North Carolina 27619-7100 Phone (919) 875-3700 www.ncrec.gov Roy Cooper, Governor COMMISSION MEMBERS George Bell, Chairman Winston-Salem Robert J. Ramseur, Jr., Vice Chairman Raleigh Cindy S. Chandler Charlotte Leonard H. “Tony” Craver, Jr. Durham Judy F. Greenhill Hickory Thomas R. Lawing, Jr. Charlotte James Sherrill Fayetteville Anna Gregory Wagoner Winston-Salem Patrice Willetts Wilmington EXECUTIVE Miriam J. Baer Executive Director Paula L. Ricard Chief Financial Officer ADMINISTRATION Wendy C. Harper Human Resource/Office Manager Jake A. Gore Chief Technology Officer Robert L. Forshaw Publications Officer EDUCATION AND LICENSING Corean E. Hamlin Director Deborah B. Carpenter Education/Examination Officer Brenda Hollings Information Services Officer Patricia A. Moylan Legal Education Officer Pamela R. Rorie Continuing Education Officer Matthew A. Wentz License Application Analyst REGULATORY AFFAIRS Janet B. Thoren Director, Legal Counsel Charlene D. Moody Assistant Director, Legal Counsel Frederick A. Moreno Deputy Legal Counsel Robert A. Patchett Associate Legal Counsel I Michael B. Gray Chief Auditor/Investigator D. Scott Schiller Financial Fraud Investigator Bart H. Allen Sr. Auditor/Investigator M. Spier Holloman Sr. Auditor/Investigator Marcia M. Waldron Auditor/Investigator Jamila G. Wilson-Davis Auditor/Investigator Jean A. Wolinski-Hobbs Auditor/Investigator Stephen L. Fussell Sr. Consumer Protection Officer Sarah E. Herman Consumer Protection Officer Glenn M. Wylie Consumer Protection Officer Peter B. Myers Information Officer Elizabeth W. Penney Information Officer Melissa A. Vuotto Rulemaking Coordinator Editor-In-Chief Miriam J. Baer Editor Robert L. Forshaw S taff U pdate Appearances People Miriam J. Baer, Executive Director, spoke to the Triangle Chapter of the Na-tional Association of Residential Proper-ty Managers and the Risk Management Committee of NC REALTORS®. Janet B. Thoren, Director, Regulatory Affairs Division and Legal Counsel, spoke to the Annual Business and and General Membership Meeting of the Outer Banks Association of REALTORS®. Frederick A. Moreno, Deputy Le-gal Counsel, spoke to the Greenville- Pitt Association of REALTORS®. Sarah E. Herman, Consumer Pro-tection Officer, spoke to the Allen Tate Company in Charlotte. Glenn W. Wylie, Consumer Pro-tection Officer, spoke at the Property Management Seminar and to the gen-eral membership of the Fayetteville Re-gional Association of REALTORS®. Peter B. Myers, Information Of-ficer, spoke to the Albemarle Area As-sociation of REALTORS®, Century 21 Patriot in Fayettetille, the Cleveland County Association of REALTORS®, the Greensboro Regional REALTOR® Association, the Harnett Council of REALTORS®, Trademark Residential in Raleigh, and Weichert REALTORS® - Team Metro in Hickory. Elizabeth W. Penney, Information Officer, spoke to the Central Carolina Association of REALTORS®. Miriam Baer Elected ARELLO® President Miriam J. Baer, Executive Director of the Commission, has been elected President of the Association of Real Estate License Law Officials (ARELLO® for a one-year term beginning in January 2017. ARELLO® is an international organization dedicated to promoting better administration and enforcement of real estate license and regulatory laws by its members. During her 29 years with the Commission, Baer held numerous positions with ARELLO®, including Senior District Vice Presi-dent, member of the Board of Directors, and Chair of various committees. ARELLO® membership is organized into five districts with four com-prised of the 50 states, U.S. territories, Bahamas and Bermuda, and Canadian provinces and one of members from Europe, Africa, Asia, Aus-tralia, and the Far East. Working committees, the Board of Directors, and the Executive Com-mittee carry out the organization’s mission to support jurisdictions in the administration and enforcement of real estate license laws and to pro-mote excellence in real estate regulation. Baer is the fifth person affiliated with the Commission to serve as President of ARELLO®. Mary Frances Whitley, former Director of Admin-istration, served as President in 2007; Phillip T. Fisher, former Executive Director, in 1991; A. P. “Red” Carlton, former Commission member and Chair, in 1985; and Joseph Schweidler, Commission Secretary-Trea-surer, in 1972. Real Estate Bulletin February 2017 3 February 15-16 March 15-16 April 12-13 May 10-11 June 14-15 All meetings, unless otherwise noted, begin at 9:00 a.m. and are held in Raleigh in the Commission’s Conference Room at 1313 Navaho Drive (27609). Occasionally, circumstances necessitate changes in meeting times and locations. C alendar C ommission Broker-in-Charge and Basic Trust Account Procedures Courses Register online at the Commission Web site, www.ncrec.gov, under Education/Course Registration. Broker-in-Charge Course (Two days) Day 1: 1 - 5 p.m.; Day 2: 8:30 a.m. - 5:30 p.m. Asheville Western Carolina University Biltmore Park February 21-22 May 16-17 Kannapolis NC Research Campus, Kannapolis March 1-2 April 18-19 May 22-23 Greensboro Deep River Event Center April 5-6 Raleigh McKimmon Center February 13-14 March 21-22 May 3-4 June 5-6 Wilmington Best Western Coastline Center May 8-9 Basic Trust Account Procedures (Commission Offices, Raleigh) (All classes 1 - 5 p.m.) Raleigh Commission Offices 1313 Navaho Drive, Raleigh February 13 April 10 June 7 See Commission Web site to confirm course dates. a former president of the Wilmington Regional Association of REALTORS® and the North Carolina Association of REALTORS®. She has been a member of the Wilmington Board of Adjustment and currently serves on the City of Wilm-ington/ UNCW Community Relations Task Force. Willetts is an approved instruc-tor for the North Carolina Real Estate Commission and for the National As-sociation of REALTORS®. A past president of the Wilming-ton Rotary Club, she was active with the Honor Flight program that works to take WWII Veterans to Washing-ton, DC, to visit their memorial and Paws4people, which provides service dogs to veterans and children with med-ical needs. The North Carolina Real Estate Commission is responsible for the regu-lation of approximately 100,000 real estate brokers and and firms in the state. and submitted written comments. The Commission considered comments and rule revisions at its meeting on January 18, 2017. Revisions are indicated at www.ncrec.gov under ‘Licensing Law and Rule Changes.’ If you would like to receive notifications of any rulemaking proceeding, you can sign up at www. ncrec.gov/Home/Subscribe or by con-tacting Melissa A. Vuotto, Commission Rulemaking Coordinator. Willetts (Continued from page 1) Education (Continued from page 1) Follow us on 4 Real Estate Bulletin February 2017 Each year, the Commission receives numerous com-plaints related to various types of misrepresentation by brokers. One common type of mis-representation involves overstating the number of bedrooms or allowed occu-pancy limits of properties, whether they are being advertised for sale or for rent. Either way, a broker’s advertisement must NOT overstate or exceed the allowed limits and design parameters of the property’s sewage disposal system or oc-cupancy permitted by the local municipality. In other words, be sure to check the limits imposed by the septic permit, specifically the num-ber of bedrooms the septic permit al-lows, and occupancy limits of the local municipality. When residential properties are built and served by on-site septic systems, the local permit department typically evalu-ates the site and determines the maxi-mum number of bedrooms allowed based on the design of the system and the land’s ability to percolate waste-water into the ground. That’s why the evaluation was historically referred to as a “perc” test. The results of the test de-termine the maximum number of bed-rooms allowed on the site. Brokers must be aware of both bed-room and occupancy limitations in the sale, resale, and rental of properties with on-site sewage disposal systems. The Real Estate Commission expects all brokers to possess the skills and knowl-edge to accurately represent facts about such properties regarding the number of bedrooms and/or maximum occupan-cy. The septic permit generally can be checked by making a phone call to the local permit department or by check-ing the department’s website. Checking the permit is especially important when there has been an addition or remodel to the property to increase the original number of bedrooms. A broker should not assume permits were issued for the construction. If the actual n u m b e r of bed-rooms in the property exceeds the num-ber of bedrooms allowed on the septic permit, the listing broker may NOT represent the dwelling as having any more bedrooms than are indicated on the septic permit, even if there is a dis-claimer made. Many municipalities have occupan-cy limits for residential dwellings. For properties being advertised for rent, the occupancy level is generally calculated by multiplying the number of bedrooms on the septic permit by two, based on a maximum of two occupants per bed-room. The maximum is, of course, cal-culated regardless of the actual number of beds the landlord might have set up inside the dwelling. Therefore, claiming a three-bedroom property “sleeps 12” because it has six sets of bunk beds is a misrepresentation if the local municipal-ity limits occupancy to two persons per bedroom. If the licensee overstates the maximum occupancy in a rental home, the tenants might over-occupy the dwell-ing and overload the septic system, caus-ing the system to fail. Such system fail-ure could result in not only the contami-nation of surrounding groundwater but also the potential condemnation of the property, not to mention costly repairs that would have to be made by the property owner. Brokers must take rea-sonable steps to discover and disclose material facts and to ensure everything being adver-tised is correct, including the sep-tic information. That means check-ing the number of bedrooms on the permit and calculating the maximum occupancy based municipality require-ments. Buyer’s agents should also be alert to problems and red flags related to the septic system and septic permit, and whether the imposed limits match the actual number of bedrooms in the dwelling. It might be necessary for the buyer’s agent to verify the information advertised by the listing agent, and to therefore potentially alert the buyer cli-ent of problems. In some cases, the permit depart-ment might not keep records perma-nently or the records might not be available for other reasons. In that case, it is reasonable to advertise based on the existing number of bedrooms but with the disclosure that the permit records are not available and therefore certain assumptions have been made by the listing agent. Both listing and buyer agents should be able to explain to their clients the value of obtaining a septic permit and what information such per-mits provide. Disclosures must always be made so that the potential buyer is made aware of material facts before the potential buyer makes an offer. CAVEAT: Real Estate License Law prohibits misrepresentation, omission, or concealment of material facts; a course of misrepresentation through false ad-vertising; and improper, dishonest, or fraudulent conduct. Willful or negligent misrepresentation of the occupancy de-sign limits of a property’s on-site sewage disposal system violates the Real Estate License Law and may result in disciplin-ary action by the Commission. Check Allowed Occupancy Limits Before Advertising Property By Peter B. Myers, Information Officer Real Estate Bulletin February 2017 5 I f you keep any funds related to a real estate transaction, an easy way to make some peace in your life is to reconcile your trust ac-count records on a monthly basis. While many see this as a daunting task, once the process is set up and com-pleted properly, it does not need to be difficult or time consuming. However, reconciling does need to be a priority. There are so many seemingly mundane tasks in our life that, if ignored, lead to large and costly problems. If you don’t brush your teeth, you have pain and costly dental bills (or worse); if you don’t ser-vice your car, the repairs can be astronomi-cal; if you don’t balance (recon-cile) your Trust Account on a regular basis, the result can be missing client/tenant funds, the loss of your real estate license, and even criminal charges. So begin with the basics: Step 1 is to reconcile your bank statement to your Trust Account or your ‘Books’; this might be your general ledger cash account, your trust account journal, a check register, or even your checkbook for your trust account. Stated simply, you are resolving differences between the bank and your Books: errors (yours or the bank’s), bank charges or inter-est earned, and timing differences. To minimize timing differences, always use the bank statement ending date, ide-ally, the last day of the month, as your cut-off date for your Books. This is the same process used to balance a personal checkbook. Always begin the process by marking (or ‘ticking’) each cleared item either by hand or using software. You can’t skip this first step of checking each matching item on your Books and each matching item on your bank statement. All un-ticked entries are your adjustments (i.e., your reconciling items). Post interest as a monthly report card on the state of your accounting records. With the pos-sible exception of credit card processing fee issues or large high volume firms, if your bank reconciliation process is dif-ficult, chances are good that improve-ments are needed in your accounting. Key Points • The only way to ensure that a suffi-cient balance of funds is on hand to cover your client liability is to rec-oncile on a monthly basis. Retain a worksheet for each monthly r e c o n c i l i a - tion showing the balancing of the Bank Statement, the Books (the cash account), and the Property Trial Balance. • While not an NCREC re-quirement, an important best practice is to perform this three way reconciliation within 48 hours of the receipt of your bank state-ment. There will be fewer reconciling items; errors and/or missing monies, if any, will be identified quickly. • For property management companies handling vacation rentals, there is a fourth step of reconciling the subsid-iary ledgers to the property (or own-er) ledgers. • If you aren’t already performing this reconciliation, start today. If you need an extra incentive, just read ‘the back of the Bulletin.’ • The broker in charge is responsible for the safeguarding of trust monies. While the reconciliation and book-keeping can be delegated, the fidu-ciary responsibility remains with the BIC: remember, ‘The Buck Stops with the BIC.’ • The Commission offers a Basic Trust Account Procedures Course mul-tiple times throughout the year; go to www.ncrec.gov to view the class schedule and register online. earned, bank charges, and other recon-ciling items to your Books, then adjust the bank statement balance for bank errors (if any). If all reconciling items haves been addressed (and your begin-ning bank balance was reconciled to the Books), this formula will be correct: Ending Bank Balance + Deposits in Transit – Outstanding Checks = Your Book Balance. Once the bank statement has been reconciled to the Books, you are ready for step 2, which is balancing the reconciled figures from Step 1 to the Property Trial Balance (this is your client liability bal-ance). The Property Trial Balance item-izes whose funds you are holding; that is, the monies being held in trust belonging to other people. It is an accounting of every dollar in the Trust Account by the tenant or client; this is a critical report since every dollar held in a Trust Account needs to be identifiable by owner. The Property Trial Balance is created by list-ing of each of your property (or owner) ledgers and their month-end balance (as-suming month-end is the cut-off). As long as reconciliations are being performed monthly, it will be only the current month’s transactions (or prior period adjustments, if any) that need to be reviewed to locate discrepancies. If reconciliations have not been per-formed in the past, the first reconcili-ation could be a long process, but it is essential to have this reconciliation on file (as required by Real Estate Commis-sion Rule A.0117 (e)). If you want an easier – or even seam-less – reconciliation, improve the record keeping. Think of bank reconciliation rec·on·cile: to make peace, adjust Reconcile Trust Accounts Mo n t h ly By Marcia M. Waldron, Auditor/Investigator 6 Real Estate Bulletin February 2017 Diligent property managers of-ten run criminal background checks on prospective ten-ants before allowing them to lease a landlord’s property. In April 2016, HUD issued guidance on how the Fair Housing Act (“the Act”) impacts the use of such a background check by all pro-viders of housing, including property managers. When designing a process for screening tenants, it is important for brokers to consider this guidance and how the use of such background checks might violate fair housing laws. Before getting into the HUD guide-lines, there are a few terms brokers should recognize and understand. The Act includes the following seven pro-tected classes: race, color, religion, na-tional origin, sex, disability, and familial status. A landlord or property manager may not discriminate against anyone in one or more of the protected classes. Another term, “disparate impact”, is of-ten used in housing discrimination cas-es and refers to a policy or practice that is neutral on its face, but its application actually has a discriminatory impact on a protected class. The use of a criminal background check as part of a tenant screening process seems to be a neutral process as long as it is required of all potential tenants, not just certain ones selected by the landlord or property manager. However, HUD has determined that due to higher than average incarcera-tion rates among certain races relative to their percentage of the total popu-lation, and when compared to incar-ceration rates of other races, the use of criminal background checks to deny housing may actually cause a disparate impact on certain races and therefore be discriminatory. What does all of this mean for a landlord or property manager? First, criminal background checks should only be used for a non-discriminatory business objective, and there cannot be an alternative to the background check that is less discriminatory. There should be some evidence that the background checks actually accomplish the goal. Does a refusal to rent to individuals with criminal convictions actually mean fewer criminal acts or property destruc-tion in the properties being managed? A blanket prohibition against anyone with any type criminal record likely would not survive a charge of discrimination. There are a couple of exceptions. The Fair Housing Act specifically states that landlords do not have to make housing available to persons with convictions for the manufacture or distribution of controlled substances. Just remember, though, other drug-related convictions are not specifically exempt from fair housing requirements. In addition, project-based HUD subsidized proper-ties must prohibit anyone subject to a lifetime registration requirement under a state government sex offender registra-tion program. For anything outside the excep-tions, HUD suggests that landlords and property managers should consider the following factors when using criminal background checks for prospective ten-ants: • Do not consider charges or arrests that did not result in conviction. Arrest records should not be used as a basis for denying an applicant for housing. Such a record does not indicate that the applicant actually engaged in any criminal activity. Remember - inno-cent until proven guilty. • Do not have a blanket policy against renting to anyone with any type of criminal conviction. Explain to landlord-clients the dangers of such a policy and advise them to use a more tailored approach. • Consider the type of conviction. Look at the nature and severity of each conviction. A shoplifting conviction should not carry the same weight in a housing decision as a conviction for distributing cocaine. While fish-ing without a license is not good, an applicant participating in that type of activity will likely be a lesser risk to residents and property than some-one selling drugs, which often brings more dangerous people and illegal drugs into the neighborhood. • Consider the timing of the convic-tion. How long ago did the event happen and how long ago was the conviction? Research tends to show that the likelihood that a person with a prior criminal conviction will com-mit another offense decreases over time. HUD offers no insight into how long might be a reasonable pe-riod to consider, so consider a reason-able amount of time that you feel you can defend if challenged. • Consider each offense individually. Create an assessment plan that is fair and takes into account mitigating fac-tors such as the surrounding events, the age of the individual at the time, rehabilitation efforts, and the rental history of the individual. In other words, each instance should be re-viewed on a case-by-case basis and narrowly tailor any refusals. As a property manager, you have a duty to discuss these issues with your landlord clients and create a program that will help keep you and your clients out of trouble and will allow all housing applicants fair access to available hous-ing. To see the HUD guidelines in full, use the link below. https://portal.hud.gov/hudportal/ documents/huddoc?id=HUD_OGC-GuidAppFHAStandCR. pdf HUD Issues Guidance on Use of Criminal Background Checks By Janet B. Thoren, Legal Counsel Real Estate Bulletin February 2017 7 A pest control company so-licits real estate brokers to join what they refer to as a “Preferred Broker Pro-gram.” Among other listed benefits of becoming a Preferred Broker, the com-pany offers all broker participants quar-terly pest control services at their per-sonal homes at no charge. In order to receive the free pest control, the broker must refer their buyer clients to the pest control company for the completion of lender-required pest inspections. The question posed to the Commis-sion’s legal staff was whether this type of program is in violation of the Real Estate Settlement Procedures Act (RE-SPA). RESPA prohibits kickbacks and unearned fees in any real estate transac-tion involving a federally related mort-gage loan. The kickback provision is generally referred to as RESPA’s “Sec-tion 8.” Section 8 prohibits anyone, in-cluding real estate brokers, from “… accept[ing] any fee, kickback, or thing of value…” as “…part of, a real estate settlement service involving a federally related mortgage loan…” 12 U.S. Code Chapter 27 § 2607(a). A “thing of value” is any payment, advance, funds, loan, service, or other consideration with more than nominal value. “RESPA also defines the term “Set-tlement service” as any service provided in connection with a real estate settle-ment for which the buyer or seller will pay. These services include, but are not limited to, the following: • title searches, • title examinations, • the provision of title certificates, • title insurance, • services rendered by an attorney, • the preparation of documents, • property surveys, • the rendering of credit reports or appraisals, • pest and fungus inspections, • services rendered by a real estate agent or broker, • the origination of a federally relat-ed mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans), and • the handling of the processing, and closing or settlement. When a lender requires a buyer to have a pest inspection as part of the loan qualification process, the inspection is considered a settlement service. On the other hand, if a seller independently chooses to have a pest inspection as part of the listing process, and pays for that service separately from the settlement process, it is not related to the real es-tate settlement and is not considered a settlement service. If a broker receives a quarterly pest control from the pest control company at no cost, a service that would typi-cally have an associated cost, they have received a “thing of value.” And if that broker receives that thing of value for referring a client to the pest control company to do a lender-required pest inspection, there is very likely a RESPA violation. Even if the broker is referring a cli-ent to the pest control company for ser-vices unrelated to a closing and there is no apparent problem with RESPA, the broker must fully disclose their arrange-ment with the pest control company to their client per Commission Rule A .0109. As you can see from the example above, whether a referral is prohibited under RESPA depends greatly on the specific transaction. If you are con-fronted with a business referral pro-gram, use the following fill-in-the-blank sentence as a test to determine whether the program may be in violation of RESPA: As part of this program, I will receive _________, which will enrich or benefit me or my firm, in exchange for re-ferring clients to _________ for services related to a real estate settlement. If you can fill in these blanks, the safest course is to consider the program a no-go. RESPA Referrals You By Sarah E. Herman Consumer Protection Officer ...whether a referral is prohibited under RESPA depends greatly on the specific transaction. 8 Real Estate Bulletin February 2017 Subchapter 58C Prelicensing Education C .0100 Schools 7 Rules C .0200 Private Schools 20 Rules C .0300 Pre/Post Courses 12 Rules C .0600 Pre/Post Instructors 8 Rules Current Education Rules Subchapter 58E Continuing Education E .0100 Update Course 5 Rules E .0200 Update Course Instructors 6 Rules E .0300 Elective Courses 10 Rules E .0400 General Sponsor Requirements 11 Rules E .0500 Course Operational Requirements 15 Rules Subchapter 58H Real Estate Education H .0100 General 1 Rule Definitions H .0200 Schools 15 Rules Private Schools Public Schools Prelicensing Courses Postlicensing Courses H .0300 Instructors 6 Rules Prelicensing Instructors Postlicensing Instructors Update Course Instructors H .0400 Continuing Education 14 Rules Sponsors Elective CE Instructors Elective CE Courses Update Courses Proposed Education Rules Reorganization of Education Reform Rules The 94 Commission rules relating to education in Subschapters C and E of the Administrative Code are being replaced by 36 rules in a new Subchapter H adopted by the Commission at its January meeting. The reform and reorga-nization are subject to Rules Commission Review approval and, if approved, take effect July 1, 2017. As shown in the lower diagram, the rules are grouped under four sections: General, Schools, Instructors, and Continuing Education. GENUP, BICUP Topics Include Radon, Property Management Property management, radon, and protecting confidential con-sumer information are among the topics for the General Update Course (GENUP) and the Broker-in- Charge Update Course (BI-CUP) for the 2017-2018 license year beginning July 1. GENUP Property Management – changes in the Vacation Rental Act and the Landlord/Tenant statutes; HUD guidelines con-cerning use of criminal records in leasing; duties of a broker/ owner (“unintended property manager”); and surcharges paid to brokers on service/repairs. Radon – in conjunction with the North Carolina Radon Pro-gram of the Department of Health and Human Services (DHHS). Protecting Confidential Con-sumer Information – broker’s duty to protect client/consumer confi-dential information; identity theft; scam alerts; use of email; Craig’s List; etc. License Law and Rule Updates - application and reinstatement fee increases and rules relating to registering assumed names and delivery of instruments, and Consumer Finance Protection Bureau updates including the release of closing disclosures to brokers. BICUP All GENUP topics plus three-way trust account reconcilia-tion, BIC duty to supervise, and breaking issues and updates. Real Estate Bulletin February 2017 9 NOTE: Much of the following in-formation has been taken from a memo from the Real Property Section of the NC Bar Association and the NC Land Title Association. The full memo is available on the Bar Association’s website and may be viewed at http://www.ncbar.org/me-dia/ 727134/nc_sc_boundarymemono-vember2016. pdf. In 1995, North and South Caro-lina created a Joint Boundary Commission to research and tweak the 334-mile border between them. The original border was estab-lished in the 1700s, but over many de-cades, the landmarks for the original boundary have disappeared or become corrupted. What people thought was the state line in some counties wasn’t the actual state line. People have devel-oped, conveyed and improved proper-ties based on an erroneous assumption of the location of the legal boundary. After 20 years of negotiations, sur-veys, and research, the governments of the two states reached an agreement about where the state border lies. The bound-ary has been re-surveyed based on histori-cal monumentation and research back to original colonial records. Effective Janu-ary 1, 2017, some parcels (or portions of larger tracts) previously believed to be in South Carolina are now confirmed to be in North Carolina, and vice versa. The re-survey could affect properties in any of the counties along the NC/ SC boundary from Polk County east (including a portion of Polk County). Although some counties may not have very many properties that show the line incorrectly, a case-by-case determina-tion will need to be made by an attorney reviewing a property’s title. A “Notice of Affected Parcel” based on taxpayer listings has or will be record-ed in the office of the Register of Deeds of each county, along with the re-survey maps. The Notice should contain certain information concerning each parcel po-tentially affected by the boundary certifi-cation, including the following: • The recording reference for the final survey of the confirmed boundary. • The names of the record owners of the affected parcel. • The property address of the affected parcel. • A tax parcel identification number or other applicable identifier for the affected parcel used by a county tax office, if available. • A brief description of the affected parcel, if available. The Notice should be indexed in the names of all record owners of the af-fected parcels (or at least the names of the taxpayers identified in the county’s property tax rolls). Information regarding the sur-veys is available on-line at the office of the North Carolina Geodetic Sur- North Carolina/South Carolina Boundary Re-Surveyed Effective January 1, 2017 By Will Martin, NC REALTORS® Legal Counsel vey at http://www.ncgs.state.nc.us/Pages/ County-and-State-Boundaries.aspx. These surveys do not indicate owners or tracts. They only show the location of the monuments of the border found. Surveyors will have access to these sur-veys to be able to identify them on the ground when they do a survey. Broker Numbers As of January 1, 2017, there are 98,681 brokers and firms licensed by the Real Estate Commission in the following categories: Active Brokers 61,352 (Active Provisional Brokers 6,859) Inactive Brokers 26,061 (Inactive Provisional Brokers 5,850) Firms 11,268 Brokers-in-Charge 16,218 Heed this Advice About Surveys, Titles, and Transaction Planning Real estate brokers involved in the purchase or sale of property near the NC/SC state line should advise their clients to get a survey, or at least some professional location of their property in relation to the state line, if there is any question at all about whether the property has been affected by the re-sur-vey. Anyone involved with prop-erties affected by the re-survey should be sure to discuss title issues and the necessary certifications of title in detail with professionals who are knowledgeable about the many legal is-sues involved in these titles, whether the property is now all in North Carolina or is still partially in South Carolina, or vice versa. Planning for transactions involving affected properties should take place much farther in advance than usual, as such transactions may require dual title examinations, dual recordings, potential delays and very importantly may affect TRID disclosures. 10 Real Estate Bulletin February 2017 Free Publications Quantity Questions and Answers on: Fair Housing Tenant Security Deposits Condos and Townhouses Residential Subdivisions and Planned Communities Purchasing Coastal Real Estate in North Carolina Renting Residential Real Estate N.C. Military Personnel Residential Lease Termination C o m m i s s i o n P u b l i c a t i o n s How to Order: ONLINE: www.ncrec.gov (Publications page) FAX: 919-877-4227 MAIL: NC Real Estate Commission, ATTN: Publications, P. O. Box 17100, Raleigh NC 27619-7100 NAME ______________________________________ ADDRESS ____________________________________ CITY/STATE/ZIP _______________________________ TELEPHONE_______________EMAIL_____________ Please allow 7 days from receipt of order for delivery. Purchase Publications Quantity Totals Residential Square Footage Guidelines ($.65 per copy) $ Working With Real Estate Agents ($.25 per copy) $ Questions and Answers on: Home Inspections ($.25 per copy) $ Earnest Money Deposts ($.25 per copy) $ Real Estate Closings ($.25 per copy) $ Offer and Acceptance ($.25 per copy) $ Order form to PURCHASE Publications Order form for FREE Publications Purchase Publications Quantity Totals Owning Vacation Rental Property ($.25 per copy) $ Broker-in-Charge Guide ($10 per copy) $ North Carolina Real Estate License Law and Commission Rules ($4 per copy) $ Real Estate Agent Safety Guide ($.25 per copy) $ Issues and Answers ($10 per copy) $ Amount Enclosed $ How To Order: Mail or fax this form. Credit card: MasterCard or Visa only. Please do not remit cash. Online: www.ncrec.gov Select Publications on the Home page. Phone: 1-866-833-5785; Fax 1-919-833-4649 Mail to: Commission Publications, P. O. Box 28151, Raleigh, NC 27611 NAME________________________________________________ ADDRESS_____________________________________________ CITY/STATE/ZIP________________________________________ TELEPHONE___________________EMAIL__________________ NAME_________________________________________________ ADDRESS______________________________________________ CITY/STATE/ZIP_________________________________________ TELEPHONE________________EMAIL_____________________ Billing address if different from shipping address Credit card orders must be a minimum of $1.00. Signature: __________________________________________ Please allow 7 days from receipt of payment for delivery. MasterCard Visa Security Code 3-digit code on card back Exp Date Free Publications Quantity Trato Con Agentes de Bienes Raíces (Working With Real Estate Agents) Preguntas y Respuestas sobre: (Questions and Answers On:) Vivienda Justa (Fair Housing) El Depósito de Seguridad del Inquilino (Tenant Security Deposits) Alquiler de Inmuebles para Vivienda (Renting Residential Real Estate) Real Estate Licensing in North Carolina Residential Property Disclosure Statement Mineral and Oil and Gas Rights Mandatory Disclosure Statement Available Online { Real Estate Bulletin February 2017 11 2015-2016 Edition NORTH CAROLINA REAL ESTATE MANUAL The North Carolina Real Estate Manual, published by the Real Estate Commission, is a comprehensive reference addressing real estate law and brokerage practice, the North Carolina Real Estate License Law and Commission rules. It serves as the authorized textbook for the real estate broker postlicensing courses and is highly recommended for licensees, attorneys, instructors and anyone else engaged or interested in real estate law and brokerage practice. The 2015-2016 edition covers a wide variety of topics including the new Mineral and Oil and Gas form and portions of the new federal Loan Estimate and Closing Disclosure docu-ments to replace the HUD-1 and GFE as well as coverage of revisions to standard forms. The files on the Web site and on disk are “READ ONLY” and may not be printed or changed. Mailing address: North Carolina Real Estate Manual P. O. BOx 28151 Raleigh, NC 27611 eMail: manual@cesmail.com Fax: 1-866-867-3746 CustoMer serviCe: 1-866-833-5785 Order Form NORTH CAROLINA REAL ESTATE MANUAL NAME ADDRESS CITY/STATE/ZIP Telephone Email NAME ADDRESS CITY/STATE/ZIP Signature: MasterCard Visa Discover QUANTITY ITEM PRICE* TOTAL Single Manual $49.00* $___________ Additional Manuals (on same order) $44.00* $___________ Manual on CD-ROM $20.00* $___________ Manual-on-Web Subscription (Access free up to 5x; register on Web site) $20.00* $___________ *All prices include taxes, shipping and handling. Also available in digital form: The Real Estate Manual on CD-ROM provides digital, searchable files in Portable Doc-ument File format (PDF) which can be read by free Acrobat Readers across all platforms. Online subscriptions permit online access to the Manual and expire upon publication of a new edition. (Users of older computers may prefer the CD-ROM for faster load times). CD-ROM ONLINE SUBSCRIPTION TO ORDER: Online at the Commision’s Web site, by mail, or fax. Credit cards accepted are MasterCard and Visa. Shipping Address (NOT P.O. BOX) Free access to Manual on Web site up to 5X. Register on Web site. Please allow 7 days from receipt of payment for delivery. Exp Date Security Code (3-digit code on reverse side of card) MasterCard/Visa/Discover Billing Address (if different from Shipping Address) NORTH CAROLINA REAL ESTATE MANUAL 2015-2016 Edition Patrick K. Hetrick Patricia A. Moylan Larry A. Outlaw Published By The North Carolina Real Estate Commission Hetrick Moylan Outlaw 2015-2016 Edition ISBN 978-0-9704907-9-7 North Carolina Real Estate Manual North Carolina Real Estate Manual 2015-2016 Edition ©2015 North Carolina Real Estate Commission ISBN 978-0-9864465-0-4 North Carolina Real Estate Commission P. O. Box 17100 Raleigh, NC 27619-7100 www.ncrec.gov 12 Real Estate Bulletin February 2017 Penalties for violations of the Real Estate License Law and Commission rules vary depending upon the particular facts and circumstances present in each case. Due to space limitations in the Bulletin, a complete description of such facts cannot be reported in the following Disciplinary Action summaries. D isciplinary A ction Don’t Forget! Write your real estate broker license number on all agency agreements. Continued JAMES MICHAEL BANKS (Raleigh) – By Consent, the Commission reprimand-ed Mr. Banks effective January 1, 2017. The Commission found that Mr. Banks, acting as the listing agent for the sale of a single-family residence, represented to his buyer that repairs were complete when the poten-tial buyer discovered that repairs had not, in fact, been made prior to closing. WANDA T. CANADY (Wallace) – By Consent, the Commission permanently revoked the broker license of Ms. Canady effective December 14, 2016. The Com-mission found that Ms. Canady, acting as the qualifying broker and broker-in-charge of a licensed real estate firm engaged in property management, failed to provide all of the requested trust account documenta-tion requested by the Commission, failed to perform trust account reconciliations, failed to maintain a general ledger, and failed to maintain a trust account journal; that Ms. Canady could not account for all rents and security deposits received by the firm and failed to deposit all rent payments and secu-rity deposits received in cash into the trust account; and that Ms. Canady admitted to spending entrusted funds on expenses, oth-er than for which the funds were intended, which led to deficit spending and a shortage in excess of $80,000 in the trust account JOSEPH TREVOR CHERRY (Char-lotte) – By Consent, the Commission sus-pended the broker license of Mr. Cherry for a period of 24 months effective September 1, 2016. The Commission found that Mr. Cherry, acting as the broker-in-charge and qualifying broker of a licensed real estate brokerage firm, managed a property (“prop-erty A”) from which he collected from the tenant $295 extra each month in rent and $100 each month for use of the washer and dryer from the tenant without the knowl-edge of the owner landlord; that Mr. Cherry charged the owner landlord for repairs made to the dryer and did not receive approval from owner landlord for repairs exceed-ing $150, in violation of the management agreement; that Mr. Cherry also managed four properties for another landlord owner (“property B”) and spent in excess of $250 on repairs without receiving approval from landlord owner, in violation of the manage-ment agreement; that Mr. Cherry was paid twice for some repairs that were already paid; and failed to give an accounting to the landlord owner within the time required by the management agreement; that an audit discovered that Mr. Cherry failed to main-tain all records as required by Commission rules and evidence of deficit spending and comingling of funds in his firm’s trust ac-counts; and that Mr. Cherry failed to de-posit cash into a trust account within three banking days of receipt. The Commission notes that Mr. Cherry’s trust accounts are now fully funded. DOROTHY M. COLESTOCK (Mur-phy) – By Consent, the Commission sus-pended the broker license of Ms. Colestock for a period of 12 months effective Novem-ber 1, 2016. The Commission then stayed the suspension for a probation period from November 1, 2016 through October 31, 2017. The Commission found that Ms. Colestock, acting as the qualifying broker and broker-in-charge of a licensed real es-tate brokerage firm, had posting errors in the firm’s trust account software accounting system going as far back as 2006 that were never corrected; that this caused an inaccu-rate set of books which led to deficit spend-ing on at least two occasions; that Ms. Cole-stock’s firm managed both long term rentals as well as vacation rentals, yet did not main-tain a subsidiary ledger for those accounts; that no personal funds ledger was used to account for funds used to cover bank service charges; and that Ms. Colestock acted as a dual agent in one transaction, but was un-able to provide a copy of the buyer agency agreement to Commission staff. The Com-mission notes that no evidence of a shortage was found in the accounts and Ms. Cole-stock’s firm has transferred all of its remain-ing rentals to another licensed firm and that Ms. Colestock has affiliated with another licensed firm to engage solely in sales trans-actions. JONATHAN H. ELLIOT (Fayetteville) – Following a hearing, the Commission permanently revoked the broker license of Mr. Elliot effective December 1, 2016. The Commission found that Mr. Elliot, acting as broker-in-charge of a sole proprietorship, failed to respond to Letters of Inquiry sent by the Commission; that Mr. Elliot failed to provide owner ledgers for the properties he was managing, copies of cancelled checks, or a trial balance; that Mr. Elliot paid “bo-nus” checks based on 25% of the total rent payments mandated in leases to an unli-censed company as compensation for get-ting leases signed by tenants; that Mr. Elliot failed to list a property for sale for the own-er as required under the listing agreement and placed a tenant in the subject proper-ty without the knowledge of the property owner; that Mr. Elliot collected rent from the tenant monthly for over two years and placed this money in his trust account; that Mr. Elliot never disbursed this money to the property owner and the balance owed to the owners in this account ballooned to over $20,000; that Mr. Elliot did not have a property management agreement with the owner; that the owner was unaware of a ten-ant being in the property because Mr. Elliot failed to provide owner statements during the tenancy and failed to provide the owner with a copy of the lease; that checks written Real Estate Bulletin February 2017 13 Licensees Must Report Convictions Commission Rule A.0113 requires any licensee who is convicted of a misdemeanor or felony or who has disciplinary action taken against him or her by any occupational licensing board to file a report with the Real Estate Commission. The reporting requirement includes convictions for driving while impaired (“DWI”). The report must be filed within sixty (60) days of the final judgment or board action. If you have questions about this rule, please call the Commis-sion’s Regulatory Affairs Division at 919-875-3700 for more infor-mation. Your Pocket License Card is your ticket for admission to Continuing Education classes. Allow at least 10 days to process a replacement request or purchase and download a replacement immediately from the Commission’s Web site. Continued on the trust account failed to identify the subject property, property owner, and the purpose for the disbursement; that Mr. El-liot failed to maintain copies of the canceled checks and the deposit slips failed to identify the purpose for the deposit; that Mr. Elliot failed to maintain a personal funds ledger and the account lacked an audit trail; that Mr. Elliot’s previously licensed firm was ad-ministratively dissolved by the North Caro-lina Secretary of State on July 21, 2011 and that Mr. Elliot failed to notify the Commis-sion of this and the firm continued to oper-ate until October 1, 2015, when the firm’s license was cancelled by the Commission; and that Mr. Elliot declared himself broker-in- charge of a sole proprietorship under the same name as the formerly licensed firm. MITCHELL LEE EUDY (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Eudy for a period of five months effective November 1, 2016. The Commission then stayed the suspen-sion for a probationary period until March 31, 2017. The Commission found that Mr. Eudy, on May 27, 2015, entered into an Ex-clusive Right to Sell listing agreement for a property; that the listed property contained a small cemetery and Mr. Eudy was aware at the time of the listing agreement that there was a cemetery located on the property; that Mr. Eudy failed to disclose the cemetery to potential buyers of the property; that Mr. Eudy asserts that he directed the sellers to inform the buyers of the existence of the cemetery; and, the buyers assert that they were not made aware of the cemetery prior to closing. FREEDOM REALTY INC. (Murphy) – By Consent, the Commission suspended the firm license of Freedom Realty for a period of 12 months effective November 1, 2016. The Commission then stayed the suspension for a probationary period from November 1, 2016 through October 31, 2017. The Commission found that Free-dom Realty had posting errors in the trust account software accounting system going as far back as 2006 that were never cor-rected; that this caused an inaccurate set of books which led to deficit spending on at least two occasions; that Freedom Realty managed both long term rentals as well as vacation rentals, yet a subsidiary ledger for those accounts was not maintained; that no personal funds ledger was used to ac-count for funds used to cover bank service charges; and that Freedom Realty acted as a dual agent in one transaction, but was un-able to provide a copy of the buyer agency agreement to Commission staff. The Com-mission notes that no evidence of a shortage was found in the accounts and that the firm has transferred all of its remaining rentals to another licensed firm and that Broker has affiliated with another licensed firm to en-gage solely in sales transactions. CHARLES LESLIE GIEZENTANNER III (Asheville) – By Consent, the Commis-sion suspended the broker license of Mr. Giezentanner for a period of one month ef-fective January 1, 2017. The Commission found that, on June 29, 2016, Mr. Giezen-tanner was convicted of a Level 2 DWI and DWLR After Impaired Revocation Notice; that Mr. Giezentanner failed to report the conviction; and that Mr. Giezentanner failed to respond to three Letters of Inquiry. GOLDEN KEY REALTY INC d/b/a RCA REALTY (Wallace) – By Consent, the Commission permanently revoked the firm license of Golden Key Realty effec-tive December 14, 2016. The Commission found that Golden Key Realty, engaged in property management, failed to provide all of the requested trust account documenta-tion requested by the Commission, failed to perform trust account reconciliations, failed to maintain a general ledger, and failed to maintain a trust account journal; that Golden Key Realty could not account for all rents and security deposits it received and failed to deposit all rent payments and security deposits received in cash into the trust account; and that Golden Key Realty’s broker-in-charge admitted to spending en-trusted funds on expenses, other than for which the funds were intended, which led to deficit spending and a shortage in excess $80,000 in the firm’s trust account. PATRICIA OLIVIA GONZALEZ (Fayetteville) – By Consent, the Commis-sion suspended the broker license of Ms. Gonzalez for a period of 18 months effec-tive September 1, 2016. The Commission found that Ms. Gonzalez, acting as broker-in- charge and qualifying broker of her firm, failed to perform monthly reconciliations of her firm’s trust accounts and that one trust account was overdrawn twice in 2014, in-dicating a shortage; that Ms. Gonzalez was unable to produce the ledgers for individual properties and/or property owners, despite multiple requests; and that Ms. Gonzalez’ firm was administratively dissolved by the North Carolina Department of the Secre-tary of State in September 2015 and Ms. Gonzalez failed to notify the Commission. KEVIN J. MCVICKER (Durham) – By Consent, the Commission reprimanded Mr. McVicker effective December 1, 2016. The Commission found that Mr. McVicker, in 2015, was affiliated with a licensed firm for which his wife was broker-in-charge/ qualifying broker; that in August 2015, the firm and Mr. McVicker’s wife were revoked by Consent by the Commission for, among 14 Real Estate Bulletin February 2017 Commission Speakers Available Real Estate Commission staff members are available to speak to your local board, office or special group. You can re-quest a presentation relating to a specific subject or a general discussion on topics of interest to those attending. To schedule a speaker, submit the “Request for Program Presenter” form available on the Commission’s website, www. ncrec.gov. Please allow at least four weeks prior to your group’s meeting. Continued other things, failure to maintain funds in a trust account, conversion of trust monies, and failure to provide transaction records to a Commission representative; that during the investigation bank records obtained by a subpoena showed trust monies and rents were deposited into a personal account held by Mr. McVicker and his wife and that Mr. McVicker wrote checks for personal expens-es from the same account; that Mr. McVick-er submitted a new firm application, desig-nating himself as a broker-in-charge on the same day that his firm’s broker license was revoked; and that Mr. McVicker agreed to supply transaction and account records but failed to do so in a timely manner. PATRICK KEVIN MONAGHAN (Charlotte) – By Consent, the Commis-sion suspended the broker license of Mr. Monaghan for a period of four months ef-fective November 1, 2016. The Commis-sion then stayed the suspension for a proba-tionary period ending March 1, 2017. The Commission found that in May 2015 Mr. Monaghan, acting as the broker-in-charge of Northpoint Asset Management, entered into a residential property management agreement for property; that according to the agreement, the monthly rent was to be $1000; that in July 2015, Mr. Monaghan procured tenants who agreed to rent the property for $140/month and, in exchange for the low rent, perform renovations, a violation of North Carolina Landlord and Tenant Law; that the lease contained no de-scription of the work tenants were to com-plete in exchange for the lower rent; that the lease provided by Mr. Monaghan included a late fee beyond the statutory limit; that Mr. Monaghan collected a security deposit in excess of the statutory limit; that an adden-dum to the lease permitted Mr. Monaghan to use tenants’ security deposit for costs not permitted and allowed the tenant security deposit to be disbursed during the tenancy in violation of Landlord and Tenant Law; and that Mr. Monaghan failed to inform the tenants and property owner which bank held the security deposit. NORTHPOINT ASSET MANAGE-MENT LLC (Charlotte) – By Consent, the Commission suspended the firm license of Northpoint Asset Management for a pe-riod of four months effective November 1, 2016. The Commission then stayed the suspension for a probationary period end-ing March 1, 2017. The Commission found that Northpoint Asset Management in May 2015, entered into a residential prop-erty management agreement for property located in Charlotte, NC; that according to the agreement, the monthly rent was to be $1000; that in July 2015, North-point Asset Management procured tenants who agreed to rent the property for $140/ month and, in exchange for the low rent, perform renovations, a violation of North Carolina Landlord and Tenant Law; that the lease contained no description of the work tenants were to complete in exchange for the lower rent; that the lease provided by Northpoint Asset Management included a late fee beyond the statutory limit; that Northpoint Asset Management collected a security deposit in excess of the statutory limit; that an addendum to the lease per-mitted Northpoint Asset Management to use tenants’ security deposit for costs and allowed the tenant security deposit to be disbursed during the tenancy in violation of Landlord and Tenant Law; that Northpoint Asset Management failed to inform the ten-ants and property owner which bank held the security deposit. CHRISTINA L. PITZ (Surf City) – By Consent, the Commission reprimanded Ms. Pitz effective January 2, 2017. The Commission found that Ms. Pitz, acting as a listing agent, failed to obtain a copy of a septic permit to verify the number or bed-rooms allowed by the septic system despite being informed that her seller-clients did not know whether the septic system was permitted as a four-bedroom house; that the buyers closed on the house under the im-pression it was permitted as a four-bedroom house instead of a three-bedroom house; and that the buyers discovered the discrep-ancy while performing remodeling work on the house and had to purchase a septic sys-tem to accommodate four-bedroom house. The Commission noted that Ms. Pitz has reached a settlement with the buyers for an undisclosed sum. PROPERTY ADMINISTRATORS, INC. (Greensboro) – By Consent, the Real Estate Education and Recovery Fund Reimburses Victims At its December 14, 2016 meet-ing, the Commission approved a pay-ment totaling $3,100 out of the Real Estate Education and Recovery Fund to one applicant who suffered finan-cial loss due to the misconduct of Ali-cia A. Christian. By Consent, the Commission or-dered permanent revocation of the real estate license of Ms. Christian ef-fective October 15, 2014. At its October 13, 2016 meeting, the Commission approved payments of $46,006.89 to six applicants who suffered financial losses due to the misconduct of Rebecca L. Niemchak. The Commission, following a hearing, ordered the permanent re-vocation of the broker license of Re-becca L. Niemchak effective October 24, 2014. At its May 5, 2016 meeting, the Commission approved payments of $75,000 to 17 applicants who suf-fered financial losses due to the mis-conduct of Cheryl B. Wilkins. By Consent, the Commission ordered the permanent revocation of the broker license of Cheryl B. Wilkins effective November 12, 2014. Real Estate Bulletin February 2017 15 January 1, 2017. The Commission found that Mr. Tarbutton, acting as the qualifying broker and broker-in-charge of a licensed real estate brokerage firm, changed the le-gal name of the firm, but failed to notify the Commission; that from 1999 to 2016, the firm operated under a name other than the name on its license; that Mr. Tarbutton acted as the broker-in-charge of two offices, his sales office and rental management of-fice, that were not in the same physical loca-tion; that Mr. Tarbutton regularly deposited trust money belonging to others into his firm’s operating account; that Mr. Tarbut-ton did not enter or maintain proper agency agreements in both sales and property man-agement transactions; that Mr. Tarbutton failed to provide vacation rental agreements to tenants; and failed to maintain his firm’s trust account records in compliance with the Real Estate License Law and Commis-sion Rules. ROBERT CRAIG THRIFT, JR. (New Bern) – The Commission accepted the vol-untary surrender of the broker license of Mr. Thrift for a period of 10 years effective November 9, 2016. The Commission dis-missed without prejudice allegations that Mr. Thrift violated the Real Estate License Law and Commission rules. Mr. Thrift nei-ther admitted nor denied misconduct. RICHARD TOCADO (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Tocado for a peri-od of one month effective October 1, 2016. The Commission found that Mr. Tocado, in and around 2014, acted as a buyer agent in a new construction real estate transaction; that Mr. Tocado, in order to secure the transaction, offered to rebate $3,000 of his commission to the buyer-client; that Mr. Tocado disclosed the rebate to the original lender, but failed to disclose it to the second lender until the day of clos- KARYN B. SPREEMAN (Hender-sonville) – By Consent, the Commission suspended the broker license of Ms. Spree-man for the period of 18 months effective December 1, 2016. Two months of the suspension shall be active with the remain-der stayed for a probationary period from February 1, 2017 through June 1, 2018. The Commission found that Ms. Spreeman listed a vacant lot for sale under a listing agreement which expired on July 31, 2015; that on September 9, 2015, Ms. Spreeman submitted an offer to purchase the lot, on behalf of a prospective buyer, to the seller; that Ms. Spreeman told her buyer client that the seller verbally accepted the offer and sent the offer in the mail to the seller for signature; that the seller claims she never verbally accepted the offer; that on Sep-tember 8, 2015, Ms. Spreeman signed the seller’s name on a document which gave the buyer authorization to obtain septic and/or well permits on behalf of the seller; that Ms. Spreeman did not have written authoriza-tion from the seller or a power of attorney document allowing her to sign on the seller’s behalf; that the seller’s land was then clear cut and permits were pulled by the buyers; and that the seller later rejected the buyer’s offer and the company that performed the work, on the buyer’s behalf, filed a lien against seller for over $7,000. The Commis-sion notes that Ms. Spreeman has paid the lien which has now been released. KENNETH L. TARBUTTON (Blow-ing Rock) – By Consent, the Commission suspended the broker license of Mr. Tar-button for a period of 36 months effective If you are a BIC or BIC eligible, to maintain your BIC status you must take the Broker-in-Charge Update Course (BICUP) + an Elective. Do not take the General Update Course - it will not satisfy your BIC CE requirements. Continued Brokers Should Ask Closing Attorneys to Not Disburse Proceeds Without Confirming Disbursement Instructions Brokers are urged to encourage closing lawyers in each transaction not to disburse proceeds other than as specifically authorized in a written document signed by the seller. There have been instances of hackers diverting funds from real estate transactions, i.e., criminals hacked into a real estate broker’s com-puter database and monitored email traffic to learn about an impending clos-ing. They send an email to the lawyer instructing the lawyer to wire the seller’s proceeds to a bank account other than the one originally identified. That email comes from an address that looked like the broker’s. The lawyer wires the seller’s proceeds to the criminals’ account. By the time the lawyer learns of this crime, the criminals have wired the funds to a foreign bank account. Commission suspended the firm license of Property Administrators for a period of 18 months effective September 30, 2016. The Commission found that Property Adminis-trators failed to prepare monthly reconcilia-tions and failed to maintain ledgers and de-posits in full compliance with Commission rules such that a clear audit trail could not be determined; and, that an audit of both trust accounts was performed and showed overages in both accounts. RSK MOUNTAIN RESORT LLC (Blowing Rock) – By Consent, the Com-mission suspended the firm license of RSK Mountain Resort for a period of 36 months effective January 1, 2017. The Commis-sion found that RSK Mountain Resort changed its legal name, but failed to notify the Commission; that from 1999 to 2016, RSK Mountain Resort operated under a name other than the name on its license; that RSK Mountain Resort regularly depos-ited trust money belonging to others into its operating account; that RSK Mountain Resort did not enter or maintain proper agency agreements in both sales and prop-erty management transactions; that RSK Mountain Resort failed to provide vacation rental agreements to tenants; and failed to maintain its trust account records in com-pliance with the Real Estate License Law and Commission Rules. KATIE ELIZABETH SINGLETON (Surf City) – By Consent, the Commis-sion reprimanded Ms. Singleton effective October 13, 2016. The Commission found that Ms. Singleton was convicted in dis-trict court of Level III DWI on June 30, 2016, and was sen-tenced to 12 months of supervised proba-tion and required to complete 72 hours of community ser-vice. The Commission noted that Ms. Single-ton timely reported the conviction to the Commission and is in compliance with the court’s order. 16 Real Estate Bulletin February 2017 43,000 copies of this public document were printed at a cost of .219 per copy North Carolina Real Estate Commission P. O. Box 17100 Raleigh, NC 27619-7100 PRSRT STD U.S. POSTAGE PAID HICKORY, NC PERMIT NO. 104 U.PERMIT PRSRT STD U.S. POSTAGE PAID HICKORY, NC PERMIT NO. 104 U.PERMIT Scan the code below to access the Commission website from your mobile devices. **Attention** BIC’s and BIC eligible brokers! Please update your re-cord to include your cur-rent phone number. You can designate your phone number as “public” or “pri-vate.” Log on to your record at www.ncrec.gov and pro-vide your phone numbers! Broker Login ing, which would delay the closing by three days; that rather than delay closing, Mr. To-cado and the buyer-client agreed that Mr. Tocado would donate the $3,000 to the buyer-client’s favorite charity; and that af-ter closing, Mr. Tocado failed to make the agreed donation. TREVOR CHERRY REAL ESTATE LLC (Charlotte) – By Consent, the Com-mission suspended the firm license of Trevor Cherry Real Estate for a period of 24 months effective September 1, 2016. The Commis-sion then stayed the suspension for a pro-bationary period from September 1, 2016 through August 31, 2018. The Commission found that Trevor Cherry Real Estate man-aged a property (“property A”) from which it collected from the tenant $295 extra each month in rent and $100 each month for use of the washer and dryer from the tenant with-out the knowledge of the owner landlord; that Trevor Cherry Real Estate charged the owner landlord for repairs made to the dryer and did not receive approval from owner landlord for repairs exceeding $150, in violation of the management agreement; that Trevor Cherry Real Estate also managed four properties for another landlord owner (“property B”) and spent in excess of $250 on repairs without receiving approval from landlord owner, in violation of the management agreement; that Trevor Cherry Real Estate was paid twice for some repairs that were already paid; and failed to give an accounting to the landlord owner within the time required by the management agreement; that an audit discovered that Trev-or Cherry Real Estate failed to maintain all records as required by Commission rules and evidence of deficit spending and comingling of funds in its trust accounts; and that Trevor Cherry Real Estate failed to deposit cash into a trust account within three banking days of receipt. The Commission notes that Trevor Cherry Real Estate’s trust accounts are now fully funded. DAVID J. WELSH (Boone) – The Commission accepted the voluntary sur-render of the broker license of Mr. Welsh for a period one year effective December 14, 2016. The Commission dismissed without prejudice allegations that Mr. Welsh vio-lated Commission rules and the Real Estate License Law. Mr. Welsh neither admitted nor denied misconduct. MARY S. WILSON (Greensboro) – By Consent, the Commission suspended the broker license of Ms. Wilson for a period of 18 months effective September 30, 2016. The Commission then stayed the suspension on certain conditions. The Commission found that Ms. Wilson, acting as broker-in- charge of a licensed real estate brokerage firm, failed to prepare monthly reconcilia-tions and failed to maintain ledgers and de-posits in full compliance with Commission rules such that a clear audit trail could not be determined; and that an audit of both trust accounts was performed and showed overages in both accounts. |
OCLC number | 7578201 |