Chapter 1Textbook Summary
Arkansas License Law: Duties and Powers of the Real Estate Commission
The Arkansas legislature enacted statutes to ensure that real estate brokers and salespersons maintain minimum standards of competence and practice that in turn protect the public health, safety and welfare.
The commission consists of 5 members:
· 3 licensees having at least 5 years of experience.
· 2 not have been active or retired licensees.
o 1 represents consumers.
o 1 is 60 years or older and represent the elderly.
Textbook National Practice
Commissioners’ terms are for 3 calendar years. Commissioners are appointed by the governor.
Licensee members are selected from a list of four nominees provided by the Arkansas Realtors Association.
Non-licensee members are selected from the state at large, subject to confirmation by the Senate. These members are full voting members, but may not grade license examinations.
The Commission selects its own chairman and vice chairman. An operating quorum is a simple majority (3 members).
The Commission regularly meets once per month, and special meetings may be called at any time by a majority vote.
Powers and duties:
· Administer oaths.
· Maintain official records suitable as evidence in courts.
· Conduct real estate seminars for licensees.
· Establish procedures for conducting real estate auctions.
The Commission conducts hearings and imposes penalties.
The Commission in the course of conducting hearings and investigations is empowered to issue subpoenas. The director has the authority to discharge the duties of fulfilling and administering the license law.
The Recovery Fund, administered by the Commission, is used for:
· Educational projects and seminars.
· Funding real estate research projects.
The Commission charges licensees annual fees for the benefit of the recovery fund.
Arkansas License Law: Licensing-related Laws and Regulations
A principal broker is an individual who performs certain real estate services for another party for compensation.
Auctioning is a licensing activity.
Parties exempted from Arkansas’ licensing requirement:
· Attorneys-in-fact and attorneys-at-law
· Resident managers
· Federal agency or state government officer or employee
· MLS wholly owned by a nonprofit organization
· Leasing assistants
Leasing duties exempted from licensure:
· Delivery of a lease application or lease.
· Receiving a security deposit, rent payment or related payment for delivery.
· Acting under the direct written instructions.
There are two types of Arkansas real estate licenses:
1. The broker’s license
2. The salesperson’s license
There are four main professional capacities of persons holding a license:
1. The principal broker: the boss.
2. The executive broker: the manager under the boss.
3. The associate broker: a broker who just sells and lists.
4. The salesperson: a selling or listing salesperson.
For qualify for broker or salesperson license, an applicant must:
· Demonstrate a record of professional conduct.
· Provide evidence of honesty, trustworthiness and integrity.
· Complete a criminal history background check.
Applicants for a broker’s license must provide proof of:
· 60 classroom hours in real estate within 36 months.
· Two years’ experience as salesperson or broker within four-years.
Applicants for a salesperson’s license must provide proof of 60 classroom hours in real estate, including 30 covering the basic principles of real estate.
National Practice
No person will be issued a license if convicted or pleaded guilty or no lo contendere to a felony or crime of moral turpitude, fraud, dishonesty, untruthfulness, or untrustworthiness.
Upon request, the Commission may make the report available to the applicant.
All applications expire one year following successful completion of the examination, or the date of the application, whichever occurs first.
Examinees who pass one section but fail the other section have six months to re-take the failed section.
Applicants are exempted from the general portion of the state exam if:
· They passed it in another state;
· The passing grade for such section is no lower;
· The examinee is licensed in another state at the time.
Licensing requirements for non-resident licensure:
· Show proof of current active licensure.
· Agree to abide by the Arkansas Real Estate License Law.
· Affiliate with a principal broker.
· If the non-resident licensee terminates such affiliation, the person’s license is terminated.
· Furnish certification of licensure and any disciplinary history.
· Appoint the executive director as the licensee’s agent for receiving notices of legal actions.
· Agree to cooperate with any investigation.
Licenses are renewed every calendar year by September 30th. Licenses not renewed by this date will incur additional fees for renewal. All Arkansas real estate licenses expire on December 31.
Inactive licenses that are not renewed by the annual deadline will expire.
Any renewal application filed after the September 30th deadline will cause the license to immediately become “inactive” and if not renewed, be treated as a renewal of an expired license after December 31st.
If a license has been expired in excess of two years, the reactivation requirement will be the same as that of a new applicant.
On or about July 15th of each year, the Commission sends licensees notice to renew licenses for the upcoming year.
Continuing education requirement:
· Active license: 7 classroom hours annually inclusive of 1 hour of safety training.
· Inactive and expired: 6 hours for every year, not to exceed 30 hours.
Arkansas License Law: Licensing-related Laws and Regulations
New licensees are not required to complete the CE requirement in the first partial year, nor the following full year of licensure.
Non-resident licensees may take CE courses in their resident states.
Licensees may be granted waivers or time extensions for demonstrated hardships. Credit for continuing education classes is based on attendance.
All newly licensed salespersons and brokers must complete a post-license education requirement.
· The salesperson requirement is to complete an 18-hour AREC Post-license course within six months.
· The broker requirement is to complete a 30-hour broker course within six months.
Brokers and salespersons must provide a Certificate of Completion course no later than the end of the month one year following the date of initial licensure.
License applicants may not practice real estate in Arkansas until they have received a current valid license and
pocket card.
Temporary licenses are valid for no more than 30 days.
Licensees are required to keep the Commission current regarding their place of business, home address, and other contact information.
When a licensee leaves the employment of a principal broker, he must immediately surrender his pocket card. The principal broker must then, within 7 days, notify and surrender the license and card to the Commission.
If a principal broker leaves the firm or dies, the Commission may allow a temporary continuation under a person approved by the Commission.
The licenses of the principal broker and all affiliated licensees must be retained and prominently displayed in the broker’s principal place of business.
The name of a broker’s business cannot be similar to that of another firm to the extent that the public could be confused as to the firm’s distinct identity.
Place of business signage:
· A permanently attached and clearly displayed sign bearing the firm’s name.
· Photographs of the signage must be furnished to the Commission for its records.
· All licenses must be displayed at the place of business.
If the business is located in an office building, the principal broker’s business name must be listed in the directory and affixed to the entrance.
Branch offices must display clear signage and the licenses of all agents practicing within the office.
In order to operate as a branch, the principal broker must designate an executive broker to be licensed at the branch as supervisor of all licensees.
If a branch office maintains a trust account, the principal broker is the party responsible for all inflows and outflows from the branch’s trust account.
Licensees are not allowed to practice real estate independently from their principal broker or executive broker.
All licensees who enter into a transaction on behalf of themselves must disclose to the other principal party that they are in fact licensed real estate practitioners.
It is a violation of license law to improperly interfere with a licensee’s relationship with a principal for the purpose of obtaining a referral fee.
A licensee has a legitimate claim to a referral fee if an actual introduction has taken place. Prohibited acts:
· Failure to account for moneys belonging to other parties.
· Acting on behalf of more than one party without knowledge.
· Accepting compensation from anyone other than the principal broker.
Auctioneers must have a written auction agreement with the seller clearly specifying whether the auction is absolute or with reserves, as well as other terms and conditions.
The principal broker may delegate supervisory authority to an executive broker:
· Sign offer and acceptance forms.
· Train and supervise subordinate brokers and salespersons.
· Discharge administrative duties.
Both principal broker and executive broker have the responsibility to train subordinate licensees.
The consummation of a transaction must be supervised by the principal broker, including the preparation of documents and the closing itself.
If the principal parties elect to have a third party close the transaction:
· Provide written closing instructions to the third party;
· Review the client’s closing statement, if reasonably available.
All licensees advertising properties must include in the advertisement the name of the licensee’s firm. The principal broker must deposit all advance fees in his trust account.
Separate files must be maintained for all transactions.
The principal broker must maintain files for all properties managed for clients.
· The firm’s records must be maintained by the principal broker for three years, available for inspection.
· Records may be kept electronically.
· If the brokerage ceases to exist, the most recent principal broker carries responsibility for the firm’s records.
Commingling is illegal.
Allowable non-trust funds: to maintain a minimum balance and to cover service charges.
The principal broker maintains sole responsibility for all trust funds deposited into and withdrawn from the trust account.
Trust fund accounts may not bear interest.
All trust fund accounts must bear the terms trust or escrow, within a federally-insured depository institution.
Principal brokers are required to provide the Commission with a written report of each trust account he maintains. Trust funds must be deposited no later than 3 business days.
Trust fund accounts must be reconciled monthly to bank statements in writing. All security deposits for leases must be deposited in the trust account.
The principal broker must not fail in disbursing funds at the proper time.
Trust funds in Arkansas may be interest bearing if the principal broker volunteers and elects to follow the provisions of the Interest on Real Estate Brokers’ Trust Account Program.
Offers and acceptances must be signed.
Licensees must ensure that all parties receive copies of the agreements.
The Commission does not require that all non-exclusive agency agreements be in writing.
All forms used to document agreements must be approved by a licensed Arkansas attorney prior to use.
All agency agreements with buyers and sellers must have a specific duration or expiration date. Open-ended agreements are prohibited.
2
Offers received by selling agents must be presented to the listing firm by the close of the following business day.
Licensees may not enter into agency agreements with prospective clients when there is reason to believe that such a party is already under an existing agency agreement.
For-sale signs may only be placed on a property during the term of the listing agreement.
Time-Shares
A time-share estate is a separate estate or interest in property, except for property tax purposes. The estate may be transferred or encumbered.
Zoning ordinances may not discriminate against time-share estates which it would not impose upon similar developments having a different form of ownership.
The enforcement powers of the Commission include conducting hearings and suspending the licenses for violations of law.
Critical regulations:
· Time-shares must be registered.
· Managing and sales agents must be registered, bonded.
· Time-share (creation) instruments must provide arrangements for management and operation of the time- share.
Violators of time-share laws are guilty of a misdemeanor and face fines up to $5,000 and one-year incarceration. They may be sued in civil court and subjected to punitive damages.
Public offering statements must be provided to all purchasers of a time-share interval.
The sale contract is voidable if the purchaser has not received the public offering statement.
Within 5 days following execution of the sales contract, the developer may cancel the contract without penalty.
Deposits accompanying time-share reservations must be placed in a non-interest bearing trust account in Arkansas, held by an independent escrow company or federally insured depository institution.
Disbursement from the trust account may only be made when:
· The rescission period has elapsed on a contract;
· The purchaser has defaulted;
· The monies are refunded to the purchaser.
Advertising must be registered with the Commission and may not lead one to believe the number of remaining units is limited.
Licensees may institute criminal proceedings against violators of license law in the county where the infraction occurs.
Parties who may have been damaged by unlicensed persons performing real estate services cannot sue the unlicensed party.
Any licensee whose license is revoked must wait two years to apply for a new license.
Disciplinary actions against licensees are initiated by the filing of a written and signed complaint given by the complainant under oath.
The Commission has the power to initiate investigations on its own behalf.
Upon receipt, the licensee has 20 days to file a written answer, signed and dated under oath.
If the complaint is determined to lack sufficient materiality or evidence based on the investigation, the executive director may dismiss the complaint without a hearing.
Complaints that are dismissed without a hearing may be appealed by filing a written appeal within 60 days and paying fees.
Any hearing or investigation of a licensee for an alleged violation of license law or regulation must occur within three years of the alleged occurrence of the violation. The exception to this time limitation is where a licensee has obtained a license through misrepresentation.
The director is required to issue notice of an upcoming hearing to all affected parties 30 days prior to the date of the hearing.
All motions must be filed 10 days in advance of the hearing date.
The hearing is conducted by the Commission’s hearing officer. All testimony is rendered under oath and recorded. Any appeal of a ruling must be filed within 15 days from the ruling date.
If a licensee has been found guilty of violating a license law or regulation, the Commission may impose penalties.
Licensees issued a citation may contest the citation. The licensee must pay the fee within 30 days or file a complaint, in which case the licensee will have a hearing. Failing to respond within 30 days is a violation.
The Commission has the power to suspend sanctions imposed, given warranting circumstances. The outcomes of hearings may also entail payment of damages to aggrieved parties.
The maximum amount the Commission may pay from the Recovery Fund is $25,000 per violation, to a maximum of $75,000.
Upon disbursal of damages to aggrieved parties, the recipients of the damages award must assign all rights and claims against a licensee to the Commission.
There are four basic agency relationships that licensees enter into:
1. Single agency
2. Subagency
3. Dual agency
4. No agency, or transaction brokerage Undisclosed dual agency is illegal. Fiduciary duties owed clients are:
· Skill
· Care
· Diligence
· Loyalty
· Obedience
· Confidentiality
· Full disclosure
· Accounting
There is no difference between fiduciary duties owed a client-seller versus a client-buyer. A specific disclosure required by Arkansas regulation is that of the agent’s compensation.
Licensees cannot accept compensation from more than one party without full written disclosure to all parties to the transaction.
Licensees are not allowed to represent a property’s price in any advertising that is different from the price agreed upon by the principal.
Licensees must also disclose adverse material facts the agent should have known.
The dual agent must strive for impartiality and resist disclosure of confidentialities to the opposite-side principal.
It is acceptable for licensees to perform ministerial acts without being held in violation of fiduciary duties owed the client.
Single agents representing sellers or landlords must disclose agency relationship to prospective buyers or buyer’s agents.
· Disclosure in writing.
· Written disclosure before contracting.
Buyer or tenant agents must disclose their agency relationship at first contact. It can be initially made orally.
If an agent initially represents a buyer, the disclosure to the seller must occur at first contact; if a seller agent, the disclosure to the buyer must occur upon first substantive contact.
The Commission promulgates a sample agency disclosure form for licensees to use in helping to fulfill their disclosure obligations with sellers.
Licensees who fail to disclose their agency relationship properly and in a timely fashion are in violation of license law and subject to sanctions.
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