Modern Real Estate Practice in Pennsylvania 12th Edition

1. Modern Real Estate Practice in Pennsylvania 12th Edition Chapter 13: Pennsylvania Real Estate Licensing Law

2. Learning Objectives Define activities that require licensure and the parties who are exempt from the license law List the different licenses and the requirements for obtaining them Identify major ethical issues of licensees, and conduct specifically prohibited by law or regulation Summarize disciplinary procedures and remedies available for violations of the law or rules, including civil and criminal penalties Define key terms

3. PA Real Estate Licensing And Registration Act (RELRA) • States and provinces have regulations • Enacted to protect the public by ensuring • Competence • Professionalism

4. 13 Pennsylvania Real Estate Licensing Law • Regulatory goals • Establish basic requirements for licensure • Define continuing education requirements • Define activities that require licensure • Define acceptable standards of conduct • Enforce standards through a disciplinary system

5. 13 Pennsylvania Real Estate Licensing Law • Purpose of regulations • Protect the public from unscrupulous or sloppy practitioners of real estate • Establish minimum levels of competency • Current law — 1980 • Real Estate Licensing and Registration Act (RELRA) • Statutory law: • Created by state legislature • PA Real Estate Commission (REC) cannot change it, only legislature can

6. 13 Pennsylvania Real Estate Licensing Law • State real estate commission • Section 202 of RELRA established the “REC” to administer the Act and supervise licensees • Section 404 authorizes REC to promulgate rules and regulations to define the statutes • Rules and Regulations have same force and effect as law • Enforced through fines and license restrictions (denial, suspension, revocation); civil and criminal actions available for serious cases

7. 13 Pennsylvania Real Estate Licensing Law Commissioner of the Bureau of Professional and Occupational Affairs Director of the Bureau of Consumer Protection, or designee Three members representing the public at large Five brokers One other person who shall have been licensed as a real estate broker, or cemetery broker

8. 13 Pennsylvania Real Estate Licensing Law Five brokers: engaged in the real estate business for a period of at least ten years immediately prior to appointment Cemetery business: licensed as real estate broker, or cemetery broker, for a period of at least five years and shall have been engaged in selling cemetery lots for at least ten years immediately prior to appointment Appointed by governor for five-year terms

9. 13 Pennsylvania Real Estate Licensing Law • Commission meetings • Regularly scheduled meetings subject to “sunshine laws” • Holds formal and informal hearings related to complaints against licensees • Must hold public meetings each year in Pittsburgh, Philadelphia, and Harrisburg: to solicit, suggestions, comments, and objections about real estate practice

10. 13 Pennsylvania Real Estate Licensing Law • Licensed activities • Must have appropriate license for activity • Otherwise, subject to disciplinary action • Unlicensed activity is frequent violation of the Act

11. 13 Pennsylvania Real Estate Licensing Law Public records Establish ownership, priority of liens, give notice of encumbrances Protect interests of owners and public Deeds, mortgages, taxes, marriages, etc. County recorder of deeds

12. 13 Pennsylvania Real Estate Licensing Law RELRA defines activities that require licenses and procedures for obtaining licenses PA definition of real estate: any interest or estate in land, whether corporeal, incorporeal, freehold or non-freehold . . . Including leasehold interests, time-share and similarly designated interests Mobile homes: assignment of lease or sale of land creates an interest in real estate

13. 13 Pennsylvania Real Estate Licensing Law • Qualifications for licensure • Ten licenses are issued • Licensee must have reputation for the following: • Honesty • Trustworthiness • Integrity • Competence • Must report all criminal convictions and attach criminal record check (90 days) • Appraisal activities regulated by appraisers

14. 13 Pennsylvania Real Estate Licensing Law • Broker: individual or entity (corporation, partnership, or association) that, for another and for a fee, commission, or other valuable consideration, does the following: • Negotiates with or aids a person in locating or obtaining for purchase, lease, or acquisition of interest in real estate • Negotiates the listing, sale, purchase, exchange, lease, time-share, financing, or option for real estate • Manages real estate

15. 13 Pennsylvania Real Estate Licensing Law • Actions of broker • Represents self to be real estate consultant, counselor, agent, or house finder • Undertakes to promote the sale, exchange, purchase, or rental of real estate (does not apply to an individual or entity whose main business is advertising, promotion or public relations) • Undertakes to perform a comparative market analysis • Attempts to perform any of these acts

16. 13 Pennsylvania Real Estate Licensing Law • Broker applicants • Be 21 years of age or older • Be a high school graduate (or GED) • Acquire 16 credits, or 240 hours of instruction (salesperson hours do not qualify) • Work three years as a licensed salesperson, or possess experience and/or education that the Commission considers the equivalent of three years’ experience as a licensed salesperson (point system)

17. 13 Pennsylvania Real Estate Licensing Law • Licensure as broker • Pass the broker’s examination within three years of application • Submit an application with the following: • Name and address of business • Recommendations attesting to applicant’s reputation for honesty, trustworthiness, integrity, and competence

18. 13 Pennsylvania Real Estate Licensing Law • Broker of record • Individual broker responsible for real estate transactions of a partnership, association, or corporation that holds a broker’s license • Assumes responsibility for all business of firm • One broker of record per firm (regardless of number of offices) • Crucial to the operation of business • In event of death, authorized party must • notify Commission, and • name replacement within 15 days

19. 13 Pennsylvania Real Estate Licensing Law • Associate broker • Individual broker employed by another broker • May perform all activities of licensed brokers • May not do the following: • Employ other licensees • Engage in business using own name • Operate from own place of business • Same licensing requirements as broker • Required license to manage branch office

20. 13 Pennsylvania Real Estate Licensing Law • Salesperson • An individual who is employed by a licensed broker to do one or more of the following: • Sell or offer to sell real estate, or list real estate for sale • Buy or offer to buy real estate • Negotiate the purchase, sale, or exchange of real estate • Negotiate a loan on real estate • Lease or rent real estate, or offer to lease or rent real estate or to place real estate for rent • Collect, offer, or attempt to collect rent for use of real estate • Assist a broker in managing a property • Perform a comparative market analysis

21. 13 Pennsylvania Real Estate Licensing Law • Salesperson and broker • All salesperson’s activities are under ultimate supervision and responsibility of employing broker • Independent contractors and employees accountable to broker • Activities that involve public must be performed by licensees

22. 13 Pennsylvania Real Estate Licensing Law • Salesperson activities • Show properties • Prepare and present offers • Prepare listing information • Solicit listings • Host open houses for public • Disseminate real estate information to public

23. 13 Pennsylvania Real Estate Licensing Law • Unlicensed activities • Personal assistants may not do the following: • Perform any of the previous activities • Perform telemarketing tasks • Discuss information with public • Interpret or explain property information to licensees • Personal assistants”may host a broker’s open for other licensees

24. 13 Pennsylvania Real Estate Licensing Law • Licensing examinations • 18 years of age or older • Successfully complete 60 hours of instruction, in basic real estate courses as determined by Commission • Pass both portions of examinations (national and state)

25. 13 Pennsylvania Real Estate Licensing Law • Supervised property management • Any assistance provided by salesperson with property manager (PM) must be supervised and controlled by employing broker • Salesperson may not independently negotiate terms of lease or execute lease on behalf of lessor

26. 13 Pennsylvania Real Estate Licensing Law • Cemetery broker • Works exclusively in cemetery lots, plots, mausoleum spaces, and openings • Responsible for business activities and maintenance of office like a broker • Successfully complete 60 hours of instruction • Work at least three years as a licensed salesperson or cemetery salesperson, or have experience and qualifications that the Commission considers adequate • Pass the written examination

27. 13 Pennsylvania Real Estate Licensing Law • Cemetery associate broker • Individual employed by a cemetery broker or broker • Met regulations to be cemetery broker • Same relationship as an associate broker has to broker

28. 13 Pennsylvania Real Estate Licensing Law • Cemetery salesperson • Individual employed by broker or cemetery broker exclusively to perform duties of cemetery lot salesperson • Must be 18 or older • Submit an application with a sworn affidavit from the broker or cemetery broker with whom the applicant desires to be affiliated that does the following: • Attests to applicant’s good reputation • Certifies that broker will actively supervise and train the applicant • No education or examination required

29. 13 Pennsylvania Real Estate Licensing Law Builder-owner does not need a license • Builder-owner salesperson • Individual who is a full-time employee of a builder-owner of single- and multifamily dwellings and who performs one or more of following: • Lists for sale, sells, or offers for sale real estate of builder-owner • Negotiates sale or exchange of real estate of builder-owner • Leases or rents, or offers to lease, rent, or place for rent, real estate of builder-owner. • Collects or offers, or attempts to collect, rent for real estate of builder-owner

30. 13 Pennsylvania Real Estate Licensing Law Does not need to take 60-hour classes • Builder-owner salesperson • Must be 18 or older • Must be employed by unlicensed builder-owner • Must pass examination

31. 13 Pennsylvania Real Estate Licensing Law • Rental listing referral agent • Individual or entity that owns or manages business that collects rental information to refer prospective tenants to rental units or locations of rental units • Does not lease or show property: prepares and distributes lists of available properties • Must complete 60 hours of classes and pass salesperson’s examination • Does not need a broker • Must have an office

32. 13 Pennsylvania Real Estate Licensing Law • Campground membership salesperson • Individual who, either as an employee or an independent contractor, sells or offers to sell campground memberships under the active supervision of a broker • Campground memberships are interests to use property on a periodic basis • A licensed broker, salesperson or time-share salesperson does not need to possess a campground membership salesperson’s license to sell campground memberships

33. 13 Pennsylvania Real Estate Licensing Law Does not need to take 60-hour classes Does not need to pass examination • Campground membership salesperson • Must be 18 or older • Successfully complete 15-hour Campground Membership Sales course, provided • Complete 30 days of onsite training • Trainee is actively supervised and trained by a broker • A licensed broker, salesperson, or time-share salesperson does not need to possess a campground membership salesperson’s license to sell campground memberships

34. 13 Pennsylvania Real Estate Licensing Law Does not need to pass examination Does not need to take 60-hour classes • Individual who sells or offers to sell time-shares • Time-share: right to occupy on periodic basis • Work under active supervision of broker: • Must be 18 or older • Complete 30-hour Time-Share Sales course • Complete 30 days of onsite training • Licensed salespersons and brokers do not need time-share license

35. 13 Pennsylvania Real Estate Licensing Law • Unlicensed activity • Section 301 of RELRA: unlawful for unlicensed person to engage in licensed activities • May not advertise or suggest they are engaged • Must be licensed at time service is offered and rendered • Not entitled to compensation, may not sue to recover payment for illegal services rendered

36. 13 Pennsylvania Real Estate Licensing Law • Criminal penalties • Section 303 of RELRA • Unlicensed activities include situations where license was suspended or revoked • First offense: fine up to $500, up to three months in jail • Subsequent offenses: • Third-degree felony • Fine between $2,000 and $5,000 • and/or • Imprisonment for one to two years

37. 13 Pennsylvania Real Estate Licensing Law • Individuals and entities excluded from the act • Owner of real estate . . . • Employee of public utility acting in related business • Officer or employee of partnership or corporation whose principal business is discovery, extraction, distribution, or transmission of energy or mineral resources • Attorney-in-fact who renders services under executed and recorded power of attorney from an owner or lessor of real estate, if power of attorney is not used to circumvent intent of the act

38. 13 Pennsylvania Real Estate Licensing Law • Exclusions (cont’d) • Attorney-at-law who receives a fee from a client for rendering services within the scope of the attorney-client relationship and does not hold self out as a real estate broker • Trustee in bankruptcy, administrator, executor, trustee, or guardian, acting under authority of a court order, will or trust instrument • Elected officer or director of banking institution, savings institution, savings bank, credit union, or trust company

39. 13 Pennsylvania Real Estate Licensing Law • Exclusions (cont’d) • Officer or employee of a cemetery company who, as an incidental part of the principal duties (and without remuneration), shows lots in company’s cemetery • Cemetery company or cemetery owned or controlled by a bona fide church or religious congregation or fraternal organization • Auctioneer licensed under The Auctioneers’ License Act . . . while performing authorized duties at a bona fide auction

40. 13 Pennsylvania Real Estate Licensing Law • Exclusions (cont’d) • Individual employed by owner of multifamily residential dwellings to manage dwellings: • Not authorized to • enter into leases, • negotiate terms and conditions of occupancy, and • hold money belonging to tenants other than on owner’s behalf • So long as owner retains authority to make decisions, may show apartments and provide information on rental amounts, building rules, regulations, and leasing qualifications

41. 13 Pennsylvania Real Estate Licensing Law • Exclusions (cont’d) • Elected officer, director or employee of banking institution, savings institution, savings bank, credit union, or trust company acting on behalf of institution performing appraisals or other evaluations of real estate in connection with loan transaction

42. 13 Pennsylvania Real Estate Licensing Law • Licensing procedures • Department of State issues licenses • Real Estate Commission • Approves proprietary schools • Sets fees subject to review under PA laws • Prescribes subject matter for examinations • Department of State contracts with independent agency to conduct testing

43. 13 Pennsylvania Real Estate Licensing Law • Real Estate Commission • Prescribes form for license applications • Investigates accuracy of license applications • Denies licenses or institutes disciplinary action • License period • Even-numbered years • Begins June 1 and ends May 31 • First issuance: expires May 31 of current license period • License active when issued and properly renewed

44. 13 Pennsylvania Real Estate Licensing Law • License renewal • Commission establishes procedures to renew licenses • On-line renewal available as of 2006 • Code forwarded to licensee through communication • If not electronic, renewal form available for download

45. 13 Pennsylvania Real Estate Licensing Law • Continuing education • 14-hour continuing education (CE) requirement for brokers and salespersons • “To maintain and increase competency” • Commission approves work and topics • 14-hour follow-up course for new salespersons being developed • Can be instructor-led or distance education • Licensee required to keep documentation of completed coursework

46. 13 Pennsylvania Real Estate Licensing Law • Inactive licenses • Voluntary relinquishment (escrow) • Failure to properly renew • May not perform activities while inactive • May reactivate by submitting proper forms within five years of inactive status • Must complete 14 hours of continuing education before reactivation • After five years, must retake examination

47. 13 Pennsylvania Real Estate Licensing Law • Out-of-state licenses • Nonresident licensee may be licensed by following Commission rules and regulations • Some states encourage streamlining license procedures (ARELLO) • PA authorizes reciprocity with states that have similar requirements

48. 13 Pennsylvania Real Estate Licensing Law • Intent of reciprocity • Allow licensees to practice in more than one state • Not intended to circumvent licensing requirements for principal place of business: • Must seek standard license • Pass examination or fulfill other requirements

49. 13 Pennsylvania Real Estate Licensing Law • Operation of real estate business • Resident, licensed broker (CB, RLRA) must maintain a fixed office • Current licenses of all licensees must be prominently displayed in the office • Office must be: • Devoted to transaction of real estate business • Must permit business to be conducted in privacy • If in private residence, must have separate entrance

50. 13 Pennsylvania Real Estate Licensing Law ABC Realty, Inc. • Business name • Name used by business entity • Must be used in all business activity and communications • Business name from license must be displayed prominently and in a permanent fashion outside all offices • Must appear exactly as on license