Q: Are licensees required to use designated agency?
A: No. Use of designated agency is not mandatory. It is up to each principal broker to decide whether designated agency will work in his or her office.
Q: Does designated agency replace dual agency?
A: No. The law states that "designated agency shall not prevent a real estate firm or brokerage company from entering into a dual agency relationship" as long as the law is complied with in all other areas.
Q: Can a licensee "shift" from a designated agency to a dual agent in one transaction?
A: Yes. The Commission interprets KRS 324.121 to allow a licensee to "shift" from a designated agent to a dual agent in one transaction if both consumers are aware of this shift and consent to it. However, the Commission does not interpret the law to allow a "shift" from dual agent to designated agent in the same transaction. If a "shift" is attempted, licensees should be extremely cautious and should be certain the necessary consumer consent occurs. If a company plans on using "shifting" of designated agency, it is recommended an attorney be consulted to discuss all implications.
Q: Does a licensee have to use the NEW agency disclosure form and the Agency Information for Consumers Bulletin if he or she is not using designated agency?
A: Yes. The new agency disclosure form and Agency Information for Consumers Bulletin must be used even if designated agency is not being used. Licensees not using the form after May 1, 1999 will be in violation of the law.
Q: Can revisions be made to the agency disclosure form and Agency Information for Consumers Bulletin?
A: Yes. However, any revisions must be prior approved by the Commission prior to use.
Q: Can more than one licensee serve as a designated agent for a consumer?
A: Yes. For example, husband-wife teams or partner teams can be designated agents, although these are not the only scenarios in which multiple licensees may serve as designated agents for consumers.
Q: Does the Commission have a specific required system that must be used to maintain confidentiality when using designated agency?
A: No. However, the law does require some specific items to be included in the broker's system. Beyond these required minimums (which are detailed in 201 KAR 11:410), the broker should determine what methods will be used as part of the system to maintain confidential information. The size of the company, number of associates and number of support staff and management personnel available will all be relevant considerations when establishing such a system. The Commission suggests consultation with an attorney.
Q: Does the agency disclosure form create designated agency?
A: No. The agency disclosure form can never create an agency relationship by itself. Note that the agency disclosure form cannot create dual agency, seller agency, or buyer agency. A separate document must exist which provides a consumer's consent to designated agency. The agency disclosure form only discloses a relationship created by another document or action.
Q: Is the Commission requiring licensees to use a KREC form to create designated agency?
A: No. The KREC has no specific form to be used to create designated agency. However, some document should be used to obtain the informed consent of the consumer to use designated agency.
Comments from the Chair
by Betty J Kaiser, Chairman
Usually, clients and consumers deal at the grassroots level with licensed sales associates, rather than principal brokers. Nevertheless, as all brokers know, the law places responsibility and liability on the principal broker as well whenever his or her sales associate is involved in a transaction.
In fact, in recent years, principal brokers have been named in Commission complaints for failing to supervise their associates properly. This "failure to supervise" is a violation of KRS 324.160(3); however, the term "failure to supervise" can be difficult to grasp, since it is a broad concept.
It has come to the attention of the Commission that many principal brokers are uncertain of exactly what this duty to supervise entails. In an attempt to alleviate some of the confusion over a principal broker's responsibilities, the Commission decided to appoint a task force to develop guidelines for use by principal brokers. The guidelines will provide assistance in the operation and supervision of a real estate office and help to avoid being named in future complaints. Commissioner/ Principal Broker Jim Huff of Jim Huff Realty; Broker Pat Parks of The Prudential Parks & Weisberg; Principal Broker Linda Moore of ERA Moore Realty Co.; John Davis, President of the Kentucky Association of Realtors; Broker Pat Hayden of Rector-Hayden, Realtors; Principal Broker Harrell Tague, Jr. of Re/Max Properties East and Broker Joy Amann of Jim Huff Realty have graciously agreed to serve on this task force, which is co-chaired by Principal Broker George Gans of Paul Semonin Realtors and Principal Broker Joe Guy Hagan of Century 21 - Joe Guy Hagan Real Estate.
The task force presented its suggestions to the Commissioners at their June meeting. They decided to model the guidelines after those developed by the Tennessee Association of Realtors. The Commission will issue printed guidelines for all brokers to follow. While these guidelines will not have the force of law, they will serve as a useful tool for principal brokers who desire to ensure that they are properly supervising their sales associates.
If you have any suggestions of possible guidelines, you should contact one of the task force members or a member of the Commission's legal staff to voice your opinions. We certainly hope these new guidelines will help all of Kentucky's brokers to eliminate the chances of being involved in a complaint.The Commission has also published a brochure for consumers which explains in detail the responsibilities of a licensed agent. If you would like to receive copies of these brochures to give to your clients as an explanation of your duties, please contact the Commission and the staff will send you these helpful brochures. Knowing the parameters of the relationship up-front may also serve to eliminate unnecessary complaints.
The Director's Comments
by Norman Brown, Executive Director
The Commission is always looking for new and better ways to improve and increase communication with real estate licensees. In an effort to transmit fast, efficient and reliable information to you and to be receptive to your transmittals as well, we are using the new advances in technology.
You can now contact us by using sources such as our new individual e-mail addresses. Each staff member has his or her own direct e-mail address (a full directory is located on page 5 of this newsletter). Other sources include our "toll free 800" number when calling from outside the Louisville area and our fax on demand system which is operational 24 hours a day and has a wide range of information. And, as always, you can communicate with us using the good ol' United State mail.
In addition, for those of you who are Internet-savvy, we are currently revamping our new website which will contain licensee information and other data. The website will have a brand new look with an exciting new format. If there is information you should need which is not yet available on our website, please refer to the legend in this newsletter for ways to contact the Commission directly to obtain that information. The Commission is also always open to ideas and suggestions on how to make our website even more helpful and user-friendly.
With the approaching millennium, many businesses, government agencies and the like are working hard to ensure that their computer systems are Y2K compliant. The Commission is no different. We have been working steadily to update our computer systems over the past couple of years and have been told we will be ready for the coming millennium. However, our fax-on-demand system is still not Y2K compliant. We are currently shopping around for a new system and hope to have it in place by August.
We have been working very hard to update our systems and to ensure a smooth transition into the next century! If you have any suggestions on how this process can be made even easier, please feel free to contact us.
The Commissioners and staff would like to extend their sympathy to the family of Mr. John Celletti who passed away in his home on June 10, 1999.
Mr. Celletti served as a Real Estate Commissioner from November 1975 until November 1981. Mr. Celletti was originally licensed as a real estate sales associate in 1955 and obtained his broker's license in 1964. He was named Realtor of the Year in 1983 and is a past president of the Louisville Board of Realtors. He was a member of the National Board of Realtors Political Action Committee, the Kentucky Board of Realtors and the National Association of Realtors.
In addition to his career in real estate, Mr. Celletti was mayor of the city of Shively in 1961 and a member of the Jefferson County Parks Board. He was also a founding member of the board of the Caritas Hospital Foundation with more than 43 years of service to the hospital.
He will be greatly missed by the real estate community.
License Law Review Task Force is Hard at Work
The Commissioner's Corner
As the Year 2000 approaches, the General Assembly is gearing up for its next session. The Commission intends to use this opportunity to amend, add to and shore up Kentucky's licensing laws.
To this end, the Commission's attorneys, as well as several other attorneys throughout the Commonwealth, have been working steadily on a License Law Review Committee. The members of the Committee include: Beverly McCormick, an attorney who teaches real estate at Morehead State University and helped to design the new core course; Virginia Lawson, an attorney in Lexington who handles numerous real estate cases before the Commission and circuit courts throughout the state; Scott Majors, a Hearing Officer from the Attorney General's office who presides frequently over the Commission's real estate cases; and Steve Frank, a private attorney who is the former General Counsel of the Commission and wrote the Commission's definitive book on licensing laws entitled Real Estate Professionals and the Law.
Jeff Blair and Lee Harris, the Commission's full-time attorneys, also serve on the Committee.
The Committee intends to present its proposals to the full Commission at the July meeting. Upon approval by the Commission the proposals will be presented to the KAR in the Fall and then to the General Assembly at its 2000 session.
The Committee is attempting to alleviate any ambiguities in the licensing laws which create confusion for practitioners in their everyday dealings. The Committee is comprehensively reviewing all of the license laws including those relating to escrow accounts, Seller's Disclosure of Property Conditions forms, continuing education, including the so-called "grandfather clause," agency disclosure and the like.
If there are any areas of the licensing laws which you believe need to be changed, clarified or amended, please do not hesitate to contact the Commission via the Internet, fax or phone to make your suggestions. The Commission always appreciates input from the licensees.
Multiple Offers and Inducements - What Is a Licensee To Do?
by: Lee Harris, Staff Attorney
In my new position as staff attorney, I have the opportunity to speak with many licensees and consumers on a daily basis regarding issues which arise during real estate transactions. There are several areas of concern for both licensees and consumers which seem to crop up often in daily practice but which create great confusion and consternation. I decided to use this space to attempt to explain some these common questions.
MULTIPLE OFFERS
Many licensees are confused about how to handle the receipt of multiple offers on the same property. Consumers and licensees seem to be under the impression that once an offer is received, that offer must be fully negotiated before any subsequent offers may be considered. This is not true. In fact, under 201 KAR 11:045, all written offers to purchase must be submitted without undue delay. Also, imagine how upset a seller would be if he or she negotiated the first contract, only to find out later that there was a better contract waiting in the wings!
The way to handle multiple offersis to present each offer as it comes in. If you receive one offer at 2:00 p.m. and cannot get together with the sellers until 7:00 p.m., you must present all other offers that arrive in the meantime. It is always best to inform the other agents involved that more than one offer will be presented. If one of your own clients puts in the second or third offer, things can become really tricky really fast. You of course do not want to leave the first buyer with the impression that your client received preferential treatment. It would not be advisable under any circumstances to reveal to your own client the contents or amount of previous offers. This could be considered self-dealing or improper conduct. It is best to let the seller choose which offer to accept.
Once the seller has decided which contract to accept, the other contracts must either be rejected or treated as back-ups. A seller may not counter more than one offer because, if more than one person accepts, the seller has sold one home more than once!
INDUCEMENTS
Many licensees are also confused about the laws concerning inducements. Kentucky has very stringent laws concerning inducements offered by licensees to the general public and/or to their clients. Nevertheless, many licensees still advertise that they will offer rebates, prizes or money to clients who list or buy their homes through that licensee. This is unlawful conduct.
201 KAR 11:121 clearly prohibits the offering of any thing of value to the public as an inducement. Included in this prohibition are advertisements in which the licensee offers to donate a portion of his or her commission to a charity, a church or some other organization in order to induce consumers to list or buy with that licensee. The theory is that the licensee is inducing the client to work with that licensee in the hope that the church or other charity will benefit. If you have any questions about an ad which you would personally like to place which may be considered an inducement, please contact the Commission's legal department for approval prior to publication of such an ad. It is not fair for certain licensees to offer inducements while others abide by this law.
Of course, after closing, licensees are permitted to give a "thank you" or a "housewarming" gift which costs less than fifty dollars ($50.00), excluding taxes, so long as the gift has not been promised prior to the sale.
DESIGNATED AGENCY POINTS OF REFERENCE
Each individual broker should decide whether designated agency will be utilized in his or her company after consultation with an attorney. The Commission believes the broker should make this decision based on what is best for the company. However, if designated agency is utilized the following points may be helpful.
- Informed consent of the consumer should be obtained prior to any designation of agency.
- A listing contract is an obvious place to obtain (seller) consumer consent to designated agency.
- The buyer consumer consent to designated agency should be obtained in a written document.
- A company may have a policy to always utilize designated agency. If a company has such a policy, all associates should be aware of this policy and understand it.
- Brokers utilizing designated agency must implement a system to maintain confidential information of clients of designated agency.
BETTY FISCHER (Cold Spring) (Case No. 98-0025)
Date of Decision: March 24, 1999LOUISE R. VENETTOZZI (Louisville) (Case No. 98-0008)
Violation: The parties entered into a settlement agreement in this case. Respondent Fischer stipulated to a violation of KRS 324.160(1)(q), specifically, filling out the Seller's Disclosure of Property Conditions form herself. This action constitutes a violation of KRS 324.360.
Disposition: Respondent Fischer agreed to pay the Complainants restitution in the amount of $1,730.00 and to accept a formal reprimand from the Commission.
Date of Decision: March 24, 1999JACK ADAMS (Richmond) (Case No. 98-0091)
Violation: The parties entered into a settlement agreement in this case. Respondent Louise Venettozzi stipulated to a violation of 201 KAR 11:121(4) for failing to act in accordance with a fiduciary standard towards a client.
Disposition: Respondent Louise Venettozzi agreed to pay restitution to the Complainants in the amount of $2,580.00.
Date of Decision: March 23, 1999JAMES P. ATKINS (Lexington) (Case No. 98-0078)
Violation: The parties entered into a settlement agreement in this case. Respondent Jack Adams stipulated to a violation of 201 KAR 11:400 for failing to provide an agency disclosure form to the buyer.
Disposition: Respondent Adams agreed to pay restitution to the Complainant in the amount of $1,500.00.
Date of Decision: March 24, 1999LINDA MAXWELL (Warsaw)
Violation: The parties entered into a settlement agreement in this case. Respondent James P. Atkins stipulated to a violation of KRS 160(1)(n) for failing to provide documents bearing the signature of a party requesting the documents and to a violation of 201 KAR 11:250, Section 2 for failing to obtain the necessary initials, dates and times on an offer to purchase or counteroffer.
Disposition: Respondent Atkins agreed to have his license placed on probation for a period of one (1) year and to complete twelve (12) hours of continuing education in addition to the six (6) hours required by law by the end of calendar year 1999. Mr. Atkins also agreed to accept a formal reprimand from the Commission.
GARY TOM DUNCAN (Williamstown) ( Case No. 98-0018)
Date of Decision: March 22, 1999REBECCA LAY (Cincinnati, Ohio) (Case No. 98-0041)
Violation: A hearing was held in this matter. The Commission adopted the Hearing Officer's recommendations. The Commission found that Respondent Maxwell and Respondent Duncan had violated 201 KAR 11:250 for failing to write the amount of a contract deposit on the purchase contract.
Disposition: The Commission issued a formal reprimand to Respondent Linda Maxwell and to Respondent Gary T. Duncan.
Date of Decision: April 21, 1999BENNY MICHAEL BROWN (Gastonia, North Carolina) (Case No. 95-0118)
Violation: The parties entered into a settlement agreement in this matter. Ms. Lay does not stipulate to any violation of licensing law; however, she admits that there is sufficient evidence for a fact-finder to find her in violation of KRS 324.160(1)(q), specifically, 201 KAR 11:250, Section 2(2). She understands that the final disposition of this case will reflect a violation of this section.
Disposition: Respondent Rebecca Lay agreed to pay restitution to the Complainants in the amount of $3,250.00.
Date of Decision: April 22, 1999KAREN OLLIGES (Louisville) (Case No. 96-0052)
Violation: Respondent Benny Michael Brown entered into a settlement agreement with the Commission. He stipulated to a violation of KRS 324.160(1)(j) for being convicted of a felony.
Disposition: Respondent Benny Michael Brown agreed to a two-year suspension of his license.
Date of Decision: April 19, 1999
Violation: The Commission entered a Default Order against Respondent Karen Olliges. Olliges plead guilty in criminal court to numerous felonies involving theft while engaging in property management. The Commission issued a Complaint against Olliges for violation of KRS 324.160 (1)(j) for being convicted of these felonies, and she never responded to any of the Commission's actions.
Disposition: The Commission revoked Olliges' license for a period of not less than five (5) years.
Our staff spotlight for this issue is Kim Brewer. Kim has been a longtime employee, joining the Commission in 1988 as a legal secretary. Kim was previously employed at the Kentucky Revenue Cabinet where she started her career in state government in 1983.
After just two years at the Commis-sion, Kim was promoted to an Administrative Specialist, Principal. Her duties include: receiving and processing all Commission invoices, budget preparation, reporting and compiling financial information, maintaining office equipment and ordering Commission supplies.
Kim is currently busy attending classes for the new state-mandated MARS financial reporting system. This new system will drastically change the way Kim handles her daily responsibilities.
Kim is very excited about learning the new MARS system. She says: "Although the learning process has been tedious, I will be able to process Commission financials much faster and with greater accuracy."
Kim lives in Jeffersonville, Indiana. In her free time, she enjoys reading, exercising and, as most women, shopping.
1999 Kentucky Core Course Information
Who has to take the course in 1999?
If your birthday is in January, February or March and you are an active licensee subject to the continuing education requirements, you MUST complete the Ky. Core Course by December 31, 1999.
Any licensee wishing to reactivate his or her license from escrow is required to complete the Ky. Core Course prior to activation.
Who is offering the course?
Beginning July 1, other education providers will be offering the core course at locations across the state (see the list on the opposite page).
How do I sign up to take the course?
Contact the provider directly for information on when and where the courses will be offered.
Can I choose any provider?
Yes. The providers are required to give first priority to those licensees who must complete the course in 1999 and those wishing to reactive from escrow. Remember that providers must make the course available to ALL licensees as long as the first priority requirement is met and the class is not full.
What is the enrollment limit per class?
Enrollment is limited to 75 students. Don't wait until the end of the year and risk the chance of being turned away because the class is full.
What is the cost of the Ky. Core Course now that it is not being provided by the Commission?
The cost of the course may vary from provider to provider.
If I take the Ky. Core Course, am I required to complete an additional six (6) hours of continuing education in the same year?
No, the core course will fulfll your continuing education requirement for the year in which you take the course.
ATTENTION: SALES ASSOCIATES MAY NOT HOLD THEIR LICENSES WITH ONE PRINCIPAL BROKER AND THEN WORK AS A LICENSED ASSISTANT FOR ANOTHER COMPANY
The Kentucky Real Estate Commission considers it a violation of licensing law for a licensee to hold his or her license with one principal broker and then work as a licensed assistant doing licensable activities for another company with a different principal broker. The Commission sees numerous possible violations inherent in these arrangements, including violations of KRS 24.160(1)(f) for receiving payment from someone other than your principal broker and KRS 324.160(1)(r) for improper conduct, as many people are bypassing Board dues by enlisting with one principal broker and working for another broker. The Commission also believes that these arrangements are an unlawful attempt to circumvent KRS 324.010 (1)(f) and KRS 324.112 (3). Anyone doing this is hereby advised to remedy this situation immediately. If you have any questions, please contact the Commission's legal department.