In an article published earlier this year, we outlined temporary rules adopted by the Real Estate Agency resulting from legislation passed in 2005. These temporary rules expired on June 29, 2006, and the Real Estate Agency has since adopted permanent rules which govern clients’ trust accounts, progressive discipline, and objective methods for investigating complaints. This article will outline the permanent rules and how they differ from the temporary ones adopted in January 2006.
Clients’ Trust Accounts
OAR 836-015-0186 addresses clients’ trust accounts, and how a broker may disburse disputed funds. Under the permanent rule, a broker may disburse disputed funds held in a clients’ trust account within 20 days following a request by the person who delivered the funds (ie, the buyer). Like the temporary rule, this rule allows a real estate broker to avoid holding disputed funds in a clients’ trust account, provided the broker follows procedures set forth in the rule.
For example, Buyer submits earnest money for the purchase of Seller's home. Broker deposits the earnest money in his clients’ trust account. Buyer and Seller disagree as to whether Buyer breached the sale agreement, and dispute who should receive the earnest money. Buyer submits a written request to Broker for return of his earnest money. Upon receipt of his request, Broker sends written notice to Seller that Buyer has requested return of the disputed funds. In addition, Broker informs Seller that he will return the disputed funds within 20 days after Buyer's request, unless the parties enter into a written agreement governing the funds or a legal claim to the funds is filed by one or both parties.
In the example above, Broker used the proper procedure under the permanent rule to return disputed funds. It is important to keep in mind that return of the disputed funds does not end the dispute or affect any right or claim a person may have to the funds. In fact, returning disputed funds merely allows a broker to avoid responsibility for the disputed funds.
You may remember that one significant change resulting from the recent legislative session was that the Real Estate Agency would begin using a system of progressive discipline for brokers who violate statutes and rules. The Real Estate Agency’s permanent rule provides that the commissioner may evaluate a number of factors to determine whether a broker should be sanctioned. If a sanction is appropriate, then the commissioner must determine whether to send a non-disciplinary advisory letter, or discipline the broker through reprimand, suspension or license revocation.
A broker may receive a non-disciplinary advisory letter (ie, educational suggestions) when an investigation has been closed and the commissioner has decided not to seek disciplinary action against the broker but wishes to educate the broker. This letter does not appear in disciplinary records, and is expunged from the Real Estate Agency’s records six years from the date of issuance.
Most significant in the permanent progressive discipline rule is that a reprimand is the greatest level of discipline a broker may be issued unless the broker 1) committed an act which resulted in significant damage or injury; 2) exhibited incompetence in professional real estate activity; 3) exhibited dishonesty or fraudulent conduct; or 4) repeated conduct or acts which were similar to acts for which the broker was previously disciplined.
One last permanent rule which was recently adopted by the Real Estate Agency relates to fairness and objectivity in investigating complaints made against brokers. In order to initiate an investigation, the commissioner or an agency manager must determine whether there are reasonable grounds to believe a violation occurred. Once initiated, investigations must be conducted in an objective, impartial and unbiased manner, and are limited in scope to the complaint. This rule will work towards fairness and impartiality in investigating complaints made against brokers.
As you can see, legislative changes may significantly impact brokers’ livelihoods, including impacting how they are sanctioned by the Real Estate Agency. For this reason, it is important that brokers stay on top of legislative changes that relate to licensed professional real estate activities and conduct their business consistent with professional real estate standards.
This column contains general information only and must not be construed as legal advice.
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