The Commission is pleased to announce that there is a brand new resource on our website (www.krec.ky.gov). The License Law Tutorial is now online. The tutorial provides the actual language of the real estate statutes and regulations and then explains them in laymen's terms. The program was designed as a learning tool to help licensees and students to better understand the laws and regulations. It also provides risk-management tips and practical information to assist licensees in complying with the laws. The tutorial is copyrighted and is offered as a free service to our licensees. It was developed through funding from the Education, Research and Recovery Fund. Keep in mind that it does not provide any type of pre-license or continuing education credit.
The program consists of four informational units covering the Kentucky real estate statutes and administrative regulations. Each unit provides a review exam and a case study so that the users can apply what they have learned. Unit 5 contains a comprehensive case study and a final examination that covers all aspects of the license law.
The program contains direct links to the various KREC-approved forms. Questions can be forwarded to the Commission's Licensing and Education or Legal Departments through the email link. More technical questions can be emailed to our webmaster. Since the laws and regulations regularly change, this program will be updated on a regular basis.
The Commission wishes to thank Attorney Virginia Lawson and Webmaster Dr. Donald Bodley for their efforts and many hours of hard work in the development of this program. The Commission has already received many positive comments from users. Log on today and try it for yourself!
by: Jerry McMahan
Input from the licensee community is one of the most important tools we can use to ensure that the laws and regulations we pass will benefit both the industry and the consumers we serve. Our monthly Commission meetings are open to all licensees and the Commission's agenda can be found on-line four days before each meeting. The 2001 Commission meeting dates are also now on-line.
One of the ways that we can receive valuable input is through the public hearing process. Every time the Commission proposes a regulation, there are two opportunities for licensees to appear before the Commission and to give their input on the proposals.
This participation is important for a number of reasons. First, you, the licensees of this state, are the ones who are out in the field dealing with clients and home sales on a daily basis. From this experience, you have a unique perspective on how certain ideas may or may not work in practical terms. Second, the Commission strives very hard to propose regulations that will make consumer representation better. However, some of these proposals might not be workable in a real-life setting. Therefore, your comments and assistance are vital.
Recently, the need for licensee input and real-world experience came to the forefront. When passing our Internet regulation last year, we included a provision mandating that the sales associate's name must appear on all Internet advertisements. After the broker reciprocity issue arose, we learned that "Realtor.com" charges extra for sales associates' names to be included in their ads.
Because of this added expense to licensees in the state, the Commission is now going to amend the Internet regulation. Including the sales associate's name in all ads turned out to be impractical. (You can read more about this issue on page 11 of this newsletter.)
We realize, of course, that you are busy and that attending a public hearing may be the farthest thing from your mind. If you can't attend, please encourage your Board of Realtor representative to attend on your behalf. The above example demonstrates how significant your contributions can be in passing the right regulation. You are the ones out there practicing what we preach. By working together, we can be assured of a better industry and a more educated licensee population.
Again, I want to personally thank all of the licensees, Boards of Realtor representatives, educators and attorneys who have participated in the passing of new statutes and regulations. If you haven't participated, I encourage you to get involved and stay abreast of what the Commission is doing.
by: Norman Brown, Executive Director
From time to time in this column, I have mentioned an organization called the Association of Real Estate License Law Officials, or "ARELLO." It occurred to me that there may be licensees who do not know what this organization is and how the Kentucky Real Estate Commission is involved with it.
The Kentucky Real Estate Commission is a member of the Southern District of the Association of Real Estate License Law Officials, commonly known as ARELLO. This organization is made up of the Commissions and Commission-ers from across the nation. We periodically meet in various cities throughout the country to discuss trends, practices and laws pertinent to the real estate industry.
Your five Commissioners serve on various working groups called "committees," of ARELLO. Examples of these committees include education, law, and fair housing. It is a wonderful chance for our Commissioners to talk to representatives from other states and to share ideas on license and regulatory law matters and ways to strengthen the industry.
I serve as the Chair of the Administrative Training Committee. The purpose of this Committee is to manage the development and implementation of training resources throughout the country. This position has been very rewarding and educational. It has allowed me to learn so much about other states' innovative and cutting-edge technological advancements.
Being a member of ARELLO is vital to the Commission's operations. First of all, by attendance at these conferences and by receiving ARELLO's publications, we can keep our fingers on the pulse of the industry. In addition, when a new law is proposed, we can benefit from the knowledge and expertise of other states that may have similar laws. ARELLO also publishes a yearly update on legal cases that have been handed down across the country. This publication allows us to better assist you in risk-reduction techniques.
Our membership in this national organization allows us to stay on top of the many changes occurring in the real estate industry and to prepare for changes that are on the horizon. Topics at the next meeting include such timely issues as broker reciprocity, personal assistant duties and Internet advertising.
In early 2000, an Internet advertising regulation was enacted. The Real Estate Commission conducted two public hearings and received dozens of comments from licensees and industry trade group representatives during the hearings. The new regulation required that the listing agent's name be listed on ALL Internet real estate ads.
Following the enactment of the regulation, several licensees raised concerns that requiring the listing agent's name on all Internet ads poses a significant financial burden to the licensees. One goal of the public hearings was to uncover hidden costs that might arise from the new regulation. Unfortunately, the Commission did not receive any comments during the public hearings addressing certain costs licensees may incur if the listing agent's name is required to be placed on all Internet real estate ads.
The Commission considered whether any consumer threat existed if the listing agent's name was not posted on all Internet real estate ads. At the January Commission meeting, the Commissioners heard comments from several licensees and licensee representatives regarding the burden that this new regulation placed on licensees. After weighing the various issues, the Commission voted to begin the amendment process for the Internet advertising regulation. This amendment process takes approximately nine months.
Please note that the Commission requests licensee input and encourages participation during regulation public comment hearings. The Commission relies on active participation from licensees. Without such participation, certain issues (like the costs mentioned in this article) cannot be adequately considered. It is very likely that if the cost issue was raised during the initial public hearings, the listing agent requirement would have been deleted from the proposed regulation and we would not be amending the current regulation.
Is your Birthday in October, November or December? If so, and you are subject to the continuing education requirements, then 2002 is your year to complete the KENTUCKY CORE COURSE.
Even though this is the fourth year since the implementation of the Core Course, the Commission still receives calls from licensees who still don
A schedule of courses and a list of providers can be found on the KREC website (www.krec.ky.gov). The provider list is also available on the fax-on-demand service by calling 1-888-KREC-FAX, document #607.
KNOW POLICY EXCLUSIONS!
By: Cindy Rice Grissom, Rice Insurance Services Company, LLC
Real estate licensees need to know about their insurance policy exclusions - that is claims which are NOT covered by the policy. The Kentucky group program provides coverage for claims arising out of any negligent act, error or omission arising out of "professional services." Professional services means services performed by the insured licensee as a real estate broker, associate broker or salesperson as defined in the Kentucky Revised Statutes Chapter 324 and for which the insured licensee is required to be licensed pursuant to the laws of Kentucky. Activities beyond the scope of your professional services are not covered. Coverage for appraisal activity by active real estate licensees is not automatically provided, but is available by endorsement for the April 2002 - April 2003 policy.
Most of the claims not covered under the real estate errors and omissions program are not eligible for coverage either: (1) because the licensee had no retroactive coverage; or (2) because the licensee had a personal interest in the property. No retroactive coverage means that the licensee has not had continuous coverage since the date of the transaction. This is not common in Kentucky since insurance coverage is mandated and most licensees keep their coverage current and continuous. It is extremely important to pay your insurance timely and avoid any gaps in coverage. For example, if you place your license in an inactive status or have your license temporarily suspended for failure to meet your continuing education requirements on time, be careful to pay the full premium amount for your insurance coverage and maintain continuous coverage. If you wait and pay the prorated premium after your license is reactivated, you will lose your continuous insurance coverage and lose your retroactive date. Then, if you have a claim arising from a transaction prior to the inception date of your continuous insurance coverage, you will not be covered.
In addition, coverage is provided under the Kentucky policy if the licensee or his/her spouse or company has a personal interest in the property. There is no coverage for a claim involving professional services relating to property: (i) developed or constructed by, or (ii) more than 10% owned by, or (iii) purchased or attempted to be purchased by, an insured or by the spouse of the insured or by any entity, corporation, partnership, or trust in which the insured or spouse of the insured owns or controls more than 10% financial interest. However, if an owner/agent lists his/her property with another agent within his/her firm, the agent without the personal interest will not be excluded from coverage under the personal interest exclusion. Please note the personal interest exclusion does not apply to the sale of property acquired pursuant to a guaranteed sale listing contract which meets the policy requirements.
Another exclusion in the policy is the fraud exclusion. Please note that even though fraud is not covered by the errors and omissions policy, the insurance company will normally defend the insured licensee under a reservation of rights if there are other covered allegations. This means that the insurance company will provide a defense of the claim, but the insurer reserves the right, in the event that the fraud allegation is proven, to be relieved of any further obligation to pay damages or continue the defense. Fraud is often alleged in lawsuits against real estate licensees, but rarely proven. This is because a higher degree of proof must be shown for fraud than for proving mere negligence.
Most professional liability policies exclude coverage for bodily injury, property damage and personal injury. Such claims are usually covered by Commercial General Liability (CGL) policies, not professional liability policies. A CGL policy is "a standard insurance policy issued to business organizations to protect them against liability Claims for bodily injury and property damage arising out of premises, operations, products and completed operations and advertising and personal injury liability." [Glossary of Insurance and Risk Management Terms, 7th Edition (1999)]. It is particularly important for firms which perform property management to carry a CGL policy for the many additional risks involved in that type of activity. Other claims which are not covered by the Kentucky group policy include discrimination claims, pollution claims, and complaints filed before the Real Estate Commission. There are endorsements available which provide limited claims expense coverage for these types of claims.
Please read your policy carefully for a complete list of exclusions. It may seem like there are a lot of claims which are not covered by the insurance policy, however, most claims reported are covered. Rice Insurance Services Company, LLC (RISC) looks forward to providing the Kentucky 2002 group E & O program underwritten by MEDMARC Casualty Insurance Company (Medmarc).
This article highlights coverage available under Medmarc's Kentucky Real Estate Errors and Omissions insurance policy and is not applicable to any other states where Medmarc may offer similar coverage. It is not the policy and is not intended to be a complete description of the terms, conditions, and exclusions that may affect coverage under the policy. All statements in this article are subject to the actual terms, conditions, and exclusions of the policy. In the event statements in this article conflict with policy provisions, the policy provision will take precedence. At your request, RISC will provide you with a specimen copy of the policy.
It is hard to believe, but renewal time is here again. ALL licenses, including active and escrow, expire on March 31, 2002 and must be renewed by that date.
DUE DATE
The due date and deadline for ALL renewals is March 31, 2002. We recommend that you send your renewal in early to ensure on-time delivery. Do not wait until the end of the month. Also, please do not call our office to check if we have received your renewal. Your cancelled check is your receipt. Again, renewals must be received or postmarked by March 31, 2002.
ESCROWED LICENSEES
Even though your license is in escrow, you still must renew your license. Renewal forms will be mailed to your home address around the end of February. The forms will come as a 3 1/2" x 8 1/2" card that will need to be bubbled in. Simply fill out the card, attach a check or money order and mail it back to the Commission. The renewal fee for escrowed licensees is still $50.00 for sales associates and $55.00 for brokers.
ACTIVE LICENSEES
Active licensees must renew through their principal brokers. Please check with your principal broker for questions concerning your renewal fee. You will owe your principal broker $50.00 for sales associates and $55.00 for brokers plus your errors and omissions insurance premium.
PRINCIPAL BROKERS
Principal brokers have a huge responsibility at renewal. You should carefully read the entire renewal form and renewal instructions. Carefully review all of the names listed on your form. If you have changes, you will need to recalculate your renewal amount. Licensees who did not fulfill their continuing education requirements for 2001 will not appear on your form. When submitting payment, we will only accept a check or money order. We also require that you submit only one check.
Also, remember that the principal broker's signature is the only signature acceptable on the renewal form.
ERRORS AND OMISSIONS INSURANCE
Errors and Omissions Insurance applies only to active licensees and is mandated under our statutes. You may select the group coverage or you have the option of choosing private coverage. If you select the group program, your errors and omissions premium has already been calculated on your renewal form. If you choose private coverage, you must deduct that amount for each licensee and recalculate the total. You will also have to attach a "Private Certification of Coverage Form" listing all licensees covered under this policy. For information on the group program you can contact the carrier directly at 897-1876 or toll free at 800-637-7319.
MULTIPLE/BRANCH OFFICES
If you have a multiple and/or branch office, you will have to submit a separate check for each office as calculated on the renewal form. Also, please submit all of your multiple/branch office renewal payments to the Commission at the same time. Do not send one office one day and one office the next because they will be returned to you.
LATE RENEWALS
Do not get caught having to pay a late renewal penalty. All renewals postmarked after March 31, 2001will be assessed a penalty. Please remember to renew on time. The penalties that will be imposed for renewals received after this date are as follows: $100 before May 15th and $200 after May 15th. The penalties are in addition to the regular renewal fees.
APPRAISAL COVERAGE
Real estate licensees who are also "Licensed" or "Certified Appraisers" (pursuant to KRS Chapter 324A) will have the option of choosing an endorsement to cover their appraisal activity. There is no cost this year for this endorsement. However, in order to receive this coverage, licensees MUST sign up for this endorsement. The limit of liability will be $100,000.00 per licensee per occurrence, without aggregate, and unlimited for defense costs.
We are happy to announce that there is a new face in the Commission's Legal Department. Skippy Glaser joined our staff in December 2001 as an Administrative Secretary.
Skippy brings to the Commission 25-plus years of experience working in State Government. Before joining our staff, she worked in the Department for Social Services and the Kentucky State Police. She graduated from Ahrens Trade High School and attended the University of Louisville and Bellarmine University.
Her duties include assisting Staff Attorney Lee Harris in writing the new law treatise and filing new regulations. Other duties include preparing the case agenda for the Commissioner's monthly meetings, closing case files, assisting with scheduling and preparing pre-hearing documents.
Skippy has an outgoing personality that is well-suited for interacting with the real estate licensees. She says, "I really enjoy working in the Legal Department, learning about real estate law and working with the other staff members at the Commission." She is a real team player, and the Commission is fortunate to have her as part of our staff.
Skippy resides in the east end of Louisville. She enjoys working out at the gym, lifting weights and doing cardiovascular exercise in her free time.
By: Lee Harris, Staff Attorney
EMPLOYMENT AGREEMENTS
As a sales associate, when you place your license with a new principal broker, you should enter into a written employment agreement. This agreement should outline the payment schedule, or commission split, to which you and the broker have agreed. In addition, it should outline any office responsibilities, such as phone duty or weekend duty, that are required of you.
Perhaps most importantly, the agreement should outline what will occur in case you leave the broker's employ or put your license into escrow at some point in the future. While this seems like a burdensome thing to do when you are just starting a new business relationship, that agreement can be very helpful to both the broker and the sales associate.
All listings belong to the principal broker, whether you have originated that business or not. When you leave, there are often listings that have not yet sold. The questions that need to be addressed in your employment agreement are whether you will be entitled to move those listings upon your departure and also whether you will be paid for listings that close after your departure.
Many sales associates do not have a written employment agreement. So, if or when they decide to leave their current principal broker or to move their licenses to another company, these questions arise. It is very difficult to know how such issues should be handled, because there has been no agreement.
If you do not have a written agreement and are leaving your current principal broker, you should discuss these issues at the time you decide to leave. Once you and the broker have come to an agreement as to how the listings and contracts will be handled, reduce that agreement to writing. Your principal broker certainly can pay you for listings that close after you leave, but he or she is not required to do so. That is why a written agreement will ensure that all parties have a clear understanding of how things will be handled once you have departed.
MOBILE HOMES
I have received numerous calls concerning an agent's or broker's desire to "list" a mobile home for sale. By definition, a mobile home is not real property if it is in fact still mobile. A mobile home can be converted to real property by being permanently attached to a piece of land and then converting the mobile home title to real property. However, a mobile home that can be moved from one location to another is still considered personal property under the law.
Therefore, a real estate agent or broker cannot use his or her license to "list" a mobile home. This would be akin to listing a boat or a refrigerator, also items of personal property. The state fire marshal's office issues special licenses for individuals to sell mobile homes. However, state law allows an individual to sell two (2) mobile homes in a twelve (12) month period without requiring a dealer's license.
LANDLORD-TENANT LAWS
The Commission frequently receives inquiries from agents, brokers and consumers about landlord-tenant laws. Many agents and brokers, of course, engage in property management and should, therefore, have a grasp of the landlord-tenant laws governing the area in which they live.
Kentucky's landlord-tenant laws are not the same throughout the state. Rather, several counties and cities have adopted the Uniform Residential Landlord-Tenant Laws, found in KRS Chapter 383.500 and beyond, while other counties and cities still use the old laws found in the beginning portion of KRS Chapter 383. The following counties and cities have adopted the Uniform Act: Jefferson Co., Fayette Co., Oldham Co., Pulaski Co.; and Georgetown, Covington, Newport, Lawrence, Dayton, Taylor Mill, Ludlow, Bellevue, and Melbourne. If you live or work in a county or city that has not adopted the Uniform Act, you are still required to follow the old law.
While the concept of the laws is essentially the same, there are some very specific items in each that differ greatly. Please take the time to review the section that applies to you. I think you should even make a copy and keep it handy in your desk drawer. If a tenant fails to pay his or her rent or if repairs are needed on an apartment, etc., it will behoove you to have that information at your fingertips. As a licensee, you should always follow the landlord-tenant laws to protect your client and to ensure that all tenants are treated fairly.
If a landlord or property manager fails to follow the law properly, for example, that landlord or tenant may not be entitled to keep a security deposit or seek further damages from a tenant. You do not want to violate a provision of the landlord-tenant laws and cost your client a deposit to which he or she is rightfully entitled. Likewise, there are several specific deadlines in the Uniform Act that must be met in order for evictions or other actions to take place. If you have not sent the proper letters or waited the appropriate timeframes, the tenant may be able to stay in the unit longer than the landlord desires. It is always better to cross your t's and dot your i's than to do things improperly and suffer the financial or legal consequences.
The citizens of Kentucky, the Commission and all real estate licensees recently lost a dedicated and valuable member of the industry and the community. William N. "Nat" Sanders passed away on the morning of January 31, 2002. He was survived by his wife, Sue; a son, William; a daughter, Ellen; a stepson, Ken; a stepdaughter, Jennifer; a sister, Bettye; two nephews; five grandchildren; and one great-grandchild.
Mr. Sanders began his real estate career in 1957 after graduating from the University of Kentucky. He was named Kentucky Realtor of the Year in 1970. In 1972, he was appointed the first Education Director of the Kentucky Real Estate Commission. On June 1, 1975, the Commission appointed him to the role of Executive Director.
Mr. Sanders was frequently quoted as saying that working at the Commission was the best job he ever had. He so enjoyed traveling around the state meeting the licensees. He was also instrumental in helping establish the real estate grant programs for colleges and universities. He wanted to help make sure there were courses available to pre-license candidates across the state. In fact, he actually helped establish real estate degrees at 19 colleges and universities.
In 1978 Nat became Education Director of the Louisville Board of Realtors and was also a former Executive Vice President of that Board. He is also a Past President of the Kentucky Association of Realtors.
Most recently, Mr. Sanders could be seen throughout the state monitoring classes for the Kentucky Real Estate Education Foundation. He visited the Commission frequently to pick up law manuals for classes. He was a true asset to this profession. Nat always offered a cheerful greeting and a smile to everyone. He will be greatly missed by all.
The Commission is pleased to announce that Rice Insurance Services Company, LLC (RISC) has won the bid for the Kentucky real estate licensees' group errors and omissions insurance program for license year 2002/2003. These are the same folks that have provided this service to Kentucky licensees in the past. The premium actually went down this year to just $66.00 per licensee, plus taxes. The carrier for the program is Medmarc Casualty Insurance Company. The Commission is looking forward to another successful program year.
Licensees in Kentucky are fortunate to receive the lowest E & O premium in the country out of the twelve states that have a mandated program. Not only do you have the lowest premium, but you also receive a limit of liability of $100,000.00 per licensee per occurrence, without an aggregate. In addition to this, the policy is written with no deductible. The Commission is glad to be able to offer Kentucky licensees such an affordable policy.
If desired, you will also be able to purchase additional endorsements to the basic policy. These endorsements include: higher coverage limits of $250,000 - $1,000,000; coverage for defense costs relating to environmental claims and coverage for defense costs for actions taken before the Commission. These endorsements should be purchased directly from the carrier.
Licensed real estate licensees who are also "licensed" or "certified appraisers" under KRS Chapter 324A will be pleased to know that they can sign up for an appraiser endorsement to the basic policy at no charge this year. This endorsement will cover acts of "licensed" or "certified appraiser" under KRS Chapter 324A who are also Kentucky real estate licensees. The limit of liability is $100,000.00 per licensee per occurrence, without an aggregate, and unlimited for defense costs. "Licensed" or "Certified Appraisers" also have the option to purchase an endorsement to provide higher coverage limits of $250,000 to $1,000,000.
Licensees should always keep in mind that this is a claims-made policy. This means that it covers claims made and reported to the company in writing during the policy period or the extended reporting period. Licensees have a 365-day extended reporting period, which begins on the date of cancellation or non-renewal of the policy. Licensees also have the option of purchasing tail coverage. Tail coverage protects you for acts committed during the policy period but which were not reported until after the licensee became inactive. Licensees who go into escrow and are not covered under another policy should consider purchasing tail coverage for added protection.
Questions about the group errors and omissions insurance program should be directed to RISC. You can reach them toll-free at 1-800-637-7319. If you are calling from the Louisville area, please call 897-1876.
The Commission is working to finalize the provisions of the administrative regulation that will explain the requirements for the new brokerage management course mandated under KRS 324.046 (1) (a). We anticipate the implementation date to be July 1, 2002. After the regulation has been enacted, all candidates for a broker's license will have to complete a three credit hour/48 classroom hour course in brokerage management as part of the real estate house required for a license. Watch for more information on this new requirement in the next newsletter.
It is illegal for any licensee to offer a prize, money, free gift, rebate or any other thing of value for the purpose of influencing a purchaser or prospective purchaser of real estate (201 KAR 11:121, Section 2).
However, you may offer refreshments or snacks to the general public and you may give a gift that has a value of less than $100.00 as a closing gift so long as it was not offered before closing.
REAL ESTATE SETTLEMENT PROCEDURES ACT
By: Virginia L. Lawson, Attorney
The Real Estate Settlement Procedures Act of 1974 (RESPA) is a federal law that became effective in 1974 after Congress found that significant reforms were needed in the real estate settlement process. Congress had conducted an investigation and found numerous abusive practices that led to higher costs for consumers obtaining mortgage loans. RESPA applies to federally regulated one-to-four family residential transactions.
Four areas were targeted for changes in the settlement process. The changes were designed to: (1) require more effective advance disclosure to buyers and sellers of settlement costs; (2) eliminate kickbacks or referral fees in the delivery of settlement services; (3) reduce the amount of money home buyers are required to place in escrow accounts for real estate taxes and property insurance; and (4) reform and modernize local record-keeping of land title information. Although all four areas are important, the two that most directly affect the real estate licensee, and the way he/she does business, are the requirements for advance disclosure of settlement costs and the elimination of kickbacks and referral fees.
Lenders must provide a special information booklet that explains the settlement process and costs to all applicants within three business days after a mortgage loan application is received or prepared. If the application is not approved within the three days, the booklet does not need to be provided. This booklet generally explains the mortgage process and gives the borrower a "good faith estimate" of the settlement costs they will likely incur.
Settlement costs, also referred to as closing costs, include services provided by the lender, the attorney, the settlement agent, the appraiser, the inspector, the surveyor, the real estate agent, the insurance agent, and the credit reporting agency. Basically, this includes all costs that the borrower is required to pay because he/she is borrowing money to purchase residential real estate.
In addition to the requirement that the booklet be delivered at the beginning of the mortgage process, RESPA requires the "HUD-1" settlement statement be used at all closings. An often ignored provision of RESPA is the requirement that the borrower has the right to inspect the HUD-1 one business day before the closing.
Under RESPA, the settlement agent is required to provide true and accurate information on the HUD-1. Borrowers, sellers, and the settlement agent all sign the HUD-1 stating that the information on the form is true and correct. In the event the information is not correct, all three parties are subject to penalties. If licensees know that the information is not correct, or even worse, suggest that the parties have inaccurate information on the HUD-1 by paying items outside of closing or engaging in "side deals" to avoid having certain information appear on the settlement statement, they may also be subject to penalties under RESPA.
Cases involving licensees often involve the prohibition against kickbacks and unearned fees. Under RESPA, no person shall give or accept a "fee, kickback, or thing of value" for referring business incident to the settlement services. Also prohibited is the giving or accepting of any portion, split, or percentage of the fees paid for rendering a service in the settlement process. Basically, licensees cannot receive referral fees from service providers that are involved in the settlement process. An example would be if a licensee accepted money or "anything of value" from the closing attorney or from the loan officer for referring business to the attorney or to the lender.
The penalties for violating this section are stiff. Any person violating this prohibition may be fined up to $10,000 or be imprisoned for up to one year, or both. In addition, the consumer who paid the fee for the service that involved the kickback is entitled to receive an amount equal to three times the amount paid for the service. This award may be collected by the borrower from either the party that paid the kickback or the one that received it.
Licensees must remember that a violation would also be a violation of their licensing statutes and regulations. A claim or lawsuit because of a violation of RESPA against a licensee would probably not be covered under the licensee's errors and omissions insurance policy.
LOIS A. BRATCHER (LOUISVILLE) Case No. 01-0058
Violation: Ms. Bratcher stipulated to a violation of KRS 324.360 (5) for failing to deliver a Seller's Disclosure of Property Condition Form.
Disposition: Ms. Bratcher agreed to pay a $100 fine to the Commission within thirty (30) days of the Final Order.
J. CHRIS JANES (BOWLING GREEN) Case No. 01-0037
Violation: Mr. Janes stipulated to a violation of KRS 324.160 (4) (v) for improper, fraudulent or dishonest conduct for being involved in a real estate transaction in which the contract price was falsely inflated to reflect a higher loan to value ratio. Mr. Janes appraised the property at $90,000, some $15,000 higher than he had appraised the same property five (5) months prior. Contrary to law, Mr. Janes did not include the required disclosure in the second appraisal, showing that he had recently appraised the property for much less.
Disposition: Mr. Janes agreed to a three year suspension of his license.
BRIAN SPAULDING (NAPLES, FLORIDA) Case No. 99-0022
Violation: Mr. Spaulding stipulated to a violation of KRS 324.160 (4) (j) for being convicted of a felony while holding a Kentucky real estate license.
Disposition: Mr. Spaulding agreed to a one year suspension of his license from the date of the Commission's Final Order. He also agreed to submit to random drug testing as condition of his continued licensure.
JOHN L. ADAMS (CLARKSVILLE, TENNESSEE) Case No. 01-0054
Violation: Mr. Adams stipulated to a violation of KRS 324.160 (4) (v) for improper conduct for attempting to represent a real estate company that was not properly formed yet while still working under another principal broker. Mr. Adams purported to work under a new company while his license was still being held by his old company.
Disposition: Mr. Adams agreed to accept a formal reprimand from the Commission and to attend six (6) additional hours of continuing education in addition to the hours already required by law.
