Chapter 05 - Real Estate Brokerage Activities and Procedures (P01) Flashcards
Office type that a broker must open, maintain, and register with the DBPR
Principal Office
Requirements for a broker’s principal office
Must:
- Registered with the DBPR
- Consist of at least one enclosed room
- Be in a building of stationary construction
- Provide privacy in negotiations and closings
Additional offices from which the broker conducts business other than the principal office
Branch Office
Office where licensed sales associates and broker associates may be licensed
Either the principal office or a branch office
Requirements for a branch office
Registered individually with the DBPR with the appropriate fee paid
Brokerage office that is transferable to a new location
Principal Office (Branch offices are not transferable)
Conditions under which a broker may have a principal or branch office in his or her home
When it is not in conflict with the local zoning ordinances
Conditions under which a branch office may be closed and reopened with a license reissue of the original license
If the closed branch office is reopened at the same location within the same two-year license period, the license may be reissued without additional fees
Time period for which a broker must maintain all books, records, and files
Five years
Office Sign Location at principal and branch offices
Required office sign must be:
- Located on or about the entrance (interior or exterior)
- Easily observed and read upon entering
Advertising Requirements
Must include the broker’s registered name or trade name of the brokerage firm and be under the supervision of the broker
Office sign content
Must contain:
- Broker’s trade name, if any
- Broker’s name
- The words “Licensed (or Lic.) Real Estate Broker”
Sales associates names on the office sign
Located beneath and clearly separated from the required text and include the license status of each name listed
Ads containing sales or broker associate names
All ads must include the last name exactly as registered with the FREC
Responsibility for all advertising no matter who created it
Broker
Internet advertisements
Must include the brokerage firm’s name or trade name placed adjacent to, immediately above, or below the point of contact information:
- Address
- phone number
- e-mail address, etc.
Escrow deposit alternate names
Deposit, earnest money deposit, or good faith deposit
Real estate advertisement that does not contain the registered or trade name of the broker or for which there is doubt that the ad is that of a real estate broker
Blind ad (which is illegal)
Action that should be taken by a licensee who is conducting a personal real estate transaction for their own benefit
Licensees should disclose their license status prior to entering any serious negotiations (but does not need to be disclosed in advertising)
Fraudulent act that a licensee is guilty of when using a name or insignia of an organization in an ad, when the licensee is not a member of that organization
False advertising
Broker actions required when placing a deposit with a title company or attorney
Selling broker must:
- Include the name, address, and phone number of the title company or attorney
- Request written verification of deposit receipt with 3 business days
- Provide a copy of written verification to seller or seller’s broker within 10 business days
Disposition of the deposit when a buyer defaults on the contract
Deposit is typically forfeited in favor of the seller (liquidated damages)
Time period within which a sales associate or broker associate must deliver a deposit to the broker
By end of the next business day following receipt (Saturdays, Sundays, and legal holidays are not considered business days)
Disposition of the deposit if no contract results
Deposit is returned to the buyer
Possible forms of deposit
Money, personal property, real property, or anything of value that can be converted to cash
Postdated check as a deposit
Requires seller’s approval (considered a promissory note)
Escrow or Trust Account placement
Commercial bank, title company which has trust powers, credit union, or savings and loan association in the state of Florida
Placement of deposit funds and a broker’s personal funds in the same account
Commingling
Escrow funds in an interest-bearing account
Written authorization of all interested parties with an agreement as to who shall receive the interest earned
Escrow reconciliation by the broker
Broker must prepare and sign a monthly written report comparing the (escrow account) trust liability with the bank statement and reconciling any differences.
Sales or property management escrow account personal funds exceptions
Up to $1,000 in a sales escrow account and up to $5,000 in a property management escrow account
Broker who either cannot or will not produce money or property belonging to another when required
Failure to Account
Fraudulent misuse, commingling, or failure to account for funds or property entrusted to a licensee
Conversion
Time period within which a broker must place the earnest money deposit in an escrow or trust account
“immediately”, defined as no later than the end of the 3rd business day following receipt (from the buyer)
Escrow dispute time constraints
15 business days to notify FREC, 30 business days to select a settlement procedure
Person or entity who owns the escrow funds before a contract has been entered into
Buyer
Escrow Reconciliation
Broker must prepare and sign a monthly written report comparing the (escrow account) trust liability with the bank statement and reconciling differences
Person or entity who owns the escrow funds after a contract has been signed but before the transaction closes
Buyer and seller jointly own the funds, with the broker, title company, or attorney holding the funds in trust
Escrow dispute settlement procedures
- Mediation
- Arbitration
- Litigation
- Escrow Deposit Order
Escrow dispute
Both the buyer and seller demand that the escrow funds be released to them (conflicting demands), or the broker has good faith doubt as to which person is entitled to the dispursement
Settlement procedure initiated when the broker requests that the FREC determine the party entitled to escrow dispursement
Escrow Dispursement Order (EDO)
Settlement procedure that is binding on the parties following a hearing in which both parties had an opportunity to be heard
Arbitration (conducted by an arbitrator who issues an award that can be enforced in a civil law suit)
Conditions of an EDO issued by the FREC
By law, the broker must follow the order for dispursement of the funds
Dispute settled by the parties before the EDO is issued by FREC
Broker should notify FREC within 10 days
Law suit filed in civil court to resolve an escrow dispute
Litigation (court action)
Double jeopardy situation for the broker upon successful appeal of the EDO by the parties
Should an appeal be upheld, the broker could be subject to civil damages for dispursing the funds according to the original EDO, that he or she was required to dispurse. (Broker may be reimbursed from Real Estate Recovery Fund)
Arbitration conditions
- Written consent by all parties
- Agreement in advance by contract to abide by the Arbitrator’s decision
Court action taken by a broker who does not claim any rights to the deposit under dispute
Bill of Interpleader (broker may still be awarded court costs and attorney’s fees)
Dispute between a broker and a party regarding the commission for the transaction
Civil court action (this is not an escrow dispute)
Settlement procedure where the parties appoint a 3rd person to assist in reaching an agreement
Mediation (conducted by a mediator who has no power to impose a decision on the parties)
Conditions for mediation
- Written consent by all parties
- If not successfully completed within 90 days, broker must promptly employ one of the other settlement procedures
Broker requests to participate in the settlement proceeds in the court’s decision
Declaratory decree
Escrow dispursement circumstances under which broker may dispurse funds without notifying FREC or utilizing one of the escape procedures
- Within 3-day rescission period for condo resale upon receipt of buyers’ written notice to withdraw from contract
- When a sales contract is subject to financing and financing cannot be obtained
- When HUD purchase, as directed by HUD contract
Rental list violations penalties
First degree misdemeanor, punishable by up to one year of imprisonment and/or a fine of up to $1,000
100% - refund entitled to an individual who paid for and received rental list information that was not current or accurate in any material aspect
Rental list refund - errors or misleading information
Licensee neglects to collect an escrow deposit stated in the contract
Culpable Negligence
75% of fee paid, if refund is requested within 30 days of the contract date
Rental list refund - rental not selected
Liability for the actions of partners, sales or broker associates under a brokers employment
The broker regardless of whether the broker knew about the actions
Compensation and rules for sales associates employed and working under a broker or owner-developer
- May not accept money or property except in the name of the employer
- May only perform activities authorized by the employer
- May only work for one broker or owner-developer at a time
Compensation for sales or broker associates
A sales associate or broker associate may ONLY be compensated by their employing broker or owner-developer and NEVER by a member of the public
Individual(s) that a sales associate may file suit against for failure to pay agreed upon compensation
ONLY the employing broker or owner-developer who failed to pay the commission
Change of employer notification requirements
Report change of employer to the FREC within 10 days of changing employers
Method by which a sales associate’s commission is determined
By agreement with the sales associate’s employing broker or owner-developer
Two or more individuals agree to share the profits or losses of a business and are each personally and severally liable for all debts and liabilities of the business
Partnership (may buy and sell real estate in the name of the partnership)
Partnership dissolution
- Death, withdrawal, or addition of a partner
- Agreement of the partners
- Bankruptcy of any partner or the partnership
- Court order
Upon employment terminations, the criminal charge associated with the taking of original listings, records, papers, or contracts without the employer’s permission
Larceny (also a breach of trust)
A business that is formed by an individual who is personally liable for his or her actions and the actions of employees within the scope of their employment
Sole Proprietorship (may sell real estate for use in his or her own business)
Real Estate brokerage partnership offering real estate services to the public
- At least one partner must hold an active broker license
- Each partner who provides real estate services to the public must hold an active broker license
- Sales associates and broker associates may not be partners
- Register with the DBPR in the name of the partnership
Mailing address change notification requirements
Licensees must report a change of mailing address to the DBPR within 10 days
Sole proprietor may offer real estate services to the public
Sole proprietor broker must:
- Hold a current, active, and valid broker license
- Register with the DBPR under personal name or trade name
Resignation or death of the only active broker in a real estate brokerage partnership
Vacancy must be filled within 14 calendar days
Limited Partner restrictions
May not take part in the management or control of the business; if they do, they become a general partner with personal liability
One general partner and one limited partner where the limited partners’ liability is limited to their investment
Limited Partnership
Restrictions on sales and broker associates in a real estate brokerage limited partnership
Sales associates and broker associates may not be general partners (but may be limited partners)
Joint venture conditions
Must be composed of separate real estate brokers (not required to register the business with the DBPR, since the brokers are already licensed)
Temporary business formation that involves a single transaction or a predetermined number of transactions
Joint Venture (or Joint Adventure) (may be formed orally or in writing, no documents must be filed)
An artificial person created by law
Corporation (for profit) (may buy and sell real estate for its own purposes but not for members of the public)
Type of partnership business formation in which partners are only jointly and severally liable for acts and debts incurred with partnership business and are not liable for acts or of debts of other individual partners
Limited Liability Partnership (LLC) (Must be filed with the Secretary of State)
Legal protection of corporate officers and board of directors against individual liability for actions in connection with corporate business
Corporate Veil (can be “pierced” to allow action where fraud or civil wrongdoings have occurred)
Practices for licensees who share office space (and may share the expense of a secretary) to avoid creating an ostensible partnership
Clearly indicate separate status with separate desks, telephones, and stationary, business signs, and advertising
Form a Corporation under Florida law
Charter (or articles of incorporation)
A corporation created under Florida law
Domestic Corporation
Type of business formation where all members render the same professional services permitted by their licensure
Limited Liability Company (LLC)
A corporation organized under the laws of another state
Foreign Corporation
A corporation organized under the laws of another country
Alien Corporation
May buy, sell, and lease real estate in limited amounts for its own use
Not-for-profit corporation
Sales and broker associates restrictions in a real estate brokerage corporation
Sales associates and broker associates may not be an officer or director
Corporation name display
Must include the word “Corporation”, “Company”, “Incorporated”, or the abbreviation “Corp.”, “Inc.”, or “Co.”
Conditions under which a corporation may operate as a real estate brokerage corporation, providing services of real estate to the public
- The corporation and names of all officers and directors must be registered with the DBPR
- At least one corporate officer must have an active real estate broker license
- All corporate officers and directors who provide real estate services to the public must hold an active real estate broker license
Business formed for religious purposes
Corporation Sole (may NOT register as a real estate brokerage corporation)
Two or more parties, such as brokers, who act or operate in a manner that deceives or misleads someone into believing that a partnership exists, when in fact, it does not
Ostensible Partnership (not a true partnership)
Titleholder for property owned by a corporation sole
The appropriate clerical personage takes title (upon his or her death, title passes to the successor in the office)
A group of businesses that wish to market or promote a specific product
Cooperative Association (may buy, sell, and lease real estate for its own use, but may NOT register as a real estate brokerage corporation)
Ostensible Partnership risk
The parties may be liable for the acts of the other parties as if a true partnership exists; the FREC can also take disciplinary action
Business created by filing a declaration of trust with the secretary of state where units in the trust are sold to the public as securities
Business Trust (May NOT register as a real estate brokerage corporation; anyone who transacts real estate on behalf of the trust must have an active real estate license)
Individuals group together for some purpose without creating one of the other business formations
Unincorporated Association (may NOT register as a real estate brokerage corporation)
Name under which a person transacts business other than the person’s legal name
Trade Name (or Fictitious Name)
Individuals or entities that may conduct business under a trade name
A broker, partnership, or corporation (a sales associate may NOT use a trade name; they must register under their true name only)
Organization formed for the purpose of real estate investment, such as investment trusts
Real Estate Syndicate (buying shares of stock in a corporation that invests in real estate is a common form of syndication)
Businesses that MAY register with the DBPR to perform real estate brokerage services
- Sole proprietorship
- Corporation
- Not-for-profit corporation
- Limited liability Company
- General Partnership
- Limited Partnership
- Limited liability partnership
Businesses that MAY NOT register to broker real estate
- Corporation Sole
- Cooperative Association
- Business Trust
- Unincorporated Association
- Joint Venture
Businesses that provide protection from personal liability and are required to file documents with the secretary of state
- Corporation (For Profit)
- Not-for-profit corporation
- Limited liability company
- Cooperative Association
- Limited Partnership
- Limited Liability Partnership
- Business Trust
Businesses whose participants are jointly and severally liable and do NOT have to file documents with the secretary of state
- Sole proprietorship
- General Partnership
- Joint Venture
- Corporation Sole
- Unincorporated Association
