Unit 10 Flashcards
Deceptive practices under the Consumer Protection Act
The Tennessee Consumer Protection Act (Title 47, Chapter 18, Part 1 “Consumer Protection Act of 1977”) protects consumers and legitimate business enterprises from those who engage in unfair or deceptive acts or practices in the conduct of trade or commerce in the state.
This law makes it a Class B misdemeanor to commit any unfair or deceptive act in any trade or commerce.
Among the prohibited deceptive acts or practices acts having direct relevance to the real estate profession are:
misrepresenting goods or services
disparaging the goods or services of another’s business
advertising goods or services with intent not to sell them as advertised
making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions
representing that a transaction confers or involves rights, remedies or obligations that it does not
representing that a service, replacement or repair is needed when it is not
causing confusion or misunderstanding concerning the authority of a salesperson, representative or agent to negotiate the final terms of a consumer transaction
representing that a guarantee or warranty confers or involves rights or remedies when it does not
advertising in a way that creates a false impression of the grade, quality, quantity, make, value, age, size, color, usability or origin of the goods or services offered so that the buyer may be attracted and switched to other goods or services
advertising an offer to sell goods or services when the offer is not a bona fide effort to sell the advertised goods or services (An offer is not bona fide if the first contact or interview is secured by deception.)
advertising that the offer of goods has been occasioned by a financial or natural catastrophe when such is not true, or misrepresenting the former price, savings, quality or ownership of any goods sold
discriminating against any disabled individual
engaging in any other act or practice which is deceptive to the consumer or to any other person
Prohibited conduct under the Real Estate Licensing Act
The conduct prohibited by the License Act, while in accord with the Consumer Protection Act, is specific to the real estate profession. The Commission may refuse, suspend, revoke or downgrade a license if it finds a licensee guilty of:
making any substantial and willful misrepresentation
making a promise likely to influence, persuade or induce a person to enter into a contract or agreement when the licensee could not or did not intend to keep the promise
continually and flagrantly making misrepresentations or false promises through affiliate brokers, other persons, or any medium of advertising, or otherwise
untruthfully advertising that one is a “Realtor” or entitled to use any other trade name, insignia, or organizational identity when the licensee is not authorized to do so
failing, within a reasonable time, to account for or to remit any moneys coming into the licensee’s possession which belong to others
failing to preserve for three years following its consummation records relating to any real estate transaction
acting for more than one party in a transaction without the knowledge and consent in writing of all parties for whom the licensee acts
failing to furnish a copy of any listing, sale, lease, or other contract relevant to a real estate transaction to all signatories at the time of execution
using or promoting the use of any real estate listing agreement form, real estate sales contract form, or offer to purchase real estate form which fails to specify a definite termination date
inducing any party to break a contract, sale or lease for the purpose of substituting a new contract that is advantageous to the licensee or where such substitution is malicious
accepting a commission or any valuable consideration by an affiliate broker for the performance of any acts specified in this chapter, from any person, except the licensed real estate broker with whom the licensee is affiliated
being convicted in any state or federal court of forgery, embezzlement, obtaining money under false pretenses, bribery, larceny, extortion, conspiracy to defraud, or any crime or any similar offense or offenses, or pleading guilty or nolo contendere to any such offense
violating any federal, state, or municipal law prohibiting discrimination in the sale or rental of real estate because of race, color, religion, sex or national origin
violating any provision of the Real Estate Broker Licensing Act, any rule duly promulgated and adopted under it, or the terms of any lawful order entered by the commission
failing, on the part of a licensee, to exercise adequate supervision over the activities of any licensed affiliate brokers within the scope of the Act
failing, on the part of a licensee, within a reasonable time to complete such administrative measures as may be required by the Commission upon the transfer or termination of any affiliate broker employed by the broker
paying or accepting, giving or charging any undisclosed commission, rebate, compensation or profit or expenditures for a principal, or in violation of the Act
failing to disclose to an owner the licensee’s intention or true position if the licensee, directly or indirectly through a third party, purchases for itself or acquires or intends to acquire any interest in or any option to purchase property which has been listed with the licensee’s office to sell or lease
engaging in the unauthorized practice of law
committing any other conduct which constitutes improper, fraudulent or dishonest dealing
violating any provision of the Tennessee Time-Share Act
Conflicts of interest
A conflict of interest, or violation of agency responsibilities, occurs when an agent cannot place the interests of his or her client first, usually because the agent has a personal interest that is in conflict with the interest of the client.
The primary areas where this may occur are:
Net listings
Net listings, illegal in Tennessee, create a potential conflict of interest by leading the broker to encourage an owner /client to put the lowest possible acceptable price in the listing, regardless of market value. Thus the agent violates fiduciary duty by failing to place the client’s interests above those of the agent.
Dual agency
Dual agency, if undisclosed, can create a conflict because the agent may mislead parties to believe they are receiving the full set of agency duties from the agent, when, in fact, the agent’s own interest in closing a transaction may take precedence over serving either party properly.
Buying/selling for one’s own account
Dealing for one’s own account without disclosure creates a potential conflict because the seller may not realize that the agent has a secret profit motive that is in conflict with the seller’s best interest.
The requirements of full disclosure of interests and obtaining signed permission from all parties are designed to prevent potential conflicts of interest.
Discrimination
Discrimination occurs when a licensee or property owner denies an individual the full and equal enjoyment of the goods, services, facilities, privileges, advantages and accommodations of a place of public accommodation, resort or amusement, on the grounds of race, creed, color, religion, sex, age or national origin.
Any such denial of “full and equal enjoyment” may constitute a violation of the License Act, the Fair Housing Act, and/or the Human Rights Act.
See Chapter 6 on “Discriminatory advertising”, and Chapter 12 on “Fair Housing” and “Human rights.”
Illegal demand for referral fees
A “referral fee” is a commission or any other type of compensation for the referral of a potential buyer, seller, lessor or lessee of real estate.
Reasonable cause allows a real estate licensee to solicit or request a referral fee but does not necessarily mean that the licensee has a legal right to be paid a referral fee.
Reasonable cause to solicit a referral fee from a licensee means:
the party seeking the fee actually introduced the referred business to the licensee
the party seeking the fee and the licensee from whom the fee is sought have a relationship of subagency, contractual referral fee, or cooperative brokerage
It is unlawful to:
solicit or request a referral fee from a real estate licensee without reasonable cause
threaten to reduce or withhold employee relocation benefits or to take other action adverse to the interests of a client of a real estate licensee because of an agency relationship
Other misconduct
Improper Listing Agreements
A broker or affiliate broker may not accept or enter a listing based on a “net price.”
Interference with agency relationship
It is unlawful for a real estate licensee to counsel a client of another real estate licensee on how to terminate or amend an existing agency contract.
Complaints, hearings, remedies
As explained in Unit 2, a party alleging a violation of the Licensing Act by a licensee must file a complaint with the Commission within the longer of:
two years from the date of commission of the alleged violation or the complainant’s discovery of the violation
the applicable statute of limitations if the violation also constitutes a criminal offense
ten days after the completion of a successful prosecution of the violation as a criminal offense
On receipt of a verified complaint in writing charging a licensee with a violation of the Act, the Commission may:
investigate the facts
hold a hearing for reprimand, or for the suspension, revocation, or downgrading of a license
Also as explained in Unit 2, an injured consumer may seek restitution from the Real Estate Recovery Fund maintained by the Commission for this purpose.
The maximum compensation to an individual for actual or compensatory damages is fifteen thousand dollars per transaction.
For alleged violations of human rights or fair housing laws, a complainant may file a complaint with the relevant commission or agency. See Unit 12 for more detail.
Responsibility of licensee to report a conviction
If a licensee pleads guilty or is convicted of any offense enumerated in the License Act, the licensee must notify the commission of that conviction within sixty days and provide the commission with certified copies of the conviction.
The licensee’s license is automatically revoked sixty days after the licensee’s conviction unless the licensee makes a written request to the commission for a hearing during that sixty-day period.
Following any such hearing, the commission may impose upon that licensee any sanction permitted by the License Act.
