Unit 13 Flashcards
Unit 1
Tennessee real estate laws and regulations are primarily contained in:
The Tennessee Real Estate Broker License Act of 1973
Rules of the Tennessee Real Estate Commission
Other laws relevant to real estate licensees include:
Uniform Landlord and Tenant Act Horizontal Property Act Notice of Completion Statute Tennessee Lead-based Paint Certification Act of 1997 Hazardous Waste Management Act of 1983 Tennessee Consumer Protection Act of 1977 Tennessee Anti-Trust Law Conveyances of Property Time-share Programs and Vacation Clubs Human Rights
Unit 2
For the protection of the public, the Commission:
Establishes and oversees:
licensing requirements
professional education
professional conduct
a Real Estate Recovery Fund
Was established in 1951.
Is a judicial body. The attorney general defends the members in court.
9 members appointed by the governor for a term of five years.
three each from each of the three grand divisions
seven have been active as broker or affiliate for five years
two must be from outside the real estate industry and from different grand divisions
Chooses a chair and vice chair from its members, and appoints an executive director and director of education.
May make whatever rules it needs to enforce the Licensing Act.
May not set fees and commissions.
May ask a court to stop anyone from violating the Act.
May refuse, suspend, revoke or downgrade a license.
Investigates complaints and holds hearings if it sees fit.
A consumer has two years from the date of an alleged violation to file a complaint, or longer depending on the statute of limitations, or the results of a criminal prosecution.
A licensee has ten days to answer a complaint.
Needs a majority vote to revoke or suspend.
It takes agreement of six members to reissue a revoked license.
A licensee must notify the Commission within sixty days of conviction for any offense in the License Act. After sixty days, the license is revoked unless the licensee requests a hearing in writing.
If a license is revoked, suspended, or surrendered, the licensee loses any school or instructor approval he or she has.
May fine a violator of the license requirement one thousand dollars for each violation. Each day of violation may be considered a separate violation.
May punish other violations with fines ranging from fifty dollars to one thousand dollars per violation.
Administers the Real Estate Recovery Fund.
must maintain a balance of five hundred thousand dollars at all times
maximum award for damages is fifteen thousand dollars per transaction
maximum amount paid out on behalf of any licensee is thirty thousand dollars
licensee must repay the amount paid out by the fund, plus interest, to reinstate a suspended or revoked license
Violation of the requirement for a license is a Class B misdemeanor.
The violator is liable for a civil penalty of up to three times the amount of any money received for the illegal services.
Unit 3
No one may act as a broker, time-share salesperson, or acquisition agent without a license.
Activities that may not be performed without a license:
Solicit listers or purchasers, show properties, host open houses, provide information not on the listing form, advertise, discuss firm contracts with outsiders, receive a commission, negotiate between buyer and seller
Do not need a license:
owners representing themselves
attorneys-in-fact or -at-law
resident managers who do no negotiating of rents
corporations dealing with their own property
individuals who work for a licensed vacation lodging services firm
Activities that may be performed without a license:
answer phone, give limited information on listings, submit listings to MLS, secure public information from courthouses, assemble closing documents, write and place ads under broker supervision, handle earnest money under broker supervision, type contract forms under supervision, compute commission checks, place signs, gather market information
Types of licenses:
broker, affiliate broker, time-share salesperson, acquisition agent
Requirements for license
character– no convictions, parole or probation in last two years
education– high school diploma, ninety hours of prelicense education for affiliate; 120 additional hours for broker
age– 18
residence– 45 days in state
experience– for broker, 36 months of active affiliate license if licensed after May 12, 1988, or 24 months if licensed before that date
examination– pass with 70% for affiliate, 75% for broker
application and fees– $100 for original license; $80 to renew
Non-resident license requirements
be from a state with reciprocity with Tennessee
hold a license that required a written examination
meet Tennessee qualifications
file a consent
obtain Errors and Omissions insurance
Each office and branch office must have:
a firm license
a principal broker
an escrow account, unless waived
Unit 4
Needed to maintain license:
Errors and Omissions insurance
proper display of license in principal broker’s main place of business
compliance with requirements to identify firm and engagement in real estate business in signage– affiliates do not have to display sign
License status
inactive– may not engage in acts requiring licensure; still subject to continuing education requirements for renewal; must pay renewal fee; converts to retired status when education is fulfilled
retired– may not engage in acts requiring licensure; only allowed if continuing education requirements have been met; must pay renewal fee to avoid expiration
expired– all licenses expire two years from date of issue unless renewed; may be reinstated without examination within 60 days of expiration by proving compliance with prerequisites and paying fees and penalties
suspended and revoked– by Commission for violation of the Licensing Act or fraudulent conduct; by court if a party obtains a judgment or decree against the licensee; a broker’s license may not be revoked for actions of an affiliate
License renewal
to avoid penalties and fines, must meet deadline for documentation of education completion– 60 days before expiration
education– for affiliate, 16 classroom hours every two years; for broker– 120 classroom hours within first 3 years, then 16 hours every two years thereafter
Unit 5
The affiliate broker:
is an employee or independent contractor of the broker
is agent and fiduciary of the broker and must follow instructions and fulfill other duties of agency
may obtain and sell listings on behalf of the broker
cannot operate without being affiliated to a broker
cannot receive payment from anyone but the broker
may not pay a commission to any unlicensed individual
must live within fifty miles of the firm office
must obtain Errors and Omissions coverage
may only change affiliation if released by the broker
when changing affiliation, may not take any listings belonging to the firm unless authorized by the broker
The principal broker:
employs or contracts with the affiliate
must supervise and train the affiliate
is responsible for contracts and escrow funds
must manage the office full time
is the only one who can pay the affiliate broker
may not withhold permission for affiliate to change affiliation\
may not pay a commission to any unlicensed individual
Unit 6
Advertising, except that by an owner/agent who is not working through the firm, must:
be directly supervised by the broker
list the firm name and phone number
indicate that it is a firm in the real estate business
For Sale signs can only be posted on a property with written permission from the owner.
Franchise advertising must include:
licensee’s name
broker or firm name and telephone number
statement that office is independently owned and operated
Internet advertising providing MLS access through the web site must include:
web site owner’s firm name and telephone number on every page
a disclaimer of listing ownership if “thumbnails” are displayed
the listing firm’s name and telephone number if listings containing more than five criteria are displayed
Gifts and prizes may be offered to promote sales, if:
they are sponsored by the firm
there is written disclosure of fair market value, time and place of delivery and any requirements that must be satisfied
they do not offer cash to any unlicensed person
Discriminatory advertising in Tennessee:
attempts to deny goods or services because of race, color, creed, religion, sex, or national origin
is a violation of the Tennessee Human Rights Act as well as license law
Prohibited advertising includes:
Substantial and willful misrepresentation.
Making false promises.
Misleading or untruthful statements.
Improper use of trade and association names.
Unit 7
General conditions for contract validity:
competent parties
mutual consent
valuable consideration
legal purpose
voluntary, good faith act
Legal age for contracting in Tennessee is 18.
Statute of Frauds requires a contract to be in writing if:
it involves $500 or more
it is a real estate lease with a term over one year
Examples of contracts that must be in writing:
exclusive right-to-sell
exclusive agency
exclusive right to represent buyer
lease for more than a year
purchase contract
employment contract
In addition to being in writing, valid listing agreements must:
have a termination date
specify a selling price
An exclusive listing agreement creates an agency relationship.
Brokers and affiliate brokers must be careful to avoid unauthorized practice of law in preparing contracts and other documents. The safest practice is to use promulgated forms.
A principal broker must:
keep transaction records on file for three years
allow proper authorities access to escrow records
A broker or affiliate must:
promptly deliver all written offers until a contract is signed
promptly deliver copies of an accepted offer or a signed counteroffer to buyer and seller
furnish all signatories with copies of transaction-relevant contracts at the time of execution
provide copies of closing documents to customer and client if acting as closing agent
Unit 8
Brokers must maintain an escrow account separate from their business account to hold the funds received from others.
A real estate firm’s escrow account may be in a state bank.
A vacation lodging service’s account must be in a federally-insured institution.
The Commission may waive the requirement for a firm that does not handle the funds of others.
Brokers are responsible at all times for earnest money and deposits received by them or affiliates, no matter who actually holds the funds
A contract authorizing a broker to place funds in an escrow account must specify:
terms for disbursement
name and address of the person actually holding the funds
Earnest money must be deposited into the escrow account promptly upon acceptance of an offer
Post-dated checks and non-cash items are not acceptable as earnest money unless specifically allowed in the contract.
Affiliate brokers must pass earnest money received to their broker immediately. Interest-bearing escrow accounts are not required or prohibited. The broker must maintain escrow records for 3 years, showing:
the depositor
date of deposits
date of withdrawals
payee
Broker must avoid improper use of escrow funds:
commingling– mixing broker’s funds with escrow funds
conversion– using escrow funds for the broker’s own purposes
Escrow funds must be properly disbursed without delay when:
the contract directs the disbursement
all interested parties execute a separate signed agreement directing disbursement
the transaction closes
an offer is rejected or withdrawn
the broker petitions a court to interplead the funds
a court orders disbursement
Unit 9
The essence of the agency relationship–trust, confidence, and mutual good faith.
Compensation and agency are independent of each other.
No implied agency in Tennessee
Agency relationship only created by explicit, written, bilateral agreement.
With no agreement– licensee is facilitator, not agent.
Exclusive right to sell and exclusive agency listings create an agency relationship.
Agency relationship between licensee and client is limited agency– agent restricted to specific duties; terminates on performance.
Agent owes client:
obedience, loyalty, assistance, advice
Agent owes all parties:
skill and care, disclosure of adverse facts, confidentiality, honesty and good faith, accounting, no self-dealing without consent and disclosure
Licensee’s verbal disclosure of relationship:
to unrepresented buyer or seller– before providing any services; confirm in writing before executing a listing agreement or preparing or presenting an offer and obtain a written receipt
to another licensee– on initial contact
Exemptions from disclosure– transactions involving commercial, lease, or auctioned properties, and residential properties of more than 4 units.
Dual agency–legal in Tennessee if disclosed.
Designated agency– to avoid creating double agency.
broker appoints a licensee to be single agent of one party in a transaction to the exclusion of all other licensees in the firm
another licensee in the firm can be designated agent of the other party
no implied sharing of confidential information, no conflict of interest
Licensees dealing for themselves must:
disclose their intention before attempting to acquire any interest
continue to disclose in any subsequent transactions
Residential property owners must:
make condition disclosure or disclaimer to buyer before acceptance of purchase contract
disclosure required unless explicitly waived
Disclosure requirement applies if:
sale, exchange, land sales contract, lease with option to buy
residential property of one to four units
Owner disclosure:
includes any material defects known to the owner
owner not required to inspect or investigate condition
owner not liable for Errors and Omissions provided the defects were unknown, owner not negligent, or errors created by public or professional experts
Licensee disclosure:
obligated to inform client of rights and obligations of disclosure
required to disclose known adverse facts, but not to discover or disclose latent defects
licensee not liable for Errors and Omissions if made disclosure of rights and obligations to buyer and seller, but may be subject to legal action for misrepresentation and failure to disclose known defects
licensee and owner do not have to disclose: presence of HIV; stigmatizing event that has no effect on structure or environment
Buyer remedies for misrepresentation:
sue for damages
terminate purchase contract before closing
pursue other legal remedies
Unit 10
Consumer Protection Act– deceptive practices, a Class B misdemeanor
misrepresenting, disparaging, advertising with no intent to deliver, false or misleading statements of fact, causing confusion about salesperson’s or agent’s authority, deceptive or false advertising, discriminating against a disabled person
Real Estate License Act– prohibited conduct cause for revocation
willful misrepresentation, false promises, unauthorized use of trade names, failing to account for funds of others, failing to preserve transaction records for 3 years, undisclosed and non-consenting dual agency, using a contract form that doesn’t specify termination date, inducing a person to break a contract for the licensee’s advantage, licensee accepting a commission from anyone but the broker, being convicted of any kind of fraudulent financial behavior, discriminating, failing to supervise affiliates, giving or receiving an undisclosed payment, failing to disclose self-interest in a transaction, practicing law without a license, violating the Time-Share Act or the Licensing Law in any way
Examples of conflicts of interest– potential violations of agency and License Act
net listings (illegal)
dual agency (illegal if undisclosed)
dealing for one’s own account (illegal if undisclosed)
Illegal demand for referral fee– violation of License Act
soliciting a fee from another licensee without reasonable cause (no procuring cause and no agency relationship)
Illegal interference with agency relationship– trying to get a client of another licensee to terminate the agency contract
Complaint against a licensee must be filed within whichever period is longest:
two years from commission or discovery of violation
statute of limitations if criminal offense
ten days after a criminal conviction for the violation
Requirement to report conviction for any prohibited act- notify Commission within sixty days.
Unit 11
Regulated by the Time-share Act:
Time-share programs – periodic use of time-share intervals occurring annually over more than one year
Vacation clubs – recurring right to use accommodations in more than one site according to mandatory reservation system
Time-share salespersons, managing agents, acquisition agents – time-share salesperson must be affiliated with a firm that is affiliated with a registered project
Managing agent of time-share project:
licensed real estate firm or bonded agent
responsible for escrow account for project reserves
Principal broker of time-share managing firm:
controls accounts
ensures Commission access to account records
must maintain time-share records for four years
Public offering statement from time-share developer or agent:
must be given to purchaser by date of sales contract
may not be used for promotion before project is registered
Purchaser’s right to rescind time-share sales contract:
any time before receipt of the offering statement
10 days from date of signing if buyer inspected site before signing
15 days from date of signing if buyer did not inspect before signing
Rental location agents: regulated by the License Act
qualifications: pertains to residential property, fee paid by tenant; must be licensed by the Commission– either special license or broker/affiliate broker license
must be bonded for $10,000, or $2,500 if firm is duly licensed
Rental agent responsibilities:
refund tenant fee (except $10) if tenant fails to obtain a rental or full fee if information is inaccurate
advertise only currently available properties– verify every day
disclose required info in advertising– rent, location, when available; rental agent’s name and occupation
refer prospects only to properly listed properties and give accurate information– Class C misdemeanor for failure
Uniform Landlord and Tenant Act regulates:
landlords, tenants, residential property managers, residential leases
NOT subject to the Landlord and Tenant Act: hotels and motels; condos and cooperatives; residences under contract for deed; rental agreements before July 1, 1975
Key provisions of the Act:
landlord access – tenant may not refuse if for emergencies, repairs, maintenance, inspections, showings
security deposits – must be kept in special account; landlord and tenant negotiate amount of return; may be applied to unpaid debt if tenant vacates
abandonment and repossession – landlord may retake after 30 days of tenant absence and a missed payment; after 15 days of lateness in payment and tenant appears absent
landlord default on essential services – tenant may deduct from rent, sue for damages, obtain other housing at landlord’s cost; landlord may not cut off essential services except for abandonment
grace period on rental payment before late fees – five days
Commercial real estate in the License Act:
no special license other than broker or affiliate broker required
includes leaseholds
any real estate that is NOT residential, defined as: vacant but zoned for one to four residential units; containing one to four residential units; condominiums, town houses, subdivision homes conveyed on a unit-by-unit basis
fees or commissions due from contracts for management or brokerage recoverable from subsequent property owners who did not sign the contract
Unit 12
The Tennessee Human Rights Act is enforced by the Tennessee Human Rights Commission
This Commission notifies the Tennessee Real Estate Commission of any violations by licensees of TREC
Alleged victim has 180 days to file complaint with the Tennessee Human Rights Commission.
Fines for violation of discriminatory housing practices: $10,000 (first time), $25,000 (second time in five years), $50,000 (three times in seven years)
Protected classes in Tennessee:
race, color, creed, religion, sex, age, national origin, handicap, familial status
protection extends to employment, public accommodations, housing, and residential real estate-related transactions
Tennessee law is similar to federal law, except:
owner-occupants of properties with 1-2 units are exempt
age-related housing with an occupancy of 90% of units by a person at least 55 years old is exempt
Illegal discriminatory practices in general:
denial of goods or services on the basis of membership in one of the protected classes
retaliation against a person for opposing any discriminatory practice
helping someone engage in a discriminatory practice
interfering with the H.R. Commission in the performance of its duties
obstructing anyone from obeying the H.R. Act or Commission
violating a conciliation agreement
Illegal discriminatory practices specific to real estate:
refusing to sell, rent, or negotiate on the basis of protected class membership
providing a different quality of services
refusing to receive or transmit offers
denying that an available property is available or refusing to show it
advertising in a discriminatory fashion
being involved with listing or selling a property whose owner discriminates
deny access to membership in a professional association
The Tennessee Department of Environment and Conservation enforces environmental laws:
hazardous waste– issues orders for remediation
septic systems– approves installations; Division of Groundwater Protection issues permits
lead-based paint– federal law
asbestos– requires notification for removal; may inspect and assess penalties; residential properties of four or fewer units generally exempt
radon and UFFI– no requirements
Division of Consumer Affairs of the Tennessee Department of Commerce & Insurance:
receives complaints about anti-trust violations and unfair practices
deals with landlord-tenant disputes and residential construction complaints
Tennessee Anti-trust law makes it illegal for real estate licensees to:
hinder free competition
make price-fixing agreements
Tennessee practices:
metes and bounds system for legal descriptions
trust deeds with power of sale to secure debt
title search and survey not required
tax on transfer: $.37 per $100 of value (or price)
tax on mortgage and deed of trust: $.115 per $100 of value; first $2,000 exempt)
