RULES AND REGULATIONS
STATE REAL ESTATE COMMISSION
[49 PA. CODE CH. 35]
General Revisions
[30 Pa.B. 5954] The State Real Estate Commission (Commission) amends Chapter 35 (relating to State Real Estate Commission) to read as set forth in Annex A.
Summary
This rulemaking updates the Commission's existing regulations to address issues of current importance to the real estate industry and to better serve and protect the interest of consumers who use the services of a licensee in a real estate transaction.
In the final-form rulemaking, the Commission made changes to §§ 35.271, 35.304, 35.305 and 35.308. Editorial changes are also made to §§ 35.201, 35.281 and 35.287. As to proposed changes to §§ 35.222, 35.223, 35.245, 35.322 and 35.327, the Commission has withdrawn the proposed rulemaking.
Response to Comments
Notice of proposed rulemaking was published at 29 Pa.B. 565 (January 30, 1999). Publication was followed by a 30-day public comment period during which the Board received comments from the Pennsylvania Association of Realtors (PAR). Following the close of the public comment period, the Board also received comments from the House Professional Licensure Committee (HPLC) and the Independent Regulatory Review Commission (IRRC). The final-form rulemaking is in response to the comments and suggestions received by the commentators and the regulatory review bodies.
For ease of reference, the Commission will address the comments in the order in which the amendments appear.
1. § 35.222(b). Licensure as broker.
§ 35.223(b). Licensure as salesperson.In proposed form, the Commission rewrote the requirements for nonresident brokers and salespersons seeking to obtain licensure by recognition of a license in another state. The HPLC questioned the rationale of the Commission's requirement that a broker be licensed in another state for 5 years prior to submitting an application for licensure. IRRC suggested that the term ''active'' replace ''current'' since a current license may be inactive. The Commission has determined that it wishes to study the issue of license by endorsement of another state's license. As such, the Commission has withdrawn the proposed revision. Therefore no changes to §§ 35.322(b) and 35.323(b) are made in final-form rulemaking.
2. § 35.245. Display of licenses in office.
Proposed § 35.245 required licensees to display their licenses in their broker's office and display a photocopy in the office where they work. The HPLC questioned the Commission's authority to require that a photocopy and not the original be displayed. Owing to HPLC's concern, the Commission has withdrawn the revision and has determined to make no change to § 35.245 in the final-form rulemaking.
3. § 35.271(b)(2). Examination for broker's license.
Proposed § 35.271(b)(2) would be amended to require mandatory education courses for brokers in office management and real estate law. The HPLC suggested that these courses would be more appropriate for continuing education for all licensees and not just newly licensed brokers. Although these courses may be of some educational value to licensees generally, it is the Commission experience that many broker violations involve escrow accounts and failure to supervise salespersons. These activities are, in the view of the Commission, core practices, knowledge of which should form the basis of broker education. In an attempt to reduce the number of violations, the Commission believes that applicants for a license should be required to complete an intensive course specifically designed to address the additional responsibilities imposed upon brokers. Finally, the Commission notes that salespersons and licensed brokers may take either the office management or law courses as part of their continuing education requirement.
4. § 35.271(b)(3)(iv). Examination for broker's license.
The proposed amendment to § 35.271(b)(3)(iv) would permit education courses offered by real estate organizations in another jurisdiction, provided they are approved by the licensing authority in that state to be counted toward the education requirement to sit for the examination.
The HPLC questioned whether permitting out-of-State courses to be counted toward the educational requirement would raise or lower standards for licensure. Under the current regulations, only courses offered in this Commonwealth are eligible for credit. Unfortunately, not all National courses, especially those in specialized areas such as commercial and property management, are taught in this Commonwealth. Therefore the Commission believes that permitting applicants to receive credit for a real estate course taught in another jurisdiction may raise educational standards and will benefit the licensees and consumers of real estate services in this Commonwealth.
5. § 35.305. Business name on advertisements.
Proposed § 35.305 eliminates the current requirement that the brokers name and telephone number be given greater prominence in advertisements. As proposed, the section requires that the broker's name and number be the same size as the advertising licensee. The HPLC questioned the necessity of the amendment.
The HPLC commented that the current regulation accomplishes the Commission's objective of ''ensuring that a consumer will know the name and telephone number of the broker who is legally responsible for the activities of the employe.'' The HPLC requested a cost analysis of the cost differential under the current regulation and the proposed amendment.
The existing regulation imposes a cost on salespersons not justified by a larger typeface. Since advertising fees vary by media and market area it is not possible to quantify the costs throughout this Commonwealth. Nonetheless, the Commission believes most licensees experience a substantial cost savings annually by eliminating the greater prominence requirement because advertisements are paid by the inch. The public will be able to identify the broker's name and number, equally as well as those of the salesperson. For these reasons, no change has been made in final rulemaking.
6. § 35.308. Relationship with educational institution.
Proposed § 35.308 requires real estate companies, franchises and networks to disclose ownership interests in advertisements, promotions and endorsements.
The HPLC requested an explanation why the Commission reversed its position taken when this provision was originally promulgated, that this regulation was needed ''to prevent real estate firms from steering prospective students to real estate providers with which the firms have business of financial relationships.''
The Commission understands that some real estate companies have an ownership interest in real estate schools. The Commission believes that it is in the best interest of students and consumers to know of this ownership interest and make choices accordingly. Despite this notice ability, § 35.354(a)(8) prohibits schools from recruiting or soliciting students.
7. § 35.322. Transfer of escrow funds.
Proposed § 35.322 would have permitted buyers and sellers to change how the escrow moneys are being held after the agreement is signed. The Commission is aware there are circumstances when the parties desire to have escrow funds released prior to the consummation of the agreement. For example, after the agreement is signed, the seller may agree to extend the settlement date for the buyer if the buyer agrees to release the escrow funds. To accomplish this under the current regulations, the agreement must be terminated and a new agreement executed.
The HPLC commented that section 604(5)(I) of the Real Estate Licensing and Registration Act (63 P. S. §§ 455.604 (5)(l)) (act) prohibits a broker from transferring funds prior to the consummation or termination of the real estate transaction. It opined that ''the Commission lacks the legislative authority to promulgate the provisions related to the transfer of escrow funds.'' Echoing PAR's comment, IRRC suggested that the term ''separate'' be deleted.
In response to the comments of the HPLC, the Commission has removed the language added on proposed.
8. § 35.327. Procedure when entitlement to money held in escrow is disputed.
Under the current regulations, when parties to disputed escrow funds are unwilling to sign a release, it is left to the broker to file an interpleader action in the courts of common pleas. The costs associated with this interpleader action include the filing fee and the attorney's fees to draft the pleading. The amendment to subsection (a) would have permitted the broker to recoup the costs of filing the interpleader.
Also, during the Commission's public meetings and in many inquiries by consumers and licensees, the Commission has been asked what a broker is to do when the broker either goes out of business or retires and there is money in the disputed escrow fund. Under the current regulations, the accounts must remain open. In an attempt to deal with this issue, the Commission would have amended subsection (b).
Both the HPLC and IRRC commented that the Commission does not have the statutory authority under section 604(a)(5)(iv) of the act to permit the broker to deduct costs from the escrow account or dispose of moneys when the parties have not consented or a civil action filed. The HPLC further suggested that subsection (b) ''improperly places the broker in the position of being the final arbiter of fact and law'' and ''unnecessarily exposes the broker to claims of liability from the aggrieved party.'' Both recommend deleting all amendments. Additionally, PAR and IRRC recommended that the term ''release'' be replaced with ''agreement regarding its disposition.''
Owing to the statutory concerns raised by the HPLC and IRRC the Commission has withdrawn the amendatory language in final rulemaking.
Compliance with Executive Order 1996-1, Regulatory Review and Promulgation
The Board reviewed this rulemaking and considered its purpose and likely impact upon the public and the regulated population under the directives of Executive Order 1996-1, Regulatory Review and Promulgation. The final-form regulations address a compelling public interest as described in this Preamble and otherwise comply with Executive Order 1996-1.
Fiscal Impact and Paperwork Requirements
The amendments will have no fiscal impact on the Commonwealth, its political subdivisions, the public and the regulated community. Likewise, the amendments will not necessitate any legal, accounting, reporting or other paperwork requirements on the regulated community.
Statutory Authority
The amendments are authorized by sections 404 and 602 of the act (63 P. S. §§ 455.404 and 455.602).
Sunset Date
The Board continually monitors the effectiveness of its regulations through communications with the regulated population; accordingly, no sunset date has been set.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on January 30, 1999, the Commission submitted a copy of the notice of proposed rulemaking, published at 29 Pa.B. 565, to IRRC and the Chairpersons of the HPLC and the Senate Consumer Protection and Professional Licensure Committee (SCP/PLC) for review and comment.
In compliance with section 5(c) of the Regulatory Review Act, the Commission also provided IRRC and the Committees with copies of the comments received, as well as other documentation. In preparing these final-form regulations, the Commission has considered the comments received from IRRC and the public.
These final-form regulations were approved by the HPLC on October 11, 2000, and deemed approved by the SCP/PLC. IRRC met on October 19, 2000, and approved the final-form regulations in accordance with section 5.1(e) of the Regulatory Review Act (71 P. S. § 745.5(e)).
Contact Person
Further information may be obtained by contacting Deborah A. Sopko, Administrative Assistant, State Real Estate Commission, at P. O. Box 2649, Harrisburg, PA 17105-2649 (717) 783-7155.
Findings
(1) Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations promulgated thereunder at 1 Pa. Code §§ 7.1 and 7.2.
(2) A public comment period was provided as required by law and all comments were considered.
(3) These amendments do not enlarge the purpose of the proposed rulemaking published at 29 Pa.B. 565.
(4) These amendments are necessary and appropriate for administration and enforcement of the Board's authorizing statute.
Order
The Board, acting under its authorizing statute, orders that:
(a) The regulations of the Board, 49 Pa. Code Chapter 35, are amended by amending §§ 35.201, 35.271, 35.281, 35.287, 35.304, 35.305, 35.308 and 35.321 to read as set forth in Annex A, with ellipses referring to the existing text of the regulations.
(b) The Board shall submit this order and Annex A to the Office of General Counsel and to the Office of the Attorney General as required by law.
(c) The Board shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) This order shall take effect upon publication in the Pennsylvania Bulletin.
JOSEPH TARANTINO, Jr.,
Chairperson(Editor's Note: The proposal to amend §§ 35.222, 35.223, 35.245, 35.322 and 35.327, included in the proposed rulemaking published at 29 Pa.B. 565, has been withdrawn by the Commission.
For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 30 Pa.B. 5807 (November 4, 2000).)
Fiscal Note: Fiscal Note 16A-560 remains valid for the final adoption of the subject regulations.
Annex A
TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS
PART I. DEPARTMENT OF STATE
Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS
CHAPTER 35. STATE REAL ESTATE COMMISSION
Subchapter B. GENERAL PROVISIONS § 35.201. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
* * * * * Broker--An individual or entity that, for another and for a fee, commission or other valuable consideration, does one or more of the following:
(i) Negotiates with or aids a person in locating or obtaining for purchase, lease or acquisition of interest in real estate.
(ii) Negotiates the listing, sale, purchase, exchange, lease, time share and similarly designated interests, financing or option for real estate.
(iii) Manages real estate.
(iv) Represents himself or itself as a real estate consultant, counsellor or house finder.
(v) Undertakes to promote the sale, exchange, purchase or rental of real estate. This subparagraph does not apply to an individual or entity whose main business is that of advertising, promotion or public relations.
(vi) Attempts to perform one of the actions listed in subparagraphs (i)--(v).
* * * * * Salesperson--An individual who is employed by a broker to do one or more of the following:
(i) Sell or offer to sell real estate, or list real estate for sale.
(ii) Buy or offer to buy real estate.
(iii) Negotiate the purchase, sale or exchange of real estate.
(iv) Negotiate a loan on real estate.
(v) Lease or rent real estate, or offer to lease or rent real estate or to place real estate for rent.
(vi) Collect rent for the use of real estate, or offer or attempt to collect rent for the use of real estate.
(vii) Assist a broker in managing property.
* * * * *
Subchapter C. LICENSURE
LICENSURE REQUIREMENTS § 35.271. Examination for broker's license.
(a) An individual who wants to take the broker's examination for a Pennsylvania broker's license shall:
(1) Be 21 years of age or older.
(2) Be a high school graduate or have passed a high school general education equivalency examination.
(3) Have worked at least 3 years as a licensed salesperson, with experience qualifications that the Commission considers adequate for practice as a broker, or possess at least 3 years of other experience, education, or both, that the Commission considers the equivalent of 3 years' experience as a licensed salesperson.
(4) Have acquired 16 credits, or 240 hours of instruction, in professional real estate education as determined by the Commission under subsection (b).
(5) Submit a completed examination application to the Commission or its designee with:
(i) Official transcripts evidencing the acquisition of course credits
(ii) A detailed resume of real estate activities performed by the candidate while working as a salesperson and a sworn statement from the candidate's employing broker confirming that these activities were performed if the candidate is a licensed salesperson.
(iii) A complete description of work experience and education that the candidate considers relevant to the requirements of paragraph (3) if the candidate is not a licensed salesperson.
(iv) A certification from the real estate licensing authority of the jurisdiction in which the candidate is licensed stating that the candidate had an active license for each year that credits are claimed if the candidate is applying brokerage experience to satisfy the professional education requirement.
(v) The fees for review of the candidate's qualifications to take the examination and for administration of the examination prescribed in § 35.203 (relating to fees).
(b) The Commission will apply the following standards in determining whether an examination candidate has met the education requirement of subsection (a)(4):
(1) A candidate who has obtained one of the following degrees will be deemed to have met the education requirement and will not be required to show completion of coursework in specific areas of study:
(i) A bachelor's degree with a major in real estate from an accredited college, university or institute of higher learning.
(ii) A bachelor's degree from an accredited college, university or institute of higher learning, having completed coursework equivalent to a major in real estate.
(iii) A juris doctor degree from an accredited law school.
(2) Except as provided in paragraph (6), 2 of the required 16 credits shall be in a Commission-developed or approved real estate office management course and 2 of the required 16 credits shall be in a Commission-developed or approved law course. At least 6 of the remaining 12 credits shall be in 3 or more of the Commission-developed courses listed in this paragraph. The remaining 6 credits shall be in real estate courses but not necessarily those listed in this paragraph. A candidate may not apply credits used to qualify for the salesperson's examination toward fulfillment of the broker education requirement.
(i) Real Estate Law.
(ii) Real Estate Finance.
(iii) Real Estate Investment.
(iv) Residential Property Management.
(v) Nonresidential Property Management.
(vi) Real Estate Sales.
(vii) Residential Construction.
(viii) Valuation of Residential Property.
(ix) Valuation of Income-Producing Property.
(3) To be counted toward the education requirement, a real estate course shall have been offered by:
(i) An accredited college, university or institute of higher learning, whether in this Commonwealth or outside this Commonwealth.
(iii) A real estate school outside this Commonwealth that has been approved by the real estate licensing authority of the jurisdiction where the school is located. The course transcript or certificate of completion shall state that the course is approved by the licensing authority of the jurisdiction where the school is located.
(iv) A real estate industry organization outside this Commonwealth, if the course is approved by the licensing jurisdiction of another state. The course transcript or certificate of completion shall state that the course is approved by the licensing jurisdiction which has approved it.
(4) A maximum of four credits will be allowed for each real estate course. A maximum of four credits will be allowed for each area of real estate study listed in paragraph (2).
(5) Courses shall have been completed within 10 years prior to the date of successful completion of the licensing examination.
(6) Two credits will be allowed for each year of active practice the candidate has had a licensed broker in another jurisdiction during the 10-year period immediately preceding the submission of the examination application.
GENERAL ETHICAL RESPONSIBILITIES § 35.281. Putting contracts, commitments and agreements in writing.
(a) A licensee who acts in a representative capacity shall ensure that sale or lease contracts, commitments and agreements in connection with a real estate transaction that he has knowledge of, or that he reasonably should be expected to have knowledge of, are in writing.
(b) A licensee who enters into an open listing agreement shall provide the seller or lessor with a written memorandum stating the terms of the agreement.
(c) A rental listing referral agent shall ensure that the agreement between himself and a prospective tenant is in writing.
§ 35.287. Supervised property management assistance by salespersons.
A salesperson may assist in the management of real estate if the salesperson's work is directly supervised and controlled by the employing broker. The salesperson may not independently negotiate the terms of a lease nor execute a lease on behalf of the lessor.
ADVERTISING AND SOLICITATION § 35.304. Disclosure of licensure when advertising own real estate.
A licensee who sells or leases his own real estate shall disclose that he is a real estate licensee in advertisements for the property. This requirement does not apply if the property is listed with a real estate company.
§ 35.305. Business name on advertisements.
(a) Brokerage companies, including sole proprietorships, cemetery companies and rental listing referral agencies shall advertise or otherwise hold themselves out to the public only under the business name designated on their license.
(b) Individual brokers of record, associate brokers, salespersons, cemetery associate brokers, cemetery salespersons and rental listing referral agents who wish to use and advertise nicknames (for example, Jack v. John or Margaret v. Peggy) shall include the names on their licensure applications or biennial renewal applications.
(c) An advertisement by an associate broker, salesperson, cemetery associate broker or cemetery salesperson shall contain the business name and telephone number of the employing broker. The names and telephone numbers shall be of equal size.
§ 35.308. Relationship with educational institution.
A real estate company, franchise or network may promote, endorse, or advertise its association, affiliation or connection with a real estate school or with a college, university or institute of higher learning regarding its offering of real estate instruction. An association, affiliation or connection which includes an ownership interest shall be disclosed in all promotions, endorsements or advertisements. For purposes of this section, an ownership interest will be considered by the Commission to include proprietary or beneficial interests through which the real estate company, franchise or network earns or has the potential to earn income, or which produces a direct or indirect economic benefit.
ESCROW REQUIREMENTS § 35.321. Duty to deposit money belonging to another into escrow account.
(a) Except as provided in subsection (b), a broker shall deposit money that the broker receives belonging to another into an escrow account in a Federally or State-insured bank or depository to be held pending consummation of the transaction or a prior termination thereof that does not involve a dispute between the parties to the transaction, at which time the broker shall pay over the full amount to the party entitled to receive it. If a broker is a partnership, association or corporation, its broker of record shall be responsible for ensuring that the escrow duty is performed.
(b) A broker is not required to hold in escrow rents that he receives as a property manager for a lessor. A broker shall deposit rents received into a rental management account that is separate from the broker's escrow and general business accounts.
(c) If a broker receives money belonging to another under an installment land purchase agreement, the transaction shall be considered consummated, for purposes of subsection (a), when the buyer has been afforded the opportunity, by means of the seller's written acknowledgement on or affixed to the agreement, to record the agreement, unless the agreement specifies otherwise.
(d) If a broker receives money belonging to another under an agreement of sale involving cemetary property, the transaction shall be considered consummated, for purposes of subsection (a), when the buyer receives a copy of the agreement of sale.
(e) If a broker receives a security deposit belonging to another under a lease agreement, the broker's duty to pay over the deposit for purposes of subsection (a), shall arise when the tenancy ends. If a sale of the leased premises or a change in a property management contract occurs during the term of the tenancy, the broker may transfer the security deposit from the broker's escrow account to the escrow account of the lessor or the lessor's broker upon notification in writing to each tenant from whom the broker received a deposit of the name and address of the banking institution in which the deposits will be held, and the amount of the deposits.
[Pa.B. Doc. No. 00-1977. Filed for public inspection November 17, 2000, 9:00 a.m.]
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