PROPOSED RULEMAKING
STATE REAL
ESTATE COMMISSION
[49 PA. CODE CH. 35]
Consumer Notice
[37 Pa.B. 1499]
[Saturday, April 7, 2007]The State Real Estate Commission (Commission) proposes to amend §§ 35.201 and 35.336 (relating to definitions; and disclosure summary for the purchase or sale of residential or commercial real estate or for the lease of residential or commercial real estate when the licensee is working on behalf of the tenant) to read as set forth in Annex A.
A. Effective Date
The proposed rulemaking will be effective 30 days after final-form publication in the Pennsylvania Bulletin. However, licensees will have 180 days to begin using the new Consumer Notice form.
B. Statutory Authority
The amendments are proposed under section 608 of the Real Estate Licensing and Registration Act (RELRA) (63 P. S. § 455.608).
C. Background and Purpose
The act of November 25, 1998 (P. L. 908, No. 112) (Act 112) amended the RELRA to establish the various agency relationships that real estate licensees are permitted to enter into with consumers. In accordance with section 608 of the RELRA, real estate licensees are required to provide consumers with a disclosure summary at the initial interview that delineates the following eleven items:
* The relationships in which the consumer may engage the broker.
* A statement informing sellers and buyers of their option to have an agency relationship with a broker, that an agency relationship is not to be presumed and that it will exist only as set forth in a written agreement between the broker and the consumer.
* A statement that a consumer has the right to enter into a negotiated agreement with the broker limiting the activities or practices that the broker will provide for on behalf of the consumer and that the fees and services to be provided are to be determined by negotiations between the consumer and the broker.
* A statement identifying any possibility that the broker may provide services to another consumer who may be party to the transaction and, if so, an explanation of the duties the broker may owe the other party and whether the broker may accept a fee for those services.
* A statement identifying any possibility that the broker may designate one or more licensees affiliated with the broker to represent the separate interest of the parties to the transaction.
* A statement of the broker's policies regarding cooperation with other brokers, including the sharing of fees.
* A statement that a buyer's broker may be paid a fee that is a percentage of the purchase price and the buyer's broker, even if compensated by the listing broker, will represent the interests of the buyer.
* A statement that the duration of the broker's employment and the broker's fees are negotiable.
* The purpose of the Real Estate Recovery Fund and the telephone number of the Commission at which further information about the fund may be obtained.
* A statement that the duration of the listing agreement or contract and the broker's commission are negotiable.
* A statement that any sales agreement must contain zoning classification of a property except in cases where the property (or each parcel thereof, if subdivided) is zoned solely or primarily to permit single-family dwellings.
At 30 Pa.B. 228 (January 8, 2000), the Commission published a final-form rulemaking containing a disclosure statement in accordance with section 608 of the RELRA. Licensees have advised the Commission that the current disclosure statement is too long and difficult for consumers to understand. They have requested that the Commission revise the disclosure statement so that it is more consumer-friendly.
D. Description of Proposed Amendments
§ 35.201. Definitions.
Currently, the definition of ''initial interview'' includes any conversation between a broker or salesperson and a consumer about the consumer's personal, business or financial needs and motivations. With the passage of time, the Commission has found this definition too broad and not in conformity with the definition of ''initial interview'' in section 608(a) of the RELRA. The Commission has found that information about a consumer's personal or business needs is often aspirational and not relevant to the consumer's actual purchasing ability. The Commission proposes amending this definition to more closely follow the language in the RELRA. Under the definition, consumers must be provided with the Consumer Notice during the first substantive discussion between a licensee and a consumer about the consumer's real estate needs.
§ 35.336. Disclosure summary for the purchase or sale of residential or commercial real estate or for the lease of residential or commercial real estate when the licensee is working on behalf of the tenant.
Proposed subsection (a) would contain the requirement in section 608 of the RELRA that real estate brokers, associate brokers and salespersons provide the disclosure summary, called the Consumer Notice, to consumers at the initial interview.
Proposed subsection (b) would contain a simplified and condensed version of the current Consumer Notice. The proposed Consumer Notice first explains the various relationships available to the consumer, then the duties required of all licensees in section 606.1 of the RELRA (63 P. S. § 455.606a) and the contractual terms that must be contained in all agreements, followed by a caution against disclosing confidential information until an agreement selecting a relationship has been executed and an Acknowledgement.
Proposed subsection (c) contains the requirement in section 608 of the RELRA that licensees retain a copy of the signed/refused Acknowledgement and provide the consumer with a copy of the entire disclosure.
E. Review and Comment on Draft Regulatory Proposal
The Commission extended an invitation to the following boards, associations, school and licensees to preliminarily review and comment on the Commission's draft regulatory proposal: Pennsylvania Association of Realtors, Realtors Educational Institute, Institute of Real Estate Studies, Polley Associates, Pennsylvania Cemetery & Funeral Association, Pennsylvania Bar Association, Allegheny Highland Association, Greater Allegheny-Kiski Area Board, Allegheny Valley Board, Beaver County Association, Bradford-Sullivan County Association, Bucks County Board, Butler County Association, Cambria-Somerset Association, Carbon County Association, Carlisle Association, Central Montgomery County Association, Central Susquehanna Valley Board, Central Westmoreland Board, Centre County Association, Chester County Association, Clearfield-Jefferson Association, Delaware Valley Realtors Association, East Montgomery County Association, Elk-Cameron County Board, Greater Erie Board, Fayette County Board; Franklin County Association, Greenville Area Board, Hanover-Adams County Association, Greater Harrisburg Association, Greater Hazleton Association, Huntingdon County Board, Indiana County Board, Lancaster County Association, Lawrence County Board, Lebanon County Association, Lehigh Valley Association, McKean County Association, Greater Meadville Board, Greater Mercer County Board, Mifflin-Juniata County Board, Mon Yough Association, Monongahela Valley Board, Greater Philadelphia Association, North Central Penn Board, Pike/Wayne Association, Pocono Mountains Association, Reading-Berks Association, Realtors Association of Metropolitan Pittsburgh, Schuylkill County Board, Greater Scranton Association, Tri-State Commercial and Industrial Association, Warren County Board, Washington-Greene Association, West Branch Valley Association, Westmoreland West Association, Greater Wilkes-Barre Association, York County Association, The Pennsylvania Federation of Housing Counselors and Agencies, and The Real Estate Consumer Council. The Commission considered comments submitted to it in drafting the proposed rulemaking.
F. Fiscal Impact and Paperwork Requirements
The proposed rulemaking should have no fiscal impact or impose additional paperwork requirements on the Commonwealth. The disclosure summary would be available on the Internet for downloading. This rulemaking would have a minimal fiscal impact and additional paperwork requirement on the regulated community in that licensees would incur the cost of reproducing the disclosure summary, keeping the signed acknowledgment and providing a copy of the entire disclosure to the consumer. The proposed rulemaking should not necessitate legal, accounting or reporting requirements on the regulated community.
G. Sunset Date
The Commission reviews the effectiveness of its regulations on an ongoing basis. Therefore, no sunset date has been assigned.
H. Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on March 28, 2007, the Board submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the Senate Consumer Protection and Professional Licensure Committee and the House Professional Licensure Committee. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Board, the General Assembly and the Governor of comments, recommendations or objections raised.
I. Public Comment
Interested persons are invited to submit written comments, recommendations or objections regarding the proposed rulemaking within 30 days of publication of this proposed rulemaking to Judith Pachter Schulder, Counsel, State Real Estate Commission, P. O. Box 2649, Harrisburg, PA 17105-2649. Reference No. 16A-5614 (Consumer Notice), when submitting comments.
JOSEPH J. MCGETTIGAN, Sr.,
ChairpersonFiscal Note: 16A-5614. No fiscal impact; (8) recommends adoption.
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:
* * * * * Initial interview--The first [communication] substantive discussion between a [broker or salesperson] licensee and a consumer [involving the personal/business or financial] about the consumer's real estate needs [and motivations of the consumer. A discussion of the objective facts about the property, including dimensions, zoning classification, age, description or list price/lease amount, is not by itself a substantive discussion].
* * * * *
Subchapter E. STANDARDS OF CONDUCT AND PRACTICE
REAL ESTATE DOCUMENTS § 35.336. Disclosure summary for the purchase or sale of residential or commercial real estate or for the lease of residential or commercial real estate when the licensee is working on behalf of the tenant.
(a) Licensees shall provide the consumer with the Consumer Notice at their initial interview.
(b) In an effort to enable consumers of real estate services to make informed decisions about the business relationships they may have with real estate brokers and salespersons (licensees), the Real Estate Licensing and Registration Act (RELRA) requires that consumers be provided with this notice at the initial interview.
(c) The Disclosure Summary [shall] must be entitled ''Consumer Notice'' and [shall] must be in the following format available from the Commission office upon request by phone, fax or internet:
(Editor's Note: As part of this proposed rulemaking, the Board is proposing to delete the text of the form which appears in 49 Pa. Code pages 35-62.1--35-62.4, serial pages (287915) to (287918), and replace it with the following text, which has been printed in regular type to enhance readability.)
CONSUMER NOTICE
THIS IS NOT A CONTRACT In an effort to enable consumers of real estate services to make informed decisions about the business relationships they may have with real estate brokers and salespersons (licensees), the Real Estate Licensing and Registration Act (RELRA) requires that consumers be provided with this Notice at the initial interview.
* Licensees may enter into the following agency relationships with consumers:
Seller Agent
As a seller agent, the licensee and the licensee's company works exclusively for the seller/landlord and must act in the seller's/landlord's best interest. All confidential information relayed by the seller/landlord must be kept confidential except that a licensee must reveal known material defects about the property. A subagent has the same duties and obligations as the seller agent.
Buyer Agent
As a buyer agent, the licensee and the licensee's company work exclusively for the buyer/tenant even if paid by the seller/landlord. The buyer agent must act in the buyer/tenant's best interest and must keep all confidential information, other than known material defects about the property confidential.
Dual Agent
As a dual agent, the licensee works for both the seller/landlord and the buyer/tenant. A dual agent may not take any action that is adverse or detrimental to either party but must disclose known material defects about the property. A licensee must have the written consent of both parties before acting as a dual agent.
Designated Agent
As a designated agent, the broker of the selected real estate company designates certain licensees within the company to act exclusively as the seller/landlord agent and other licensees within the company to act exclusively as the buyer/tenant agent in the transaction. Because the broker supervises all of the licensees, the broker automatically serves as a dual agent. Each of the designated licensees are required to act in the applicable capacity explained previously. Additionally, the broker has the duty to take reasonable steps to assure that confidential information is not disclosed within the company.
In addition, a licensee may serve as a Transaction Licensee
A transaction licensee provides real estate services without having any agency relationship with a consumer. Although a transaction licensee has no duty of loyalty or confidentiality, a transaction licensee is prohibited from disclosing that:
* The seller will accept a price less than the asking/listing price,
* The buyer will pay a price greater than the price submitted in the written offer, and
* The seller or buyer will agree to financing terms other than those offered.
Like licensees in agency relationships, transaction licensees must disclose known material defects about the property.
* Regardless of the business relationship selected, all licensees owe consumers the duty to:
* Exercise reasonable professional skill and care.
* Deal honestly and in good faith.
* Present, as soon as practicable, all written offers, counteroffers, notices and communications to and from the parties. This duty may be waived by the seller where the seller's property is under contract and the waiver is in writing.
* Comply with Real Estate Seller Disclosure Act.
* Account for escrow and deposit funds.
* Disclose, as soon as practicable, all conflicts of interest and financial interests.
* Provide assistance with document preparation and advise the consumer regarding compliance with laws pertaining to real estate transactions.
* Advise the consumer to seek expert advice on matters about the transaction that are beyond the licensee's expertise.
* Keep the consumer informed about the transaction and the tasks to be completed.
* Disclose financial interest in a service, such as financial, title transfer and preparation services, insurance, construction, repair or inspection, at the time service is recommended or the first time the licensee learns that the service will be used.
* The following contractual terms are negotiable between the licensee and the consumer and must be addressed in an agreement/disclosure statement:
* The duration of the licensee's employment, listing agreement or contract.
* The licensee's fees or commission.
* The scope of the licensee's activities or practices.
* The broker's cooperation with and compensation to other brokers.
* All sales agreements must contain the property's zoning classification except where the property is zoned solely or primarily to permit single family dwellings.
* The Real Estate Recovery Fund exists to reimburse any person who has obtained a final civil judgment against a Pennsylvania real estate licensee owing to fraud, misrepresentation, or deceit in a real estate transaction and who has been unable to collect the judgment after exhausting all legal and equitable remedies. For complete details about the Fund, call (717) 783-3658.
Before you disclose any financial information to a licensee, be advised that unless you select a business relationship by signing a written agreement, the licensee is NOT representing you. A business relationship is NOT presumed.
__________
ACKNOWLEDGMENT I acknowledge that I have received this disclosure.
Date:______ __________ (Consumer's printed name) (Consumer's signature)
_________________ )______ __________ (Consumer's printed name) (Consumer's signature)
_________________ )I certify that I have provided this document to the above consumer during the initial interview.
Date: _________________
(Licensee)
Adopted by the State Real Estate Commission at
49 Pa. Code § 35.336.
[Pa.B. Doc. No. 07-597. Filed for public inspection April 6, 2007, 9:00 a.m.]
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