BEFORE THE BOARD OF REALTY REGULATION
DEPARTMENT OF LABOR AND INDUSTRY
STATE OF MONTANA
In the matter of the amendment of ARM 24.210.301 definitions, 24.210.401 fee schedule, 24.210.426 trust account requirements, 24.210.430 internet advertising rules, 24.210.601, 24.210.602, 24.210.604, 24.210.610, 24.210.611, 24.210.624, 24.210.625, 24.210.635, 24.210.641, 24.210.660, 24.210.661, 24.210.667 and 24.210.674 brokers and salespersons, 24.210.801, 24.210.803, 24.210.805, 24.210.807, 24.210.809, 24.210.812, 24.210.828, 24.210.829, 24.210.835 and 24.210.840 property management, and the adoption of NEW RULE I public participation, and NEW RULES II and III course provider
NOTICE OF AMENDMENT AND ADOPTION
TO: All Concerned Persons
1. On March 22, 2012, the Board of Realty Regulation (board) published MAR notice no. 24-210-37 regarding the public hearing on the proposed amendment and adoption of the above-stated rules, at page 556 of the 2012 Montana Administrative Register, issue no. 6.
2. On April 17, 2012, a public hearing was held on the proposed amendment and adoption of the above-stated rules in Helena. Several comments were received by the April 25, 2012, deadline.
3. The board has thoroughly considered the comments received. A summary of the comments received and the board's responses are as follows:
COMMENT 1: A commenter recommended the board clarify the definition of "cancellation" in ARM 24.210.301(7).
RESPONSE 1: The board acknowledges the comment, but did not find the definition confusing and sees no need for further clarification.
COMMENT 2: One commenter pointed out that the proposed amendments to the trust account requirements in ARM 24.210.426(4)(f) and 24.210.805(7) could cause confusion about the licensees using trust account funds to pay personal indebtedness. Noting that trust funds and trust accounts are not the same thing, the commenter stated that changing "trust account" to "trust funds" may lead licensees to believe they may use funds from the trust account to pay for personal indebtedness.
RESPONSE 2: The board agrees with the comment and is amending both rules to eliminate the confusion and clarify the board's intent that at no time may trust funds or money in the trust account be used to pay personal indebtedness.
COMMENT 3: Several commenters suggested clarifying the trust account amendments in ARM 24.210.426(4)(i)(vii) and 24.210.805(9)(d)(iii) and requiring verification of specific funds deposited before those funds could be disbursed.
RESPONSE 3: The board discussed several circumstances where a licensee was caught with a bad check, which prompted this rule amendment. For instance, a scam exists where a licensee receives a check and, shortly after, a refund is requested. The refund is issued before the licensee determines that the initial check funds are no good. The licensee has either comingled funds or their trust account is negative. The board believes that the amendments, with regard to verifying funds, are protective of the consuming public as well as licensees.
COMMENT 4: One commenter stated that the proposed amendments to ARM 24.210.426(7) are unclear as to how long certain trust account documentation records must be maintained if the funds are not held in a broker's trust account and asked what documentation must be maintained to show proof of delivery.
RESPONSE 4: The board acknowledges the comment, but did not find the amendments confusing and sees no need for further clarification.
COMMENT 5: Several commenters agreed with the grammatical changes proposed for internet advertising in ARM 24.210.430, but suggested the board consider reviewing those rules in their entirety and amending them at some time in the future.
RESPONSE 5: The board appreciates all comments made during rulemaking.
COMMENT 6: Several commenters expressed concern about the Internet advertising amendments in ARM 24.210.430(7) and suggested the board revise or remove them. The commenters stated it is virtually impossible to get information changed on third party web sites, as once the information is originally posted by the licensee, it is out there for anyone to use. Licensees no longer have the ability to change or update the information and should not be held responsible.
RESPONSE 6: The board acknowledges the comments and is amending this rule exactly as proposed.
Comments 7 through 16 apply to ARM 24.210.601:
COMMENT 7: A number of commenters supported the concept of a temporary supervising broker in ARM 24.210.601, but suggested temporary supervising brokers exist on a constant basis, without time limitations, and always on file with the board. The commenters suggested a one-time fee for this arrangement, activating the temporary supervising broker by written notification to the board, and stated that no salesperson should have to pay a fee.
RESPONSE 7: The board appreciates all comments made in the rulemaking process, but does not agree. Individual circumstances change and agreements on file for a length of time will age and may not apply in the future. Further, the requirements as proposed by the board have the effect of ensuring that all parties are timely made aware and in agreement regarding a transfer.
COMMENT 8: A commenter observed that while a release from a supervising broker is required in ARM 24.210.601(1) for a salesperson to transfer, there is no definition of "release." The commenter was unclear what would constitute a release and what form it would take.
RESPONSE 8: The board acknowledges the comment, but did not find the amendments confusing and sees no need for further clarification.
COMMENT 9: Several commenters questioned whether the board has the authority in ARM 24.210.601(10) to require a broker signature on a listing agreement negotiated by a salesperson in order for the listing to be valid. One commenter noted that "listing" is contained in the statutory definition of "broker," and asked if that was a sufficient statutory basis for a rule that stated only brokers could list property.
RESPONSE 9: The board concluded that this amendment does not substantially change the existing requirement, but simply adds clarity to the existing requirement. The board currently has the authority to require broker signature on listings and only brokers are defined to include doing listings.
COMMENT 10: A commenter expressed confusion in ARM 24.210.601(14) regarding the timing of the cancellation of a salesperson's license under different circumstances. It appears a sales license is cancelled immediately if it is voluntarily returned by the supervising broker, but does not appear to be cancelled for ten days if the board notifies the salesperson of the broker's failure to renew. The commenter suggested the board clarify that a salesperson may not conduct licensed activity after being notified that a supervising broker has failed to renew.
RESPONSE 10: The board agrees with the commenter and is amending the rule to eliminate confusion and add clarity to the requirements of a salesperson.
COMMENT 11: Several commenters noted the recommended mechanism available for a salesperson who does not want to be transferred to a temporary supervising broker, but that there does not appear to be any requirement for a salesperson to be informed of the temporary transfer. The commentators suggested a process for such notification.
RESPONSE 11: The board agrees that the broker has the responsibility to notify the salespeople when they are being temporarily transferred. The board is amending ARM 24.210.601(16)(a) to ensure the notification of the salesperson.
COMMENT 12: Several commenters questioned the amendments to ARM 24.210.601, specifically (16) and (17) that reference ARM 24.210.611, since temporary supervising brokers are not found in ARM 24.210.611, either in the current rule text or proposed additional language.
RESPONSE 12: The board agrees that the citations to ARM 24.210.611 are incorrect and inadvertent typographical errors. The references should all be to sections within ARM 24.210.601 and the board is amending this rule accordingly.
COMMENT 13: One commenter suggested the board define "broker of record" as used in ARM 24.210.601(16)(c), to describe the current supervising broker.
RESPONSE 13: The board appreciates the comment, but does not believe there is confusion and sees no need for clarification.
COMMENT 14: A commenter questioned what would happen to a salesperson that had been temporarily transferred to a temporary supervising broker for the maximum time within a 12-month period, and then transferred to a new supervising broker. The commenter asked if the salesperson would be prohibited from having a temporary supervising broker if the new broker needed to be away for a period of time?
RESPONSE 14: The board intends that the clock will start over with a new supervising broker of record in such an instance, and is amending ARM 24.210.601(16)(c) accordingly.
COMMENT 15: Several commenters opposed restricting the temporary supervising broker transfer of a salesperson to 60 days in any 12-month period in ARM 24.210.601(16), stating that it will not allow for medical conditions that would require the supervising broker be out for longer periods of time.
RESPONSE 15: The board believes that the exception found in ARM 24.210.601(17) addresses these concerns.
COMMENT 16: One commenter requested an alternative to the requirement in ARM 24.210.601(16)(g) of transferring within three business days prior to the effective date of the temporary transfer. The commenter stated that, in the case of death or incapacitation, three days might not be possible.
RESPONSE 16: The board believes these concerns are addressed in ARM 24.210.601(17).
COMMENT 17: Several commenters questioned the meaning of "initiated" in new language added to ARM 24.210.624(5) that provides inactive licensees may only receive a commission for a real estate transaction if the transaction was initiated prior to the licensee going inactive. The commenters believe the phrase is vague and questioned what acts would indicate initiation of a transaction.
RESPONSE 17: The board agrees with the comments and is not amending the rule at this time.
Comments 18 through 21 apply to ARM 24.210.641:
COMMENT 18: One commenter stated that the board is passing unnecessary requirements on supervising brokers in ARM 24.210.641 by requiring that licensees include their license number in advertising, dictating the business name a broker can use in advertising, restricting business by not letting brokers communicate with potential buyers until a buyer broker contract is signed, requiring that licensees document the disclosure of available information on sexual offenders, eliminating important topics from the continuing education topic list, and requiring the core course without continuing education credit.
RESPONSE 18: The board concluded that requiring the license number does not add clarity for the public and, with the new numbering system, it will be expensive for licensees to include their new license number. The board also acknowledges that including the agency name does not add clarity as the licensee must identify that they hold a license when advertising. The board agrees with the comment and is not amending ARM 24.210.641(5)(ag) at this time. To mirror this change, the board is also amending ARM 24.210.301(20) in the same manner.
The board notes that there seems to be a misunderstanding of the proposed amendment to ARM 24.210.641(5)(am), and amending as proposed could result in a situation that is worse than the current confusion. The proposed amendment was an attempt to put a defining line on when a buyer broker agreement is required, with the intent to have the buyer sign a buyer broker agreement prior to coming to the closing table. The board agrees that the concept is worth pursuing, but the amendment needs further work. The board is not amending (5)(am) at this time.
The board agrees with the comments on ARM 24.210.641(5)(aw) regarding the requirement to document compliance with 37-51-105, MCA. The statute is very specific about licensee requirements and the proposed amendment appears to add additional unintended licensee duties. The board is not adding (5)(aw) to the rule at this time.
The comments on the continuing education topic list and core course rules do not apply to this rules project, as they were not included in the proposal notice.
COMMENT 19: Several commenters opposed the proposed requirement in ARM 24.210.641(5)(ag)(ii) that all advertising by a brokerage company that does not include "realty" or "real estate" must include the tag "a real estate agency." The commenters stated this will require brokerage companies to incur substantial expense to change their ads. Commenters asked the board to add "properties" since there are many real estate companies whose name includes "property" or "properties," but not "realty" or "real estate," or require that ads disclose that the advertising is placed by a real estate brokerage company, but allow discretion on how the disclosure is made.
RESPONSE 19: The board agrees and is not amending (5)(ag) at this time.
COMMENT 20: Several commenters opposed the proposed amendment to ARM 24.210.641(5)(am) that it is unprofessional conduct for licensees to offer guidance, direction, or advice to a buyer without a buyer broker agreement. The commenters stated the rule is vague, ambiguous, and could be interpreted to include acts that would not necessarily involve a licensee functioning as a buyer broker. The prohibited activities do not appear to be limited to actions done in conjunction to a real estate transaction. Some commenters asserted that the timing of the buyer broker agreement requirement should reflect when a licensee is actually acting as a buyer broker, and not just providing more generalized information. Some commenters observed that the proposed amendment places a more difficult, or even impossible responsibility to timely disclose and document disclosure of sexual or violent offender registration information on listing agents.
RESPONSE 20: The board agrees with the commenters and is not amending (5)(am) at this time.
COMMENT 21: Several commenters requested clarification of "incidental property management" as proposed in ARM 24.210.641(5)(z). When a listing remains on the market for a long time, a seller agent may be asked to lease out the property, pending sale. The proposed amendment would require those real estate licensees to also comply with all property management requirements, except certain advertising rules in certain circumstances. A few commenters asked the board to just eliminate the entire amendment.
RESPONSE 21: The board agrees with the comments and is amending ARM 24.210.641(5)(z) to clarify that real estate licensees do not have to comply with the property management advertising rules when property management is performed in conjunction with a listing.
COMMENT 22: One commenter opposed requiring all licensees to complete the annual board-mandated core education course in ARM 24.210.667 and provided several comments the commenter had made in previous rule projects regarding licensee accountability to the public. The commenter stated that the current continuing education requirements are sufficient if licensees are held responsible for their own actions.
RESPONSE 22: The board acknowledges the comment, but notes that the comment does not relate to this rules notice.
COMMENT 23: One commenter objected to the elimination of carry over hours in ARM 24.210.667 and suggested that carry over hours could only count as elective hours. The commenter opined that all licensees are being punished due to the actions of a few who cause problems and asserted that the board is overzealous in protecting consumers.
RESPONSE 23: The board appreciates all comments made during the rulemaking process, but concluded these comments seem to demonstrate a misunderstanding of this rule amendment. The board is not amending carry over provisions in this proposal and notes that carry over hours have been disallowed since 2007. The board is now proposing to eliminate a duplicative statement of the prohibition in (8) of this rule, which is not a substantial change. The board notes that its primary function is to protect the public health, safety, and welfare.
COMMENT 24: One commenter stated that the board needs to be aware of consumer needs and not limit a real estate licensee's marketing exposure for client benefits. The commenter recommended that the board table consideration of the temporary supervising broker until they can establish a focus group and encouraged the board to get back to business and avoid sidetracking, which is distracting from the big picture.
RESPONSE 24: The board appreciates all comments made during the rulemaking process, and notes that a task force was created prior to the drafting and eventual proposal of these rule amendments. The proposed amendments are the result of the task force's efforts. The board notes that its primary function is to protect the public health, safety, and welfare.
COMMENT 25: One commenter stated that if the board is going to mandate minimum services that must be provided by licensees, the board should tell licensees how much to charge for the services. The commenter suggested the board create a fee schedule similar to one published by the State Auditor for title insurance companies.
RESPONSE 25: The board acknowledges the comment, but notes that it does not relate to this rules notice. Entry-only rules were already adopted in a previous rule package.
4. The board has amended ARM 24.210.401, 24.210.430, 24.210.602, 24.210.604, 24.210.610, 24.210.611, 24.210.625, 24.210.635, 24.210.660, 24.210.661, 24.210.667, 24.210.674, 24.210.801, 24.210.803, 24.210.807, 24.210.809, 24.210.812, 24.210.828, 24.210.829, 24.210.835, and 24.210.840 exactly as proposed.
5. The board has adopted NEW RULES I (24.210.202), II (24.210.666), and III (24.210.834) exactly as proposed.
6. The board has amended ARM 24.210.301, 24.210.426, 24.210.601, 24.210.641, and 24.210.805, with the following changes, stricken matter interlined, new matter underlined:
24.210.301 DEFINITIONS (1) through (19) remain as proposed.
(20) "Licensee identification" as used in this chapter means a written disclosure of the licensee's name,
license number, and identifying that the advertisement is made by a real estate licensee or by a brokerage company.
(21) through (29) remain as proposed.
24.210.426 TRUST ACCOUNT REQUIREMENTS (1) through (4)(e) remain as proposed.
(f) No payments of personal indebtedness of the broker shall be made from a trust account or trust funds;
(g) through (9) remain as proposed.
24.210.601 GENERAL LICENSE ADMINISTRATION REQUIREMENTS
(1) through (13) remain as proposed.
(14) A salesperson whose supervising broker has failed to renew or reinstate the broker's expired broker license or supervising broker endorsement must request to be placed on inactive status or transfer their salesperson license to another supervising broker within ten days of being notified by the board that their supervising broker's broker license or supervising broker endorsement has expired.
Failure to transfer to a new supervising broker within ten days will result in cancellation of their active license. A salesperson shall not conduct licensed activity during this unsupervised period.
(15) and (16) remain as proposed.
(a) The temporary transfer of supervision must be in writing and must be provided to the salesperson by the broker of record. The writing must include:
(i) through (16)(b) remain as proposed.
(c) An existing supervising broker may not transfer temporary supervision of a salesperson for more than 60 days in any 12-month period, and any individual salesperson may not be temporarily supervised by anyone for more than 60 days in any 12-month period, unless transferred to a new supervising broker of record. This limit may not be extended without written approval by the board, which must be based on good cause. A temporary supervising broker may exceed 60 days of temporary supervision in any 12-month period. A temporary supervising broker is not the "broker of record" of any salesperson who is temporarily transferred to the temporary supervising broker.
(d) and (e) remain as proposed.
(f) Temporary transfers of supervision may be extended beyond the effective termination date subject to the limitation of
ARM 24.210.611 (16)(c).
(g) through (17)(b) remain as proposed.
(c) Supervision of the salesperson may be transferred to a temporary supervising broker as provided in
ARM 24.210.611 (16). However, the authorization set forth in ARM 24.210.611 (16)(a) shall not be required.
(18) A salesperson who does not wish to be supervised by a temporary supervising broker may place their salesperson license on inactive status or transfer their license to another supervising broker as provided in
ARM 24.210.601 this rule.
24.210.641 UNPROFESSIONAL CONDUCT (1) through (5)(y) remain as proposed.
(z) failing, while acting as a property manager as defined in 37-51-102, MCA, to abide by the requirements of
37-51-607, Title 37, chapter 51, part 6, MCA, and the requirements of the Board of Realty Regulation's rules for property management as set forth in ARM 24.210.805 and 24.210.828, except for the advertising requirements of . Incidental property management duties shall not require compliance with ARM 24.210.828(3)(u);
(aa) through (af) remain as proposed.
(ag) failing to disclose in advertising
(i) the licensee's name , license number, and identifying that the advertisement is made by a real estate licensee ; or
(ii) that the advertising is made by a brokerage company. If the company name does not include "realty" or "real estate," the advertising must include the phrase "a real estate agency";
(ah) through (al) remain as proposed.
(am) acting as
offering real estate guidance, direction, or advice to a buyer agent without a written buyer broker agreement;
(an) through (av) remain as proposed.
(aw) failure to document compliance with 37-51-105, MCA, prior to or contemporaneously with an offer for the purchase and sale, rental, or lease of inhabitable real property;
(ax) and (ay) remain as proposed, but are renumbered (aw) and (ax).
(6) and) (7) remain as proposed.
24.210.805 PROPERTY MANAGEMENT TRUST ACCOUNT REQUIREMENTS (1) through (6) remain as proposed.
(7) Except for personal funds referenced in (3), no payments of personal indebtedness of the property manager shall be made from such trust accounts or trust funds.
(8) through (15) remain as proposed.
7. The board is not amending ARM 24.210.624.
BOARD OF REALTY REGULATION
C. E. "ABE" ABRAMSON, CHAIRPERSON
/s/ DARCEE L. MOE /s/ KEITH KELLY
Darcee L. Moe Keith Kelly, Commissioner
Alternate Rule Reviewer DEPARTMENT OF LABOR AND INDUSTRY
Certified to the Secretary of State August 27, 2012