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5. Real Estate Brokerage Activities: Guides for Salesperson / FL RE pre-license

Brokerage Offices
All brokers in the state of Florida must have a real estate office and must register that office with the DBPR. This is called the Primary office.

All sales associates working under the broker’s direction must be registered and work from the broker’s primary office or a branch office. A sales associate or broker associate may not have an independent office of his own.

Branch Offices -Home Office
Whenever a broker wishes to conduct business in more than one location, each office must be registered with DBPR (Department of Business and Professional Regulation) and the appropriate fee/s paid. All advertising (i.e. phone numbers, letterhead, etc.) of the broker must be displayed to indicate to the public that such an office is operated at that location by the broker.
Other People’s Money
This can be security deposits, rent money, earnest money deposits or any type of money being held by the broker in escrow for the buyer or seller.
Escrow
is an amount of money or property granted to somebody but held by a third party and only released after a specific condition has been met
Escrow Accounts Deposited
This must be an account separate from the broker’s own operating funds.

The broker must be a SIGNATORY on all escrow accounts
A broker may maintain more than one escrow account and maintain up to $1000 of his own money in each sales escrow account or up to $5,000 in a property management account.
The broker must reconcile the accounts no more than 30 DAYS from the date of the last reconciliation was performed or should have been performed. This requirement cannot be delegated to any other person.

Within 10 BUSINESS DAYS of the date of receipt, the broker shall make a written request to the title company or attorney to provide a written verification of receipt of the deposit.
Within 10 days of verification of deposit, the broker shall provide the seller (if unrepresented) or seller’s broker a copy of written verification.

Interest Bearing Accounts
He may do so only if the following is stated in writing with all parties to the transaction:
– the name of the party who is to receive the interest
– the date the earned interest must be disbursed.
Record Keeping of Escrow/Trust Accounts
– Brokers who fail to reconcile their escrow accounts monthly (or more frequently) are subject to a citation. – Failure to properly maintain escrow accounts is the one of the most common problems found during a DBPR Audit.
– Records must be available to the DBPR or its authorized representatives during regular business hours.
– ONE A MONTH the broker shall have a written statement made comparing the broker’s total liability with the reconciled bank balances of all trust accounts. This includes the sum total of all deposits received, pending and being held by the broker at any point in time.
Escrow Accounts in Dispute
Escrow is held in an account until it needs to be turned over to the closing source. If a contract does not close, or a portion of the escrow claimed by the brokerage, the broker’s portion will be apportioned into the broker’s operating account for disbursement as require
Occasionally, however, there is a dispute over the return or disbursement of earnest money. It is the responsibility of the broker to then notify the FREC within 15 business days from the last party’s demand
Good-faith doubt
meaning the broker honestly doubts the claim of a party, the broker reports the situation to the FREC.
The broker has 30 days from the last party’s demand to implement one of the procedures set up for escrow disputes. These are:
-Escrow Disbursement Order
-Mediation
-Arbitration
-Litigation

A situation that is considered good faith doubt is when one party to the dispute does not respond to the broker’s correspondence about the escrow money when a transaction fails to close on time or if the buyer (or his spouse) refuses to close at all.

EDO
An Escrow Disbursement Order from FREC
Once the EDO is requested, the broker must follow the instructions of the FREC.
If the EDO is overturned on appeal, the broker may be liable for civil damages in a civil suit.
However, if the broker has followed the EDO, damages to the broker can be reimbursed from the RE Recovery Fund without jeopardy to the broker’s license, and the broker is not required to repay the Fund.
The FREC may refuse to issue a Disbursement Order, in which case the other procedures must be used.
Mediation
Both parties agree in writing to mediation by a mediator.
If the issue is not solved within 90 DAYS, the licensee must use the other types of dispute procedures
Arbitration
If the buyer and seller cannot agree, the issue is submitted to arbitration and a third party (arbitrator) makes a decision for one party or the other.
If this fails, the parties go to Litigation
Litigation
is simply a law suit, asking the courts through a process called INTERPLEADER to determine the rightful owner of the disputed escrow.
The court issues a DECLARATORY JUDGMENT which is a binding determination of the rights and status of the parties.
Commingling
A separate account is required for a broker to deposit these funds apart from his own personal or operating funds. To mix personal and public money is called Commingling and is illegal under Florida law, with the exception of $1000 that a broker may deposit in the escrow (or trust) account to keep the account open
Conversion
means taking money that should be held in escrow for the parties and using the money for the broker’s own needs (such as operating money). This is an illegal act.
When sale associate obtain money:
to be deposited in the escrow account, it must be given to the broker IMMEDIATELY.
This means NO LATER than the end of the next business day.
When a broker receives money
to be deposited in an escrow account, he must deposit it immediately within THREE BUSINESS DAYS. (Holidays and weekends are excluded)
Rental Lists and Rental Companies
When a broker provides a list of rental property for a fee and acts as an information broker to a tenantFREC requires that the broker give the tenant a contract that specifies that the tenant has the right to:
– Request a refund of 75% of the fee (if requested within 30 days) if the tenant does not find a rental; and
– Request a refund of 100% of the full fee (if requested within 30 days) if the information is inaccurate.

The penalty for advertising obsolete or otherwise inaccurate rental lists is a fine up to $1,000 and/or up to one year in prison. This is a first degree misdemeanor.

The Role of the Broker in Property Transfer
The broker must be very careful NOT to give an opinion as to the validity of title to a property since the broker is not an expert in that field. ONLY an attorney may give an opinion of title, after reviewing the chain of ownership over a period of time.
Commissions
is compensation paid to a real estate broker for real estate service. It can be paid as a
– Percentage of sale price
– Flat Fee or Salary
– Or a combination of both, as set forth in the listing agreement, management agreement or agreement.

Only brokers can contract with Principals or customers. A sales associate works under the direction and guidance of a broker and cannot contract directly with the Principal or customer.

In order to collect a commission, a broke
-Must be a licensed real estate broker or sales associate
– Must have been employed by the principal under a valid contract such as a listing agreement, agreement etc
– Must have been the PROCURING cause of the sale, a series of events leading to the sale/purchase or renting of real property
-Must have a READY, WILLING and ABLE buyer, seller or tenant, depending who the contract calls for
The Sherman Anti-Trust Act
he Sherman Anti-Trust Act directly affects real estate brokers. The act specifically forbids:
– price fixing
-Group boycotts
– Division of market by location on price
Kickbacks are legal only under limited conditions:
– All parties to the transaction must be fully informed of the kickback.
– The kickback must not be prohibited by other law (such as the Real Estate Settlement Procedures Act).
– The commission may be shared with an unlicensed seller or buyer of the property sold with lender approval.

NOTE: It is unlawful for a licensee to pay any fee to an unlicensed individual for performing the services of real estate.

Change of Employer
Any time a sales associate changes employers (brokers) he must notify the FREC within 10 DAYS on the current form prescribed by the DBPR
Using Trade Names of Real Estate Organizations
Unauthorized display of names or insignia of real estate organizations or associations is prohibited by FREC rules. For example, do not use the REALTOR® trademark or any other group insignia or designation unless you are a current member or are qualified in that skill or business.
Types of Business Entities that May Register as a Real Estate Brokerage
A broker may wish to do business as a BUSINESS ENTITY instead of using his own name.
The broker should consult with his own attorney or accountant to find the specific entity that meets his specific needs. These companies will need to be registered with the DBPR.

– Sole proprietorship
-General Partnership
-Limited Partnerships
-Corporation
– Limited Liability Partnership:( LLP)
– Limited Liability Company : (LLC)

The department may license broker associates and sales associates as: an individual, professional corporation or limited liability company provided the licensee uses the legal name.

Sole proprietorship
business owned by ONE person.
It may have a trade name rather than the name of the owner.
Advantages: easy to manage – and decisions are made by the owner.
Disadvantage: when the owner dies, the company ceases to exist.

Liability is completely held by the one owner. All actions of associates to this broker are his responsibility and his alone.

A sole proprietor does NOT NEED to register with the Secretary of State UNLESS a trade name is used.

General Partnership
business owned by MORE than ONE broker.

Each partner in a general partnership is liable for any debt; each partner helps to make the decisions and receives a share of the profits.

At least one of the brokers must be specified as the active broker.
All partners dealing with the public must be an active broker.

A sales associate or a broker associate cannot be partners in a general partnership. Any change in the makeup of the partnership must be reported to the FREC. The partnership is registered with the FREC but does NOT have to be filed with the Secretary of State.

If the primary broker dies, that broker must be replaced by another active broker within 14 days. If this does not occur, the partnership registration is cancelled and all the licensees associated with the partnership become involuntarily inactive.

A general partnership is dissolved by:
agreement of the partners
death of one of the partners
court action
bankruptcy of one of the partners
bankruptcy of the partnership
Limited Partnerships
business owned by at least ONE GENERAL partner and at least one LIMITED PARTNER.
All the management is done by the general partner. Limited partners contribute investment cash but are limited in the amount of liability to the amount of money they have already given.
Limited partners (sometimes called SILENT partners) do not have a voice in the managing of the company.
The limited partnership is registered with the FREC, and at least one of the general partners must be an active broker.

The partnership is created by filing with the Secretary of State.
The partnership must be also be registered with the FREC. General partners who work with the public must be active brokers and licensed with the FREC.
All other general partners must also be registered with the DRE.
Limited partners do not have to be licensed or registered. Sales associates and broker associates cannot be general partners but they may be limited partners.

Death of primary broker
If the primary broker dies, that broker must be replaced by another active broker within 14 days.
If this does not occur, the partnership registration is CANCELED and all the licensees associated with the partnership become INVOLUNTARY INACTIVE.
Corporation
company that is an ENTITY, rather than a single person.
It may have a TRADE NAME associated with it.

A corporation is formed by filing Articles of Incorporation with the Secretary of State which specify the duties and powers of the corporation.
The corporation must be registered with the FREC.

Stockholders own the business but it is MANAGED by a BOARD OF DIRECTORS, acting through its OFFICERS. The Corporation may be either for profit or nonprofit.

Corporations may cease to exist when
– the stockholders act to dissolve the company
– a court order dissolved the company
– the life span has expired, as provided in the charter
– the corporation fails to file an annual report with the State of Florida
– the annual fee required by the state of Florida is not paid.

If the firm only has one active broker, and that broker dies, the company has 14 calendar days to notify the FREC.
If this is not met, the corporation’s registration will be CANCELED and the licenses of all its associates become INVOLUNTARY INACTIVE. If there is more than one active broker, the associates are not affected by the change of leadership.

Limited Liability Partnership:( LLP)
form of ownership that provides liability protection similar to protection offered to limited partners in a limited partnership.
Basically the partner is liable only for the acts the he, himself has done, rather than the partnership, The Limited Liability Partnership must file with the Secretary of State and must always use the letters LLP in it’s name.
Limited Liability Company : (LLC)
is also called a “professional company” and its purpose is to provide professional real estate services without the liability of an unprotected broker’s or sales associate license.
Liability of an LLC is limited to a single person’s professional action.
Broker associates and sales associates may register with the Department as a professional corporation or limited liability company to limit individual liability after providing authorization from the Secretary of State. The license is issued in the licensee’s legal name only and shall include the designation LLC.
Trade names
An individual broker, partnership or corporation may use a trade name, and if so it must be disclosed upon the request for a license and be placed upon the registration or license.
It cannot be the same as a real or trade name of another registrant or licensee.
No individual, partnership or corporation may be registered under more than one trade name.
The actual name of the individual or an entity is not a trade name.
Such a name must be noted on the records of the Commission and placed on the license so that the public will know that this is a licensed broker and a registered company.

A sales associate may not use a trade name or fictitious name at any time. They must register and operate under their true name only.

Organizations that Can NOT be Registered as a Real Estate Brokerage
A Corporation Sole- church organization, but not a non-profit
A joint venture-temporary relationship
A Business Trust-investment group for its own purposes
A Cooperative/Condominium/Homeowners’ Association- These associations are formed to manage common ownership and do not deal in real estate
An unincorporated Association- local property owners, not partners
An Ostensible (Quasi) Partnership – hidden relationship
An ostensible partnership may be formed without the knowledge of a real estate broker.

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