2017 -- S 0168

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LC000864

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

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A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS - REAL ESTATE BROKERS AND

SALESPERSONS

     

     Introduced By: Senators Lombardi, McCaffrey, Lynch Prata, Archambault, and Jabour

     Date Introduced: February 01, 2017

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 5-20.5-14 and 5-20.5-26 of the General Laws in Chapter 5-20.5

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entitled "Real Estate Brokers and Salespersons" are hereby amended to read as follows:

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     5-20.5-14. Revocation, suspension of license -- Probationary period -- Penalties.

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     (a) The director may upon his or her own motion, and shall, upon the receipt of the

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written verified complaint of any person initiating a cause under this section, ascertain the facts

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and, if warranted, hold a hearing for the suspension or revocation of a license. The director has

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power to refuse a license for cause or to suspend or revoke a license or place a licensee on

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probation for a period not to exceed one year where it has been obtained by false representation,

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or by fraudulent act or conduct, or where a licensee, in performing or attempting to perform any

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of the acts mentioned in this chapter, is found to have committed any of the following acts or

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practices:

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     (1) Making any substantial misrepresentation;

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     (2) Making any false promise of a character likely to influence, persuade or induce any

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person to enter into any contract or agreement when he or she could not or did not intend to keep

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that promise;

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     (3) Pursuing a continued and flagrant course of misrepresentation or making of false

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promises through salespersons, other persons, or any medium of advertising, or otherwise;

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     (4) Any misleading or untruthful advertising;

 

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     (5) Failing to deposit money or other customers' funds received by a broker or

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salesperson into an escrow account maintained by the broker which complies with the

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requirements set forth in § 5-20.5-6, upon execution of a purchase and sales agreement;

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     (6) Failing to preserve for three (3) years following its consummation records relating to

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any real estate transaction as described in the regulations issued by the department;

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     (7) Acting for more than one party in a transaction without the knowledge and consent, in

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writing, of all parties for whom he or she acts;

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     (8) Placing a "for sale" or "for rent" sign on any property without the written consent of

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the owner, or his or her authorized agent;

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     (9) Failing to furnish a copy of any listing, sale, lease or other contract relevant to a real

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estate transaction to all signatories of the contract at the time of execution;

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     (10) Failing to specify a definite termination date that is not subject to prior notice, in any

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listing contract;

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     (11) Inducing any party to a contract, sale, or lease to break that contract for the purpose

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of substitution in lieu of that contract a new contract, where that substitution is motivated by the

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personal gain of the licensee;

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     (12) Accepting a commission or any valuable consideration by a salesperson for the

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performance of any acts specified in this chapter, from any person, except the licensed real estate

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broker with whom he or she is affiliated;

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     (13) Failing to disclose to an owner his or her intention or true position if he or she

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directly or indirectly through a third party, purchases for him or herself or acquires or intends to

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acquire any interest in or any option to purchase property which has been listed with his or her

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office to sell or lease;

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     (14) Being convicted of any criminal felony in a court of competent jurisdiction of this or

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any other state or federal court, involving dishonesty, breach of trust, forgery, embezzlement,

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obtaining money under false pretenses, bribery, larceny, extortion, conspiracy to defraud, fraud,

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false dealing or any similar offense(s) or by pleading guilty or nolo contendere to any such

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criminal offense or offenses;

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     (15) Violating any rule or regulation promulgated by the department in the interest of the

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public and consistent with the provisions of this chapter;

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     (16) In the case of a broker licensee, failing to exercise adequate supervision over the

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activities of his or her licensed salesperson within the scope of this chapter;

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     (17) Failing or refusing to provide information requested by the commission or director

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as the result of a formal or informal complaint to the director which would indicate a violation of

 

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this chapter;

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     (18) Soliciting, selling, or offering for sale real property by offering free lots, or

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conducting lotteries or contests or offering prizes for the purpose of influencing a purchaser or

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prospective purchaser of real property;

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     (19) Paying or accepting, giving or charging any undisclosed commission, rebate,

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compensation, or profit or expenditures for a principal, or in violation of this chapter;

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     (20) Any conduct in a real estate transaction, which demonstrates bad faith, dishonesty,

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untrustworthiness, or incompetence;

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     (21) Failing to have all listing agreements in writing, properly identifying the property

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and containing all of the terms and conditions of the sale, including the commission to be paid,

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the signatures of all parties concerned, and a definite expiration date in that contract, which shall

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not require an owner to notify a broker of his or her intention to terminate. An exclusive agency

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listing or exclusive right to sell listing shall be clearly indicated in the listing agreement;

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     (22) Accepting a listing based on "net price". In cases where the owner wishes to list in

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this manner, the agreed-upon commission is added and listings made in the usual manner;

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     (23) Negotiating or attempting to negotiate the sale, exchange, or lease of any real

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property directly with an owner or lessor knowing that the owner or lessor has an outstanding

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exclusive listing contract with another licensee covering the same property, except when the real

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estate broker or salesperson is contacted by the client of another broker regarding a real estate

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service, and the broker or salesperson has not directly or indirectly initiated those discussions,

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they may discuss the terms which they might enter into future agency agreement or they may

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enter into an agency agreement which becomes effective upon termination of any existing

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exclusive agreement; or they may enter into an agreement for other real estate service not covered

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by an existing agency relationship;

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     (24) Accepting an exclusive right to sell or lease or an exclusive agency and subsequently

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failing to make a diligent effort to sell or lease the listed property;

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     (25) Advising against the use of the services of an attorney in any real estate transaction;

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     (26) Representing to any lender or any other party in interest, either verbally or through

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the preparation of a false sales contract, an amount other than the true and actual sales price;

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     (27) Submitting to an owner a written offer to purchase or lease unless that offer contains

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the essential terms and conditions of the offer including the manner in which the purchase price is

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to be paid, and if that offer is contingent upon certain conditions, those conditions shall be clearly

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stated in the offer, or unless the offer is conditioned upon the later execution of a complete

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agreement for sale;

 

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     (28) Paying any sums of money being held in an escrow account to any person, or

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converting such sums of money for his or her own use, in the event of a failed real estate

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transaction, without having complied with the department's rules and regulations relative to the

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transfer of disputed deposit funds to the office of the general treasurer;

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     (29) Advertising to sell, buy, exchange, rent, or lease the property of another in a manner

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indicating that the offer to sell, buy, exchange, rent, or lease that property is being made by a

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private party not engaged in the real estate business, nor insert advertisements in any publication

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containing only a post office or other box number, telephone number, or street address. No

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salesperson shall advertise the property of another under his or her own name;

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     (30) As a licensed salesperson, failing upon termination of his or her employment or

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affiliation with a real estate broker and upon demand by the broker to immediately turn over to

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the broker any and all information, records or other materials obtained during his or her

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employment whether the information or records were originally given to him or her by the broker

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or copied from the records of that broker or affiliation or acquired by the salesperson during his

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or her employment;

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     (31) Offering, promising, giving or paying directly or indirectly, any part or share of his

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or her commission or compensation arising or accruing from any real estate transaction to any

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person who is not licensed as a real estate broker, but who by law should be licensed, or who is

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not a real estate salesperson employed by that licensee;

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     (32) Soliciting the sale, lease, or the listing for sale or lease, of residential property on the

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ground of loss of value due to the present or prospective entry in the neighborhood of a person or

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persons of another race, religion, or ethnic origin, nor shall he or she distribute or cause to be

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distributed material or make statements designed to induce a residential property owner to sell or

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lease his or her property due to such factors;

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     (33) Failure of the employing broker to notify the director, in writing, within ten (10)

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days of the termination of a salesperson's employment of contractual relationship, or failure of a

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salesperson to notify the director, in writing, within ten (10) days of any change in his/her broker

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affiliation;

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     (34) Failure to report all written offers to the owner prior to the signing of a purchase and

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sale agreement by the owner; or

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     (35) Failure of agents to provide buyers and sellers of real property with disclosure

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regarding real estate agency relationships as specified in chapter 20.6 of this title; or

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     (36) Failure of an associate broker to inform the public of associate broker status by not

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listing associate broker on business cards and correspondence or by informing the public that his

 

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or her status in the real estate firm is that of broker.

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     (37) Failure to pay monies being held in an escrow account governed by §5-20.5-26

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within ten (10) calendar days of receipt of a written release and instructions that have been signed

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by all parties to a failed real estate transaction.

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     (b) The director is authorized to levy an administrative penalty not exceeding one

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thousand dollars ($1,000) for any violation under this section or the rules and regulations of the

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department of business regulation.

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     5-20.5-26. Escrows.

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     (a) Escrow.

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     (1) Escrow accounts.

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     (i) Each real estate firm shall maintain an escrow account under the supervision of the

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broker qualified to do business in the name and on behalf of the corporate, partnership or

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association licensee. All those funds paid to a salesperson or paid directly to a broker shall be

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segregated on the broker's books and deposited in an account in a recognized federally insured

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financial institution in Rhode Island separate from any account containing funds owned by the

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broker. A broker or salesperson shall not commingle deposit money or other customers' funds and

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his or her own funds, use a customer's funds as his or her own, or fail to keep an escrow or trustee

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account of funds deposited with him or her relating to a real estate transaction, for a period of

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three (3) years, showing to whom the money belongs, date deposited, date of withdrawal, to

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whom paid, and any other pertinent information that the commission requires. Those records are

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to be available to the commission and the department or their representatives, on demand, or upon

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written notice given to the depository. Each broker/office supervisor shall maintain a monthly

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report as to the status of that office's escrow account, and is responsible for its accuracy.

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     (ii) A multi-office firm may either have an escrow account for each office or one central

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escrow account for the firm.

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     (iii) Funds held in escrow may be applied to the commission when earned by the listing

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company.

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     (iv) Whenever the ownership of any deposit monies received by a broker or salesperson

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pursuant to this section is in dispute by the parties to a real estate transaction, the broker or

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salesperson shall deposit the monies with the general treasurer within one hundred eighty (180)

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days of the date of the original deposit, those monies to be held in trust by the general treasurer

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until the dispute is mediated, arbitrated, litigated, or otherwise resolved by the parties. The parties

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to a real estate transaction may agree in writing to extend the time period by which the monies

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must be deposited with the general treasurer in accordance with regulations promulgated by the

 

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department of business regulation.

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     (v) The department of business regulation shall have the authority to promulgate rules

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and regulations with respect to such escrow accounts and the deposit of monies with the general

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treasurer.

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     (2) Escrow agents. Funds or deposits placed in escrow may be held by any person or

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entity legally authorized to hold funds in that capacity, e.g., the real estate broker or attorney.

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     (b) Dual activities. In all real estate transactions in which a broker holds more than one

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title, e.g., builder, contractor, or insurance agent, all deposit monies received must be placed in

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the brokers real estate escrow account, unless there is a contractual agreement between the

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principals to the contrary.

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     (c) Unlawful appropriation. Pursuant to § 11-41-11.1, any licensee to whom any money

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or other property is entrusted as escrow funds, who intentionally appropriates to the licensee's

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own use that money or property, or transfers the funds from an escrow account to a company or

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personal account prior to a closing, is guilty of unlawful appropriation.

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     (d) An escrow agent shall pay monies being held in an escrow account as instructed by

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the parties to a failed real estate transaction within ten (10) calendar days of receipt of a written

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release and instructions that have been signed by all parties to the transaction.

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     SECTION 2. This act shall take effect on September 1, 2017.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS - REAL ESTATE BROKERS AND

SALESPERSONS

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     This act would require an escrow agent to release monies held in an escrow account

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within ten (10) calendar days of receipt of a written release and instructions signed by all parties

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to a failed real estate transaction.

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     This act would take effect on September 1, 2017.

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