Chapter 055
2017 -- H 5222
Enacted 06/27/2017

A N   A C T

Introduced By: Representatives Morin, Phillips, Carson, Casey, and O'Brien
Date Introduced: January 26, 2017

It is enacted by the General Assembly as follows:
     SECTION 1. Sections 5-20.5-14 and 5-20.5-26 of the General Laws in Chapter 5-20.5
entitled "Real Estate Brokers and Salespersons" are hereby amended to read as follows:
     5-20.5-14. Revocation, suspension of license -- Probationary period -- Penalties.
     (a) The director may, upon his or her own motion, and shall, upon the receipt of the
written verified complaint of any person initiating a cause under this section, ascertain the facts
and, if warranted, hold a hearing for the suspension or revocation of a license. The director has
power to refuse a license for cause or to suspend or revoke a license or place a licensee on
probation for a period not to exceed one year where it has been obtained by false representation,
or by fraudulent act or conduct, or where a licensee, in performing or attempting to perform any
of the acts mentioned in this chapter, is found to have committed any of the following acts or
     (1) Making any substantial misrepresentation;
     (2) Making any false promise of a character likely to influence, persuade, or induce any
person to enter into any contract or agreement when he or she could not or did not intend to keep
that promise;
     (3) Pursuing a continued and flagrant course of misrepresentation or making of false
promises through salespersons, other persons, or any medium of advertising, or otherwise;
     (4) Any misleading or untruthful advertising;
     (5) Failing to deposit money or other customers' funds received by a broker or
salesperson into an escrow account maintained by the broker which that complies with the
requirements set forth in § 5-20.5-6 5-20.5-26, upon execution of a purchase and sales agreement;
     (6) Failing to preserve for three (3) years following its consummation records relating to
any real estate transaction as described in the regulations issued by the department;
     (7) Acting for more than one party in a transaction without the knowledge and consent, in
writing, of all parties for whom he or she acts;
     (8) Placing a "for sale" or "for rent" sign on any property without the written consent of
the owner, or his or her authorized agent;
     (9) Failing to furnish a copy of any listing, sale, lease or other contract relevant to a real
estate transaction to all signatories of the contract at the time of execution;
     (10) Failing to specify a definite termination date that is not subject to prior notice, in any
listing contract;
     (11) Inducing any party to a contract, sale, or lease to break that contract for the purpose
of substitution in lieu of that contract a new contract, where that substitution is motivated by the
personal gain of the licensee;
     (12) Accepting a commission or any valuable consideration by a salesperson for the
performance of any acts specified in this chapter, from any person, except the licensed real estate
broker with whom he or she is affiliated;
     (13) Failing to disclose to an owner his or her intention or true position if he or she,
directly or indirectly through a third party, purchases for him or herself or acquires or intends to
acquire any interest in or any option to purchase property which that has been listed with his or
her office to sell or lease;
     (14) Being convicted of any criminal felony in a court of competent jurisdiction of this or
any other state or federal court, involving dishonesty, breach of trust, forgery, embezzlement,
obtaining money under false pretenses, bribery, larceny, extortion, conspiracy to defraud, fraud,
false dealing or any similar offense(s) or by pleading guilty or nolo contendere to any such
criminal offense or offenses;
     (15) Violating any rule or regulation promulgated by the department in the interest of the
public and consistent with the provisions of this chapter;
     (16) In the case of a broker licensee, failing to exercise adequate supervision over the
activities of his or her licensed salesperson within the scope of this chapter;
     (17) Failing or refusing to provide information requested by the commission or director
as the result of a formal or informal complaint to the director which that would indicate a
violation of this chapter;
     (18) Soliciting, selling, or offering for sale real property by offering free lots, or
conducting lotteries or contests or offering prizes for the purpose of influencing a purchaser or
prospective purchaser of real property;
     (19) Paying or accepting, giving or charging any undisclosed commission, rebate,
compensation, or profit or expenditures for a principal, or in violation of this chapter;
     (20) Any conduct in a real estate transaction, which that demonstrates bad faith,
dishonesty, untrustworthiness, or incompetence;
     (21) Failing to have all listing agreements in writing, properly identifying the property
and containing all of the terms and conditions of the sale, including the commission to be paid,
the signatures of all parties concerned, and a definite expiration date in that contract, which shall
not require an owner to notify a broker of his or her intention to terminate. An exclusive agency
listing or exclusive right to sell listing shall be clearly indicated in the listing agreement;
     (22) Accepting a listing based on "net price". In cases where the owner wishes to list in
this manner, the agreed-upon commission is added and listings made in the usual manner;
     (23) Negotiating, or attempting to negotiate, the sale, exchange, or lease of any real
property directly with an owner or lessor knowing that the owner or lessor has an outstanding
exclusive listing contract with another licensee covering the same property, except when the real
estate broker or salesperson is contacted by the client of another broker regarding a real estate
service, and the broker or salesperson has not directly or indirectly initiated those discussions,
they may discuss the terms which they might enter into future agency agreement or they may
enter into an agency agreement which that becomes effective upon termination of any existing
exclusive agreement; or they may enter into an agreement for other real estate service not covered
by an existing agency relationship;
     (24) Accepting an exclusive right to sell or lease or an exclusive agency and subsequently
failing to make a diligent effort to sell or lease the listed property;
     (25) Advising against the use of the services of an attorney in any real estate transaction;
     (26) Representing to any lender or any other party in interest, either verbally or through
the preparation of a false sales contract, an amount other than the true and actual sales price;
     (27) Submitting to an owner a written offer to purchase or lease unless that offer contains
the essential terms and conditions of the offer including the manner in which the purchase price is
to be paid, and if that offer is contingent upon certain conditions, those conditions shall be clearly
stated in the offer, or unless the offer is conditioned upon the later execution of a complete
agreement for sale;
     (28) Paying any sums of money being held in an escrow account to any person, or
converting such sums of money for his or her own use, in the event of a failed real estate
transaction, without having complied with the department's rules and regulations relative to the
transfer of disputed deposit funds to the office of the general treasurer;
     (29) Advertising to sell, buy, exchange, rent, or lease the property of another in a manner
indicating that the offer to sell, buy, exchange, rent, or lease that property is being made by a
private party not engaged in the real estate business, nor insert inserting advertisements in any
publication containing only a post office or other box number, telephone number, or street
address. No salesperson shall advertise the property of another under his or her own name;
     (30) As a licensed salesperson, failing upon termination of his or her employment or
affiliation with a real estate broker and upon demand by the broker to immediately turn over to
the broker any and all information, records, or other materials obtained during his or her
employment whether the information or records were originally given to him or her by the broker
or copied from the records of that broker or affiliation or acquired by the salesperson during his
or her employment;
     (31) Offering, promising, giving, or paying, directly or indirectly, any part or share of his
or her commission or compensation arising or accruing from any real estate transaction to any
person who is not licensed as a real estate broker, but who by law should be licensed, or who is
not a real estate salesperson employed by that licensee;
     (32) Soliciting the sale, lease, or the listing for sale or lease, of residential property on the
ground of loss of value due to the present or prospective entry in the neighborhood of a person or
persons of another race, religion, or ethnic origin, nor shall he or she distribute, or cause to be
distributed, material or make statements designed to induce a residential property owner to sell or
lease his or her property due to such factors;
     (33) Failure of the employing broker to notify the director, in writing, within ten (10)
days of the termination of a salesperson's employment of contractual relationship, or failure of a
salesperson to notify the director, in writing, within ten (10) days of any change in his/her broker
     (34) Failure to report all written offers to the owner prior to the signing of a purchase and
sale agreement by the owner; or
     (35) Failure of agents to provide buyers and sellers of real property with disclosure
regarding real estate agency relationships as specified in chapter 20.6 of this title; or
     (36) Failure of an associate broker to inform the public of associate broker status by not
listing associate broker on business cards and correspondence or by informing the public that his
or her status in the real estate firm is that of broker.; or
     (37) Failure to pay sums of money being held in an escrow account, pursuant to §5-20.5-
26, within ten (10) days of receipt of a written release that has been signed by all parties to a
failed real estate transaction.
     (b) The director is authorized to levy an administrative penalty not exceeding one
thousand dollars ($1,000) for any violation under this section or the rules and regulations of the
department of business regulation.
     5-20.5-26. Escrows.
     (a) Escrow.
     (1) Escrow accounts.
     (i) Each real estate firm shall maintain an escrow account under the supervision of the
broker qualified to do business in the name and on behalf of the corporate, partnership or
association licensee. All those funds paid to a salesperson or paid directly to a broker shall be
segregated on the broker's books and deposited in an account in a recognized federally insured
financial institution in Rhode Island separate from any account containing funds owned by the
broker. A broker or salesperson shall not commingle deposit money or other customers' funds and
his or her own funds,; use a customer's funds as his or her own,; or fail to keep an escrow or
trustee account of funds deposited with him or her relating to a real estate transaction, for a period
of three (3) years, showing to whom the money belongs, date deposited, date of withdrawal, to
whom paid, and any other pertinent information that the commission requires. Those records are
to be available to the commission and the department or their representatives, on demand, or upon
written notice given to the depository. Each broker/office supervisor shall maintain a monthly
report as to the status of that office's escrow account, and is responsible for its accuracy.
     (ii) A multi-office firm may either have an escrow account for each office or one central
escrow account for the firm.
     (iii) Funds held in escrow may be applied to the commission when earned by the listing
     (iv) Whenever the ownership of any deposit monies received by a broker or salesperson
pursuant to this section is in dispute by the parties to a real estate transaction, the broker or
salesperson shall deposit the monies with the general treasurer within one hundred eighty (180)
days of the date of the original deposit, those monies to be held in trust by the general treasurer
until the dispute is mediated, arbitrated, litigated, or otherwise resolved by the parties. The parties
to a real estate transaction may agree in writing to extend the time period by which the monies
must be deposited with the general treasurer in accordance with regulations promulgated by the
department of business regulation.
     (v) The department of business regulation shall have the authority to promulgate rules
and regulations with respect to such escrow accounts and the deposit of monies with the general
     (2) Escrow agents. Funds or deposits placed in escrow may be held by any person or
entity legally authorized to hold funds in that capacity, e.g., the real estate broker or attorney.
     (b) Dual activities. In all real estate transactions in which a broker holds more than one
title, e.g., builder, contractor, or insurance agent, all deposit monies received must be placed in
the brokers real estate escrow account, unless there is a contractual agreement between the
principals to the contrary.
     (c) Unlawful appropriation. Pursuant to § 11-41-11.1, any licensee to whom any money
or other property is entrusted as escrow funds, who intentionally appropriates to the licensee's
own use that money or property, or transfers the funds from an escrow account to a company or
personal account prior to a closing, is guilty of unlawful appropriation.
     (d) Release of funds. An escrow agent shall pay sums of money being held in an escrow
account as instructed by the parties to a failed real estate transaction, within ten (10) days of
receipt of a written release that has been signed by all the parties to the failed real estate
     SECTION 2. This act shall take effect on September 1, 2017.