Managing Broker Platinum Package

Upon completion of this section, you should be able to:

• Describe the limitations placed on a broker in preparing listing agreements, buyer agency agreements, purchase and sale agreements, exchanges and options on real property
• Demonstrate familiarity with the offences outlined in RCW 18.85.361 (Grounds for Disciplinary Actions), RCW 18.86.030 (Duties of a Broker) and RCW 18.235.130 (Uniform Regulations of Business and Professions Act)
• Demonstrate an understanding of the provisions of RCW 18.86 (The Real Estate Relationships Act) and describe how agency relationships may be created or terminated and identify when disclosure of potential agency conflicts is required
• Discuss the issues of vicarious liability and how they may arise from broker conduct

Broker Limitations in Preparing Agreements

A broker should avoid drafting contracts, contract provisions, or legal documents that could be construed as the product of unlicensed practice of law. This includes listing agreements, purchase and sale agreements, buyer agency agreements, leases, exchanges and options on real property. Your job is to assist your clients in completing the standard contract forms. Guide your clients by educating them on each of the clauses in the contract and how they might best draft the agreements. Advise your clients to seek proper legal counsel if the contract should extend beyond the standard form or should your client wishes to have a customs agreement drafted.

Use only standard forms in the exercise of your duties. Such forms must be reviewed and approved by real estate attorneys. Use extreme caution in adding anything to these standard forms.

Note: Many brokerages have policies that strictly prohibit brokers from writing additional clauses into a contract without management approval. As an agent, it is imperative that you understand your brokerage's policies regarding this.

Cultum v. Heritage House Realtors

In Cultum v. Heritage House Realtors, the court ruled that brokers need to take great care in using the standardized forms and must ensure that all additions are in line with the terms and conditions of the contract, or the broker can be held liable for damages and losses. According to the ruling:

"[An agent] is permitted to complete simple printed standardized real estate forms, which forms must be approved by a lawyer, it being understood that these forms shall not be used for other than simply real estate transactions which arise in the usual course of the [agent's] business and that such forms will be used only in connection with real estate transactions actually handled by such [agent] as [an agent] and then without charge for the simple service of completing the form."

Check for Understanding Question

You are writing a Purchase and Sale Agreement (PSA) for your buyer client. Your client may be exposed to a pay cut or layoff due to some union negotiations.

Conversely, he may be eligible for a promotion and a pay increase, depending on the union settlement. Your client has written three very detailed paragraphs on this situation and would like them to be a contingency to the contract so that he may not be bound to complete the purchase if certain circumstances should arise. He would like this verbiage to be added to the standard form as an addendum. As the buyer’s broker, which of the following is the best course of action that you can take?

1. Encourage the buyer to have their attorney review the Purchase and Sale Agreement and the verbiage that he would like to include.
2. Attach a copy of your client’s handwritten contingency to the contract and label it “Exhibit “A”
3. Rewrite the contingency into the body of the contract
4. Submit the offer to the seller without the contingency and without the buyer’s knowledge

Offenses Outlined in RCW 18.85, RCW 18.86.030, and RCW 18.235.130

The following Revised Code of Washington laws deal with the duties of a broker, unprofessional conduct, and disciplinary actions.

Disciplinary Action - Grounds
RCW 18.85.361

“In addition to the unprofessional conduct described in RCW 18.235.130, the director may take disciplinary action against any person engaged in the business or acting in the capacity of a real estate broker, managing broker, designated broker, or real estate firm, regardless of whether the transaction was for the person's own account or in a capacity as broker, managing broker, designated broker, or real estate firm, and may impose any of the sanctions and fines specified in RCW 18.235.110 for any holder or applicant who is guilty of:

1. Violating any of the provisions of this chapter or any lawful rules made by the director pursuant thereto or violating a provision of chapter 64.36, 19.105, or 18.235 RCW or RCW 18.86.030 or the rules adopted under those chapters or section;
2. Making, printing, publishing, distributing, or causing, authorizing, or knowingly permitting the making, printing, publication or distribution of false statements, descriptions or promises of such character as to reasonably induce any person to act thereon, if the statements, descriptions, or promises purport to be made or to be performed by either the licensee or his or her principal and the licensee then knew or, by the exercise of reasonable care and inquiry, could have known, of the falsity of the statements, descriptions or promises;
3. Knowingly committing, or being a party to, any material fraud, misrepresentation, concealment, conspiracy, collusion, trick, scheme, or device whereby any other person lawfully relies upon the word, representation or conduct of the licensee;
4. Accepting the services of, or continuing in a representative capacity, any broker or managing broker who has not been granted a license, or after his or her license has been revoked or during a suspension thereof;
5. Conversion of any money, contract, deed, note, mortgage, or abstract or other evidence of title, to the person's own use or to the use of that person's principal or of any other person, when delivered in trust or on condition, in violation of the trust or before the happening of the condition; and failure to return any money or contract, deed, note, mortgage, abstract, or other evidence of title within thirty days after the owner thereof is entitled thereto, and makes demand therefor, is prima facie evidence of such conversion;
6. Failing, upon demand, to disclose any information within the person's knowledge, or to produce any document, book, or record in the person's possession for inspection by the director or the director's authorized representatives acting by authority of law;
7. Continuing to sell any real estate, or operating according to a plan of selling, whereby the interests of the public are endangered, after the director has, by order in writing, stated objections thereto;
8. Advertising in any manner without including the real estate firm's name or assumed name as licensed in a clear and conspicuous manner in the advertisement; except, that real estate brokers, managing brokers, or firms advertising their personally owned real property must only disclose that they hold a real estate license;
9. Accepting other than cash or its equivalent as earnest money unless that fact is communicated to the owner before the owner's acceptance of the offer to purchase, and such fact is shown in the purchase and sale agreement;
10. Charging or accepting compensation from more than one party in any one transaction without first making full disclosure in writing of all the facts to all the parties interested in the transaction;
11. Accepting, taking, or charging any undisclosed commission, rebate, or direct profit on expenditures made for the principal;
12. Accepting employment or compensation for appraisal of real property contingent upon reporting a predetermined value;
13. Issuing a report on any real property in which the broker, managing broker, or real estate firm has an interest unless that interest is clearly stated in the report;
14. Misrepresentation of membership in any state or national real estate association;
15. Discrimination against any person in hiring or in real estate brokerage service activity, on the basis of any of the provisions of any local, county, state, or federal anti-discrimination law;
16. Failing to keep an escrow or trustee account of funds deposited relating to a real estate transaction, for a period of three years, showing to whom paid, and other pertinent information as the director may require, such records to be available to the director, or the director's representatives, on demand, or upon written notice given to the bank;
17. In the case of a firm and its designated broker, failing to preserve records relating to any real estate transaction for three years following the submission of the records to the firm;
18. Failing to furnish a copy of any listing, sale, lease, or another contract relevant to a real estate transaction to all signatories thereof within a reasonable time following execution;
19. In the case of a broker or managing broker, acceptance of a commission or any valuable consideration for the performance of any acts specified in this chapter, from any person, except the licensed real estate firm with whom the broker or managing broker is licensed;
20. To direct any transaction involving his or her principal, to any lending institution for financing or to any escrow company, in expectation of receiving a kickback or rebate therefrom, without first disclosing the expectation to his or her principal;
21. Buying, selling, or leasing directly, or through a third party, any interest in real property without disclosing in writing that the person is a real estate licensee;
22. In the case of real estate firms, and managing and designated brokers, failing to exercise adequate supervision over the activities of their brokers and managing brokers within the scope of this chapter;
23. Any conduct in a real estate transaction which demonstrates bad faith, dishonesty, untrustworthiness, or incompetence;
24. Acting as a vehicle dealer, as defined in RCW 46.70.011, without having a license to do so; or
25. Failing to ensure that the title is transferred under chapter 46.12 RCW when engaging in a transaction involving a mobile or manufactured home as a broker, managing or designated broker, or firm.”

Broker’s Specific Duties by State Law
RCW 18.86.030

1.“Regardless of whether a broker is an agent, the broker owes to all parties to whom the broker renders real estate brokerage services the following duties, which may not be waived:

• To exercise reasonable skill and care;
• To deal honestly and in good faith;
• To present all written offers, written notices and other written communications to and from either party in a timely manner regardless of whether the property is subject to an existing contract for sale or the buyer is already a party to an existing contract to purchase;
• To disclose all existing material facts known by the broker and not apparent or readily ascertainable to a party; provided that this subsection shall not be construed to imply any duty to investigate matters that the broker has not agreed to investigate;
• To account in a timely manner for all money and property received from or on behalf of either party;
• To provide a pamphlet on the law of real estate agency in the form prescribed in RCW 18.86.120 to all parties to whom the broker renders real estate brokerage services, before the party signs an agency agreement with the broker, signs an offer in a real estate transaction handled by the broker, consents to dual agency, or waives any rights, under RCW 18.86.020(1)(e),18.86.040 (1)(e), 18.86.050(1)(e), or 18.86.060(2) (e) or (f), whichever occurs earliest; and
• To disclose in writing to all parties to whom the broker renders real estate brokerage services before the party signs an offer in a real estate transaction handled by the broker, whether the broker represents the buyer, the seller, both parties, or neither party. The disclosure shall be set forth in a separate paragraph entitled "Agency Disclosure" in the agreement between the buyer and seller or in a separate writing entitled "Agency Disclosure."

2. Unless otherwise agreed, a broker owes no duty to conduct an independent inspection of the property or to conduct an independent investigation of either party's financial condition, and owes no duty to independently verify the accuracy or completeness of any statement made by either party or by any source reasonably believed by the broker to be reliable.”

Unprofessional Conduct
RCW 18.235.130

“Unprofessional conduct - Acts or conditions that constitute.

The following conduct, acts, or conditions constitute unprofessional conduct for any license holder or applicant under the jurisdiction of this chapter:

1. The commission of any act involving moral turpitude, dishonesty, or corruption relating to the practice of the person's profession or operation of the person's business, whether the act constitutes a crime or not. At the disciplinary hearing, a certified copy of a final holding of any court of competent jurisdiction is conclusive evidence of the conduct of the license holder or applicant upon which a conviction or the final holding is based. Upon a conviction, however, the judgment and sentence are conclusive evidence at the ensuing disciplinary hearing of the guilt of the license holder or applicant of the crime described in the indictment or information, and of the person's violation of the statute on which it is based. For the purposes of this subsection, conviction includes all instances in which a plea of guilty or nolo contendere is the basis for the conviction and all proceedings in which the sentence has been deferred or suspended. Except as specifically provided by law, nothing in this subsection abrogates the provisions of chapter 9.96A RCW. However, RCW9.96A.020 does not apply to a person who is required to register as a sex offender under RCW 9A.44.130;

2. Misrepresentation or concealment of a material fact in obtaining or renewing a license or in reinstatement thereof;

3. Advertising that is false, deceptive, or misleading;

4. Incompetence, negligence, or malpractice that results in harm or damage to another or that creates an unreasonable risk of harm or damage to another;

5. The suspension, revocation, or restriction of a license to engage in any business or profession by a competent authority in any state, federal, or foreign jurisdiction. A certified copy of the order, stipulation, or agreement is conclusive evidence of the revocation, suspension, or restriction;

6. Failure to cooperate with the disciplinary authority in the course of an investigation, audit, or inspection authorized by law by:

• Not furnishing any papers or documents requested by the disciplinary authority;
• Not furnishing in writing an explanation covering the matter contained in a complaint when requested by the disciplinary authority;
• Not responding to a subpoena issued by the disciplinary authority, whether or not the recipient of the subpoena is the accused in the proceeding; or
• Not providing authorized access, during regular business hours, to representatives of the disciplinary authority conducting an investigation, inspection, or audit at facilities utilized by the license holder or applicant;

7. Failure to comply with an order issued by the disciplinary authority;

8. Violating any of the provisions of this chapter or the chapters specified in RCW 18.235.020(2) or any rules made by the disciplinary authority under the chapters specified in RCW 18.235.020(2);

9. Aiding or abetting an unlicensed person to practice or operate a business or profession when a license is required;

10. Practice or operation of a business or profession beyond the scope of practice or operation as defined by law or rule;

11. Misrepresentation in any aspect of the conduct of the business or profession;

12. Failure to adequately supervise or oversee auxiliary staff, whether employees or contractors, to the extent that consumers may be harmed or damaged;

13. Conviction of any gross misdemeanour or felony relating to the practice of the person's profession or operation of the person's business. For the purposes of this subsection, conviction includes all instances in which a plea of guilty or nolo contendere is the basis for conviction and all proceedings in which the sentence has been deferred or suspended. Except as specifically provided by law, nothing in this subsection abrogates the provisions of chapter 9.96A RCW. However, RCW 9.96A.020 does not apply to a person who is required to register as a sex offender under RCW 9A.44.130;

14. Interference with an investigation or disciplinary action by willful misrepresentation of facts before the disciplinary authority or its authorized representatives, or by the use of threats or harassment against any consumer or witness to discourage them from providing evidence in disciplinary action or any other legal action, or by the use of financial inducements to any consumer or witness to prevent or attempt to prevent him or her from providing evidence in disciplinary action; and

15. Engaging in unlicensed practice as defined in RCW 18.235.010.”