YOU & A DOC ENFORCEMENT CALL

Besides the REALTOR® Code of Ethics, real estate brokers and licensees are bound by state statutes in the practice or our trade. In Minnesota, enforcement runs through the Minnesota Department of Commerce (“DOC”). Last year, there were 43 enforcement actions against agents/brokers. Considering that Minnesota has 22,000 real estate licenses (brokers & salespersons), that number of enforcement actions does not suggest a high percentage of licensees who are found in violation of licensing law.

So why should you read on? Although the enforcement actions are low, it is the focus of the actions that we are bringing to your attention.

  1. Make sure you have the correct information on file with the DOC – address, email, etc. The REALTOR® Association files are not linked to the DOC Pulse Portal system. MN Statute 82.641, Subd. 5 requires licensees to notify the commissioner, in the format prescribed by the commissioner, of a change of information contained in a license application on file with the commissioner within ten (10) days of the change (e.g. your legal name, age, residence address, the name and place of business of the real estate broker on whose behalf the salesperson is to be acting, and any other information you completed in a license application). As you review your real estate education on  the Pulse Portal system – check to ensure your other information is accurate. Here’s where to check your CE on Pulse Portal: www.pulseportal.com
  2. Make sure you keep accurate and complete files. Paperwork may be cumbersome to keep track of, but it is the easiest way to document and substantiate your actions in a real estate transaction. Notes of phone conversations or emails confirming conversations and other activities will help you remember what happened, when it happened, and how it was handled. You may ask “Why”? Can you remember all of the conversations you had with a client 6 or 10 months ago? A log with notes about conversations, or email records confirming some of these conversations would be helpful if you are involved in an enforcement investigation.
  3. Understand your fiduciary duties. When you represent a party in a real estate transaction – buyer or seller – make sure you are acting in their best interest and living up to your fiduciary duties. Understand your role in all agency relationships – including dual agency or acting as a facilitator – and complete the paperwork appropriately.
  4. Expertise in the specific real estate discipline. Some of the enforcement actions involved property management situations by agents who were not working through or reporting such activities to their broker. Talk with your broker about what real estate services you wish to provide to consumers within the structure of the real estate firm, and to confirm whether such activities are allowed by the supervised by your broker.Although you have a real estate license, it is important to be competent within any real estate discipline in which you engage. Don’t participate in any real estate disciplines without the broker’s approval and supervision.
  5. Read the MN REALTOR® publications. All statutory changes applicable to real estate licensees are highlighted in our publications. We email them to all members through our weekly and monthly newsletters. Review the MN REALTOR® Desktop Reference Guide, which contains Minnesota and federal regulations and laws that you should be familiar with. The Reference Guide is laid out in an easy to read Q & A format with links to the statutes and other information related to the issues. Please keep in mind, the 15 hours of CE you take annually cannot cover all of the legal requirements and responsibilities you have as a real estate professional. NAR, MN REALTORS®, and your local association all provide informational updates so you can stay abreast of the laws.

DOC enforcement personnel may contact you to investigate a complaint or compliance issues. We’ve heard from a number of members – and their counsel – about the numerous ways the DOC staff have engaged licensees in their investigations. Many times the investigation starts with a “conversation” in which a licensee may falsely assume they have done nothing to be concerned about, and that they need not speak with their broker or attorney before answering any and all questions asked by the DOC. Here are several tips regarding how to handle any such conversation or investigation:

  1. Don’t feel obligated to answer questions before speaking to your broker or legal counsel. The DOC may call and immediately commence questions and information gathering which they will use to build a case against a licensee. It is important that you understand you have the right to abstain from answering their questions until you consult with your broker or legal counsel. They should be providing you with confirmation of that fact, via a Tennessen Warning. You may also need to speak with your E & O insurer as soon as you’re aware of an investigation to determine whether you may have coverage for such an event. Before guessing about a file or a matter that may have occurred some time ago. ask them what file or transaction they’d like to know about, and set up a time to call them back or meet with them once you’ve had an opportunity to review your file. No matter the pressure, you have time to review the transaction and call your broker/legal counsel before answering any questions.
  2. You have the right to have legal representation in a DOC investigation or enforcement action. Make certain you obtain the assistance of someone who has the expertise and knowledge about the enforcement process and your rights in an investigation before moving forward.
  3. Take the call seriously. Even if you think the inquirer is missing some facts or asking for general information. Remember the old saying “everything you say can and will be used against you…” Although some investigations or enforcement actions are the result of the DOC having received false information or erroneous statements in a complaint, do not make the mistake of presuming you have nothing to be concerned about, such that you are too casual about what you say, or the significance of such an investigation. Since any violation of licensing law can result in a fine of up to $10,000 per violation (plus the costs of the investigation), it is important to devote adequate time and consideration to how you will handle such an investigation.
  4. Be proactive. The best way to stay out of trouble is to follow the rules. The best way to follow the rules is to read about them regularly and to know what you are required to do, and what you are prohibited from doing, as a real estate licensee. The five tips at the beginning of this article are a good place to start.

If real estate licensees break the law and harm consumers, they should be held accountable. There is no advantage to the industry in having bad characters in the real estate business.

However, you are innocent until proven guilty. If the DOC enforcement staff contacts you, remember it is likely they are seeking to determine whether you have violated licensing laws. They tend to focus on finding violations, without giving you the benefit of the doubt. Know and follow real estate licensing regulations and applicable law, stay current with changes to statutes that impact your business, and if you are investigated, remember to consult your E & O provider, broker and legal counsel before engaging in a response to a DOC inquiry or enforcement action.

Chris

 

Christoper Galler

Chief Executive Officer

cgaller@mnrealtor.com

 

 

The Minnesota REALTORS® is the largest trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.

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