No. 43012 (Amendment): Rule R162-2f. Real Estate Licensing and Practices Rules

(Amendment)

DAR File No.: 43012
Filed: 06/18/2018 02:49:53 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this proposed rule amendment is to amend and clarify the definition of owner for purposes of exemption from the requirements of the Real Estate Licensing and Practices Act, to amend and clarify the manner and content of qualifying experience points to be submitted to the Division of Real Estate (Division) by an applicant for licensure as a real estate broker, and to update and correct a reference citation.

Summary of the rule or change:

This proposed rule amendment includes: in Section R162-2f-200, amending and clarifying the definition of owner for purposes of exemption from the requirements of the Real Estate Licensing and Practices Act; in Section R162-2f-202b, amending and clarifying the manner and content of qualifying experience points to be submitted to the Division by an applicant for licensure as a real estate broker; in Section R162-2f-401f, bringing up to date the date of approval of two lead-based paint forms approved for use by licensees; in Section R162-2f-401j, correcting a reference citation; and in Section R162-2f-501, amending and clarifying the manner and content of qualifying experience points to be submitted to the Division of Real Estate by an applicant for licensure as a real estate broker.

Statutory or constitutional authorization for this rule:

• Section 61-2f-103
• Section 61-2f-202
• Section 61-2f-203

Anticipated cost or savings to:

the state budget:

The Division has the staff and budget in place to administer this proposed amendment. One of the purposes of this proposed rule amendment is to amend and clarify the definition of owner for purposes of exemption from the licensing requirements of the Real Estate Licensing and Practices Act. An owner of real property is already exempt from the licensing requirements of the Real Estate Licensing and Practices Act. Another purpose of this proposed rule amendment is to amend and clarify the manner and number of documented experience points that a broker applicant may submit to the Division. It is expected that this proposed amendment will tend to lower the number of hours that Division staff will devote to reviewing the experience of an applicant to determine the applicant's qualification for licensure. After conducting a thorough analysis, it was determined that this proposed rule amendment will not result in a fiscal impact, affect those resources, or result in any additional cost or savings to the state budget.

local governments:

Local governments are not required to comply with, or enforce, the Real Estate Licensing and Practices rules. After conducting a thorough analysis, it was determined that this proposed rule amendment will not result in a fiscal impact to local governments.

small businesses:

There is a large but unknown number of small businesses that own real property in the state of Utah. An owner of real property is exempt from the licensing requirements of the Real Estate Licensing and Practices Act. This proposed rule amendment does not create new obligations for an owner of real property nor does it increase the cost associated with any existing obligation. There are approximately 14,250 licensed real estate sales agents in the state. Any one of these sales agents may apply for licensure as a broker at some point in the future. This proposed rule amendment does not create new obligations for a broker applicant nor does it increase the cost associated with any existing obligation. This proposed amendment would simply amend and clarify the manner and content of qualifying experience points to be submitted to the Division by an applicant for licensure as a real estate broker. After conducting a thorough analysis, it was determined that this proposed rule amendment will not result in a fiscal impact to small businesses.

persons other than small businesses, businesses, or local governmental entities:

There is a large but unknown number of persons other than small businesses, businesses, or local government entities that own real property in the state of Utah. An owner of real property is exempt from the licensing requirements of the Real Estate Licensing and Practices Act. This proposed rule amendment does not create new obligations for an owner of real property nor does it increase the cost associated with any existing obligation. After conducting a thorough analysis, it was determined that this proposed rule amendment will not result in a fiscal impact to persons other than small businesses, businesses, or local government entities that own real property in the state of Utah.

Compliance costs for affected persons:

There is a large but unknown number of persons who own real property in the state of Utah. An owner of real property is exempt from the requirements of the Real Estate Licensing and Practices Act. This proposed rule amendment does not create new obligations for an owner of real property nor does it increase the cost associated with any existing obligation. There are approximately 14,250 licensed real estate sales agents in the state. Any one of these sales agents may apply for licensure as a broker at some point in the future. This proposed rule amendment does not create new obligations for a broker applicant nor does it increase the cost associated with any existing obligation. This proposed amendment would simply amend and clarify the manner and content of qualifying experience points to be submitted to the Division by an applicant for licensure as a real estate broker. After conducting a thorough analysis, it was determined that this proposed rule amendment will not result in a fiscal impact to affected persons.

Comments by the department head on the fiscal impact the rule may have on businesses:

None of the foregoing amendments will result in a fiscal impact to small businesses.

Francine A. Giani, Executive Director, Commerce

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Commerce
Real Estate
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Justin Barney at the above address, by phone at 801-530-6603, by FAX at , or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/14/2018

This rule may become effective on:

08/21/2018

Authorized by:

Jonathan Stewart, Director

RULE TEXT

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs

FY 2019

FY 2020

FY 2021

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Person

$0

$0

$0

Total Fiscal Costs:

$0

$0

$0

Fiscal Benefits

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Persons

$0

$0

$0

Total Fiscal Benefits:

$0

$0

$0

Net Fiscal Benefits:

$0

$0

$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described in the narrative. Inestimable impacts for Non-Small Businesses are described in Appendix 2.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

There are a large but unknown number of large businesses that own real property in the state of Utah (NAICS #s 531110, 531120, 531130, 531190) in Utah. Owners are exempt from licensure under the Real estate Licensing and Practices Act and the Real Estate Licensing and Practices Rules. This proposed amendment defines "Owner" and clarifies the exemption. The full impact to these non-small businesses cannot be estimated as the necessary data are unavailable.

 

This Fiscal Analysis reviewed and approved byFrancine A. Giani, Executive Director, Commerce Department.

 

 

R162. Commerce, Real Estate.

R162-2f. Real Estate Licensing and Practices Rules.

R162-2f-200. Owner

(1) For purposes of Section 61-2f-202(1):

(a) "owner" means a person who has:

(i) a sole ownership interest in real estate, or

(ii) an ownership interest in real estate as a joint tenant or a tenant in common;

(b) "owner or lessor" does not include:

(i) a person who holds an option to purchase real property;

(ii) a mortgagee;

(iii) a beneficiary under a deed of trust;

(iv) a trustee under a deed of trust; or

(v) a person who owns or holds a claim that encumbers any real property or an improvement to the real property.

(2) For purposes of Subsection 61-2f-202(1)(a)(i):

(a) any person performing an act described in Subsection 61-2f-102(20) on behalf of an entity must be:

(i) if the entity is a corporation, an officer or director of the corporation;

(ii) if the entity is a limited liability company,

(A) a member of a member-managed limited liability company, or

(B) a manager of a manager-managed limited liability company;

(iii) if the entity is a partnership, a partner of the partnership;

(iv) if the entity is a limited partnership, a general partner of the limited partnership;

(v) if the entity is a trust, a trustee of the trust;

(vi) if the entity is an estate of a deceased individual, a court-appointed personal representative of the estate; or

(vii) if the entity is the estate of an individual subject to a conservatorship, a court-appointed conservator of the estate.

(b) A person who is an entity or organization not described in Subsections (1)(c)(i) through (vii) above is not exempt from licensure under Section 61-2f-202(1)(a)(i).

 

R162-2f-202b. [ Principal ]Broker Licensing Fees and Procedures.

(1) To obtain a Utah license to practice as a [principal ]broker, an individual shall:

(a) evidence honesty, integrity, truthfulness, and reputation pursuant to Subsection R162-2f-201(1);

(b) evidence competency to transact the business of real estate pursuant to Subsection R162-2f-201(2);

(c)(i) successfully complete 120 hours of approved prelicensing education, including:

(A) 45 hours of broker principles;

(B) 45 hours of broker practices; and

(C) 30 hours of Utah law and testing; or

(ii) apply to the division for waiver of all or part of the education requirement by virtue of:

(A) completing equivalent education as part of a college undergraduate or postgraduate degree program, regardless of the date of the degree; or

(B) completing other equivalent real estate education within the 12-month period prior to the date of application;

(d)(i) apply with a testing service designated by the division to sit for the licensing examination; and

(ii) pay a nonrefundable examination fee to the testing center;

(e) pursuant to this Subsection (3)(a), take and pass both the state and national components of the licensing examination;

(f)(i) unless Subsection (2)(a) applies, evidence the individual's having, within the five-year period preceding the date of application either:

(A) three years full-time, licensed, active real estate experience; or

(B) two years full-time, licensed, active, real estate experience and one year full-time professional real estate experience from the optional experience table in Appendix 3; and

(ii) evidence having accumulated, within the five-year period preceding the date of application, a total of at least 60 documented experience points complying with R162-2f-401a, as follows:

(A) 45 to 60 points pursuant to the experience points tables found in Appendices 1 and 2, of which a maximum of 25 points may have been accumulated from the "All other property management" subsections of Appendix 2; and

(B) 0 to 15 points pursuant to the experience point table found in Appendix 3;[and]

(iii) a minimum of one-half of the experience points from Tables 1 and 2 must derive from transactions of properties located in the state of Utah;

(iv) evidence of qualifying experience which the individual shall submit to the division by:

(A) selecting from the individual's total qualifying experience documented experience points for which the experience complies with the requirements in section R162-2f-401a; and

(B) submitting for review and approval by the division documentation of at least 60 documented experience points and no more than 80 documented experience points of the individual's qualifying experience; and

(v)[(iv)] if an individual submits evidence of experience points for transactions involving a team or group, experience points are limited to those transactions for which the individual is named in any written agency agreements and purchase and[/or] lease contracts and the applicable experience points will be divided proportionally among the licensees identified in the agency agreements and [and/or ]lease contracts;

(g) pursuant to this Subsection (3)(b), submit to the division an application for licensure including:

(i) documentation indicating successful completion of the approved broker prelicensing education;

(ii) a report of the examination showing a passing score for each component of the examination; and

(iii) the applicant's business, home, and e-mail addresses;

(h) provide from any state where licensed as a real estate agent or broker:

(i) a written record of the applicant's license history; and

(ii) complete documentation of any disciplinary action taken against the applicant's license;

(i) if applying for an active license, affiliate with a registered company;

(j) pay the nonrefundable fees required for licensure, including the nonrefundable fee required under Section 61-2f-505 for the Real Estate Education, Research, and Recovery Fund; and

(k) if applying for licensure as a principal broker, establish real estate and property management trust accounts, as applicable pursuant to Section R162-2f-403, that:

(i) contain the term "real estate trust account" or "property management trust account", as applicable, in the account name; and

(ii) are separate from any operating account(s) of the registered entity for which the individual will serve as a broker; and

(iii)[(l)] identify the location(s) where brokerage records will be kept.

(2)(a) If an individual applies under this Subsection R162-2f-202b within two years of allowing a [principal ]broker license to expire, the experience required under Subsection (1)(f) shall be accumulated within the seven-year period preceding the date of application.

(b) Pursuant to Section R162-2f-407, an individual whose application is denied by the division for failure to meet experience requirements under this Subsection (1)(f) may bring the application before the commission.

(3) Deadlines.

(a) If an individual passes one test component but fails the other, the individual shall retake and pass the failed component:

(i) within six months of the date on which the individual achieves a passing score on the passed component; and

(ii) within 12 months of the date on which the individual completes the prelicensing education.

(b) An application for licensure shall be submitted:

(i) within 90 days of the date on which the individual achieves passing scores on both examination components; and

(ii) within 12 months of the date on which the individual completes the prelicensing education.

(c) If any deadline in this Section R162-2f-202b falls on a day when the division is closed for business, the deadline shall be extended to the next business day.

(4) Restriction. A [principal ]broker license may not be granted to an applicant whose sales agent license is on suspension or probation at the time of application.

(5) Dual broker licenses.

(a)(i) A person who holds or obtains a dual broker license under this Subsection may function as the principal broker of a property management company that is a separate entity from the person's real estate brokerage.

(ii) A dual broker may not conduct real estate sales activities from the separate property management company.

(iii) A principal broker may conduct property management activities from the person's real estate brokerage:

(A) without holding a dual broker license; and

(B) in accordance with Subsections R162-2f-401j and R162-2f-403a-403c;

(b) A dual broker who wishes to consolidate real estate and property management operations into a single brokerage may:

(i) at the broker's request, convert the dual broker license to a principal broker license; and

(ii)(A) convert the property management company to a branch office of the real estate brokerage, including the assignment of a branch broker and using the same name as the real estate brokerage; or

(B) close the separate property management company.

(c) As of May 8, 2013:

(i) the Division shall:

(A) cease issuing property management principal broker (PMPB) licenses;

(B) cease issuing property management company (MN) registrations except as to a second company registered under a dual broker license;

(C) convert any property management principal broker (PMPB) license to a real estate principal broker (PB) license; and

(D) as to any property management company (MN) registration that is not a second company under a dual broker license, convert the registration to a real estate brokerage (CN) registration; and

(ii) it shall be permissible to conduct real estate sales activities under any company registration that is converted pursuant to this Subsection (5)(c)(i)(C).

 

R162-2f-401f. Approved Forms.

(1) The following standard forms are approved by the commission and the Office of the Attorney General for use by all licensees:

(a) July 19, 2017, Real Estate Purchase Contract;

(b) January 1, 1987, Uniform Real Estate Contract;

(c) October 1, 1983, All Inclusive Trust Deed;

(d) October 1, 1983, All Inclusive Promissory Note Secured by All Inclusive Trust Deed;

(e) August 5, 2003, Addendum to Real Estate Purchase Contract;

(f) August 27, 2008, Seller Financing Addendum to Real Estate Purchase Contract;

(g) January 1, 1999, Buyer Financial Information Sheet;

(h) August 27, 2008, FHA/VA Loan Addendum to Real Estate Purchase Contract;

(i) January 1, 1999, Assumption Addendum to Real Estate Purchase Contract;

(j) August 1, 2018,[January 1, 1999,] Lead-based Paint Addendum to Real Estate Purchase Contract;[and]

(k) August 1, 2018,[January 1, 1999,] Disclosure &[and] Acknowledgment Regarding Lead-based Paint and/or Lead-based Paint Hazards ; and[.]

(l) July 19, 2017, Deposit of Earnest Money With Title Company Addendum to Real Estate Purchase Contract.

 

R162-2f-401j. Standards for Property Management.

(1) Property management performed by a real estate brokerage, or by licensees or unlicensed assistants affiliated with the brokerage, shall be done under the name of the brokerage as registered with the division unless the principal broker holds a dual broker license and obtains a separate registration pursuant to Section R162-2f-205 for a separate business name.

(2) In addition to fulfilling all duties related to supervision per Section 61-2f-401 (14)[(12)], the principal broker of a registered entity, and the branch broker of a registered branch, shall implement training to ensure that each sales agent, associate broker, and unlicensed employee who is affiliated with the licensee has the knowledge and skills necessary to perform assigned property management tasks within the boundaries of these rules, including this Subsection R162-2f-401j(3).

(3) An unlicensed individual employed by a real estate or property management company may perform the following services under the supervision of the principal broker without holding an active real estate license:

(a) providing a prospective tenant with access to a rental unit;

(b) providing secretarial, bookkeeping, maintenance, or rent collection services;

(c) quoting rent and lease terms as established or approved by the principal broker;

(d) completing pre-printed lease or rental agreements, except as to terms that may be determined through negotiation of the principals;

(e) serving or receiving legal notices;

(f) addressing tenant or neighbor complaints; and

(g) inspecting units.

(4) Within 30 days of the termination of a contract with a property owner for property management services, the principal broker shall deliver all trust money to the property owner, the property owner's designated agent, or other party as designated under the contract with the property owner.

 

R162-2f-501. Appendices.

(1) When submitting evidence of qualifying experience which experience complies with the requirements in section R162-2f-401a as part of an application for licensure as a broker, an applicant shall select from the applicant's total qualifying experience at least 60 documented experience points and no more than 80 documented experience points for review and approval by the division.

(2)[(1)] When calculating experience points in Table 1, experience points for a transaction subject to an agency agreement other than an exclusive brokerage agreement as defined in Utah Code Subsection 61-2f-308(1)(d) are limited to one-quarter of the points described in Table 1.

(3)[(2)] When calculating experience points from Tables 1 and 2, experience points are limited to points for those activities which require a real estate license and comply with R162-2f-401a. A minimum of one-half of the points in Tables 1 and 2 must derive from transactions of properties located in the state of Utah.

 

TABLE 1
APPENDIX 1 - REAL ESTATE SALES TRANSACTIONS
EXPERIENCE TABLE

 
 RESIDENTIAL - points can be accumulated from either the selling 
or the listing side of a real estate closing: 
  (a)   One unit dwelling                           2.5 points 
  (b)   Two- to four-unit dwellings                   5 points 
  (c)   Apartments, 5 units or over                  10 points 
  (d)   Improved lot                                  2 points 
  (e)   Vacant land/subdivision                      10 points 
 
COMMERCIAL 
  (f)   Hotel or motel                               10 points 
  (g)   Industrial or warehouse                      10 points 
  (h)   Office building                              10 points 
  (i)   Retail building                              10 points

 

 

TABLE 2
APPENDIX 2 - LEASING TRANSACTIONS AND PROPERTY MANAGEMENT
EXPERIENCE TABLE

 
RESIDENTIAL 
  (a)  Each property management                 1 point per unit 
      agreement                                 up to 5 points 
  (b)  Each unit leased                         1.25 points 
                                                per unit 
  *(c)  All other property management           0.25 pt/month 
 
COMMERCIAL - hotel/motel, industrial/warehouse, office, or 
retail building 
  (a)  Each property management                 1 point per 
      agreement                                 unit up to 5 points 
  (b)  Each unit leased                         1.25 points 
                                                per unit 
  *(c)  All other property management           1 pt/month 
 
     *When calculating experience points from Table 2, the 
total combined monthly experience credit claimed for "All other 
property management" combined, both residential and commercial, 
may not exceed 25 points in any application to practice as a 
real estate broker.

 

 

TABLE 3
APPENDIX 3 - OPTIONAL EXPERIENCE TABLE

 
 Real Estate Attorney                             1 pt/month 
CPA-Certified Public Accountant                  1 pt/month 
Mortgage Loan Officer                            1 pt/month 
Licensed Escrow Officer                          1 pt/month 
Licensed Title Agent                             1 pt/month 
Designated Appraiser                             1 pt/month 
Licensed General Contractor                      1 pt/month 
Bank Officer in Real Estate Loans                1 pt/month 
Certified Real Estate Prelicensing Instructor   .5 pt/month

 

 

KEY: real estate business, operational requirements, trust account records, notification requirements

Date of Enactment or Last Substantive Amendment: [ January 1, ]2018

Notice of Continuation: August 12, 2015

Authorizing, and Implemented or Interpreted Law: 61-2f-103(1); 61-2f-105; 61-2f-203(1)(e); 61-2f-206(3); 61-2f-206(4)(a); 61-2f-306; 61-2f-307

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