1. Florida Real Estate Principles, Practices & Law 39th Edition
Unit 5: Real Estate Brokerage Activities and Procedures

2. Brokerage Offices Active brokers must have an office
Enclosed room—stationary construction
Privacy to conduct negotiations
Brokers must keep records in office
Books, real estate transaction files
If zoning allows, office may be in broker’s residence
May have offices in another state
Sales associates may NOT open and register an office of their own

3. Branch Office Broker must register each branch office
Branch office registrations are Not transferable
Temporary shelter in a subdivision being sold by broker is NOT a branch office unless sales associates are permanently assigned or sales transactions are closed at that location

4. Licensed Real Estate Broker
Office Signs
Little Mo Realty
Murl H. Crawford
Licensed Real Estate Broker
Trade name (if used)
Broker’s name
Words “Licensed Real Estate Broker” or “Lic. Real Estate Broker”

5. Associates Names on Entrance Sign
Names of sales associates and broker associates are optional
If included
Associate names must be below names of brokers
Include license type next to each name, such as sales associate
Line or space must separate associate names from broker names

6. Brokerage Entity Signs
If the brokerage entity is a partnership, corporation, or limited liability partnership/company sign must contain
Name of firm or corporation
Name of at least one active broker
Words, “Licensed Real Estate Broker”
Kellogg Real Estate, Inc.
Sandi M. Kellogg
Licensed Real Estate Broker

7. Advertising
Advertising must inform people they are dealing with a licensee or a brokerage firm
Broker is responsible for all advertising
Must include name of brokerage firm
Blind advertising
Fails to disclose name of brokerage firm and includes only PO box, telephone number and/or street address
Blind advertising is illegal

8. Names of Licensees in Advertising
Licensees may include personal name in ads
Must use last name as registered with FREC when including personal name in an ad
Yard signs and classified ads must include registered name of the brokerage firm
Promotional materials
Name of brokerage firm
Sales associate’s name may also appear

9. False Advertising
False, deceptive, or misleading information in advertisements for real estate is illegal
Second degree misdemeanor

10. Internet Advertising
Point of contact information is the means to contact the brokerage firm or a licensee including
Mailing address
Street address
address
Telephone or fax number
Brokerage name must appear adjacent to or immediately above/below point of contact information

11. Membership in Organizations
Licensees cannot use term REALTOR® unless a member of NAR

12. For Sale By Owner Licensees may sell their own property “by owner”
Can advertise property and include personal contact information
Should disclose that seller is licensed before beginning negotiations and in the contract

13. Telephone Solicitation
Telephone solicitation initiation of a call for the purpose of encouraging purchase or investment in property, goods or services
Making telephone calls to obtain listings or buyers is telephone solicitation
Regulated by state and federal law
Calling hours restricted

14. Telephone Solicitation Regulation
Florida Law
No Solicitation List
Maintained by Dept. of Agriculture & Consumer Services
$10,000 fine
For-sale-by-owner exception (Federal law supersedes state law)
Federal Law
National do-not-call registry
$11,000 fine
No exception for FSBOs (must check registry)
Florida list added to national registry

15. Exceptions to National Do-Not-Call List
When representing a potential buyer may call a FSBO seller, provided the buyer is interested in the property
May contact individuals with whom associate had an established business relationship for up to 18 months
May contact a customer for three months after a business inquiry

16. Fax Solicitations Unsolicited fax ads are prohibited
Requirements to send fax advertisements
Established business relationship
Voluntarily received fax number
Clearly state opt-out procedures
Honor opt-out requests within 30 days

17. Escrow or Trust Accounts
Escrow (trust) account
An account for the deposit of money the broker holds in trust for others
Deposit
Money delivered to a licensee in connection with a real estate transaction
Earnest money deposit can be cash or anything that can be converted into money

18. Timely Deposit of Escrow Funds
Sales Associates
Deliver to broker no later than end of the next business day
Brokers
Deposit in escrow account no later than end of the third business day
Broker’s time starts after sales associate receives the deposit

19. Example of Escrow Deposit
Sales associate received earnest money deposit on Wednesday
Sales associate must deliver deposit to broker no later than Thursday
Broker must deposit in escrow account no later than Monday (no holidays)

20. Escrow Check Payable to Sales Associate
Have buyer write a new check payable to broker’s escrow account
If not practical endorse check and write, “For deposit only to (name of escrow)”

21. Postdated Checks and Insufficient Funds
Obtain seller’s approval before accepting
Broker must secure check until payable and then immediately deposit in escrow
Checks returned for insufficient funds
Broker is not responsible if the broker made a timely deposit

22. Acceptable Depositories
Broker-held escrow accounts
Florida commercial bank
Credit union
Savings (and loan) association
Florida-based title company or Florida attorney (broker is not the escrow agent)

23. Broker-Held Escrow Accounts
Broker must be a signatory on escrow account
Additional persons (e.g., bookkeeper) may also be a signatory
Escrow accounts must be reconciled each month
Broker must review, sign and date monthly reconciliation

24. Title Company/Attorney Escrow Accounts
Indicate title company (or attorney) name, address, and telephone number on contract
Within 10 business days after deposit is due, buyer’s broker must make written request to title company (attorney) for verification of receipt of deposit
Within 10 business days after broker made written request, provide seller’s broker with a copy of written verification

25. Interest-Bearing Escrow Accounts
Written permission from all parties before placing in interest-bearing account
Written authorization who is entitled to interest
Broker, if authorized, may receive interest earned

26. Recordkeeping
Brokers must keep business records, books, and accounts in compliance and available for DBPR audit
Must preserve records for five years and two years beyond court proceeding

27. Money to Maintain Escrow Account
Brokers may place $1,000 personal or brokerage funds in a sales escrow account
Brokers may place $5,000 personal or brokerage funds in property management escrow account

28. Misappropriation of Escrow Funds
Trust funds must be kept in a separate account
Commingle
The illegal practice of mixing another’s funds with broker’s money
Conversion
Unauthorized control or use of another person’s property

29. Notice and Settlement Procedures
Broker must not disburse escrow funds until transaction closes or with agreement of the parties
Broker has conflicting demands
When buyer and seller make demands regarding disbursing of escrow funds that are inconsistent with each other and cannot be resolved

30. Conflicting Demands
Must notify FREC in writing within 15 business days of receiving conflicting demands
Begin settlement procedure within 30 business days of receiving conflicting demands

31. Settlement (Escape) Procedures
Mediation Informal, nonbinding process, negotiated settlement
Arbitration Binding judgment by third party (prior consent of parties)
Litigation
Interpleader – broker has no financial claim
Declaratory judgment – judge declares each party’s rights to funds
Escrow disbursement order (EDO)

32. Escrow Disbursement Order (EDO)
Commission issues a determination of who is entitled to disputed funds
Funds must be held in brokerage escrow account
Must inform FREC within 10 business days if dispute is settled or it goes to court

33. Exceptions to Notice and Settlement Procedures
Brokers are not required to notify FREC or start a settlement procedure in these situations
Sale of HUD-owned property
Timely notice to cancel a residential condominium contract
Failure to satisfy the financing clause in a contract

34. Good-Faith Doubt
Broker doubts either party’s intention to act in good faith according to the contract
Notify the FREC in writing within 15 business days of having the doubt
Begin a settlement procedure within 30 days of having the doubt

35. Rental Information and Lists
Written disclosure required, stating
If rental information provided under contract is not current or accurate, consumer may demand within 30 days of contract date a return of fee
If consumer does not obtain a rental, entitled to receive a return of 75% of the fee paid, if demand is made within 30 days of contract date
Advertising rental information that is inaccurate or not current is first-degree misdemeanor

36. Antitrust Laws
Antitrust laws protect competition and ensure against restraint of trade
Sherman and Clayton Antitrust Acts
Federal Trade Commission Act
It is illegal to
Fix commissions or fees for services (price-fixing)
Conspire to split up market areas to avoid competition (market allocation)

37. Broker’s Commission
Established by agreement between broker and party who agrees to pay
Negotiable

38. Sales Associate’s Commission
Must be paid by associate’s employer; not directly by buyer or seller
Associate’s split determined by agreement with employer
Associates may not operate independently

39. Liens on Real Property
Liens on residential property for nonpayment of commission
Only allowed if broker is given that authority in a contract
Otherwise seek civil judgment

40. F.S. 475, Part III Commercial Real Estate Sales Commission Lien Act
Gives broker lien rights on seller’s net proceeds from sale of commercial property
Not lien rights on the real property
Brokerage agreement (listing contract) must clearly state broker’s lien rights
Effective date of the lien is date of recording commission notice

41. F.S. 475, Part IV Commercial Real Estate Leasing Commission Lien Act
Gives broker lien rights for commission earned for leasing commercial real estate
If landlord agreed to pay commission, lien is against landlord’s interest in the real property
If tenant agreed to pay commission, lien is on tenant’s leasehold estate

42. Kickbacks, Rebates, Unearned Fees
Referral fees for non-real estate services
Buyer and seller must be fully informed
Must not violate RESPA (Illegal for closing services, title searches, appraisals, etc.)
Person receiving kickback must be properly licensed if applicable (e.g., mortgage loan originator license)

43. Referral Fees for Real Estate Services
Licensees may share their commission with the buyer or seller in that transaction (with full disclosure)
May not share commission with any other unlicensed person
May not pay an unlicensed person for referral of real estate business (finder’s fee of up to $50 to a tenant exception)

44. Change of Employer
Sales associate license ceases to be in force when associate changes employer
DBPR must be notified within 10 days after change to new employer
Associate may not conduct real estate services until registered under new employer
Fiduciary relationship between associate and broker

45. Change of Mailing Address
Licensees must notify DBPR within 10 days of change to current mailing address
Failure to notify DBPR:
Citation
Fine of $500

46. Brokerage Business Entities
Chapter 475 defines broker to include anyone who is general partner, officer or director of brokerage partnership or corporation
Chapter 475 prohibits a person licensed as a sales associate or broker associate from registering as a general partner, officer or director of a brokerage entity

47. Business Entities That May Register as Real Estate Brokers
Sole Proprietorship
General Partnership
Limited Partnership
Limited Liability Partnership (LLP)
Corporation
Limited Liability Company (LLC)

48. Sole Proprietorship Owned by one person Owner liability
Owner must hold active broker license
Register under own name or trade name

49. General Partnership Two or more persons engaging in business together
Created by written, oral, or implied agreement
Each is liable for partnership debts and can bind other partners in contracts

50. Real Estate Brokerage General Partnership
Register partnership with the DBPR
At least one partner must be an active broker
Partners who deal with public and perform real estate services must be active brokers
Sales associates may not be general partners

51. Limited Partnership
Created by written instrument filed with Florida Department of State
One or more general partners and one or more limited partners
Limited partners make investment of cash or property – not services
Limited partners have limited liability

52. Real Estate Brokerage Limited Partnership
Register limited partnership with the DBPR
General partners who perform real estate services must be active brokers
At least one general partner must be active broker
All other general partners must register with DBPR
Sales associates may not be general partners
Limited partners do not register with DBPR

53. Ostensible Partnership Prohibited
Quasi partnership
When the actions of two or more persons create the appearance that a partnership exists
Each may be liable for other person’s debts and torts
Subject to license suspension

54. Limited Liability Partnership (LLP)
Protection from personal liability
Partners are not subject to limitations imposed on limited partners in a traditional limited partnership
Name of registered limited liability partnership must include in name
Registered limited liability partnership or LLP at end of name

55. Corporations (Inc.)
An artificial person or legal entity created by law
File articles of incorporation with FL Dept. of State
Foreign corporation is organized under laws of another state; may do business in Florida
Domestic corporation incorporated in Florida
Managed by board of directors & officers

56. Real Estate Brokerage Corporation
Register corporation with the DBPR
At least one officer or director must be an active broker
Active and inactive brokers and unlicensed people may serve as officers and directors
Must be active brokers to perform real estate services
Unlicensed officers and directors register with the DBPR
Sales associate may not be officer or director
Sales associate may be shareholder

57. Death of Only Active Broker
If only active broker of a brokerage partnership or corporation dies, resigns, or is removed from office, the vacancy must be filled within 14 calendar days
No new brokerage business may be conducted until a new active broker is registered with DBPR
Failure to timely replace broker results in cancellation of the registration and licensees become involuntary inactive

58. Limited Liability Company (LLC)
Best features of a corporation and a partnership
Protection from personal liability
IRS treats LLC as a partnership for tax purposes
Income is taxed only once, as in a partnership

59. Business Entities That May Not Register
Corporation sole – church (religious) organization
Joint venture – temporary business arrangement
Business trust – involves entity’s own property
Cooperative association – involves own property
Unincorporated association – example is property owners in a subdivision

60. Trade Names
Business name other than the legal name of the person doing business
T/A (trading as)
D/B/A (doing business as)
Fictitious name refers to the name registered with the Dept. of State
Brokers who operate under trade names must also register trade name with DBPR
Associates must have licenses issued in their legal names (not under a trade name)

61. Personal Assistants Unlicensed Licensed Administrative tasks
May not perform duties requiring a license
May not be paid a commission
Licensee who employs unlicensed assistants
Must comply with state and federal employment laws
Licensed
Can perform services of real estate
Must be registered with employing broker
Broker must pay licensed assistant for brokerage activities