Bulletin 1983 V14-3
The Real Estate Commission has in recent weeks encountered two incidents involving persons engaged in real estate brokerage activities without a real estate license. One involved an out-of-state broker who showed real estate in North Carolina and then collected a portion of the sales commission from a North Carolina broker. And the other involved a person who had continued to engage in the real estate brokerage business for several years after her license had expired.
Although it is presumed that the recipient of this Bulletin is currently licensed as a broker or salesman, nevertheless the Commission felt that all licensees should be made fully aware of these incidents since they also affected in various ways persons who were properly licensed.
Cooperating With Out-of-State Brokers
Frequently, North Carolina brokers (especially brokers in "border areas" of our State) find that it is in the best interest of their clients to offer their client's property for sale to persons in other states. They will, therefore, request the assistance o licensed brokers and brokerage firms in such other states in selling the North Carolina property.
Co-brokering with an out-of-state broker who is also licensed in North Carolina is always preferable since the out-of-state broker may enter North Carolina and perform a full range of brokerage acts and services in connection with the transaction. If the out-of-state broker does not hold a North Carolina real estate license, then he or she may not perform in North Carolina any act which requires a real estate license (e.g., showing the property, negotiating or discussing terms of sale, etc.); to do so could result in criminal prosecution in North Carolina. Furthermore, if a North Carolina broker shares a commission with or otherwise compensates an unlicensed person for performing an act which requires a real estate license, then the North Carolina broker is subject to disciplinary action (license suspension, revocation, etc.) by the Real Estate Commission.
In view of the serious risks involved in co-brokering North Carolina properties with out-of-state brokers who are not licensed in North Carolina, the Commission recommends that North Carolina brokers who may be contemplating such arrangements reduce to writing their co-brokerage agreements describing in detail the terms and conditions of the arrangement and expressly stating that the out-of-state broker shall not enter North Carolina to conduct or participate in any phase of the transaction. It is further recommended that the North Carolina broker obtain from the cooperating broker prior to the payment of any commission or fee, a statement from the broker certifying that neither he nor any other agent acting through him or his firm performed any act in North Carolina which required a North Carolina real estate license.
This statement and the co-brokerage agreement should be retained by the North Carolina broker in his transaction file for future reference should any question subsequently arise concerning his arrangement and relationship with the out-of-state broker.
Failure To Renew License
Qualifying for a real estate license is for most persons a very challenging undertaking. Consequently, it is not surprising that only a very few persons each year allow their licenses to expire. Indeed, more than 95% of all real estate brokers and salesmen renew their licenses each year.
Of concern to the Commission, however, are those instances where persons are found to have been engaging in the real estate brokerage business after their licenses have expired-sometimes for many years. When confronted with this fact, these persons generally respond that they did not receive a renewal application and therefore simply forgot to renew. Yet almost all admit that they continued to pay their annual real estate privilege tax to the Department of Revenue during this period.
It is the responsibility of each broker and salesman to see that his or her real estate license is renewed in a timely manner. To remind licensees of the expiration of their licenses, the Commission has in recent years sent special notices notifying them that their licenses have expired. In addition, licensees are sent renewal stickers each year to affix to their license certificates to serve as a reminder to their associates who may have forgotten to renew their licenses. And, in recent months the Commission has adopted a Rule (Rule .1001)'whereby the Broker-in-Charge of a real estate office will be held responsible for the proper display of the licenses and renewal stickers of all brokers and salesmen operating from his office; that is, the Broker-In-Charge may be disciplined for allowing persons to work from his or her office after their licenses have expired.
The question arises then "What if the broker or salesman fails to observe or heed these warning signals and continues to engage in brokerage activities while his license is lapsed?" In addition to those criminal sanctions set forth in the License Law which may be imposed against persons who have engaged in unlicensed real estate activity, the Commission may also require such persons to complete certain real estate education and/or pass the licensing examination as a condition of license reinstatement.
A further sanction is also being considered by the Commission for persons who have received brokerage commissions or fees for services performed while their licenses are lapsed. Since it is an established principle of law that an unlicensed broker is precluded from recovering his compensation for services performed which required licensure, the Commission may as a condition precedent to the reinstatement of a license, require the broker or salesman to refund to the appropriate parties all brokerage commissions and fees received during the period of unlicensed activity.