NEW RULES ADOPTED

COMMISSION ADOPTS CONTRACT RULES AND UPDATES TRUST ACCOUNT RULES

After conducting a public hearing on April 14, the North Carolina Real Estate Commission, pursuant to authority vested in it by the General Statutes of North Carolina, voted to adopt new rules concerning contract drafting and contract forms, and to amend other rules dealing with trust account recordkeeping and time sharing. The new rules and amendments will go into effect on July 1, 1988, subject to final review of the Administrative Rules Review Commission.

The Real Estate Commission's Legal Counsel, Assistant Attorney General Thomas R. Miller, explains the proposed new rules and amendments at an April 14 rulernaking hearing in Raleigh.

Notice of the proposed new rules and amendments was published in the last issue of the Real Estate Bulletin. In response, the Commission received many oral and written comments from licensees concerning the proposed rulemaking action. As a result of the comments received, certain changes were made to the proposed rules prior to their adoption by the Commission.

Following the rulemaking hearing, Commission Vice-Chairman J. Edward Poole confers with James L. Bichsel, Executive Vice-President of the North Carolina Association of REALTORS, Inc.

RULE A .0111
DRAFTING LEGAL INSTRUMENTS

As adopted, Rule A. 0111 makes it clear that brokers and salesmen may not draft offers, sales contracts, leases, notes, deeds, deeds of trust and other documents which secure the legal rights of others. Licensees have always been prohibited from the unauthorized practice of law by Section 93A-6(a)(11) of the Real Estate License Law. Of course, licensees may continue to assist their clients and customers in filling in the blanks of form offers to purchase, sales contracts and leases. In response to industry comment, the Commission added language to the rule expressly permitting brokers and salesmen to make notes and correspondence inch as "letters of intent" regarding negotiations of a transaction, so long as such writings do not themselves constitute binding contracts. The Commission also approved a suggestion that the rule expressly authorize licensees to use computer and word processing equipment to complete form contracts. However, such equipment may not be used to draft original legal documents.

Rule A .0112 will govern the offer to purchase and contract forms employed by real estate brokers and salesmen. To meet the minimum standards set by the rule, such forms will be required to contain provisions or blanks calling for the entry of certain information about the transaction. In response to concerns expressed by a number of brokers, the Commission revised the rule prior to adoption to clarify that although the incomplete form must contain certain provisions, the buyers and sellers who use the form are free to alter, amend or delete the form's provisions as they see fit.

The recently revised Offer to Purchase and Contract form (Standard Form No. 2 /1987) jointly approved by the North Carolina Bar Association and the North Carolina Association of REALTORS, Inc., more than satisfies the requirements of the rule.

The Commission voted to amend Rule A .0107(e) to substantially stiffen the requirements for trust account bookkeeping. As amended, the rule will require brokers to record on deposit tickets information identifying the property, parties and transactions for which funds are being deposited. When the ticket itself cannot accommodate the entry of this information, the broker must record it on a separate work-sheet for each deposit ticket. Tickets and work-sheets must be retained for a period of three years.

Under the amendments adopted by the Commission, a broker is required to create and maintain a separate ledger for each sales transaction and if a broker is in the property management business, for each owner for whom the broker acts as manager. The ledger sheet must show the parties, property and transaction and the amounts and purposes of deposits and disbursements. The broker must keep a running balance of the funds on deposit for each sales transaction and for each owner of property managed by the broker.

The rule will also require brokers to maintain a journal or check stubs for their must account and a running balance for the account.

Most of the new requirements were once only strong recommendations in the Trust Account Guidelines. Rule A .0107(e) as amended will now make the recommended accounting practices mandatory.

OTHER AMENDMENTS

Rule A .0301 was amended to permit license application forms to include general inquiries into an applicant's education, experience and fitness for licensure.

Rule A .0506(a) was amended to clarify that a person licensed as a real estate salesman shall not act as a broker or act outside the supervision of his Broker-In-Charge.

Rule A .0611 was adopted to provide that licensees accused of misconduct in a notice of hearing may file a written response and that such responses and other pleadings in contested cases must be in writing or made on the record during a hearing.

Rule B .0501(c) and (d) were amended to correct a typographical error and to require a time share project broker to pay the purchaser ten day escrow monies directly to the project's independent escrow agent when the developer is unable to give purchasers lien-free title to their units within forty-five days of the contract date. Alternatively, project brokers in this situation may pay the escrow funds to the developer by check bearing a restrictive endorsement requiring deposit into the account of the independent escrow agent.