New License Law Rule Requirements Effective February 10, 2019 – OHIO REALTORS
By Peg Ritenour, Ohio REALTORS Vice President of Legal Services
Under Ohio law, government agencies such as the Ohio Division of Real Estate and Professional Licensing are required to go through a rule review process every five years. This process can involve the adoption of new rules or the amendment or rescission of existing rules.
As has been discussed in numerous Ohio REALTORS programs, the Division has spent over a year reviewing its rules, drafting revisions and undergoing the formal adoption process. On Jan. 31 the Division filed the rule changes in their final version, which concluded this process. Under Ohio law, the new/amended rules became effective on Feb 10. These rules are included in the Ohio Administrative Code and are enforceable as a part of Ohio “license law”.
In total, 48 administrative rules were either adopted, amended or rescinded. For the most part these changes are technical or grammatical or merely reflect a re-organization of existing rules. However, there are several that are substantive. Among these are rules that involve the Agency Disclosure Statement, advertising, trust account records, brokerage agency policy, etc. They are discussed in detail below.
The following are the rule changes that became effective on Feb. 10:
Revised Agency Disclosure Statement. The Division has amended this form to change the reference from “broker” to “principal broker” in several places — in section II on page one and in the paragraph regarding management level licensees on page two. The Superintendent has indicated that since these changes are technical in nature, she will not enforce use of the new form until the end of the year. However, it is strongly encouraged that brokers begin the transition to the new form as soon as possible. Click here for the new version.
Advertising Requirements. The language in this rule regarding name identification by licensees in advertising will now require licensees who want to use a nickname, initials, middle name or maiden name to register that name with the Division. This will be required in order for licensees to advertise in any name that is different than the licensee’s name as it appears on their license, and will include even common nicknames or derivatives of a first name such as Dave, Jim, Pat, Chris, Debbie, etc. It will also allow for use of more unusual nicknames such as Buzz, Skip, Buffy, etc. The Division is in the process of finalizing a form to register such names. REALTORS will be notified and provided a link to this form as soon as it is available. The Division has indicated that licensees will be given ample time to comply with this new registration process.
Broker Notice when Returning a License. There are two significant changes to this rule. The first concerns the principal broker’s duty to provide written notice to an affiliated licensee when the broker is returning his/her license to the Division of Real Estate.
Under existing law, this written notice must be provided to the licensee within three business days of returning the license. This notice was previously required to be given to the licensee by certified mail. Based upon an Ohio REALTORS request, this certified mail requirement has been eliminated. The principal broker can now provide notice of the return of a license to the licensee by hand delivery, mail, email, or fax.
In addition, the amended rule requires the principal broker to maintain proof that the written notice has been delivered to the licensee and send the Division a copy of such notice. A copy of this notice can simply be included with the license when it is mailed to the Division. The notice (not the license) can also be emailed to the Division at “>Webreal@com.state.oh.us. It is important for principal brokers to comply with this requirement as failure to provide this notice to the agent and the Division may be considered evidence of misconduct and subject the broker to disciplinary action.
Under existing law, the notice that is given to the licensee informing him that his license has been returned to the Division must include information regarding the licensee’s reinstatement rights. The Division has provided a sample letter for brokers that contains the required information.
To clarify when this notice must be given, existing Ohio law requires the principal broker to provide notice to the licensee in two situations: (1) where the broker decides to return the license of an affiliated licensee, or (2) when the licensee asks the broker to return their license. Such notice is NOT required if the Superintendent requests the return of the license (i.e., due to license suspension) or if the licensee informs the broker that he/she is transferring to another brokerage. (Please note that the license law was amended several years ago to no longer require a broker to return a license to the Division if the licensee informs the broker that he/she is transferring to another brokerage.)
Required Brokerage Trust Account/Property Management Trust Account Information. The existing rule now expands the type of trust account records that the principal broker must maintain to include additional forms of payment and disbursement. The rule now requires that with respect to either a brokerage’s regular or property management trust account, the following records must be maintained regarding funds that are received and disbursed by the brokerage:
- Cash and associated receipt number
- Negotiable instrument information (i.e., the account and check number for received funds)
- Money order number
- Electronic funds transfer number
- Funds transfer number
- Automated clearing house (ACH) number
- Credit or debit card transaction number
Also, under the amended rules it will no longer be necessary for brokerages to maintain the required trust account information in “columnar” form. This Ohio REALTORS initiated change will now allow brokerage to utilize accounting software programs for both their regular and property management trust accounts, regardless of how the account information is displayed.
Sponsoring new agents. The amended rule regarding a broker’s sponsorship of an applicant for a real estate license requires the principal broker to provide both the applicant and the Division with written notice if the broker is terminating his sponsorship of that applicant. Failure to provide that notice can now be considered evidence of misconduct by the principal broker. This notice can either be mailed or emailed to the Division at “>Webreal@com.state.oh.us.
Requirements to Act as the Principal Broker for more than one Brokerage. Two years ago legislation was passed that permits a broker to act as the principal broker for more than one brokerage. To do so, permission of the Superintendent is required. Thereafter, the Commission adopted a policy regarding the criteria that must be met to approve such a request. These have now been formally adopted in rule. These include the following:
- There must be commonality in the name of all brokerages with which the principal broker seeks to affiliate (i.e., Smith Residential Realty and Smith Property Management Services).
- If the brokerage is a corporation, the principal broker must be an officer or shareholder of the corporation.
- If the brokerage is a limited liability company (an LLC), the principal broker must be a member of the LLC.
- if the brokerage is a partnership or limited liability partnership, the principal broker must be a general partner of the partnership or limited liability partnership.
Requirements for Approval of Multiple “dba’s”. The same legislation (HB 532) also amended Ohio license law to allow one brokerage to use multiple “dbas.” The newly adopted rules codify the Real Estate Commission’s previously stated policies regarding the requirements that must be met for approval of a brokerage request for an additional trade name or “dba” (“doing business as”). They are:
- There is commonality between the trade names (i.e., Acme Commercial Real Estate and Acme Residential Services)
- The proposed name is not misleading or is likely to mislead the public
- A special or trust account must be maintained in each trade name, and
- All trade names are registered with the Ohio secretary of state’s office following approval by the superintendent.
In addition, the rule provides that a brokerage can have no more than five (5) trade names.
Mandatory Brokerage Company Agency Policy. The Division has also amended the rule that sets forth the requirement that each brokerage maintain a brokerage policy that addresses numerous issues related to agency. (This is the longer internal brokerage policy that each company must maintain, not the Consumer Guide.)
The policy must now include:
- A list of positions in the brokerage which are designated by the brokerage as principal brokers and if applicable, management level licensees.
- If the principal broker is approved by the superintendent to serve as principal broker in more than one brokerage, the name(s) and business address(es) of the additional brokerage(s).
- If the brokerage operates under more than one trade name, a list of any and all such trade names.
Most importantly, under the revised rule, the principal broker is now required to provide and document receipt of this policy by each employee, independent contractor and affiliated licensee.
Please note that Ohio REALTORS will be updating the sample company policies available on its website to reflect these new requirements.
Team Names. One of the proposed rules that many REALTORS are aware of involved team advertising. As drafted, this amendment would prohibit teams from using the term “realty” or “and associates” in its team name. It would also require teams to use the word “team” or “group” in its name. This rule was proposed by the Ohio Real Estate Commission out of concern that use of the above terms may confuse the public to believe that the team is a brokerage. As a result of comments from a few licensees regarding team names, the Division has decided to stay this rule to allow for further input and discussion. Therefore, this proposed rule has NOT been adopted at this time. Any updates on the status of this rule will be provided.
Original article available at https://www.ohiorealtors.org/blog/1056/new-license-law-rule-requirements-effective-feb-10/
Legal articles provided in the Ohio REALTORS Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.