Common Violations & Tips for Dealing with the Alabama Real Estate Commission
July 31, 2020
Going before the Alabama Real Estate Commission (AREC) for any reason is likely not on your bucket list. The Commission, the governmental entity charged by the Legislature with enforcing licensing laws, hears complaints on alleged license law violations at its monthly meetings. Real estate licensees go before AREC for a variety of reasons. Here are some of the most common:
- Bad Check/Insufficient Funds: As you know, all licensees pay dues to the Commission. Having insufficient funds, including writing a bad check, when paying those dues is one of the most common violations. Bear in mind, a bad check also includes paying online from a bank account with insufficient funds. The Commission will often assess a fine when this happens.
- Lack of Required Documentation in Files: Real estate professionals are required to keep record of certain documents pertaining to their transactions. In the hustle, you may forget to have a RECAD form or estimated net sheet signed, for instance, which can result in a violation when AREC comes to audit.
- Escrow Account Issues: Some of the most common violations with the harshest penalties involve clients’ money. Earnest money, rent and security deposits should be held in an escrow or trust account, separate from operating accounts. Even long-time real estate licensees have fallen afoul of this requirement.
In addition to complaints, the Commission also hears other requests, such as applications for a salesperson license from applicants who have committed a felony or crime of moral turpitude[i], for instance. If you must go before the Commission for any reason, consider the following:
- Remedy the Problem Before the Hearing: If an audit or a consumer complaint has revealed an issue, remedy the problem before the hearing. The Commission will likely ask what you have done to make sure the problem does not happen again. If a bad check was written, pay the fine along with the original amount of payment required. If the issue resulted from a bank mess-up, ask the bank to write a letter explaining what happened to show to the Commission. For other issues, like a lack of signed RECAD forms in client files, you should consider revising office policies to ensure proper documentation and when or how often the broker reviews files of agents.
- Be Honest and Humble – The first and primary rule is to be honest about what happened and apologize, whether it was you or an agent under you. Brokers are strictly liable for the actions of their agents. This means that as a broker, if one of your agents messed up, you can be held accountable as well. Even if you truly did nothing wrong, a belligerent defense is not an effective strategy. Those before the Commission who believe they are innocent are often just ignorant of the law, so belligerently denying wrongdoing can result in a higher fine or revocation of your license.
- No Ex Parte Communication with Commissioners – Do not under any circumstances contact a Commissioner before or after the hearing about your case. This is highly inappropriate and can result in additional violation charges.
- Pay Any Outstanding Fines – Some of the most difficult hearings are those when someone wants to apply for a license but committed a crime in the past, sometimes 20 to 30 years ago. Watching someone testify to past wrongs is not fun for anyone, especially the Commission. However, requiring those convicted of crimes to testify first is an important safeguard for the profession and the public.
If you are seeking a license but must go before the Commission because of a past crime, be sure to first pay any outstanding fines or restitution. If you do not know whether you owe anything, call the court that heard your case or ask the AREC staff member assigned to your case.
- Attorney Representation – Occasionally, those before the Commission are represented by attorneys, as is their right. Most of the time, an attorney is not necessary, and a better strategy is to fix the issue, explain what you did to prevent a re-occurrence, say sorry, and ask for forgiveness. If you do decide to hire an attorney, be sure your attorney understands that a Commission hearing operates slightly different than a courtroom.
[i] Crimes of moral turpitude include misdemeanors involving money or theft, like shoplifting.