AREC Holds August Meeting – Failure to Fill-in Payment Blank in Management Agreement Held License Law Violation

The Alabama Real Estate Commission (AREC) met last week for its August meeting. After a scheduled break in July, all nine commissioners participated in the the day-long meeting. The agenda followed the standard structure, except that the hearings portion lasted until the late afternoon. Two of the cases contained useful insights for your real estate practice. One dealt with the use of escrow funds (rent payments), and the other dealt with the failure of the agent/property manager to insert a payment amount into the management agreement. Continue reading for highlights to the August meeting.

License numbers remain steady with 546 and 487 new licenses issued in June and July respectively. According to statistics stated at the meeting, 38,018 unique licenses are regulated by AREC, as well as almost 43,900 total licenses. This appears to continue a trend of increases in total licensee numbers, albeit much smaller increases than what was seen in 2021 into 2022. 

Education license renewals are currently due and will be considered past due after September 30, 2023. AREC has issued just over 850 education licenses, which includes schools and educators. 

Commissioners presided over one request for a hearing and 17 hearings, including 4 complaints brought against licensees, and one application to hold a license after a prior revocation, 7 applications for a determination of licensing eligibility and 5 applications for a salespersons temporary license all brought by the licensee.  

For one of the complaints, Commissioners found the licensee/broker and company guilty of four counts for failing to have any files related to the real estate transactions of the licensee. The licensee claimed all files were lost or destroyed in a move. Commissioners accepted the surrender of the licenses as a revocation and fined the parties $2500 on all four counts. 

Another complaint highlights the importance of maintaining the integrity of escrow accounts. A licensee/broker/owner of a property management company was found guilty and fined $2500, when an audit revealed his management company was using rent monies in an escrow account to pay for repairs to owners’ properties. Despite testimony that the licensee was unaware of the practice and that the non-licensee accountant had not done it at the licensee’s direction, the licensee had not supervised the accounts adequately. Best practice is to either use company money to pay for repairs and maintenance and invoice the owner the amount spent or receive a check from the owner in advance.

Finally, one licensee and the licensee’s broker was found guilty of negligence in their real estate practice and fined $100 each for failing to fill out a property management agreement completely. In the case, a consumer/owner, who was not present at the meeting, complained to the Commission for various reasons. The resulting investigation found that the consumer’s complaints had nothing to do with license law but did reveal that the licensee had failed to input or later amend the property management agreement with the company’s management fee. Testimony showed that the fee was agreed upon verbally and paid for over a year and a half but never incorporated into the agreement. The licensee and broker testified that operations had been disrupted by a hurricane and the omission slipped through the cracks. While the $100 each is a small fine, both now have a license violation on their records. This case should serve as a reminder that agreements should be in writing and, if a portion is not known or decided upon at a later date, a licensee may violate license for failing to incorporate the change into the agreement. 

AREC’s next two meetings will take place on September 14 and October 26. The September meeting will be held in Montgomery and the October meeting in Tuscaloosa. All AREC meetings may be viewed via a link on AREC’s website here.