DAR File No. 27940

Commerce, Real Estate

R162-6-1

Improper Practices

NOTICE OF PROPOSED RULE

DAR File No.: 27940
Filed: 05/26/2005, 09:45
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose for the change is to: 1) enact into rule a common law contract law principle that real estate agents and brokers cannot sign for their clients without a duly executed power of attorney; and 2) explicitly require that real estate licensees use the state-approved form for counteroffers instead of altering the offer form.

Summary of the rule or change:

The changes are: 1) a real estate agent or broker who signs or initials a document for his client must have a duly executed power of attorney authorizing him to do so; and 2) a licensee may not make a counteroffer by making changes, whiting out, or otherwise altering an offer form, but instead must use the state-approved addendum form.

State statutory or constitutional authorization for this rule:

Subsection 61-2-5.5(1)(a)(v)

Anticipated cost or savings to:

the state budget:

None--State government is not affected by the technical requirements placed on real estate agents and brokers when they are filling in legal documents.

local governments:

None--Local governments are not affected by the technical requirements placed on real estate agents and brokers when they are filling in legal documents.

other persons:

None--The only other persons who could be affected by the technical requirements placed on real estate agents and brokers who fill in legal documents for their principals would be the agents and brokers themselves and their principals. These technical requirements will not cost the principals any money, and may actually save them costs that might be incurred if the improperly filled-out documents are later invalidated. The agents and brokers will incur very minimal extra costs in obtaining powers of attorney and in using state-approved addenda for counteroffers, but the agents and brokers would also potentially save costs that they might incur if documents that they have filled out are later invalidated.

Compliance costs for affected persons:

Rules specifying how licensees are to sign or initial documents for their principals and how licensees are to make counter offers could cost licensees a very small amount of money to purchase state-approved addendum forms or to obtain written powers of attorney from their principals. However, that small extra cost should be outweighed by the potential savings to licensees who are saved by these rules from making what could be very costly mistakes.

Comments by the department head on the fiscal impact the rule may have on businesses:

This rule filing establishes standards requiring a licensee to obtain a power of attorney when acting on behalf of a client, stating how such representative capacity is to be signified in official documents, and requiring the use of state-approved forms for counteroffers. Although these measures could result in some minor paperwork for licensees, it is expected that in the long run, licensees, the public and the industry will benefit from the adoption of these standards. No further fiscal impact to businesses is foreseen. Russell C. Skousen, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Shelley Wismer at the above address, by phone at 801-530-6761, by FAX at 801-530-6749, or by Internet E-mail at swismer@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/15/2005

This rule may become effective on:

07/16/2005

Authorized by:

Dexter Bell, Director

RULE TEXT

R162. Commerce, Real Estate.

R162-6. Licensee Conduct.

R162-6-1. Improper Practices.

. . . . . . .

6.1.11. Failure to have written agency agreement. To avoid representing more than one party without the informed consent of all parties, principal brokers and licensees acting on their behalf shall have written agency agreements with their principals. The failure to define an agency relationship in writing will be considered unprofessional conduct and grounds for disciplinary action by the Division.

6.1.11.1. A principal broker and licensees acting on his behalf who represent a seller shall have a written agency agreement with the seller defining the scope of the agency.

6.1.11.2. A principal broker and licensees acting on his behalf who represent a buyer shall have a written buyer agency agreement with the buyer defining the scope of the agency.

6.1.11.3. A principal broker and licensees acting on his behalf who represent both buyer and seller shall have written agency agreements with both buyer and seller which define the scope of the limited agency and which demonstrate that the principal broker has obtained the informed consent of both buyer and seller to the limited agency as set forth in Section R162-6.2.15.3.1.

6.1.11.3.1 A licensee may not act or attempt to act as a limited agent in any transaction in which: a) the licensee is a principal in the transaction; or b) any entity in which the licensee is an officer, director, partner, member, employee, or stockholder is a principal in the transaction.

6.1.11.4. A licensee affiliated with a brokerage other than the listing brokerage who wishes to act as a sub-agent for the seller, shall, prior to showing the seller's property:

(a) obtain permission from the principal broker with whom he is affiliated to act as a sub-agent;

(b) notify the listing brokerage that sub-agency is requested;

(c) enter into a written agreement with the listing brokerage consenting to the sub-agency and defining the scope of the agency; and

(d) obtain from the listing brokerage all information about the property which the listing brokerage has obtained.

6.1.11.5. A principal broker and licensees acting on his behalf who act as a property manager shall have a written property management agreement with the owner of the property defining the scope of the agency.

6.1.11.6. A principal broker and licensees acting on his behalf who represent a tenant shall have a written agreement with the tenant defining the scope of the agency.

6.1.12. Signing without legal authority. A licensee shall not sign or initial any document for a principal unless the licensee has prior written authorization in the form of a duly executed power of attorney from the principal authorizing the licensee to sign or initial documents for the principal. A copy of the power of attorney shall be attached to all documents signed or initialed for the principal by the licensee.

6.1.12.1. When signing a document for a principal, the licensee shall sign as follows: "(Principal's Name) by (Licensee's Name), Attorney-in-Fact."

6.1.12.2. When initialing a document for a principal, the licensee shall initial as follows: "(Principal's Initials) by (Licensee's Name), Attorney-in-Fact for (Principal's Name)."

6.1.13. Counteroffers. A licensee shall not make a counteroffer by making changes, whiting out, or otherwise altering the provisions of the Real Estate Purchase Contract or the language that has been filled in on the blanks of the Real Estate Purchase Contract. All counteroffers to a Real Estate Purchase Contract shall be made using the State-Approved Addendum form.

KEY: real estate business

[April 21, 2004]2005

Notice of Continuation June 7, 2002

61-2-5.5

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Shelley Wismer at the above address, by phone at 801-530-6761, by FAX at 801-530-6749, or by Internet E-mail at swismer@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.