WSR 97-21-051

PROPOSED RULES

DEPARTMENT OF LICENSING

(Real Estate Commission)

[Filed October 13, 1997, 3:35 p.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 96-13-015 and 97-18-068.

Title of Rule: (1) Amend WAC 308-124-021(2) Definitions: This rule adds WAC language recognizing real estate companies that operate as limited liability companies or partnerships which were made part of the Real Estate Licensing Law in 1997 with the passage of SSB 5267.

(2) New WAC 308-124-025, 308-124-035, and 308-124-045, application of brief adjudicative proceedings. These rules create a brief administrative procedure for certain kinds of real estate licensing adjudicative matters, in particular, the suspension of a license for default on a student loan - pursuant to RCW 18.85.225.

(3) Amend WAC 308-124A-120(3) Application for license--Interim license; 308-124A-200 (1), (2), (3), (4), (5) Corporate or copartnership applicants for licenses--Proof required, 308-124A-205 Corporate license renewal--Proof required, 308-124C-030 Accuracy and accessibility of records, 308-124D-061(1) Broker supervision of affiliated licensees. Adds language relating to limited liability companies and partnerships.

(4) Repeal WAC 308-124F-040 Standards for professional associations and educational organizations. This rule is being repealed because it duplicates current statutory language regarding public records disclosure and parts are in conflict with public records law.

Purpose: See Title of Rule above.

Statutory Authority for Adoption: RCW 18.85.040.

Statute Being Implemented: Student loan default law, RCW 18.85.225; recognizing limited liability corporation and partnerships, RCW 18.85.120.

Summary: See Title of Rule above.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Robert Mitchell, Real Estate Program Manager, P.O. Box 9015, Olympia, WA 98507-9015, phone (360) 586-6102, FAX (360) 586-0998.

Name of Proponent: Department of Licensing, Real Estate Commission, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: See Title of Rule above.

Proposal Changes the Following Existing Rules: See Title of Rule above.

No small business economic impact statement has been prepared under chapter 19.85 RCW. These rule changes are housekeeping in nature and do not have an impact on small business.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption.

Hearing Location: Columbia Seafirst Center, 701 Fifth Avenue, 40th Floor Conference Center, Seattle, WA, on December 5, 1997, at 9:00 a.m.

Assistance for Persons with Disabilities: Contact Robert Mitchell by December 1, 1997, TDD (360) 586-6102.

Submit Written Comments to: Robert Mitchell, FAX (360) 586-0998, by December 1, 1997.

Date of Intended Adoption: December 5, 1997.

October 10, 1997

Linda M. Moran

Senior Assistant

Attorney General

AMENDATORY SECTION (Amending WSR 90-23-039, filed 11/15/90, effective 12/16/90)

WAC 308-124-021 Definitions. (1) Words and terms used in these rules shall have the same meaning as each has under chapter 18.85 RCW unless otherwise clearly provided in these rules, or the context in which they are used in these rules clearly indicates that they be given some other meaning.

(2) "Designated broker" is the natural person designated by a corporation, limited liability company, limited liability partnership or partnership to act as a broker on behalf of the corporation, limited liability company, limited liability partnership or partnership. The designated broker must be an officer of the corporation, manager or member of the limited liability company, partner of the limited liability partnership or a general partner of the partnership and must be separately qualified for licensure as a real estate broker.

(3) "Principal owner" is a person who owns or controls, directly or indirectly, ten percent or more of a real estate brokerage, regardless of whether such interest stands in the person's true name or in the name of a nominee.

(4) "Individual broker" is the natural person who owns a sole proprietorship brokerage company and is the licensed broker of the firm.

(5) "Incorporated associate broker" is the natural person qualified as a broker who works with a broker and who is licensed as a corporation and whose license states that he or she is associated with a broker.

(6) "Affiliated licensees" are the natural persons licensed as salespersons, associate brokers, incorporated associate brokers, and/or branch managers employed by a real estate broker and who are licensed to represent a broker in the performance of any of the acts specified in chapter 18.85 RCW.

[Statutory Authority: RCW 18.85.040. 90-23-039, 308-124-021, filed 11/15/90, effective 12/16/90; 88-24-059 (Order PM 811), 308-124-021, filed 12/7/88; 87-20-091 (Order PM 683), 308-124-021, filed 10/7/87; 81-05-016 (Order RE 128), 308-124-021, filed 2/10/81; 78-11-052 (Order RE 125), 308-124-021, filed 10/23/78; Order RE 120, 308-124-021, filed 9/20/77; Order RE 114, 308-124-021, filed 7/2/75; Order RE-102, 308-124-021, filed 10/28/71.]

NEW SECTION

WAC 308-124-025 Application of brief adjudicative proceedings. The director adopts RCW 34.05.482 through 34.05.494 for the administration of brief adjudicative proceedings conducted by request, and/or at the discretion of the director pursuant to RCW 34.05.482, for the categories of matters set forth below. Brief adjudicative proceedings will be limited to a determination of one or more of the following issues:

(1) Whether an applicant for a license meets the minimum criteria for a license to practice as a real estate broker or real estate salesperson in this state and the department proposes to deny the application;

(2) Whether a person is in compliance with the terms and conditions of a final order or agreement previously issued by the department;

(3) Whether to deny or withdraw approval of any real estate clock hour courses, school approval, or instructor approval;

(4) Whether a license holder requesting renewal has submitted all required information and whether a license holder meets minimum criteria for renewal;

(5) Whether a license holder has been certified by a lending agency and reported for nonpayment or default on a federally or state-guaranteed education loan or service-conditional scholarship; and

(6) Whether a cease and desist order issued to an unlicensed person for acting as a real estate broker or salesperson was properly issued.

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NEW SECTION

WAC 308-124-035 Preliminary record in brief adjudicative proceedings. (1) The preliminary record with respect to an application for an original or renewal license, for approval of an education course or curriculum, or for the proper issuance of a cease and desist order shall consist of:

(a) The application for the license, renewal, or approval and all associated documents; or the cease and desist order and all associate documents;

(b) All documents relied upon by the program in proposing to deny the license, renewal, or approval; or all documents relied upon by the program in issuing a cease and desist order; and

(c) All correspondence between the applicant for license, renewal, or approval and the program regarding the application; or all correspondence between the respondent and the program regarding the issuance of the cease and desist order.

(2) The preliminary record with respect to determination of compliance with a previously issued final order or agreement shall consist of:

(a) The previously issued final order or agreement;

(b) All reports or other documents submitted by, or at the direction of, the license holder, in full or partial fulfillment of the terms of the final order or agreement;

(c) All correspondence between the license holder and the program regarding compliance with the final order or agreement; and

(d) All documents relied upon by the program showing that the license holder has failed to comply with the previously issued final order or agreement.

(3) The preliminary record with respect to the determination of nonpayment or default by the license holder on a federally or state-guaranteed education loan or service-conditional scholarship shall consist of:

(a) Certification and report by the lending agency that the identified person is in default or nonpayment on a federally or state-guaranteed education loan or service-conditional scholarship; or

(b) A written release, if any, issued by the lending agency stating that the identified person is making payment on the loan in accordance with a repayment agreement approved by the lending agency.

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NEW SECTION

WAC 308-124-045 Conduct of brief adjudicative proceedings. (1) Brief adjudicative proceedings shall be conducted by a presiding officer for brief adjudicative proceedings designated by the director. The presiding officer for brief adjudicative proceedings shall not have personally participated in the decision which resulted in the request for a brief adjudicative proceeding.

(2) The parties or their representatives may present written documentation. The presiding officer for brief adjudicative proceedings shall designate the date by which written documents must be submitted by the parties.

(3) The presiding officer for brief adjudicative proceedings may, in his or her discretion, entertain oral argument from the parties or their representatives.

(4) No witnesses may appear to testify.

(5) In addition to the record, the presiding officer for brief adjudicative proceedings may employ agency expertise as a basis for the decision.

(6) The presiding officer for brief adjudicative proceedings shall not issue an oral order. Within ten days of the final date for submission of materials or oral argument, if any, the presiding officer for brief adjudicative proceedings shall enter an initial order.

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AMENDATORY SECTION (Amending WSR 91-23-006, filed 11/7/91, effective 12/8/91)

WAC 308-124A-120 Application for license--Interim license. (1) A person who desires to be licensed as a real estate salesperson or associate broker, or broker shall make application on a form approved by the director and the real estate salesperson and associate broker application shall be signed by the broker or designated broker to whom the license will be issued. The branch manager may sign for the broker or designated broker for licenses to be issued to that branch office. All signatures must be original signatures of the signators, unless signed under authority of a written power of attorney.

(2) Upon receipt of notice of passage of the examination and the license application form, applicants for a real estate salesperson license may commence working upon the postmark date to the department or date of hand delivery to the licensing division of the department of the signed, dated and completed license application form with the license fee. The completed license application form, if submitted with the license fee, shall serve as an interim license for a period up to forty-five days after the postmark date or date of hand delivery to the department, unless grounds exist to take disciplinary action against the license under RCW 18.85.230.

(3) There are no interim licenses for designated brokers for corporations, limited liability companies, limited liability partnerships or partnerships, individual real estate brokers or associate brokers. Upon notification of passage of the examination, applicants for associate broker licenses, individual broker licenses, or designated broker licenses for corporations, limited liability companies, limited liability partnerships or partnerships must submit a complete license application with the license fee to the department of licensing and qualify for the license under chapter 18.85 RCW and the rules.

[Statutory Authority: RCW 18.85.040. 91-23-006, 308-124A-120, filed 11/7/91, effective 12/8/91; 88-20-036 (Order PM 774), 308-124A-120, filed 9/30/88, effective 1/1/89; 87-20-091 (Order PM 683), 308-124A-120, filed 10/7/87; 81-05-016 (Order RE 128), 308-124A-120, filed 2/10/81.]

AMENDATORY SECTION (Amending WSR 90-23-039, filed 11/15/90, effective 12/16/90)

WAC 308-124A-200 Corporate or copartnership applicants for licenses--Proof required. The minimum qualifications for a corporation, limited liability company, limited liability partnership or partnership to receive a broker's license are:

(1) An officer in the corporation, a manager or member in the limited liability company, a partner in the limited liability partnership or a general partner in the partnership, as the case may be, shall be designated as the broker and shall separately qualify for a valid broker's license. The corporation, limited liability company, limited liability partnership or partnership and the designated broker are required to pay only a single license and license renewal fee.

(2) The applicant shall furnish a character and credit rating of the designated broker, officers, managers or members and principal owners of the corporation or limited liability company directly involved in the company's Washington real estate activity and, in the case of a partnership or limited liability partnership, the general partners and all principal owners. A new credit rating is not required if one has been filed with the department within the preceding eighteen months.

(3) If the applicant is a partnership or limited liability partnership, it shall furnish a copy of its partnership or limited liability partnership agreement.

(4) Licenses issued to corporations, limited liability companies, limited liability partnerships and partnerships expire two years from the date of issuance which date will be the renewal date.

(5) If a corporation applies for licensure as an incorporated associate broker, the associate broker shall be the sole licensee of the corporation. The renewal period for the incorporated associated broker shall be the same as the renewal period for corporations, limited liability companies, limited liability partnerships or partnerships under this chapter.

[Statutory Authority: RCW 18.85.040. 90-23-039, 308-124A-200, filed 11/15/90, effective 12/16/90; 88-20-037 (Order PM 775), 308-124A-200, filed 9/30/88. Statutory Authority: RCW 18.85.040, 18.85.140 and 18.85.190. 87-17-051 (Order PM 673), 308-124A-200, filed 8/18/87, effective 10/1/87. Statutory Authority: RCW 18.85.040. 81-05-016 (Order RE 128), 308-124A-200, filed 2/10/81; Order RE 114, 308-124A-200, filed 7/2/75.]

AMENDATORY SECTION (Amending Order PM 683, filed 10/7/87)

WAC 308-124A-205 Corporate license renewal--Proof required. Applicants for renewal of a corporate, limited liability company or limited liability partnership license shall furnish proof of current master license renewed by authority of secretary of state.

[Statutory Authority: RCW 18.85.040. 87-20-091 (Order PM 683), 308-124A-205, filed 10/7/87.]

AMENDATORY SECTION (Amending Order PM 683, filed 10/7/87)

WAC 308-124C-030 Accuracy and accessibility of records. All required real estate records shall be accurate, posted and kept up to date. All required real estate records shall be kept at an address where the real estate broker is licensed to maintain a real estate office. Such records shall be retained and available for inspection by the director or the director's authorized representative for a minimum of three years. While RCW 18.85.230(20) requires the retention of records for three years, licensees should be aware that the applicable statute of limitations may vary from this three-year retention period.

In the case of a corporate, limited liability company, limited liability partnership or partnership brokerage firm, the responsibility imposed by this section shall apply to both the corporation, limited liability company, limited liability partnership or partnership and the natural person designated and licensed to act as broker for the corporation, limited liability company, limited liability partnership or partnership. Prior to issuing a new license indicating a change of designated broker for a corporate, limited liability company, limited liability partnership or partnership licensee, the licensee must submit evidence that the requirements have been satisfied.

A statement signed by both the outgoing designated broker and the incoming designated broker, listing all outstanding client trust liabilities, copies of trust account bank statements and the latest trust account reconciliations and certifying that funds in hand in the trust account maintained by the licensee are adequate to meet these client trust liabilities will satisfy this requirement. The incoming designated broker shall not be deemed responsible for any discrepancy identified in the statement, unless the incoming designated broker contracted to accept such responsibility.

[Statutory Authority: RCW 18.85.040. 87-20-091 (Order PM 683), 308-124C-030, filed 10/7/87; 82-17-039 (Order 130), 308-124C-030, filed 8/13/82; Order RE 120, 308-124C-030, filed 9/20/77; Order RE 114, 308-124C-030, filed 7/2/75.]

AMENDATORY SECTION (Amending WSR 90-01-044, filed 12/14/89, effective 1/14/90)

WAC 308-124D-061 Broker supervision of affiliated licensees. (1) Individual and designated brokers shall be responsible for supervising the conduct of all associate brokers and salespersons licensed to them, whether in an individual capacity or through a corporate, limited liability company, limited liability partnership or partnership entity. A broker shall not be held responsible for inadequate supervision if:

(a) An associate broker or salesperson violates a provision of chapter 18.85 RCW, or the rules promulgated thereunder, in contravention of the supervising broker's specific written policies or instructions;

(b) Reasonable procedures had been established to verify that adequate supervision was being performed;

(c) Upon learning of the violation, the broker attempted to prevent or mitigate the damage;

(d) The broker did not participate in the violation;

(e) The broker did not ratify the violation; and

(f) The broker did not attempt to avoid learning of the violation.

(2) The existence of an independent contractor relationship or any other special compensation arrangement between the broker and affiliated licensees shall not release the broker and licensee of any duties, obligations, or responsibilities.

[Statutory Authority: RCW 18.85.040. 90-01-044, 308-124D-061, filed 12/14/89, effective 1/14/90.]

REPEALER

The following section of the Washington Administrative Code is repealed: