THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY TOMLINSON, BRUBAKER, WAUGH, M. WHITE, McILHINNEY, SMUCKER, TARTAGLIONE, FOLMER, ROBBINS, BAKER, BROWNE, EARLL, ERICKSON, RAFFERTY, BOSCOLA, O'PAKE, LOGAN, WOZNIAK, COSTA, KASUNIC, STOUT, FONTANA AND WASHINGTON, FEBRUARY 19, 2009

REFERRED TO CONSUMER PROTECTION AND PROFESSIONAL LICENSURE, FEBRUARY 19, 2009  

AN ACT

Amending the act of February 19, 1980 (P.L.15, No.9), entitled

"An act establishing the State Real Estate Commission and

providing for the licensing of real estate brokers and

salesmen," defining "qualified association"; further

providing for prohibited acts and for duties of licensee

generally; and providing for handling of deposits and other

escrows.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 201 of the act of February 19, 1980 (P.L.

15, No.9), known as the Real Estate Licensing and Registration

Act, is amended by adding a definition to read:

Section 201.  Definitions.

The following words and phrases when used in this act shall

have, unless the context clearly indicates otherwise, the

meanings given to them in this section:

* * *

"Qualified association."  A corporation, limited liability

partnership, limited partnership or limited liability company 

that:

(1)  is incorporated or otherwise organized under the

laws of this Commonwealth or another jurisdiction;

(2)  does not hold a license under this act;

(3)  does not hold itself out to the public as providing

real estate services or real estate-related services; and

(4)  is solely owned by licensees who are all affiliated

with the same broker.

In case of the death of an owner of a qualified association,

ownership may continue through the licensees' estate for a

period not to exceed 18 months.

* * *

Section 2.  Section 604(a)(5) of the act, amended June 29,

1990 (P.L.246, No.58), is amended, subsection (a) is amended by

adding paragraphs and the section is amended by adding a

subsection to read:

Section 604.  Prohibited acts.

(a)  The commission may upon its own motion, and shall

promptly upon the verified complaint in writing of any person

setting forth a complaint under this section, ascertain the

facts and, if warranted, hold a hearing for the suspension or

revocation of a license or registration certificate or for the

imposition of fines not exceeding $1,000, or both. The

commission shall have power to refuse a license or registration

certificate for cause or to suspend or revoke a license or

registration certificate or to levy fines up to $1,000, or both,

where the said license has been obtained by false

representation, or by fraudulent act or conduct, or where a

licensee or registrant, in performing or attempting to perform

any of the acts mentioned herein, is found guilty of:

* * *

[(5)  Failure to comply with the following requirements:

(i)  all deposits or other moneys accepted by every

person, holding a real estate broker license under the

provisions of this act, shall be retained by such real

estate broker pending consummation or termination of the

transaction involved, and shall be accounted for in the

full amount thereof at the time of the consummation or

termination;

(ii)  every salesperson and associate broker promptly

on receipt by him of a deposit or other moneys on any

transaction in which he is engaged on behalf of his

broker-employer, shall pay over the deposit to the

broker;

(iii)  a broker shall not commingle the money or

other property of his principal with his own;

(iv)  every broker shall immediately deposit such

moneys, of whatever kind or nature, belonging to others,

in a separate custodial or trust fund account maintained

by the broker with some bank or recognized depository

until the transaction involved is consummated or

terminated, at which time the broker shall account for

the full amount received. Under no circumstances shall a

broker permit any advance payment of funds belonging to

others to be deposited in the broker's business or

personal account, or to be commingled with any funds he

may have on deposit;

(v)  every broker shall keep records of all funds

deposited therein, which records shall indicate clearly

the date and from whom he received money, the date

deposited, the dates of withdrawals, and other pertinent

information concerning the transaction, and shall show

clearly for whose account the money is deposited and to

whom the money belongs. All such records and funds shall

be subject to inspection by the commission. Such separate

custodial or trust fund account shall designate the

broker, as trustee, and such account must provide for

withdrawal of funds without previous notice. All such

records shall be available to the commission, or its

representatives, immediately after proper demand or after

written notice given, or upon written notice given to the

depository;

(vi)  a broker is not required to hold in escrow

rents that he receives for property management for a

lessor. A broker shall deposit rents received into a

rental management account that is separate from the

broker's escrow account and general business accounts; or

(vii)  a broker shall be permitted to deposit moneys

into his escrow account to cover service charges to this

account assessed by the banking institution.]

(5.1)  Failing to comply with any of the requirements of

section 608.5.

* * *

(31)  Owning an interest in a qualified association that

does any of the following:

(i)  Participates in any of the prohibited acts under

this subsection.

(ii)  Is not solely owned by licensees who are all

affiliated with the same broker.

(iii)  Holds itself out to the public as providing

real estate services or real estate-related services.

* * *

(c)  Notwithstanding any other provision of this act, it is

not unlawful for a broker to pay a commission or compensation to

a qualified association or for an associate broker or

salesperson to receive a commission or compensation for the

provision of real estate services or real estate-related

services from a qualified association in which the associate

broker or salesperson owns an interest.

Section 3.  Section 606.1(a)(5) of the act, added November

25, 1998 (P.L.908, No.112), is amended and the subsection is

amended by adding a paragraph to read:

Section 606.1.  Duties of licensee generally.

(a)  Regardless of whether a licensee is acting within the

scope of an agency relationship with a consumer, a licensee owes

to all consumers to whom the licensee renders real estate

services the following duties which may not be waived:

* * *

(5)  to account in a timely manner for all money and

property received from or on behalf of any consumer to a

transaction consistent with the provisions of section [604(a)

(5)] 608.5;

* * *

(14)  A licensee must report to the commission within 30

days of forming or joining a qualified association all of the

following:

(i)  Name of the qualified association.

(ii)  Names of the owners of the qualified

association.

(iii)  The jurisdiction where the qualified

association is registered.

(iv)  Date the qualified association was registered.

(v)  Changes in ownership of the qualified

association.

Section 4.  The act is amended by adding a section to read:

Section 608.5.  Handling of deposits and other escrows.

(a)  All deposits or other escrows accepted by a broker must

be retained by the broker pending:

(1)  consummation of the transaction involved;

(2)  termination prior to consummation of the transaction

involved where there is either:

(i)  no dispute as to entitlement to the deposit or

other escrows; or

(ii)  a prior agreement in writing or electronic form

as to disposition of the deposit or other escrows in the

event of a dispute regarding entitlement to the deposit

or other escrows;

(3)  receipt by the broker of instructions in writing or

electronic form, signed by all of the parties to the

transaction at any time after the broker's receipt of the

deposit or other escrows, directing the broker to release

some or all of the deposit or other escrows; or

(4)  an order of a court of competent jurisdiction

specifying disposition of the deposit or other escrows

becoming final and not subject to appeal.

(b)  Deposits and other escrows must be accounted for in the

full amount thereof at the time of consummation, termination or

release as provided in subsection (a). If less than the full

amount held pursuant to subsection (a) is released, notice must

be given in writing or electronic form to all the parties to the

transaction of the amounts released, the persons to whom

distribution is made and the amounts that continue to be held

pursuant to subsection (a).

(c)  Every associate broker or salesperson shall, promptly 

following receipt of a deposit or other escrow, pay over the

funds to the broker employing the associate broker or

salesperson.

(d)  A broker shall not commingle deposits or other escrows

or property of another person with the broker's own funds or

property.

(e)  A broker must deposit moneys and property, of whatever

kind or nature, belonging to others, in a separate custodial or

trust fund account maintained by the broker with a bank or

recognized depository by the end of the business day following

their receipt by the broker. The moneys and property must be

held by the broker until they are paid or released as provided

in subsection (a), at which time the broker shall account for

the full amount received. Under no circumstances shall a broker

permit any advance payment of funds belonging to others to be

deposited in the broker's business or personal account or to be

commingled with any funds the broker may have on deposit.

(f)  If a deposit in connection with an offer to buy or lease

real estate is in the form of a check and the buyer and seller

or lessee and lessor consent in writing or electronic form, the

broker may hold the check and not deposit it as otherwise

required by this section pending acceptance of the offer. If the

offer is not accepted, the broker shall promptly return the

check uncashed to the buyer or lessee. If the offer is accepted,

the broker shall deposit the check into a custodial or trust

fund account by the close of business on the business day

following acceptance of the offer.

(g)  A broker must keep records of all funds deposited in a

custodial or trust fund account, which records indicate clearly

the date and from whom the broker received the funds, the date

deposited, the dates of withdrawals and other pertinent

information concerning the transaction, and must show clearly

for whose account the money is deposited and to whom the money

belongs. All such records and funds shall be subject to

inspection by the commission, and must be available to the

commission, or its representatives, immediately after proper

demand or after notice in writing or electronic form given to

the broker or depository. Each separate custodial or trust fund

account must designate the broker as trustee, and the account

must provide for withdrawal of funds without previous notice.

(h)  A broker is not required to hold in escrow rents that

the broker receives for property management for a lessor.

(i)  A broker must deposit rents received into a rental

management account that is separate from the broker's escrow

account and general business accounts.

(j)  A broker is permitted to deposit moneys into an escrow

account to cover service charges to the account assessed by the

banking institution.

(k)  This section does not preclude the parties to a

transaction from agreeing in writing or electronic form to have

deposits or other escrows held by a person other than the

brokers who represent the parties. This subsection shall not be

construed to allow an associate broker, salesperson or qualified

association to hold deposits or other escrows.

Section 5.  This act shall take effect in 60 days.