HB-4416, As Passed Senate, March 20, 2008

SUBSTITUTE FOR

HOUSE BILL NO. 4416

     A bill to amend 1980 PA 299, entitled

"Occupational code,"

by amending sections 2501 and 2512 (MCL 339.2501 and 339.2512),

section 2501 as amended by 2003 PA 196 and section 2512 as amended

by 2002 PA 42, and by adding section 2512d.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 2501. As used in this article:

     (a) "Employ" or "employment" means the relationship between a

real estate broker and an associate broker or a real estate

salesperson which may include an independent contractor

relationship. The existence of an independent contractor

relationship between a real estate broker and an individual

licensed to the real estate broker shall not relieve the real

estate broker of the responsibility to supervise acts of the

licensee regulated by this article.

     (b) "Independent contractor relationship" means a relationship

between a real estate broker and an associate broker or real estate

salesperson that satisfies both of the following conditions:

     (i) A written agreement exists in which the real estate broker

does not consider the associate broker or real estate salesperson

as an employee for federal and state income tax purposes.

     (ii) Not less than 75% of the annual compensation paid by the

real estate broker to the associate broker or real estate

salesperson is from commissions from the sale of real estate.

     (c) "Limited service agreement" means a written service

provision agreement by which the real estate broker and client

establish an agency relationship in which certain enumerated

services, as set forth in section 2512d(3)(b), (c), and (d), are

knowingly waived in whole or part by the client.

     (d) "Professional designation" means a certification from a

real estate professional association demonstrating attainment of

proven skills or education in a real estate occupational area and

may include the right to use a title or letters after the

licensee's name that represent the designation bestowed by the

certifying entity.

(e) (a) "Property management" means the leasing or renting, or

the offering to lease or rent, of real property of others for a

fee, commission, compensation, or other valuable consideration

pursuant to a property management employment contract.

(f) (b) "Property management account" means an interest-

bearing or noninterest-bearing account or instrument used in the

operation of property management.

(g) (c) "Property management employment contract" means the

written agreement entered into between a real estate broker and

client concerning the real estate broker's employment as a property

manager for the client; setting forth the real estate broker's

duties, responsibilities, and activities as a property manager; and

setting forth the handling, management, safekeeping, investment,

disbursement, and use of property management money, funds, and

accounts.

(h) (d) "Real estate broker" means an individual, sole

proprietorship, partnership, association, corporation, common law

trust, or a combination of those entities who with intent to

collect or receive a fee, compensation, or valuable consideration,

sells or offers for sale, buys or offers to buy, provides or offers

to provide market analyses, lists or offers or attempts to list, or

negotiates the purchase or sale or exchange or mortgage of real

estate, or negotiates for the construction of a building on real

estate; who leases or offers or rents or offers for rent real

estate or the improvements on the real estate for others, as a

whole or partial vocation; who engages in property management as a

whole or partial vocation; who sells or offers for sale, buys or

offers to buy, leases or offers to lease, or negotiates the

purchase or sale or exchange of a business, business opportunity,

or the goodwill of an existing business for others; or who, as

owner or otherwise, engages in the sale of real estate as a

principal vocation.

(i) (e) "Real estate salesperson" means a person who for

compensation or valuable consideration is employed either directly

or indirectly by a licensed real estate broker to sell or offer to

sell, to buy or offer to buy, to provide or offer to provide market

analyses, to list or offer or attempt to list, or to negotiate the

purchase or sale or exchange or mortgage of real estate, or to

negotiate for the construction of a building on real estate, or to

lease or offer to lease, rent or offer for rent real estate, who is

employed by a real estate broker to engage in property management,

or who sells or offers for sale, buys or offers to buy, leases or

offers to lease, or negotiates the purchase or sale or exchange of

a business, business opportunity, or the goodwill of an existing

business for others, as a whole or partial vocation.

     (f) "Employ" or "employment" means the relationship between a

real estate broker and an associate broker or a real estate

salesperson which may include an independent contractor

relationship. The existence of an independent contractor

relationship between a real estate broker and an individual

licensed to the real estate broker shall not relieve the real

estate broker of the responsibility to supervise acts of the

licensee regulated by this article.

     (g) "Independent contractor relationship" means a relationship

between a real estate broker and an associate broker or real estate

salesperson that satisfies both of the following conditions:

     (i) A written agreement exists in which the real estate broker

does not consider the associate broker or real estate salesperson

as an employee for federal and state income tax purposes.

     (ii) Not less than 75% of the annual compensation paid by the

real estate broker to the associate broker or real estate

salesperson is from commissions from the sale of real estate.

     (h) "Professional designation" means a certification from a

real estate professional association demonstrating attainment of

proven skills or education in a real estate occupational area, and

may include the right to use a title or letters after the

licensee's name that represent the designation bestowed by the

certifying entity.

     (j) "Service provision agreement" means a buyer agency

agreement or listing agreement executed by a real estate broker and

a client that establishes an agency relationship.

     Sec. 2512. A licensee who commits 1 or more of the following

is subject to the penalties set forth in article 6:

     (a) Except in a case involving property management, acts for

more than 1 party in a transaction without the knowledge of the

parties.

     (b) Fails to provide a written agency disclosure to a

prospective buyer or seller in a real estate transaction as defined

in section 2517.

     (c) Represents or attempts to represent a real estate broker

other than the employer without the express knowledge and consent

of the employer.

     (d) Fails to account for or to remit money coming into the

licensee's possession which belongs to others.

     (e) Changes a business location without notification to the

department.

     (f) In the case of a real estate broker, fails to return a

real estate salesperson's license within 5 days as provided in

section 2507.

     (g) In the case of a licensee engaged in property management,

violates section 2512c(2), (5), or (6).

     (h) Except as provided in section 2512b, shares or pays a fee,

commission, or other valuable consideration to a person not

licensed under this article including payment to any person

providing the names of, or any other information regarding, a

potential seller or purchaser of real estate but excluding payment

for the purchase of commercially prepared lists of names. However,

a licensed real estate broker may pay a commission to a licensed

real estate broker of another state if the nonresident real estate

broker does not conduct in this state a negotiation for which a

commission is paid.

     (i) Conducts or develops a market analysis not in compliance

with section 2601(a)(ii).

     (j) Fails to provide the minimum services as specified in

section 2512d(3) when providing services pursuant to a service

provision agreement unless expressly waived in writing by the

client under section 2517(3).

(k) (j) Except in the case of property management accounts,

fails to deposit in the real estate broker's custodial trust or

escrow account money belonging to others coming into the hands of

the licensee in compliance with the following:

     (i) A real estate broker shall retain a deposit or other money

made payable to a person, partnership, corporation, or association

holding a real estate broker's license under this article pending

consummation or termination of the transaction involved and shall

account for the full amount of the money at the time of the

consummation or termination of the transaction.

     (ii) A real estate salesperson shall pay over to the real

estate broker, upon receipt, a deposit or other money on a

transaction in which the real estate salesperson is engaged on

behalf of the real estate broker.

     (iii) A real estate broker shall not permit an advance payment

of funds belonging to others to be deposited in the real estate

broker's business or personal account or to be commingled with

funds on deposit belonging to the real estate broker.

     (iv) A real estate broker shall deposit, within 2 banking days

after the broker has received notice that an offer to purchase is

accepted by all parties, money belonging to others made payable to

the real estate broker into a separate custodial trust or escrow

account maintained by the real estate broker with a bank, savings

and loan association, credit union, or recognized depository until

the transaction involved is consummated or terminated, at which

time the real estate broker shall account for the full amount

received.

     (v) A real estate broker shall keep records of funds deposited

in its custodial trust or escrow account, which records shall

indicate clearly the date and from whom the money was received, the

date deposited, the date of withdrawal, and other pertinent

information concerning the transaction, and shall show clearly for

whose account the money is deposited and to whom the money belongs.

The records shall be subject to inspection by the department. A

real estate broker's separate custodial trust or escrow account

shall designate the real estate broker as trustee, and the

custodial trust or escrow account shall provide for withdrawal of

funds without previous notice. This article and the rules

promulgated pursuant to this article do not prohibit the deposit of

money accepted under this section in a noninterest bearing account

of a state or federally chartered savings and loan association or a

state or federally chartered credit union.

     (vi) If a purchase agreement signed by a seller and purchaser

provides that a deposit be held by an escrowee other than a real

estate broker, a licensee in possession of such a deposit shall

cause the deposit to be delivered to the named escrowee within 2

banking days after the licensee has received notice that an offer

to purchase is accepted by all parties.

     Sec. 2512d. (1) A real estate broker or real estate

salesperson acting pursuant to a service provision agreement shall

perform the duties imposed in subsection (2). A real estate broker

may authorize a designated agent to represent the client, so long

as that authorization is in writing.

     (2) A real estate broker or real estate salesperson acting

pursuant to a service provision agreement owes, at a minimum, the

following duties to his or her client:

     (a) The exercise of reasonable care and skill in representing

the client and carrying out the responsibilities of the agency

relationship.

     (b) The performance of the terms of the service provision

agreement.

     (c) Loyalty to the interest of the client.

     (d) Compliance with the laws, rules, and regulations of this

state and any applicable federal statutes or regulations.

     (e) Referral of the client to other licensed professionals for

expert advice related to material matters that are not within the

expertise of the licensed agent.

     (f) An accounting in a timely manner of all money and property

received by the agent in which the client has or may have an

interest.

     (g) Confidentiality of all information obtained in the course

of the agency relationship, unless disclosed with the client's

permission or as provided by law, including the duty not to

disclose confidential information to any licensee who is not an

agent of the client.

     (3) A real estate broker or real estate salesperson acting

pursuant to a service provision agreement shall provide the

following services to his or her client:

     (a) When the real estate broker or real estate salesperson is

representing a seller or lessor, the marketing of the client's

property in the manner agreed upon in the service provision

agreement.

     (b) Acceptance of delivery and presentation of offers and

counteroffers to buy, sell, or lease the client's property or the

property the client seeks to purchase or lease.

     (c) Assistance in developing, communicating, negotiating, and

House Bill No. 4416 (H-3) as amended February 26, 2008

presenting offers, counteroffers, and related documents or notices

until a purchase or lease agreement is executed by all parties and

all contingencies are satisfied or waived.

     (d) After execution of a purchase agreement by all parties,

assistance as necessary to complete the transaction under the terms

specified in the purchase agreement.

     (e) [FOR A BROKER OR ASSOCIATE BROKER WHO IS INVOLVED AT THE

CLOSING OF A REAL ESTATE OR BUSINESS OPPORTUNITY TRANSACTION FURNISHING,

OR CAUSING TO BE FURNISHED, TO THE BUYER AND SELLER, A COMPLETE AND

DETAILED CLOSING STATEMENT SIGNED BY THE BROKER OR ASSOCIATED BROKER

SHOWING EACH PARTY ALL RECEIPTS AND DISBURSEMENTS AFFECTING THAT PARTY.]

     (4) A real estate broker or real estate salesperson

representing a seller under a service provision agreement shall not

advertise the property to the public as "for sale by owner" or

otherwise mislead the public to believe that the seller is not

represented by a real estate broker.

     (5) The services described in subsection (3)(b), (c), and (d)

may be waived in a limited service agreement.

     Enacting section 1. This amendatory act does not take effect

unless House Bill No. 4417 of the 94th Legislature is enacted into

law.

     Enacting section 2. This amendatory act takes effect July 1,

2008.