Legal Hotline

By Chris Darby, Tom Muldoon and John Nalls of Counselors Title, LLC, and Pardo & Drazin, LLC, General Counsel

QUESTION: Does my role or responsibility as a listing agent change if my client will be using a 1031 Exchange when selling their investment property?

ANSWER: Your role in the transaction does not change. You will want to ensure that your client is using a Qualified Intermediate to properly handle the 1031 Exchange and complying with the requirements of the IRS Tax Code.

QUESTION: If you have a seller with a security camera all around his house, do you need to disclose that to the visitors, agents or buyers?

ANSWER: This is a complicated issue for which some, but not all, jurisdictions have laws regarding required disclosures and/or the disconnection of audio recordings during showings or open houses. GCAAR has attempted to address the matter of making buyers aware that surveillance systems may record conversations in sellers’ homes in GCAAR Form 1318, Important Information for the Purchase of Real Estate:

18. SECURITY SYSTEMS/ELECTRONIC DEVICES: Buyer is advised that Seller may have a system on Seller’s property that records audio and/or video. If so, Buyer’s actions and/or conversations could be heard, recorded and/or seen. The Montgomery County Jurisdictional Addendum to the Listing Agreement (GCAAR Form #909) also has a paragraph notifying sellers of Maryland’s law on this topic:

7. HOME SECURITY SYSTEMS THAT MONITOR

OR RECORD AUDIO: Seller is advised that Maryland law prohibits audio recording and/ or monitoring of private conversations without the consent of all parties. NAR has also published a survey of various jurisdictions’ laws on this subject that can be found at: bit.ly/2OYlaSf. The short answer is that, while technology seems to increasingly create an environment where recordings are regularly taking place in many people’s homes, it would be a good idea for sellers to affirmatively disclose this possibility. That means disclosing where they know recordings are taking place. And in places like Maryland, where the law actually requires consent for audio recordings, such devices should be disconnected during open houses and showings.

QUESTION: I am in the process of destroying real estate transaction files I no longer need to store. I want to make certain I understand the requirements for keeping these files.

ANSWER: Both the State of Maryland and the District of Columbia have laws regarding how long real estate documents must be maintained and for what period of time they must be kept.

Section 42-2853.197(22) of District of Columbia real estate law outlines the requirement of real estate documents: 1. Question: Must a real estate broker keep an escrow or trustee accounting of funds deposited relating to a real estate transaction? Answer: Yes. Brokers must keep an escrow or trustee accounting of all funds that are deposited with him or her relating to real estate and business transactions. 2. Question: How long must real estate transaction records be maintained? Answer: Three years. 3. Question: What information must the real estate records contain that are maintained? Answer: The records must show to whom the money belongs, the date of deposit, the date of withdrawal, to whom paid, and other pertinent information as the Board may require by regulation. 4. Question: Is the DC Real Estate Board allowed to inspect a broker’s records? Answer: Yes. The records must be made available to the Board on demand or upon written notice given to the depository.

Section 17-507 of Maryland real estate law outlines the requirement of real estate documents: 1. Question: Where must a real estate broker maintain records of trust money?

Answer: Each real estate broker shall maintain all records of trust money in a secured area within the office of the broker. 2. Question: What is a real estate licensee responsible for keeping copies of?

Answer: Each licensee shall keep copies of the following items: a) listings; and b) any other document executed or obtained by the licensee in connection with a transaction involving the provision of real estate brokerage services, including any electronic signature contained on a document. 3. Question: How long shall the real estate transaction records be held for? Answer: five years starting on the date of the closing of a real estate transaction, or, if the transaction is not closed, five years after the date of the listing. 4. Question: How long shall property management service records be kept? Answer: Five years after the termination of the management agreement. 5. Question: Is a licensee allowed to keep records and store them in an electronic method? Answer: Yes if, a) the stored record cannot be erased or edited; b) the stored record is made or preserved as part of, and in the regular course of, the licensee’s business; c) the original record from which the stored record was copied was made or prepared by the licensee or the licensee’s employees at or near the time of the activity described in the record; d) the custodian of the record is able to identify the stored record, the mode of its preparation, and the mode of storage; and e) the electronic storage system contains a reliable indexing system that provides: i. convenient access to the document or record; ii. appropriate quality control of the storage process; and iii. chronological arrangement of stored documents or records. 6. Question: Is the Maryland Real Estate Commission allowed to inspect a licensee’s records? Answer: Yes. On reasonable notice from the Commission, a licensee shall allow a representative of the Commission to enter the licensee’s place of business during business hours to inspect a record required to be kept. And the licensee shall provide, at the licensee’s expense, a paper copy of any document or record requested by the Commission. A licensee shall display to the Commission on demand all records, books, and accounts of any money held in trust.

DISCLAIMER: The answers provided here are the opinion of the authors, are for informational purposes and are only for GCAAR members. Neither Counselors Title, LLC, nor Pardo & Drazin, LLC, is providing legal advice, but rather providing a general statement of law. No lawyer/client relationship is–or will be–established as a result of this material. Readers are encouraged to retain their own counsel for their specific questions. Answers may have been edited for formatting purposes.

Legal Hotline, continued QUESTION: Prior to becoming a REALTOR®, I was a consultant. I do understand that the real estate sales commission (buying, selling, leasing properties) needs to be processed through my brokerage. Before engaging in consulting, I'd like to make certain I am following the guidelines concerning compensation. Please clarify what streams of income must be processed through the brokerage and what streams of income do not need to be processed through the brokerage (e.g. consulting fees, government contracts related to services outside of sales and leasing, etc.).

ANSWER: Below is the Maryland statutory definition for providing real estate brokerage services, which must be processed through the brokerage. (l) “Provide real estate brokerage services” means to engage in any of the following activities: (1) for consideration, providing any of the following services for another person: (i) selling, buying, exchanging, or leasing any real estate; or (ii) collecting rent for the use of any real estate; (2) for consideration, assisting another person to locate or obtain for purchase or lease any residential real estate; (3) engaging regularly in a business of dealing in real estate or leases or options on real estate; (4) engaging in a business the primary purpose of which is promoting the sale of real estate through a listing in a publication issued primarily for the promotion of real estate sales; (5) engaging in a business that subdivides land that is located in any state and sells the divided lots; or (6) for consideration, serving as a consultant regarding any activity set forth in items (1) through (5) of this subsection.

QUESTION: Can the seller who is occupying pursuant to a Post-Settlement Occupancy Agreement, giving notice, vacate the property prior to the "Specified Date" without penalty?

ANSWER: There is no penalty for the seller vacating the property prior to the “Specified Date” in the Post-Settlement Occupancy Addendum (GCAAR Form 1309). However, Paragraph 1 specifically provides that “The amount paid for this license is non-refundable in the event Seller vacates the Property prior to the end of the Occupancy Period.” Accordingly, the seller may not seek a refund of any previous amounts paid for leaving early.

Mike is an experienced litigator regularly handling real estate disputes in Maryland, Virginia, and the District of Columbia between residential buyers, sellers, real estate brokers, and agents, including matters involving:

v Real estate contract disputes and breach of contract claims v Buyer or seller refusing to close on a transaction v Disputes involving the release of an earnest money deposit v Commission and fee disputes v Homeowner/contractor disputes v Mechanic’s liens v General civil litigation v Construction defects v Claims for fraud and property condition disclosure issues Mike has been repeatedly recognized by Super Lawyer Magazine in the area of civil litigation.

4520 East West Hwy • Suite 700 Phone: 301.547.3647 • Fax: 301.951.8631 Bethesda, MD 20814 Email: Mike@BramnickCreed.com