Administrative – Real Estate License – Broker ‘Relationship’ – Notice

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The Virginia Court of Appeals upholds monetary sanctions and loss of license against a real estate agent who entered into separate contracts to buy two adjacent lots in Hanover County, but failed to follow contract terms about payment of delinquent taxes, to include complete terms of a contract and to comply with a deadline for a deposit; but the appellate court reverses the board’s sanction based on Va. Code § 54.1-2138, saying that statute did not require the agent to disclose the lack of a broker relationship.

In fall 2004, agent Edward Williams was working for Virginia Real Estate and Development Inc. On Dec. 8, 2004, Williams entered into a contract to individually purchase a 1.25-acre lot in Hanover County from Edward Waller for $7,000, stating that Williams would make a $1.00 earnest money deposit with VARED, the escrow agent, and that Williams would pay delinquent taxes of $4,205.35 on the property.

Under Williams’ signature was a statement, “Purchaser is a licensed real estate agent.” Williams never deposited the $1.00 and the settlement agreement showed that Waller, not Williams, paid delinquent taxes and fees of $6,106.95.

On March 23, 2005, Williams entered into a contract to individually purchase a 7.5-acre lot adjacent to Waller’s lot, from James Thacker for $35,000. The agreement said Williams would deposit $1,000 with Courthouse Title LLC as escrow, the same day of the contract. The contract included Williams’ real estate license number and his VARED employment. Williams and Thacker closed on April 28, 2005; Williams did not deliver a check to the escrow agent until at least April 12, 2005.

In counts I and VII of the Real Estate Board’s summary of its informal fact finding (IFF) by presiding member Byrl Taylor and the recommendation to the board, Taylor found that Williams violated Va. Code § 54.1-2138 by failing to disclose the fact that he had no brokerage relationship with the two sellers. The board imposed a $500 fine and eight hours of continuing education for each violation, which the board accepted.

Code § 54.1-2138 has not been consistently and regularly applied to licensees who fail to disclose the lack of a brokerage relationship. In fact, neither Williams nor the board cites any case or board decision in which Code § 54.1-2138 has been applied to sanction a licensee for failing to disclose the lack of a brokerage relationship.

There was no broker relationship Williams was required to disclose. Nothing in the plain meaning of Code § 54.1-2138 requires a real estate license to disclose the lack of a broker relationship to another party to the transaction. By its very terms, the statute imposes an affirmative obligation to disclose the existence of a circumstance, as opposed to a declaration that the circumstance does not exist. The circuit court erred in affirming the board’s decision and holding Williams violated Code § 54.1-2138 when he failed to notify the parties that no brokerage relationship existed in the transactions.

This court rejects Williams’ claim that the board made findings outside the agency’s specialized competence in finding Williams violated 18 VAC 135-20-260(10) when he failed to pay delinquent taxes as required by the Waller contract, and violated 18 VAC 135-20-300(6) when he failed to include the complete terms and conditions of the Waller contract by not clearly stating who was to pay the taxes. There was no error of law in concluding Williams failed to include the complete terms and conditions of the transaction.

There were no due process violations warranting reversal of the circuit court decision. The circuit court conscientiously considered Williams’s claim that the ultimate sanctions of $9,000 were unfair in light of the previous consent offer of $4,250. Although the disparity was great, “suggest[ing] motives of retaliation or pique,” the circuit court said, Williams failed to show a reasonable likelihood that the increase was the product of actual vindictiveness on the part of the sanctioning authority, in light of all the evidence. We find no error in the circuit court decision. Nor was there error in Taylor’s consideration of a tax assessment on Waller’s property that was not introduced into the record, as the assessment was irrelevant to the findings from which Williams appeals.

Also, given the purpose of the escrow money, the department’s regulations and this court’s standard of review, we conclude it was neither arbitrary and capricious nor unreasonable for the board to find the terms governing the earnest money deposit, which the parties agreed to in writing, material. The court upholds the decision to fine Williams $1,000 and revoke his license for his failure to deposit $1.00 as required by the Waller contract within five days of the contract’s ratification, failure to provide written notice of a material change in the contract and notice that the deposit was not made by the contract deadline in the Thacker contract.

We reverse the circuit court decision upholding the board’s conclusion that Williams violated Code § 54.1-2138. We vacate the imposition of $1,000 in fines and eight hours continuing education as sanctions for these violations. We affirm the circuit court’s decision in all other respects.

Affirmed in part, reversed in part and final judgment.

Williams v. Commonwealth of Va., Real Estate Board (Alston, J.) No. 2799-09-2, Sept. 14, 2010; Henrico County Cir.Ct. (Balfour) Brenda L. Page for appellant; Steven P. Jack, AAG, for appellee. VLW 010-7-355, 25 pp.