Senate Bill No. 248-Committee on Commerce and Labor
March 27, 1997
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Referred to Committee on Commerce and Labor
SUMMARY--Regulates business of property management and makes various other changes relating to real estate. (BDR 54-715)
FISCAL NOTE: Effect on Local Government: Yes.
Effect on the State or on Industrial Insurance: Yes.
EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.
AN ACT relating to real estate; providing for the regulation of the business of property management; prohibiting a person from acting as a property manager without the proper license and a permit issued by the real estate division of the department of business and industry; revising provisions governing the trust account of a real estate broker; amending the grounds for disciplinary action by the real estate commission; providing a penalty; and providing other matters properly relating thereto.
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
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Section 1 Chapter 645 of NRS is hereby amended by adding thereto the provisions set forth as sections 2 to 6, inclusive, of this act.
Sec. 2 "Property management" means the physical, administrative or financial maintenance and management of real property, or the supervision of such activities for a fee, commission or other compensation or valuable consideration, pursuant to a brokerage agreement.
Sec. 3 "Property manager" means a person engaged in property management who, as an employee or independent contractor, is associated with a licensed real estate broker, whether or not for compensation.
Sec. 4 1. A person who is licensed pursuant to this chapter as a real estate broker, real estate broker-salesman or real estate salesman may apply to the real estate division for a permit to engage in property management.
2. An applicant for a permit must:
(a) Furnish proof satisfactory to the division that he has successfully completed at least 24 classroom hours of instruction in property management; and
(b) Comply with all other requirements established by the commission for the issuance of a permit.
3. A permit expires, and may be renewed, at the same time as the license of the holder of the permit.
4. An applicant for the renewal of a permit must:
(a) Furnish proof satisfactory to the division that he has successfully completed at least 3 of the hours of the continuing education required for the renewal of his license pursuant to NRS 645.575 in an approved educational course, seminar or conference concerning property management; and
(b) Comply with all other requirements established by the commission for the renewal of a permit.
5. The commission may adopt such regulations as it determines are necessary to carry out the provisions of this section. The regulations may, without limitation:
(a) Establish additional requirements for the issuance or renewal of a permit.
(b) Establish a fee for the issuance and renewal of a permit.
(c) Set forth standards of education for the approval of a course of instruction to qualify a person for a permit pursuant to this section.
Sec. 5 1. To engage in the business of property management in this state:
(a) A partnership shall designate one of its members;
(b) A corporation shall designate one of its officers or employees;
(c) A limited-liability company shall designate its manager; and
(d) A broker who conducts business as a sole proprietor shall designate a person who is licensed under the broker,
to submit an application for a permit to engage in property management. The partnership, corporation, limited-liability company or sole proprietor shall not engage in the business of property management unless the person so designated has been issued a permit to engage in property management by the real estate division.
2. If the person designated to apply for a permit pursuant to subsection 1 meets the qualifications for a permit set forth in section 4 of this act, the division shall issue to that person a permit to engage in property management on behalf of the partnership, corporation, limited-liability company or sole proprietor, and thereupon he may perform all the acts of a property manager contemplated by this chapter.
3. A person to whom a permit has been issued pursuant to this section may act as a property manager pursuant to the permit only on behalf of the partnership, corporation, limited-liability company or sole proprietor, and not on his own behalf. If that person ceases to be connected or associated with the partnership, corporation, limited-liability company or sole proprietor, the partnership, corporation, limited-liability company or sole proprietor shall designate another person who meets the qualifications for a permit set forth in section 4 of this act to hold the permit on behalf of the partnership, corporation, limited-liability company or sole proprietor.
4. Any member, officer or employee of a partnership, corporation or limited-liability company, other than the person designated as the property manager pursuant to subsection 1, who wishes to engage in the business of property management must apply in his own name individually for a separate permit to engage in property management. Pursuant to such a permit, the member, officer or employee of a partnership, corporation or limited-liability company may act as a property manager only as an officer or agent of the partnership, corporation or limited-liability company, and not on his own behalf.
Sec. 6 1. A real estate broker who holds a permit to engage in property management shall not act as a property manager unless the broker has first obtained a written brokerage agreement signed by the broker and the client for whom the broker will manage the property.
2. A brokerage agreement for property management must include, without limitation:
(a) The term of the agreement;
(b) A provision for the retention and disposition of deposits of the tenants of the property during the term of the agreement;
(c) The fee or compensation to be paid to the broker; and
(d) The extent to which the broker may act as the agent of the client.
Sec. 7 NRS 645.0005 is hereby amended to read as follows:
645.0005 As used in this chapter, unless the context otherwise requires, the words and terms defined in NRS 645.001 to 645.040, inclusive, and sections 2 and 3 of this act, have the meanings ascribed to them in those sections.
Sec. 8 NRS 645.030 is hereby amended to read as follows:
645.030 1. "Real estate broker" means a person who, for another and for compensation or with the intention or expectation of receiving compensation:
(a) Sells, exchanges, options, purchases, rents, or leases, or negotiates or offers, attempts or agrees to negotiate the sale, exchange, option, purchase, rental, or lease of, or lists or solicits prospective purchasers, lessees or renters of, [or collects or offers, attempts or agrees to collect rental for the use of,] any business or real estate or the improvements thereon or any modular homes or other housing offered or conveyed with any interest in real estate; [or]
(b) Engages in or offers to engage in the business of claiming, demanding, charging, receiving, collecting or contracting for the collection of an advance fee in connection with any employment undertaken to promote the sale or lease of business opportunities or real estate by advance fee listing advertising or other offerings to sell, lease, exchange or rent property [.] ; or
(c) Engages in or offers to engage in the business of property management.
2. Any person who, for another and for compensation, aids, assists, solicits or negotiates the procurement, sale, purchase, rental or lease of public lands is a real estate broker within the meaning of this chapter.
Sec. 9 NRS 645.230 is hereby amended to read as follows:
645.230 1. It is unlawful for any person, limited-liability company, partnership, association or corporation to engage in the business of, act in the capacity of, advertise or assume to act as, a [real] :
(a) Real estate broker, real estate broker-salesman or real estate salesman within the State of Nevada without first obtaining the appropriate license from the real estate division as provided for in this chapter [.] ; or
(b) Property manager within the State of Nevada without first obtaining from the real estate division as provided for in this chapter a license as a real estate broker, real estate broker-salesman or real estate salesman and a permit to engage in property management.
2. The real estate division may prefer a complaint for a violation of this section before any court of competent jurisdiction [and the real estate division] and may assist in presenting the law or facts upon any trial for a violation of this section.
3. The district attorney of each county shall prosecute all violations of this section in their respective counties in which violations occur, unless prosecuted by the attorney general. Upon the request of the administrator, the attorney general shall prosecute any violation of this section in lieu of the district attorney.
Sec. 10 NRS 645.240 is hereby amended to read as follows:
645.240 1. The provisions of this chapter do not apply to, and the terms "real estate broker" and "real estate salesman" do not include, any [person] :
(a) Person who, as owner or lessor, performs any of the acts mentioned in NRS 645.030, 645.040, 645.230 and 645.260, with reference to property owned or leased by them, or to the regular employees thereof with respect to the property so owned or leased, where those acts are performed in the regular course of or as an incident to the management of such property and the investment therein. For the purposes of this [subsection,] paragraph, "management" means activities which tend to preserve or increase the income from the property by preserving the physical desirability of the property or maintaining high standards of service to tenants. The term does not include sales activities.
(b) Employee of a real estate broker while engaged in the collection of rent for or on behalf of the broker.
(c) Person while performing the duties of a property manager for a property, if the person maintains an office on the property and does not engage in property management with regard to any other property.
(d) Person while performing the duties of a property manager for a common-interest community governed by the provisions of chapter 116 of NRS, a condominium project governed by the provisions of chapter 117 of NRS, a time share governed by the provisions of chapter 119A of NRS, or a planned unit development governed by the provisions of chapter 278A of NRS, if the person is a member in good standing of, and, if applicable, holds a current certificate, registration or other similar form of recognition from, a nationally recognized organization or association for persons managing such properties that has been approved by the real estate division by regulation.
2. Except as otherwise provided in NRS 645.606 to 645.6085, inclusive, the provisions of this chapter do not apply to:
(a) Any bank, thrift company, credit union, trust company, savings and loan association or any mortgage or farm loan association licensed under the laws of this state or of the United States, with reference to property it has acquired for development, for the convenient transaction of its business, or as a result of foreclosure of property encumbered in good faith as security for a loan or other obligation it has originated or holds.
(b) A corporation which, through its regular officers who receive no special compensation for it, performs any of those acts with reference to the property of the corporation.
(c) The services rendered by an attorney at law in the performance of his duties as an attorney at law.
(d) A receiver, trustee in bankruptcy, administrator or executor, or any other person doing any of the acts specified in NRS 645.030 under the jurisdiction of any court.
(e) A trustee acting under a trust agreement, deed of trust or will, or the regular salaried employees thereof.
(f) The purchase, sale or locating of mining claims or options thereon or interests therein.
(g) The State of Nevada or a political subdivision thereof.
Sec. 11 (Deleted by amendment.)
Sec. 12 NRS 645.310 is hereby amended to read as follows:
645.310 1. All deposits accepted by every real estate broker or person registered as an owner-developer pursuant to this chapter, which are retained by him pending consummation or termination of the transaction involved, must be accounted for in the full amount at the time of the consummation or termination.
2. Every real estate salesman or broker-salesman who receives any money on behalf of a broker or owner-developer shall pay over the money promptly to the real estate broker or owner-developer.
3. A real estate broker shall not commingle the money or other property of his client with his own.
4. If a real estate broker receives money, as a broker, which belongs to others, he shall promptly deposit the money in a separate checking account located in a bank in this state which must be designated a trust account. All down payments, earnest money deposits, rents, or other money which he receives, on behalf of his client or any other person, must be deposited in the account unless all persons who have any interest in the money have agreed otherwise in writing. A real estate broker may pay to any seller or the seller's authorized agent the whole or any portion of such special deposit. The real estate broker is personally responsible and liable for such deposit at all times. A real estate broker shall not permit any advance payment of money belonging to others to be deposited in the real estate broker's business or personal account or to be commingled with any money he may have on deposit.
5. Every real estate broker required to maintain a separate trust account shall keep records of all money deposited therein. The records must clearly indicate the date and from whom he received money, 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. The real estate broker shall balance each separate trust account at least monthly. The real estate broker shall provide to the division, on a form provided by the division, an annual accounting which shows an annual reconciliation of each separate trust account. All such records and money are subject to inspection and audit by the division and its authorized representatives. All such separate trust accounts must designate the real estate broker as trustee and provide for withdrawal of money without previous notice.
6. Each real estate broker shall notify the division of the names of the banks in which he maintains trust accounts and specify the names of the accounts on forms provided by the division.
7. If a real estate broker who has money in a trust account dies or becomes mentally disabled, the division, upon application to the district court, may have a trustee appointed to administer and distribute the money in the account with the approval of the court. The trustee may serve without posting a bond.
Sec. 13 NRS 645.324 is hereby amended to read as follows:
645.3241. The commission may require such forms of brokerage agreements which include provisions for the payment of advance fees to be used, and such reports and forms of accounting to be kept, made and submitted, and may adopt such rules and regulations as the commission may determine to be necessary to carry out the purposes and intent of NRS 645.322.
2. A licensee shall maintain, for review and audit by the division, each brokerage agreement that is entered into by the licensee.
3. Any violation of the rules, regulations, orders or requirements of the commission constitutes grounds for disciplinary action against a licensee.
Sec. 14 NRS 645.630 is hereby amended to read as follows:
645.630 The commission may require a licensee or owner-developer to pay an administrative fine of not more than $5,000 for each violation he commits or suspend, revoke or place conditions upon his license or registration, or do both, at any time if the licensee or owner-developer has, by false or fraudulent representation, obtained a license or registration, or the licensee or owner-developer, whether or not acting as such, is found guilty of:
1. Making any material misrepresentation.
2. Making any false promises of a character likely to influence, persuade or induce.
3. Accepting a commission or valuable consideration as a real estate broker-salesman or salesman for the performance of any of the acts specified in this chapter or chapter 119 or 119A of NRS from any person except the licensed real estate broker with whom he is associated or the owner-developer by whom he is employed.
4. Representing or attempting to represent a real estate broker other than the broker with whom he is associated, without the express knowledge and consent of the broker with whom he is associated.
5. Failing to maintain, for review and audit by the division, each brokerage agreement governed by the provisions of this chapter and entered into by the licensee.
6. Failing, within a reasonable time, to account for or to remit any money which comes into his possession and which belongs to others.
[6.] 7. If he is required to maintain a trust account:
(a) Failing to balance the trust account at least monthly; and
(b) Failing to submit to the division an annual accounting of the trust account as required in NRS 645.310.
8. Commingling the money or other property of his clients with his own or converting the money of others to his own use.
[7.] 9. In the case of a broker-salesman or salesman, failing to place in the custody of his licensed broker or owner-developer, as soon as possible, any deposit or other money or consideration entrusted to him by any person dealing with him as the representative of his licensed broker.
[8.] 10. Accepting other than cash as earnest money unless that fact is communicated to the owner before his acceptance of the offer to purchase and that fact is shown in the receipt for the earnest money.
[9.] 11. Upon acceptance of an agreement, in the case of a broker, failing to deposit any check or cash received as earnest money before the end of the next banking day unless otherwise provided in the purchase agreement.
[10.] 12. Inducing any party to a brokerage agreement, sale or lease to break it in order to substitute a new brokerage agreement, agreement of sale or lease with the same or another party if the inducement to make the substitution is offered to secure personal gain to the licensee or owner-developer.
If discipline is imposed pursuant to this section, the costs of the proceeding, including investigative costs and attorney's fees, may be recovered by the board.
Sec. 15 NRS 645.633 is hereby amended to read as follows:
645.633 The commission may take action pursuant to NRS 645.630 against any person subject to that section who is guilty of:
1. Willfully using any trade name, service mark or insigne of membership in any real estate organization of which the licensee is not a member, without the legal right to do so.
2. Violating any order of the commission, any agreement with the division, any of the provisions of this chapter, chapter 116, 119, 119A, 119B, 645A or 645C of NRS or [of] any regulation adopted thereunder.
3. Paying a commission, compensation or a finder's fee to any person for performing the services of a broker, broker-salesman or salesman who has not first secured his license pursuant to this chapter. This subsection does not apply to payments to a broker who is licensed in his state of residence.
4. A felony, or has entered a plea of guilty, guilty but mentally ill or nolo contendere to a charge of felony or any crime involving fraud, deceit, misrepresentation or moral turpitude.
5. Guaranteeing, or having authorized or permitted any person to guarantee, future profits which may result from the resale of real property.
6. Failure to include a fixed date of expiration in any written brokerage agreement or to leave a copy of the brokerage agreement with the client.
7. Accepting, giving or charging any undisclosed commission, rebate or direct profit on expenditures made for a client.
8. Gross negligence or incompetence in performing any act for which he is required to hold a license pursuant to this chapter, chapter 119, 119A or 119B of NRS.
9. Any other conduct which constitutes deceitful, fraudulent or dishonest dealing.
10. Any conduct which took place before his being licensed, which was in fact unknown to the division and which would have been grounds for denial of a license had the division been aware of the conduct.
11. Knowingly permitting any person whose license has been revoked or suspended to act as a real estate broker, broker-salesman or salesman, with or on behalf of the licensee.
Action may also be taken pursuant to NRS 645.630 against a person subject to that section for the suspension or revocation of a real estate broker's, broker-salesman's or salesman's license issued to him by any other jurisdiction.
Sec. 16 1. Notwithstanding the provisions of sections 1 to 11, inclusive, of this act to the contrary, a person licensed in this state on July 1, 1998, as a real estate broker, real estate broker-salesman or real estate salesman may engage in property management in this state until July 1, 1999, without a permit issued pursuant to section 4 of this act by the real estate division of the department of business and industry.
2. Such a person shall be deemed to have satisfied the educational requirements of section 4 of this act for the initial issuance of a permit to engage in property management if, on or before July 1, 1999, he passes a test on the principles of property management established or adopted by the real estate commission and administered by the real estate division of the department of business and industry.
3. For the purposes of subsection 2, the real estate commission shall, not later than July 1, 1998, establish or adopt a test on the principles of property management.
Sec. 17 The amendatory provisions of this act do not apply to offenses that are committed before July 1, 1998.
Sec. 18 The provisions of subsection 1 of NRS 354.599 do not apply to any additional expenses of a local government that are related to the provisions of this act.
Sec. 19 1. This section and sections 12 to 18, inclusive, of this act become effective on October 1, 1997.
2. Sections 4 and 10 of this act become effective on October 1, 1997, for the purpose of adopting regulations and on July 1, 1998, for all other purposes.
3. Sections 1, 2, 3 and 5 to 9, inclusive, of this act become effective on July 1, 1998.