Second Substitute H.B. 346

Representative Gage Froerer proposes the following substitute bill:

1 DIVISION OF REAL ESTATE RELATED
2 AMENDMENTS
3 2008 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Gage Froerer
6 Senate Sponsor: Sheldon L. Killpack
7
8 LONG TITLE
9 General Description:
10 This bill modifies provisions related to areas regulated by the Division of Real Estate.
11 Highlighted Provisions:
12 This bill:
13 . addresses rulemaking by the Real Estate Commission;
14 . addresses fines that may be imposed;
15 . addresses disciplinary actions that may be imposed under provisions related to real
16 estate brokers and agents, the Real Estate Appraiser Licensing and Certification Act,
17 and the Utah Residential Mortgage Practices Act;
18 . provides for registration of trainees under the Real Estate Appraiser Licensing and
19 Certification Act;
20 . addresses terminology for experts under the Real Estate Appraiser Licensing and
21 Certification Act;
22 . modifies criminal penalties under the Real Estate Appraiser Licensing and
23 Certification Act and the Utah Residential Mortgage Practices Act;
24 . addresses the hours required of prelicensing education for mortgage licensing
25 including providing for rulemaking;

26 . removes grandfathering language related to principal lending manager;
27 . provides for deposit of certain fees into the Residential Mortgage Loan Education,
28 Research, and Recovery Fund; and
29 . makes technical and conforming amendments.
30 Monies Appropriated in this Bill:
31 None
32 Other Special Clauses:
33 None
34 Utah Code Sections Affected:
35 AMENDS:
36 61-2-5.5, as last amended by Laws of Utah 2007, Chapter 325
37 61-2-13, as last amended by Laws of Utah 1991, Chapter 165
38 61-2-20, as last amended by Laws of Utah 2007, Chapter 325
39 61-2-21, as last amended by Laws of Utah 2007, Chapter 325
40 61-2b-2, as last amended by Laws of Utah 2005, Chapter 199
41 61-2b-6, as last amended by Laws of Utah 2005, Chapter 199
42 61-2b-8, as last amended by Laws of Utah 2005, Chapter 199
43 61-2b-18, as last amended by Laws of Utah 2005, Chapter 199
44 61-2b-21, as last amended by Laws of Utah 2005, Chapter 199
45 61-2b-22, as last amended by Laws of Utah 2005, Chapter 199
46 61-2b-24, as last amended by Laws of Utah 2005, Chapter 199
47 61-2b-25, as last amended by Laws of Utah 2007, Chapter 306
48 61-2b-26, as last amended by Laws of Utah 2005, Chapter 199
49 61-2b-27, as last amended by Laws of Utah 2005, Chapter 199
50 61-2b-28, as last amended by Laws of Utah 2007, Chapter 325
51 61-2b-29, as last amended by Laws of Utah 2007, Chapter 325
52 61-2b-30.5, as last amended by Laws of Utah 2005, Chapter 199
53 61-2b-31, as last amended by Laws of Utah 2007, Chapter 325
54 61-2b-33, as last amended by Laws of Utah 2005, Chapter 199
55 61-2c-202, as last amended by Laws of Utah 2007, Chapter 325
56 61-2c-206, as last amended by Laws of Utah 2007, Chapter 325

57 61-2c-403, as last amended by Laws of Utah 2007, Chapter 325
58 61-2c-502, as last amended by Laws of Utah 2007, Chapter 325
59 ENACTS:
60 61-2c-405, Utah Code Annotated 1953
61
62 Be it enacted by the Legislature of the state of Utah:
63 Section 1. Section 61-2-5.5 is amended to read:
64 61-2-5.5. Real Estate Commission.
65 (1) There is created within the division a Real Estate Commission. The commission
66 shall:
67 (a) make rules for the administration of this chapter that are not inconsistent with this
68 chapter, including:
69 (i) licensing of:
70 (A) principal brokers;
71 (B) associate brokers;
72 (C) sales agents;
73 (D) real estate companies; and
74 (E) branch offices;
75 (ii) prelicensing and postlicensing education curricula;
76 (iii) examination procedures;
77 (iv) the certification and conduct of:
78 (A) real estate schools;
79 (B) course providers; and
80 (C) instructors;
81 (v) proper handling of funds received by real estate licensees;
82 (vi) brokerage office procedures and recordkeeping requirements;
83 (vii) property management;
84 (viii) standards of conduct for real estate licensees; [and]
85 (ix) rules made under Section 61-2-26 regarding an undivided fractionalized long-term
86 estate; and
87 (x) if the commission determines necessary, rules as provided in Subsection 61-2-20 (3)

88 regarding legal forms;
89 (b) establish, with the concurrence of the division, all fees as provided in this chapter
90 and Title 61, Chapter 2a, Real Estate Recovery Fund Act;
91 (c) conduct all administrative hearings not delegated by the commission to an
92 administrative law judge or the division relating to the:
93 (i) licensing of any applicant;
94 (ii) conduct of any licensee;
95 (iii) the certification or conduct of any real estate school, course provider, or instructor
96 regulated under this chapter; or
97 (iv) violation of this chapter by any person;
98 (d) with the concurrence of the director, impose sanctions as provided in Section
99 61-2-12 ;
100 (e) advise the director on the administration and enforcement of any matters affecting
101 the division and the real estate sales and property management industries;
102 (f) advise the director on matters affecting the division budget;
103 (g) advise and assist the director in conducting real estate seminars; and
104 (h) perform other duties as provided by:
105 (i) this chapter; and
106 (ii) Title 61, Chapter 2a, Real Estate Recovery Fund Act.
107 (2) (a) The commission shall be comprised of five members appointed by the governor
108 and approved by the Senate.
109 (b) Four of the commission members shall:
110 (i) have at least five years' experience in the real estate business; and
111 (ii) hold an active principal broker, associate broker, or sales agent license.
112 (c) One commission member shall be a member of the general public.
113 (d) No more than one commission member described in Subsection (2)(b) shall at the
114 time of appointment reside in any given county in the state.
115 (e) At least one commission member described in Subsection (2)(b) shall at the time of
116 an appointment reside in a county that is not a county of the first or second class.
117 (3) (a) Except as required by Subsection (3)(b), as terms of current commission
118 members expire, the governor shall appoint each new member or reappointed member to a

119 four-year term ending June 30.
120 (b) Notwithstanding the requirements of Subsection (3)(a), the governor shall, at the
121 time of appointment or reappointment, adjust the length of terms to ensure that the terms of
122 commission members are staggered so that approximately half of the commission is appointed
123 every two years.
124 (c) Upon the expiration of the term of a member of the commission, the member of the
125 commission shall continue to hold office until a successor is appointed and qualified.
126 (d) A commission member may not serve more than two consecutive terms.
127 (e) Members of the commission shall annually select one member to serve as chair.
128 (4) When a vacancy occurs in the membership for any reason, the replacement shall be
129 appointed for the unexpired term.
130 (5) (a) A member may not receive compensation or benefits for the member's services,
131 but may receive per diem and expenses incurred in the performance of the member's official
132 duties at the rates established by the Division of Finance under Sections 63A-3-106 and
133 63A-3-107 .
134 (b) A member may decline to receive per diem and expenses for the member's service.
135 (6) (a) The commission shall meet at least monthly.
136 (b) The director may call additional meetings:
137 (i) at the director's discretion;
138 (ii) upon the request of the chair; or
139 (iii) upon the written request of three or more commission members.
140 (7) Three members of the commission constitute a quorum for the transaction of
141 business.
142 Section 2. Section 61-2-13 is amended to read:
143 61-2-13. Grounds for revocation of principal broker's license -- Automatic
144 inactivation of affiliated associate brokers and sales agents licenses.
145 (1) (a) [Any] An unlawful act or [any] violation of this chapter committed by [any real
146 estate sales agent or associate broker employed or engaged as an independent contractor by or
147 on behalf of a licensed principal broker or committed by any employee, officer, or member of a
148 licensed principal broker] a person listed in Subsection (1)(b) is cause for:
149 (i) the revocation, suspension, or probation of [the] a principal broker's license[,]; or

150 [for]
151 (ii) the imposition of a fine against the principal broker in an amount not to exceed
152 [$500] $2,500 per violation.
153 (b) Subsection (1)(a) applies to an act or violation by any of the following:
154 (i) a real estate sales agent or associate broker employed by a licensed principal broker;
155 (ii) a real estate sales agent or associate broker engaged as an independent contractor
156 by or on behalf of a licensed principal broker; or
157 (iii) an employee, officer, or member of a licensed principal broker.
158 (2) (a) The revocation or suspension of a principal broker license automatically
159 inactivates [every] an associate broker or sales agent license granted to [those persons] a person
160 by reason of [their] that person's affiliation with the principal broker whose license [was] is
161 revoked or suspended, pending a change of broker affiliation.
162 (b) A principal broker shall, [prior to] before the effective date of [the] a suspension or
163 revocation of [his] the principal broker's license, notify in writing every licensee affiliated with
164 [him] the principal broker of the revocation or suspension of [his] the principal broker license.
165 Section 3. Section 61-2-20 is amended to read:
166 61-2-20. Rights and privileges of real estate licensees to fill out forms or
167 documents.
168 [A] (1) Except as provided in Subsection (2), a real estate licensee may fill out only
169 those legal forms approved by the commission and the attorney general, and those forms
170 provided by statute[, with the following exceptions:].
171 [(1)] (2) (a) (i) A principal broker may fill out any documents associated with the
172 closing of a real estate transaction.
173 [(b)] (ii) A branch broker or associate broker may fill out any documents associated
174 with the closing of a real estate transaction if designated to fill out the documents by the
175 principal broker with whom the branch broker or associate broker is affiliated.
176 [(2)] (b) A real estate licensee may fill out real estate forms prepared by legal counsel
177 of the buyer, seller, lessor, or lessee.
178 [(3)] (c) If the commission and the attorney general have not approved a specific form
179 for the transaction, a principal broker, associate broker, or sales agent may fill out real estate
180 forms prepared by any legal counsel, including legal counsel retained by the brokerage to

181 develop these forms.
182 (3) The commission may by rule, made in accordance with Title 63, Chapter 46a, Utah
183 Administrative Rulemaking Act, provide a process for the approval of a legal form under this
184 section by the commission and the attorney general:
185 Section 4. Section 61-2-21 is amended to read:
186 61-2-21. Remedies and action for violations.
187 (1) (a) The director shall issue and serve upon a person an order directing that person to
188 cease and desist from an act if:
189 (i) the director has reason to believe that the person has been engaging, is about to
190 engage, or is engaging in the act constituting a violation of this chapter; and
191 (ii) it appears to the director that it would be in the public interest to stop the act.
192 (b) Within ten days after receiving the order, the person upon whom the order is served
193 may request [an adjudicative proceeding] a hearing.
194 (c) Pending [the] a hearing requested under Subsection (1)(b), [any] a cease and desist
195 order shall remain in effect.
196 (d) If a request for a hearing is made, the division shall follow the procedures and
197 requirements of Title 63, Chapter 46b, Administrative Procedures Act.
198 (2) (a) After [the] a hearing requested under Subsection (1), if the commission and the
199 director agree that [the] an act of the person violates this chapter, the director:
200 (i) shall issue an order making the order issued under Subsection (1) permanent; and
201 (ii) may impose [a civil penalty not to exceed the greater of:] another disciplinary
202 action under Section 61-2-12 .
203 [(A) $2,500 for each violation; or]
204 [(B) the amount of any gain or economic benefit derived from each violation.]
205 (b) The director shall file suit in the name of the Department of Commerce and the
206 Division of Real Estate, in the district court in the county in which an act described in
207 Subsection (1) [occurred] occurs or where the person resides or carries on business, to enjoin
208 and restrain the person from violating this chapter if:
209 (i) (A) [no] a hearing is not requested under Subsection (1); and
210 (B) the person fails to cease the act described in Subsection (1); or
211 (ii) after discontinuing the act described in Subsection (1), the person again

212 commences the act.
213 (c) [The] A district [courts] court of this state [shall have] has jurisdiction of an action
214 brought under this section.
215 (d) Upon a proper showing in an action brought under this section [related to an
216 undivided fractionalized long-term estate], the court may:
217 (i) issue a permanent or temporary, prohibitory or mandatory injunction;
218 (ii) issue a restraining order or writ of mandamus;
219 (iii) enter a declaratory judgment;
220 (iv) appoint a receiver or conservator for the defendant or the defendant's assets;
221 (v) order disgorgement;
222 (vi) order rescission;
223 (vii) impose a civil penalty not to exceed the greater of:
224 (A) $2,500 for each violation; or
225 (B) the amount of any gain or economic benefit derived from [each] a violation; and
226 (viii) enter any other relief the court considers just.
227 (e) The court may not require the division to post a bond in an action brought under
228 this Subsection (2).
229 (3) [The remedies and action] A remedy or action provided in this section [may] does
230 not limit, interfere with, or prevent the prosecution of[, any other remedies or actions] another
231 remedy or action, including a criminal [proceedings] proceeding.
232 Section 5. Section 61-2b-2 is amended to read:
233 61-2b-2. Definitions.
234 (1) As used in this chapter:
235 (a) (i) "Appraisal" means an unbiased analysis, opinion, or conclusion relating to the
236 nature, quality, value, or utility of a specified [interests] interest in, or [aspects] aspect of,
237 identified real estate or identified real property.
238 (ii) An appraisal [shall be] is classified by the nature of the assignment as a valuation
239 appraisal, an analysis assignment, or a review assignment in accordance with the following
240 definitions:
241 (A) "Valuation appraisal" means an unbiased analysis, opinion, or conclusion that
242 estimates the value of an identified parcel of real estate or identified real property at a particular

243 point in time.
244 (B) "Analysis assignment" means an unbiased analysis, opinion, or conclusion that
245 relates to the nature, quality, or utility of identified real estate or identified real property.
246 (C) "Review assignment" means an unbiased analysis, opinion, or conclusion that
247 forms an opinion as to the adequacy and appropriateness of a valuation appraisal or an analysis
248 assignment.
249 (b) "Appraisal Foundation" means the Appraisal Foundation that was incorporated as
250 an Illinois not-for-profit corporation on November 30, 1987.
251 (c) (i) "Appraisal report" means [any] a communication, written or oral, of an
252 appraisal.
253 (ii) An appraisal report [shall be] is classified by the nature of the assignment as a
254 valuation report, analysis report, or review report in accordance with the definitions provided in
255 Subsection (1)(a)(ii).
256 (iii) The testimony of a person relating to the person's analyses, conclusions, or
257 opinions concerning identified real estate or identified real property is considered to be an oral
258 appraisal report.
259 (d) "Board" means the Real Estate Appraiser Licensing and Certification Board that is
260 established in Section 61-2b-7 .
261 (e) "Certified appraisal report" means a written or oral appraisal report that is certified
262 by a state-certified general appraiser or state-certified residential appraiser.
263 (f) (i) (A) "Consultation service" means an engagement to provide a real estate
264 valuation service analysis, opinion, conclusion, or other service that does not fall within the
265 definition of appraisal.
266 (B) "Consultation service" does not mean a valuation appraisal, analysis assignment, or
267 review assignment.
268 (ii) Regardless of the intention of the client or employer, if a person prepares an
269 unbiased analysis, opinion, or conclusion, the analysis, opinion, or conclusion is considered to
270 be an appraisal and not a consultation service.
271 (g) "Contingent fee" means a fee or other form of compensation, payment of which is
272 dependent on or conditioned by:
273 (i) the reporting of a predetermined analysis, opinion, or conclusion by the person

274 performing the analysis, opinion, or conclusion; or
275 (ii) achieving a result specified by the person requesting the analysis, opinion, or
276 conclusion.
277 (h) "Division" means the Division of Real Estate of the Department of Commerce.
278 (i) "Federally related transaction" means [any] a real estate related transaction that is
279 required by federal law or by federal regulation to be supported by an appraisal prepared by:
280 (i) a state-licensed appraiser; or
281 (ii) a state-certified appraiser.
282 (j) "Real estate" means an identified parcel or tract of land including improvements if
283 any.
284 (k) "Real estate appraisal activity" means the act or process of making an appraisal of
285 real estate or real property and preparing an appraisal report.
286 (l) "Real estate related transaction" means:
287 (i) the sale, lease, purchase, investment in, or exchange of real property or an interest in
288 real property, or the financing of such a transaction;
289 (ii) the refinancing of real property or an interest in real property; or
290 (iii) the use of real property or an interest in real property as security for a loan or
291 investment, including mortgage-backed securities.
292 (m) "Real property" means one or more defined interests, benefits, or rights inherent in
293 the ownership of real estate.
294 (n) "State-certified general appraiser" means a person who holds a current, valid
295 certification as a state-certified general appraiser issued under this chapter.
296 (o) "State-certified residential appraiser" means a person who holds a current, valid
297 certification as a state-certified residential real estate appraiser issued under this chapter.
298 (p) "State-licensed appraiser" means a person who holds a current, valid license as a
299 state-licensed appraiser issued under this chapter.
300 [(q) "State-registered appraiser" means a person who before May 3, 1999, was
301 registered as an appraiser under this chapter.]
302 [(r)] (q) "Trainee" means an individual who:
303 (i) does not hold an appraiser license or appraiser certification issued under this
304 chapter; [and]

305 (ii) works under the direct supervision of a [state-licensed appraiser or] state-certified
306 appraiser to earn experience for licensure[.]; and
307 (iii) is registered as a trainee under this chapter.
308 [(s)] (r) "Unbiased analysis, opinion, or conclusion" means an analysis, opinion, or
309 conclusion relating to the nature, quality, value, or utility of identified real estate or identified
310 real property that is prepared by a person who is employed or retained to act, or would be
311 perceived by third parties or the public as acting, as a disinterested third party in rendering the
312 analysis, opinion, or conclusion.
313 (2) (a) If a term not defined in this section is defined by rule, the term shall have the
314 meaning established by the division by rule made in accordance with Title 63, Chapter 46a,
315 Utah Administrative Rulemaking Act.
316 (b) If a term not defined in this section is not defined by rule, the term shall have the
317 meaning commonly accepted in the business community.
318 Section 6. Section 61-2b-6 is amended to read:
319 61-2b-6. Duties and powers of division.
320 (1) The division [shall have] has the powers and duties listed in this Subsection (1).
321 (a) The division shall:
322 (i) receive [applications] an application for licensing [and], certification, or
323 registration;
324 (ii) establish appropriate administrative procedures for the processing of [applications]
325 an application for licensure [or], certification, or registration;
326 (iii) issue [licenses and certifications to qualified applicants] a license or certification
327 to a qualified applicant pursuant to this chapter; and
328 [(iv) maintain a registry of the names and addresses of individuals who are currently
329 licensed or certified as appraisers under this chapter.]
330 (iv) register an individual who applies for registration as a trainee under this chapter.
331 (b) (i) The division shall require [a trainee to notify the division that the trainee is
332 acting] an individual to register as a trainee with the division before the individual acts in the
333 capacity of a trainee earning experience for licensure.
334 (ii) The board shall adopt rules in accordance with Title 63, Chapter 46a, Utah
335 Administrative Rulemaking Act, for the trainee [notification] registration required by this

336 Subsection (1)(b).
337 (c) The division shall hold public hearings under the direction of the board.
338 (d) The division may:
339 (i) solicit bids and enter into contracts with one or more educational testing services or
340 organizations for the preparation of a bank of questions and answers approved by the board for
341 licensing and certification examinations; and
342 (ii) administer or contract for the administration of licensing and certification
343 examinations as may be required to carry out the division's responsibilities under this chapter.
344 (e) The division shall provide administrative assistance to the board by providing to the
345 board the facilities, equipment, supplies, and personnel that are required to enable the board to
346 carry out the board's responsibilities under this chapter.
347 (f) The division shall assist the board in upgrading and improving the quality of the
348 education and examinations required under this chapter.
349 (g) The division shall assist the board in improving the quality of the continuing
350 education available to [persons] a person licensed and certified under this chapter.
351 (h) The division shall assist the board with respect to the proper interpretation or
352 explanation of the Uniform Standards of Professional Appraisal Practice as required by Section
353 61-2b-27 when an interpretation or explanation becomes necessary in the enforcement of this
354 chapter.
355 (i) The division shall establish fees in accordance with Section 63-38-3.2 :
356 (i) for processing:
357 (A) a trainee [notifications] registration;
358 (B) [applications] an application for licensing and certification; and
359 (C) [registration of expert witnesses] approval of an expert witness; and
360 (ii) for all other functions required or permitted by this chapter.
361 (j) The division may:
362 (i) investigate [complaints] a complaint against:
363 (A) [trainees] a trainee; [or]
364 (B) [persons] a person licensed or certified under this chapter; or
365 (C) a person required to be licensed, certified, or registered under this chapter;
366 (ii) subpoena [witnesses and the production of books, documents, records, and other

367 papers;] a witness;
368 (iii) subpoena the production of a book, document, record, or other paper;
369 [(iii)] (iv) administer [oaths] an oath; and
370 [(iv)] (v) take testimony and receive evidence concerning [all matters] a matter within
371 the division's jurisdiction.
372 (k) The division may:
373 (i) promote research and conduct studies relating to the profession of real estate
374 appraising; and
375 (ii) sponsor real estate appraisal educational activities.
376 (l) The division shall adopt, with the concurrence of the board, rules for the
377 administration of this chapter pursuant to Title 63, Chapter 46a, Utah Administrative
378 Rulemaking Act, that are not inconsistent with this chapter or the constitution and laws of this
379 state or of the United States.
380 (m) The division shall employ an appropriate staff to investigate allegations that
381 [persons] a person required to be licensed [or], certified, or registered under this chapter
382 [failed] fails to comply with this chapter.
383 &nbs