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Second Substitute S.B. 64

Representative Gordon E. Snow proposes the following substitute bill:





Sponsor: L. Alma Mansell

             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Utah Uniform Securities Act and Real Estate provisions to
             10      address certain real estate transactions.
             11      Highlighted Provisions:
             12          This bill:
             13          .    exempts certain real estate transactions from the definition of securities;
             14          .    exempts real estate brokers or agents from the definition of agent, broker-dealer,
             15      investment advisor, or investor adviser representative when the real estate broker or
             16      agent receives compensation in connection with an offer or sale;
             17          .    clarifies that the list of excluded real property estates is not an exclusive list;
             18          .    defines terms;
             19          .    addresses the Division of Real Estate making rules:
             20              .    regarding required disclosures in the offer or sale of an undivided fractionalized
             21      long-term estate;
             22              .    imposing requirements of management agreements; and
             23              .    addressing master leases;
             24          .    addresses investigatory powers of the Division of Real Estate;
             25          .    addresses remedies and actions for violations; and

             26          .    makes technical changes.
             27      Monies Appropriated in this Bill:
             28          None
             29      Other Special Clauses:
             30          None
             31      Utah Code Sections Affected:
             32      AMENDS:
             33          61-1-13, as last amended by Chapter 81, Laws of Utah 2003
             34          61-2-2, as last amended by Chapter 264, Laws of Utah 2003
             35          61-2-5.5, as last amended by Chapters 102 and 243, Laws of Utah 1996
             36          61-2-21, as last amended by Chapter 173, Laws of Utah 1999
             37      ENACTS:
             38          61-2-11.5, Utah Code Annotated 1953
             39          61-2-26, Utah Code Annotated 1953
             41      Be it enacted by the Legislature of the state of Utah:
             42          Section 1. Section 61-1-13 is amended to read:
             43           61-1-13. Definitions.
             44          (1) As used in this chapter:
             45          [(1)] (a) "Affiliate" means a person that, directly or indirectly, through one or more
             46      intermediaries, controls or is controlled by, or is under common control with a person
             47      specified.
             48          [(2)] (b) (i) "Agent" means any individual other than a broker-dealer who represents a
             49      broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.
             50          (ii) "Agent" does not include an individual who represents:
             51          [(a)] (A) an issuer, who receives no commission or other remuneration, directly or
             52      indirectly, for effecting or attempting to effect purchases or sales of securities in this state, and
             53      who:
             54          [(i)] (I) effects transactions in securities exempted by Subsection 61-1-14 (1)(a), (b),
             55      (c), (i), or (j);
             56          [(ii)] (II) effects transactions exempted by Subsection 61-1-14 (2);

             57          [(iii)] (III) effects transactions in a covered security as described in Sections 18(b)(3)
             58      and 18(b)(4)(D) of the Securities Act of 1933; or
             59          [(iv)] (IV) effects transactions with existing employees, partners, officers, or directors
             60      of the issuer; or
             61          [(b)] (B) a broker-dealer in effecting transactions in this state limited to those
             62      transactions described in Section 15(h)(2) of the Securities Exchange Act of 1934.
             63          (iii) A partner, officer, or director of a broker-dealer or issuer, or a person occupying a
             64      similar status or performing similar functions, is an agent only if he otherwise comes within
             65      this definition.
             66          (iv) "Agent" does not include a person described in Subsection (3).
             67          [(3)] (c) (i) "Broker-dealer" means any person engaged in the business of effecting
             68      transactions in securities for the account of others or for [his] the person's own account.
             69          (ii) "Broker-dealer" does not include:
             70          [(a)] (A) an agent;
             71          [(b)] (B) an issuer;
             72          [(c)] (C) a bank, savings institution, or trust company;
             73          [(d)] (D) a person who has no place of business in this state if:
             74          [(i)] (I) the person effects transactions in this state exclusively with or through:
             75          [(A)] (Aa) the issuers of the securities involved in the transactions;
             76          [(B)] (Bb) other broker-dealers; or
             77          [(C)] (Cc) banks, savings institutions, trust companies, insurance companies,
             78      investment companies as defined in the Investment Company Act of 1940, pension or
             79      profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for
             80      themselves or as trustees; or
             81          [(ii)] (II) during any period of 12 consecutive months the person does not direct more
             82      than 15 offers to sell or buy into this state in any manner to persons other than those specified
             83      in Subsection [(3)(d)(i)] (1)(c)(ii)(D)(I), whether or not the offeror or any of the offerees is then
             84      present in this state;
             85          [(e)] (E) a general partner who organizes and effects transactions in securities of three
             86      or fewer limited partnerships, of which the person is the general partner, in any period of 12
             87      consecutive months;

             88          [(f)] (F) a person whose participation in transactions in securities is confined to those
             89      transactions made by or through a broker-dealer licensed in this state;
             90          [(g)] (G) a person who is a real estate broker licensed in this state and who effects
             91      transactions in a bond or other evidence of indebtedness secured by a real or chattel mortgage
             92      or deed of trust, or by an agreement for the sale of real estate or chattels, if the entire mortgage,
             93      deed or trust, or agreement, together with all the bonds or other evidences of indebtedness
             94      secured thereby, is offered and sold as a unit;
             95          [(h)] (H) a person effecting transactions in commodity contracts or commodity options;
             96          (I) a person described in Subsection (3); or
             97          [(i)] (J) other persons as the division, by rule or order, may designate, consistent with
             98      the public interest and protection of investors, as not within the intent of this Subsection [(3)]
             99      (1)(c).
             100          [(4)] (d) "Buy" or "purchase" means every contract for purchase of, contract to buy, or
             101      acquisition of a security or interest in a security for value.
             102          [(5)] (e) "Commodity" means, except as otherwise specified by the division by rule:
             103          [(a)] (i) any agricultural, grain, or livestock product or byproduct, except real property
             104      or any timber, agricultural, or livestock product grown or raised on real property and offered or
             105      sold by the owner or lessee of the real property;
             106          [(b)] (ii) any metal or mineral, including a precious metal, except a numismatic coin
             107      whose fair market value is at least 15% greater than the value of the metal it contains;
             108          [(c)] (iii) any gem or gemstone, whether characterized as precious, semi-precious, or
             109      otherwise;
             110          [(d)] (iv) any fuel, whether liquid, gaseous, or otherwise;
             111          [(e)] (v) any foreign currency; and
             112          [(f)] (vi) all other goods, articles, products, or items of any kind, except any work of art
             113      offered or sold by art dealers, at public auction or offered or sold through a private sale by the
             114      owner of the work.
             115          [(6)] (f) (i) "Commodity contract" means any account, agreement, or contract for the
             116      purchase or sale, primarily for speculation or investment purposes and not for use or
             117      consumption by the offeree or purchaser, of one or more commodities, whether for immediate
             118      or subsequent delivery or whether delivery is intended by the parties, and whether characterized

             119      as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures
             120      contract, installment or margin contract, leverage contract, or otherwise.
             121          [(a)] (ii) Any commodity contract offered or sold shall, in the absence of evidence to
             122      the contrary, be presumed to be offered or sold for speculation or investment purposes.
             123          [(b) (i)] (iii) (A) A commodity contract shall not include any contract or agreement
             124      which requires, and under which the purchaser receives, within 28 calendar days from the
             125      payment in good funds any portion of the purchase price, physical delivery of the total amount
             126      of each commodity to be purchased under the contract or agreement.
             127          [(ii)] (B) The purchaser is not considered to have received physical delivery of the total
             128      amount of each commodity to be purchased under the contract or agreement when the
             129      commodity or commodities are held as collateral for a loan or are subject to a lien of any
             130      person when the loan or lien arises in connection with the purchase of each commodity or
             131      commodities.
             132          [(7) (a)] (g) (i) "Commodity option" means any account, agreement, or contract giving
             133      a party to the option the right but not the obligation to purchase or sell one or more
             134      commodities or one or more commodity contracts, or both whether characterized as an option,
             135      privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty, or otherwise.
             136          [(b) It] (ii) "Commodity option" does not include an option traded on a national
             137      securities exchange registered with the United States Securities and Exchange Commission or
             138      on a board of trade designated as a contract market by the Commodity Futures Trading
             139      Commission.
             140          [(8)] (h) "Director" means the director of the Division of Securities charged with the
             141      administration and enforcement of this chapter.
             142          [(9)] (i) "Division" means the Division of Securities established by Section 61-1-18 .
             143          [(10)] (j) "Executive director" means the executive director of the Department of
             144      Commerce.
             145          [(11)] (k) "Federal covered adviser" means a person who:
             146          (i) is registered under Section 203 of the Investment Advisers Act of 1940; or
             147          (ii) is excluded from the definition of "investment adviser" under Section 202(a)(11) of
             148      the Investment Advisers Act of 1940.
             149          [(12)] (l) "Federal covered security" means any security that is a covered security under

             150      Section 18(b) of the Securities Act of 1933 or rules or regulations promulgated [thereunder]
             151      under Section 18(b) of the Securities Act of 1933.
             152          [(13)] (m) "Fraud," "deceit," and "defraud" are not limited to their common-law
             153      meanings.
             154          [(14)] (n) "Guaranteed" means guaranteed as to payment of principal or interest as to
             155      debt securities, or dividends as to equity securities.
             156          [(15) (a)] (o) (i) "Investment adviser" means any person who, for compensation,
             157      engages in the business of advising others, either directly or through publications or writings,
             158      as to the value of securities or as to the advisability of investing in, purchasing, or selling
             159      securities, or who, for compensation and as a part of a regular business, issues or promulgates
             160      analyses or reports concerning securities.
             161          [(b)] (ii) "Investment adviser" also includes financial planners and other persons who,
             162      as an integral component of other financially related services, provide the [foregoing]
             163      investment advisory services described in Subsection (1)(o)(i) to others for compensation and
             164      as part of a business or who hold themselves out as providing the [foregoing] investment
             165      advisory services described in Subsection (1)(o)(i) to others for compensation.
             166          [(c)] (iii) "Investment adviser" does not include:
             167          [(i)] (A) an investment adviser representative;
             168          [(ii)] (B) a bank, savings institution, or trust company;
             169          [(iii)] (C) a lawyer, accountant, engineer, or teacher whose performance of these
             170      services is solely incidental to the practice of his profession;
             171          [(iv)] (D) a broker-dealer or its agent whose performance of these services is solely
             172      incidental to the conduct of its business as a broker-dealer and who receives no special
             173      compensation for them;
             174          [(v)] (E) a publisher of any bona fide newspaper, news column, news letter, news
             175      magazine, or business or financial publication or service, of general, regular, and paid
             176      circulation, whether communicated in hard copy form, or by electronic means, or otherwise,
             177      that does not consist of the rendering of advice on the basis of the specific investment situation
             178      of each client;
             179          [(vi)] (F) any person who is a federal covered adviser;
             180          (G) a person described in Subsection (3); or

             181          [(vii)] (H) such other persons not within the intent of this Subsection [(15)] (1)(o) as
             182      the division may by rule or order designate.
             183          [(16)] (p) (i) "Investment adviser representative" means any partner, officer, director
             184      of, or a person occupying a similar status or performing similar functions, or other individual,
             185      except clerical or ministerial personnel, who:
             186          [(a) (i)] (A) (I) is employed by or associated with an investment adviser who is licensed
             187      or required to be licensed under this chapter; or
             188          [(ii)] (II) has a place of business located in this state and is employed by or associated
             189      with a federal covered adviser; and
             190          [(b)] (B) does any of the following:
             191          [(i)] (I) makes any recommendations or otherwise renders advice regarding securities;
             192          [(ii)] (II) manages accounts or portfolios of clients;
             193          [(iii)] (III) determines which recommendation or advice regarding securities should be
             194      given;
             195          [(iv)] (IV) solicits, offers, or negotiates for the sale of or sells investment advisory
             196      services; or
             197          [(v)] (V) supervises employees who perform any of the [foregoing] acts described in
             198      this Subsection (1)(p)(i)(B).
             199          (ii) "Investment advisor representative" does not include a person described in
             200      Subsection (3).
             201          [(17) (a)] (q) (i) "Issuer" means any person who issues or proposes to issue any security
             202      or has outstanding a security that it has issued.
             203          [(b)] (ii) With respect to a preorganization certificate or subscription, "issuer" means
             204      the promoter or the promoters of the person to be organized.
             205          [(c) With respect to:]
             206          [(i) interests in trusts, including but not limited to collateral trust certificates, voting
             207      trust certificates, and certificates of deposit for securities; or]
             208          [(ii) shares in an investment company without a board of directors, "issuer"]
             209          (iii) "Issuer" means the person or persons performing the acts and assuming duties of a
             210      depositor or manager under the provisions of the trust or other agreement or instrument under
             211      which the security is issued[.] with respect to:

             212          (A) interests in trusts, including collateral trust certificates, voting trust certificates, and
             213      certificates of deposit for securities; or
             214          (B) shares in an investment company without a board of directors.
             215          [(d)] (iv) With respect to an equipment trust certificate, a conditional sales contract, or
             216      similar securities serving the same purpose, "issuer" means the person by whom the equipment
             217      or property is to be used.
             218          [(e)] (v) With respect to interests in partnerships, general or limited, "issuer" means the
             219      partnership itself and not the general partner or partners.
             220          [(f)] (vi) With respect to certificates of interest or participation in oil, gas, or mining
             221      titles or leases or in payment out of production under the titles or leases, "issuer" means the
             222      owner of the title or lease or right of production, whether whole or fractional, who creates
             223      fractional interests therein for the purpose of sale.
             224          [(18)] (r) "Nonissuer" means not directly or indirectly for the benefit of the issuer.
             225          [(19)] (s) "Person" means an individual, a corporation, a partnership, a limited liability
             226      company, an association, a joint-stock company, a joint venture, a trust where the interests of
             227      the beneficiaries are evidenced by a security, an unincorporated organization, a government, or
             228      a political subdivision of a government.
             229          [(20)] (t) "Precious metal" means the following, whether in coin, bullion, or other
             230      form:
             231          [(a)] (i) silver;
             232          [(b)] (ii) gold;
             233          [(c)] (iii) platinum;
             234          [(d)] (iv) palladium;
             235          [(e)] (v) copper; and
             236          [(f)] (vi) such other substances as the division may specify by rule.
             237          [(21)] (u) "Promoter" means any person who, acting alone or in concert with one or
             238      more persons, takes initiative in founding or organizing the business or enterprise of a person.
             239          [(22) (a)] (v) (i) "Sale" or "sell" includes every contract for sale of, contract to sell, or
             240      disposition of, a security or interest in a security for value.
             241          [(b)] (ii) "Offer" or "offer to sell" includes every attempt or offer to dispose of, or
             242      solicitation of an offer to buy, a security or interest in a security for value.

             243          [(c)] (iii) The following are examples of the definitions in [Subsections (22)(a) and (b)]
             244      Subsection (1)(v)(i) or (ii):
             245          [(i)] (A) any security given or delivered with or as a bonus on account of any purchase
             246      of a security or any other thing, is part of the subject of the purchase, and has been offered and
             247      sold for value;
             248          [(ii)] (B) a purported gift of assessable stock is an offer or sale as is each assessment
             249      levied on the stock;
             250          [(iii)] (C) an offer or sale of a security that is convertible into, or entitles its holder to
             251      acquire or subscribe to another security of the same or another issuer is an offer or sale of that
             252      security, and also an offer of the other security, whether the right to convert or acquire is
             253      exercisable immediately or in the future;
             254          [(iv)] (D) any conversion or exchange of one security for another shall constitute an
             255      offer or sale of the security received in a conversion or exchange, and the offer to buy or the
             256      purchase of the security converted or exchanged;
             257          [(v)] (E) securities distributed as a dividend wherein the person receiving the dividend
             258      surrenders the right, or the alternative right, to receive a cash or property dividend is an offer or
             259      sale;
             260          [(vi)] (F) a dividend of a security of another issuer is an offer or sale; or
             261          [(vii)] (G) the issuance of a security under a merger, consolidation, reorganization,
             262      recapitalization, reclassification, or acquisition of assets shall constitute the offer or sale of the
             263      security issued as well as the offer to buy or the purchase of any security surrendered in
             264      connection therewith, unless the sole purpose of the transaction is to change the issuer's
             265      domicile.
             266          [(d)] (iv) The terms defined in Subsections [(22)(a) and (b)] (1)(v)(i) and (ii) do not
             267      include:
             268          [(i)] (A) a good faith gift;
             269          [(ii)] (B) a transfer by death;
             270          [(iii)] (C) a transfer by termination of a trust or of a beneficial interest in a trust;
             271          [(iv)] (D) a security dividend not within Subsection [(22)(c)(v) or (vi)] (1)(v)(iii)(E) or
             272      (F);
             273          [(v)] (E) a securities split or reverse split; or

             274          [(vi)] (F) any act incident to a judicially approved reorganization in which a security is
             275      issued in exchange for one or more outstanding securities, claims, or property interests, or
             276      partly in such exchange and partly for cash.
             277          [(23)] (w) "Securities Act of 1933," "Securities Exchange Act of 1934," "Public Utility
             278      Holding Company Act of 1935," and "Investment Company Act of 1940" mean the federal
             279      statutes of those names as amended before or after the effective date of this chapter.
             280          [(24) (a)] (x) (i) "Security" means any:
             281          [(i)] (A) note;
             282          [(ii)] (B) stock;
             283          [(iii)] (C) treasury stock;
             284          [(iv)] (D) bond;
             285          [(v)] (E) debenture;
             286          [(vi)] (F) evidence of indebtedness;
             287          [(vii)] (G) certificate of interest or participation in any profit-sharing agreement;
             288          [(viii)] (H) collateral-trust certificate;
             289          [(ix)] (I) preorganization certificate or subscription;
             290          [(x)] (J) transferable share;
             291          [(xi)] (K) investment contract;
             292          [(xii)] (L) burial certificate or burial contract;
             293          [(xiii)] (M) voting-trust certificate;
             294          [(xiv)] (N) certificate of deposit for a security;
             295          [(xv)] (O) certificate of interest or participation in an oil, gas, or mining title or lease or
             296      in payments out of production under such a title or lease;
             297          [(xvi)] (P) commodity contract or commodity option;
             298          [(xvii)] (Q) interest in a limited liability company;
             299          [(xviii)] (R) viatical settlement interest; or
             300          [(xix)] (S) in general, any interest or instrument commonly known as a "security," or
             301      any certificate of interest or participation in, temporary or interim certificate for, receipt for,
             302      guarantee of, or warrant or right to subscribe to or purchase any of the foregoing.
             303          [(b)] (ii) "Security" does not include any:
             304          [(i)] (A) insurance or endowment policy or annuity contract under which an insurance

             305      company promises to pay money in a lump sum or periodically for life or some other specified
             306      period; [or]
             307          [(ii)] (B) interest in a limited liability company in which the limited liability company
             308      is formed as part of an estate plan where all of the members are related by blood or marriage,
             309      there are five or fewer members, or the person claiming this exception can prove that all of the
             310      members are actively engaged in the management of the limited liability company[. Evidence];
             311      or
             312          (C) (I) a whole long-term estate in real property;
             313          (II) an undivided fractionalized long-term estate in real property that consists of ten or
             314      fewer owners; or
             315          (III) an undivided fractionalized long-term estate in real property that consists of more
             316      than ten owners if, when the real property estate is subject to a management agreement:
             317          (Aa) the management agreement permits a simple majority of owners of the real
             318      property estate to not renew or to terminate the management agreement at the earlier of the end
             319      of the management agreement's current term, or 180 days after the day on which the owners
             320      give notice of termination to the manager;
             321          (Bb) the management agreement prohibits, directly or indirectly, the lending of the
             322      proceeds earned from the real property estate or the use or pledge of its assets to any person or
             323      entity affiliated with or under common control of the manager; and
             324          (Cc) the management agreement complies with any other requirement imposed by rule
             325      by the Real Estate Commission under Section 61-2-26 .
             326          (iii) For purposes of Subsection (1)(x)(ii)(B), evidence that members vote or have the
             327      right to vote, or the right to information concerning the business and affairs of the limited
             328      liability company, or the right to participate in management, shall not establish, without more,
             329      that all members are actively engaged in the management of the limited liability company.
             330          [(25)] (y) "State" means any state, territory, or possession of the United States, the
             331      District of Columbia, and Puerto Rico.
             332          (z) (i) "Undivided fractionalized long-term estate" means an ownership interest in real
             333      property by two or more persons that is a:
             334          (A) tenancy in common; or
             335          (B) any other legal form of undivided estate in real property including:

             336          (I) a fee estate;
             337          (II) a life estate; or
             338          (III) other long-term estate.
             339          (ii) "Undivided fractionalized long-term estate" does not include a joint tenancy.
             340          [(26) (a)] (aa) (i) "Viatical settlement interest" means the entire interest or any
             341      fractional interest in any of the following that is the subject of a viatical settlement:
             342          [(i)] (A) a life insurance policy; or
             343          [(ii)] (B) the death benefit under a life insurance policy.
             344          [(b)] (ii) "Viatical settlement interest" does not include the initial purchase from the
             345      viator by a provider of viatical settlements.
             346          (bb) "Whole long-term estate" means a person or persons through joint tenancy owns
             347      real property through:
             348          (i) a fee estate;
             349          (ii) a life estate; or
             350          (iii) other long-term estate.
             351          [(27)] (cc) "Working days" means 8 a.m. to 5 p.m., Monday through Friday, exclusive
             352      of legal holidays listed in Section 63-13-2 .
             353          (2) A term not defined in [Section 61-1-13 ] this section shall have the meaning as
             354      established by division rule. The meaning of a term neither defined in this section nor by rule
             355      of the division shall be the meaning commonly accepted in the business community.
             356          (3) (a) This Subsection (3) applies to:
             357          (i) the offer or sale of a real property estate exempted from the definition of security
             358      under Subsection (1)(x)(ii)(C); or
             359          (ii) the offer or sale of an undivided fractionalized long-term estate that is the offer of a
             360      security.
             361          (b) A person who, directly or indirectly receives compensation in connection with the
             362      offer or sale as provided in this Subsection (3) of a real property estate is not an agent,
             363      broker-dealer, investment adviser, or investor adviser representative under this chapter if that
             364      person is licensed under Chapter 2, Division of Real Estate, as:
             365          (i) a principal real estate broker;
             366          (ii) an associate real estate broker; or

             367          (iii) a real estate sales agent.
             368          (4) The list of real property estates excluded from the definition of securities under
             369      Subsection (1)(x)(ii)(C) is not an exclusive list of real property estates or interests that are not a
             370      security.
             371          Section 2. Section 61-2-2 is amended to read:
             372           61-2-2. Definitions.
             373          As used in this chapter:
             374          (1) "Associate real estate broker" and "associate broker" means any person employed
             375      or engaged as an independent contractor by or on behalf of a licensed principal real estate
             376      broker to perform any act set out in Subsection (12) for valuable consideration, who has
             377      qualified under [the provisions of] this chapter as a principal real estate broker.
             378          (2) "Branch office" means a principal broker's real estate brokerage office other than
             379      [his] the principal broker's main office.
             380          (3) "Commission" means the Real Estate Commission established under this chapter.
             381          (4) "Concurrence" means the entities given a concurring role must jointly agree for
             382      action to be taken.
             383          (5) "Condominium" or "condominium unit" is as defined in Section 57-8-3 .
             384          (6) "Condominium homeowners' association" means all of the condominium unit
             385      owners acting as a group in accordance with declarations and bylaws.
             386          (7) (a) "Condominium hotel" means one or more condominium units that are operated
             387      as a hotel.
             388          (b) "Condominium hotel" does not mean a hotel consisting of condominium units, all
             389      of which are owned by a single entity.
             390          (8) "Director" means the director of the Division of Real Estate.
             391          (9) "Division" means the Division of Real Estate.
             392          (10) "Executive director" means the director of the Department of Commerce.
             393          (11) "Main office" means the address which a principal broker designates with the
             394      division as [his] the principal broker's primary brokerage office.
             395          (12) "Principal real estate broker" and "principal broker" means any person:
             396          (a) (i) who sells or lists for sale, buys, exchanges, or auctions real estate, options on
             397      real estate, or improvements on real estate with the expectation of receiving valuable

             398      consideration; or
             399          (ii) who advertises, offers, attempts, or otherwise holds himself out to be engaged in
             400      the business described in Subsection (12)(a)(i);
             401          (b) employed by or on behalf of the owner of real estate or by a prospective purchaser
             402      of real estate who performs any of the acts described in Subsection (12)(a), whether [his] the
             403      person's compensation is at a stated salary, a commission basis, upon a salary and commission
             404      basis, or otherwise;
             405          (c) who, with the expectation of receiving valuable consideration, manages property
             406      owned by another person or who advertises or otherwise holds himself out to be engaged in
             407      property management;
             408          (d) who, with the expectation of receiving valuable consideration, assists or directs in
             409      the procurement of prospects for or the negotiation of the transactions listed in Subsections
             410      (12)(a) and (c); and
             411          (e) except for mortgage lenders, title insurance agents, and their employees, who assists
             412      or directs in the closing of any real estate transaction with the expectation of receiving valuable
             413      consideration.
             414          (13) (a) "Property management" means engaging in, with the expectation of receiving
             415      valuable consideration, the management of property owned by another person or advertising or
             416      otherwise claiming to be engaged in property management by:
             417          (i) advertising for, arranging, negotiating, offering, or otherwise attempting or
             418      participating in a transaction calculated to secure the rental or leasing of real estate;
             419          (ii) collecting, agreeing, offering, or otherwise attempting to collect rent for the real
             420      estate and accounting for and disbursing the money collected; or
             421          (iii) authorizing expenditures for repairs to the real estate.
             422          (b) "Property management" does not include:
             423          (i) hotel or motel management;
             424          (ii) rental of tourist accommodations, including hotels, motels, tourist homes,
             425      condominiums, condominium hotels, mobile home park accommodations, campgrounds, or
             426      similar public accommodations for any period of less than 30 consecutive days, and the
             427      management activities associated with these rentals; or
             428          (iii) the leasing or management of surface or subsurface minerals or oil and gas

             429      interests, if the leasing or management is separate from a sale or lease of the surface estate.
             430          (14) "Real estate" includes leaseholds and business opportunities involving real
             431      property.
             432          (15) "Real estate sales agent" and "sales agent" mean any person affiliated with a
             433      licensed principal real estate broker, either as an independent contractor or an employee as
             434      provided in Section 61-2-25 , to perform for valuable consideration any act set out in
             435      Subsection (12).
             436          (16) (a) "Regular salaried employee" means an individual who performs a service for
             437      wages or other remuneration, whose employer withholds federal employment taxes under a
             438      contract of hire, written or oral, express or implied.
             439          (b) "Regular salaried employee" does not include a person who performs services on a
             440      project-by-project basis or on a commission basis.
             441          (17) "Reinstatement" means restoring a license that has expired or has been suspended.
             442          (18) "Reissuance" means the process by which a licensee may obtain a license
             443      following revocation of the license.
             444          (19) "Renewal" means extending a license for an additional licensing period on or
             445      before the date the license expires.
             446          (20) (a) "Undivided fractionalized long-term estate" means an ownership interest in
             447      real property by two or more persons that is a:
             448          (i) tenancy in common; or
             449          (ii) any other legal form of undivided estate in real property including:
             450          (A) a fee estate;
             451          (B) a life estate; or
             452          (C) other long-term estate.
             453          (b) "Undivided fractionalized long-term estate" does not include a joint tenancy.
             454          Section 3. Section 61-2-5.5 is amended to read:
             455           61-2-5.5. Real Estate Commission created -- Functions -- Appointment --
             456      Qualification and terms of members -- Expenses -- Meetings.
             457          (1) There is created within the division a Real Estate Commission. The commission
             458      shall:
             459          (a) make rules for the administration of this chapter which are not inconsistent with

             460      this chapter, including:
             461          (i) licensing of principal brokers, associate brokers, sales agents, real estate companies,
             462      and branch offices;
             463          (ii) prelicensing and postlicensing education curricula, examination procedures, and the
             464      certification and conduct of real estate schools, course providers, and instructors;
             465          (iii) proper handling of funds received by real estate licensees, and brokerage office
             466      procedures and recordkeeping requirements;
             467          (iv) property management; [and]
             468          (v) standards of conduct for real estate licensees; and
             469          (vi) rules made under Section 61-2-26 regarding an undivided fractionalized long-term
             470      estate;
             471          (b) establish, with the concurrence of the division, all fees as provided in this chapter
             472      and Title 61, Chapter 2a, Real Estate Recovery Fund Act;
             473          (c) conduct all administrative hearings not delegated by it to an administrative law
             474      judge relating to the licensing of any applicant, conduct of any licensee, or the certification or
             475      conduct of any real estate school, course provider, or instructor regulated under this chapter;
             476          (d) with the concurrence of the director, impose sanctions against licensees and
             477      certificate holders as provided in Section 61-2-11 ;
             478          (e) advise the director on the administration and enforcement of any matters affecting
             479      the division and the real estate sales and property management industries;
             480          (f) advise the director on matters affecting the division budget;
             481          (g) advise and assist the director in conducting real estate seminars; and
             482          (h) perform other duties as provided by this chapter and Title 61, Chapter 2a, Real
             483      Estate Recovery Fund Act.
             484          (2) (a) The commission shall be comprised of five members appointed by the governor
             485      and approved by the Senate.
             486          (b) Four of the commission members shall have at least five years' experience in the
             487      real estate business and shall hold an active principal broker, associate broker, or sales agent
             488      license.
             489          (c) One commission member shall be a member of the general public.
             490          (d) No more than one commission member may be appointed from any given county in

             491      the state.
             492          (3) (a) Except as required by Subsection (3)(b), as terms of current commission
             493      members expire, the governor shall appoint each new member or reappointed member to a
             494      four-year term ending June 30.
             495          (b) Notwithstanding the requirements of Subsection (3)(a), the governor shall, at the
             496      time of appointment or reappointment, adjust the length of terms to ensure that the terms of
             497      commission members are staggered so that approximately half of the commission is appointed
             498      every two years.
             499          (c) A commission member may not serve more than one consecutive term.
             500          (d) Members of the commission shall annually select one member to serve as chair.
             501          (4) When a vacancy occurs in the membership for any reason, the replacement shall be
             502      appointed for the unexpired term.
             503          (5) (a) Members shall receive no compensation or benefits for their services, but may
             504      receive per diem and expenses incurred in the performance of the member's official duties at
             505      the rates established by the Division of Finance under Sections 63A-3-106 and 63A-3-107 .
             506          (b) Members may decline to receive per diem and expenses for their service.
             507          (6) The commission shall meet at least monthly. The director may call additional
             508      meetings at his discretion or upon the request of the chair or upon the written request of three
             509      or more commission members. Three members constitute a quorum for the transaction of
             510      business.
             511          Section 4. Section 61-2-11.5 is enacted to read:
             512          61-2-11.5. Investigations related to an undivided fractionalized long-term estate.
             513          In addition to any action authorized by Section 61-2-11 , in relationship to the offer or
             514      sale of an undivided fractionalized long-term estate:
             515          (1) the division may make any public or private investigation within or outside of this
             516      state as the division considers necessary to determine whether any person has violated, is
             517      violating, or is about to violate this chapter or any rule or order under this chapter;
             518          (2) to aid in the enforcement of this chapter or in the prescribing of rules and forms
             519      under this chapter, the division may require or permit any person to file a statement in writing,
             520      under oath or otherwise as to all facts and circumstances concerning the matter to be
             521      investigated; and

             522          (3) for the purpose of the investigation described in Subsection (1), the division or any
             523      employee designated by the division may:
             524          (a) administer oaths and affirmation; or
             525          (b) take any action permitted by Section 61-2-11 including:
             526          (i) subpoena witnesses and compel their attendance;
             527          (ii) take evidence; and
             528          (iii) require the production of any books, papers, correspondence, memoranda,
             529      agreement, or other documents or records relevant or material to the investigation.
             530          Section 5. Section 61-2-21 is amended to read:
             531           61-2-21. Remedies and action for violations.
             532          (1) (a) If the director has reason to believe that any person has been [or], is engaging in,
             533      or is about to engage in acts constituting violations of this chapter, and if it appears to the
             534      director that it would be in the public interest to stop such acts, [he] the director shall issue and
             535      serve upon the person an order directing that person to cease and desist from those acts.
             536          (b) Within ten days after receiving the order, the person upon whom the order is served
             537      may request an adjudicative proceeding.
             538          (c) Pending the hearing, [the] any cease and desist order shall remain in effect.
             539          (d) If a request for a hearing is made, the division shall follow the procedures and
             540      requirements of Title 63, Chapter 46b, Administrative Procedures Act.
             541          (2) (a) After the hearing, if the commission and the director agree that the acts of the
             542      person violate this chapter, the director:
             543          (i) shall issue an order making the [cease and desist] order issued under Subsection (1)
             544      permanent[.]; and
             545          (ii) may impose a fine.
             546          (b) If no hearing is requested and if the person fails to cease the acts, or after
             547      discontinuing the acts, again commences the acts, the director shall file suit in the name of the
             548      Department of Commerce and the Division of Real Estate, in the district court in the county in
             549      which the acts occurred or where the person resides or carries on business, to enjoin and
             550      restrain the person from violating this chapter.
             551          (c) The district courts of this state shall have jurisdiction of these suits.
             552          (d) Upon a proper showing in an action brought under this section related to an

             553      undivided fractionalized long-term estate, the court may:
             554          (i) issue a permanent or temporary, prohibitory or mandatory injunction;
             555          (ii) issue a restraining order or writ of mandamus;
             556          (iii) enter a declaratory judgment;
             557          (iv) appoint a receiver or conservator for the defendant or the defendant's assets;
             558          (v) order disgorgement;
             559          (vi) order rescission;
             560          (vii) impose a fine of not more than $500 for each violation of this chapter; and
             561          (viii) enter any other relief the court considers just.
             562          (e) The court may not require the division to post a bond in an action brought under
             563      this Subsection (2).
             564          (3) The remedies and action provided in this section may not interfere with, or prevent
             565      the prosecution of, any other remedies or actions including criminal proceedings.
             566          Section 6. Section 61-2-26 is enacted to read:
             567          61-2-26. Rulemaking required for offer or sale of an undivided fractionalized
             568      long-term estate -- Disclosures -- Management agreement.
             569          (1) (a) A licensee or certificate holder under this chapter who sells or offers to sell an
             570      undivided fractionalized long-term estate shall comply with the disclosure requirements
             571      imposed by rules made by the commission under this section.
             572          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             573      commission shall make rules as to the timing, form, and substance of disclosures required to be
             574      made by a licensee or certificate holder under this section.
             575          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             576      commission shall make rules imposing requirements for a management agreement related to an
             577      undivided fractionalized long-term estate that makes the offer or sale of the undivided
             578      fractionalized long-term estate treated as a real estate transaction and not treated as an offer or
             579      sale of a security under Chapter 1, Utah Uniform Securities Act.
             580          (3) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             581      commission shall make rules establishing:
             582          (a) the disclosures required in the sale or offer of an undivided fractionalized long-term
             583      estate that is subject to a master lease;

             584          (b) requirements for the management of a master lease on an undivided fractionalized
             585      long-term estate; and
             586          (c) the requirements on the structure of a master lease on an undivided fractionalized
             587      long-term estate.

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