Rhode Island Real Estate Law Addendum - Flashcards

Associate broker

Any licensed real estate broker employed or engaged as an independent contractor by or in behalf of a licensed real estate broker to do or deal in any activity as included or comprehended by the definitions of a real estate broker in subsection (5) of this section, for compensation or otherwise.

Director

The director of business regulation for the state.

Opinion of value

An analysis, opinion, or conclusion prepared by a person licensed under chapter 20.5 of title 5, in the ordinary course of his or her business relating to the price of specified interests in or aspects of identified real estate or identified real property or by comparison to other real property currently or recently sold in the marketplace for the purpose of listing, purchase, or sale, excluding an appraisal prepared by a person licensed under the provisions of chapter 20.7 of title 5, that conforms to the standards adopted by the uniform standards of professional appraisal practice ('USPAP').

Real estate (Chapter 5-20.5)

Includes leaseholds as well as any and every interest or estate in land, whether corporeal or incorporeal, freehold or non-freehold, and whether the property is situated in this state or elsewhere.

Real estate broker

Includes all persons, partnerships, associations, and corporations, foreign and domestic, who for a fee, commission, or other valuable consideration, or with the intention or expectation of receiving or collecting a fee, commission, or other valuable consideration, lists, sells, purchases, exchanges, rents, leases, prepares an opinion of value, or auctions any real estate, or the improvements on real estate including options or who negotiates or attempts to negotiate any such activity; advertises or holds himself or herself, itself, or themselves out as engaged in those activities; or directs or assists in the procuring of a purchaser or prospect calculated or intended to result in a real estate transaction. Also includes any person, partnership, association, or corporation employed by or on behalf of the owner or owners of lots, or other parcels of real estate, at a stated salary, or upon a fee, commission or otherwise, to sell that real estate, or any parts, in lots or other parcels, and who or that sells, exchanges or leases, or offers or attempts or agrees to negotiate the sale, exchange or lease of any such lot or parcel of real estate.

Real estate salesperson

Any person employed or engaged as an independent contractor by or on behalf of a licensed real estate broker to do or deal in any activity as included or comprehended by the definitions of a real estate broker in subsection (5) of this section, for compensation or otherwise.

Real estate recovery account

An account established and maintained by the department of business regulation from which any person aggrieved by an act, representation, transaction, or conduct of a licensed real estate broker or real estate salesperson, upon the grounds of fraud, misrepresentation or deceit, may recover by order of the superior court an amount of not more than fifty thousand dollars ($50,000) for damages sustained.

Real estate broker's license renewal

Valid for a period not exceeding three years. Requires payment of renewal fee and proof of completion of a minimum of 24 classroom hours of director-approved real estate educational sessions or courses during the preceding two-year (2) period, with at least three hours on fair housing.

Fixed office requirement for brokers

Each resident licensed real estate broker must maintain a fixed office within this state where all business records relating to real estate transactions and office management are kept. Original licenses of the broker and affiliated salespersons must be prominently displayed.

Temporary license for deceased broker's representative

Upon the death of a sole proprietor licensed real estate broker, the director may issue a temporary license to their legal representative or a designated individual, without examination, for a period not exceeding one year to continue the business, upon filing the required bond and fee.

Nonresident real estate broker license

A nonresident may become a real estate broker by conforming to all chapter provisions, if licensed in another state that offers reciprocal privileges to Rhode Island brokers and meets licensing requirements. Not required to maintain a business place in Rhode Island.

Required E&O insurance coverage (individual licensee)

For an individual licensee, the insurance shall be in an amount for each claim of at least fifty thousand dollars ($50,000) and in an aggregate amount of at least one hundred fifty thousand dollars ($150,000.00).

Required E&O insurance coverage (principal broker's blanket policy)

For a principal broker's blanket policy, the minimum coverage shall be: in an amount for each claim of at least fifty thousand dollars ($50,000.00) multiplied by the number of individual licensees employed by or associated with the principal broker, and in an aggregate amount of at least one hundred fifty thousand dollars ($150,000.00) multiplied by the number of individual licensees; or in an amount sufficient to provide coverage at a level of at least three hundred thousand dollars ($300,000) for each claim with an aggregate top limit of liability for all claims of at least one million dollars ($1,000,000) during any one year.

Escrow account (Real Estate Firms)

Each real estate firm must maintain an escrow account under the supervision of the broker qualified to do business. All funds paid to a salesperson or directly to a broker must be segregated on the broker's books and deposited in a federally insured financial institution in Rhode Island, separate from the broker's own funds. Records for these accounts must be kept for three years.

Disputed escrow deposits

If ownership of deposit monies is in dispute, the broker or salesperson must deposit the monies with the general treasurer within 180 days of the original deposit, to be held in trust until the dispute is resolved. Parties may agree in writing to extend this period.

Unlawful appropriation of escrow funds

Any licensee to whom any money or other property is entrusted as escrow funds, who intentionally appropriates to the licensee's own use that money or property, or transfers the funds from an escrow account to a company or personal account prior to a closing, is guilty of unlawful appropriation.

Release of escrow funds

An escrow agent must pay sums of money held in an escrow account as instructed by the parties to a failed real estate transaction, within ten (10) days of receipt of a written release signed by all parties.

License required for brokerage ownership

No person, firm or corporation shall have an ownership interest in a real estate brokerage firm nor participate in the operation of the real estate brokerage firm unless they hold a valid real estate broker's license.

Cease and Desist Order for Unlicensed Activity

If the department of business regulation believes activities requiring licensure are being conducted without a license, or after denial/suspension/revocation, it may issue an order to show cause, leading to a cease and desist order if a violation is found. Non-compliance can result in court injunction.

Appraisal (Commercial Licensing)

An analysis, opinion, or conclusion relating to the nature, quality, value or utility of specified interests in, or aspects of, identified real estate prepared by a person licensed under R.I. Gen. Laws § 5-20.7-1, et seq. and Part 1 of this Subchapter, that conforms to the standards adopted by the Uniform Standards of Professional Appraisal Practice ('USPAP') in accordance with R.I. Gen. Laws § 5-20.7-19.

Brokerage (Commercial Licensing)

A business entity, sole proprietorship or partnership in the business or service of acting as a real estate broker as that term is defined in R.I. Laws § 5-20.5-1.

Broker price opinion (BPO)

An analysis, opinion, or conclusion prepared by a person licensed under R.I. Gen. Laws Chapter 5-20.5, in the ordinary course of his or her business relating to the price of specified interests in or aspects of identified real estate or identified real property for the purpose of listing, purchase, or sale.

Classroom (Commercial Licensing)

Either a physical classroom in which classes are taught by an instructor appearing in-person or a live-virtual classroom with interactive instruction between instructor and students.

Clock hour

A period of at least fifty (50) minutes of classroom instruction.

Comparative market analysis (CMA)

An analysis, opinion, or conclusion prepared by a person licensed under R.I. Gen. Laws Chapter 5-20.5 in the ordinary course of his or her business relating to the price of specified interests in or aspects of identified real estate or identified real property by comparison to other real property currently or recently sold in the marketplace for the purpose of listing, purchase, or sale.

Department (Commercial Licensing)

The Department of Business Regulation.

License (Commercial Licensing)

A real estate salesperson or broker license issued by the Department.

Net Listing

An agreement in which a prospective seller lists Real Estate for sale with an authorization to a Broker to sell at a specified net dollar return to the seller and which provides that the Broker may retain as Commission the difference between the specified dollar return to the seller and the actual sales price.

Promptly

Not more than ten (10) calendar days.

Real Estate Commission (Commercial Licensing)

The Commission created pursuant to R.I. Gen. Laws § 5-20.5-12.

Social Media

Any digital tool by which users create and share content with the public, including but not limited to the following websites and applications: Twitter, LinkedIn, Facebook, Instagram, Youtube, and TikTok.

Teams (Commercial Licensing)

Two or more licensees who: (a) Work under the supervision of the same principal broker to perform activities that require a license; (b) Represent themselves to the public as being part of a team or group; and (c) Are designated by a team name that is both approved by the principal broker and different from the brokerage name of their principle broker.

Licensee's Name and Address Requirement

Every licensee must ensure the Department has their current personal name, firm affiliation, trade name, residence address, and firm address on record at all times. Any change must be reported in writing within ten (10) days.

Principal Broker Responsibilities

Responsible for supervising affiliated licensees and non-licensed employees, maintaining escrow accounts, compliance with real estate laws and regulations, filing changes of business address/trade name, properly displaying licenses, verifying licensee good standing, retaining transaction and escrow records, and supervising team activities (including escrow, agreements, names, advertising, and member lists).

Salesperson Affiliation Requirement

A licensed real estate salesperson must be affiliated with a licensed principal broker to engage in any real estate activity requiring licensure and shall not operate, supervise, or manage a real estate brokerage.

Pre-licensing Education Requirement (Salesperson)

Applicants, including former licensees whose license expired for over a year, must submit satisfactory evidence of completing a minimum of 45 classroom hours. Classroom hours completed more than two years from application date are not considered.

Pre-licensing Education Requirement (Broker)

Applicants, including former licensees whose license expired for over four years, must submit satisfactory evidence of completing a minimum of 90 classroom hours, unless exempted. The 45 classroom hours used for a salesperson's license cannot be used for the broker's 90-hour requirement, and classroom hours completed more than four years from application date are not considered.

Auditing of Pre-licensing Courses

The Department's representative may attend any pre-licensing course at no charge to evaluate compliance. Schools teaching via live-virtual classrooms must provide login credentials for auditing purposes.

License Renewal Fee for Real Estate Recovery Fund

Before an original license is issued, the applicant must pay a fee of twenty-five dollars ($25.00) for deposit into the Real Estate Recovery Fund Account.

License Renewal Term (Commercial Licensing)

Licenses issued before January 1, 2020, are renewed every two years on May 1 of each even-numbered year. Licenses issued after January 1, 2020, are renewed every two years on the anniversary of the issuance date. Licensees are responsible for timely renewal, and failure to do so will result in administrative disciplinary proceedings.

Disaffiliation of Licensee

When a licensee disaffiliates from a brokerage, the principal broker must send written notice to the Department's Real Estate Section. The principal broker of the new brokerage must sign and submit a transfer of license form. Licensees are not required to return their license unless revoked or surrendered.

Dissolution of Brokerage

The principal broker must notify the Department in writing of the brokerage's dissolution and return their license within ten (10) days. All affiliated licensees must transfer their license to another brokerage or return it to the Department for cancellation within ten (10) days.

Property Management Company Licensing

Any person performing acts defined as a 'real estate broker' in R.I. Gen. Laws § 5-20.5-1(5) in the course of managing another person's real property must be licensed as a real estate broker, unless they are a bona fide owner, lessor, or lessee of the property or their regular employees.

Reporting Convictions and Disciplinary Actions

Any licensee convicted of a felony or misdemeanor, or disciplined by a governmental agency for another occupational license, must file a written report with the Department within sixty (60) days of the final judgment or order.

Discriminatory Practices Prohibited (Commercial Licensing)

No licensee shall solicit property sales/leases based on the entry of protected class individuals into a neighborhood, nor distribute materials or make statements to induce such acts. Licensees and brokerages must not advertise or inquire in a way that expresses any limitation, specification, or discrimination based on protected class status as defined by the Rhode Island Fair Housing Practices Act.

Unlawful Licensed Real Estate Activity

No person shall engage in licensed real estate activity while their license is expired, revoked, suspended, or otherwise invalid. Fraudulently certifying continuing education completion may lead to license suspension.

Inspection of Records (Commercial Licensing)

Every principal broker and affiliated licensee must make all records of transactions, books of account, instruments, documents, and forms available for inspection by the Department. Escrow account records are available on demand; other records during regular business hours.

Commission Payment Policy for Affiliated Licensees

Principal brokers must promulgate a written policy for commission payment to affiliated licensees upon termination, specifying the commission rate. This policy must be agreed to in writing by each affiliated licensee at the start of affiliation. The accounting must be made within 30 days of termination.

Incentive Payments to Procuring Licensees

If a seller offers an incentive payment beyond the agreed listing fee to a procuring licensee, the principal broker and seller must have a written agreement describing the payment. If it's a cooperative sale, the payment must conform to R.I. Gen. Laws § 5-20.5-14(12) and be distributed by the affiliated principal broker.

Licensee Ownership/Business Interest Disclosure

In any real estate transaction, a licensee must disclose in writing at the first personal contact, but no later than making an offer to purchase, if they have an ownership interest, will be purchasing any portion, have a business interest in a buyer or seller entity, or are a representative of a family or household member involved in the transaction.

Advance Fees (Commercial Licensing)

Any principal broker charging or collecting an advance fee for services (e.g., advertising costs) must furnish the buyer or seller with a list of services to be rendered at the time of fee acceptance. This does not apply to advance fees for market analysis.

Prohibition Against Lending Name/License

No licensee shall directly or indirectly lend their name or license for the benefit of another person, or for the purpose of circumventing Rhode Island real estate licensure laws and regulations. Arrangements where a licensee affiliates with a principal broker not actively involved in licensed real estate activity for such circumvention are grounds for disciplinary action.

General Advertising Requirements for Licensees

All advertising must include the name of the brokerage or principal broker under which the licensee is licensed, displayed larger and more prominently than any licensee or team name, and in close proximity. Team names must include 'Team' or 'Group' and not use words suggesting a brokerage (e.g., 'Agency,' 'Brokerage,' 'Realty').

Internet Advertising Requirements

For all online advertising and websites, the brokerage's name and contact information must appear on the home/landing page and every viewable page of the licensee/team's advertisements or websites, prominently displayed larger and in close proximity to the licensee's or Team's information. Social media advertising requires the brokerage name to be larger and accessible within 'one click' of any character-limited post.

Advertising for Home Warranty Contracts

Any advertising offering a home warranty contract must specify its essential terms and indicate if the offer is mandatory. Essential terms are limited to components/structure for inspection warranties and components only for non-inspection warranties. Advertising must also comply with all Federal and State warranty legislation.

Listing agreements: Prohibited terms

No listing agreement or contract for real property sale shall contain a pre-printed fee, commission rate, or commission amount. 'Net listing' contracts are prohibited. Any agreement providing for the principal broker's retention of deposit monies upon buyer default must state this in large or bold print.

Appraisals by non-certified licensees

Licensed real estate brokers and salespersons not certified or licensed as appraisers under R.I. Gen. Laws § 5-20.7 are prohibited from describing any valuation of real estate as an 'appraisal'.

Broker Price Opinion (BPO) / Comparative Market Analysis (CMA) Disclaimer

When a real estate salesperson or broker provides a BPO or CMA, they must disclose that it is not a certified appraisal conforming to USPAP and include a specific disclaimer: 'This opinion or analysis is not a certified appraisal or an appraisal that conforms to the Uniform Standards of Professional Appraisal Practice (USPAP). It is intended only for the benefit of the addressee for the purpose of assisting buyers or sellers or prospective buyers or sellers in deciding the listing offering, or sale price of the real property and not for any other purpose, including but not limited to, lending purpose excepting that specifically provided under R.I. Gen. Laws § 5-20.7-3.'

Real Estate School Permit Expiration

All real estate school permits are valid for one (1) year and expire annually on August 31. Courses are approved for a three (3) year period and require resubmission for re-approval.

Instructor Qualification for Real Estate Schools

To act as an instructor for salesperson or broker curriculum, a person must hold a valid real estate broker's or salesperson's license in Rhode Island, and attest to at least five (5) years of full-time work (25+ hours/week) as a licensed real estate broker or salesperson. Exemptions for equivalent qualifications (e.g., academic, specialized knowledge) may be granted by the Department.

Continuing Education for License Renewal

All non-exempt licensees must complete twenty-four (24) clock hours of Department-approved real estate courses during the preceding two-year (2) period. Nine of these hours must be from CORE subject areas, including at least three hours on fair housing. The remaining fifteen hours can be any Department-approved course.

Exemptions from Continuing Education (Commercial Licensing)

Licensees with a valid license issued before December 12, 1984, are exempt. Effective January 1, 2022, attorneys licensed by the RI Supreme Court and granted a license under R.I. Gen. Laws § 5-20.5-4(d) are also exempt.

Affiliated licensee

A licensed real estate salesperson or real estate broker as defined in § 5-20.5-1 associated with a particular principal broker.

Brokerage (Residential Real Estate Transactions)

A principal broker as defined in § 5-20.5-8 and his or her affiliated licensees.

Buyer (Residential Real Estate Transactions)

A person who acquires or seeks to acquire an ownership interest in real estate.

Client

A buyer, seller, tenant, or landlord who has agreed to representation by a licensee in a real estate transaction, evidenced by an executed, mandatory relationship disclosure, to whom a licensee owes the duties set forth in § 5-20.6-5.

Client representation contract

An express, written contract between a principal broker or his or her affiliated licensees and a client who authorizes the principal broker or his or her affiliated licensees to act as a client representative for a buyer, seller, landlord, or tenant and meets the requirements of § 5-20.6-10.

Confidential information (Residential Real Estate Transactions)

Includes a buyer's/tenant's willingness to pay more, a seller's/landlord's willingness to accept less, previous offers, parties' motivating factors, willingness to agree to other financing terms, facts/suspicions about psychologically impacted/stigmatized property (other than material defects), and information about a party's assets, liabilities, income, or expenses.

Customer

A buyer, seller, tenant, or landlord who has agreed to certain assistance by a licensee in a real estate transaction, evidenced by an executed, mandatory relationship disclosure, to whom a licensee owes the duties set forth in § 5-20.6-4.

Designated client representative

An affiliated licensee appointed by the principal broker or his or her designee to represent a buyer, seller, tenant, or landlord in a real estate transaction. The licensee must obtain informed, written consent with a signed mandatory relationship disclosure.

Designee

An associate broker as defined in § 5-20.5-1 whom a principal broker authorizes to act on his or her behalf.

Director (Residential Real Estate Transactions)

The director of business regulation for the state.

Dual facilitator

A single licensee who, with the prior written consent of both parties assists a seller client and a buyer client in the same transaction subject to specific limitations.

Landlord (Residential Real Estate Transactions)

A person who leases or attempts to lease his or her ownership interest in real estate to another person.

Lease (Residential Real Estate Transactions)

An express written or oral contract between a landlord and tenant for the use or occupancy by the tenant of real estate that is owned by another person.

Licensee (Residential Real Estate Transactions)

An individual licensed by the director as a real estate broker or real estate salesperson pursuant to chapter 20.5 of this title.

Mandatory relationship disclosure

A form that describes the relationship between a consumer and a principal broker and his or her affiliated licensees that meets the requirements of § 5-20.6-8.

Ministerial acts

Acts of an administrative nature that licensees perform for client or customers, including, but not limited to, showing property; preparing offers or agreements to sell, purchase, exchange, rent, or lease; conveying offers or agreements to the parties; and providing information and assistance.

Principal broker (Residential Real Estate Transactions)

A real estate broker licensed by the director who is designated by the brokerage to be responsible for the supervision and activities of his or her affiliated licensees in accordance with this chapter and chapter 20.5 of this title.

Real estate (Residential Real Estate Transactions)

Refers to vacant land on which a building is intended to be constructed for use as one or two (2) residential dwellings or land with physical improvements consisting of a house and/or structure comprised of four (4) or fewer residential units.

Sales agreement

An express written contract signed by the buyer and seller for the purchase and sale of the real estate.

Sell, sale, or sold

A transaction for the transfer of real estate from a seller to a buyer, including, but not limited to, exchanges of real estate between the seller and buyer and transactions involving the creation of a sales agreement.

Seller (Residential Real Estate Transactions)

A person who sells or attempts to sell an ownership interest in real estate to another person.

Tenant (Residential Real Estate Transactions)

A person who acquired or seeks to acquire an interest in real estate that entitles him or her to occupy or use a property that is owned by another person.

Transaction coordinator

A principal broker or his or her designee who supervises a real estate transaction in a capacity in which one affiliated licensee represents a buyer or tenant as a designated client representative and another affiliated licensee represents a seller or landlord as a designated client representative in the same transaction. A transaction coordinator does not owe any fiduciary duties to any party in a transaction except the duties to protect the confidential information of the parties and to properly account for money placed in his or her care.

Transaction facilitator

A licensee who provides assistance to a buyer, seller, tenant, or landlord, or both, in a real estate transaction. A transaction facilitator does not owe any fiduciary duties to any party in a transaction but does owe the duties set forth in § 5-20.6-4.

Transaction Facilitator Duties to a Customer

To perform agreed-upon ministerial acts timely and competently; to perform these acts with honesty, good faith, reasonable skill, and care; to properly account for money or property placed in the care and responsibility of the principal broker; and to protect confidential information when assisting customers as a dual facilitator. A transaction facilitator does not owe any other fiduciary duties.

Designated Client Representative Duties to a Client

To perform the terms of the client representation contract with reasonable skill and care; to promote the client's best interest in good faith and honesty; to protect the client's confidential information during and after the relationship; to perform agreed-upon ministerial acts timely and competently, with honesty, good faith, reasonable care and skill; and to properly account for money or property placed in the care and responsibility of the principal broker.

Designated Client Representatives in the Same Transaction

A principal broker or designee may appoint multiple affiliated licensees to represent buyer/tenant and seller/landlord in the same transaction. Parties must receive written notice of potential conflict of interest. The principal broker or designee acts as a transaction coordinator, protecting confidential information and accounting for funds.

Dual Facilitator Relationship

A licensee may only assist both buyer client and seller client (or tenant client and landlord client) in the same transaction as a neutral dual facilitator, with prior written consent of the principal broker and all parties. The relationship is for the specific transaction only, and the dual facilitator remains the designated client representative for respective parties in future separate transactions. Cannot act as an advocate for either party.

Mandatory Relationship Disclosure Requirement

A licensee must provide a prospective buyer, seller, tenant, or landlord with a copy of a commission-approved mandatory relationship disclosure and obtain a signed acknowledgment of receipt prior to disclosing any confidential information. If the party refuses to sign, the licensee must sign and date a written declaration of the refusal. This disclosure must be executed no later than the preparation of a sales agreement, offer to purchase, or lease.

Client Representation Contract Minimum Requirements

If chosen, it must be an express, written contract including terms of compensation, descriptions of services and limitations, a statement that a principal broker may appoint affiliated licensees as designated client representatives for different parties in the same transaction (with client consent), and be signed by all parties.

Relationship and Compensation

The payment or promise of payment or compensation to a licensee does not create an agency relationship between any licensee and buyer, seller, tenant, or landlord.

Penalty for Relationship Disclosure Violation

Each violation of the provisions regarding relationships in residential real estate transactions by a licensee constitutes a violation of law and may subject the licensee to disciplinary action. However, failure to provide the mandatory relationship disclosure does not void the sales agreement or create any defect in title.

Agent (Real Estate Sales Disclosures)

Any individual or entity acting on behalf of a seller or buyer to effect the transfer of real estate. It includes listing agent, selling agent, buyer’s agent, and their respective brokers.

Agreement to transfer

A purchase and sale agreement, installment-sales contract, option to purchase agreement, or other agreement intended to effect the transfer of real estate from a seller to a buyer.

Buyer (Real Estate Sales Disclosures)

Any individual or entity seeking to obtain title to real estate from a seller for consideration.

Closing

The time at which real estate is transferred from seller to buyer and consideration is delivered to the seller or to a settlement agent with the intention of imminent delivery upon the recording of pertinent documents and other ministerial acts associated with settlement.

Deficient conditions

Any land restrictions, defect, malfunction, breakage, or unsound condition existing on, in, across, or under the real estate of which the seller has knowledge.

Lead exposure hazard

A condition that presents a clear and significant health risk to occupants of the dwelling, dwelling unit, or premises, particularly where there are children under the age of six (6) years.