MISSISSIPPI LEGISLATURE
2004 Regular Session
To: Judiciary B
By: Representative Morris
AN ACT TO AMEND SECTION 73-34-7, MISSISSIPPI CODE OF 1972, TO CLARIFY THE NUMBER OF MEMBERS FROM THE SAME PROFESSIONAL APPRAISAL ORGANIZATION WHO MAY BE APPOINTED BY THE GOVERNOR TO THE MISSISSIPPI REAL ESTATE APPRAISER LICENSING AND CERTIFICATION BOARD; TO AMEND SECTION 73-35-16, MISSISSIPPI CODE OF 1972, TO INCREASE THE MAXIMUM AMOUNT OF PREMIUM FOR THE ERRORS AND OMISSIONS INSURANCE PROGRAM OFFERED TO LICENSEES OF THE MISSISSIPPI REAL ESTATE COMMISSION; TO AMEND SECTION 73-35-21, MISSISSIPPI CODE OF 1972, TO CLARIFY THAT ASSOCIATE REAL ESTATE BROKERS OR SALESPERSONS MAY OWN ANY LAWFULLY CONSTITUTED BUSINESS ORGANIZATION FOR THE PURPOSE OF RECEIVING COMMISSIONS; TO MAKE LEGISLATIVE FINDINGS REGARDING THE INTEREST ON REAL ESTATE BROKERS' ACCOUNTS ACT; TO AMEND SECTIONS 73-35-103 AND 73-35-105, MISSISSIPPI CODE OF 1972, TO REVISE THE INTEREST ON REAL ESTATE BROKERS' ACCOUNTS ACT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 73-34-7, Mississippi Code of 1972, is amended as follows:
73-34-7. (1) (a) There is hereby established, as an adjunct board to the Mississippi Real Estate Commission, a board to be known as the Mississippi Real Estate Appraiser Licensing and Certification Board, which shall consist of six (6) members. Five (5) members shall be appointed by the Governor, with the advice and consent of the Senate, one (1) from each congressional district as such district existed on January 1, 1989; the Administrator of the Mississippi Real Estate Commission shall be an ex officio, nonvoting member.
(b) The initial appointments made by the Governor shall be in compliance with guidelines issued by the Federal Financial Institutions Examination Council or its designee; and the appointees shall serve for terms ending on December 31, 1991. Not more than two (2) positions on the board shall be filled with appointees who hold membership in the same professional appraisal organization.
(c) From and after January 1, 1992, gubernatorial appointments shall be made pursuant to the procedure established in this paragraph (c). The five (5) members shall be appointed by the Governor, with the advice and consent of the Senate, one (1) from each congressional district as such district existed on July 1, 2004, and one (1) from the state at large. The provisions of this paragraph (c) shall not affect persons who are members of the Real Estate Appraiser Licensing and Certification Board as of January 1, 2004. Such member shall serve out their respective terms, upon the expiration of which the provisions of this paragraph (c) shall take effect. Nothing provided herein shall be construed as prohibiting the reappointment of any member of the said board.
(d) At least three (3) members shall be certified general real estate appraisers or at least two (2) members shall be certified general real estate appraisers and one (1) member may be a certified residential real estate appraiser. Not more than two (2) positions on the board shall be filled with appointees who hold membership in the same professional appraisal organization. Of the initial appointments made pursuant to this paragraph (d), two (2) shall serve for three (3) years, two (2) shall serve for two (2) years and one (1) shall serve for one (1) year. Thereafter, each member shall serve for a term of four (4) years. Upon the expiration of a member's term, such member shall continue to serve until the appointment and qualification of a successor. Commencing with appointments made in 1992, no person shall be appointed as a member of the board for more than two (2) consecutive terms. The Governor may remove an appointed member for cause.
(2) The board shall meet not less than twice a calendar year. Written notice shall be given to each member of the time and place of each meeting of the board at least ten (10) days prior to the scheduled date of the meeting.
(3) A quorum of the board shall be three (3) voting members; commencing January 1, 1992, at least one (1) present must be a licensed certified general real estate appraiser or a certified residential real estate appraiser. Appointed members of the board are entitled to mileage and actual expenses as authorized by Section 25-3-41 and per diem as provided by Section 25-3-69; ex officio members are entitled to mileage and actual expenses only.
(4) The board shall elect a chairman and such other officers as it deems necessary. Such officers shall serve as such for terms established by the board.
SECTION 2. Section 73-35-16, Mississippi Code of 1972, is amended as follows:
73-35-16. (1) The following words and phrases shall have the meanings ascribed herein unless the context clearly indicates otherwise:
(a) "Aggregate limit" means a provision in an insurance contract limiting the maximum liability of an insurer for a series of losses in a given time period such as the policy term.
(b) "Claims-made" means policies written under a claims-made basis which shall cover claims made (reported or filed) during the year the policy is in force for incidents which occur that year or during any previous period the policyholder was insured under the claims-made contract. This form of coverage is in contrast to the occurrence policy which covers today's incident regardless of when a claim is filed even if it is one or more years later.
(c) "Extended reporting period" means a designated period of time after a claims-made policy has expired during which a claim may be made and coverage triggered as if the claim had been made during the policy period.
(d) "Licensee" means any active individual broker, broker-salesperson or salesperson, any partnership or any corporation.
(e) "Per-claim limit" means the maximum limit payable, per licensee, for damages arising out of the same error, omission or wrongful act.
(f) "Prior acts coverage" applies to policies on a claims-made versus occurrence basis. Prior acts coverage responds to claims that are made during a current policy period, but the act or acts causing the claim or injuries for which the claim is made occurred prior to the inception of the current policy period.
(g) "Proof of coverage" means a copy of the actual policy of insurance, a certificate of insurance or a binder of insurance.
(h) "Retroactive date" means a provision, found in many claims-made policies, that the policy shall not cover claims for injuries or damages that occurred before the retroactive date even if the claim is first made during the policy period.
(2) The following persons shall submit proof of insurance:
(a) Any active individual broker, active broker-salesperson or active salesperson;
(b) Any partnership (optional); or
(c) Any corporation (optional).
(3) Individuals whose licenses are on inactive status are not required to carry errors and omissions insurance.
(4) All Mississippi licensees shall be covered for activities contemplated under this chapter.
(5) Licensees may obtain errors and omissions coverage through the insurance carrier approved by the Mississippi Real Estate Commission and provided on a group policy basis. The following are minimum requirements of the group policy to be issued to the commission, including, as named insureds, all licensees who have paid their required premium:
(a) All activities contemplated under this chapter are included as covered activities;
(b) A per-claim limit is not less than One Hundred Thousand Dollars ($100,000.00);
(c) An annual aggregate limit is not less than One Hundred Thousand Dollars ($100,000.00);
(d) Limits apply per licensee per claim;
(e) Maximum deductible is Two Thousand Five Hundred Dollars ($2,500.00) per licensee per claim for damages;
(f) Maximum deductible is One Thousand Dollars ($1,000.00) per licensee per claim for defense costs; and
(g) The contract of insurance pays, on behalf of the injured person(s), liabilities owed.
(6) (a) The maximum contract period between the insurance carrier and the commission is to be three (3) consecutive policy terms, after which time period the commission shall place the insurance out for competitive bid. The commission shall reserve the right to place the contract out for bid at the end of any policy period.
(b) The policy period shall be a twelve-month policy term.
(c) The retroactive date for the master policy shall not be before July 1, 1994.
(i) The licensee may purchase full prior acts coverage on July 1, 1994, if the licensee can show proof of errors and omissions coverage that has been in effect since at least March 15, 1994.
(ii) If the licensee purchases full prior acts coverage on July 1, 1994, that licensee shall continue to be guaranteed full prior acts coverage if the insurance carriers are changed in the future.
(iii) If the licensee was not carrying errors and omissions insurance on July 1, 1994, the individual certificate shall be issued with a retroactive date of July 1, 1994. This date shall not be advanced if the insurance carriers are changed in the future.
(iv) For any new licensee who first obtains a license after July 1, 1994, the retroactive date shall be the effective date of licensure.
(v) For any licensee who changes status of license from inactive to active, the retroactive date shall be the effective date of change to "active" licensure.
(d) Each licensee shall be notified of the required terms and conditions of coverage for the policy at least thirty (30) days before the renewal date of the policy. A certificate of coverage, showing compliance with the required terms and conditions of coverage, shall be filed with the commission by the renewal date of the policy by each licensee who elects not to participate in the insurance program administered by the commission.
(e) If the commission is unable to obtain errors and omissions insurance coverage to insure all licensees who choose to participate in the insurance program at a premium of no more than Two Hundred Fifty Dollars ($250.00) per twelve-months' policy period, the requirement of insurance coverage under this section shall be void during the applicable contract period.
(7) Licensees may obtain errors and omissions coverage independently if the coverage contained in the policy complies with the following minimum requirements:
(a) All activities contemplated under this chapter are included as covered activities;
(b) A per-claim limit is not less than One Hundred Thousand Dollars ($100,000.00);
(c) The deductible is not more than Two Thousand Five Hundred Dollars ($2,500.00) per licensee per claim for damages and the deductible is not more than One Thousand Dollars ($1,000.00) per licensee per claim for defense costs; and
(d) If other insurance is provided as proof of errors and omissions coverage, the other insurance carrier shall agree to a noncancelable policy or to provide a letter of commitment to notify the commission thirty (30) days before the intention to cancel.
(8) The following provisions apply to individual licensees:
(a) The commission shall require receipt of proof of errors and omissions insurance from new licensees within thirty (30) days of licensure. Any licenses issued at any time other than policy renewal time shall be subject to a pro rata premium.
(b) For licensees not submitting proof of insurance necessary to continue active licensure, the commission shall be responsible for sending notice of deficiency to those licensees. Licensees who do not correct the deficiency within thirty (30) days shall have their licenses placed on inactive status. The commission shall assess fees for inactive status and for return to active status when errors and omissions insurance has been obtained.
(c) Any licensee insured in the state program whose license becomes inactive shall not be charged an additional premium if the license is reactivated during the policy period.
(9) The commission is authorized to adopt such rules and regulations as it deems appropriate to handle administrative duties relating to operation of the program, including billing and premium collection.
SECTION 3. Section 73-35-21, Mississippi Code of 1972, is amended as follows:
73-35-21. (1) The commission may, upon its own motion and shall upon the verified complaint in writing of any person, hold a hearing for the refusal of license or for the suspension or revocation of a license previously issued, or for such other action as the commission deems appropriate. The commission shall have full power to refuse a license for cause or to revoke or suspend a license where it has been obtained by false or fraudulent representation, or where the licensee in performing or attempting to perform any of the acts mentioned herein, is deemed to be guilty of:
(a) Making any substantial misrepresentation in connection with a real estate transaction;
(b) Making any false promises of a character likely to influence, persuade or induce;
(c) Pursuing a continued and flagrant course of misrepresentation or making false promises through agents or salespersons or any medium of advertising or otherwise;
(d) Any misleading or untruthful advertising;
(e) Acting for more than one (1) party in a transaction or receiving compensation from more than one (1) party in a transaction, or both, without the knowledge of all parties for whom he acts;
(f) Failing, within a reasonable time, to account for or to remit any monies coming into his possession which belong to others, or commingling of monies belonging to others with his own funds. Every responsible broker procuring the execution of an earnest money contract or option or other contract who shall take or receive any cash or checks shall deposit, within a reasonable period of time, the sum or sums so received in a trust or escrow account in a bank or trust company pending the consummation or termination of the transaction. "Reasonable time" in this context means by the close of business of the next banking day;
(g) Entering a guilty plea or conviction in a court of competent jurisdiction of this state, or any other state or the United States of any felony;
(h) Displaying a "for sale" or "for rent" sign on any property without the owner's consent;
(i) Failing to furnish voluntarily, at the time of signing, copies of all listings, contracts and agreements to all parties executing the same;
(j) Paying any rebate, profit or commission to any person other than a real estate broker or salesperson licensed under the provisions of this chapter;
(k) Inducing any party to a contract, sale or lease to break such contract for the purpose of substituting in lieu thereof a new contract, where such substitution is motivated by the personal gain of the licensee;
(l) Accepting a commission or valuable consideration as a real estate salesperson for the performance of any of the acts specified in this chapter from any person, except his employer who must be a licensed real estate broker; or
(m) Any act or conduct, whether of the same or a different character than hereinabove specified, which constitutes or demonstrates bad faith, incompetency or untrustworthiness, or dishonest, fraudulent or improper dealing.
(2) No real estate broker shall practice law or give legal advice directly or indirectly unless said broker be a duly licensed attorney under the laws of this state. He shall not act as a public conveyancer nor give advice or opinions as to the legal effect of instruments nor give opinions concerning the validity of title to real estate; nor shall he prevent or discourage any party to a real estate transaction from employing the services of an attorney; nor shall a broker undertake to prepare documents fixing and defining the legal rights of parties to a transaction. However, when acting as a broker, he may use an earnest money contract form. A real estate broker shall not participate in attorney's fees, unless the broker is a duly licensed attorney under the laws of this state and performs legal services in addition to brokerage services.
(3) It is expressly provided that it is not the intent and purpose of the Mississippi Legislature to prevent a license from being issued to any person who is found to be of good reputation, is able to give bond, and who has lived in the State of Mississippi for the required period or is otherwise qualified under this chapter.
(4) In addition to the reasons specified in subsection (1) of this section, the commission shall be authorized to suspend the license of any licensee for being out of compliance with an order for support, as defined in Section 93-11-153. The procedure for suspension of a license for being out of compliance with an order for support, and the procedure for the reissuance or reinstatement of a license suspended for that purpose, and the payment of any fees for the reissuance or reinstatement of a license suspended for that purpose, shall be governed by Section 93-11-157 or 93-11-163, as the case may be. If there is any conflict between any provision of Section 93-11-157 or 93-11-163 and any provision of this chapter, the provisions of Section 93-11-157 or 93-11-163, as the case may be, shall control.
(5) Nothing in this chapter shall prevent an associate broker or salesperson from owning any lawfully constituted business organization, including, but not limited to, a corporation, limited liability company or limited liability partnership, for the purpose of receiving payments contemplated in this chapter. The business organization shall not be required to be licensed under this chapter and shall not engage in any other activity requiring a real estate license.
SECTION 4. The Mississippi Legislature supports the efforts of the Mississippi Association of Realtors and Mississippi Bankers Association to establish a foundation dedicated to funding initiatives that will increase housing opportunity in Mississippi. The primary goal is to increase the supply of affordable housing and enhance the ability of low and middle income wage earning Mississippians to achieve the American Dream of homeownership.
The IREBEA program created by this act shall be strictly voluntary. Buyers who wish to have their escrow deposits placed in an interest-bearing account for their own benefit still will be able to do so. Brokers who participate in the fund will be issued a "notice to customers" to be displayed in the lobby of their offices, announcing the program and outlining its objectives.
The Mississippi Legislature does not expect real estate licensees to obtain the express permission of clients to use interest earned from their deposits to participate in this program; it is sufficient for licensees to prominently display their notice of participation in this program by posting a sign in the lobby of their offices, announcing the program and outlining its objectives.
SECTION 5. Section 73-35-103, Mississippi Code of 1972, is amended as follows:
73-35-103. As used in Sections 73-35-101 through 73-35-105, the following terms shall have the meanings ascribed herein unless the context clearly indicates otherwise:
(a) "Real estate broker" or "broker" means an individual, partnership or corporation licensed pursuant to Section 73-35-1 et seq., and as defined under Section 73-35-3(1).
(b) "IREBEA" means the program created and governed by Sections 73-35-101 through 73-35-105.
(c) "Interest earnings" means the total interest earnings generated by the IREBEA at each individual financial institution.
(d) "Mississippi Housing Opportunity Foundation" means the 501(c)(3) organization created by the Mississippi Association of Realtors and Mississippi Bankers Association for the purpose of increasing the supply of affordable housing in Mississippi and encouraging homeownership among low and middle income wage earners with funds generated via the IREBEA program.
SECTION 6. Section 73-35-105, Mississippi Code of 1972, is amended as follows:
73-35-105. (1) The IREBEA program shall be a voluntary program based upon willing participation by real estate brokers, whether proprietorships, partnerships or professional corporations.
(2) IREBEA shall apply to all clients or customers of the participating brokers whose funds on deposit are either nominal in amount or to be held for a short period of time.
(3) The following principles shall apply to clients' or customers' funds which are held by brokers who elect to participate in IREBEA:
(a) No earnings on the IREBEA accounts may be made available to or utilized by a broker.
(b) Upon the request of the client or customer, earnings may be made available to the client whenever possible upon deposited funds which are neither nominal in amount nor to be held for a short period of time; however, traditional broker-client or broker-customer relationships do not compel brokers either to invest clients' or customers' funds or to advise clients or customers to make their funds productive.
(c) Clients' or customers' funds which are nominal in amount or to be held for a short period of time shall be retained in an interest bearing checking or savings trust account with the interest, less any service charge or fees, made payable at least quarterly to the Mississippi Housing Opportunity Foundation Fund as required in subsection (6).
(d) The broker shall select in writing that the Mississippi Housing Opportunity Foundation shall be the beneficiary of such fund for the interest earnings on such fund. * * *
(e) The determination of whether clients' or customers' funds are nominal in amount or to be held for a short period of time rests in the sound judgment of each broker, and no charge of ethical impropriety or other breach of professional conduct shall attend a broker's exercise of judgment in that regard.
(f) Notification to clients or customers whose funds are nominal in amount or to be held for a short period of time is unnecessary for those brokers who choose to participate in the program. Participation in the IREBEA program is accomplished by the broker's written notification to an authorized financial institution. That communication shall contain an expression of the broker's desire to participate in the program and, if the institution has not already received appropriate notification, advice regarding the Internal Revenue Service's approval of the taxability of earned interest or dividends to the Mississippi Housing Opportunity Foundation Fund.
(4) The following principles shall apply to those clients' or customers' funds held in trust accounts by brokers who elect not to participate in IREBEA:
(a) No earnings from the funds may be made available to any broker.
(b) Upon the request of a client or customer, earnings may be made available to the client or customer whenever possible upon deposited funds which are neither nominal in amount nor to be held for a short period of time; however, traditional broker-client or broker-customer relationships do not compel brokers either to invest clients' or customers' funds or to advise clients or customers to make their funds productive.
(c) Clients' or customers' funds which are nominal in amount or to be held for short periods of time, and for which individual income generation allocation is not arranged with a financial institution, shall be retained in a noninterest-bearing demand trust account.
(d) The determination of whether clients' or customers' funds are nominal in amount or to be held for a short period of time rests in the sound judgment of each broker, and no charge of ethical impropriety or other breach of professional conduct shall attend a broker's exercise of judgment in that regard.
(5) The corpus and interest earnings from the Mississippi Housing Opportunity Foundation Fund shall be expended solely for the following purposes when allowed under Section 501(c)(3) of the Internal Revenue Code;
(a) Increase affordable housing opportunities in Mississippi by all necessary and proper means;
(b) Promote the availability of affordable, adequate, safe and decent housing to the citizens of Mississippi;
(c) Support education and research in housing issues, problems and opportunities;
(d) Provide technical assistance to groups seeking to deal with housing issues and needs;
(e) Engage in activities intended to enhance the ability of Mississippi citizens to secure housing;
(f) Provide financial resources to organizations that encourage homeownership opportunities for moderate, low and very low income individuals and families.
(6) All funds received from the IREBEA program shall be deposited with the Mississippi Housing Opportunity Foundation Fund quarterly. A separate accounting shall be made annually for all funds received. The corpus from the previous Real Estate Endowment Fund authorized under this act may be disbanded and distributed for use by the educational institution holding the funds at its discretion. The program authorized in subsection (5) and the budget therefore shall be approved by a board of directors. The board shall consist of four (4) representatives appointed by the Mississippi Association of Realtors and three (3) appointed by the Mississippi Bankers Association. This legislation shall only allow for this project to be performed. However, the Mississippi Housing Opportunity Foundation and their attorney(s) shall be responsible for complying with all federal and state laws and regulations, including, but not limited to, any necessary IRS code provisions.
(7) The educational programs authorized in subsection (5) and the budget therefor shall be approved by a board of directors * * *. The board shall consist of four (4) representatives appointed by the Mississippi Association of Realtors and three (3) appointed by the Mississippi Bankers Association.
(8) The Mississippi Real Estate Commission shall adopt appropriate and necessary rules in compliance with the provisions of Sections 73-35-101 through 73-35-105.
SECTION 7. This act shall take effect and be in force from and after July 1, 2004.