August 21, 2019

Colorado Court of Appeals: Real Estate Transaction-Broker’s Duties are Statutory and Cannot Be Contracted Away

The Colorado Court of Appeals issued its opinion in Colorado Real Estate Commission v. Vizzi on Thursday, March 7, 2019.

Administrative Law—Real Estate License—Transaction-Broker—Mandatory Duties—Federal Antitrust Law—Due Process—Sanctions.

Vizzi entered into contracts in 2013 and 2014 with three clients to provide unbundled real estate brokerage services in exchange for a flat fee. In one instance, he contracted only to list the client’s property on the Multiple Listing Services (MLS) list. In two other instances, he contracted only to provide a yard sign, a lock box, and centralized showing services, and to list the properties on the MLS. An anonymous informant notified the Colorado Real Estate Commission (Commission) of Vizzi’s practices and the Commission charged Vizzi with failing to fulfill his statutory duties under C.R.S. § 12-61-807(2). An administrative law judge (ALJ) found that Vizzi was required to provide his clients all of the services listed C.R.S. § 12-61-807(2) and failed to do so in the transactions at issue. The Commission adopted the ALJ’s findings of fact and conclusions of law and modified the discipline imposed on Vizzi to include public censure.

On appeal, Vizzi maintained that he was permitted by statute to contract out of many of the duties imposed on transaction-brokers under C.R.S. § 12-61-807(2) and the contracts in question successfully accomplished that goal. A transaction-broker’s statutory duties are mandatory and cannot be contracted away. Here, the record supports the ALJ’s findings that Vizzi intended not to act as a transaction-broker and manifested that intent by inserting language into the contracts disclaiming the duties of such a broker, and Vizzi violated C.R.S. §§ 12-61-113(1)(k), 12-61-113(1)(n), and 12-61-803(1).

Vizzi also argued that the Commission’s policy prohibiting the provision of limited real estate services violates federal antitrust law. The Commission’s discipline of defendant for failing to perform his statutory duties fell within the Commission’s statutory authority and is properly considered state sovereign action. Therefore, it did not violate federal antitrust laws.

Vizzi next maintained that the ALJ violated his due process rights by denying his motion to compel disclosure of the identity of the anonymous complainant. Vizzi did not show how the complainant’s identity was relevant to his ability to defend against the Commission’s charges. Therefore, the Commission did not err in upholding the ALJ’s denial of Vizzi’s motion to compel disclosure of the anonymous complainant.

Vizzi further contended that the Commission exceeded its statutory authority and thus violated his due process rights when it imposed public censure after the ALJ had imposed only a fine and continuing education. Alternatively, Vizzi argued the decision to impose public censure was arbitrary and capricious. Vizzi violated his statutory duties multiple times after the Commission’s December 2010 position statement put him on notice that the listing contracts he prepared in 2013 and 2014 were improper. And the public censure penalty was sought in the initial charge against Vizzi. Therefore, the Commission acted within its statutory authority by imposing a sanction beyond that imposed by the ALJ, and the Commission’s sanction bore some relation to Vizzi’s misconduct and to the needs of the public.

The order was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Real Estate Broker Properly Disciplined by Commission for Conversion of HOA Funds

The Colorado Court of Appeals issued its opinion in In re Disciplinary Action Against the Real Estate Broker’s License of Bernard McConnell v. Colorado Real Estate Commission on Thursday, September 24, 2015.

Real Estate Commission Discipline.

In 2010 and 2011, while serving as president of the Pinecliff Homeowners Association (HOA), McDonnell wrote four checks totaling $10,000 on the HOA’s account payable to himself or his business. When the treasurer discovered one of these checks, McDonnell claimed he had written the check by mistake and repaid the HOA. When the treasurer’s term ended, McDonnell took custody of the HOA’s accounting records and refused to appoint a new treasurer.

The next year, an HOA board member called for a meeting to discuss accounting issues. McDonnell declined to attend and resigned. He then deposited the remaining $8,000 he had withdrawn for non-HOA purposes into the HOA bank account.

When the HOA board discovered the checks, they reported McDonnell to the police and the Colorado Real Estate Commission (Commission). No criminal charges were filed, but the Commission opened an investigation. The Commission charged McDonnell with four violations of the Colorado Real Estate Broker License Law. McDonnell appealed the Commission’s order sanctioning him on some of those counts.

The Court of Appeals first rejected McDonnell’s contention that the Commission did not have authority to sanction him for conduct that does not involve “selling, exchanging, buying, renting or leasing” real estate. The Court cited numerous provisions that allow the Commission to sanction a broker’s improper conduct outside of the real estate context, particularly when it speaks to the broker’s honesty, dignity, or moral character.

The Court also rejected McDonnell’s argument that CRS § 12-61-113(1)(g) (providing for sanctions for failure to properly account for funds) only applies to a licensee’s conduct involving real estate matters. The plain language of the section is clearly broader and not so limited.

McDonnell argued that CRS § 13-16-113(1)(g.5) (providing for discipline for conversion of funds of others and diverting funds of others without authorization) applies only to real estate transactions and that, even if it applies, his conduct was not conversion because he always intended to return the money. The Court disagreed, again holding that the section applies to more than just real estate transactions. Moreover, the Commission’s conclusion that McDonnell took the funds from the HOA without authorization and used them was amply supported in the record.

The Court further rejected McDonnell’s argument that CRS § 12-61-113(1)(t) (providing for discipline for any other conduct that constitutes dishonest dealing) only applies in the real estate context. It also rejected his argument that his actions did not rise to the level of dishonest dealing. Although “dishonest dealing” is not defined in Colorado statute or case Law, a court can determine the meaning of an undefined phrase of common usage by ascertaining its usual and ordinary meaning. Here, McDonnell’s misrepresentations and misappropriations demonstrate the ordinary meaning of a dishonest act.

The Court agreed with McDonnell that he could not be disciplined under CRS § 12-61-113(1)(n) (providing for discipline for incompetency or endangerment to the public). The administrative rule implementing this section provides an exhaustive list of grounds for unworthiness or incompetence, none of which were done by McDonnell and none of which apply outside of the real estate context. Accordingly, the Court affirmed the Commission’s conclusions as to three of the four counts, along with the Commission’s sanctions.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Real Estate Commission Revamps Brokerage Forms Website

The Colorado Real Estate Commission has updated the webpage where the Colorado Real Estate Commission’s broker forms are available. These forms are available as fillable Adobe PDF documents and may be downloaded from the CREC website.

As reported by CBA-CLE Legal Connection last week, many of these forms are marked “Mandatory 1-13.” However, the forms are only mandatory for use by licensed real estate brokers — attorneys are not required to use these forms exclusively.

Colorado Real Estate Commission Forms Effective January 1, 2013 (Revised)

The Colorado Real Estate Commission amended several forms in 2012, which are effective January 1, 2013 and mandatory for use by licensed real estate brokers. The forms are available as PDFs that may be downloaded from a zip file on the Colorado Real Estate Commission website.

The forms with a January 1, 2013 effective date are:

  • AE 41-9-12 – “Agreement to Amend/Extend Contract”
  • CBS1-9-12 – “Contract to Buy and Sell Real Estate (Residential)”
  • CBS2-9-12 – “Contract to Buy and Sell Real Estate (Income – Residential)”
  • CBS3-9-12 – “Contract to Buy and Sell Real Estate (Commercial)”
  • CBS4-9-12 – “Contract to Buy and Sell Real Estate (Land)”
  • CBSF1-9-12 – “Contract to Buy and Sell Real Estate (Colorado Foreclosure Protection Act)”
  • CL8-9-12 – “Closing Instructions”
  • CP40-9-12 – “Counterproposal”
  • EBA53-10-12 – “Exclusive Brokerage Listing Addendum to Listing Contract”
  • EM9-9-12 – “Earnest Money Receipt”
  • GD31-9-12 – “Green Disclosure (Energy)”
  • LB36-10-12 – “Licensee Buy-Out Addendum to Contract to Buy and Sell Real Estate”
  • LC50-9-12 – “Exclusive Right-to-Sell Listing Contract”
  • LP45-9-12 – “Lead-Based Paint Disclosure (Sales)”
  • LP46-9-12 – “Lead-Based Paint Disclosure (Rentals)”
  • NTC43-10-12 – “Inspection Objection”
  • NTC43R-10-12 – “Inspection Resolution”
  • NTT44-9-12 – “Notice to Terminate”
  • RA33-9-12 – “Residential Addendum to Contract to Buy and Sell Real Estate”

These forms and all other Colorado Real Estate Commission forms may be downloaded from the Colorado Real Estate Commission website.