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Chapter 3 - The Georgia Code
At the completion of this chapter, students will be able to do the following:
1) List the powers of the Commission to issue, suspend, or revoke a license.
2) Identify the requirements regarding escrow accounts.
3.1 The Georgia Real Estate Commission
In this chapter we will review Chapter 40 (Real Estate Brokers and Salesperson), Title 43 of the Georgia Code.
The Georgia Code supplements the Georgia Real Estate License Law, which we just reviewed in the previous chapter. There are times when the Georgia Code provides additional rules and regulations on top of those written under the Georgia Real Estate License Law.
Let’s start by going over the rules and regulations regarding the Georgia Real Estate Commission.
Section 43-40-2. Creation of commission
This section of the Georgia Code involves the establishment of a Georgia Real Estate Commission. The Commission is appointed by the governor and is comprised of six people. Five of those six must be real estate professionals actively participating in the industry for no less than five years. The final person must have no connection to the real estate industry and instead must be an active consumer advocate.
Any vacancy on the Commission is filled by the Governor. Any person who has a connection to any matter brought before the Commission must recuse themselves from voting on the issue. Members of the Commission may be removed for specific causes including not being involved, dishonesty, sanctions, or incompetence.
The Commission’s role is to create regulations which apply to those who have real estate licenses in Georgia. The Commission is further tasked with providing an annual report for the Governor as well as both Chambers of the Assembly. This report must cover what rules or regulations were implemented, provide hard numbers on the number of real estate professionals in the state, as well as a detailed analysis of the income and expenses of the Commission. Details of personnel employed by the Commission must also be included. When called upon to do so, the commission must also be prepared to submit a mid-year report.
Members of the Commission are entitled to collect a stipend for their services. This stipend is equivalent to their actual expenses, $25 per meeting, and expenses incurred in getting to and from meetings.
Section 43-40-3. Determination of fees by commission
This section provides the Commission with the authority to set and collect fees based on costs. Costs are further defined as direct and indirect costs associated with the Commission.
Section 43-40-3.1. Rules and regulations
This section outlines the guidelines for the Commission to follow when implementing new rules. Some of these guidelines include reduction of paperwork, changes in records retention, and non-standard signature acceptance procedures.
Section 43-40-4 – Establishment of Real Estate Commissioner
This section provides the Commission with the authority to hire a full-time employee to serve as Real Estate Commissioner. Such person may not have an ownership interest in any company with ties to the real estate industry. In addition to providing the Commission the authority to set the Commissioner’s salary, this section also provides guidelines on the hiring authority of the Commissioner for their needed staff members. Outside of these guidelines, the Commission further can set up any criteria for the Commissioner as they deem appropriate.
Section 43-40-5 Status of license of commissioner and commission employees
This section sets up rules for the Commissioner and all Commission appointees to place their real estate licenses into inactive status for the period of time they serve. Fees must be paid by such members to maintain their license until such time as their term on the Commission comes to an end. Once the tenure has expired, members of the Commission may place their license back into active status.
Section 43-40-6 Seal; records
This section allows for establishment of a seal with the words “State Real Estate Commission, State of Georgia” which may be affixed to any document approved by the Commission. This section further defines the guidelines for usage of said seal and provides the Commission the authority to determine how to handle paper record retention after conversion to electronic records.
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3.2 Obtaining a License
Georgia requires all real estate professionals to obtain a license. The process for obtaining a license is explained in Title 43, Chapter 40, subsections 7 through 11 of the Georgia Code. We’ll provide a summary of the process, educational requirements, and the continuing education requirements to maintain a real estate brokers or salespersons license in Georgia.
The initial application process requires you to provide basic information about you and your business. If you intend to operate under your own name, you’ll be asked to provide that along with the address at which you’ll be conducting business as well as other information requested by the commission.
For those operating as a specific entity, such as a partnership or limited liability company, the business name and then name and residential address of the members of the company must be provided. Those who are operating as corporations must provide the corporate name, as well as the name and address of the corporate officers.
The information you submit as part of the application process is kept confidential. However, once your license is granted, part of the information submitted will be available publicly including names, license number and status, information on your business, and whether you’ve been subject to any sanctions. Other information, including training, may also be made publicly available at the discretion of the commission.
Subsection eight defines the qualifications for community association managers license.
The qualifications include:
- being at least 18 years of age,
- a resident of Georgia, and
- high school diploma or GED.
There are other requirements which must be met including:
- passing a criminal background check,
- completion of 25 hours in an approved managers study course and
- passing an approved real estate exam.
Should you be unable to meet any of these requirements, your request for this license will be denied and you will not be entitled to a hearing.
The requirements for a broker or associate broker’s license is also part of subsection eight.
The requirements are slightly different:
- You must be at least 21 years old to apply,
- have an active license and
- have maintained an active license for a minimum of three of the last five years at the time of application.
Educational requirements include 60 hours of commission-approved coursework. Those who are previously licensed as community association managers must have completed 75 hours of additional approved instruction. Passing the commission approved real estate exam is also required. Like the community association manager, failure to meet all requirements will result in your application being denied and no appeal hearing granted.
In order to qualify to become a real estate salesperson, you must satisfy the following requirements:
- First you must be at least 18 years old with a high school diploma or a certificate of equivalency.
- Second, you must complete the required 75-hour Georgia real estate salespersons course (which is what you are currently taking).
- And, finally, you must pass the real estate salespersons State exam.
Once you have obtained your salesperson’s license, there are additional requirements which must be met to maintain your license. The commission requires each professional to undertake at least 25 hours of continued education within one year of obtaining their license.
Should you fail to complete the additional training requirements, you must surrender your license immediately. Lapses in licensing may be cured by completing the required course and exam within six months of surrender.
Instructors as well as courses required under this section must be approved by the commission. The commission also has the right, but not the obligation to approve training other than in-person training.
Subsection 9 defines the rules of non-Georgia residents who have a license in other states. Those who do not reside in Georgia and have maintained a license since at least July 1, 1991 will have many of these requirements waived. To do so, they must show proof they have a current license, they must pay the fees, and attest they have reviewed the section of the rules and regulations for brokers in Georgia. Should a non-Georgia resident participate in any agreement with an in-state broker they must have a written agreement which complies with all commission rules and regulations.
Licensing as a broker may be denied if a firm fails to comply with any of the provisions of the Georgia code. Any person who acts as a licensee must hold a real estate license or the firms’ brokers license may be suspended or denied.
3.3 Required Fees
Real estate professionals in Georgia are expected to pay specific fees for their licensing. These fees are paid to the Georgia Real Estate Commission which is the authority responsible for setting the fees. Here is a breakdown of what is expected from licensees.
The purpose of the fees (which you are assessed) is to pay the expenses associated with operating the Commission’s office as well as those fees incurred during enforcement of the Georgia statues. Under the guidelines set by the commission, no fees collected shall be refunded for any reason.
As part of your licensing application, you will be required to pay a fee for the State exam. Should you fail the test, you will have to pay an additional fee after filing a new application. Once you have passed the State exam, the company you will be working for will be required to pay an additional fee to activate your license.
When you renew your license per the commission’s requirements, you will also be asked to pay additional fees. Should you fail to renew your license before it expires, you are still entitled to reinstatement for a period of up to two years. It’s important to note that a reinstatement requires the payment of renewal fees, late fees that may have been due while your license was lapsed as well as a reinstatement fee.
Should you fail to renew your license after two years, you will be required to meet additional educational requirements for a period of up to five years. And you will also be responsible for the same fees, even if the lapse was due to failure of paying the renewal fees. Any license who allows their license to lapse for five years will be required to meet education requirements and pass the State exam again. Non-resident licensees may renew their licensing provided they have maintained their license in their home state. You should also be aware that if you decide to have your license maintained as inactive, you will be required to pay licensing fees to maintain inactive status.
Should you opt to change your status from broker or associate broker to salesperson, you may turn in your broker’s license and apply for a salesperson’s license without passing any additional tests. You will be subject to the same fees as an original applicant.
Should your license lapse because of a disaster in your area, you may be able to get your license renewed for a period of up to two years provided that you can demonstrate your personal property or place of business were negatively impacted.
Any fees you pay to the commission are controlled by the state treasurer. All expenses of the commission are to be paid from the funds which are collected for licensing, application, and renewal fees and there is no state budget allowance should those fees fail to cover the expenses of the commission.
3.4 Power of the Commission to Issue, Suspend, or Revoke a License
Anyone who holds a license for real estate in Georgia is bound by the rules issued by the Commission. The Commission has broad powers including the right to revoke, suspend or issue a real estate license to any person as well as the right to regulate the rules pertaining to the issuance of a license.
The Georgia Code grants the Commission the following powers.
The Commission can regulate all licensing matters including the issuing, suspension, revocation, and censure of any licenses. Each applicant agrees that the Commission has this power as part of their initial application, or application for renewal.
In addition, should the Commission feel it is necessary to investigate or examine a broker's trust account, they have the full authority to hire or enter into a contract to assist them with the fulfillment of such examination. There are some limits on this authority; however, since the Commission must be able to demonstrate such examination requires specific expertise including that of an accounting or legal expert. In these cases, the Commission maintains full supervisory authority over such experts. Final decisions in any cases are made by the Commission and not by any expert whom the Commission hires to undertake the review.
It is important to remember the Commission has broad power to collect fees as well. The fees may be used to pay any and all fees required to pay such experts provided that any funds remaining at the end of the year are turned over to the State Treasurer for deposit to the State Treasury. No fees remaining at the end of the fiscal year may be carried over from year to year.
One of the more serious responsibilities of the Commission is establishing what behavior is acceptable for those who are license holders. The Commission has previously established it is the responsibility of a real estate license holder to act in the interest of the public. Therefore, license applications are reviewed and will not be approved should the applicant have a prior felony conviction. It is also worth noting the Commission has determined that should an applicant have pled no contest or agree to treatment as part of a first-offender program, this person may also be denied a license.
The Commission may review applicants at their discretion should more than five years have passed, and the applicant has fulfilled their debt by fulfilling the terms of any jail time, restitution, etc. which were a result of the conviction or arrest. The Commission retains the right to insist that applicants with a prior conviction be able to effectively demonstrate they have successfully established their competence, honesty, and can demonstrate they can be trusted. The Commission has the sole discretion to request such documentation and has the authority to determine how the applicant must document their claims of having rehabilitated themselves.
In cases where the applicant is applying for an associate broker or a broker’s license, should there have been a conviction involving a financial crime, or one of moral turpitudes, the waiting period before being reconsidered will be 10 years. The 10 years begins at the time of conviction, release from incarceration, or fulfillment of sentencing whichever of these events occurs last.
False statements, violation of fair housing law, or pending criminal charges shall be grounds for denial of a license and in some cases, for refusal to issue a license at any time. Should an active licensee be convicted of a crime, the Commission may suspend their license within 60 days of the conviction. Additionally, license holders who are facing mortgage foreclosure or are in default of child support payments will also have their license suspended, or an initial or renewal license application denied. Such suspension, or denial shall continue until such time as the applicant has made appropriate arrangements to address the issue.
Applicants for a real estate license may have the opportunity to rebut a denial, revocation or suspension of their license through a hearing. These hearings will take place in the location where the Commission has established their primary place of business. Should an applicant not be satisfied after such a hearing, they may be entitled to request the superior court of Georgia to review their case. The court review will also take place in the county where the Commission does business.
3.5 Brokerage Management
In this lesson, we will discuss the requirements relating to brokerage management.
Brokers are responsible for overseeing the activities of licensees in their offices. In addition, they are required to follow all local rules for operating a business. The general rules which apply to operations include putting policies in place to protect the public and provide for the oversight of those licensees who are working in the office.
A qualifying broker could be putting their own license at risk should an affiliate in their office break any of the rules laid out in the Georgia Code. This may be prevented by maintaining written procedures which cover advertising, review and issuance of contracts for sale and purchase, renting or leasing, or offers issued on properties.
In addition, the qualifying broker is responsible for making sure the affiliate is aware of trust accounting procedures and has a review process to make sure the rules are being followed. They must further provide instructions on required education and testing.
The supervising broker must provide written agreements confirming the affiliate's compensation for completed transactions and while they may delegate such authority as needed, the qualifying broker will still be responsible for all actions performed by the affiliate.
Only a licensed broker may operate an office where they are the sole proprietor. Should a partnership exist, the qualifying broker must be a partner, and should the office be owned by a corporation, the qualifying broker must be one of the officers. When signing contracts, the individual qualifying broker as well as the corporation is bound by the terms of the contract. The officer of the company must also remain a signatory on all trust accounts.
The Georgia commission must be notified, in writing, of any address changes of the operation within 30 days of its occurrence. Additionally, should an affiliated broker leave the firm, the broker must provide a process for the license to be forwarded to the new firm, or returned to the commission.
Should a transaction be pending at the time an affiliate leaves an office, they may participate in the completion of the transaction provided there is a written agreement between the affiliate and the qualifying broker which clearly lays out the terms of the agreement, compensation, and the qualifying broker’s assurance they accept the liability for the action of the affiliate.
3.6 Escrow Accounts and Recovery Fund
Throughout a broker’s career, they will be asked to take control over certain deposits. These may include funds for escrow purposes, good faith deposits, and other deposits such as security deposits or association fees. Brokers have a responsibility to ensure these funds are held for the benefit of the person they are intended for. The Georgia Code is specific about how these funds are to be managed.
All funds received by a broker, or their managing office are to be deposited into a federally-insured account which must be designated as a trust or escrow account. These accounts must be registered with the Commission. Any broker who does not regularly maintain this type of account must open one within 24 hours of receiving funds related to a real estate transaction.
The Commission must be notified of where any funds for a real estate transaction are being held. Information including account number or name must be made available to the Commission upon the account being established. The Commission reserves the right to have access to the records for the account at two specific periods of time. First, if there is a concern about any activity in the account, and second when the Commission is reviewing licensing requirements.
In most cases, all bank accounts must be held in a bank in Georgia. There are exceptions to this which apply to those brokers or agents who are licensed in other states, however, the Commission still retains the right to review those accounts. It is also worth noting that, provided the Commission is notified, a broker may maintain more than one trust account.
Earnest money, security deposit, or other trust funds may not be used to pay a broker’s commission until such time as the designated transaction has been completed. Funds shall only be disbursed from the trust account when properly authorized.
There are specific rules which pertain to funds which are escrowed for the purposes of escrowing funds for reserves for taxes and insurance, or any other encumbrance. Disbursement of funds must be made only as previously agreed upon and all involved parties must be duly notified of the date and amount of the disbursement.
If the Commission suspects after examination of the paperwork associated with a trust account that there is potentially a problem, or if a licensee refuses access to the documents associated with any trust account, a report will be filed with the Georgia Attorney General.
In these cases, the Attorney General may request a judge issue an order to impound the account and appoint a receiver to oversee such account. The licensee may be required to turn over to the receiver books, papers, documents, and records pertaining to the account. Should a judge issue such an order, the receiver may be given control over many aspects of a business including the right to custody, collection, administration, winding up, and liquidation of such property and business.
The Commission has the authority, and obligation to maintain a real estate recovery fund. This fund shall have a balance of at least one million dollars and is a research, education, and recovery fund. The purpose of the fund is to provide funds for any person harmed in a real estate transaction who is not a licensee. Any party harmed shall be entitled to collect a maximum amount of $25,000 from the fund.
The monies deposited in this fund shall be collected from licensees. These funds are assessed at the time of obtaining a license and are set by the Commission. Funds are only disbursed after a court has ordered a judgment and a determination has been made as to the validity of their claim. The Commission must receive a written request for disbursal of funds within 30 days of the claim being validated by the court. The Commission does have the right to further verify the claim.
When a licensee is found to have acted improperly resulting in a claim being filed and paid by the Commission, they shall have no access to a new license until such time as the licensee has repaid the amount in full, plus interest at the judgment rate.
If at any time the fund does not have sufficient resources to pay any legitimate claim, the Commission shall be obligated to make such payment as funds are available for the full amount of the claim plus four percent interest on any amounts which remain unpaid. Before any payments are made on claims, judgments which may have been authorized to the aggrieved party must be turned over for the benefit of the fund.
The Commission is further authorized to use this fund for education purposes including developing courses, conducting seminars, conducting research projects impacting licensees. All licensees in Georgia agree they may be assessed an additional fee of up to $30 per person per year to maintain this fund.
Any licensed broker who also acts as a community association management service provider will be required to maintain a fidelity bond, or fidelity insurance which protects the association from any potential issues which may arise out of their handling of trust funds.
Most real estate professionals work on commission and there may be cases when they are not paid as agreed. However, before any type of collection may occur through the legal system, there must be proof that the person who is seeking to recover the compensation is properly licensed in the state of Georgia. The Georgia Commission, as well as the Commissioner, are authorized to act if a violation occurs.
There are codes of conduct which govern the actions of a licensed real estate professional which must be followed, or their license may be at risk. Codes of conduct are also well-established for those who provide education for licensees. Violations can result in serious consequences and the Georgia Commission has the final say and authority to determine the consequences.
The Georgia Administrative Procedure Act allows licensees, schools, or instructors to follow due process when accused of acting inappropriately. Once the hearing process is complete, the Georgia Commission has the discretion to deal with adverse findings.
In the event any school or instructor offering real estate education, or any licensed real estate licensee is found to have violated any rules set by the Commission, the Commission has the authority to determine the penalties.
Penalties for violations, or fraudulent representation include suspension of licenses, refusal to issue new or renew a license, sanctions, fines, and potential imposition of new education requirements. Should any licensee be penalized, the Commission also retains the right to hire an auditor to review their books at any time.
Violations for which a licensee could face potential penalties include violations of the Fair Housing Act. These violations may be explicit, such as in advertising or may be implicit such as refusal to show properties in certain neighborhoods to certain persons.
Misrepresentation of property values, failure to disclose dual broker relationships, or conflicts of interest may also be considered violations. Any real estate professional who fails to maintain trust accounts properly, including allowing comingling of funds, fails to clearly identify deposits or withdrawals to such accounts, or removes funds from a trust account without authorization, could be subject to fines, penalties and loss or suspension of their license.
Real estate professionals must always act in an ethical manner in all transactions. No professional shall display a for sale, lease, or rent sign without the proper authorization of a property owner. In addition, a licensee must disclose to all parties any transaction in which they are a principal. Licensees may not use coercion to convince a property owner or buyer to complete a transaction. Coercion includes over-stating property value, making promises based on potential future value of property, or convincing a seller to change property brokers when a contract already exists.
Licensees are also prohibited from entering into commission or fee agreements with those who are not licensed in Georgia. There are situations where a fee may be paid to someone who no longer holds a valid license in Georgia but did hold a license at the time the transaction started. For example, a person was properly licensed but is deceased when the transaction is completed or has moved from the United States since the transaction started.
In addition to making full disclosure to potential clients, a licensee has the obligation to ensure all contracts are legal based on the laws of Georgia. No licensee shall be considered to be practicing law when taking part in a real estate contract of any kind which requires all parties to sign.
Such contracts must clearly explain the date of expiration and have the proper signatures affixed to them. In the event a transaction is not completed, the licensee shall make sure all good faith deposits and other monies are properly accounted for and any balances are returned to the proper parties within 30 days of the termination.
Licensees must always disclose any conflicts of interest and act in the best interest of the public at large. When a licensee has found to be in violation of any portion of the code, the Commission reserves the right to review all prior sanctions and disciplinary actions and take those into consideration when determining the severity of new actions.
Citations and letter of findings shall not be considered sanctions under the code. The Commission shall maintain the right to issue citations when a licensee is found to be in violation of any rules. They may impose fines, require additional education, or suspend licenses if the fines or educational requirements are not met by the licensee.
3.8 Judicial Review
Whenever a licensed real estate professional in Georgia is found by the Commission to have violated any rule, they do have the right to request a hearing. The licensee shall be notified about their right to a hearing and any failure to respond to the notice shall allow the Commission to proceed to hear evidence and take action they deem appropriate.
After the hearing, the licensee shall be notified of any action taken by the Commission via verifiable mail. Should action be taken which is adverse to the licensee, they shall have the right to request judicial review of the action in the superior court where the Commission is located. This may only be done after all administrative options have been exhausted.
Any person applying for a license, any person who already holds a license, a facility offering courses, and instructors who are approved by the Commission shall be subject to investigation should a sworn complaint against them be filed.
In the event the Commission becomes aware of wrongdoing because of a court action on another case, the Commission may investigate for a period of up to three years. Any person who is authorized to conduct an authorized investigation shall have full access to any documents which are necessary to complete such investigation. In the event of a refusal to provide any documents, the Commission shall have the right to issue a subpoena to get access any documentation necessary.
The result of investigations shall be made available only to the Commission and the Commissioner. Such results shall only be released when requested for further law enforcement activity or when requested in writing by the licensee.
The Commission retains the right to make available on their website the names of any licensee including schools, instructors and real estate professionals who have been subject to suspension or revocation. The Commission or the Commission’s staff may invoke the right to request any principal remove themselves from any hearing or disciplinary meeting. No person shall have the right to participate in the proceedings against any licensee, the Commission retains the right to exclude anyone not directly involved.
Any applicant for a license, or licensee shall be subject to a review of their criminal record. Should such applicant, or licensee be found guilty, or plead no contest, except for minor traffic violations, they shall be subject to a full review of their potential criminal history including access to FBI records. The Commission shall always maintain such criminal history in strict confidence. No such information shall be part of the applicant or licensee’s public record and shall be used only by the Commission as allowed by the Commission's mandate.
Any action which is taken by the Commission may be referred to the Attorney General for further action when warranted. The Attorney General has the right to assist in any manner in the enforcement of any portion of the Georgia real estate code.
3.9 Acting Without a License
Any person who is acting in the capacity of a real estate broker must be properly licensed in Georgia. There are exceptions on when a license is required which may include the spouse of a licensee, an attorney acting in an incidental manner or under power of attorney, property or community association managers, and others who may not be collecting a fee for their services such as a referral fee. None of the exceptions shall apply to any person who is attempting to offer their services without obtaining a license if one would normally be required. Additionally, these exceptions do not apply to any person who currently has a real estate license which may be inactive.
Any person who has an intention to close a transaction without a license shall be deemed to be in violation of the rules of the real estate Commission. Their actions will be seen as unlawful unless there is an exemption which applies to their circumstances. If such action is determined to be in violation of the Georgia Code, the Commission has the right to issue a cease and desist order to the involved parties.
If after a cease and desist order is issued for acting without a license, the Commission shall have the right to impose a fine of up to $1,000 per transaction. Each day such a violation occurs shall be treated as a separate violation and will be subject to judicial review by the superior court. The Commission does have the right to pursue action without a requirement of a cease and desist order.
The Code does not determine when an employer-employee or broker-independent contractor relationship exists, this is up to the discretion of the parties involved. Should a person be acting as a licensee without proper licensing they will be guilty of a misdemeanor.
Chapter 3 - Quiz
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