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Law Index -- Real Estate License Related Law
Administrative Rules
Chapter 193E Real Estate Brokers and Salespersons Index (PDF)
Chapter 193E Real Estate Brokers and Salespersons Analysis (PDF)
Rule Changes --193E Real Estate Brokers and Salespersons
Rule Changes --193E Real Estate Brokers and Salespersons

2000 R00-01

Commission Approved for Notice of Intended Action: December 9, 1999
Filed as Notice of Intended Action: December 24, 1999
Published as: ARC # 9600A January 12, 2000
Public Hearing: February 1, 2000
Commission Adopted: February 22, 2000
Date Filed Adopted: March 3, 2000
Adopted Published: March 22, 2000 ARC # 9739A
Effective Date *Non-Delayed Rules: April 26, 2000

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*Important Note --
The Specific Rules Delayed were terminated 6-9-00.
See R00-02

Administrative Rules Review Committee: 04-07-00
Rules 1.1 and 1.41 introductory paragraph, and subrules 1.41(3) and 1.41(7) delayed 70 days

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Notice of Intended Action

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REAL ESTATE COMMISSION [193E]
Adopted and Filed

Pursuant to the authority of Iowa Code sections 543B.9 and 543B.18, the Real Estate Commission hereby amends Chapter 1, "Business Conduct," Iowa Administrative Code.

These amendments are adopted to comply with changes made to Iowa Code section 543B.34(9a) and new section 543B.60A regarding restrictions on payment of commission to others.

The amendments to Chapter 1 add a new definition for "referral fee" or "finder's fee." New rule 193E--1.41(543B) clarifies the Commission's position relating to payment of rebates and inducements by licensees. Subrule 1.27(1) is amended to reflect the amount of personal funds allowable in the trust account as set in Iowa Code section 543B.46(4). New subrule 1.27(15) clarifies record retention requirements and record availability for trust account and compliance
audits.

Notice of Intended Action was published in the January 12, 2000, Iowa Administrative Bulletin as ARC 9600A. Two written comments were received prior to the public hearing held February 1, 000, and one person provided comments at the public hearing.

Nonsubstantive changes in language have been made for clarity and conciseness in the following: rule .141(543B), introductory paragraph, subrules 1.41(2) to 1.41(7), 1.41(8), paragraphs "c" and "d," and subrule 1.42(6), paragraphs "i" and "j."

These amendments were approved by the Commission on February 22, 2000.

These amendments shall become effective April 26, 2000.

These amendments are intended to implement Iowa Code sections 543B.9 and 543B.18. The following amendments are adopted.

* Item 1 4-7-00 Delayed 70 days and terminated 6-9-00* Item 1. Amend rule 193E--1.1(543B) by adopting the following new definition in alphabetical order:
" Referral fee" or "finder's fee" means any fee or other valuable consideration paid by a licensee to any unlicensed person or entity for the purpose of procuring prospects for the sale, exchange, purchase, rental or leasing of real estate.

Item 2. Amend subrule 1.27(1), paragraph "c," as follows:

c. A broker shall not commingle personal funds in a trust account; provided, however, that not more than $100, or the amount specified in Iowa Code section 543B.46(4), $500 of the broker's ersonal funds may be maintained in each separate account if (1) such personal funds are separately accounted for and (2) such personal funds are intended to be used by the broker to pay for expenses directly related to maintaining the account. The broker shall ensure that personal funds are deposited to cover bank service charges as specified in Iowa Code section 543B.46, and that at no time are trust moneys used to cover any charges. Upon notification that the broker's personal funds are not sufficient to cover service charges initiated by the bank that are above the normal maintenance charges, the broker shall deposit personal funds to correct the deficiency within 15 days of the closing date of that bank statement.

Item 3. Amend rule 193E--1.27(543B) by adopting the following new subrule:

1.27(15) Every broker shall retain for a period of at least five years true copies of all business books; accounts, including voided checks; records; contracts; closing statements; disclosures; signed documents; and correspondence relating to each real estate transaction that the broker has handled and each property managed. The records shall be made available for inspection by the commission, staff, and its authorized representatives at all times during usual business hours at the broker's regular place of business. If the brokerage closes, the records shall be made available for inspection by the commission, staff, and its authorized representatives upon request.

Item 4. Adopt the following new rule:

* 4-7-00 Introductory paragraph Delayed 70 days and terminated 6-9-00* 193E--1.41(543B) Rebates and inducements. With proper written disclosure, rebates and inducements may be paid to a party to the transaction, consistent with Iowa Code sections 543B.6 and 543B.34(9a), provided such party does not engage in any activity that requires a real estate license. A rebate or inducement shall not be made without the required written disclosures to the parties as provided in 193E--1.42(543B).

1.41(1) A licensee shall not pay a commission, any part of the commission, or valuable consideration to an unlicensed third party for performing brokerage functions or engaging in any activity that requires a real estate license. Referral fees or finder's fees paid to unlicensed third parties for performing brokerage activities, or engaging in any activity that requires a real
estate license, are prohibited.

1.41(2) In a listing contract, the broker is principal party to the contract. The broker may, with proper disclosure, pay a portion of the commission earned to an unlicensed seller or landlord that is a principal party to the listing contract. This will be deemed a reduction in the amount of the earned commission.

* 4-7-00 Delayed 70 days and subrule terminated 6-9-00 *
1.41(3) Payment to an unlicensed buyer or tenant is often referred to as "rebating." A broker's intention to pay money or costs associated with a transaction to a buyer or tenant may be advertised and promoted as a sales inducement. The payment to the buyer or tenant is permissible, when disclosed, because the broker is licensed and authorized to negotiate and the buyer or tenant may negotiate on the buyer's or tenant's own account.

1.41(4) A licensee may present a gratuitous gift, such as flowers or a door knocker, to the buyer or tenant subsequent to closing and not promised or offered as an inducement to buy or lease. The permission and disclosure requirements of 193E--1.42(543B) do not apply as long as any client relationship has terminated.

1.41(5) A licensee may present free gifts, such as prizes, money, or other valuable consideration, to a potential party to a transaction or lease, prior to signing a contract to purchase or lease and not promised or offered as an inducement to buy or lease. It is the licensee's responsibility to ensure that the promotion is in compliance with other Iowa laws, such as gaming regulations. The permission and disclosure requirements of 193E--1.42(543B) do not apply as long as no client relationship has been established with the buyer or lessee.

1.41(6) The offering by a licensee of a free gift, prize, money, or other valuable consideration as an inducement shall be free from deception and shall not serve to distort the true value of the real estate service being promoted.

* 4-7-00 Delayed 70 days and subrule terminated 6-9-00
* 1.41(7) No broker shall pay a commission, referral or finder's fee, or other valuable consideration to another broker knowing that a portion will be paid to an unlicensed person or party for performing any activity for which a real estate license is required, or which otherwise constitutes a commission, referral or finder's fee, or other valuable consideration, requested after a bona fide offer to purchase has been accepted or a bona fide listing agreement or buyer's brokerage agreement has been signed, or which constitutes an undisclosed rebate or inducement.

1.41(8) A licensee may make donations to a charity, or other not-for-profit organization, for each listing or closing, or both, that the licensee has during a specific time period. The receiving entity may be selected by the licensee or by a party to the transaction. The contribution may be in the name of the licensee or in the name of a party to the transaction. Contributions are permissible only if the following conditions are met:

a. There are no restrictions placed on the payment;

b. The donation is for a specific amount;

c. The receiving entity does not act or participate in any manner that would require a license;

d. The licensee exercises reasonable care to ensure that the organization or fund is a bona fide nonprofit;

e. The licensee exercises reasonable care to ensure that the promotional materials clearly explain the terms under which the donations will be made; and

f. All required disclosures are made.

Item 5. Amend subrule 1.42(6) by adopting the following new paragraphs "i" and "j:"

i. The provisions of these rules and subrules do not apply to a gratuitous gift, such as flowers or a door knocker, to a buyer or tenant subsequent to closing and not promised or offered as an inducement to buy or lease as long as any client relationship has terminated.

j. The provisions of these rules and subrules do not apply to a free gift, such as prizes, money, or other valuable consideration, to a potential party to a transaction or lease prior to signing a contract to purchase or lease and not promised or offered as an inducement to sell, buy, or lease as long as no client relationship has been established with the buyer or lessee.

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