Principles of Real Estate Practice in New York: First Edition

PREFACE

About the text

Principles of Real Estate Practice in New York is a modern learning tool for the student preparing to enter the real estate business in New York as a licensed professional. It contains the essentials of real estate law, principles, and practices taught in New York real estate schools and colleges, including all those fundamentals that real estate educators, practicing professionals, testing services, and licensing officials agree are necessary for basic competence. Principles of Real Estate Practice in New York covers the prelicense requirements mandated by New York license law.

Principles of Real Estate Practice is tailored to the needs of the prelicense student. It is designed to

make it easy for students to learn the material

prepare students for numerous career applications

stress practical, rather than theoretical, skills and knowledge.

Inside the cover

Each section begins with an overview of the main heads covered in the section. As each of these heads is expanded, the subheads are displayed in the margin. Key terms are printed in bold type the first time they are used and defined. The sections conclude with a study aid called the Snapshot Review, which compresses the main points of the section into one or two pages. After the last section are tests for all the sections. The answer key following the tests refers to the page in the text that explains the correct answer. The book is also provided with a special section on real estate math, a practice exam reflecting the content of the New York licensing examination, and two glossaries of real estate terminology.

About the authors

For over forty years, Stephen Mettling and David Cusic have operated one of the nation's most successful custom training organizations specializing in real estate program development. Mr. Mettling has also served as vice president and author for a major real estate training and publishing organization. Under various capacities, he has managed the acquisition, development, and sale of national real estate textbooks and publications, as well as directed the country's largest affiliated group of real estate schools.

Mr. Cusic, an author and educator with international real estate training experience, has been engaged in vocation-oriented education since 1966. Specializing in real estate training since 1983, he has developed numerous real estate training programs for corporate and institutional clients around the country.

Ryan Mettling, partner and publisher of Performance Programs, is an experienced online curriculum designer, author, and course developer.

1

License Law and Regulations

Introduction to License Law

License Categories and Responsibilities

Requirements for Licensure

Maintaining A License

License Renewal

Promulgated Regulations

Place of Business Requirements

Branch Office Requirements

Advertising Guidelines

License Law Violations

Unlicensed Assistants

Property Condition Disclosure Act

Gas Well Disclosure

INTRODUCTION TO LICENSE LAW

State Board of Real Estate

Activities

requiring licensure

Licensure exemptions

Purpose

The primary purpose of real estate license law is to protect the general public.

To protect consumers from misrepresentation and fraud, real estate license laws have been enacted to regulate the practices of real estate professionals. New York enacted its own laws in 1922 to regulate the industry and to protect the health, welfare, and safety of the general public. The laws protect consumers from financial loss as a result of dishonest and incompetent practices by real estate professionals in exchange for a fee or other compensation. These New York laws are covered in the following statutes:

Real Property Law, License Law and Regulations Article 12-A

Real Property Law, Conveyances & Mortgages Article 8

Real Property Law, Recording Instruments Affecting Real Property Article 9

Real Property Law, Property Condition Disclosure in The Sale of Residential Real Property Article 14

Executive Law, Human Rights Law Article 15

United States Code, Section 42 USCA 3604

Rules and Regulations Title 19 NYCRR, Real Estate Brokers and Salespersons, Subchapter D

N.Y. Comp. Codes Rules & Regulations Title 19 § 175.25 - Advertising

State Board of Real Estate

Real estate regulatory duties are shared between the state’s Division of Licensing Services and the New York State Board of Real Estate. The Board was established in 1996 and consists of 15 members, including the Secretary of State serving as chairperson and the Superintendent of Financial Services. The other 13 members consist of at least 5 licensed real estate brokers who have been engaged in real estate for at least 10 years prior to appointment to the Board and members of the public who are not real estate licensees.

Seven of the 13 members are appointed by the Governor, with 3 of those members being licensed brokers and 4 being members of the public. Two of the 13 are appointed by the temporary President of the Senate, with 1 being a licensed broker and the other being a member of the public. Two more of the 13 are appointed by the Speaker of the Assembly, with 1 being a licensed broker and the other being a member of the public. The remaining 2 members are appointed as follows: 1 licensed broker or member of the public by the Minority Leader of the Senate and 1 licensed broker or member of the public by the Minority Leader of the Assembly.

Members of the Board serve 2-year terms and may be reappointed for a total of 10 years. They are not paid for their regulatory services.

The Board has the following powers and duties:

Promulgate rules or regulations affecting real estate licensees which fall under the auspices of the Secretary of State;

Prescribe content for prelicensing courses and administer the license examination;

Approve real estate schools;

Study the operation of laws and regulations regarding rights, responsibilities, and liabilities of licensees related to the transfer of real property and make recommendations on related legislation;

Enforce programs and activities related to enforcement of real estate laws;

Submit annual reports to the appropriate legislative committees regarding complaints

Activities requiring licensure

A person who performs any real estate activity, as listed in the following sections, for another and for compensation or valuable consideration or in anticipation of compensation or consideration must hold a current real estate license. Exemptions from this requirement are as follows.

Licensure exemptions

The following individuals are not required to hold a New York real estate license:

persons appointed by or acting under the judgment or order of any court (referees, receivers, administrators, executors, guardians)

public officers while performing their official duties

attorneys at law

resident managers of single-owner properties employed to manage, maintain, lease, and collect rent

tenant organizations and not-for-profit corporations authorized to enforce New York City’s housing code 

LICENSE CATEGORIES AND RESPONSIBILITIES

Real estate broker

Real estate associate broker

Real estate salesperson

Out of state licenses

Other licenses or registrations

Real estate broker

A real estate broker is any appropriately licensed person, firm, limited liability company or corporation who

lists real property for sale,

sells (at auction or otherwise), exchanges, buys or rents, or

offers or attempts to negotiate a sale (at auction or otherwise), exchange, purchase or rental of an estate or interest in real estate, or

collects, offers, or attempts to collect rent for the use of real estate, or

negotiates, offers, or attempts to negotiate, a loan secured or to be secured by a mortgage, other than a residential mortgage loan (as defined in §590 of the Banking Law), or other incumbrance upon or transfer of real estate, or

is engaged in the business of a tenant relocator, or

who, notwithstanding any other provision of law, performs any of the above stated functions with respect to the resale of condominium property originally sold pursuant to the provisions of the General Business Law governing real estate syndication offerings for another and for a fee, commission, or other valuable consideration or the expectation of a fee, commission, or other valuable consideration.

Activities requiring licensure. Anyone engaging in any of the above activities must hold a real estate broker’s license unless otherwise exempt from licensure.

Responsibilities to public. Brokers have the following responsibilities to the public:

Undertaking fair and honest dealings using professional techniques and training so as never to defraud members of the public

Accountability for all funds that belong to others and that have been placed in the broker’s possession

Limited and minimum disclosure of material facts or defects related to the subject property that would impact

the property’s value -- disclosure to a buyer is necessary when such facts or defects are known to the seller’s agent

the buyer’s financial ability to purchase the property -- disclosure to a seller is necessary when such facts or defects are known to the buyer’s agent

Responsibilities to licensees. Brokers have the following responsibilities to associated licensees:

Supervision of the associated licensees in their performance of real estate activities

Provision of guidance, training, and oversight to associated licensees

Holding licenses

Collecting commissions and paying salespersons and associate brokers

Providing office space, documents, supplies, and administrative support

Dual licensure. Dual licensure occurs when a licensed broker holds two or more licenses.

Real estate associate broker

A real estate associate broker is any individual who holds a broker’s license but chooses to work as a salesperson under the name and supervision of another licensed Real Estate Broker or another broker who is licensed under a partnership, trade name, limited liability company or corporation. An associate broker must meet the qualifications for broker licensure but must be sponsored by a licensed broker and must perform real estate activities under the laws and provisions that govern real estate salespersons.

An associate broker may retain a separate broker’s license under an individual, partnership, trade name, limited liability company, or corporation.

As an associate broker, the licensee may

facilitate the purchase and sale of property on behalf of customers,

obtain lists of property for sale with employing broker,

assist buyers (customers) of real estate to locate and purchase property (listed with employing brokers or another broker),

list and negotiate the sale, lease, or rental of real property for others for compensation.

Activities requiring licensure. Anyone engaging in any of the above activities as an associate broker must hold a real estate broker’s license with a designated sponsoring broker.

Responsibilities to the sponsoring broker. Associate brokers have the following responsibilities to sponsoring brokers:

Conduct all real estate activities in the name of the sponsoring broker

Conduct all activities in compliance with their licenses and related real estate laws, rules, and regulations

Responsibilities to the public. Associate brokers have the same responsibilities to the public as brokers have:

Fair and honest dealings

Accountability

Disclosures

Real estate salesperson

A real estate salesperson is any appropriately licensed person who, under the association and supervision of a licensed Real Estate Broker,

handles the sale, lease, or rental of real property for others for compensation;

lists for sale, sells or offers for sale, at auction or otherwise,

buys or offers to buy or negotiates the purchase, sale, or exchange of real estate,

obtains lists of property for sale with employing broker and assists buyers (customers) of real estate to locate and purchase such properties listed with employing broker or another broker,

negotiates a loan on real estate other than a mortgage loan as defined in section 590 of the banking law,

leases or rents or offers to lease, rent, or place for rent any real estate,

collects or offers or attempts to collect rent for the use of real estate for or in behalf of such real estate broker, or

notwithstanding any other provision of law, performs any of the above stated functions with respect to the resale of a condominium property originally sold pursuant to the provisions of the general business law governing real estate syndication offerings.

A salesperson cannot operate independently and is responsible for understanding the Real Estate License Law. A salesperson acts as the sponsoring broker’s agent with all listings to be accepted by the broker, even if the listing is negotiated by the salesperson.

Activities requiring licensure. Anyone engaging in any of the above activities must hold a real estate salesperson’s license unless otherwise exempt from licensure.

Responsibilities to the sponsoring broker. Salespersons have the following responsibilities to sponsoring brokers:

Conduct all real estate activities in the name of the sponsoring broker

Conduct all activities in compliance with their licenses and related real estate laws, rules, and regulations

Responsibilities to the public. Salespersons have the same responsibilities to the public as brokers have:

Fair and honest dealings

Accountability

Disclosures

Dual licensure. Dual licensure occurs when a licensed salesperson holds two or more licenses to work under the sponsorship and supervision of two or more brokers. The salesperson must hold a separate license for each sponsoring broker.

Out of state licenses

Nonresident licensees

A nonresident of New York who is a licensed broker or salesperson in another state may obtain a New York real estate license by meeting the New York licensure requirements. A nonresident broker who practices real estate in New York does not need to maintain a place of business in New York as long as the broker is licensed and maintains a place of business in the other state. However, the other state must offer the same nonresident license opportunity to New York licensees. If the other state prohibits nonresident licensure to New York licensees, then New York will prohibit nonresident licensure to the other state’s resident licensees.

Every nonresident license applicant is required to file an irrevocable consent which places the licensee under the jurisdiction of New York courts. It also designates the New York Secretary of State as the licensee’s agent to be served with any summons, subpoena or other process against the licensee. Service on the Secretary is considered the same as service on the licensee personally.

Reciprocal license

A nonresident licensee may practice real estate in New York if the licensee’s resident state has a reciprocity agreement with New York. Reciprocity agreements allow a licensee in one state to become licensed in another state without meeting the other state’s education and examination requirements. States with these agreements recognize each other’s real estate laws and licensure requirements. States with reciprocity agreements with New York must also issue reciprocal licenses to New York resident licensees.

Nonresidents seeking a New York reciprocal license must live and work in their resident state and must submit a New York application, the appropriate fee, and an irrevocable consent form. A nonresident salesperson’s home state broker must also have a New York broker’s license and sponsor the salesperson’s reciprocity application.

Currently, New York has reciprocity agreements with nine states with the following restrictions:

Arkansas– only brokers with 2 years of Arkansas licensure

Colorado – only brokers and associate brokers; associate brokers to submit a salesperson application and fee

Connecticut – brokers and salespersons

Georgia – brokers and salespersons who passed Georgia license exam

Massachusetts – only brokers with 2 years of Massachusettslicensure

Mississippi – only brokers with 2 years of Mississippi licensure

Oklahoma – brokers and salespersons, each with 2 years of Oklahoma licensure

Pennsylvania – brokers and salespersons

West Virginia – brokers and salespersons

Members of Armed Forces households

An individual who is a part of the household of a member of the United States armed forces, National Guard, or Reserves may also obtain a New York license.

The individual must have been part of the household prior to the member relocating to New York. The individual must also meet certain licensure, certification, or registration requirements and must submit a New York licensure application. While licensed and living in New York, the individual is required to complete 11 of the 22 ½ hours of continuing education within the first year. The 11 hours must include 3 hours of New York License Law and regulations.

Mutual recognition

For a nonresident licensee to practice real estate in New York when there is no reciprocity agreement or nonresident license, the licensee’s home state would need a mutual recognition agreement with New York. In mutual recognition, both states agree to recognize and apply the education and experience of a licensee from one state to those required in the second state. The nonresident licensee may then practice real estate in the other state without obtaining a license in that state.

Other licenses or registrations

Corporation, partnership, limited liability company

Any corporation, partnership, or limited liability company (LLC) wishing to conduct real estate activities must have at least one designated officer, partner, or LLC member or manager who is licensed as a broker, having met all broker licensing requirements. No officer, partner, or LLC member or manager may be licensed as a salesperson, and no employee of the entity may be licensed and operate as a broker for the entity.

Office manager

An individual who works as an office manager under the name and supervision of a broker must be licensed as an associate broker and have been an active associate broker for at least two of the four years prior to becoming the office manager. The individual is required to maintain the broker license and perform supervision duties over salespersons and other associate brokers.

Mortgage banking companies

Mortgage banking companies provide real estate loans that can then be sold to investors. If the company continues to service the loan once it is sold, the company will receive a fee for the service. Unlike thrift institutions, savings and loan associations, and savings banks, mortgage banking companies do not provide checking or savings accounts. However, they do provide a great percentage of all mortgage loans. Although they operate under fewer regulations than thrift institutions, they are required to file a $50,000 surety bond or establish a $50,000 trust fund to reimburse customers for improper fees.

Mortgage broker

A real estate license is required for anyone in New York who negotiates or attempts to negotiate a mortgage loan for non-residential property. A licensed broker or a licensed salesperson who is associated with a licensed broker may negotiate such mortgage loans. The licensee must also be registered with the State Banking Department.

Mortgage brokers are typically paid by the borrower to find an appropriate lender for the sought-after loan. The mortgage broker may be required to obtain a surety bond or set up a $25,000 trust fund.

However, negotiating a mortgage loan on one-to-four residential unit(s) requires registration with the Department of Financial Services.

Home inspector

Home inspectors in New York must be licensed as such, having completed the required coursework or earned the required supervised experience, passed the exam, and paid the license fee. License terms are for two years and require completion of continuing education prior to license renewal. Prior to recommending a home inspector to a home buyer, real estate licensees should confirm the inspector holds a current license.

Real estate appraiser

Appraisers are licensed or certified to analyze and form a professional opinion as to the quality and value of real property. Education and experience requirements are based on the category of licensure or certification. Applicants must also pass the examination and pay the appropriate exam and license fees. License/certification terms are for 2 years and require completion of continuing education prior to renewal.

Apartment information vendor

Any person who engages in the business of providing information on the location and availability of residential rental property for a fee paid by the customer is called an apartment information vendor. The vendor sets up meetings between the customer and the owner of the rental property or between the customer and the current occupant who wishes to share the housing. The license term begins on November 1 and ends on October 31 each year.

To qualify for licensure, the vendor must be at least 18 years old, trustworthy, and able to maintain a special interest-bearing account within a national or state chartered bank located within New York State with $5,000 for the main office and $2,500 for each branch office. The vendor needs written consent from the Secretary of State to withdraw funds from the account, followed by a 6-month waiting period after the request to withdraw funds.

Coursework, examinations, and fees are not required for licensure. Vendors are required to provide potential tenants with a contract or receipt that includes the services they offer, with the same services displayed on signage in their offices. If they do not find acceptable housing, they must refund a percentage of the fee paid by the customer.

Apartment sharing agent

An apartment sharing agent is paid a fee to find potential roommates for current owners or occupants of housing. Licensure is valid for one year from November 1 to October 31 of the next year. As with apartment information vendors, coursework, examinations, and fees are not required for licensure. Agents must maintain a special interest-bearing account within a national or state-chartered bank located within New York State with at least $2,500 for the main office and $1,200 for each branch office and must obtain written consent from the Secretary of State and then wait 6 months to withdraw funds from the account

REQUIREMENTS FOR LICENSURE

Broker

Associate broker

Salesperson

Department of State denial of license

Broker

General requirements

20 years of age

Licensees cannot have a criminal, sex offense, or sexual violence conviction unless the Secretary does not bar licensure based on such conviction

Must have proof of honesty and trustworthiness

Must have proficient knowledge of the English language (State examinations are available in English only to confirm the applicant’s competency in the English language.)

Must be a citizen or lawful permanent resident of the United States

Must have experience as a licensed salesperson for at least 2 years, or experience in general real estate field for at least 3 years, or a combination of both

Must have minimum points for experience type, e.g., buying and selling own property, managing employer’s property, etc.

Must have current NYS photo driver’s license or photo non-driver ID card

Application, education, and examination requirements

License applicants must:

complete and submit the 13-page application found online at dos-0036-f-a-real-estate-broker-application_02.2023.pdf (ny.gov) and the application fee to the Department of State [current fees are listed online at Real Estate Broker | Department of State (ny.gov)].

submit all proposed business names in writing to the Division of Licensing Services for approval, then file appropriate document for use of the chosen approved name with either the County Clerk’s office or the NYS Department of State, Division of Corporations.

satisfactorily complete 152 hours of approved education to include

the 45-hour salesperson course,

the 30-hour salesperson remedial,

a 2-hour Fair Housing and/or implicit bias training continuing education course, and

the 75-hour broker course.

Education requirements may be satisfied by attending the approved classroom-instructed course for at least 90% of the instruction time or by completing the required hours through online distance learning. Online courses must be completed within 12 months. Satisfying coursework includes passing the school’s final exam.

These courses are valid for 8 years following the course completion date. If they are not used within the 8 years, they will expire and must be retaken.

A Bachelor’s Degree earned in the United States with a concentration in real estate may qualify for a salesperson or broker course waiver. An official transcript must be submitted. (Rules and Regulations, Title 19 NYCRR §176.15)

Pass the State examination

exams are multiple choice based on the 152-hour pre-licensing course(s) and must be completed within 2 ½ hours

exams are pass/fail with no numeric score provided

exam results are available for 2 years

passed exams allow submission of the licensure application and fee.

failed exams can be rescheduled

Exam sites throughout the State can be found online at

Real Estate Salesperson Exam Sites | Department of State (ny.gov).

Pay the license fee

The DOS will issue the broker’s license after the applicant has demonstrated competency and trustworthiness and met all licensure requirements. The license will include the broker’s name and principal business address.

Licenses are issued for 2-year terms.

Associate broker

All requirements for associate broker licensure are the same as for broker licensure, except the associate broker applicant must obtain a sponsoring broker prior to obtaining the license.

Salesperson

General requirements

18 years of age

Proof of honesty and trustworthiness

No criminal, sex offense, or sexual violence conviction unless the Secretary does not bar licensure based on such conviction

Obtain a sponsoring broker who must authorize the application after which the DOS will review it for completeness and qualifications for the real estate salesperson license.

Have legal right to work in the United States

Have an appropriate understanding of the English language (State examinations are available in English only to confirm the applicant’s competency in the English language.)

Current NYS photo driver’s license or photo non-driver ID card

Application, education, and examination requirements

Complete and submit the 7-page application found online at dos-0022-f-a-real-estate-salesperson-application_02.2023.pdf (ny.gov)andthe application fee to the Department of State [current fees are listed online at Real Estate Salesperson | Department of State (ny.gov)].

Individuals applying based on attorney status, requesting an additional salesperson license, or having been previously licensed should submit a paper application by regular mail. Individuals who completed education outside of New York State and have received an education waiver must pass the state examination and submit an application to the State Licensing office for processing.

Satisfactorily complete 77 hours of approved education to include

the 45-hour salesperson qualifying course,

the 30-hour salesperson remedial, and

a 2-hour Fair Housing and/or implicit bias training continuing education course.

Complete a school administered proctored examination

Pass the State examination

Pay the license fee

Education requirements may be satisfied by attending the approved classroom-instructed course for at least 90% of the instruction time or by completing the required hours through online distance learning. Online courses must be completed within 12 months. Satisfying coursework includes passing the school’s final exam.

A Bachelor’s Degree earned in the United States with a concentration in real estate may qualify for a salesperson or broker course waiver. An official transcript must be submitted. (Rules and Regulations, Title 19 NYCRR §176.15)

The DOS will issue the salesperson’s license after the applicant has demonstrated competency and trustworthiness and met all licensure requirements. The license will include the salesperson’s name and business address along with the sponsoring broker’s name and principal business address.

Licenses are issued for 2-year terms.

Department of State denial of license

Before denying a license, the DOS will notify the applicant in writing of the reasons for the denial. The notification is served personally or sent by certified mail. The DOS is also to notify the proposed sponsoring broker. The applicant then has 30 days to request the chance to be heard in person or by council. If the request is not received within 30 days, the denial becomes final.

Licenses may be denied for any of the following reasons:

Failure to disclose pending criminal charges or convictions

Conviction of a felony or misdemeanor related to the qualifications, functions, and duties of a real estate licensee

Administrative action taken against the business or license of the real estate agency

Determination that the facts of a particular case warrant denial

MAINTAINING A LICENSE

Who holds the license

Pocket cards

License changes

Who holds the license

Licenses are issued by the Department of State with the licensee’s name and photo obtained from the Department of Motor Vehicles. A salesperson’s license is held by the sponsoring broker.

Pocket cards

In addition to the applicant’s license, the DOS will issue a pocket card to the new licensee. The card will include the broker licensee’s photo, name, and business address. For a salesperson licensee, the card will include the licensee’s photo, name, and the sponsoring broker’s name and business address. The card for all licensees will also include certification that the card holder is a licensed real estate broker or salesperson. If the card is ever lost or damaged, the licensee may provide proof of the loss or damage, pay a $10 fee, and request a replacement card from the Secretary of State. Pocket cards are held by the licensee and must be shown whenever asked.

License changes

Changes of association or termination

If a salesperson or associate broker stops working for the supervising broker or is terminated, the broker is to file a termination notice on the appropriate online form. The licensee will be terminated by the Department of State within 5 days from the date the licensee leaves the broker’s association. The broker is required to terminate a salesperson or associate broker prior to the change of association being completed by the new sponsoring broker. The salesperson’s license may be endorsed to a new sponsoring broker when the new record of association is filed with the DOS and the appropriate fee is paid.

For a licensee with an expired license who wishes to change broker association and renew the license under a different broker, the new broker must change the licensee’s association prior to the license’s renewal. With an expired license, the licensee does not need the former broker to submit a termination notice to the State.

All association changes must be approved by the Department of State who will mail a new license to the licensee’s business address.

Changes in broker name/status/location

If the broker’s name, status, or address changes, the broker must notify the DOS of the change. [Change form can be found online at DOS-1473 (ny.gov).] The broker’s own name and the names of each associated salesperson and associate broker must be included along with a $10 filing fee for each named licensee. Failure to notify the DOS of such changes will result in license suspension.

Changing the real estate company’s name requires submission of a new broker application.

Death of broker

If a sole proprietor broker dies, the broker’s license can be used by the duly appointed administrator or executor to complete any transactions unfinished at the time of the broker’s death. This applies to transactions by the broker or any associated salespersons and provides up to 120 days from the date of the broker’s death for the transactions to be completed. Upon submission of an application to the Secretary of State, the time period may be extended another 120 days for good cause. If the license expires during either the initial 120 days or the extension, it will automatically be renewed until the applicable time period expires. No renewal fee is charged in this case.

The broker’s license must be modified to include deceased after the broker’s name, the date of the death, and the name of the administrator or executor

Felony conviction

If a broker or salesperson is convicted of a felony, regardless of the state where the felony occurred, the licensee must submit a certified copy of the conviction judgment to the DOS.

LICENSE RENEWAL

Renewal requirements

Continuing education requirements

Sponsoring broker requirements

Renewal requirements

Licenses are good for 2 years and must be renewed prior to the expiration date printed on the license. Three months prior to the expiration date, renewal reminders will be sent to the licensee with instructions on how to renew the license online at http://www.dos.ny.gov/licensing/eaccessny.html.