NORTH CAROLINA GENERAL ASSEMBLY
1979 SESSION
CHAPTER 614
SENATE BILL 417
AN ACT TO ESTABLISH A REAL ESTATE RECOVERY FUND AND TO INCREASE THE EDUCATIONAL REQUIREMENTS TO QUALIFY FOR LICENSURE AS A REAL ESTATE BROKER.
The General Assembly of North Carolina enacts:
Section 1. Chapter 93A of the General Statutes is hereby amended by adding a new Article as follows:
"ARTICLE 2.
"Real Estate Recovery Fund.
"§ 93A-11. Real estate recovery fund created; payment to fund; management. — (a) There is hereby created a special fund to be known as the 'Real Estate Recovery Fund' which shall be set aside and maintained by the North Carolina Real Estate Licensing Board. Said fund shall be used in the manner provided under this Article for the payment of unsatisfied judgments where the aggrieved person has suffered a direct monetary loss by reason of certain acts committed by any person licensed under this Chapter.
(b) On September 1, 1979, the board shall transfer the sum of one hundred thousand dollars ($100,000) from its expense reserve fund to the real estate recovery fund. Thereafter, if on December 31 of any year the amount remaining in the real estate recovery fund is less than fifty thousand dollars ($50,000) the board may at its option replenish the fund from whatever funds it has or may determine that each licensee under this Chapter, when renewing his license, shall pay in addition to his license renewal fee, a fee not to exceed ten dollars ($10.00) per broker and five dollars ($5.00) per salesman as shall be determined by the board for the purpose of replenishing the fund.
(c) The board shall invest and reinvest the monies in the real estate recovery fund in the same manner as provided by law for the investment of funds by the clerk of superior court. The proceeds from such investments shall be deposited to the credit of the fund.
"§ 93A-12. Application for payment out of fund; grounds. — (a) When any aggrieved person obtains final judgment in any court of competent jurisdiction against any real estate broker or salesman licensed under this Chapter on grounds of conversion of trust funds arising directly out of any transaction which occurred when such broker or salesman was licensed and acted in a capacity for which a license is required under this Chapter and which transaction occurred on or after September 1, 1979, such person may, upon termination of all proceedings including appeals, file a verified application in the court in which judgment was entered for an order directing payment out of the real estate recovery fund of the amount remaining unpaid upon the judgment which represents an actual and direct loss sustained by reason of said conversion of trust funds.
In case of a judgment rendered by a magistrate in a small claims action, the aggrieved person shall file such verified application in the district court. The district court judge may then make a determination as to whether such judgment rendered by a magistrate was based on facts constituting grounds for recovery under this Article and may enter an order directing payment of such judgment out of the real estate recovery fund.
A copy of the verified application shall be served upon the board and the judgment debtor and a certificate or affidavit of such service filed with the court. Jurisdiction of the court against the fund or the board shall not attach under this Article until after judgment is obtained against a licensee and execution is returned unsatisfied.
(b) For purposes of this Chapter, the term 'trust funds' shall include all down payments, earnest money deposits, advance listing fees and other monies received on behalf of his principal or any other person by a real estate broker or salesman licensed under this Chapter, under the terms of an express or implied agreement that the broker or salesman is not entitled to retain all or a portion of such monies until the occurrence of some future event.
"§ 93A-13. Hearing; required showing. — Upon such application by an aggrieved person, the court shall conduct a hearing and the aggrieved person shall be required to show:
(1) he is not a spouse of the judgment debtor or a person representing such spouse; and
(2) he is making application not more than one year after termination of all proceedings, including appeals, in connection with the judgment;
(3) he has complied with all requirements of this Article;
(4) he has obtained a judgment as described in G.S. 93A-12, stating the amount owing thereon at the date of application;
(5) he has made all reasonable searches and inquiries to ascertain whether the judgment debtor is possessed of real or personal property or other assets liable to be sold or applied in satisfaction of the judgment;
(6) that by such search he has discovered no real or personal property or other assets liable to be sold or applied, or that he has discovered certain of them, describing them, but that the amount so realized was insufficient to satisfy the judgment, stating the amount realized and the balance remaining due on the judgment after application of the amount realized; and
(7) he has diligently pursued his remedies including attempted execution on the judgment against all the judgment debtors which execution has been returned unsatisfied. In addition to that, he knows of no assets of the judgment debtor and that he has attempted collection from all other persons who may be liable to him in the transaction for which he seeks payment from the real estate recovery fund if there be any such other persons.
"§ 93A-14. Answer and defense by board; proof of conversion. — (a) Whenever the court proceeds upon an application as set forth in this Article the board may defend such action on behalf of the fund and shall have recourse to all appropriate means of defense and review, including examination of witnesses. The judgment debtor may defend such action on his own behalf and shall have recourse to all appropriate means of defense and review, including examination of witnesses. At any time it appears there are no triable issues of fact and the application for an order directing payment from the fund is without merit, the court shall dismiss the application. Motion to dismiss may be supported by affidavit of any person or persons having knowledge of the facts and may be made on the basis that the application and the judgment referred to therein do not form the basis for a meritorious recovery within the purview of G.S. 93A-12 or that the applicant has not complied with the provisions of G.S. 93A-13; provided, however, notice of such motion shall be given at least 10 days prior to the time fixed for hearing.
(b) Whenever the judgment obtained by an applicant is by default, stipulation, or consent, or whenever the action against the licensee was defended by a trustee in bankruptcy, the applicant, for purposes of this Article, shall have the burden of proving his cause of action for conversion of trust funds. Otherwise, the judgment shall create a rebuttable presumption of the conversion of trust funds. This presumption is a presumption affecting the burden of producing evidence.
"§ 93A-15. Order directing payment out of fund, compromise of claims. — If the court finds after said hearing that the claim should be levied against the fund, the court shall enter an order directed to the board requiring payment from the fund of whatever sum the court shall find to be payable upon the claim in accordance with the limitations contained in this Article. The board may, subject to court approval, compromise a claim based upon the application of an aggrieved party; however, the board shall not be bound in any way by any prior compromise or stipulation of the judgment debtor.
"§ 93A-16. Maximum liability; pro rata distribution; attorney fees. — (a) Payments from the real estate recovery fund shall be subject to the following limitations:
(1) the right to recovery under this Article shall be forever barred unless application is made within one year after termination of all proceedings including appeals, in connection with the judgment;
(2) the fund shall not be liable for more than five thousand dollars ($5,000) per transaction regardless of the number of persons aggrieved or parcels of real estate involved in such transaction; and
(3) the liability of the fund shall not exceed in the aggregate ten thousand dollars ($10,000) for any one licensee within a single calendar year, and in no event shall it exceed in the aggregate twenty thousand dollars ($20,000) for any one licensee.
(b) If the maximum liability of the fund is insufficient to pay in full the valid claims of all aggrieved persons whose claims relate to the same transaction or to the same licensee, the amount for which the fund is liable shall be distributed among the claimants in a ratio that their respective claims bear to the total of such valid claims or in such manner as the court deems equitable. Upon petition of the board, the court may require all claimants and prospective claimants to be joined in one action to the end that the respective rights of all such claimants to the real estate recovery fund may be equitably adjudicated and settled.
(c) In the event an aggrieved person is entitled to payment from the fund in an amount of one thousand dollars ($1,000) or less, the court may allow such person to recover from the fund reasonable attorney's fees incurred in effecting such recovery. Reimbursement for attorney's fees shall be limited to those fees incurred in effecting recovery from the fund and shall not include any fee incurred in obtaining judgment against the licensee.
"§ 93A-17. Repayment to fund; automatic suspension of license. — Should the board pay from the real estate recovery fund any amount in settlement of a claim or toward satisfaction of a judgment against a licensed real estate broker or salesman, the license of the broker or salesman shall be automatically suspended upon the effective date of an order by the court authorizing payment from the fund. No such broker or salesman shall be granted a reinstatement until he has repaid in full, plus interest at the legal rate as provided for in G.S. 24-1, the amount paid from the real estate recovery fund.
"§ 93A-18. Subrogation of rights. — When, upon order of the court, the board has paid from the real estate recovery fund any sum to the judgment creditor, the board shall be subrogated to all of the rights of the judgment creditor to the extent of the amount so paid and the judgment creditor shall assign all his right, title, and interest in the judgment to the extent of the amount so paid to the board and any amount and interest so recovered by the board on the judgment shall be deposited in the real estate recovery fund.
"§ 93A-19. Waiver of rights. — The failure of an aggrieved person to comply with this Article shall constitute a waiver of any rights hereunder.
"§ 93A-20. Persons ineligible to recover from fund. — No real estate broker or real estate salesman who suffers the loss of any commission from any transaction in which he was acting in the capacity of a real estate broker or real estate salesman shall be entitled to make application for payment from the real estate recovery fund for such loss.
"§ 93A-21. Disciplinary action against licensee. — Nothing contained in this Article shall limit the authority of the board to take disciplinary action against any licensee under this Chapter, nor shall the repayment in full of all obligations to the fund by any licensee nullify or modify the effect of any other disciplinary proceeding brought under this Chapter."
Sec. 2. The first four sentences of G.S. 93A-4(a) hereby rewritten to read as follows:
"Any person, partnership, association, or corporation hereafter desiring to enter into business of and obtain a license as a real estate broker or real estate salesman shall make written application for such license to the board on such forms as are prescribed by the board. Each applicant for a license as a real estate broker or real estate salesman shall be at least 18 years of age. Each applicant for a license as a real estate broker shall have been actively engaged as a licensed real estate salesman in this State for at least 24 months on a full-time basis prior to making application for a license as a real estate broker, or shall furnish evidence satisfactory to the board of experience in real estate transactions which the board shall find equivalent to such 24 months' experience as a licensed real estate salesman, or shall furnish evidence satisfactory to the board of completion of at least 60 hours of classroom instruction which shall include the study of: real estate broker responsibilities, mortgages, easements, leases, liens, taxation, zoning, real property insurance, real estate appraising, agency contracts, land contracts, government regulation of land transfers and such other topics as the board determines, at a school approved by the board. Each applicant for a license as a real estate salesman shall furnish evidence satisfactory to the board of completion of 30 classroom hours of such courses of education in real estate subjects at a school approved by the board as the board shall by regulation prescribe or shall furnish evidence satisfactory to the board of experience in real estate transactions which the board shall find equivalent to such real estate education."
Sec. 3. G.S. 93A-4(d) is hereby amended by adding the following sentence at the end thereof:
"The board is further authorized to adopt rules and regulations necessary for the approval of real estate schools and such rules and regulations may, in accordance with G.S. 93A-4(a), prescribe specific requirements pertaining to the teaching of mechanics and law governing real estate transactions at such schools."
Sec. 4. The title of Chapter 93A of the General Statutes, "Real Estate Brokers and Salesmen", is hereby changed to read "Real Estate License Law".
Sec. 5. G.S. 93A-1 through G.S. 93A-10 are hereby designated as Article 1 of Chapter 93A of the General Statutes to be entitled "Real Estate Brokers and Salesmen".
Sec. 6. G.S. 93A-4(a) is amended by deleting the number "60" in the third sentence and substituting in lieu thereof the number "90".
Sec. 7. Sections 1-5 of this act shall become effective September 1, 1979. Section 6 of this act shall become effective January 1, 1981.
In the General Assembly read three times and ratified, this the 21st day of May, 1979.