Representative Brian Greene is sponsoring legislation this session, HB96, that deals with regulation of a specific type of real estate investment. There has been confusion in the public and media regarding what the bill does and how it changes the regulatory authority.
HB96 deals with real estate investments known as tenant-in-common, or TIC. Until 2005 there was uncertainty as to how, or under what authority, these investments should be regulated. The state at that time chose to place the regulatory authority under the Division of Real Estate. It was done in such a way though, that it gave the Division no authority to ensure compliance by the seller.
The current statute places the duty to disclose on the licensed real estate agent rather than on the seller. A couple of problems have arisen out of this structure:
· Oftentimes the agent doesn’t have access to the information and the seller, who has no duty to disclose, doesn’t provide it, resulting in no disclosures.
· Sellers can also legally use in-house sales people, who aren’t required to be licensed agents and therefore aren’t subject to the current disclosure requirements, meaning that yet again sellers can sell their properties without any disclosures.
The sole purpose of HB96 is to shift the burden of disclosure from agents to sellers so that whether they use in-house reps or licensed independent agents, sellers will be required to make certain disclosures. The bill also lists some of the most important ones, which doesn’t exist in the current statute, and provides authority to the Division of Real Estate to add further disclosures as they deem appropriate.
The recent amendment simply included one additional parameter – that an item required to be disclosed be reasonably available to the seller – that must be considered when adopting disclosure requirements by rule.
Under the amended HB96, the Division has broad rule-making authority and they are given broad enforcement authority that doesn’t exist in current statute, all while making it more likely that investors will have access to the information they need to make an informed decision.