Chapter 1 - License Law

I. Introduction to NY License Law

The primary purpose of Article 12-A of the NY Real Property Law is to protect the public. The law ensures that licensees are trustworthy and competent to handle the financial and legal complexities of real estate transactions.

The Three Categories of Licensure:

• Real Estate Broker: A person or entity who, for another and for a fee, negotiates any form of real estate transaction. The broker is the only one authorized to enter into a listing agreement and receive compensation directly from a client.

• Real Estate Associate Broker: Someone who has met all the requirements to be a broker but chooses to work under the name and supervision of another broker. They cannot work independently.

• Real Estate Salesperson: An individual who is licensed to perform real estate activities but must be supervised by a sponsoring broker.

II. Responsibilities and Education

To obtain a license, you must meet specific age and education requirements:

• Salesperson: Must be at least 18 years old. Requires a 77-hour approved course and passing the state exam.

• Broker/Associate Broker: Must be at least 20 years old. Requires 120 hours of education (the 77-hour course plus a 45-hour broker course) and 2 years of experience (measured by a points system).

Who needs a license? Anyone who lists, sells, buys, or negotiates real estate for another and for compensation must be licensed. Exemptions from Licensure:

• Attorneys admitted to the NY Bar (unless they hire salespersons, then they must obtain a broker license).

• Public officers performing official duties.

• Property Owners selling their own property (FSBO).

• Building Superintendents or maintenance workers.

III. License Maintenance and Operations

• License Custody: Your license is physically held by your Sponsoring Broker.

• Pocket Cards: Licensees must carry their Department of State (DOS) issued pocket card at all times and show it upon request.

• Renewals: Licenses must be renewed every 2 years. You must complete 22.5 hours of Continuing Education (CE), which includes specific mandates:

• 3 hours of Fair Housing.

• 2.5 hours of Ethical Business Practices.

• 1 hour of Agency (2 hours for your first renewal).

• 2 hours of Cultural Competency.

• 2 hours of Implicit Bias training.

• 1 hour of Recent Legal Matters.

• Fees: Currently $65 for a salesperson renewal and $185 for a broker renewal.

IV. Advertising and Compliance

Advertising Rules:

• All ads must clearly identify the name of the broker or brokerage.

• Blind Ads are prohibited: An ad that does not identify the broker is illegal.

• Salespersons must use their full name as it appears on their license.

Unlicensed Assistants: They may perform "ministerial" (clerical) tasks only.

• Allowed: Answering phones, scheduling appointments, placing signs, and typing documents (if approved by the broker).

• Forbidden: Discussing listings, showing property, or negotiating any terms or commissions.

V. Violations, Penalties, and Disclosures

The Department of State (DOS) has the power to revoke, suspend, or fine a licensee for violations like commingling funds (mixing client money with personal/business money) or net listings (illegal in NY).

• Fines: The DOS can impose a fine of up to $1,000 per violation.

• Misdemeanor: A violation of Article 12-A is a misdemeanor punishable by up to 1 year in jail and/or a fine.

• Article 14 (PCDA): Sellers of 1-4 unit residential dwellings must provide a Property Condition Disclosure Statement. If they do not, the law previously required a $500 credit; however, as of March 2024, the $500 "opt-out" credit has been repealed. Sellers are now legally mandated to provide the disclosure.

• Section 242: Sellers must disclose the existence of any uncapped natural gas wells on the property.

⚠️ EXAM ALERT: QUICK FACTS

• Dual Licensure: You can hold two licenses at once (e.g., a broker license and a salesperson license) but you must pay two separate fees and have the consent of both brokers.

• Change of Association: If you leave your broker, the broker must file a termination notice online immediately. You cannot perform any real estate activities until your new broker has filed your change of association.

• Kickbacks: It is illegal to receive a "kickback" or "referral fee" from a mortgage broker or title company without full disclosure and consent of all parties.

• Commission: Salespersons can only receive commission payments from their sponsoring broker. It is illegal to take a check directly from a client.

KEY TERMS

Administrative discipline: The enforcement of license law by the Department of State (DOS) through fines, reprimands, or license suspension/revocation.

Apartment information vendor: Any person who, for a fee, provides information concerning the location and availability of residential real property for rent.

Apartment sharing agent: Any person who, for a fee, arranges or assists in arranging shared housing for residential property.

Article 12-A: The section of the New York Real Property Law that contains most of the laws and regulations governing real estate brokers and salespersons.

Article 78 proceeding: A legal appeal to the NY Supreme Court to review a decision made by a government agency (like the DOS).

Associate real estate broker: A licensed broker who chooses to work under the name and supervision of another broker.

Blind ad: An advertisement that does not clearly indicate that the advertiser is a real estate broker. (Note: These are illegal in NYS).

Change of Association: The process of moving your license from one sponsoring broker to another.

Commingling: The illegal act of mixing a client's funds (like an escrow deposit) with the broker’s personal or business money.

Continuing education: The 22.5 hours of education required every two years to renew a real estate license in New York.

Escrow: A neutral account used to hold funds (like earnest money) on behalf of other people during a transaction.

Exemption: Categories of people (like lawyers or owners) who do not need a real estate license to perform certain real estate acts.

Home inspector: A professional licensed by the DOS to observe and report on the condition of a residential property's systems and components.

Irrevocable consent: A document signed by out-of-state licensees allowing them to be sued in New York courts.

Kickback: An illegal payment made to a licensee for referring business to a service provider (like a title company or lender).

Listing agreement: A contract between an owner and a broker where the broker is hired to find a buyer or tenant.

Misdemeanor: A crime punishable by a fine (up to $1,000) and/or imprisonment (up to one year). Violations of license law are classified as misdemeanors.

Multiple listing service (MLS): A suite of services that brokers use to share property listings and offer compensation to other brokers.

Net listing: An illegal commission arrangement where the broker keeps all sale proceeds above a specific price set by the seller.

Pocket card: A government-issued card that serves as portable proof of your real estate license.

Real estate appraiser: A professional licensed to provide an unbiased estimate of a property's value.

Real estate broker: A person or entity licensed to negotiate real estate transactions for others in exchange for a fee.