K e n t u c k y R e a l E s t a t e

N E W SA Publication of the Kentucky Real Estate Commission

CONTENTS

Comments from Chair

From the Director’s Desk

Informed Clients andCustomers

Company Not Owned byPrincipal Broker

Remembering FormerCommissioner Julius A.Wise

Governor Signs House Bill244

Measuring Square Footage

Updating Seller’sDisclosure Form

Builder Deposits

New Reciprocal Agreement

Errors and OmissionsInsurance

Disciplinary Actions

Over the years, the Commission hasreceived a steady flow of anony-mous letters regarding violators ofthe advertisement statute. KRS324.117(4) states that all listed prop-erty shall include the name of thereal estate company or thename of the principal bro-ker. In the past, theCommission has sent let-ters to individuals, some-times repeatedly, inform-ing them of the require-ments of KRS 324.117.

The Commission is nowtaking a stronger stance againstviolators of this statute. The firsttime a licensee violates this statute, awarning letter will be sent out. TheCommission is tracking all of thewarning letters. Any future viola-tions will result in the licensee pay-ing a $500.00 fine. If the licenseedoes not pay the fine, theCommission will file a complaint.

There are a few exceptions to therequirements of KRS 324.117. If alicensee is selling, renting, leasing orotherwise dealing in his or her ownproperty, he or she is not required

under this statute to include thecompany name or the name of theprincipal broker. However, theCommission advises licensees tocheck with their principal brokers oncompany policies regarding advertis-

ing of listed property.

Many times, licensees havetold the Commission thatthe seller has placed theadvertisement in thenewspaper without thelicensee’s consent. The

Commission has ruledthat the broker must be in

charge of all advertisements,regardless of who places thoseadvertisements. There is new lan-guage in KRS 324.117(4) whichstates: “If listed property is adver-tised by a customer or a client of alisting licensee, the licensee shall, atminimum, provide the customer orclient with written notification ofthe requirements of KRS 324.117.The licensee shall keep in his or herfiles a copy of the notification andany other documentation that is gen-erated by the licensee as proof of hisor her compliance with this section.”

Do Not Print Another AdvertisementWithout Reading This First!

Printed with State FundsIssue No. 197, Summer 2004

Kentucky RealEstate Commission10200 Linn Station RoadLouisville, KY 40223Phone: 502-425-4273Toll Free: 1-888-373-3300Fax: 502-426-2717Web Site: www.krec.ky.gov

Commissioners

Bob Roberts, ChairRichmond

Betty KaiserLouisville

Arvel J. McMahan PeWee Valley

Ron SmithLouisville

Sue TeegardenAlexandria

Commission Staff

Norman Brown Executive Director

Education and Licensing

Linda PoliskieEducation Director

Sarah WestSarah ChandlerMichelle Gary

Legal

Lee B. HarrisGeneral Counsel

Mary StevensonDianna RogersDenise Wade

Administrative

Shelly SaffranDirector of Administration

Kim Brewer Louis Carter Melissa Kime

2

Comments fromthe Chairby: Bob Roberts,

Chair

I have been on the Commission for14 years, and I am currently serv-ing as the Chair. I thought itmight be interesting for those ofyou who have never attended aCommission meeting to knowwhat takes place each month.

The Commission meetings are runby the Chair based on RobertsRules of Order, and a majorityvote decides all issues and cases.The Commission is made up offive members, all appointed by theGovernor of Kentucky. The Chaironly votes in the event of a tie. Ifa particular Commissioner or staffmember has a conflict with a case,he or she will recuse himself orherself from the matter.

Every month, the Commission hasa lengthy agenda of issues toaddress. First, the Commissionlooks at the EducationDepartment’s report. Each month,we look at course, school andinstructor approvals. OurEducation Director, LindaPoliskie, goes over every applica-tion to assess whether the contentcomplies with our educationalguidelines. In addition, shereviews applications from schoolsand instructors to ensure that ourrequirements are met. We alsohave to rule on waiver requests,delinquency plans, testing con-tracts and testing question issues.

Our Executive Director, NormanBrown, then gives a report con-cerning the Commission’s finances

and budget. The Commissiontakes its role as financial stewardsvery seriously, and we review thebudget and finances very carefullyevery month. In addition, we hirean independent auditor to reviewour accounts every year. We arehappy to report that our auditorhas always given us an excellentrating.

Next, our Administration Director,Shelly Saffran, reports on officeissues, such as personal servicecontracts, personnel and healthcare concerns, errors and omis-sions insurance and newsletter arti-cles.

Licensees and attorneys sometimesschedule a time to present a specif-ic concern to the Commissioners.We generally allow each personabout fifteen minutes. Most peo-ple also submit documentationprior to the meeting so that theCommission can review theirissues. If possible, we then vote onthe issue and our legal counseldrafts a letter regarding our deci-sion.

Finally, our General Counsel, LeeHarris, presents the legal report.We review the current number ofcases pending and the status ofeach case, investigation andappeal. We then review the legalquestions and concerns. Theseusually deal with advertising ques-tions and violations, inducementand rebate questions, promotion of

Continued on Page 3

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From theDirector’s Deskby: Norman E. Brown,

Executive Director

As usual, things here at theCommission are very busy! Iwould like to use this column tooutline several publications andprograms that we are currentlyimplementing to assist thelicensees and consumers of ourfine state.

First, we are working on a buyerbrochure and a seller brochure,modeled after similar publicationsfrom another regulatory agency inCanada. These brochures willoutline important informationand facts for both buyers and sell-ers of real estate. Licensees willbe able to use them in client pre-sentations, and we will be givingthem as hand-outs at homebuyerseminars.

Our fair booth this year will belocated in the South Wing. Wewill be using our “Get Real”theme to encourage consumers touse a licensed real estate agent orbroker and to encourage unli-censed people to enter the realestate business. Over 700,000Kentuckians visit the Fair everyyear, and this is our best opportu-nity to reach the consumers ofthis state. If you happen to beout at the Fair, please stop by tosee our new state-of-the-art booth.We would love to put a face witha name.

As a joint project, theCommission and the KentuckyAssociation of Realtors® are inthe process of developing a safety

brochure, which will givelicensees tips on how to best pro-tect themselves when showingproperties and meeting newclients. While our incidents ofviolence against licensees havebeen low, other states have experi-enced increasing problems withattacks on licensees and scams toenter vacant homes. It is best tobe pro-active and to educate our-selves on how to avoid these typesof encounters – rather than wait-ing for tragedy to strike.

We are of course continuing ourtrek around the state, givinghomebuyer seminars to con-sumers and teaching licenseesabout license laws and legalissues.

The Commission is joining forceswith the Kentucky Association ofRealtors® to establish a task forceto study the issues of inducementand rebate laws in this state. TheCommission receives numerousquestions, complaints and con-cerns about these laws on a week-ly and monthly basis.

Our new website address iswww.krec.ky.gov. There is a sur-vey on the website in which youcan offer your feedback andadvice on how we can better servethe public and the licensees. Ifyou ever have suggestions of howwe can better serve you or thereal estate consumers, please letus know.

out-of-state properties and the like.During our meeting, we also haveapplicant hearings. Each applicantwho has a felony at any time in hisor her lifetime or a misdemeanor inthe past five years must appearbefore the full Commission for ahearing. The Commission has theirentire criminal and work history, aswell as references and an investiga-tion report. The Commission thentakes testimony from the applicantand any witnesses. The Commissionthen goes into Executive Session todiscuss whether the applicant will beapproved for licensure.

We also receive a binder with thepending legal cases. Each month,we review approximately 30 cases atdifferent stages to determine whetherto send the case for investigation, todismiss it, to order it to hearing or toadopt a settlement agreement or rec-ommended findings from theHearing Officers. After the meeting,the legal staff sends out the Orders,indicating the Commission’s deci-sion.

Comments from theChairContinued from Page 2

LLEETT UUSSKKNNOOWW WWHHAATTYYOOUU TTHHIINNKK!!

Log on to theCommission’s

website and fill outour survey. We want

to hear yourthoughts and ideas.(www.krec.ky.gov)

Commissioner’s

Corner

4

There are numerous laws and issuesinvolved in a real estate transaction.Oftentimes, consumers do not under-stand the complexities or nuances ofcontract, agency and license law. Solong as everything goes smoothly, theseissues may not be addressed; however, ifa problem arises, it is a benefit to have awell-informed client or customer.

The question is: how can the client orcustomer become informed? Theanswer is simple: the agent or brokershould inform the client or customer ofthe issues at each stage of the process.

For example, the Commission receivesa lot of calls from consumers who arein a multiple offer situation. The firstbuyer to make an offer believes that heor she will have the opportunity tocounter or to raise his or her offer. Thelicensee should inform the offeror thatthis is simply not the case – if the buyerwants the property, he or she shouldmake a reasonable and sound offer atthe beginning of the process. Likewise,many buyers believe that a verbal accep-tance is binding. Licensees should not

INFORMED CLIENTS AND CUSTOMERSBy: Lee B. Harris, General Counsel

In most cases, the principal broker andthe owner of the real estate company areone and the same. However, this is notrequired by law. There are numerouscompanies in this state that are ownedby a sales associate or an unlicensedindividual. Those owners then hire aprincipal broker to run the company.

Before hiring a principal broker to runthe company, the owner should draft anemployment agreement that deals withall kinds of potential conflicts and prob-lems. For instance, the owner and theprincipal broker should consider whatwill happen if the principal broker leavesthat company. Who will keep the list-ings and current pending contracts?

The Commission has recently seen sever-al instances in which the owner and theprincipal broker do not have such anagreement. When the principal brokerand the owner decide to part ways, forwhatever reason, there is confusionabout how to handle the listings and anypending transactions. All of those issuesshould be dealt with before the principalbroker even takes over the company.

A well-crafted agreement will serve toensure a smooth transition. This isimportant not only for the owner and thebroker but for the consumer buyers andsellers as well. By having an agreementin place, it will help to avoid problems inthe future.

COMPANIES NOT OWNED BY THE PRINCIPAL BROKER

verbally negotiate; however, if there areverbal negotiations, the licensee shouldmake it absolutely clear to the con-sumers that there is no binding contractuntil an agreement is actually signed bythe seller.

In addition, many consumers becomefrustrated when making offers on prop-erties owned by out-of-state mortgageor relocation companies. The frustra-tions stem from the fact that many ofthese companies will not agree to any-thing in writing until the very end ofnegotiations and will take several weeksto respond to any offers or counterof-fers. This frustration can easily beavoided if the licensee informs thebuyer of the possible delays and possi-ble verbal counter-offers at the outset.

The point of these examples is that con-sumers do not like surprises or unex-pected delays. If the licensee canimpart his or her wisdom and experi-ence on a consumer, then the transac-tion will likely be smoother. Forinstance, a buyer does not want to findout the rules of multiple offers afteranother buyer has already made a betteroffer.

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The following are the major revisions to the licenselaw that were passed by the General Assembly at its2004 session. To view the complete Senate Bill, log onto the Legislative Research Commission’s website atwww.lrc.ky.gov/RECORD/04RS/SB244/bill.doc.This bill became law on July 15, 2004. It is now ineffect and must be followed. Please review the specificchanges and make sure that you follow the new laws.If you need additional information on the meaning oreffect of any of these changes, please feel free to con-tact the Commission’s legal department. In addition,you may want to attend a law course or core course toupdate yourself on the laws and to receive practicaladvice on how to implement these laws into your dailypractice. Below is a summary of the major changes:

REFERRAL FEE (KRS 324.020(4))

This statute was clarified to say that "No broker shallsplit fees with or compensate any person who is notlicensed to perform any of the acts regulated by thischapter, except that a broker may pay a referral fee toa broker licensed outside of Kentucky for referring aclient to the Kentucky broker." The Commission hasnever allowed out-of-state brokers to receive any pay-ment other than a referral fee. This statute merelyclarifies longstanding Commission law.

ADVERTISING (KRS 324.117(4))

This statute was clarified to say that whenever proper-ty is listed, the licensee must include the name of thereal estate company as it appears on the license or thename of the principal broker with whom the licenseeis affiliated in ALL ADVERTISEMENTS of the listedproperty, regardless of who places the advertisement.The only exception to this law is if the licensee is sell-ing, renting, leasing or otherwise dealing in his or herown property. If listed property is advertised by theclient or customer, the listing licensee shall provide theclient or customer with written notification of therequirements of this statute and the licensee shall keepa copy of such notification.

INVESTIGATIONS (KRS 324.150(2))

This statute was clarified to allow the Commission,while investigating violations, to compel the produc-tion of books, papers, documents, and other evidence,to review evidence and to enter the office or branchoffice of the licensee for the purpose of inspectingrequired documents which relate to the investigation.

UNLICENSED BROKERAGE (KRS 324.990(1))

This statute makes a first time offense of unlicensedbrokerage a Class A misdemeanor and any subsequentoffenses will be a Class D felony. Licensees will notbe subject to this penalty if they engage in unlicensedreal estate brokerage due to failure to renew a previ-ously valid license.

ERRORS AND OMISSIONS INSURANCE (KRS324.395(7))

This statute was amended to raise the maximum annu-al premium ceiling for errors and omissions insuranceprovided under the group policy for licensees from onehundred twenty-five dollars ($125) to two hundred dol-lars ($200).

Now that the statutes have been passed, theCommission must promulgate regulations to interpretthe statutory changes. The Legal Department is cur-rently working on a regulation proposal to submit tothe Legislative Research Commission. This processgenerally takes six to nine months to complete. Oncethe regulations have been approved, we will updateyou on the changes in the newsletter, on our websiteand in continuing education courses.

GoGovverernor Fnor Fletcletcher Signs House Bill 244 into Laher Signs House Bill 244 into Laww

Governor Signs Bill into Law

First Row: John Chandler, Judy Piazza,Denise Wade, Governor Ernie Fletcher,

Betty Kaiser and Bob RobertsSecond Row: Norman Brown, Ken Warden,Jerry McMahan, Ron Smith and Lee Harris

6

One of the first questions a buyerusually asks about a piece of prop-erty is: “What is the squarefootage?” Many buyers feel it isimportant because it allows them(although not always accurate) toestimate the value of the home andto compare it with other properties.However, when measuring squarefootage, there is not a statute or aregulation outlining the proper pro-cedure.

Under KRS 324.160(4)(b),licensees shall not make any sub-stantial misrepresentation about apiece of property. Licensees arenot required under license law toreport square footage. However,licensees must make sure that ifthey do choose to report square

footage,they reportit accurate-ly.Licensees shouldalso disclose exactly how they cal-culated square footage and whetheror not they actually measured theproperty themselves or relied on athird party’s measurement.Licensees should also be aware thatwhen they are reporting squarefootage, they only calculate “livingarea” square footage. It should beheated, finished and directly acces-sible from other living areas. Iflicensees rely on a previous listing,survey or appraisal report, theyshould disclose to the parties wherethey obtained the square footageamount. Licensees should not relyon a square footage total calculatedby the home owner or a tax orPVA record. Licensees should

encourage buyers to obtain theirown square footage calculation if itis an important factor of theirhome-buying decision.

Licensees need to be trained on theproper procedure for measuringsquare footage. The American

National StandardsInstitute (ANSI) hasdeveloped the AmericanNational Standard for

Single-Family ResidentialBuildings: Square Footage-Methodfor Calculating. The NationalAssociation of Realtors® was acontributing member in the devel-opment of this standard. For moreinformation on obtaining thesestandards, call the NAHB ResearchCenter at 1-800-638-8556.

The Kentucky Real EstateCommission has not adopted a par-ticular standard and licenseesshould check with their principalbrokers or local Board ofRealtors® for the preferred methodof measurement.

The Seller’s Disclosure of Property Conditions Form(“Seller’s Disclosure”) is designed for the seller to givethe buyer the best and most accurate picture of thedefects in the property the buyer is interested in purchas-ing. If a seller has entered into a contract with a poten-tial buyer, and that contract falls through due to defectsin the home or items uncovered in a home inspection,the seller must update the Seller’s Disclosure to reflectthat. The Commission has seen complaints and lawsuitsin which the seller did not update the form, a subse-quent buyer purchases the home and finds the defect.When the buyer learns that this defect was in factrevealed to the seller through a previous home inspec-tion, it is quite easy for the buyer to prove that the sellerknew or should have known of the defect. In addition,if the listing agent was involved in those negotiations, itis also easy for the buyer to show that the listing agentwas aware of the defect and failed to disclose it.

In some instances, the seller may disagree with theresults of the home inspection. If this occurs, the sellerhas several options. The seller can order another homeinspection and provide details from both inspections,showing the differences in each. Or, the seller couldprovide details of the home inspection, state his or herobjection to those and encourage any future prospectivepurchasers to specifically check out the disputed defectsto their own satisfaction.

It is very important for the listing agent to make surethat the seller updates the Seller’s Disclosure after a dealhas fallen through due to inspection negotiations. Ifnot, both the listing agent and the seller could be heldresponsible for failing to disclose what then becomes aknown defect. In no case should the seller simply dis-miss the inspection results outright without furtheraction. It could be possible that there are ten disputeditems on the inspection report and one of those itemsturns out to be legitimate. The seller would then unwit-tingly be failing to disclose known defects.

Be Careful When DisclosingSquare Footage

Updating the Seller’s Disclosure of Property Conditions Form

By: Shelly Saffran,Director of Administration

By Lee B. Harris, General Counsel

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Recently, the real estate industry losta very valuable member and friend.On Friday, July 2, 2004, formerCommissioner Julius A. Wise passedaway in his hometown ofElizabethtown, Kentucky. Thefuneral was held at ElizabethtownBaptist Church. Current Chair BobRoberts and former Commissioner

Jim Huff served as pallbearers.Julius is survived by his wife, Ina,son, Scott, daughter, Juliana and twograndsons, Julius Alexander andGavin.

Julius began his real estate career in1958 as a sales associate andobtained his broker’s license one yearlater. He founded Wise Auction andReal Estate in 1968 and remainedprincipal broker until his death.During his career, Julius was associ-ated with many organizations. Hewas Past President of the HardinCounty Board of Realtors® and wasa member of the NationalAssociation of Realtors®, theKentucky Association of Realtors®,the Association of Real EstateLicense Law Officials, the Heart ofKentucky Association of Realtors®,the Lincoln Trail Homebuilder's

Association and the NationalAuctioneers Association.

In 1983, Julius was appointed as aCommissioner for the Kentucky RealEstate Commission by GovernorJohn Y. Brown, Jr. He was electedChair of the Commission in 1986,1988 and 1994. He was appointedby three other Governors and servedon the Commission until 1994.

Julius so enjoyed being on theCommission, and he leaves a legacyof good service and fond memories.He was an asset to the professionand was an instrumental part ofmandating errors and omissionsinsurance. Julius was never withouthis smile or his sense of humor. Hewill truly be missed by theCommissioners, the staff and the realestate community.

Often,when a buyer is

purchasing a home that is under con-struction at the time, the builder willrequest a deposit or down payment.Sometimes, this deposit goes towardsbuilding expenses. In most cases, thedeposit or down payment is not to beplaced into escrow and is not refund-able should the deal fall through forsome reason.

The Commission has seen some prob-lems arise out of these non-refundabledeposits or down payments. Agentswho are representing buyers on thesedeals should be particularly cautiousand advise their buyer-clients of the

risks associated with such a payment.

First, the contract should clearly andspecifically state that the money is notbeing placed into an escrow accountbut that it is being paid directly to thebuilder – and that it will be spent!Many times, buyers believe that themoney is being paid to the builder tohold, but is not actually being spent.In addition, if there is standard, pre-printed language in the purchase con-tract indicating that the deposit will beplaced into a broker’s escrow account,be sure to mark out this clause. By nomeans should the contract indicatethat the broker will hold the moneywhen, in fact, it is going directly to thebuilder.

Second, the buyer’s agent should tellthe buyer that there are risks associat-ed with paying a non-refundabledeposit. For example, what if theproperty never closes and the builderhas spent the money on building mate-rials? Is the buyer truly prepared tolose that amount of money? Is there aprovision in the contract to protect thebuyer in case the property does not

close due to the seller’s default?

Third, it is advisable to check out thebuilder’s references and past clients, todetermine whether there is any addi-tional risk. The buyer’s agent shouldadvise the buyer to ask the builder fora list of other customers for whom thebuilder has worked. In addition, thebuyer’s agent can point the buyer tothe local Homebuilder's’ Associationto determine if the builder is a mem-ber of that organization. If so, thebuyer should ask whether there havebeen any complaints filed and howthose were resolved. The buyer’s agentmay want to advise the buyer to checkwith the Better Business Bureau andthe local courts to determine whetherthe builder has had any complaints orlawsuits filed. Certainly, if the buyer’sagent is aware of any past problems,the buyer’s agent should inform thebuyer of those facts.

If there are any red flags raised by anyof the above steps, the buyer may wantto consider negotiating a different sortof deposit or down payment, if possi-ble.

Former Commissioner Julius A. Wise Remembered

BUILDERDEPOSITSBy: Lee B. Harris,General Counsel

8

At the June 17, 2004 Commission Meeting, theCommissioners approved a new reciprocal agree-ment between the Kentucky Real EstateCommission and the Mississippi Real EstateCommission. The agreement is very similar to sev-eral of the other reciprocal agreements Kentuckycurrently has with other approved states. Licenseesinterested in obtaining reciprocal agreements withother states can log on to the Commission’s website(www.krec.ky.gov) for the specific requirements ofeach agreement.

Reciprocal agreements are based on “active”licensees; therefore, licensees must be active at the

time of application. If you are an active Kentuckylicensee and would like to become licensed inanother state through reciprocity, you will first needto contact that state for an application. Many stateswill require a “Letter of Certification” to show thatthe licensee is in good standing in Kentucky. Toobtain this document, simply send your request inwriting to the Kentucky Real Estate Commissionalong with a $10.00 check made payable to KREC.

Below are the states that have reciprocal agreementswith Kentucky and the contact information for eachstate. Remember, more information can be foundon the Commission’s website.

MISSISSIPPI MISSISSIPPI AND KENTUCKY SIGN AND KENTUCKY SIGN A A NEW RECIPRNEW RECIPROCAL OCAL AAGREEMENTGREEMENT

CURRENT RECIPRCURRENT RECIPROCAL STOCAL STAATESTES

Florida

Ohio

IndianaIllinois

Alabama

Colorado Georgia

Iowa

North Carolina

South Carolina

Mississippi

Tennessee

KY

Nebraska

Missouri

WestVirginia

Oklahoma

SouthDakota

Alabama Real Estate Comm. (334) 242-5544Colorado Div. of Real Estate (303) 894-2166Florida Div. of Real Estate (407)481-5632Georgia Real Estate Comm. (404) 656-3916Illinois Real Estate Comm.(217) 785-9300Indiana Professional Licensing (317) 232-2980Iowa Professional Licensing Div.(515) 281-7393Mississippi Real Estate Comm.(601) 932-9191Missouri Real Estate Comm.(573) 751-2628

Nebraska Real Estate Comm.(402) 471-2004North Carolina Real Estate Comm.(919) 875-3700Ohio Division of Real Estate (614)466-4100Oklahoma Real Estate Comm. (405) 521-3387South Carolina Real Estate Comm. (803)896-4400South Dakota Real Estate Comm. (605) 773-3600Tennessee Real Estate Comm.(615) 741-2273West Virginia Real Estate Comm. (304) 558-3555

Reciprocal States Phone Numbers

9

If you place your license on inac-tive status, you need to be awareof special considerations regard-ing your errors and omissionsinsurance coverage. The currentKentucky group policy provides:“In the event an Insured's licenseis placed on inactive status duringa period in which the Insured haspaid the applicable premium, thepolicy will remain in effect for theremainder of the Individual PolicyPeriod as if the license had notbeen placed in inactive status,regardless of whether the licenseis re-activated, except that cover-age will not be provided for acts,errors or omissions of the Insuredwhich occur during the periodwhen the license was in an inac-tive status.”

The current group policy is writ-ten on a "claims-made and report-ed" basis. This means that cover-age is provided only for thoseClaims that are made against youand reported to the insurancecompany in writing during thepolicy period. If you place yourlicense on inactive status, you maystill be eligible for limited cover-age after the policy period. Thecurrent group policy provides:"In case of cancellation or nonre-newal because a Licensee retires,places license on inactive status orallows license to expire, the policywill apply to Claims first madeagainst the Insured and reportedto the Company up to ninety (90)days after the effective date ofcancellation or nonrenewal. Saidninety (90) day period will behereinafter referred to as theAutomatic Extended ReportingPeriod.

After you place your license inac-tive, you are not required by lawto maintain your coverage.

However, a prudent individualwill maintain coverage in order toavoid personal liability for Claimsmade after expiration of the poli-cy period. An Optional ExtendedReporting Period Coverage, com-monly known as "Tail Coverage"may be purchased to cause thepolicy to apply to Claims firstmade and reported up to three (3)years after the effective date ofthe cancellation or nonrenewal.Tail Coverage can only be pur-chased within ninety (90) daysafter the licensee's policy has ter-minated. Tail Coverage is impor-tant because so many professionalliability Claims are not made untilmonths after the subject transac-tion occurs, and some may even bemade years after the transaction.

The current group policy pro-vides:

Coverage afforded by theAutomatic and Optional ExtendedReporting Periods:

1. Shall apply solely to Claimsarising from a negligent act, erroror omission: (a) committed oralleged to have been committedsubsequent to the RetroactiveDate, and (b) committed oralleged to have been committedprior to the effective date of can-cellation or nonrenewal, and(c) which are otherwise insuredunder all the other terms, condi-tions and exclusions of this policy.2. Shall not apply to any Claim,which is insured by any other pol-icy of insurance, nor as excessabove such other policy of insur-ance.3. Nothing in Paragraphs 1 or 2shall serve to increase the Limitsof Liability as provided inInsuring Agreement II or theSupplementary Payments as pro-

vided inSection IV.The Limits ofLiability for anyExtended ReportingPeriod shall be a part of,and not in addition to,the Limits of Liabilitylisted on the Declarations.

The current group policy requiresthat the Claim be reported to theinsurance company, in writing,during your policy period or anyextended reporting period. TheInsured must give written noticeby submitting a completed Noticeof Claim Form to the Company assoon as possible after the Claim isfirst made but in no event morethan ninety (90) days after theInsured becomes aware of suchClaim. Such written notice shallinclude the name of the licenseeand shall include the time, placeand details of the Claim. Failureto report a Claim in a timely man-ner could jeopardize the coverageprovided by the policy. RISC uti-lizes a simple Claim reportingform which is located on its website www.risceo.com, however,for assistance in reporting aClaim, please call (800) 637-7319.

This information is for illustrativepurposes only and is not a con-tract. It is intended to provide ageneral overview of the productsand services offered. Only thepolicy can provide the actualterms, coverages, amounts, condi-tions and exclusions. This pro-gram is only available inKentucky.

This article was submitted by theCommission’s group insurancecarrier, Rice Insurance Services,Inc. To contact them, call 502-897-1876 or 1-800-637-7319.

PPRROOTTEECCTT YYOOUURRSSEELLFF EEVVEENN IIFFYYOOUURR LLIICCEENNSSEE IISS IINNAACCTTIIVVEE

10

Nhat Hoang (Louisville) CaseNo. 03-0043Violation: Mr. Hoang wasfound in violation of KRS324.160 (4)(s) for failing torespond to a Sworn Complaintsent to him by the Commission.The Commission deemed thefacts stated in the complaint astrue since Mr. Hoang did notrespond to the complaint andfound him in violation of KRS324.160 (4)(b) and (v) for makinga substantial misrepresentationand for conduct which consti-tutes improper, fraudulent or dis-honest dealings. Mr. Hoang wasfound to have removed his clientsnames from the clients’ deedwithout their permission and tohave put his name on the deed.Mr. Hoang then demandedmoney to transfer the deed backto the owners.Disposition: Mr. Hoang’s realestate license was revoked and hewas fined in the amount of onethousand dollars ($1,000.00).

Greg B. Boyles (Louisville)Case No. 02-0113Violation: Mr. Boyles was foundin violation of KRS 324.160(4)(j) for being convicted of afelony while holding a Kentuckyreal estate license.Disposition: The Commissionadopted the Hearing Officer'sRecommended Findings of Factand Conclusions of Law, whichstate that the license of Greg B.Boyles is suspended for twoyears. After two years, he mayseek reapplication by presentingthe Commission with proof ofgood character.

Robert P. Carter (Lexington)Case No. 03-0086Violation: Mr. Carter wasfound in violation of KRS324.160(4)(v) for improper con-duct. The Commission issued anorder of default.Disposition: Mr. Carter's licenseshall not be reinstated until hehas complied with all of therequirements for licensure, anduntil he has submitted proof tothe Commission that he has suc-cessfully completed an alcoholtreatment program since April 3,2003, which is the date of histhird DUI conviction. If Mr.Carter's license is reinstated, itshall be on probation for a periodof twelve (12) months from thedate of reinstatement.

Russell G. Dunn (Lexington)Case No. 03-0077Violation: Mr. Dunn agreedthat he unintentionally violatedKRS 324.160(4)(u) by violatingthe provisions of KRS 324.111(4) and (6), when he released theescrow account funds in questionin a manner that all partiesagreed did not involve fraud orresult in any monetary loss to thecomplainant in this matter.Disposition: Mr. Dunn agreedto pay a fine in the amount ofone thousand dollars ($1,000.00)of which five hundred dollars($500.00) shall be waived uponMr. Dunn successfully complet-ing nine (9) hours of continuingeducation, in addition to anyhours already required byKentucky law.

Jerry D. Cooper (Anchorage)Case No. 03-0088 Violation: Mr. Cooper agreedto a violation of KRS324.160(4)(h) for failing toaccount for or remit, within areasonable time, monies belong-ing to another that came into Mr.Cooper's possession and KRS324.160(u), specifically KRS324.111, for failing to place acontract deposit into his escrowaccount.Disposition: Mr. Cooper agreedto pay to the Complainant a sumin the amount of eight thousanddollars ($8,000.00). Mr. Cooperagrees that he shall not voluntari-ly file for bankruptcy. Mr.Cooper agreed to pay a fine inthe amount of five hundred dol-lars ($500.00) and enforcement ofthe fine shall be waived upon Mr.Cooper's successful completionof six (6) hours of continuingeducation, in addition to anyhours already required byKentucky law.

Michael P. Ziegler (Hebron)Case No. 03-0131 Violation: Mr. Ziegler agreedthat he violated KRS324.160(4)(g) for attempting torepresent a broker without havingthat broker's consent.Disposition: Mr. Ziegler agreedto pay a five hundred ($500.00)fine and to attend six (6) hours ofcontinuing education, in additionto any hours already required bylaw.

Charles H. Padgett(Clarksville, Tennessee) Case No.03-0100

Disciplinary Actions

11

Violation: Mr. Padgett stipulatedthat he unintentionally violatedKRS 324.160 (4)(u) when he unin-tentionally violated KRS324.020(1) by listing a piece ofproperty and engaging in propertymanagement during a period thathe was not licensed to engage inreal estate brokerage in Kentucky.Disposition: Mr. Padgett agreedto pay a sum in the amount of onethousand seven hundred sixty-seven dollars and forty-five cents($1,767.45), which represents allfees earned by him while hislicensed was cancelled. Mr.Padgett also agreed to completethree (3) hours of continuing edu-cation in a Commission-approvedlaw course.

Eugene J. Gudenkauf (Radcliff)Case No. 03-0070 Violation: Mr. Gudenkaufagreed that he unintentionally vio-lated KRS 324.160(4)(b) by incor-rectly representing to hisbuyer/client that a certificate ofoccupancy had been issued for theproperty in question.Disposition: Mr. Gudenkaufagreed to pay the complainant thesum of seven hundred sixty dol-lars ($760.00). Mr. Gudenkaufagreed to complete six (6) hours ofcontinuing education in additionto any hours already required byKentucky law.

F. Nelson Collins (Louisville)Case No. 03-0126Violation: Mr. Collins agreedthat he unintentionally violatedKRS 324.160(6) and KRS324.160(4)(u), as illustrated by 201KAR 11:121, Section 1(2) andKRS 324.160(4)(m), by failing to

Disciplinary ActionsContinued from Page 10

adequately supervise his affiliatelicensees, causing them to offer,unintentionally, an illegal induce-ment to the general public.Disposition: Mr. Collins agreedto pay a fine in the amount offive hundred dollars ($500.00).Mr. Collins also agreed to suc-cessfully complete, within twelve(12) months of the Commission'sFinal Order, six (6) hours of con-tinuing education in aCommission-approved lawcourse, in addition to any hoursalready required by Kentuckylaw.

Nancye W. Hancock(Pendleton), Grant B. Neidigh(LaGrange), Constance C.Byers (LaGrange), Lisa H.Gowing (LaGrange), Lee T.Hamilton (LaGrange), Phil L.Hornbeck (Crestwood) andJeffrey L. Combs (LaGrange)Case No. 03-0126Violation: All of the individualsabove agreed to an unintentionalviolation of KRS 324.160(4)(u),as illustrated by 201 KAR11:121, Section 1(2), and KRS324.160(4)(m) by offering an ille-gal inducement to the generalpublic.Disposition: All agreed to pay afine in the amount of two hun-dred dollars ($200.00) each.They also agreed to each success-fully complete, within twelve (12)months of the Commission'sFinal Order, six (6) hours of con-tinuing education in aCommission-approved lawcourse, in addition to any hoursalready required by Kentuckylaw.

Patricia A. Nuccitelli(Radcliff) Case No. 03-0141Violation: Ms. Nuccitelli agreed

to a violation of KRS 314.160(6)for failing to adequately supervisea licensee affiliate and KRS324.160 (4)(u), specifically, 201KAR 11:121 for failing to act inaccordance with a fiduciary stan-dard towards a client and by fail-ing to properly act as a dual agentas required by KRS Chapter 324.Disposition: Ms. Nuccitelliexpressly agreed to pay to theComplainant, as restitution, asum of six thousand dollars($6,000.00) and to complete six(6) hours of continuing educationin a Commission-approvedcourse, in addition to any hoursalready required by Kentuckylaw. Within six-months of thefinal order, Respondent Nuccitellishall provide in-house training toall licensed agents in her realestate company. RespondentNuccitelli also agreed to accept aformal reprimand.

Keturah Parr (New Haven)Case No. 03-0141Violation: Ms. Parr agreed to aviolation of KRS 324.160 (4)(u),specifically, 201 KAR 11:121, forfailing to act in accordance witha fiduciary standard towards aclient.Disposition: Ms. Parr agreed tocomplete six (6) hours of contin-uing education in a Commission-approved law course, in additionto any hours already required byKentucky law.

COMMISSIONHAS A NEW

WEBSITEADDRESS

www.krec.ky.gov

PRESORTEDSTANDARD

U.S. POSTAGEPAID

LOUISVILLE, KYPERMIT NO.

TThe Khe Kentucentuckky Ry RealealEstaEstate Commission willte Commission will

be cbe closed on:losed on:

SeSeptember 5,ptember 5, 20042004(La(Labor Dabor Day)y)

&&NoNovvember 11,ember 11, 20042004

(V(Vetereteranan’’s Das Day)y)

COME SEE US ATTHE 100th KENTUCKY

STATE FAIR

The Kentucky Real EstateCommission will again have a

booth at the Kentucky State Fair inthe Government Section of the

South Wing. We will be promotingusing a licensed real estate agentand giving away combs, emery

boards and magnets. The fair runsAugust 19 - 29, 2004. Stop by and

see us. We would like to meet you!

WWorord Scrd Scrambamblele

1. SERUGALTNIO_ _ _ _ _ _ _ _ _ _ _

2. USREAQ OETAGOF_ _ _ _ _ _ _ _ _ _ _ _ _

3. IPORRCALEC_ _ _ _ _ _ _ _ _ _

4. TSAEUTTS_ _ _ _ _ _ _ _

5. EIRCSDLSOU_ _ _ _ _ _ _ _ _ _

Answers:1.Regulations 2.Square Footage 3.Reciprocal 4.Statutes 5.Disclosure

Kentucky Real Estate Commission10200 Linn Station Road, Suite 201Louisville, KY 40223 Phone: (502) 425-4273 Fax: (502) 426-2717Toll Free: 1-888-373-3300 Fax-On-Demand: 1-888-KREC-FAXWeb Address: www.krec.ky.gov