The power of the pen never should be underestimated. Colorado’s Division of Real Estate recently announced that it is investigating certain findings reported in The Denver Post regarding affiliated business arrangements (AfBAs) between real estate brokers and title agents.
“The commission voted to open investigations in regard to any alleged AfBA violations of the brokers named in the ‘Shared office space raises questions for real estate agents, title companies’ article,” real estate division spokesman Eric Turner confirmed with RESPA News.
The five-member commission voted 3-1 to investigate alleged AfBA registration violations, with Commissioner Christopher McElroy recusing himself from the vote and Commissioner Jarrod Nixon submitted the dissenting vote.
Turner added that the commission declined to take any further action against the brokers mentioned in The Denver Post article titled, “Real Estate brokers’ ties with title insurers might cost Colorado consumers,” because that article contained “purely statistical data” that did not identify whom had failed to register their AfBA with the commission.
Shortly after these articles were published in November 2016, the commission released a common practice violation advisory on reporting AfBAs. The items discussed within that advisory still apply, Turner said. All Colorado licensed real estate brokers who refer business to settlement service providers must make certain disclosures if:
The commission did not specifically discuss the issue of shared office space arrangements.
“The Colorado Real Estate Practice Act (CREPA) does not specifically address shared space,” Turner said, adding that shared space agreements would be evaluated through the Sham Test requirements of RESPA to determine the legitimacy of an AfBA.
When asked whether the commission was working on additional advisories regarding its investigation, Turner stated that the Division of Real Estate may not confirm or deny the existence of any open investigations under CREPA.
According to the advisory: “The licensee or the employing broker of a licensee who is party to an affiliated business arrangement must disclose the existence of the arrangement. The disclosure must be written and provided to the party they are referring at the time the referral is made. Additionally, written disclosure must be made at the time the contract to buy and sell is executed by all parties to the transaction.”
A broker cannot require the use of an AfBA or a particular settlement service provider as a condition of obtaining services from that broker. Brokers also are required to provide a written disclosure of the names of all AfBAs to which the broker is a party at the time a broker enters into or changes an affiliated business arrangement.
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