Q: I am a recently licensed real estate broker in the District of Columbia. I have heard that the City Council has recently enacted a rather sweeping law affecting the real estate brokerage industry, but have not been able to get much information about this new law. Can you advise?
A: In December 1982, the Council of the District of Columbia enacted the D.C. Real Estate Licensure Act of 1982 (Act 4-299). Although final action was taken by the council in December, the law will not become effective until the 30-day congressional review period has lapsed.
Unfortunately for District legislation, 30 congressional days does not necessarily mean 30 calendar days. The 30 days are counted only for those days when Congress is actually in session, and it may very well be that this new law will not take effect until the middle of March.
The new law represents a major departure from the District's existing real estate license laws. The law establishes, among many other provisions, a requirement that all deposit monies for any real estate or business transaction be placed in an account in a financial institution located within the District whose deposits are insured either by the Federal Deposit Insurance Corp. (FDIC) or the Federal Savings and Loan Insurance Corp. (FSLIC).
These deposit accounts must be maintained in a separate account, and, if the account is held for 45 days or more, must earn interest from the date received by the escrow holder at the highest interest rate of either the legal maximum rate under federal law for ordinary savings deposits in commercial banks, or at the rate on the certificate of deposit or other security given as the escrow or trust.
In other words, the escrow holder is obligated to assure the depositor that the money will accrue interest at the best rate permissible under District law.
There is an interesting legal question as to whether these escrow requirements apply only to real estate brokers, or also to attorneys, title companies, or other trustees who are involved in a real estate transaction.
The major provision of the new law is the requirement that property managers doing business in the District be licensed.
Additionally, for the first time in the District's history, the law establishes a real estate guaranty and education fund, which will be administered by the Real Estate Commission in the District. This new guaranty fund will bring the District into line with many other jurisdictions, and will assure consumers that in the event they have grievances against a licensed real estate broker or property manager, there will be adequate funds to compensate a consumer if the licensee is no longer in business--or has no funds to satisfy any legitimate claims against that company or individual.
The law will have to be implemented by the Real Estate Commission. It is unclear at the present time when the commission will adopt regulations implementing the new law. Projections by the commission itself seem to suggest that the regulations may not be available for at least six months.
However, consumers and real estate professionals alike should become familiar with the provisions of this new law. For the first time in the District's history, a major revamping of the real estate licensure laws has been enacted. Whether the consumer benefits will, of course, depend on the implementation by the real estate commission--as well as the effective monitoring of this new law by interested consumer and civic organizations.