201 KAR 11:121. Improper conduct.


      RELATES TO: KRS 324.010(3), 324.160, 24 C.F.R. 3500

      STATUTORY AUTHORITY: KRS 324.281(5), 324.282

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 324.282 authorizes the Real Estate Commission to promulgate administrative regulations necessary to carry out and enforce the provisions of KRS Chapter 324. This administrative regulation establishes behavior considered improper conduct.


      Section 1. The following shall be improper for any licensed agent:

      (1) To accept or agree to accept, without written disclosure to the seller and buyer or lessor or lessee on the purchase or lease contract, a referral fee from any person in return for directing a client or customer to that person, or another, who provides or agrees to provide any goods, service, insurance or financing related to a transaction involving real estate. This provision shall not affect paying or receiving referral fees between licensed agents for brokerage services.

      (2) It shall not be improper conduct to advertise the fee or other compensation the licensed agent agrees to charge for his services.

      (3) To refuse or prohibit any prospective purchaser from viewing or inspecting real estate listed for sale or lease with the agent, or with the agent's company, without the written and signed direction of the owner. This provision shall not be construed to permit otherwise unlawful discrimination.

      (4) To fail to satisfy one (1) or more of the following fiduciary duties owed to the licensee's client:

      (a) Loyalty;

      (b) Obedience to lawful instructions;

      (c) Disclosure;

      (d) Confidentiality;

      (e) Reasonable care and diligence; and

      (f) Accounting.

      (5) To advertise a guaranteed sales plan without the required disclosure, as defined in 201 KAR 11:011.

      (6) To violate a statute or administrative regulation governing brokers, sales associates, or real estate transactions.

      (7) To serve in the dual capacity of a real estate licensee and loan originator, if the real estate licensee, while acting in that capacity:

      (a) Fails to disclose this dual role in writing and fails to indicate in that disclosure that the licensee will receive additional payment for the loan origination activities;

      (b) Fails to contact the Department of Financial Institutions to register and pay the one (1) time fee for engaging in loan origination, if the licensee is engaged in loan origination as a part of his or her real estate activities to assist his or her real estate clients in obtaining financing;

      (c) Receives payment but fails to perform the requirement in subparagraph 1 of this paragraph, plus at least five (5) of the remaining thirteen (13) specific activities listed below:

      1. Taking information from the borrower and filling out the application;

      2. Analyzing the prospective borrower’s income and debt and pre-qualifying the prospective borrower to determine the maximum mortgage that the prospective borrower can afford;

      3. Educating the prospective borrower in the home buying and financing process, advising the borrower about the different types of loan products available, and demonstrating how closing costs and monthly payments could vary under each product;

      4. Collecting financial information (tax returns, bank statements) and other related documents that are part of the application process;

      5. Initiating or ordering a verification of employment and verifications of deposit;

      6. Initiating or ordering a request for mortgage and other loan verifications;

      7. Initiating or ordering appraisals;

      8. Initiating or ordering an inspection or engineering report;

      9. Providing disclosures (truth in lending, good faith estimate, others) to the borrower;

      10. Assisting the borrower in understanding and clearing credit problems;

      11. Maintaining regular contact with the borrower, realtors, and lender, between application and closing to appraise them of the status of the application and gather any additional information as needed;

      12. Ordering legal documents;

      13. Determining whether the property was located in a flood zone or ordering that service; and

      14. Participating in the loan closing;

      (d) Requests or receives compensation that is not commensurate with the actual work performed; or

      (e) Requests or receives compensation for work that is not actually performed by him or her.

      (8) A broker licensed in Kentucky to aid, abet, or otherwise assist any individual who is not actively licensed in Kentucky in the practice of brokering real estate in this state. This prohibition shall include a Kentucky broker assisting an unlicensed individual with the listing, selling, leasing or managing of any Kentucky property or assisting an unlicensed individual in representing any buyer or lessee seeking property in Kentucky. An unlicensed individual shall include an individual who may be affiliated with a national franchise and may have a license in another state but who does not have an active Kentucky license. (17 Ky.R. 2295; Am. 2691; 3105; eff. 4-12-91; 27 Ky.R. 1509; 2708; eff. 4-9-2001; 31 Ky.R. 1329; 1647; eff. 4-22-05; 34 Ky.R. 829; 2277; eff. 5-2-2008; 36 Ky.R. 429; 1012; eff. 12-4-2009.)