50. Unauthorized Practice of Law

4 DOS 92 Matter of DOS v. DuBois - drafting of deposit clause in contract fails to comply with provisions of Duncan Hill Realty, 62 A.D.2d 690, app. den. 45 N.Y.2d 821

28 DOS 91 Matter DOS v. Century 21 Janes Real Estate - penalty modified to forfeiture of commission and 2-month suspension. Prior decision 11 DOS 89 prohibited gratuitous use of third party beneficiary clause for broker commission

Case 173 Matter of DOS v. Marinelli, Consent Order - forms without attorney approval clause or joint bar association/Realtor board approval - $500 fine and corrective actions affidavit

Consent #194 Matter of DOS v. Century 21 Deidrich - failure to include notice of legally binding agreement and attorney approval clause; failure to use form jointly approved by local bar association and local board of Realtors; $1,000 fine

5 DOS 93 Matter of Mansher & Gold East Realty - sales trainee inserts unclear caveat; not mere scrivener following client's directions who is acting in secretarial capacity

6 DOS 93 Matter of Cornell Associates Realty - sales associate uses contract form which does not contain an attorney approval clause

Opinion Letter 3/2/93 (Roslyn Friedman) - don't need real estate license to operate "900" number, but if giving advice that would substantially affect legal rights, violates Judiciary Law §484

63 DOS 93 Matter of Carpio d/b/a Dentone Realty -broker acts as dual agent without informed consent; advises that attorney is not needed and commits unauthorized practice of law; alteration of document and improper notarization; forfeiture of right to commission due to breach of fiduciary duty

80 DOS 93 Matter of Droz d/b/a Adirondack Real Escapes - extensive delay (6 years after event and 5 years after complaint) coupled with prejudice to licensee (witnesses memories faded) and absence of excuse from DOS result in dismissal of one charge (regarding alleged delay in making deposit of buyer's check); unlawful practice of law in use of form contract without attorney approval clause which is not jointly approved by bar association and Board of Realtors (review by two attorneys is insufficient); failure of proof that broker did not make clear for whom he was acting; permissible for broker to modify his commission agreement and accept second mortgage from buyer at suggestion of seller's attorney

CRC #592 Matter of DOS v. Johnson, Consent Order - misrepresentation by failure to disclose material fact of 10' easement; unauthorized practice of law (Judiciary Law §478) by preparing statement without attorney-approval clause; fine of $2,000

Matter of Treefrog Realty, Opinion Letter 94-13 (Sumber) - broker may complete contract containing attorney-approval clause without engaging in the unauthorized practice of law (Judiciary Law §478)

CRC #375 Matter of DOS v. Murat, Consent Order - failure to hold deposit in escrow violation 19 NYCRR §175.1; failure to pay judgment violation RPL §441-c; drafting binder is unauthorized practice of law and violates Judiciary Law §478; restitution of $2,800; fine of $2,500

24 DOS 95 Matter of Seplow - disciplinary charge jurisdiction where licensee's renewal has been previously denied; proof of service of process; agency relationship and duties; fraud in sale of cooperative apartment, including false information about particular sale and willful non-disclosure of material information; failure to obey buyer's obvious intent to have deposit treated as funds to be held in escrow as payments to seller; conversion; rules applicable to supplemental pleadings - absent surprise or prejudice, motion to file and serve could be granted on day of hearing, but here respondent doesn't appear, so supplemental complaint dismissed without prejudice; DOS fails its burden of proof as to extortion and retention of unlawful commission and unauthorized practice of law; when respondent became optionee to purchase subject matter, agency relationship ceased to exist; fiduciary duty precludes respondent from acting simultaneously as agent and principal in a transaction; restitution of $35,000 deposit plus interest at legal rate for judgments

77 DOS 95 Matter of DOS v. Deppoliti, et al. - auctions; pleadings amended to conform to proof; individual proper party where license under non-corporate assumed name; obligation of honesty before fiduciary obligation upon agency; working farm improved by 1-4 family residence requires disclosure form under RPL §443 but is not governed by 19 NYCRR 175.24; false representation demonstrates untrustworthiness; failure to disclose back taxes demonstrates incompetency; complainant failed to establish unlicensed practice of law; buyers premium earned on acceptance of offer per contract; demand for unearned commission demonstrates untrustworthiness; failure to pay court costs equivalent to failure to pay judgment; failure excused due to reliance on attorney advice; revocation

Matter of LIBOR, Declaratory Ruling 95-8 - unauthorized practice of law; attorney approval clause; standard form Board contract; Duncan & Hill analysis; use of "fill in the blanks" LIBOR form contract containing 3 business day attorney approval clause does not constitute unauthorized practice of law provided that broker or salesperson must not give legal advice and shall recommend seeking advice of attorney before signing

83 DOS 95 Matter of DOS v. Loffredo - improper commission suit by broker; representative broker liable for forms used; unauthorized practice of law where sales agreement did not contain attorney's approval clause; collateral estoppel on issues of fact; pleadings amended to conform to the proof where no surprise or prejudice, and matters actually litigated; ready, willing and able purchaser not obtained when unable to obtain mortgage per sales agreement; release of listing agreement required where improperly procured

160 DOS 96, Matter of DOS v. Werner - dual agency; vicarious liability; dependent transactions; unauthorized practice of law; violation of Reg. 175.24 by minor variations in language is de minimus; failure to provide RPL §443 disclosure to seller before entering into listing agreement demonstrates incompetency; representation of buyer and seller in separate but interrelated transactions consists of dual agency and requires informed consent of the parties after full and fair disclosure; licensee did not engage in unauthorized practice of law where contract used did not contain an attorney’s approval clause and was not recommended by a joint bar/Realtors committee where contract was completed by licensee at instruction of buyer’s attorney, licensee instructed seller to consult their attorney and final contract was the product of negotiations between the parties’ attorneys; failure to advise principal when entering into agency agreement of office policy not to co-broker properties for the first 30 days of the listing was a breach of agent’s fiduciary duties; commissions are unearned where agent breaches its fiduciary duties to principal; broker admonished to use exact language of Reg. 175.24 and to use sales contracts containing an attorney’s approval clause; broker fined $2,000.00 and required to disgorge commissions of $7,100.00 plus interest; two salespersons each find $1,000.00

CRC #95-0469, Matter of DOS v. Maczko - Consent Order - duty to supervise sales associates; unlicensed activity; unauthorized practice of law; broker allows unlicensed person to participate in a regulated real estate transaction, $377.78 fine, $750.00 restitution plus interest; licensed salesperson engaged in the unauthorized practice of law, sixty-day suspension; broker and salesperson required to attend Law of Agency course

Formal Opinion No. 96-F11, Attorney General (Secretary of State Treadwell) - unauthorized practice of law; Attorney General’s opinion follows decision of Duncan & Hill regarding preparation of purchase and sale contracts by real estate licensees; licensee can avoid the unauthorized practice of law by (i) making purchase and sale contracts subject to approval by each party’s attorney or (ii) utilizing and merely completing a fill-in-the-blanks form jointly approved by recognized bar association and Realtors’ association which clearly and prominently indicates on its face that it is a legally binding contract and recommends that the parties seek advice of a lawyer before signing; even properly using accepted forms, brokers cautioned not to give legal advice

79 DOS 99 Matter of DOS v. Pagano - disclosure of agency relationships; failure to appear at hearing; proper business practices; unauthorized practice of law; unearned commissions; vicarious liability; fraudulent practice; jurisdiction; ex parte hearing may proceed upon proof of proper service; DOS has jurisdiction after expiration of respondents’ licenses as acts of misconduct occurred and the proceedings were commenced while the respondents were licensed; licensee fails to timely provide seller client with agency disclosure form prior to entering into listing agreement and fails to timely provide agency disclosure form to buyer upon first substantive contact; broker fails to make it clear for which party he is acting; broker violates 19 NYCRR 175.24 by using exclusive right to sell listing agreement without mandatory definitions of “exclusive right to sell” and “exclusive agency”; broker breaches fiduciary duties to seller clients by misleading them as to buyer’s ability to financially consummate the transaction; broker breaches his fiduciary duty to seller by referring seller to the attorney who represented the buyers when he knew or should have known such attorney could not properly protect seller’s interests; improper for broker to use listing agreements providing for broker to retain one half of any deposit if forfeited by buyer as such forfeiture clause could, by its terms, allow broker to retain part of the deposit when broker did not earn a commission; broker must conduct business under name as it appears on license; broker engaged in the unauthorized practice of law in preparing contracts for purchase and sale of real estate which did not contain a clause making it subject to the approval of the parties’ attorneys and were not a form recommended by a joint bar/real estate board committee; broker demonstrated untrustworthiness and incompetency in using sales contract which purported to change the terms of the listing agreement to include a higher commission; broker demonstrated untrustworthiness and incompetency in using contracts of sale which were unclear, ambiguous, vague and incomplete; broker failed to amend purchase agreement to reflect amendment to increase deposit amount; broker demonstrated untrustworthiness in back-dating purchase agreements; broker demonstrated untrustworthiness in participating in scheme to have seller hold undisclosed second mortgage and to mislead first mortgagee about the purchaser’s financial ability to purchase; broker demonstrated untrustworthiness by claiming unearned commission and filing affidavit of entitlement for unearned commission; DOS fails to establish by substantial evidence that respondent acted as undisclosed dual agent; corporate broker bound by the knowledge acquired by and is responsible for acts committed by its licensees within the actual or apparent scope of their authority; corporate and individual brokers’ licenses revoked, no action taken on application for renewal until proof of payment of sum of $2,000.00 plus interests for deposits unlawfully retained

122 DOS 99 Matter of DOS v. Smith - failure to pay judgment; unauthorized practice of law; salesperson breaches fiduciary duty to principal by inducing principal to make two loans to other persons, guarantying payment of said loans, failing to honor those guarantees and failing to satisfy a judgment entered against him; unauthorized practice of law by drafting promissory note; $1,000.00 fine and suspension of license until proof of satisfaction of judgment

162 DOS 99 Matter of DOS v. Swaby - unauthorized practice of law; notary public; DOS fails its burden of proof; broker engaged in the unauthorized practice of law by preparing, for a fee, a petition, Non Payment Dwelling, for a landlord; single act of preparation of petition; DOS fails to prove fraud or fraudulent business practice; real estate broker’s license and notary commission suspended for three months

189 DOS 99 Matter of DOS v. Naftal - listing agreements; deposits; unauthorized practice of law; vicarious liability; amendment of pleading to conform to the proof; improperly altering listing agreement without the consent or knowledge of principal to show the potential commission split with buyer’s broker to meet MLS requirements; preparing and submitting fraudulent MLS change notifications purporting to extend and alter listings; deposit of escrow funds into operating account; preparation of lease constitutes the unauthorized practice of law; pleadings may be amended to conform to the proof and encompass a charge not stated in the complaint where the issue has been fully litigated by the parties and is closely enough related to the stated charges that there is no surprise or prejudice to the respondent; continuing to offer properties for sale after preparation of forged listing extensions violates 19 NYCRR 175.10; DOS fails to establish violation of 19 NYCRR 175.12 for failure to provide copy of listing extension where extension was not authorized by principal; DOS fails to demonstrate demand for unearned commission where broker may have believed they were entitled to a commission; broker’s licenses suspended for one year and thereafter until such time as restitution in the amounts of $5,000.00 and $2,055.40 is made

CRC #98-2490 Matter of DOS v. Rand, Consent Order - binders; unauthorized practice of law; broker drafts and obtains the execution of an “offer to purchase and acceptance” regarding real property which did not contain an attorney’s approval clause nor was it a fill in the blanks form approved by a recognized bar association in conjunction with a recognized Realtors’ organization; $1,000.00 fine

CRC #98-0769 Matter of DOS v. Prince, Consent Order - failure to utilize agency disclosure forms pursuant to RPL §443; failure to file and return rents and/or security deposits; commingling client funds constitutes conversion and violates 19 NYCRR §175(1); preparation of contracts that failed to contain an attorney approval clause and were not on approved forms constituted the unauthorized practice of law; attempting to and/or negotiating directly with the seller violated 19 NYCRR §175.8; $15,000.00 fine, restitution in the amount of $567.50 and broker agrees that his license shall be revoked if he is found or pleads nolo contendere or admits, after a disciplinary hearing, to have violated Article 12-A and stipulates not to have any financial or ownership interest in any business which holds a real estate broker’s license during any period of time he is not licensed

CRC #98-0954 Matter of DOS v. Christiana, Consent Order - preparation of lease that failed to contain an attorney approval clause and was not on an approved form constituted the unauthorized practice of law; $750.00

7 DOS APP. 00 (189 DOS 99) Naftal v. DOS - altering co-brokerage information on a listing agreement; signing client’s name to change notifications reflecting extension agreements; submitting altered documents to DOS in the course of its investigation; unauthorized practice of law by preparing a lease between client and respective tenant; failure to deposit certain funds into an escrow account not mitigated nor excused because no party suffered financial harm as a result thereof; determination to suspend license for one year and order to refund the sum of $5,000.00 affirmed

393 DOS 00 Matter of DOS v. Finley - disclosure of agency relationships; unauthorized practice of law; failure to provide agency disclosure form to seller client prior to entering into listing agreement and failure to provide to buyer prior to first substantive contact; RPL §443 applies to sale of working dairy farm which includes single family residence; once DOS establishes that broker prepared purchase contract, burden of proof shifts to broker to show that contract was prepared using a properly devised form; broker fails to meet its burden to establish that sales contract met the requirements of Duncan & Hill; broker engaged in the unauthorized practice of law for giving legal advice orally

246 DOS 02 Matter of DOS v. Resilard - prior misconduct; collateral estoppel; unauthorized practice of law; Bankruptcy Court determination which was not appealed by respondent established he engaged in fraud, misrepresentation and the unauthorized practice of law; respondent is collaterally estopped from contesting the Bankruptcy Court determination; real estate broker’s license revoked

649 DOS 02 DOS v. Holzbach – disclosure of agency relationships; proper business practices; sanctions; unauthorized practice of law; vicarious liability; broker fails to timely provide agency disclosure form to buyer although disclosure form could have been faxed to and received from buyer; broker back dated agency disclosure form demonstrating incompetency; use of designated agent form without the use of required agency disclosure form pursuant to RPL §443(4); use of “removal of contingency” addendum to contract which did not contain an attorney approval clause and was not on a form jointly approved by the County Bar Association and REALTOR Association constituted the unauthorized practice of law; corporate broker liable for the acts of its representative broker; proper to impose a higher fine after hearing than that which was offered in settlement (joint fine of $2,000.00 offered); associate broker fined $2,000.00, representative broker fined $1,000.00, and corporate broker fined $2,000.00

228 DOS 03 DOS v. Tucci – disclosure of agency relationships; dual agency; unauthorized practice of law; vicarious liability; fiduciary agency relationship was created both between the broker and the landlord and between the broker and the tenant; broker fails to provide agency disclosure form to tenant at any time during the employment; broker failed to make it clear to both parties that he was acting as an agent for both parties in violation of 19 NYCRR §175.7; broker engaged in the unauthorized practice of law by preparing a lease agreement; broker’s preparation of lease agreement appears to have been done as a service to the landlord and prospective tenant and not with the intention to circumvent either licensing law or judiciary law; fiduciary obligation of confidentiality continues after the termination of the fiduciary relationship; broker did not breach his duty of confidentiality by providing an affidavit in a civil suit between the landlord and tenant where the information provided was not confidential; broker’s co-partner is vicariously liable for the wrongful acts of the other co-partner committed within the scope of the partnership business as Partnership Law §24 prescribes that all parties are liable, jointly and severally, for the wrongful acts or omissions of the other co-partner committed within the scope of the partnership business; $2,500 fine

772 DOS 05 DOS v. Silva – unauthorized practice of law; failure to cooperate with DOS investigation; DOS fails it’s burden of proof; DOS fails to establish salesperson engaged in the unauthorized practice of law and breached it’s fiduciary duties by telling prospective tenant that New York State law provides a 48 hour lease cancellation; salesperson agreed to pay landlord $1,850.00 in exchange for release of tenant and thereafter, after landlord issued tenant a release, stopped payment on his check; DOS lacks authority to assess monetary damages; salesperson pursued transaction without the knowledge and assistance of his broker; salesperson provided false information to DOS in the course of it’s investigation; salesperson’s license suspended for one year.

137 DOS 06 DOS v. Turner- DOS fails its burden of proof; unauthorized practice of law; DOS fails to prove that broker failed to disclose purchase offers to her principal as evidence established that seller was informed and did discuss all offers and gave consideration to each; broker engaged in the unauthorized practice of law by preparing a purchase contract and failing to show that the form was prepared under the proper auspices in accordance withDuncan & Hill Realty v. DOS

1373 DOS 07 Matter of Owner’s Club Realty Corp.- Broker; apartment rental; entitlement to commission upon bringing about meeting of the minds; improper use of rental agreement which misstates law in some situations; incompetency; $500.00 fine; dismissal of charges of retaining unearned commissions and requiring the signing of a statement allowing an unearned commission

1625 DOS 07 Matter of Harris- broker; unauthorized practice of law as to provisions of rider requiring legal expertise without attorney approval clause; unearned commission; commingling 175.1; untruthful testimony; $2000 fine and suspension until refunds $2500 deposit with interest

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