STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, )

)

Petitioner, )

)

vs. ) CASE NO. 94-1125

) HOME OWNERS EQUITY FUND, INC. ) and GENE LAWRENCE, )

)

Respondents. )

)

RECOMMENDED ORDER

By Joint Stipulation filed July 20, 1994, the parties waived an evidentiary hearing and presented the case based on the transcript of the July 14, 1994, deposition of Respondent Lawrence and an affidavit of Respondent Lawrence.

The affidavit was filed July 26, 1994, and the deposition transcript was filed August 10, 1994.

There are 18 exhibits attached to the deposition transcript. Respondent Lawrence could not identify Exhibits 4, 17, and 18. The remaining exhibits are admitted into evidence as part of the record.

By Order entered July 28, 1994, the undersigned required the parties to file any proposed recommended orders by August 22, 1994. Rulings on the proposed findings contained in timely filed proposed recommended orders are in the appendix.

APPEARANCES

The parties are represented as follows:

For Petitioner: Attorney Theodore R. Gay

Department of Business and Professional Regulation

401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128

For Respondent: Harry Blair

Blair & Blair

2138-40 Hoople Street

Ft. Myers, Florida 33901 STATEMENT OF THE ISSUE

The issue in this case is whether Respondents are guilty of various disciplinary violations and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

By Administrative Complaint dated November 19, 1993, Petitioner alleged that, at all material times, Respondents were not licensed as real estate brokers in Florida. The Administrative Complaint alleges that in Florida, on November 15, 1991, Respondents solicited Curtis and Lynda McRee to purchase real property located in N. Ft. Myers and the McRees gave Respondents a $750 deposit as a cash down payment on the mobile home and land. The Administrative Complaint alleges that, on November 25, 1991, the McRees executed a contract to purchase the mobile home and land for $25,000. The Administrative Complaint alleges that the McRees made total payments to Respondents of $1930 through May 30, 1992, at which time the owner's attorney advised the McRees to discontinue making further payments because the property was being foreclosed.

Counts I and II of the Administrative Complaint allege that Respondents Home Owners Equity Fund, Inc. and Gene Lawrence are guilty of operating as brokers without holding valid broker's licenses, in violation of Sections 475.42(1)(a) and 475.25(1)(e).

The Administrative Complaint alleges that in Florida, on May 18, 1992, Respondents solicited Delfino and Candelaria Lopez to purchase real property located in E. Ft. Myers and they gave Respondents a $750 deposit as a cash down payment on the property. The Administrative Complaint alleges that the Lopezes made monthly payments to Respondents in partial payment of the $40,000 purchase price.

Counts III and IV of the Administrative Complaint allege that Respondents Home Owners Equity Fund, Inc. and Gene Lawrence are guilty of operating as brokers without holding valid broker's licenses, in violation of Sections 475.42(a)(a) and 475.25(1)(e).

The Administrative Complaint alleges that in Florida, on May 25, 1992, Respondents solicited a $125 nonrefundable fee from Laura A. Ortiz to assist her in finding a house to purchase. The Administrative Complaint alleges that she entrusted Respondents with a $4000 deposit for the purchase of real property.

Due to the failure of Respondents to perform, Ms. Ortiz allegedly had to contact the listing broker to purchase the house. She allegedly demanded the return of her deposit, but Respondents returned only $3500.

Counts V and VI of the Administrative Complaint allege that Respondents Home Owners Equity Fund, Inc. and Gene Lawrence are

guilty of operating as brokers without holding valid broker's licenses, in violation of Sections 475.42(a)(a) and 475.25(1)(e).

The Administrative Complaint alleges that in Florida, on April 17, 1993, Respondent Gene Lawrence met Rosa Saez and told her that he could find her a house with a small down payment, no credit check, no income verification, and a monthly payment of $200. The Administrative Complaint alleges that Ms. Saez paid Respondents $125 to help her find a house. She allegedly found a house in

1. Ft. Myers that she wanted to buy. On June 11, 1993, Respondents advised Ms. Saez that she had to pay them $1000 to handle the transaction, which she did.

   
   

   Counts VII and VIII of the Administrative Complaint allege that Respondents Home Owners Equity Fund, Inc. and Gene Lawrence are guilty of operating as brokers without holding valid broker's licenses, in violation of Sections 475.42(a)(a) and 475.25(1)(e).

   The Administrative Complaint alleges that in Florida, on May 7, 1993, Humberto Zavala and Sandra Aparicio gave Respondents $125 to help find them a house. On the same day, Respondents allegedly gave Mr. Zavala and Ms. Aparicio a list of properties to view.

   
   

   Counts IX and X of the Administrative Complaint allege that Respondents Home Owners Equity Fund, Inc. and Gene Lawrence are guilty of operating as brokers without holding valid broker's licenses, in violation of Sections 475.42(a)(a) and 475.25(1)(e).

   
   

   Based on the foregoing allegations, the Administrative Complaint seeks an administrative fine of not more than $5000 per offense or count, as provided in Section 455.228(1).

   
   

   FINDINGS OF FACT

   
   

   1. Respondent Gene Lawrence (Lawrence) is president of Respondent Home Owner's Equity Fund, Inc. (Homeowners) and has been for six years. He is not licensed as a real estate broker or salesperson in Florida and has not been so since 1987 or 1988. He has never worked actively in the real estate business. At no time has Homeowners ever employed a licensed real estate broker, nor was it itself licensed to engage in real estate brokerage activities.

      
      

   2. Homeowners was formed in 1986 or 1988. Lawrence is the sole owner of Homeowners. From December 1986 through December 1993, Homeowners engaged in business involving the purchase and sale of single-family homes, employing from 1-3 employees in its principal place of business in Ft. Myers.

      
      

   3. In general, Homeowners purchased homes and sold them to buyers, receiving installment payments for the purchase price. In most cases, Homeowners used contracts for deed or sometimes a lease-purchase arrangement.

      
      

   4. Homeowners located buyers through newspaper advertising. The advertisements stated that a person could own his own home instead of paying rent for about the same monthly payment. Advertisements, mostly in a shopper- type newspaper, ran almost continuously.

   5. One of Homeowner's ads, under the "For Sale by Owner" category, states: HAVE YOU HAD TROUBLE GETTING A MORTGAGE? CAN

      YOU AFFORD $500 OR MORE PER MONTH? WE CAN PUT YOU IN A HOME OF YOUR CHOICE! INVESTORS WILL BUY THE HOME & HOLD THE MORTGAGE. NO QUALIFYING. 332-0043

   6. Another Homeowner ad, under rental properties, states: WOULD YOU RATHER OWN THAN RENT? FOR THE

      SAME MONTHLY PAYMENTS AND DEPOSIT YOU CAN

      PURCHASE YOUR OWN HOME! VARIOUS PRICES - SIZES - AREAS. NO BANKS, NO CREDIT CHECKS, NO HASSLES. CALL 332-0053 TODAY!!

      
      

   7. After meeting a customer in the office, Lawrence or another employee of Homeowners would determine if the customer's desires were reasonable. If so, the customer's profile, including needs and ability to pay, would be filed. If

      the customer was interested in obtaining the services of Homeowners, the customer had to pay a fee at the initial meeting. The fee was usually $125.

      
      

   8. The service provided by Homeowners was to offer to sell to the customer homes that it already owned or, more often, homes that it was willing to purchase. If the customer became interested in a house that Homeowners was unwilling to purchase, Homeowners would not assist the customer in any way.

      
      

   9. Following the initial visit, Homeowners would give the customer a list of homes that Homeowners was considering buying. At the same time, Homeowners did a credit check on the customer. The fee paid by the customer entitled him to these services from Homeowners for 120 days.

      
      

   10. Homeowners typically purchased homes with seller- provided financing, usually with a low down payment. The homes

       were of a price that Respondents' customers could afford, given their modest means. The price range was typically $50,000 to $60,000. In Lee County, where Respondents focused their efforts, a house in that range might have two or three bedrooms.

       
       

   11. If the customer purchased a home from Homeowners, it would credit his fee against his first month's payment. Otherwise, the fee was nonrefundable.

       
       

   12. When Homeowners purchased a home, Lawrence typically handled the negotiations with the listing agent. Lawrence or one of Homeowners' employees then negotiated the sale to the customer.

       
       

   13. On November 15, 1991, Curtis McRee gave Lawrence a $750 down payment on a mobile home and lot in N. Ft. Myers. At the same time, he and his wife, Lynda L. McRee entered into a contract for deed with Homeowners under which Homeowners would convey "by a good and sufficient deed" fee simple title, clear of all encumbrances, if the McRees paid an additional $24,250 with interest at an annual rate of 10.5 percent through monthly payments of $386. At this rate,

       92 monthly payments would be required to satisfy the obligation. The contract for deed involves a mobile home lot, but omits any mention of a mobile home.

       
       

   14. On the same date, Respondents acquired the same property from a third party. The purchase money mortgage note was for $19,750, bearing interest at the annual rate of 10 percent, and payable by 84 monthly payments of $327.87.

       
       

   15. When the McRees missed some payments, Respondents

       failed to make payments to their mortgagee, which foreclosed on the mortgage and retook title to the property.

       
       

   16. On May 18, 1992, Homeowners acquired three lots from a third party for

       $30,319.80. On the same date, Homeowners entered into a contract for deed with Delfino and Candelaria Lopez under which Homeowners would convey fee simple title to the three lots, free of all encumbrances, by a "good and sufficient deed," if they paid $39,950 at 10.5 percent annually by monthly payments of between $375 and $396.

       
       

   17. On May 25, 1992, Laura A. Ortiz paid Homeowners a fee of $120. The receipt form states that Ms. Ortiz acknowledges that the fee "is collected in advance from clients interested in purchasing residential property, owned, or to be owned by [Homeowners]." The form adds that, during the next 120 days, Homeowners will offer Ms. Ortiz homes with monthly payments of less than $500 and Homeowners will offer owner financing at 10.5 percent annually. The form

       concludes by noting that the fee is nonrefundable, but will be credited toward the first monthly payment.

       
       

   18. On June 25, 1990, Homeowners acknowledged receipt from Ms. Ortiz of

       $500 as an "escrow deposit" for property located at 15779 Treasure Island.

       
       

   19. It is unclear whether Homeowners had a contract with the owner of 15779 Treasure Island when Homeowners accepted Ms. Ortiz's $500 escrow deposit. However, a dispute developed between Homeowners and the owner over liability to repair a roof, and Homeowners could not offer the property to Ms. Ortiz, who instead rented another property owned by Homeowners at a monthly rental of $500.

       
       

   20. Based on Lawrence's affidavit, Ms. Ortiz paid Homeowners a deposit of

       $4000, of which only $3500 was refunded when the deal fell through. The $500 withheld was to pay rent that Ms. Ortiz owed.

       
       

   21. On April 19, 1993, Rosa Saez paid Homeowners the $125 fee and entered into a receipt form of the type described above. Ms. Saez found a house that she liked and paid Homeowners a deposit of $1000. When some problem arose preventing Homeowners from purchasing the property that she wanted, Lawrence returned the $1000 deposit by giving Ms. Saez a personal check dated July 8, 1993.

       
       

   22. There is no evidence connecting Humberto Zabala or Sandra Aparicio to Homeowners or Lawrence.

       
       

   23. In December 1993, Homeowners stopped operating due to the pending disciplinary investigation and poor health of Lawrence. In March 1994, Lawrence began operating a similar type of business in his own name. He claims that he is not a broker and does not need to be licensed because he does not put buyers and sellers together nor does he charge a commission. Lawrence claims to sell only the homes that he owns and does so as a "social service for people," which he has continued to offer, despite doing no better than breaking even, due to a "dogged determination, a perseverance, perseverance and tenacity."

       
       

       CONCLUSIONS OF LAW

       
       

   24. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes.)

       
       

   25. Section 455.228(1) provides that Petitioner may seek an administrative fine of not more than $5000 per incident against an unlicensed person violating the provisions governing the practice of any regulated profession.

       
       

   26. Section 475.42(1)(a) provides: "No person shall operate as a broker or salesperson without being the holder of a valid and current active license therefor."

       
       

   27. Section 475.01(1)(c) defines a "broker" as:

       
       

       a person who, for another, and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation or

       valuable consideration therefor, . . . sells,

       exchanges, buys, rents, or offers, attempts or agrees to . . . negotiate the sale, exchange, purchase, or rental of . . . any real property or any interest in or concerning the same, . . . or who advertises or holds out to the public by any oral or printed solicitation or representation that

       he is engaged in the business of . . . buying, selling, exchanging, leasing, or renting

       . . . real property of others or interest therein, . . . or who takes any part in the procuring of sellers, purchasers,lessors, or lessees of . . . the real property of another, or leases, or interest therein, . . . or who directs or assists in the procuring of prospects or in the negotiation or closing

       of any transaction which does, or is calculated to, result in a sale, exchange, or leasing thereof, and who receives, expects

       or is promised any compensation or valuable consideration, directly or indirectly therefor; and all persons who advertise rental property information or lists. . . .

       The term "broker" also includes any person

       who is a[n] ... officer of a corporation

       which acts as a broker.

   28. Section 475.011(2) provides an exemption from licensing to: Any individual [or] corporation which

       sells, exchanges, or leases its own real property; however, this exemption shall not be available if and to the extent that an agent, employee, or independent contractor paid a commission or other compensation strictly on a transactional basis is employed to make sales, exchanges, or leases to or with customers in the ordinary course of an owner's business of selling, exchanging, or leasing real property to the public[.]

       
       

   29. Petitioner must prove the material allegations against Respondent by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987). However, Section 475.43 creates a presumption that a person is acting as a real estate broker:

       
       

       if a party has sold, leased, or let real estate, the title to which was not in him when it was offered for sale, lease, or letting, or such party . . . has advertised real estate for sale, lease, or rental, generally, or describing property, the title

       to which was not in such party at the time ....

       
       

       Section 475.43 places the burden of proof upon such persons to show that they were not acting as a broker in such transactions.

   30. There is no evidence concerning Counts IX and X, which should be dismissed. The remainder of the recommended order considers Counts I-VIII.

       
       

   31. Petitioner proved that Homeowners operated as a "broker" with respect to the McRees, Lopezes, Ms. Ortiz, and Ms. Saez.

       
       

   32. Homeowners advertised or held out to the public that it was "engaged in the business of . . . buying, selling, exchanging, leasing, or renting . . . real property of others." At the time of the solicitation of customers and receipt of the registration fee, Homeowners typically did not own the real property in which the customers were interested. This was clearly the case with respect to the Ortiz and Saez transactions, which fell through when Homeowners could not acquire title. Even though the order of the closings is unclear, the McRee and Lopez transactions also satisfy this definition. Obviously, Homeowners offered the properties to McRee and Lopez prior to the days on which they signed contracts for deed; thus, Homeowners was dealing with properties owned by third parties at the time.

       
       

   33. Homeowners took "any part in the procuring of sellers, purchasers, lessors, or lessees of . . . the real property of another." Again, the Ortiz and Saez transactions clearly satisfy this definition, as Homeowners never acquired the subject real property. For the reason set forth above, the McRee and Lopez transactions also satisfy this definition, as the procuring process necessarily predated the closings.

       
       

   34. Likewise, Homeowners

       
       

       direct[ed] or assist[ed] in the procuring

       of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a sale, exchange, or leasing thereof, and who receives, expects

       or is promised any consideration or valuable consideration, directly or indirectly therefore.

       
       

   35. Lastly, Homeowners "advertise[d] rental property information."

       
       

   36. Lawrence is also a "broker" due to the last sentence of the statutory definition, which states that a "broker" includes "any person who is a[n] . . . officer of a . . . corporation which acts as a broker." Additionally, Lawrence himself satisfies the other definitions.

       
       

   37. The central question in this case is whether Respondents are exempt from the licensing regulations because they meet the definition of "any individual [or] corporation ... which sells, exchanges, or leases its own real property."

       
       

   38. First, this exemption is unavailable to Lawrence. Homeowners, not Lawrence, owned the real property in question, at least when Homeowners successfully acquired title to the property.

       
       

   39. Second, this exemption is unavailable to Homeowners in the Ortiz and Saez transactions because Homeowners never owned the real property in question.

       
       

   40. Third, the exemption is unavailable to Homeowners in the McRee and Lopez transactions because Homeowners in substance did not own the property in question. It acquired the property solely to resell it to its customer. When

       the customer failed to make payments, so did Homeowners. Although Homeowners was personally liable on the McRee mortgage note, evidently the risk of a deficiency judgment (or a deficiency judgment that could be satisfied) was sufficiently low as to free Homeowners from the essential risks of ownership.

       
       

   41. The preceding conclusions determine that Homeowners is liable as a broker in each of the four transactions without reliance upon Section 475.43, which effectively shifts the burden of proof from Petitioner to Respondents on the issue of whether they are brokers. Conceivably, this statute might conflict with judge-made law in Ferris and similar decisions. However, the statute provides an additional basis for determining that Homeowners is a broker in the McRee and Lopez transactions where it is unclear whether Homeowners acquired title before or after the execution of contracts for deed to the McRees and Lopezes. If the burden of showing that it is not a broker were placed upon Homeowners, it failed to show the order of the transactions and thus failed to show that it was not a broker in each case.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Florida Real Estate Commission enter a final order dismissing Counts IX and X of the Administrative Complaint, finding each Respondent guilty of four counts of engaging in real estate brokerage activities without a license, and imposing an administrative fine of $5000 against Gene Lawrence and $5000 against Home Owners Equity Fund, Inc.

ENTERED on August 24, 1994, in Tallahassee, Florida.

ROBERT E. MEALE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings on August 24, 1994.

APPENDIX

Rulings on Petitioner's Proposed Findings

1-12: adopted or adopted in substance.

13: rejected as unsupported by the appropriate weight of the evidence. 14-15: adopted or adopted in substance.

Rulings on Respondent's Proposed Findings

1-3: adopted or adopted in substance.

4: rejected as unsupported by the appropriate weight of the evidence. Typically, Homeowners did not acquire the real property until a customer had expressed interest in the property.

5: adopted or adopted in substance.

6-8: rejected as unsupported by the appropriate weight of the evidence. 9-11: adopted or adopted in substance.

12: rejected as unsupported by the appropriate weight of the evidence. 13-14: adopted or adopted in substance.

15: rejected as irrelevant.

16-18: adopted or adopted in substance.

19: rejected as unsupported by the appropriate weight of the evidence. 20-21: rejected as irrelevant.

COPIES FURNISHED:

Attorney Theodore R. Gay Department of Business and

Professional Regulation

401 NW 2nd Ave. Suite N-607 Miami, FL 33128

Harry Blair Blair & Blair

2138-40 Hoople St.

Ft. Myers, FL 33901

Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street

Tallahassee, FL 32399-0792

Darlene F. Keller Division Director Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, FL 32802-1900

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 94-001125

Orders for Case No: 94-001125