STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, DIVISION OF )

REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 89-4616

)

JON A. McVETY, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Veronica E. Donnelly, held a formal hearing in the above-styled case on January 8, 1990, in Fort Myers, Florida.

APPEARANCES

For Petitioner: John R. Alexander, Esquire

DPR- Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801

For Respondent: Jon A. McVety, pro se

3120 Grand Avenue

Fort Myers, Florida 33901 STATEMENT OF THE ISSUES

Whether the Respondent's real estate broker's license should be suspended, revoked, or otherwise disciplined based upon the allegation that the Respondent placed escrowed money into an interest bearing account without the authorization of the interested parties.

PRELIMINARY STATEMENT

Prior to hearing, the Petitioner, Department of Professional Regulation, Division of Real Estate (the Department), withdrew the allegations set forth in paragraphs eight through eleven of the Administrative Complaint. These changes reduced the charges to a one-count complaint. The original Count III was the basis of the prosecution which took place before the Hearing Officer. The Respondent, Jon A. McVety (McVety), is charged with having placed escrowed money into an interest bearing account without the authorization of the interested parties, in violation of Rule 21V-14.014, Florida Administrative Code, and Section 475.25(1)(e), Florida Statutes.

By an election of rights form signed July 29, 1989, the Respondent disputed the allegations of fact contained in the Administrative Complaint and requested a formal administrative hearing.

During the hearing, the Department presented one witness, the Respondent McVety. One composite exhibit was introduced by the Department, and two joint exhibits were also admitted into evidence. In addition to his presentation in the Department's case-in-chief, the Respondent presented evidence in mitigation of the acts which are the subject of the Administrative Complaint.

In the course of the proceeding, the Department requested that the last sentence in paragraph six of the Administrative Complaint also be removed from the pleadings. The sentence was stricken and was not considered by the Hearing Officer in these proceedings.

A transcript of the hearing was not ordered. The parties waived their opportunities to file proposed findings of fact prior to the entry of a Recommended Order.

FINDINGS OF FACT

1. At all times material to these proceedings, the Respondent McVety was a licensed real estate broker in Florida, having been issued license numbers 0461636 and 0258678.

   
   

2. On January 1, 1989, the Respondent purchased the company Realty Services of Southwest Florida, Inc., a Florida corporation. One of the services provided by the corporation was property management. Rents and security deposits were collected from tenants of residential leases on behalf of property owners. In some cases, Respondent McVety was acting as an agent on behalf of property owners through the corporation. In other cases, Respondent McVety or the corporation was the actual property owner.

   
   

3. When Respondent McVety took over the management of the corporation after his stock purchase, he noticed that the escrow account into which security deposits were placed, was a non-interest bearing account. On January 23, 1989, the escrow account was changed by the Respondent from an non-interest bearing escrow account to an interest bearing account. The tenants were not notified that their security deposits were now bearing interest.

   
   

4. On March 17, 1989, a routine audit was conducted of the Respondent's escrow accounts. During the audit, it was discovered that one hundred and seventeen of the one hundred and thirty leases stated that the security deposits were being held in an non-interest bearing account. The leases which stated that the deposits were in an interest bearing account were signed after the Respondent purchased the corporation. The one hundred and seventeen leases with a non-interest bearing escrow were signed by the tenants prior to the stock transfer.

   
   

5. There were no allegations that interest had actually been paid by the bank on the escrow account or that there had been any failure by the Respondent to account for the interest to the tenants, the actual owners of the funds.

6. In mitigation, the Respondent stated that once he was made aware of the problems and truly understood the Department's concerns, a letter was sent to each tenant explaining the placement of the security deposits into an interest bearing escrow account on January 23, 1989. These letters were sent on April 3, 1989.

   
   

7. In addition, a new real estate lease was prepared on behalf of the corporation by an attorney. The purpose of the new lease was to explicitly state the rights and responsibilities of the parties regarding the interest on these accounts.

   
   

8. In this case, no one was cheated, no secret commissions were earned, and the sums in question were trifling.

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter pursuant to Section 120.57(1), Florida Statutes.

   
   

10. Section 475.25(1)(e), Florida Statutes, empowers the Florida Real Estate Commission with the authority to discipline a real estate license if the Commission finds that the applicant:

    
    

    Has violated any of the provisions of this chapter or any lawful order or rule made or issued under the provisions of this chapter or chapter 455.

    
    

11. By Administrative Complaint, the Respondent is charged with having placed escrowed money into an interest bearing account without the authorization of the interested parties. The rule regarding interest bearing escrow accounts was amended effective October 13, 1988, a few months before the audit occurred. Rule 21V-14.014, Florida Administrative Code, provides as follows:

    
    

    A licensed real estate broker is not prohibited from placing escrow money, entrusted

    to him by any person dealing with him as a broker, in an interest bearing account. The placement of escrow monies in an interest bearing account, and designation of the party who is to receive the interest, must be done with the permission of all the interested parties. Said escrow account must be in a title company, banking institution, credit union, or savings and loan association located and doing business in Florida ...

    
    

    Section 475.01(c), Florida Statutes, defines a "Broker" as:

    
    

    ... a person who, for another, and for compensation or valuable consideration directly or indirectly paid or promised, or with an intent to collect or receive a compensation or valuable consideration therefore, ... rents ... any real property...

12. Respondent McVety dealt with the tenants in his status as a broker when he changed the status of the account, and their deposit monies began to bear interest. Rule 21V-14.014, Florida Administrative Code applies, and a violation of the rule occurred when the permission of all of the interested parties was not obtained prior to the status change of the escrow account to an interest bearing account. Consequently, a violation of Section 475.25(1)(e), Florida Statutes, has occurred and the Respondent is guilty of the offense.

    
    

13. A range of disciplinary guidelines from which disciplinary penalties will be imposed upon licensees guilty of violating Chapter 475, Florida Statutes, are found in Chapter 21V-24, Florida Administrative Code.

    
    

14. The penalties for a violation of Section 475.25(1)(e), Florida Statutes, is located in Rule 21V-24.001(3), Florida Administrative Code, which provides:

    
    

    The minimum penalty for all below listed sections is a reprimand and/or fine up to

    $1,000.00 per count... . The maximum penalties are as listed:

    
    

    (k) 475.25(1)(e) - Up to 8 years suspension or revocation.

    
    

    In addition to the guidelines, Rule 21V-24.001(4) states:

    
    

    a)When either the Petitioner or Respondent

    is able to demonstrate aggravating or mitigating circumstances to the Commission by clear and convincing evidence, the Commission shall be entitled to deviate from the above guidelines in imposing discipline upon a licensee ...

    
    

15. As mitigating evidence was presented to the Hearing Officer, the following mitigating circumstances were considered in the recommended penalty set forth in this Order:

    
    

    1. The severity of the offense.

    2. The degree of harm to the consumer or public.

    3. The number of counts in the Administrative Complaint.

    4. The prompt correction of the offense by the Respondent on his own initiative.

    5. The establishment of safeguards by Respondent in his revised lease to assure that the offense would not occur in the future.

       
       

16. In this case, as in the case of Webb v. Florida Real Estate Commission, 351 So.2d 71 (3d DCA 1977), only a minor violation of the rules of the Commission is evident, and a written reprimand is an appropriate penalty. It was not proved at hearing that the Respondent intended to earn money for himself or the corporation from the funds belonging to others. The letter sent

to each of the tenants dated April 3, 1989, indicates an intent to the contrary.

RECOMMENDATION

Accordingly, based upon the foregoing, it is RECOMMENDED:

1. That the Respondent McVety be found guilty of having violated Rule 21V- 14.014, Florida Administrative Code, and is therefore in violation of Section 475.25(1)(e), Florida Statutes. This violation was originally Count II of the Administrative Complaint. Counts I and II, having been withdrawn, are dismissed.

   
   

2. That the Respondent McVety be issued a written reprimand as the penalty for the one violation.

DONE and ENTERED this 30th day of January, 1990, in Tallahassee, Leon County, Florida.

Copies furnished:

John R. Alexander, Esquire DPR - Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801

John A. McVety 3120 Grand Avenue

Fort Myers, Florida 33901

Darlene F. Keller Executive Director Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801

VERONICA E. DONNELLY

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the

Division of Administrative Hearings this 30th day of January, 1990.

Kenneth E. Easley, Esquire General Counsel

Department of Professional Regulation

1940 North Monroe, Suite 60

Tallahassee, FL 32399-0792

Docket for Case No: 89-004616

Orders for Case No: 89-004616