Businesses and Professions
Real Estate Brokers and Salespersons
§ 5-20.5-5 Real estate recovery account.
(a)(1) The department of business regulation shall establish and maintain a
real estate recovery account from which any person aggrieved by an act,
representation, transaction, or conduct of a licensed real estate broker or
real estate salesperson, upon the grounds of fraud, misrepresentation or
deceit, may recover by order of the superior court of the county where the
violation occurred, an amount of not more than fifty thousand dollars ($50,000)
for damages sustained by the fraud, misrepresentation, or deceit, as a result
of any real estate transaction in which the real estate broker or salesperson
has acted in his or her capacity as a real estate broker or salesperson. This
account shall not be used to reimburse any real estate broker or salesperson
for any commission, fee, or other valuable consideration due or owing from any
other real estate broker or salesperson. Provided, that pursuant to subsection
(h) of this section the amount available for payments of claims is limited to
fifty thousand dollars ($50,000) for any one licensee. Payment of claims is
made in order according to the date a judgment is awarded with that judgment
awarded earliest in time being paid first.
(2) When any person makes application for an original license
to practice as a real estate broker or salesperson he or she shall pay, in
addition to his or her original license fee, a fee determined by the department
for deposit in the real estate recovery account. If the department does not
issue the license, this fee is returned to the applicant.
(b) If, on December 31 of any year, the balance remaining in
the real estate recovery account is less than two hundred thousand dollars
($200,000), every real estate broker, when renewing his or her license during
the following calendar year, shall pay, in addition to his or her license
renewal fee, a fee of twenty-five dollars ($25.00) for deposit in the real
estate recovery account, and every real estate salesperson, when renewing his
or her license during that year, shall pay, in addition to his or her license
renewal fee, a fee of twenty-five dollars ($25.00) for deposit in the real
estate recovery account.
(c)(1) No action for a judgment which subsequently results in
an order for collection from the real estate recovery account shall be started
later than two (2) years from the accrual of the cause of action. When any
aggrieved person commences action for a judgment, which may result in
collection from the real estate recovery account, the aggrieved person shall
notify the department of business regulations, in writing, to this effect at
the time of the commencement of that action.
(2) When any aggrieved person recovers a valid judgment in
any court of competent jurisdiction against any real estate broker, or real
estate salesperson, upon the grounds of fraud, misrepresentation, or deceit,
which occurred on or after May 11, 1978, the aggrieved person may, upon the
termination of all proceedings, including reviews and appeals in connection
with the judgment, file a verified claim in the court in which the judgment was
entered and, upon ten (10) days' written notice to the department, may apply to
the court for an order directing payment out of the real estate recovery
account, of the amount unpaid upon the judgment, subject to the limitations
stated in this section.
(3) The court shall proceed upon the application in a summary
manner, and, upon the hearing on the application, the aggrieved person shall be
required to show:
(i) He or she is not a spouse of debtor, or the personal
representative of the spouse;
(ii) He or she has complied with all the requirements of this
(iii) He or she has obtained a judgment as set out in
subdivision (2) of this subsection, stating the amount of the judgment and the
amount owing on it on the date of the application;
(iv) He or she has made all reasonable searches and inquiries
to ascertain whether the judgment debtor is possessed of real or personal
property or other assets, liable to be sold or applied in satisfaction of the
(v) That by the search pursuant to paragraph (iv) of this
subdivision he or she has discovered no personal or real property or other
assets liable to be sold or applied, or that he or she has discovered certain
of them, describing them, owned by the judgment debtor and liable to be so
applied, and that he or she has taken all necessary action and proceedings for
the realization, and that the amount realized was insufficient to satisfy the
judgment, stating the amount realized and the balance remaining due on the
judgment after application of the amount realized.
(4) The court shall make an order directed to the department
of business regulation requiring payment from the real estate recovery account
of whatever sum it finds to be payable upon the claim, pursuant to and in
accordance with the limitations contained in this section, if the court is
satisfied, upon the hearing of the truth of all matters required to be shown by
the aggrieved person by subdivision (3) of this subsection and that the
aggrieved person has fully pursued and exhausted all remedies available to him
or her for recovering the amount awarded by the judgment of the court.
(5) Should the department of business regulation pay from the
real estate recovery account any amount in settlement of a claim or toward
satisfaction of a judgment against a licensed real estate broker or real estate
salesperson, the license of the broker or salesperson shall be automatically
revoked upon the issuance of a court order authorizing payment from the real
estate recovery account. This broker or salesperson is not eligible to receive
a new license until he or she has repaid in full, plus interest at the rate of
twelve percent (12%) a year, the amount paid from the real estate recovery
account on his or her account. A discharge in bankruptcy does not relieve a
person from the penalties and disabilities provided in this subdivision.
(6) If, at any time, the money deposited in the real estate
recovery account is insufficient to satisfy any authorized claim or portion of
a claim, the department shall, when sufficient money has been deposited in the
real estate recovery account, satisfy those unpaid claims or portions of
claims, in the order that those claims or portions of claims were originally
filed, plus accumulated interest at the rate of twelve percent (12%) a year.
(d) It is unlawful and constitutes a misdemeanor for any
person or his or her agent to file with the department of business regulation
any notice, statement, or other document required under this chapter which is
false or untrue or contains any material misstatement of fact.
(e) When the department receives notice, as provided in
subdivision (c)(1) of this section, the department may enter an appearance,
file an answer, appear at the court hearing, defend the action, or take
whatever other action it deems appropriate on behalf and in the name of the
defendant, and take recourse through any appropriate method of review on behalf
of, and in the name of, the defendant.
(f) When, upon the order of the court, the department of
business regulation has paid from the real estate recovery account any sum to
the judgment creditor, the department is subrogated to all of the rights of the
judgment creditor and the judgment creditor assigns all his or her right,
title, and interest in the judgment to the department and any amount and
interest recovered by the department on the judgment shall be deposited to the
(g) The failure of an aggrieved person to comply with this
chapter relating to the real estate recovery account constitutes a waiver of
any rights under this chapter.
(h) Notwithstanding any other provision, the liability of
that portion of the real estate recovery account allocated for the purposes of
the real estate recovery account shall not exceed fifty thousand dollars
($50,000) for any one licensee.
(i) Nothing contained in this section limits the authority of
the department of business regulation to take disciplinary action against any
licensee for a violation of this chapter, or the rules and regulations of the
department; nor does the repayment in full of all obligations to the real
estate recovery account by any licensee nullify or modify the effect of any
other disciplinary proceeding brought pursuant to this chapter.
History of Section.
(P.L. 1978, ch. 169, § 2; P.L. 1982, ch. 429, § 1; P.L. 1985, ch.
181, art. 59, § 1; P.L. 1990, ch. 412, § 2; P.L. 1990, ch. 480,
§ 1; P.L. 1992, ch. 61, § 1; P.L. 1993, ch. 138, art. 6, §