STATE OF NEW YORK
DEPARTMENT OF STATE
OFFICE OF ADMINISTRATIVE HEARINGS
590 DOS 00
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DIVISION OF LICENSING SERVICES,
Complainant,
-against-
KNOLLY T. FLETCHER,
Real Estate Broker,
Respondents.
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ADMINISTRATIVE LAW TRIBUNAL
123 William Street, New York, NY 10038
Felix Neals, Supervising Administrative Law Judge
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HEADNOTE
A respondent who failed to comply with the statutory, disclosure requirements of Real Property Law, §443, demonstrated untrustworthiness and incompetence.
STATE OF NEW YORK
DEPARTMENT OF STATE
OFFICE OF ADMINISTRATIVE HEARINGS
590 DOS 00
---------------------------------------------------------------------------X
DIVISION OF LICENSING SERVICES,
Complainant,
-against-
KNOLLY T. FLETCHER, DECISION
Real Estate Broker,
Respondent.
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ADMINISTRATIVE LAW TRIBUNAL
123 William Street, New York, NY 10038
Held: April 18 and September 27, 2000
Felix Neals, Supervising Administrative Law Judge
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The respondenty, Mr. Knolly T. Fletcher, 1431 Nostrand Avenue, Brooklyn, NY 11226, was represented Bernd Lorge, Esq., 96 Schemerhorn Street, Brooklyn, NY 11201, at the hearing April 15, 2000. The respondent herself at the hearing of September 27, 2000.
The complainant, the Division of Licensing Services, was represented by Laurence J. Soronen, Esq., Litigation Counsel, 84 Holland Avenue, Albany, NY 12208.
ISSUE
The Division of Licensing Services started this action under the provisions of Real Property Law, §441-e, State Administrative Procedure Act, Articles 3 and 4, and 19 New York Codes, Rules and Regulations, §400. The State charges that the respondent engaged in fraud and fraudulent practices and demonstrated untrustworthiness and incompetence. Specifically, the complaint alleges that the respondent: (1) retained an unearned commission; and (2) failed to provide the disclosure form required by Real Property Law, §443.
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PROCEDURAL HISTORY
The hearing held on April 18, 2000, was adjourned without date at the request of respondent's legal counsel to allow continuation of potential settlement discussions. Subsequently, the respondent protested the proposed agreement made by his attorney, and the matter was reopened for hearing. The tribunal denied respondent's request made on September 26, 2000, for a further adjournment.
SUMMARY OF THE EVIDENCE
Evidence submitted includes the following:
A. EXHIBITS.
1. Pleadings consisting of notice of hearing, complaint, and license history of respondent.
2. Notice of re-opening.
3. Denial of request for adjournment.
4. Notice of judgment, Parker v Robinson, Civil Court of the City of New York.
5. Documents City of New York, Department of Housing Preservation and Development.
6. Rent receipts.
7. Letter, Village Justice Court, Inc., Village of Valley Stream.
8. Disclosure agreement dated November 19, 1997.
9. Public access property profile overview.
B. WITNESS. Ms. Victoria Cline, License Investigator, Division of Licensing Services, and Ms. Elaine Parker, complaining witness, testified for the State.
FACTS
By the substantial evidence, I find the following facts:
Mr. Knolly T. Fletcher is licensed as a real estate broker for the term March 31, 1999, to March 31, 2001, 1431 Nostrand Avenue, Brooklyn, NY 11226.
In November 1997, Ms. Elaine Parker hired Mr. Fletcher to locate an apartment. Mr. Fletcher located a basement apartment in a two-family house, 5108 Beverly Road, Brooklyn. In the negotiating of the rental terms of the apartment, Mr. Fletcher also represented the owner of the
property.
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Ms. Parker rented the apartment on November 18, 1997, and paid Mr. Fletcher a $500 commission. The rental accommodation was an illegal apartment that had been cited in violation notices prior to November 1997. Mr. Fletcher did not disclose that information to the tenant and failed to provide agency disclosure forms either to the prospective tenant or to the owner.
Ms. Parker occupied the apartment from November 1997 until June 27, 1998, at a monthly rental of $550, evidenced by receipts signed by the landlord.
On August 13, 1998, in Civil Court of the City of New York, Small Claims, Ms. Parker obtained a judgment of $3,015 against the landlord, Ms. Venette Robinson. In her suit against Mr. Knolly T. Fletcher for a return of the $500 commission, Mr. Fletcher obtained a judgment in his favor on July 2, 1998.
Mr. Fletcher offered a disclosure form purportedly signed by the landlord on November 17, 1997. In comparing the genuine signature of the landlord on the rent receipts and on certification of correction violation form filed by the landlord with City of New York Department of Housing Preservation and Development (documents in evidence either proved or conceded to be genuine) with the disputed signature that appears on the disclosure form dated November 17, 1997, the tribunal finds that the signature purported to be that of Ms. Venette Robinson on the disclosure form, is noticeably different from the signatures proved to be genuine. Therefore, the signature that appears on the disclosure form dated November 17, 1997, is not the signature of the landlord, Ms. Venette Robinson. The record does not disclose any evidence regarding the execution of the signature on the disclosure form.
Mr. Fletcher testified that he was unaware of the illegality of the basement apartment that was rented, and evidence in opposition to his sworn statement was not offered.
OPINION
Real Property Law, §443, prescribes that a real estate broker representing the owner of residential real property must provide an agency disclosure form to a lessee or a potential lessee of that property at the time of the broker's first, substantive contact with the lessee or potential lessee, and must obtain thereon the signed acknowledgement of the lessee or potential lessee, or if the lessee refused to sign the disclosure form, the broker must prepare and keep in his files a written declaration of the facts of the refusal. At the time of the agency employment, Mr. Fletcher failed to give a disclosure form to the prospective tenant, Ms. Parker, and failed either to obtain the signed acknowledgment of Ms. Parker or failed to prepare the written declaration.
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Where, as here, the broker represents both landlord and prospective tenant, complete disclosure of the agency status of the real estate agent is essential to the preservation of the integrity of the fiduciary relationship that exists between the real estate broker and the principals and is fundamental to the fair conduct of the transactions and to the protection of the public that the parties know whom the licensee is representing. Otherwise, the parties to a regulated, real estate transaction will be unprepared to assure that their interests are property protected. Accordingly, a
violation of the disclosure requirements warrants the imposition of a severe penalty.
Conduct by a licensed real estate broker that has the effect of violating or that encourages violation of local zoning and occupancy regulations is a demonstration of untrustworthiness and incompetency where the substantial evidence proves that the broker knew of the illegality of the occupancy or, at least, acted without making necessary inquiries in a situation in which the broker should have suspected that the occupancy might be unlawful. The substantial evidence fails to establish either that the broker knew of or had a duty to inquire about the illegality of the basement apartment rented to Ms. Parker.
However, Mr. Fletcher received money for providing an illegal service - the renting of the illegal apartment. In additipn, Mr. Fletcher improperly received a $500 commission after having failed to comply with the statutory, disclosure requirement of Real Property Law, §443.
Ordinarily, where a licensed broker received a commission for providing an illegal service or after failing to comply with the statutory disclosure requirements, the broker is required to return the money, together with interest, as a condition of retaining the broker's license. However, the issue of the $500 commission litigated between Ms. Parker and Mr. Fletcher in a Small Claims Court action that resulted in a judgment in favor of Mr. Fletcher is res judicata between the parties as to the amount of money (CLS NYC Civil Ct. Act, §1808).
CONCLUSIONS OF LAW
Based on the foregoing findings of fact and opinion and as a matter of law, I conclude:
The respondent demonstrated untrustworthiness and incompetence in that he violated Real Property Law, §443.
The State failed to prove by substantial evidence that the respondent engaged in fraud and fraudulent practices.
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ORDER
Based on the foregoing findings of fact, opinion, and conclusion of law, and under the provisions of Real Property Law, §441-c:
I ORDER the respondent, Mr. Knolly T. Fletcher, on or by November 30, 2000, to pay a fine of one thousand ($1000) dollars, by certified check or money order to the New York State, Department of State. The payment of the fine shall be sent to Ms. Usha Barat, Customer Service Unit, Department of State, Division of Licensing Services, 84 Holland Avenue, Albany, NY 12208.
I FURTHER ORDER that if the respondent, Mr. Knolly T. Fletcher, fails to timely comply with the order of this tribunal: (1) all licenses issued to the respondent under Real Property Law, Article 12-A, shall be as of December 1, 2000, suspended until the respondent does comply; and (2) on or by December 1, 2000, the respondent, Mr. Knolly T. Fletcher, shall send to Ms. Usha Barat, Customer Service Unit, Department of State, Division of Licensing Services, 84 Holland Avenue, Albany, NY 12208, the real estate broker license and pocket card issued to him for the term March 31, 1999, through March 31, 2001, or alternatively shall file an affidavit in form prescribed by the Division of Licensing Services if the failure to return the license and pocket card is due either to the documents' loss or destruction.
SO ORDERED: October 27, 2000
Felix Neals
Supervising Administrative Law Judge