141 DOS 92
Issued: December 18, 1992
STATE OF NEW YORK
DEPARTMENT OF STATE
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In the Matter of the Application of:
MITCHELL BERNIER, DECISION
for a License as a Real Estate Broker.
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Administrative Law Tribunal
270 Broadway, New York, N.Y. 10007.
Held: October 7, 1992.
Before: Felix Neals, Administrative Law Judge.
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Mr. Mitchell Bernier, 39-78 49th Street, Sunnyside, N.Y. 11104, appeared pro se.
The Division of Licensing Services was represented by Mr. Michael Coyne, 333 E. Washington Street, Syracuse, N.Y. 13202.
ISSUE
This proceeding was heard on October 7, 1992, pursuant to the provisions of Real Property Law, §441-e, to determine if the applicant possesses the experience required by the provisions of Real Property Law, §441(1)(d), to be licensed as a real estate broker.
FACTS
Mr. Mitchell Bernier, previously licensed as a real estate salesperson, submitted an application on December 19, 1991, to the Division of Licensing Services for license as a real estate broker. The Division of Licensing Services notified the applicant by letter dated July 10, 1992, that he was ineligible for licensure because his experience in unlicensed real estate brokerage activities could not be considered or credited as qualifying experience in accordance with the provisions of law. The Division of Licensing Services credited the applicant with nine months of experience.
The applicant's administrative appeal of the Division of Licensing Services' decision was denied by the Division of Licensing Services by letter dated July 31, 1992. On August 1, 1992, the applicant requested a quasi-judicial administrative hearing.
The facts in this case are undisputed. The applicant was licensed as a real estate salesperson associated with Acosta Realty from March 31, 1986 to July 18, 1986, and with Home Market Realty Corp. from July 28, 1986, to December 30, 1986. The files of the Division of Licensing Services indicate that Mr. Bernier was inactive as a real estate salesperson as of December 30, 1986. Mr. Bernier is not licensed as a real estate salesperson currently and has not been so licensed since the 1986-1988 licensure term.
At 241-243 Troop Avenue, Brooklyn, N.Y., the applicant conducts business as Bernier Leoni Funding Corp. and Mitchell Bernier Realty Corp. Signs on the office windows advertise "Bernier Property Management" and that "Section 8" apartments are available for rental. The applicant admits that: he is engaged in the placement of mortgage loans on real property for a fee; he represents sellers of real property for a fee; and he represents prospective tenants for a fee who are seeking to rent apartments governed by the provisions of the Section 8 Housing Assistance Program of the federal Housing and Community Development Act of 1974. Mr. Bernier also admits that neither he nor any of his companies are licensed in any capacity in the State of New York by the Department of State, the Banking Department or the Insurance Department.
Mr. Bernier's customary business practices are as follows:
1. Sales of Real Property. When representing a seller of real property, Mr. Bernier has the seller execute: (a) a power of attorney which appoints Mr. Bernier as the seller's "Attorney In Fact" to sell the property and to act to the extent that the seller is "...permitted by law to act through an agent:" and provides that "The within power extends to permitting and allowing the attorney-in-fact Mitchell Bernier to deduct from whatever proceeds he may obtain the sum of or a sum equal to % for his services as a[n] agent for selling my house and no claim of any kind or nature will lie against him by reason of such deduction and rentation of such moneys." (b) a preprinted form "Bernier Realty Corporation Commission Agreement" that advertises the company as "Real Property Law Consultants" and provides that "The commission aforesaid shall be due and payable only if, as and when title shall close to said premises except for willful default of the owner and such commission shall be paid by the owner at the closing of title to said premises out of the mortgage proceeds available at such closing or by the OWNERS certified check payable to MITCHELL BERNIER REALTY CORP." (c) a preprinted form "Bernier Realty Corporation Sales Agreement" with "Power of Attorney" and (d) a preprinted form "Mitchell Bernier Realty Corporation Exclusive Right to Sell Employment" agreement.
2. Mortgage Loans. In mortgage loan transactions the potential mortgagors sign: (1) A preprinted form "Mitchell Bernier Realty Commission Agreement" for a fee with a "20% Percent Advance. Non Refundable" or a preprinted form "Bernier Realty Corporation Agreement for Financial Services" providing for a commission and a non-returnable fee" for the time involved to appraise the feasibility of the loan or investment and also defray any expenses incurred. This fee is separate from fees due, if a loan or an investment is obtained. It is understood that this Agreement is to be on a "best efforts" basis." (2) A power of attorney to Mr. Bernier which also states that "THE WITHIN POWER EXTENDS TO PERMITTING AND ALLOWING THE ATTORNEY-IN-FACT MITCHELL BERNIER TO DEDUCT FROM WHATEVER PROCEEDS HE MAY OBTAIN THE SUM OF_____OR A SUM EQUAL TO_____% FOR HIS SERVICES AS A AGENT AND NO CLAIM OF ANY KIND OR NATURE WILL LIE AGAINST HIM BY REASON OF SUCH DEDUCTION AND RENTATION OF SUCH MONEYS."
The evidence establishes that Mr. Bernier acted as attorney-in-fact for a fee: (1) in the sale of one-family homes in August 1989, September 1989, and August 1990, and in the sale of a three-family home in July 1988. In those transactions, the sellers executed the preprinted forms of power-of-attorney, commission agreement, sales agreement, and exclusive right to sell contract. In the sale of the three-family home in July 1988, Mr. Bernier represented both the seller and the buyer (as mortgagor) in the transaction and received a fee from both. In the power of attorney form executed by the seller in the September 14, 1989 transaction, Mr. Bernier extended the provision allowing for deduction of a commission fee from the proceeds of the sale to include a share in the selling price as follows: "The within power extends to permitting and allowing the attorney-in-fact Mitchell Bernier to deduct from whatever proceeds he may obtain the sum of $5,000 or a sum equal to for his services as a agent for selling my house and no claim of any kind or nature will lie against him by reason of such deduction and rentation of such monies. Anything over or above captioned selling price will be split between the agent and the seller regardless of the 7% commission on $81,600.00."
The record shows that Mr. Bernier represented for a fee property owners in obtaining mortgage loans for a two-family dwelling (January 1989), a twelve-unit apartment building (May 1990), a six-family house (June 1990), and a two-family house (June 1990). In the mortgage transactions, the mortgagors signed the preprinted forms of power of attorney and either a commission agreement or a financial services agreement. In a transaction involving the negotiations of a mortgage on a building consisting of two dwelling units and a commercial store, the power of attorney signed by the owner was worded as follows: "The within power extends to permitting and allowing the attorney-in-fact Mitchell Bernier To deduct from whatever proceeds he may obtain the sum of $1,650. For the services as an agent. For the transaction of real estate (house), situated at 110 Manhattan Avenue, Brooklyn, New York 11206 (two-family brick house) Mortgaging and Insurance. And no claims of any kind will lie against him by reasons of such deductions and rentation of such money. AF" In this case, Mr. Bernier charged a fee for obtaining both a mortgage and insurance for the property owner.
3. Apartment Rentals. The applicant's admitted general practice when representing prospective tenants seeking Section 8 Housing accommodations is illustrated in the testimony of a complaining witness, Ms. Diana Maisonet. On June 10, 1992, Ms. Maisonet, who was eligible for housing assistance, went to the office of Mitchell Bernier Real Estate Corporation seeking a "Section 8 apartment. Mr. Bernier requested Ms. Maisonet: (1) to sign a preprinted form agreement which states "THE APPLICANT MUST GIVE US A FEE OF $500.00 DOLLARS. IF APPLICANT RECEIVES PUBLIC ASSISTANCE OR SECTION 8, THE OFFICE WILL PROVIDE THE STANDARD PROCEDURE OF CALLING AND WRITING LETTERS TO EITHER DEPARTMENT. THE ABOVE MENTIONED FEE DOES NOT APPLY TO THE BROKER'S FEE. THE OFFICE WILL DO ITS BEST EFFORT IN GETTING AN APARTMENT SUITABLE FOR THE APPLICANT, IN ACCORDANCE WITH SECTION 8, THE HUMAN RESOURCE ADMINISTRATION OR BOTH. THERE IS NO LIMIT TO THE NUMBER OF APARTMENTS THE APPLICANTS CAN SEE, BUT THE ABOVE MENTIONED FEES ARE NON-REFUNDABLE. *IF I APPLICANT, RENT AN APARTMENT OF A HOUSE DIRECTLY OR INDIRECTLY THROUGH INFORMATION GIVEN TO ME BY MITCHELL BERNIER REALTY CORP. I AGREE TO PAY A FEE EQUAL TO ONE MONTHS RENT PAYABLE IN CASH, BANK CHECK, OR MONEY ORDER. MOREOVER I WILL WAIVE ANY CLAIM OF ANY KIND OR ANY NATURE IN OR ABOUT RECOVERING ANY FEES GIVEN TO MITCHELL BERNIER REALTY CORP. FOR THE PURPOSE OF SEEKING APARTMENTS ON MY BEHALF. I AGREE TO THE TERMS STATED ABOVE. (THE FEE IS NON-REFUNDABLE)." AND (2) To sign a preprinted form "Mitchell Bernier Real Estate Corporation Apartment Application." Ms. Maisonet gave Mr. Bernier $300 at the time the application was executed. Mr. Bernier did not obtain an apartment for Ms. Maisonet, and after demand by Mr. Maisonet, he has refused to return the $300 which he retains as a non-refundable fee.
Mr. Michael J. Kerse, First Deputy Inspector General, New York City Housing Authority (NYCHA) testified that the Section 8 Housing Assistance Program is federally financed and administered by the NYCHA. The program is designed to provide leased housing to people of low income. Applications and informational booklets advise all recipients that "No payment or fee should be given to anyone in connection with the preparation, filing or processing of this application for Section 8 Housing Assistance." The advisory does not mention the finding of an apartment.
Mr. Bernier testified that in finding apartments for customers, the "finder's fee" is usually "one month's rent." However, "There is a $500 administrative fee for the Section 8 process" that is in excess of the finder's fee. Mr. Bernier does not consider either the administrative fee or the finder's fee as a broker's fee. In cases of sales of and mortgage loans on real property, Mr. Bernier states that he acts as an "attorney-in-fact" for the seller or mortgagor and not as a real estate broker in any such transaction.
The evidence shows and the applicant admits that he: negotiated and placed loans secured by real property dwellings consisting of two, six, and twelve family units for customers for a fee; represented sellers for a fee in the sale of real property; and for both an administrative fee and a finder's fee, negotiated the rental of apartments, including Section 8 housing, on behalf of prospective tenants.
OPINION
I. The evidence clearly establishes that the applicant performed for others and for a fee activities prescribed in law as the activities of a real estate broker without being licensed.
Real estate broker is defined in Real Property Law, §440(1), as "...any person, firm or corporation, who, for another and for a fee, commission or other valuable consideration, lists for sale, sells, at auction or otherwise, exchanges, buys or rents, or offers or attempts to negotiate a sale, at auction or otherwise, exchange, purchase or rental of an estate or interest in real estate, or collects or offers or attempts to collect rent for the use of real estate, or negotiates or offers or attempts to negotiate, a loan secured or to be secured by a mortgage, other than a residential mortgage loan, as defined in section five hundred ninety of the banking law, or other incumbrance upon or transfer of real estate...."
Real Property Law, §440-a, prohibits any person, co-partnership or corporation from engaging in the business or occupation of a real estate broker or real estate salesman in this state without first procuring a license therefor as prescribed in law.
The legal consequence of the statutes is that a license as a real estate broker is required to legally represent others for a fee in the negotiating of leases, of loans secured by mortgages other than residential mortgage loans, and of sales of real property.
II. The applicant's activities in areas governed by provisions of the Banking Law and of the Insurance Law are not acts for which the applicant is required to be licensed as a real estate broker. However, violations of those laws may be considered in determining the applicant's trustworthiness to be licensed as a real estate broker. Dovale v Paterson, 85 AD2d 602, 444 NYS2d 694, 695 (2nd Dept. 1981). Department of State v Blackmore, 58 DOS 88 (1988), confirmed Blackmore v Shaffer, 128 AD2d 494, 512 NYS2d 421 (2nd Dept. 1987). Department of State v Jeremias, 40 DOS 83 (1983).
Mr. Bernier also performed the services of a mortgage broker for others for a fee without being licensed by the New York State Banking Department. Banking Law, §590(2)(b) proscribes that "No person, partnership, association, corporation or other entity shall engage in the business of soliciting, processing, placing or negotiating a mortgage loan or offering to solicit, process, place or negotiate a mortgage loan in this state without first being registered with the superintendent as a mortgage broker in accordance with the registration procedure provided in...law and by such regulations as may be promulgated by the banking board or prescribed by the superintendent."
In the Banking Law, "mortgage loan" is defined as "...a loan to a natural person made primarily for personal, family or household use, primarily secured by either a mortgage on residential real property or certificates of stock or other evidence of ownership interest in, and proprietary leases from, corporations or partnerships formed for the purpose of cooperative ownership of residential real property;" (§590(1)(a)). "Residential real property" means "...real property located in this state improved by a one-to-four family dwelling used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more persons...." (§590(1)(b).
The applicant negotiated and obtained mortgages on residential real property for others for a fee.
In addition, on at least one occasion, the applicant charged a fee for obtaining insurance on real property without being licensed by the New York State Insurance Department. The Insurance Law, §2102(a)(1), prohibits any "...person, firm, association or corporation...(from acting) as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in this state without having authority to do so by virtue of a license issued in force pursuant to the provisions of...(the Insurance Law). An insurance broker is "...any person, firm, association or corporation who or which for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance or annuity contract or in placing risks or taking out insurance, on behalf of an insured other than himself or itself or on behalf of any licensed insurance broker...." (§2101(4)(c)). When Mr. Bernier for a fee attempted to procure an insurance contract on behalf of the property owner, the applicant was acting as an insurance broker without being licensed.
III. In the presentation of his case, the applicant did not address the issue of illegal activities in areas governed by the Banking Law and the Insurance Law. The applicant contends that he is not required to be licensed as a real estate broker while acting as an attorney-in-fact for customers although he charges a fee and that in rental transactions, he receives a finder's fee, not a broker's commission. Both contentions are legally incorrect.
A person who engages in the rental of apartments for others for a fee as a finder must either: (1) Be licensed as a real estate broker or as an associated salesperson (Real Property Law, §§440 and 440-a); or (2) be licensed as an apartment information vendor (Real Property Law, §§446-a and 446-b). Therefore, in the rental of apartments to prospective tenants for a fee either as a fiduciary agent or as a finder, the applicant is required to be licensed either as a real estate broker or as an apartment information vendor.
IV. The powers of attorney from the prospective sellers and mortgagors to the applicant do not convey an ownership interest to or make the applicant a principal in the transactions. In fact, the power-of-attorney documents name the applicant as an agent and states that the applicant is to act to the extent that the principal is "...permitted by law to act through an agent." Consequently, Mr. Bernier was acting as an agent on behalf of principals for compensation when performing activities prescribed in the provisions of Real Property Law, §440, Banking Law, §590(2)(b), and Insurance Law, §2101(4)(c).
All such activities engaged in by Mr. Bernier after December 30, 1986 (the date on which he terminated his association with a licensed real estate broker), were clearly unlicensed and illegally performed.
V. Unless properly licensed, a person, firm, association or corporation is prohibited from receiving any money, fee, commission or thing of value for performing on behalf of another any activity required to be licensed by the Department of State, the Banking Department or the Insurance Department (Real Property Law, §442-d. Banking Law, §598(5). Insurance Law, §2102(b)(3)). Accordingly, all fees, commissions or other compensation received by Mr. Bernier after December 30, 1986, for performing activities found to be illegal because of his unlicensed status were unlawfully obtained.
VI. In determining the experiential competence of the applicant for a license as a real estate broker in accordance with the experience criteria set forth in Real Property Law,§441(a)(d), real estate transactions made by the applicant in contravention of law are not considered or credited as qualifying experience. Department of State v Strout, 20 DOS 88 (1988).
All the transactions completed after December 30, 1986, and offered by the applicant in support of the application for licensure occurred in violation of law and cannot be considered as qualifying experience.
VII. An applicant for license as a real estate broker has the burden of proving compliance with the statutory prerequisite of experience. (State Administrative Procedure Act, §306. Real Property Law, §441(1)(d), and 19 NYCRR 175.21(b). In this case, the applicant failed to prove that he possesses the experience required by law to be licensed as a real estate broker.
CONCLUSIONS OF LAW
1. The applicant engaged in unlicensed activities, in violation of the provisions of Real Property Law, §440-a, Banking Law, §590(2)(b), and Insurance Law, §2102(a)(1).
2. The applicant unlawfully collected fees and commissions for performing unlicensed activities, in violation of the provisions of Real Property Law, §442-d, Banking Law, §598(5), and Insurance Law, §2102(b)(3).
3. The applicant failed to prove that he possesses experience sufficient to meet the minimum experience criterion required by law. Real Property Law, §441(1)(d). 19 NYCRR 175.21(b).
DETERMINATION
IT IS DETERMINED, according to the foregoing and pursuant to the provisions of Real Property Law, §441-e, that the applicant, Mr. Mitchell Bernier, does not meet the minimum experience criterion prescribed in Real Property Law, §441(1)(d), and 19 NYCRR 175.2(b), and accordingly, the application of the applicant for a license as a real estate broker is denied.
From the testimony and evidence produced at the hearing, the above findings of fact, opinion, conclusions of law, and determination are made, and the adoption of this decision is recommended.
Felix Neals
Administrative Law Judge
Concur and So Ordered on: GAIL S. SHAFFER
Secretary of State
By:
Maureen F. Glasheen
Deputy Secretary of State