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1997 SESSION

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SB 1104 Consumer Real Estate Settlement Protection Act.

Introduced by: Warren E. Barry | all patrons    ...    notes | add to my profiles

SUMMARY:

Consumer Real Estate Settlement Protection Act. Establishes the Consumer Real Estate Settlement Protection Act, a measure governing the qualifications and financial responsibility obligations of persons conducting real estate settlements involving four or fewer residential units. The Act stipulates that only persons licensed as attorneys, title insurance companies, title insurance agents and real estate brokers may conduct such settlements. Financial institutions, together with their affiliates and subsidiaries, are exempt from this restriction when they are parties to such settlements, e.g., furnishing mortgage loan proceeds.

Settlement agents subject to the Act are required to maintain minimum insurance and bonding coverage as follows: (i) $250,000 in errors and omissions or malpractice insurance, (ii) $100,000 in fidelity bonds or employee dishonesty insurance, and (iii) $100,000 in surety bonding. Additionally, they must maintain separate escrow accounts for the deposit of settlement proceeds, and may not receive any of the interest from such accounts. These accounts are made subject to annual audits by independent certified public accountants, except that (i) lawyers' accounts will audited by the Virginia State Bar and (ii) title insurers will audit the escrow accounts of title insurance agents. Title insurers' accounts will be audited by their licensing authority.

The Act requires all settlement agents to register with the Virginia State Bar within 90 days of its effective date, and once every two years thereafter. It further directs the Virginia State Bar, in consultation with the Virginia Real Estate Board and the Virginia State Corporation Commission, to adopt regulations establishing settlement agent guidelines. These guidelines (i) are intended to assist settlement agents in avoiding and preventing the unauthorized practice of law in conjunction with real estate settlements and (ii) will be furnished to settlement agents concurrent with their registration (and any renewal thereof); state and federal regulators of financial institutions; and to members of the general public, upon request. The Bar is directed to receive and investigate complaints concerning settlement agent or financial institution noncompliance with these guidelines; it may assess penalties of up to $5,000 for any willful violation of the Act's State Bar registration and guideline provisions described above.

Real estate contracts encompassing the sale of not more than four residential units must contain language stating that copies of the Virginia State Bar guidelines are available upon request from the parties' settlement agents. These contracts must also disclose that (i) parties have the right to select their own settlement agent and (ii) no settlement agent, except one licensed as an attorney, can provide legal advice to parties to real estate transactions.

With the exception of the Virginia State Bar's exercise of authority over the unauthorized practice of law, the Act's provisions will be enforced by settlement agents' licensing authorities, e.g., the Virginia State Corporation Commission in the case of title insurers and agents. In addition to any penalties they may otherwise issue pursuant to statute or regulation, these licensing authorities are authorized to assess penalties of up to $5,000 for each violation of the Act, and to revoke or suspend settlement agents' licenses issued by such authorities.

Settlement agents are allowed 90 days from the effective date of this act to (i) be appropriately licensed to serve as settlement agents and (ii) comply with the Act's escrow account provisions.


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