ALJDEC decisions subject to certification as final

19F-156-REL · Department of Real Estate · 2019-08-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 11, 2019 and May 23, 2019 followed by post-hearing submissions and review of the hearing record.

APPEARANCES: William A. Kozub, Esq., represented Austin VanScoyk. Robert N. Bass, Esq. represented Rylie Alder. Assistant Attorney General Deain Ousounov represented the Arizona Department of Real Estate.

ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn _____________________________________________________________________ FINDINGS OF FACT 1. On February 26, 2013, the Arizona Department of Real Estate (Department) issued real estate broker’s license BR570108000 to Respondent Austin VanScoyk (VanScoyk). This license was set to expire on February 28, 2019. 2. On September 13, 2011, the Department issued the real estate entity license LC641444000 to Property Wise Realty LLC dba Property Wise Realty (PWR). This license was set to expire on February 28, 2019. VanScoyk is the designated broker for PWR. 3. On July 30, 2010, the Department issued real estate salesperson’s license SA637456000 to Brandi Weathers (Weathers). This license is set to expire on July 3, 2020. 4. Jarom Lunt (Lunt) is a homebuilder; his company is JJL Design & Build, LLC. VanScoyk had known Lunt for several years and, eventually, became Lunt’s broker for Lunt’s real estate transactions. Lunt is not a licensed real estate salesperson. 5. In 2014, PWR began to share office space in a building with Lunt. Lunt pays the rent and VanScoyk supplies the front office person/receptionist for both businesses. 6. Rylie Alder (Alder) was hired by VanScoyk in June 2018 to be his assistant at PWR. VanScoyk pays Alder on an hourly basis.[1] Because VanScoyk only needed a part-time assistant, Alder became the front office/person receptionist; therefore, Alder also assists Lunt when needed in his business activities. Alder is not a licensed real estate salesperson. 7. Lunt constructed a speculative home (Home) in Safford, Arizona on Navajo Street. Lunt listed Home with VanScoyk. VanScoyk set up the “file” for Home in the office software system. 8. All documents in this matter regarding Home were prepared on a real estate business computer software program, dotloop.com, that contains various document templates that can be pulled up, filled out, and are able to be electronically signed/dated prior to sending to the other party or on to the next person. Access to “files” created in dotloop.com is by user name and password. Dotloop has a time-stamped log of persons, i.e., “user names” accessing the system/files. 9. Alder had access to dotloop files using VanScoyk’s user name and password; VanScoyk often left his computer on with his access open so that Alder was able to do things, at his direction, if he was out of the office. Therefore, when Alder was using VanScoyk’s computer or his user name and password, the dotloop log would show VanScoyk was using the system. 10. VanScoyk’s position was that Alder was not trained on the software like a sales person would have been and that, if Alder rather than a sales person was being asked to prepare a form in the system and he was not in the office, he would tell Alder which file/form to open and what to write on the form, and he would make her verbally acknowledge what the form now said by having her repeat it back to him. VanScoyk indicated that he would be able to look a document over if he was in the office. 11. On August 20, 2018, Weathers made an offer on Home on behalf of a prospective buyer. She prepared all necessary documents on dotloop.com, including a waste water addendum signed by the buyer which called for the seller to pay up to $3,000.00 for wastewater treatment repairs. [2] 12. Later that day, VanScoyk called Weathers and indicated that the seller was countering but would pay the buyer’s closing costs. 13. Based on her conversation with Lunt in the office and with VanScoyk on the speaker-phone, Alder prepared the counter offer in the dotloop file. Alder’s position is that she was working for Lunt when she filled this form out; however, at hearing, her testimony revealed that VanScoyk also reminded Alder about specific information for Alder to place on the counter offer.[3] VanScoyk also clarified that he had given specific language to Alder for the counter offer and told Alder to dotloop it to Lunt for signature. 14. VanScoyk “really” could not recall whether he had gone back to the office to “double check” the document, stating “I may have before he signed it,” but he also indicated that Lunt had signed it “a few hours later.”[4] 15. After Lunt signed the counter offer, the documents were dotlooped to Weathers. 16. Regarding the documents that Weathers received from Alder: the counter offer signed by seller indicated that the buyer would pay the closing costs, which was not what Weathers had been told by VanScoyk; and, the wastewater addendum (WWA) was not the original one (that had been signed by buyer) that Weathers had provided to VanScoyk. 17. In preparing the documents to be sent back to Weathers, Alder pulled up a new WWA form, had Lunt sign it, and sent that along to Weathers, rather than using the one already received for the Home transaction from Weathers.[5] The original WWA had proposed that the seller would be responsible for the first $3,000.00 in repairs on the wastewater system.[6] 18. The hearing record is inconsistent on Weathers’ receipt of the original WWA. Weathers indicated VanScoyk told Alder, while they were on the three-way call, to pull up the original one, to send it to the seller for signature, and then send it to Weathers. At hearing, VanScoyk stated that he later sent the original one on to Weathers. 19. Alder was a participant in a three way call with VanScoyk and Weathers but disputes she ever had a direct conversation with Weathers. Alder denies telling Weathers that she “created” the new WWA.[7] 20. VanScoyk denies telling Weathers that Alder “wrote up” the counter offer.[8] 21. On August 27, 2018, Kimberly Clifton, the Designated Broker for Tierra Antigua Realty, filed a complaint with the Department alleging unlicensed real estate activities by Alder. Overall, Weathers believed that Alder was performing tasks that only a departmentally licensed person was allowed to do. 22. On November 7, 2018, the Department issued a Cease and Desist Order to Alder regarding the allegation of unlicensed real estate activity. The Department requested statements from Alder, VanScoyk, and Weathers.[9]

23. In response to Alder’s appeal, on June 7, 2019, the Department issued a Notice of Hearing regarding this matter. 24. The Department alleges violations by Alder of A.R.S. § 32- 2153(B)(6), that of engaging in the business of real estate without holding a license. 25. The Department alleges violations by VanScoyk of A.R.S. § 32- 2153(A)(21), that of failing, as a licensed broker, to exercise reasonable supervision of the activities of salespersons … or others under the broker’s employ.

26. At hearing, the Department argued that VanScoyk’s failure to supervise Alder resulted in the errors of (a) the origination of a document,[10] the new WWA, by the unlicensed Alder, and (b) errors on the counter offer regarding the warranty and the need for later addendums. The Department’s position is that there was a procedure that should have been in place, or if one was in place, was not followed as to any and all documents prepared by a staffer, here, Alder. The Department’s concern was that having Alder read language back to him over the phone was not sufficient supervision. Additionally, the Department argued that Alder’s origination of a new WWA from the dotloop system was a failure of VanScoyk to have supervised her regarding the transaction because he should have directed her to use the existing one in the file and should have prevented her from creating a new document which he also did not verify to be appropriate (in not reflecting the same terms). The Department requested that the Cease & Desist Order be upheld as to Alder and that a $500.00 penalty and additional classroom education be assessed for VanScoyk. 27. Alder argued that she did not create a WWA, that her actions were simply clerical, and that any information she placed on a dotloop template was at the direction of VanScoyk or Lunt. Alder’s position, and VanScoyk’s position in support of Alder’s position, is that Alder was exempt from the licensing requirements. Alder argued that she did not perform any action set forth in A.R.S. § 32-2101(48), and specifically did not “assist[] or direct[] in the negotiation of any transaction calculated or intended to result in the sale, exchange, leasing or rental of real estate…”[11] 28. VanScoyk argued that Alder not using the original WWA or attaching the wrong document was simply an error or clerical mistake, that Lunt was not disputing the WWA terms of the buyer, and that such a mistake does not warrant any penalty. VanScoyk argued that he, Lunt and Alder all took the position that Alder simply transcribed the information she was provided onto the counter offer and that such work was not “assisting” in the negotiation of a real estate transaction. VanScoyk argued that Alder did not create or draft any document for the Home transaction, and therefore, there was no act over which the Department has authority that was not supervised by VanScoyk. Finally, VanScoyk argued that even if Alder had created a document for the Home transaction, she was exempt from being licensed pursuant to A.R.S. § 32-2121(A)(1), (A)(9), or (A)(17). 29. The evidence presented to the hearing record established the unlicensed activity and the failure to supervise as were alleged by the Department. CONCLUSIONS OF LAW 1. This hearing was conducted in accordance with Arizona Revised Statutes (A.R.S.) § 41-1092.01 et seq. Respondent has the burden of proof and the standard of proof on all issues is by a preponderance of the evidence. See Arizona Administrative Code (A.A.C.) R2-19-119. 2. A.R.S. § 32-2153(A) provides as follows: The commissioner may suspend or revoke a license, deny the issuance of a license, issue a letter of concern to a licensee, issue a provisional license or deny the renewal or the right of renewal of a license issued under this chapter if it appears that the holder or applicant, within five years immediately preceding, in the performance of or attempt to perform any acts authorized by the license or by this chapter has:

21. As a licensed broker, failed to exercise reasonable supervision over the activities of salespersons, associate brokers or others under the broker’s employ or failed to exercise reasonable supervision and control over the activities for which a license is required of a corporation, limited liability company or partnership on behalf of which the broker acts as designated broker under section 32-2125.

The Commissioner is authorized under A.R.S. § 32-2153(A) to discipline licensees for the reasons set forth above. The Department relies on a person, once licensed, to follow any and all applicable real estate laws, rules, policies, and commissioner orders. 3. Respondent’s arguments fail regarding an exemption from the licensing requirements for Alder. The provisions cited simply do not apply because the property owner was not selling the property; PWR was engaged by Lunt to sell the Home property. Additionally, by originating the new WWA, Alder went beyond the activities clarified by the Department to be performed as an “unlicensed assistant” and performed an act that requires a person to be licensed for real estate activities. 4. Respondent VanScoyk failed to supervise Alder when he failed to verify the documents Alder had prepared for the Home transaction. VanScoyk relied on his verbal direction over the phone as to the documents Alder forwarded to Weathers; unfortunately the lack of supervision or a visual review of those documents prior to the forwarding of the documents resulted in Alder originating from dotloop a new document, the new WWA, and forwarding that document in the course of a real estate transaction. The attachment of an existing wrong document might be considered to be a clerical error; however, in this case, Alder originated a new document due to the lack of supervision. The circumstance resulted in Alder performing a task for which a person is required to be licensed. 5. The Department alleged that VanScoyk violated A.R.S. § 32- 2153(A)(21). The Administrative Law Judge concludes that the hearing record evidences the violation. Because VanScoyk violated A.R.S. § 32- 2153(A)(21), the Department has authority to discipline his license. 6. The Department’s Cease & Desist Order should be upheld as to Alder’s actions taken at that time and only on the Home transaction at that time. No other actions of Alder prior to or since the Home transaction were evidenced to demonstrate any other unlicensed activity. Therefore, given the recency of Alder’s hiring and inexperience in August of 2018, the failure to supervise should be considered a cause of the unlicensed act. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Department’s Cease & Desist Order be upheld as to the Alder act that took place, and it is further recommended that the Department’s proposed penalty and discipline be assessed for VanScoyk. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order shall be five days from the date of the certification. Done this day, August 7, 2019.

/s/ Kay A. Abramsohn Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate

----------------------- [1] Alder’s training for her job was essentially on-the-go, i.e., as she was asked to do something, she would be shown or walked through what to do, step by step. [2] Weathers had multiple issues with how the transaction proceeded, specifically the one-year versus two-year warranty, miscommunication, and other related construction documents. However, the only process addressed herein is that in which Alder was noted to have taken part. For example, on the two-year or one-year warranty issue, VanScoyk indicated at hearing that he had not remembered to tell Alder to put that on the counter offer, which resulted in the later addendums; there was evidence that the price point on the counter offer was tied into Lunt accepting a two-year warranty period. See Exhibit 6. [3] Audio hearing record (HR), May 23, 2019 at 14:09 – 15:12. [4] HR, May 23, 2019 at 1:32:20 – 1:33:26. [5] See Exhibit 12. At hearing, VanScoyk indicated that he was “pretty sure” he had directed Alder to “share” the document with Weathers and he characterized Alder’s action in not seeing the original WWA as a clerical error. [6] See Exhibit 11 [7] This is in reference to Weathers’ September 4, 2018 statement. See Exhibit 4. [8] Id. [9] See Exhibits 7, 9, and 4, respectively. Lunt also filed a statement. See Exhibit 8. [10] See Exhibit 19. [11] A.R.S. § 32-2101(48)(h) was cited in the Cease & Desist Order; the statute was amended and the new numbering for this provision is found at 32- 2101(49).

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826