ALJDEC - Licensing

24F-081-REL · Department of Real Estate · 2024-01-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Real Estate Activities of:

KOCHAROV, ALEXANDER holder of

license number SA107347000,

Respondent.

No. 24F-081-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 10, 2024

APPEARANCES: Assistant Attorney General Raya Gardner represented the Arizona Department of Real Estate. Respondent Alexander Kocharov appeared on his own behalf. Bret Biesenthal appeared as witness for the Arizona Department of Real Estate.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

EXHIBITS ADMITTED INTO EVIDENCE: The Arizona Department of Real Estate’s Exhibits 1-17.

FINDINGS OF FACT

On November 10, 1994, the Arizona Department of Real Estate (“Department”) issued Real Estate Salesperson License Number SA107347000 to Alexander Kocharov (“Respondent”). The license is scheduled to expire on November 30, 2024.

Bret Biesenthal, Senior Investigator for the Department, testified regarding Respondent’s licensing history and the facts giving rise to the instant matter.

On May 11, 2023, the Department received a complaint with attachments from Chris Williamson, alleging that Respondent’s actions and representations in connection with ten (10) properties located in Goodyear, Arizona, violated real estate statutes and rules.

In response to the complaint, the Department began an investigation into the matter. The Department sent a message to Respondent and his Designated Broker, Aleksey Devyatov, via the Department’s Message Center that contained a copy of the complaint along with a letter outlining the allegations against Respondent. In its message, the Department requested a signed narrative statement about the matter and supporting documentation, including all property management documentation in their possession, within seven (7) days of the date of the letter.

On May 20, 2023, Mr. Devyatov provided the Department with a statement as follows:

Following is the Key Factor Realty formal response to your inquiry related to complaint filed by Chris Williamson against our former agent Alexander Kocharov:

On April 26th, 2023, I received the call from Chris Williamson who notified me of all allegations listed in the complaint letter. This was the first time I’ve heard of any of this taken place.

I had no prior knowledge of any allegations listed in the complaint. I have only learned about this from the call I received from Mr. Williamson on 4/26/2023.

I had no knowledge of any property management services performed by Alexander Kocharov under Key Factor Realty nor was it authorized by Key Factor Realty.

Following my conversation with Mr. Williamson, I immediately contacted Alex Kocharov and was shocked to find out that he was running a property management operation under his own LLC named Specialized Consulting Services.

Following my conversation with Alexander Kocharov and upon his confirmation of these unauthorized activities, I immediately severed his employment with my brokerage on 4/27/2023.

On May 28, 2023, Respondent provided his response to the Department in the form of a two-page statement and numerous documents.

Mr. Biesenthal testified regarding Respondent’s property management activities, as well as Respondent’s commingling of funds.

Property Management Activities

On June 4, 2022, Respondent signed a Property Management Agreement (“PMA”) for presentation to Wayne Strickler, the owner of the ten (10) properties in question.

When Respondent executed this PMA, he was employed as a salesperson under Mr. Devyatov at Key Factor Realty, LLC. The PMA identifies Key Factor Realty, LLC at the top of the document. In the body of the PMA, Specialized Consulting Services, LLC is identified as the broker acting through Respondent as the salesperson. Respondent is listed as the sole manager and owner of Specialized Consulting Services, LLC. Mr. Biesenthal testified that Specialized Consulting Services, LLC does not hold an entity license with the Department.

The PMA designates as the broker, Specialized Consulting Services LLC, as the sole and exclusive agent to lease, operate and manage the ten (10) properties specified, all located within the Centerra Subdivision, and provides for a leasing commission of 3% to the broker, which in this case is the unlicensed entity, Specialized Consulting Services, LLC.

Mr. Strickler, the owner of the properties, never returned a signed copy of the PMA to Respondent and no other written agreement exists between the parties.

On May 10, 2022, Respondent presented the tenants of the ten (10) properties with a welcome letter that identified himself as the Resident Manager at SCS Real Estate Services and stated that he was hired by Mr. Strickler “to manage the properties in Centerra Subdivision.”

Respondent executed ten (10) Lease Agreements on behalf of Mr. Strickler. In the terms of the Lease Agreements, Respondent directed rent payments to go directly to the owner. In six (6) of these Lease Agreements, Respondent indicated that he confirmed the existence of an agency relationship for the transaction and represented that he was an agent of both the tenant and the owner. The Lease Agreements provide that it does not take the place of an agency disclosure form, however, there are no signed dual agency documents for these transactions.

Respondent collected rent payments from tenants and received compensation for property management activities. Mr. Biesenthal testified that Respondent received direct payments through electronic funds transfers from tenant accounts.

Commingling of Funds

On or about September 21, 2022, Respondent executed a Lease Agreement on behalf of Mr. Strickler for one (1) of the ten (10) properties located at 15113 East Monroe Street, Goodyear, Arizona. The Lease Agreement on which “Key Factor Realty LLC” appears on top, provides instructions for the deposit of a $500.00 earnest money payment into the Broker’s Trust Account of “Alexander Kocharov Specialized Consulting Services.” Mr. Biesenthal testified that a trust account held by a licensed broker is required for property management, and that Respondent was not a licensed broker and Specialized Consulting Services is an unlicensed entity. The act of Respondent depositing this money into his personal account constitutes the commingling of funds, as evidenced by the Department’s Exhibit 11, which shows that $500.00 was sent to Respondent’s personal account from the tenant for the earnest money for this lease agreement.

On January 18, 2023, Respondent executed a Landlord Verification form from the Maricopa County Human Services Department and identified his personal residential address as the payment remittance address for the property located at 15113 West Monroe Street, Goodyear, Arizona. Respondent identified himself and signed the document as Property Manager, and the tenants were to send their rent payments directly to Respondent at his home address, rather than to a trust account.

On January 26, 2023, Respondent collected a cash rent payment in the amount of $7,000.00 from a tenant for the property located at 15283 West Adams Street in Goodyear, Arizona. Respondent did not have a trust account in which to deposit the money. Further, Respondent did not immediately deposit the cash into Mr. Strickler’s bank account and held onto it while awaiting instructions from Mr. Strickler.

On January 27, 2023, Respondent deposited a check from a tenant in the amount of $4,500.00 into his Wells Fargo bank account.

On February 6, 2023, Respondent deposited a check from a tenant in the amount of $6,000.00 into his Wells Fargo bank account. Additionally, on three (3) separate occasions, tenants sent individual rent payments directly to Respondent in the amounts of $2,460.00, $600.00, and $1,900.00.

Mr. Biesenthal testified regarding email exchanges between Respondent and Mr. Strickler’s employees in which Respondent admitted to signing leases and referenced a PMA.

Mr. Biesenthal further testified that Respondent’s record keeping was improper in regard to rents collected, there was no tenant ledger, and there were no trust account records as required for property management because there was no trust account. Respondent’s personal account was improper for the deposit of rent payments.

Mr. Biesenthal testified that Respondent conducted numerous activities outside of his brokerage, without permission from his broker, including unlicensed property management. Respondent identified Key Factor Realty, LLC on numerous documents without permission and used an unlicensed entity as a brokerage. Further, Respondent represented both parties when executing lease agreements. Respondent commingled funds.

Because Respondent’s activities were not conducted through a licensed entity, the Department lacks the ability to regulate the activity, and therefore cannot achieve its duty to protect the public by regulating property management and enforcing its statutes and rules.

The Department argued that Respondent’s conduct constituted violations of A.R.S. §§ 32-2153(A)(2), (A)(7), (A)(8), (A)(9), (A)(15), (A)(16), (A)(18), (B)(6) and (B)(7).

Respondent testified that he has been a licensed real estate agent for thirty (30) years and has never had any complaints against his license. Respondent testified that Specialized Consulting Services is “for investors to remodel properties.” Respondent testified that he is familiar with the laws regulating real estate and that he was not conducting real estate activities outside of Key Factor Realty, LLC.

Respondent explained that Mr. Strickler is approximately 84 years old and requested that Respondent oversee his properties that were existing rental properties. Respondent testified that he agreed to help Mr. Strickler “maintain” the properties. Respondent testified that he met with the tenants and prepared a letter to introduce himself. That letter indicates that Respondent is the Director of Property Management.

Respondent testified that he conducted and prepared an analysis of the properties for Mr. Strickler and advised Mr. Strickler to increase the rents on all of the properties and Mr. Strickler agreed. Respondent explained that because Mr. Strickler was out of the country, there as a time difference and issues with communication. Consequently, based on their relationship, Respondent’s and Mr. Strickler’s agreement was a “hand shake deal.”

Respondent negotiated and executed new lease agreements with the existing tenants and testified that he did so as a “favor” to Mr. Strickler.

Respondent testified that he did not want to be responsible for the collecting of the rents and did not receive a commission on the rents, however, Respondent testified that he collected rents because he “wanted to help” Mr. Strickler. Respondent asserted he received compensation of $800.00 per month for maintenance of the properties.

Respondent testified that he had all the property reports however, those reports were confiscated by Mr. Williamson during a meeting.

Respondent also testified that he was not tasked with collecting rents, however, one of Mr. Strickler’s business associates was “supposed to notify” Respondent after one month of any non-payment of rent. Respondent testified that he waited four to five months without a rental payment before he asked a tenant why the rent was not paid, and informed the tenant that if they did not pay the rent, they would be evicted. The tenant gave Respondent $7,000.00 in cash at that moment and Respondent “did not know what to do with the money because he didn’t have an account.” Respondent asserted that the money was put in a safe deposit box.

Respondent admitted to accepting Zelle payments for rent from tenants because “the goal was to collect money.”

Respondent asserted that the commingling of funds was not intentional, and that he did not send the funds to Mr. Strickler’s business associate because he “was not sure Mr. Strickler would get the money.”

Respondent acknowledged deducting $2,400.00 for his fees from the monies collected.

Respondent contended that it was his belief that Mr. Williamson’s goal in filing the instant complaint was to “take over the properties from him.”

Respondent further asserted that a license is not required for property maintenance and that the activities that he was performing were not property management activities. Respondent testified that he was hired by Mr. Strickler to perform property maintenance through Specialized Consulting Services, LLC. However, Respondent admitted to signing the leases and collecting rents when tenants were delinquent in their payments. Respondent asserted that he “volunteered” to collect rents for Mr. Strickler and did not consult with anyone regarding this activity. Respondent testified that he based his actions on his interpretation of the real estate statutes and that he “knows the law” because he has been in the industry for 30 years. Respondent testified that he is aware that he would have needed a trust account and approval from his broker for property management, however he did not need either of those to perform property maintenance.

At hearing, Respondent took no responsibility and showed no remorse for his actions, stating that he “did nothing wrong.”

CONCLUSIONS OF LAW

The Department has jurisdiction over Respondent and the subject matter in this case.

Pursuant to A.R.S. § 41-1092.07(G)(2) and A.A.C. R2-19-119(B), the Department bears the burden of proof in this matter. The standard of proof is by a preponderance of the evidence.

The substantial, probative, and credible evidence of record established that Respondent: i) acted for more than one party in a transaction without the knowledge or consent of all parties to the transaction; ii) accepted compensation as a licensee for performing any of the acts specified in this chapter from any person who is not authorized to provide compensation pursuant to A.R.S. § 32-2155; iii) represented or attempted to represent a broker other than the broker to whom he was licensed; iv) failed, within a reasonable time, to remit monies to the rightful owner; v) failed to keep an escrow or trust account or other record of monies deposited with the licensee relating to a real estate transaction; vi) commingled monies; vii) failed to maintain a complete record of each transaction; viii) engaged in the business of a real estate broker without holding a license; and ix) demonstrated incompetence to perform any duty or requirement of a licensee.

The Department established it has grounds to revoke Respondent’s license pursuant to A.R.S. § 32-2153(A)(2), (A)(7), (A)(8), (A)(9), (A)(15), (A)(16), (A)(18), (B)(6) and (B)(7).

RECOMMENDED ORDER

IT IS ORDERED revoking Alexander Kocharov’s Real Estate Salesperson License Number SA107347000.

Pursuant to A.R.S. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.

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 will be forty (40) days from the date of that certification.

Done this day, January 26, 2024.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Susan Nicolson, Commissioner

Arizona Department of Real Estate

[email redacted]

Raya Gardner

Office of the Attorney General

[email redacted]

Alexander Kocharov

[email redacted]

By: OAH Staff