The Georgia General Assembly created the real estate license law in 1926. Through that law the Legislature sought to protect the public from intentional or unintentional harm that could arise in their relationships with real estate brokers. The law established a three-member Commission to regulate licensees. That regulation required a simple registration process for all persons acting as brokers in counties with a population greater than 44,195. Only five counties (Bibb, Chatham, Fulton, Muscogee, and Richmond) had such populations in 1926. The law initially listed unlawful purposes and allowed the Commission to suspend or revoke the licenses of individuals who committed any unlawful practice.
The license law was modified in 1932 to require an examination and a passing grade of all persons subject to the license law and regulation. The addition of examination requirements reflected the desire of the Legislature to assure minimum competency levels of new licensees to eliminate unintentional harm to the public from actions of the licensees.
In 1949, new legislation required that real estate brokers licensed in Georgia secure a $1,000.00 bond. The bonding requirement was an attempt to protect the public against potential fraudulent or misleading actions by licensees.
During the early part of the 1950’s, a shrinking farm population and a growing urban population caused the growth of the real estate brokerage industry in Georgia’s small cities. In 1956 the Legislature extended the license law to require licensure for persons acting in the capacity of a broker in all counties in Georgia.
By the 1960’s rapid growth in Georgia’s seven Metropolitan Statistical Areas (Albany, Athens, Atlanta, Augusta, Columbus, Macon, and Savannah) coincided with the rapid growth of new real estate licensees in those areas. In 1960 Georgia had 7,400 licensees. By 1970 that number had doubled to 14,850. The license law in effect at that time had not contemplated new practices and new standards of practice that arose; the use of new forms of real property ownership; and the reduction of personal relationships that had existed between the licensees, their clients (principals), and customers (the public). So, in the late 1960’s and the early 1970’s the Commission, together with consumer groups and private trade associations, began drafting fundamental changes for the license law.
In 1972 the Legislature acted on the first of those proposals and created the office of the Real Estate Commissioner as a full time employee of the Commission. The Commissioner was charged with the duties of overseeing the day-to-day operation of the Commission’s office. The first Real Estate Commissioner was Elmer A. Borgschatz who had served for nearly twenty years as Real Estate Commissioner in Minnesota. During his first year as Commissioner, Mr. Borgschatz worked to draft a new comprehensive license law designed to meet the needs of the 1970’s.
In 1973, the Legislature adopted the proposed new comprehensive license law. Five aspects of this new law are particularly noteworthy.
- A complete revision of the unfair trade practices section of the law increased the number of prohibited practices from ten to twenty-eight to identify more clearly what business practices licensees should avoid.
- The number of Commission members increased from three to five to assure broader representation from an expanded and growing population of licensees in the entire state.
- The new law required brokers and sales associates to complete education courses before taking and passing a qualifying examination.
- Fair housing provisions that reflected the federal statutes that Congress had enacted during the 1960’s were incorporated into the law.
- A recovery fund replaced the bonding system. The recovery fund offered higher protection to the public at less cost to licensees. At the time a $1,000.00 bond cost approximately $40.00 per year. The recovery fund offered $10,000.00 protection to the public with a onetime licensee payment of $20.00.
In 1978 the legislature amended the law to increase the members on the Commission from five to six. The new member had to have an interest in consumer affairs and represent that constituency and could not hold a real estate license. That same year, the number of licensees increased to 42,000. This growth of licensees from 1970 and a recent court decision in 1977 prompted the Legislature to make the Real Estate Commission a separate budget unit of state government.
The 1977 court decision, and subsequently adopted state statutes, required that all license fees collected from real estate licensees be used exclusively for the costs of regulating the real estate brokerage industry. The court ruled that if the state did not expend the license fees that it collected for regulation of the real estate industry, then the state should reduce the license fees to a level commensurate with expenditures. To meet the standard established by that court order, the Legislature separated the Commission from the Secretary of State’s office. The legislature made the Commission a separate budget unit and gave it authority to establish reasonable license fees in order to balance income and expenditures.
In 1980 the Legislature significantly enhanced the education requirement for new salespersons and imposed a continuing education requirement. The new provisions required salespersons to attend a prelicensing course before taking and passing the qualifying examination. In addition, the new provisions required salespersons to attend two additional courses in the first two years of licensure, and complete continuing education courses for every future renewal period.
In 1985 the Legislature added to the Commission’s responsibilities the administration of the Georgia Time-Share Act. This act required persons selling or managing time-share projects and persons operating time-share exchange programs to register with the Commission, to provide contract rescission rights to purchasers, and to provide purchasers with a public offering statement.
In 1990 the Legislature added responsibility for administration of the Georgia Land Sales Act to the Commission. Similar to the Time-Share Act, this Act required persons who develop certain subdivisions to register with the Commission, to provide contract rescission rights to purchasers, and to provide prospective purchasers with a property report that makes a variety of disclosures.
In 1995 upon the Commission’s recommendation, the General Assembly amended both the Land Sales Act and the Time-Share Act so as to remove the Commission as administrator of the Acts. Consequently, the provisions of the two acts are now enforced through private civil action or through criminal proceedings brought by the District Attorney or the Attorney General.
In addition, the legislature added a major exception to the license law for persons who provide property management services on property available for occupancy for periods of less than 90 days. Sometimes called the “innkeepers exception,” this provision exempted from real estate licensing requirements those persons managing such operations as hotels and motels and vacation type rentals such as short-term cabin rentals or condominium rentals for fewer than 90 days in resort areas. In other clarifying amendments to the exceptions to licensure, unlicensed referral agents were limited to three transactions in any one year; and brokers were permitted to use unlicensed full time employees in managing residential and nonresidential properties under written management agreements so long as the unlicensed employees performed only ministerial duties.
In 1996 at the Commission’s request, the General Assembly created a new restricted license for community association managers. Prior to 1996 the Commission had issued only licenses to brokers, associate brokers, and salespeople. Each license entitles the holder to perform all the acts permitted by law to a broker. The only restriction is that associate brokers and salespeople must perform those acts on behalf of a broker since only a broker can act independently. In contrast, the holder of a community association manager’s license can only perform community association management services on behalf of a broker. The law specifically prohibits community association managers from performing any of the other acts of a broker. Other law changes in 1996 mandated the Commission to examine every broker’s trust account or accounts at least once during every renewal period and permitted the Commission to accept applications by fax.
The most significant legislative change in 1997 was a provision to expand the Commission’s authority to contract with other entities to assist in carrying out its duties. This change was consistent with the Governor Zell Miller’s privatization initiative and in keeping with earlier authority given to the Commission to contract out the administration of the licensing examinations. In the area of investigations the Commission was limited to contracting for special legal or accounting expertise only.
The 1998 General Assembly removed from the license law the requirement that every active brokerage firm had to maintain an open and active trust account. This change permitted brokerage firms that did not accept or hold trust funds to have an active license without maintaining a trust account. At the same time, if those firms did receive trust funds, they would be required to open a trust account within one business day of receiving the funds. Another change increased the maximum fine that the Commission could levy in a single disciplinary action from $2,000.00 to $5,000.00. Other amendments added two unfair trade practices: a) inducing a person to alter or modify another licensee’s fee or commission without that licensee’s prior written approval and b) failing to obtain permission from a prospect before referring that prospect to another licensee or failing to disclose to the person being referred whether or not the licensee would receive a fee for the referral.
Since its inception, the license law has allowed the Commission to discipline licensees found guilty of violating its provisions by reprimanding, suspending, or revoking a license. In 1979 new provisions gave the Commission the flexibility to require education and accountant’s reports on trust accounts instead of, or in addition to, the traditional sanctions. In 1987 the Legislature also authorized the Commission to impose fines in its disciplinary process if the Commission deemed them appropriate. In 1991 the Legislature authorized the Commission to revoke the license of a broker found incompetent to exercise those duties and simultaneously to issue a salesperson’s license if the broker otherwise demonstrated honesty and trustworthiness. In 1999 the Legislature authorized the Commission to develop a system of citations for minor offenses. Thus, by 1999 the Commission’s disciplinary options had reached the full range of options normally available to other real estate Commissions and professional licensing agencies.