86.19

OPINION NO. 86-19

An inquiry has been presented concerning whether the Chairman of the Real Estate Commission (the Requestor) may accept a position as a broker of record for a time-share developer within his county. The Real Estate Commission (the Commission) is a unit within the Department of Licensing and Regulation (DLR) and is established and functions pursuant to Article 56, §213-224A, Annotated Code of Maryland. The Commission consists of eight members appointed by the Governor with the advice of the Secretary of DLR and the advice and consent of the Senate. Five Commissioners must be licensed brokers or salesmen, while the remaining three members are prohibited from being "directly or indirectly engaged in the business of real estate." The Commission has general licensing and enforcement authority over all real estate brokers and salesmen doing business in Maryland. This includes partial responsibility under the Real Property Article, §11A-101 et seq., Annotated Code of Maryland, for implementation of the Maryland Real Estate Time-Sharing Act.

Under §11A-121 developers of time-share projects are prohibited from offering a time-share to the public until they have received a certificate of registration from the Real Estate Commission. Section 11A-124 further makes it unlawful for

any developer to sell or offer to sell a time-share in this State unless the developer has designated a person as the project broker for the time-share project. The time-share project shall be considered a separate real estate office for purposes of the real estate licensing laws of this State.

Time-share project brokers must be licensed real estate brokers, and no one may sell, advertise, or offer for sale any time-share unless the person is a broker, assistant broker, or real estate salesperson licensed by the Real Estate Commission. General regulations have been issued by the Commission setting forth the registration requirements and providing for hearings where a registration is denied. The regulations also provide that the rules of procedure applicable to suspensions and revocations of regular real estate licenses apply to time-share registrations. Records of transactions are required to be maintained (including records regarding the activities of real estate brokers and salespersons) and made available to the Commission at its request, and general regulations deal with inaccurate or misleading statements, misrepresentations about improvements, and other general matters.

This inquiry results from the Requestor's interest in being the broker-of-record for a time-share development in his county. This is a development of townhouses newly constructed specifically as a time-share project, by a developer that is involved in approximately 80% of the time-share projects in the State. It includes an amenities package, and involves the sale of each unit for one-week intervals. This is a real estate transaction in which the purchaser receives a deed for the unit for his particular time period. The developer's registration was apparently processed through and approved by the Commission more than a year ago. The Requestor indicates that he was not involved with the project at that time and was only recently asked by the developer to replace the former broker-of-record. He believes this is because his existing real estate business is nearer in proximity to the development.

This project is the first time-share project in this geographical area, though the Requestor indicates that they have become relatively commonplace in recent years, especially in resort areas. He says that time-share units are promoted as original sales (resales are not common) as vacations rather than as investments. Units are marketed by sales agents who advertise the intervals in the media and conduct tours on weekends. The State time-share law allows for a rescission period in which a potential purchaser may change his mind without penalty. As broker-of-record the Requestor would be responsible for supervision of sales agents and for maintenance of the escrow accounts at the resort. The developer has sales people hired especially for the project, and would not be using the Requestor's agents in his existing agency. However, as required by the real estate law, all sales agents will be licensed through the Requestor as the broker-of-record. In this capacity he will be accountable for their activities and to assure they do their jobs properly and in compliance with the real estate law.

The Requestor indicates that his primary experience in time-share development is by virtue of his need to be familiar with it in his work on the Commission. He believes that this work for the developer is more a product of location, however, than his position on the Commission. He states that he has made it clear that his position can in no way be used in advertising or discussion of sales, and has indicated that he would disqualify himself from Commission action as to all matters arising regarding this project in particular or time-share in general. Even though he recognizes that he, and his Commission status, may generally be known in this relatively small community, he does not believe this would be a factor here since it is a resort development marketed primarily to non-residents.

The Department of Licensing and Regulation (through its Secretary and its Counsel) believes that these precautions are adequate to deal with this situation. Though the agency Counsel recognizes there could be some appearance concern given the high pressure, high sales atmosphere of this sometimes controversial program, he notes that the rescission provision in Maryland is being honored and seems to be working. He points out that though this position would involve regular interaction with other licensees and that there would be significant compliance requirements subject to Commission control, these issues are no different than those that would apply to any broker serving on the Commission.

Section 3-103(a)(1) of the Public Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law) prohibits an official from having private employment with any entity that is under his authority or that of his agency, or that would impair his impartiality or independence of judgment. Section 3-103(a)(2)(i) provides, however, that the prohibitions of the section do not apply to

a public official who is appointed to a regulatory or licensing authority pursuant to a statutory requirement that persons subject to the jurisdiction of the authority be represented in appointments to it.

The Requestor is appointed to the Commission as a broker member, and to the extent that this activity is viewed as a part of that status, we believe that it would be excepted from the strict prohibitions of subsection (a)(1).

We have considered this exception on several occasions. In our Opinion No. 81-39, for example, the optometry practice of a member of the Board of Examiners in Optometry was found to be under the exception, but his education and training activities were not. The exception was found to apply to an individual who was an owner/instructor of an entity that offered electrology courses, since she was appointed to the Electrology Board both as an electrologist and electrology instructor. (Opinion No. 82-39.) In Opinion No. 85-5 two members of the Kidney Disease Commission were advised that the exception did not apply to their continued employment with Blue Cross and Blue Shield, even though they were appointed as insurance representatives, because we concluded the the particular contractual relationship between their Commission and Blue Cross was not the kind of jurisdictional conflict intended to be excused by this provision. In Opinion No. 85-12, the regulated party exception was found not to apply to allow a contract between the Optometry Board and the practice of one of its members.

In applying this exception, we have thus looked to the function of the board or commission and the specific appointing criteria involved, and the exception has been allowed as to activities that are viewed as a standard and inherent part of the activity that is the basis for appointment. Other enterprises of the appointee/member that are separate from or in addition to the fundamental appointing criteria have been excepted pursuant to this provision. In the situation presented by the Requestor we believe that this exception would apply to his service as a broker-of-record for the time-share developer. He is appointed to the Commission as a broker member, and the real estate law seems to include time-share brokering as a component of the brokerage activity. In neither the real estate licensing law nor the time-share law do there appear to be any particular requirements regarding time-share brokers as distinguished from a regular broker. Nor do the activities and responsibilities (in supervising sales agents, for example) of the time-share broker appear to vary significantly from those in which the Requestor engages in his regular real estate business. In fact, the law specifically indicates that the time-share office is a real estate office for purposes of the real estate law.

We therefore conclude that the exception in §3-103(a)(2)(i) applies to allow the Requestor to establish this relationship with the time-share developer. We advise, of course, that the other provisions of the Ethics Law continue to apply. These include the non-participation provision of §3-101, the prohibition against use of prestige of office in §3-104, and the bar against private use of confidential official information in §3-107. The Requestor must therefore take care to disqualify himself from participation in any Commission matter involving this project or developer (or any time-share matter, given the extent of this developer's involvement in the time-share business). He should also continue to be certain that his position and status as Chairman of the Commission does not become a factor in his brokering activities for this developer, and also take care to avoid any situation that would give the appearance of his use of Commission information in connection with or for the benefit of his private employer or business activities.

Herbert J. Belgrad, Chairman
   Reverend John Wesley Holland
   Betty B. Nelson

Date: August 20, 1986