§ 93A-57. Release of Liens or Subordination Instrument +13North Carolina · Real Estate · English

Prior to any closing, the developer must record a release of all liens/encumbrances affecting the timeshare or comply with alternatives: if interest holders exist, execute and record a subordination and notice to creditors instrument, or make Commission-approved alternative arrangements to protect owners.

• ✓Developer must record a lien release prior to any closing or comply with an alternative
• ✓A subordination and notice to creditors instrument protects owners from subsequent creditors and remains effective despite developer bankruptcy
• ✓Alternative arrangements must be approved by the Commission

If a lien other than a mortgage/deed of trust affects more than one timeshare, an owner is entitled to release of their timeshare upon payment proportionate to their liability ratio. Upon payment, the lien holder must promptly deliver a release, and the managing entity may not assess or lien for that expense.

• ✓Owner may obtain release by paying the proportionate amount attributable to their timeshare
• ✓Lien holder must promptly deliver a release upon receipt of payment

A licensee may not receive valuable consideration from a vendor/supplier in connection with an expenditure on behalf of the principal without the principal's written consent (secret profit prohibited). A licensee may not receive consideration for recommending/procuring/arranging services for a party without full and timely disclosure.

• ✓May not receive vendor compensation on principal's expenditures without written consent [A.0109(a)]
• ✓May not receive consideration for recommending services without full and timely disclosure [A.0109(b)]
• ✓The party for whom services are arranged need not be the agent's principal
• ✓Secret profits (e.g., vendor kickbacks) are prohibited

In sales transactions, a broker may not receive compensation over nominal value from the principal unless in a written agency contract, or from any other person unless fully and timely disclosed to the principal. Nominal compensation (insignificant/token, e.g., a $25 wine or $50 gift certificate) does not require consent. Bonuses must be disclosed.

• ✓Compensation from principal must be in a written agency contract [A.0109(c)]
• ✓Compensation from others requires full and timely disclosure to the principal
• ✓Nominal compensation is insignificant/token (e.g., $25 wine, $50 gift certificate)
• ✓Builder bonuses must be disclosed to buyer-clients in a timely manner
• ✓In sales, disclosure may be oral but must be confirmed in writing before an offer

The Commission will not arbitrate commission disputes. A licensee may not compensate or share compensation with unlicensed persons for acts requiring a license in NC. NC brokers may pay referral fees to out-of-state licensees who do not perform services physically in NC. A limited exception permits referral fees to travel agents for vacation rentals. RESPA prohibitions control.

• ✓Commission will not arbitrate commission rate or division disputes [A.0109(f)]
• ✓May not compensate unlicensed persons for acts requiring a license in NC [A.0109(g)]
• ✓May pay out-of-state licensees who do not provide services physically in NC
• ✓Limited exception: referral fees to travel agents for vacation rentals only
• ✓RESPA-prohibited fees/kickbacks are also prohibited [A.0109(i)]

A licensee may not require or force an escrow agent or attorney to split a commission or pay part to another person. It is the licensee's duty to ensure third-party payments are made. An affiliated broker must receive commission from their BIC; an unaffiliated broker may receive commission directly from the escrow agent or closing attorney.

• ✓May not force an attorney/escrow agent to split or disburse a commission
• ✓It is the licensee's duty to ensure third-party payments are made
• ✓Affiliated brokers must receive commission from their broker-in-charge
• ✓Unaffiliated brokers may receive commission directly from the closing attorney

Each real estate firm must have a designated BIC for its principal office and a different BIC for each branch office. No broker may be BIC of more than one office at a time, and no office may have more than one BIC. A firm has no office anywhere without a BIC.

• ✓Each principal office and each branch office must have a different designated BIC
• ✓No broker may be BIC of more than one office at a time
• ✓No office may have more than one designated BIC
• ✓BIC is a status category, not a separate license

A sole proprietorship must designate a BIC if it: maintains a trust account for others' money, advertises/promotes broker services in any manner, or has other brokers affiliated. A firm need not have a BIC if organized solely to receive compensation through another firm/broker, is a tax pass-through, has no office, and has no one associated other than its qualifying broker.

• ✓Sole proprietor needs BIC if handling trust money, advertising services, or having affiliated brokers
• ✓Advertising/promoting broker services (ads, business cards, soliciting, listings) triggers BIC requirement
• ✓Holding own residential tenant security deposits alone does not trigger BIC requirement
• ✓Pass-through firms with no office and only the qualifying broker are exempt from BIC

To be BIC-eligible: active (non-provisional) license, 2 years full-time or 4 years part-time experience within 5 years (or qualifying NC attorney), and complete the 12-hour BIC Course within 120 days of designation. To maintain: renew license, keep active, complete the 4-hour BICUP plus a 4-hour elective each year. To regain lost status, reactivate the license first, then possess required experience and retake the 12-hour BIC Course.

• ✓BIC eligibility requires active non-provisional license and required experience
• ✓Must complete 12-hour BIC Course within 120 days of designation or lose eligibility
• ✓Must complete BICUP plus a 4-hour elective each year to maintain eligibility
• ✓Failure to complete BICUP and elective by June 10 causes loss of status the following July 1
• ✓Must retake the 12-hour BIC Course to regain lost status; no exceptions

The BIC is the primary person responsible for supervision and management of an office, including proper maintenance of trust accounts and records. A BIC must notify the Commission in writing within 10 days of ceasing to serve as BIC of an office. Nonresidents are subject to the same BIC requirements.

• ✓BIC is responsible for supervision, management, and trust account maintenance
• ✓Must notify Commission in writing within 10 days of ceasing to serve as BIC
• ✓Nonresident companies must have a BIC holding an active NC broker license

Every developer must designate by affidavit a natural person as timeshare registrar responsible for recording timeshare instruments and lien releases. No sales or offers may be made until a registrar is designated. The registrar must ensure Article compliance and may only record instruments as provided by the Article.

• ✓A natural person must be designated as timeshare registrar by affidavit
• ✓No sales or offers may occur before a registrar is designated
• ✓Registrar is responsible for recordation of instruments and lien releases

A registrar is guilty of a Class I felony for knowingly or recklessly failing to record a required timeshare instrument. A responsible general partner, officer, joint venturer, or sole proprietor is guilty of a Class I felony for intentionally allowing sales without first designating a registrar.

• ✓Knowing/reckless failure to record is a Class I felony
• ✓Intentionally allowing sales without a designated registrar is a Class I felony

The developer must designate a program broker for each timeshare program and sales location. The program broker acts as supervising broker and must directly, personally, and actively supervise all salespersons to ensure sales comply with the Chapter.

• ✓A program broker must be designated for each program and sales location
• ✓The program broker must directly, personally, and actively supervise salespersons

A broker must deliver an accurate, detailed closing statement at consummation showing all monies received and disbursed. The settlement agent (usually the closing attorney or a nonlawyer assistant) prepares it. A broker must confirm accuracy of entries about which they have direct knowledge (sale price, due diligence fee, earnest money, commission/split) and may assume third-party amounts are correct absent reason to suspect otherwise.

• ✓Broker must confirm accuracy of entries within direct knowledge
• ✓Broker may rely on but must review the settlement agent's statement
• ✓Broker must notify settlement agent and lender of any omitted expenses
• ✓In NC, closings are almost always conducted by an attorney

The TRID rule (effective October 3, 2015) replaced the HUD-1 and final Truth-in-Lending statement with two Closing Disclosure (CD) documents (one for borrower, one for seller). Closing Disclosures are disclosures only, not settlement statements. ALTA settlement statements may be used; HUD-1 may still be used in non-TRID transactions (cash, construction, investment).

• ✓TRID replaced HUD-1 and TIL with separate borrower and seller Closing Disclosures
• ✓Closing Disclosures are not equivalent to settlement statements
• ✓HUD-1 may still be used in non-TRID transactions such as cash or investment purchases

The Commission, Executive Director, or designated representative may issue subpoenas for witnesses and for records/documents concerning matters heard or investigated. The Commission is exempt from Chapter 53B requirements for subpoenas of a licensee's trust account records from financial institutions, but must send a copy to the licensee by regular mail.

• ✓The Commission may subpoena witnesses and records relevant to investigations or hearings
• ✓The Commission is exempt from Chapter 53B when subpoenaing a licensee's trust account records
• ✓A copy of the trust account subpoena must be sent to the licensee by regular mail

Chapter 47E requires most residential property owners to complete a disclosure form for buyers (answers: yes, no, or no representation). Failure to provide it allows the buyer to cancel in writing within three calendar days of contract acceptance. Sellers must also provide a Mineral and Oil and Gas (MOGS) disclosure before an offer. Licensees assist but must not complete the form or advise on representations.

• ✓Most residential owners must provide the disclosure form to buyers
• ✓Failure to provide allows buyer to cancel in writing within three calendar days of acceptance
• ✓MOGS disclosure is a separate required form given before an offer
• ✓Licensee must disclose all material facts regardless of the seller's representation
• ✓Licensees assist with but do not complete the form for the seller

Rule A.0111 prohibits drafting legal instruments but allows filling in blanks on preprinted forms. Rule A.0112 specifies minimum terms for preprinted offer/sales contract forms. Rule A.0113 requires reporting criminal convictions (felony/misdemeanor including DWI), court-martial, notarial sanctions, or professional license discipline within 60 days.

• ✓May fill in blanks on preprinted forms but not draft legal instruments [A.0111]
• ✓Preprinted offer/contract forms must contain specified minimum terms [A.0112]
• ✓Must report convictions and license discipline within 60 days [A.0113]
• ✓DWI is a misdemeanor and must be reported
• ✓Reporting duty is ongoing

Trust money is money belonging to others received by a broker acting as an agent, or held as temporary custodian of others' funds. Common examples: earnest money deposits, down payments, tenant security deposits, rents, HOA dues/assessments, and final settlement money. For short-term rentals it also includes advance reservation deposits and sales taxes on gross receipts.

• ✓Trust money is money belonging to others held by a broker
• ✓Includes earnest money, down payments, security deposits, rents, HOA dues, settlement money
• ✓Short-term rentals include advance reservation deposits and sales taxes

A trust/escrow account must contain only others' money (separate), be custodial (only broker/designee has disbursement control), and be available on demand. It must be a demand deposit account in a federally insured institution lawfully doing business in NC that agrees to make records available to the Commission. The bank may be outside NC if these conditions are met.

• ✓Account must be separate, custodial, and available on demand
• ✓Must be a demand deposit account in a federally insured institution
• ✓Institution must agree to make records available to the Commission
• ✓May be located outside NC if all conditions are met

The BIC must ensure the bank designates the account and that 'trust account' or 'escrow account' appears on signature cards, statements, deposit tickets, and checks. Proper designation protects funds from being frozen/attached and provides FDIC insurance up to $250,000 per individual for whom funds are held. Failure to designate may allow attachment or deny FDIC coverage.

• ✓Words 'trust account'/'escrow account' must appear on all account documents
• ✓Proper designation protects funds from freezing/attachment
• ✓FDIC insures up to $250,000 per individual owner of funds
• ✓Failure to designate may result in attachment or denied FDIC coverage

G.S. 93A-6(a)(12) prohibits commingling a broker's own money/property with others'. A broker may not keep others' funds in a personal/business account, nor deposit personal funds into the trust account (except allowed bank charge amounts). A broker with an ownership interest in property may not deposit funds related to that property into the brokerage trust account.

• ✓May not commingle personal/business funds with others' funds
• ✓May not deposit personal funds into trust account except for bank charges
• ✓Broker-owned property funds may not go into the brokerage trust account

Rule A.0117 requires complete records of deposits, maintenance, and withdrawal of others' money; the Commission may inspect without prior notice. Rule A.0110(g)(4) makes the BIC responsible for proper maintenance of trust accounts and records. A BIC may delegate recording/deposit to clerical staff but remains responsible; access should be limited and controlled.

• ✓Broker must keep complete trust account records
• ✓Commission may inspect trust records without prior notice
• ✓BIC is responsible for proper maintenance of trust accounts
• ✓BIC remains responsible even when delegating to clerical staff

Rule A.0116(e) permits a BIC to transfer earnest money to the closing attorney/settlement agent not more than 10 days before the anticipated settlement date. Earnest money may not be disbursed before settlement for any other purpose without written consent of the parties (e.g., cannot pay for inspections without written consent).

• ✓Earnest money may be transferred to closing attorney up to 10 days before settlement
• ✓No pre-settlement disbursement for other purposes without written consent of parties

General rule: all trust monies must be deposited within three banking days of receipt. Exception: earnest money with offers and tenant security deposits with leases must be deposited within three banking days of acceptance of the offer/lease - unless tendered in cash, which must be deposited within three banking days of receipt even without acceptance.

• ✓General rule: deposit trust money within three banking days of receipt
• ✓Earnest money/security deposits: deposit within three banking days of acceptance
• ✓Cash deposits must be deposited within three banking days of receipt regardless of acceptance
• ✓A broker may choose to deposit checks immediately unless instructed otherwise

A broker must open/maintain a trust account when the broker or an affiliated licensee takes possession of trust money. Inactive brokers or those not handling others' funds need none. Generally only one trust account is required; HOA/POA funds require a separate account for each association. A broker leasing own residential property may need an account under G.S. 42-50.

• ✓Account required when broker or affiliate takes possession of trust money
• ✓Only one account generally required for a broker holding trust money
• ✓A separate account is required for each HOA/POA managed
• ✓Owners leasing own residential property may need an account under G.S. 42-50

Brokers should have the bank bill them or charge personal/operating accounts. If not possible, a broker may deposit up to $100 of personal funds (or other required amount) to cover (not avoid) charges - e.g., $200 if charges are $100 monthly. These personal funds must be recorded via a personal funds ledger. This is permissible commingling to avoid using others' money for bank charges.

• ✓Up to $100 of personal funds may be kept to cover bank charges
• ✓Personal funds must be identified in a personal funds ledger
• ✓This is permissible commingling to avoid using others' money for charges

A broker may deposit trust money into an interest-bearing account only after obtaining written authorization from all parties with interest in the funds, specifying how and to whom interest is paid. If in a transaction instrument, the authorization must be conspicuous. Trust accounts must remain demand accounts - no investment in securities, bonds, or fixed-term CDs.

• ✓Requires written authorization from all interested parties
• ✓Authorization must specify how and to whom interest is paid
• ✓Trust accounts must remain demand accounts - no bonds/CDs/securities

Rule A.0116(d): In a dispute over return/forfeiture of any deposit (other than a residential tenant security deposit), the broker must retain the deposit in trust until a written release from the parties is obtained or a court orders disbursement. G.S. 93A-12 provides procedures for depositing disputed funds with the Clerk of Court.

• ✓Retain disputed deposits in trust until written release or court order
• ✓Applies to deposits other than residential tenant security deposits
• ✓G.S. 93A-12 allows depositing disputed funds with the Clerk of Court

A provisional broker must deliver all trust money immediately to their broker-in-charge and may not retain it longer than absolutely necessary. Trust money received by a nonresident limited commercial broker must be delivered immediately to the affiliated resident NC broker. BICs should have written procedures for handling trust money.

• ✓Provisional brokers must deliver trust money immediately to their BIC
• ✓Provisional brokers may not hold trust money longer than necessary
• ✓Nonresident limited commercial brokers deliver funds to the affiliated NC broker

Rule A.0116(b)(4) allows a broker to accept custody of a check/negotiable instrument made payable to the seller for an option or due diligence fee, but only to deliver it to the seller. While in custody, the broker must, per the buyer's instructions, either deliver it to the seller or return it to the buyer, and must safeguard the instrument.

• ✓Broker may hold a check payable to the seller only to deliver it to the seller
• ✓Must follow buyer's instructions to deliver or return the instrument
• ✓Broker is responsible for safe delivery of the instrument

Any person violating G.S. 93A-1 (acting as a broker without a license) is guilty of a Class 1 misdemeanor upon conviction.

• ✓Violation of G.S. 93A-1 is a Class 1 misdemeanor
• ✓Unlicensed real estate brokerage is a criminal offense

For one year following execution of an instrument of indebtedness, the owner may assert against the developer, assignee, or holder any claims/defenses available against the developer, and this right cannot be waived. Recovery against an assignee/holder cannot exceed the amount paid by the developer under the instrument.

• ✓Claims/defenses may be asserted for one year and cannot be waived
• ✓Recovery against an assignee/holder is capped at the amount paid by the developer
• ✓A required conspicuous NOTICE must appear in every instrument of indebtedness

The Commission may issue a limited broker's license to a person/entity from another state, regardless of reciprocity, if they are of good moral character and licensed in good standing elsewhere, only engage in commercial real estate transactions while affiliated with a resident NC broker, and comply with NC law. The resident NC broker must actively supervise. The fee may not exceed $300.

• ✓A limited broker license is available only for commercial real estate transactions
• ✓The licensee must be affiliated with and actively supervised by a resident NC broker
• ✓The licensee cannot be affiliated with a resident NC provisional broker
• ✓The limited license fee may not exceed $300

Each timeshare program must have a managing entity (developer, third-party firm, or owners' association). The managing entity may not furnish an owner's contact information without written approval, must maintain and quarterly update an owners' list, and may not publish the list except to the Commission. It must, however, perform requested owner mailings to advance legitimate business within 30 days upon advance reimbursement.

• ✓A managing entity must be designated for each timeshare program
• ✓Owner contact information may not be disclosed without the owner's written approval
• ✓Owners' list must be updated at least quarterly and not published except to the Commission
• ✓Legitimate-business mailings must occur within 30 days after an owner's request with advance reimbursement

The managing entity must make books/records reasonably available for inspection, may charge reasonable copying fees, and must maintain records per generally accepted accounting practices. It may require a confidentiality agreement. Notices may be delivered by email only if the owner first consents electronically, and consent is effective until revoked.

• ✓Books and records must be reasonably available for owner inspection
• ✓Records must be maintained per generally accepted accounting practices
• ✓Email notice requires prior electronic consent, effective until revoked

Officers, directors, and agents must discharge duties in good faith with ordinary prudence and are exempt from monetary liability unless conduct involves criminal violation, improper personal benefit, recklessness, or bad faith. During a declared state of emergency, the managing entity may exercise broad emergency powers (special assessments without a vote, borrowing, closing/evacuating property, modifying reservations, tolling liens), limited to time reasonably necessary, giving greater weight to health and safety.

• ✓Officers/directors act in good faith with the care of an ordinarily prudent person
• ✓Liability exemption is lost for criminal violation, improper benefit, recklessness, or bad faith
• ✓Emergency powers include levying special assessments without an owner vote
• ✓Emergency powers are limited to the time reasonably necessary to protect health/safety

If a developer or managing entity has substantially complied with the Article, nonmaterial errors or omissions cannot be the basis for purchaser claims/defenses; however, the developer/managing entity bears the burden of proof.

• ✓Nonmaterial errors are not a basis for claims if substantial compliance is shown
• ✓The developer or managing entity bears the burden of proof

A broker must deliver a detailed, accurate closing statement showing all monies about which the broker knows or should know. A broker may rely on a statement prepared by an attorney/settlement agent but must review it for accuracy and notify parties of errors. TRID replaced the HUD-1 with Closing Disclosures for TRID-governed loans; HUD-1 or ALTA statements may be used in non-TRID transactions.

• ✓Broker must deliver an accurate closing statement of all monies known or reasonably known
• ✓Broker may rely on an attorney-prepared statement but must review for accuracy
• ✓Broker must confirm accuracy of all entries within direct knowledge
• ✓Broker must notify settlement agent and lender of omitted expenses
• ✓TRID (effective Oct 3, 2015) replaced HUD-1/TILA with Closing Disclosures

Trust money is money belonging to others received by a broker acting as agent, or money held as temporary custodian. Common examples include earnest money deposits, down payments, tenant security deposits, rents, HOA dues/assessments, and final settlement proceeds. For short-term rentals it also includes advance reservation deposits and sales taxes on gross receipts.

• ✓Trust money is money belonging to others received by a broker as agent
• ✓Examples: earnest money, down payments, security deposits, rents, HOA dues, settlement proceeds
• ✓Short-term rentals include advance reservation deposits and sales taxes
• ✓Must be held in trust even when only collateral to the agent's role

A trust/escrow account is a bank account holding only trust money; it must be separate, custodial, and available on demand. It must be a demand deposit account in a federally insured institution lawfully doing business in NC that allows Commission inspection. Must be properly designated 'trust' or 'escrow' to protect funds and preserve FDIC coverage. FDIC insures up to $250,000 per individual owner.

• ✓Trust account must be separate, custodial, and available on demand
• ✓Must be a demand deposit account in a federally insured institution allowing Commission inspection
• ✓Words 'trust account' or 'escrow account' must appear on cards, statements, checks
• ✓FDIC insures up to $250,000 per individual for whom funds are held
• ✓Bank may be located outside NC for most trust money

A broker must open a trust account when the broker or affiliated licensee takes possession of trust money. Inactive brokers or those not handling others' funds need not maintain one. Generally only one trust account is required, but brokers managing HOA funds must maintain a separate trust account for each association.

• ✓A trust account is required when a broker/affiliate takes possession of trust money
• ✓Inactive brokers or those not handling others' funds need no trust account
• ✓Generally only one trust account is required
• ✓HOA/POA managers must maintain a separate trust account for each association
• ✓HOA managers must provide written statements at least quarterly

A broker may not commingle personal/business funds with others' funds. A broker with an ownership interest may not deposit related monies in the brokerage trust account. Exception: a broker may deposit up to $100 of personal funds (or the amount needed) to cover, not avoid, bank service charges, and must record them via a personal funds ledger.

• ✓A broker may not commingle personal or business funds with others' funds
• ✓A broker with ownership interest may not deposit related monies in the brokerage trust account
• ✓May deposit up to $100 personal funds to cover (not avoid) bank service charges
• ✓Personal funds for charges must be recorded via a personal funds ledger

Trust monies must be deposited within three banking days of receipt. Exception: earnest money with offers and tenant security deposits must be deposited within three banking days following acceptance, unless tendered in cash, in which case within three banking days of receipt regardless of acceptance. Provisional brokers must immediately deliver trust money to their BIC.

• ✓General rule: deposit trust monies within three banking days of receipt
• ✓Earnest money and security deposits: within three banking days following acceptance
• ✓Cash must be deposited within three banking days of receipt regardless of acceptance
• ✓Provisional brokers must immediately deliver trust money to their BIC
• ✓Nonresident limited commercial brokers deliver trust money to the resident NC broker

A BIC may transfer earnest money to the settlement agent no more than 10 days before settlement; otherwise, disbursement before settlement requires written party consent. Disputed non-security-deposit funds must be retained until written release or court order. Option/due diligence checks payable to the seller are held (not deposited) and delivered to the seller; cash must be deposited in trust.

• ✓Earnest money may be transferred to settlement agent no more than 10 days before settlement
• ✓Disbursement before settlement requires written consent of the parties
• ✓Disputed funds retained until written release or court order [A.0116(d)]
• ✓Option/due diligence checks payable to seller are held, not deposited
• ✓Broker may not retain such instruments more than three business days after contract acceptance
• ✓Cash for option/due diligence must be deposited in trust within three banking days

Every licensee must safeguard the money/property of others per the License Law and rules. A broker may not convert others' money to their own use, apply it to another purpose, or assist another in conversion or misapplication.

• ✓Every licensee must safeguard money/property of others [A.0116(g)]
• ✓May not convert others' money to own use
• ✓May not apply money to a purpose other than intended
• ✓May not assist others in conversion or misapplication

A broker may use an interest-bearing trust account only with prior written authorization from all parties specifying how and to whom interest is paid. All trust accounts must be demand accounts, so investing trust money in securities, government bonds, or fixed-term CDs is prohibited.

• ✓Interest-bearing trust account requires prior written authorization from all parties
• ✓Authorization must specify how and to whom interest is paid
• ✓Trust accounts must be demand accounts
• ✓Investing trust money in securities, bonds, or fixed-term CDs is prohibited

The BIC is responsible for proper maintenance of trust accounts and records. A BIC may delegate recording/depositing to clerical staff but remains responsible for care and custody of funds. Access to trust money must be limited and carefully controlled. The Commission may inspect trust records without prior notice.

• ✓The BIC is responsible for proper maintenance of trust accounts and records
• ✓BIC remains responsible even if a clerical employee handles the records
• ✓Access to trust money must be limited and carefully controlled
• ✓Commission may inspect trust account records without prior notice