(a) Each licensed broker shall keep and maintain for a period of three years, paper and/or electronic records of each transaction effected through his or her office concerning the sale [or mortgage] of one- to four-family dwellings. In some transactions, the broker may not be provided a copy of the document required. In such instances, the broker will not be found to have violated this regulation if said document is not kept and maintained. Records to be kept and maintained shall contain:

(1) the names and addresses of the seller[,] and the buyer, [mortgagee, if any,] (2) the broker prepared purchase contract or binder, or if the purchase contract is not prepared by the broker, then the purchase price [and resale price, if any,] and the amount of deposit (if collected by broker) [paid on contract], (3) the amount of commission paid to broker, (4) [or g]the gross profit realized by the broker if purchased by him or her for resale, [expenses of procuring the mortgage loan, if any, the net commission or net profit realized by the broker showing the disposition of all payments made by the broker. In lieu thereof each broker shall keep and maintain, in connection with each such transaction a copy of (1) contract of sale, (2) commission agreement, (3) closing statement, (4) statement showing disposition of proceeds of mortgage loan.] (5) any document required under Article 12-A of the Real Property Law and (6) the listing agreement or commission agreement or buyer-broker agreement.

[(b) Each licensed broker engaged in the business of soliciting and granting mortgage loans to purchasers of one to four family dwellings shall keep and maintain for a period of three years, a record of the name of the applicant, the amount of the mortgage loan, the closing statement with the disposition of the mortgage proceeds, a copy of the verification of employment and financial status of the applicant, a copy of the inspection and compliance report with the Baker Law requirements of FHA with the name of the inspector. Such records shall be available to the Department of State at all times upon request.]

1. Statutory authority:

RPL § 442-k(1) authorizes the New York State Department of State to promulgate regulations regarding records of transactions to be maintained by real estate brokers. To fulfill this purpose, the Department of State has issued rules and regulations which are found at Part 175 of Title 19 NYCRR and is proposing this rule.

2. Legislative objectives:

Article 12-A of the Real Property Law protects consumers by ensuring competency of real estate brokers and salespeople. In addition to the licensing requirement imposed by Article 12-A of the Real Property Law, the statute imposes professional education, examination and other requirements. 19 NYCRR 175.23 was adopted pursuant to Real Property Law section 442-k(1) which authorizes the Department of State to promulgate regulations regarding records of transactions to be maintained by real estate brokers. This regulation furthers the legislative objective of consumer protection by ensuring the real estate brokers retain necessary transaction records.

3. Needs and benefits:

19 NYCRR 175.23 currently requires real estate brokers to retain certain transaction records for a period of three years. The Department of State has received complaints from the industry that the regulation no longer accurately reflects transaction records which real estate brokers create, use or are given access. The Department of State has also received numerous inquiries regarding whether transaction records may be retained electronically. To provide necessary clarification and update 19 NYCRR 175.23 to better reflect transaction records which must be retained, the Department of State is proposing the instant rule.

The rule would permit real estate brokers to retain records electronically and create a “safe harbor” provision whereby real estate brokers would not be sanctioned by the Department of State for violating the regulation if they were not provided with a copy of the document as part of the transaction. Insofar as brokers who participate in residential mortgage transactions are also regulated by the Department of Financial Services and required by that agency to retain certain business records, the existing Department of State requirement is being eliminated. Finally, the rule is being amended to better reflect records commonly retained in real estate broker files.

4. Costs:

a. Costs to regulated parties:

Because real estate brokers are already required to retain certain transaction records for a period of three years, the Department of State does not anticipate that the proposed rule will impose any new costs upon real estate brokers.

b. Costs to the Department of State:

The Department of State does not anticipate any additional costs to implement the rule. Existing staff will handle answering questions about the new recordkeeping requirements and existing enforcement staff will investigate and enforce compliance with the proposed rule.

5. Local government mandates:

The rule does not impose any program, service, duty or responsibility upon any county, city, town, village, school district or other special district.

6. Paperwork:

19 NYCRR 175.23 currently requires real estate brokers to retain certain transaction records for a period of three years. The proposed rule will continue this requirement while making amendments to the existing regulation to better reflect transactions records which real estate brokers create, use and have access to and have the ability to retain.

7. Duplication:

This rule does not duplicate, overlap or conflict with any other state or federal requirement.

8. Alternatives:

In preparing this proposed rule making, the Department of State worked closely with the New York State Board of Real Estate to consider alternatives. The Department of State contemplated not proposing the instant rule making. It was determined, however, that the existing regulation no longer accurately reflects records which brokers create, use and have access to, and duplicate recordkeeping regulations of other state agencies. The Department of State also considered making the rule effective immediately upon adoption yet ultimately determined that a delayed effective date would provide adequate time to notify and educate licensees about the new requirements and afford the Department of State sufficient time to modify its existing procedures so as to implement and enforce the rule.

9. Federal standards:

There are no federal standards requiring real estate brokers to retain transaction records.

10. Compliance schedule:

The rule will be effective 90 days following publication of the Notice of Adoption in the State Register. adoption to afford sufficient time to notify and educate licensees on the new recordkeeping requirements.

1. Effect of rule:

The rule will apply to licensed real estate brokers. The Department of State (the “Department”) currently licenses 52,403 real estate brokers, many of whom operate small businesses.

The rule does not apply to local governments.

2. Compliance requirements:

19 NYCRR 175.23 currently requires real estate brokers to retain certain transaction records for a period of three years. The proposed rule making amends this regulation to better reflect transaction records which real estate brokers create, use and have access to and that should be retained as a record of the transaction.

3. Professional services:

Real estate brokers will not need to rely on professional services to comply with the requirements of the proposed rule. The records required to be retained by the rule are standard transaction records which real estate brokers use, create or are given access to as part of a real estate transaction.

4. Compliance costs:

Because real estate brokers are already required to retain certain transaction records for a period of three years, the Department of State does not anticipate that the proposed rule making will impose any new costs upon real estate brokers.

5. Economic and technological feasibility:

The Department has determined that it will be economically and technologically feasible for small businesses to comply with the proposed rule. 19 NYCRR 175.23 already imposes a record keeping requirement on real estate brokers. The proposed rule making amends the regulation to better reflect records which brokers create, use and have access to and should retain as a record of the transaction. As such, the requirements imposed by the proposed rule making will not significantly increase the costs of doing business.

It will also be technologically feasible for small businesses to comply with the proposed rule. Real estate brokers, including those working for small businesses, will not have to rely on special technology to conform their business practices with the requirements of the proposed rule.

6. Minimizing adverse economic impact:

The Department of State has not identified any adverse economic impact of this rule.

19 NYCRR 175.23 already imposes a record keeping requirement on real estate brokers. The proposed rule making amends the regulation to better reflect records which brokers create, use and have access to and should retain as a record of the transaction. As such, there should be no cost associated with retaining the records. The proposed rule making clarifies that records may also be retained in electronic form. As such, the storage costs associated with the record retention requirement should be minimal.

7. Small business participation:

Prior to proposing the rule, the Department of State published a copy of the proposed text on its website. No comments were received. The Department of State will continue its outreach after the rule is formally proposed as a Notice of Proposed Rule Making in the State Register. The publication of the rule in the State Register will provide additional notice to small businesses. Additional comments will be received and entertained by the Department during the formal public comment period indicated in this Notice of Proposed Rule Making.

8. Compliance:

The rule will be effective ninety (90) days following adoption.

9. Cure period:

The Department of State is not providing for a cure period prior to enforcement of these regulations. The proposed rule will be effective ninety (90) days following publication of the Notice of Adoption in the State Registeradoption. Prior to proposing this rule, the Department notified regulated parties about the new requirements. As such, licensees have been given adequate notice of the proposed regulation and sufficient time within which to amend their businesses practices so as to comply with the requirements of the proposed rule.

1. Effect of the rule:

The rule will apply to licensed real estate brokers. The Department of State currently licenses 52,403 real estate brokers, some of whom work in rural areas.

2. Compliance requirements:

19 NYCRR 175.23 currently requires real estate brokers to retain certain transaction records for a period of three years. The proposed rule making amends this regulation to better reflect transaction records real estate brokers create, use and have access to and that should be retained as a record of the transaction.

3. Professional services:

Real estate brokers will not need to rely on professional services to comply with the requirements of the proposed rule. The records required to be retained by the rule are standard transaction records which real estate brokers either create or are given access to as part of a real estate transaction.

4. Compliance costs:

Because real estate brokers are already required to retain certain transaction records for a period of three years, the Department of State does not anticipate that the proposed rule will impose any new costs upon real estate brokers.

5. Minimizing adverse economic impacts:

The Department of State has not identified any adverse economic impact of this rule.

19 NYCRR 175.23 already imposes a record keeping requirement on real estate brokers. The proposed rule making amends the regulation to better reflect records brokers create, use and have access to and that they should retain as a record of the transaction. As such, there should be no cost associated with retaining the records. The proposed rule making clarifies that records may also be retained in electronic form. As such, the storage costs associated with the record retention requirement should be minimal.

6. Rural area participation:

Prior to proposing the rule, the Department of State published a copy of the proposed text on its website. No comments were received. The Department of State will continue its outreach after the rule is formally proposed as a Notice of Proposed Rule Making in the State Register. The publication of the rule in the State Register will provide additional notice to appraisers located in rural areas. Additional comments will be received and entertained by the Department.

1. Impact of the rule:

The rule will impact real estate brokers.

The Department of State has not identified any adverse impact of this rule on jobs and employment opportunities. 19 NYCRR 175.23 currently requires real estate brokers to retain certain transaction records for a period of three years. The proposed rule making merely amends the regulation to better reflect records real estate brokers create, use and have access to and clarifies that transaction records may be retained electronically.

2. Categories and numbers affected:

The rule will apply to licensed real estate brokers. Currently, the Department of State (the “Department”) licenses 52,403 real estate brokers.

3. Regions of adverse impact:

The Department has not identified any region of the state where the rule would have a disproportionate adverse impact on jobs or employment opportunities. Real estate brokers work in all areas of the state. However, the compliance requirements imposed by the rule are minor and should not result in job loss or the inhibition of job creation in any region.

4. Minimizing adverse impact:

The Department has not identified any adverse impacts of this rule on employment or employment opportunities. The compliance requirements of the rule are minimal and should not result in a loss of jobs or impede the creation of new employment opportunities. The proposed rule making also clarifies that transaction records may be retained electronically, thereby potentially reducing expenses associated with storing transaction records.

So as to provide adequate time for licensees to bring themselves into compliance with the rule requirements, the Department of State will not make it effective until ninety days following publication of the Notice of Adoption in the State Register.