Rep. Norm Thurston — Voting Record

Bill

Number

S.B. 121 Second Substitute (2019GS)

Sponsor

Sen. Hemmert, D.

Final action

Governor Signed 3/29/2019

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• defines terms;
• enacts provisions that govern affiliated business arrangements involving a title entity;
• with certain exceptions, adopts the federal Real Estate Settlement Procedures Act as the state law governing affiliated business arrangements involving a title entity;
• provides that the Division of Real Estate shall enforce the provisions of the bill;
• requires a title entity to submit an annual report to the Division of Real Estate related to the title entity's affiliated business arrangements and capitalization during the previous calendar year;
• allows the Division of Real Estate to enforce certain provisions of the federal Real Estate Settlement Procedures Act against real estate licensees;
• repeals existing provisions governing controlled business relationships in the title industry; and
• makes technical changes.

Every vote on this bill

Bill text

CONTROLLED BUSINESS IN TITLE INSURANCE REPEAL
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Daniel Hemmert
House Sponsor: 
Mike Schultz
LONG TITLE
General Description:
This bill modifies provisions related to title insurance.
Highlighted Provisions:
This bill:
▸ defines terms;
▸ enacts provisions that govern affiliated business arrangements involving a title
entity;
▸ with certain exceptions, adopts the federal Real Estate Settlement Procedures Act as
the state law governing affiliated business arrangements involving a title entity;
▸ provides that the Division of Real Estate shall enforce the provisions of the bill;
▸ requires a title entity to submit an annual report to the Division of Real Estate
related to the title entity's affiliated business arrangements and capitalization during
the previous calendar year;
▸ allows the Division of Real Estate to enforce certain provisions of the federal Real
Estate Settlement Procedures Act against real estate licensees;
▸ repeals existing provisions governing controlled business relationships in the title
industry; and
▸ makes technical changes.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
31A-23a-504
, as last amended by Laws of Utah 2015, Chapter 330
61-2f-401
, as last amended by Laws of Utah 2018, Chapter 213
ENACTS:
31A-23a-1101
, Utah Code Annotated 1953
31A-23a-1102
, Utah Code Annotated 1953
31A-23a-1103
, Utah Code Annotated 1953
31A-23a-1104
, Utah Code Annotated 1953
31A-23a-1105
, Utah Code Annotated 1953
31A-23a-1106
, Utah Code Annotated 1953
31A-23a-1107
, Utah Code Annotated 1953
REPEALS:
31A-23a-503
, as last amended by Laws of Utah 2013, Chapter 319
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
31A-23a-504
 is amended to read:
31A-23a-504.
Sharing commissions.
(1) (a) Except as provided in Subsection 
31A-15-103
(3), a licensee under this chapter
or an insurer may only pay consideration or reimburse out-of-pocket expenses to a person if the
licensee knows that the person is licensed under this chapter as to the particular type of
insurance to act in Utah as:
(i) a producer;
(ii) a limited line producer;
(iii) a consultant;
(iv) a managing general agent; or
(v) a reinsurance intermediary.
(b) A person may only accept commission compensation or other compensation as a
person described in Subsections (1)(a)(i) through (v) that is directly or indirectly the result of
an insurance transaction if that person is licensed under this chapter to act as described in
Subsection (1)(a).
(2) (a) Except as provided in Section 
31A-23a-501
, a consultant may not pay or receive
a commission or other compensation that is directly or indirectly the result of an insurance
transaction.
(b) A consultant may share a consultant fee or other compensation received for
consulting services performed within Utah only:
(i) with another consultant licensed under this chapter; and
(ii) to the extent that the other consultant contributed to the services performed.
(3) This section does not prohibit:
(a) the payment of renewal commissions to former licensees under this chapter, former
Title 31, Chapter 17, or their successors in interest under a deferred compensation or agency
sales agreement;
(b) compensation paid to or received by a person for referral of a potential customer
that seeks to purchase or obtain an opinion or advice on an insurance product if:
(i) the person is not licensed to sell insurance;
(ii) the person does not sell or provide opinions or advice on the product; and
(iii) the compensation does not depend on whether the referral results in a purchase or
sale; or
(c) the payment or assignment of a commission, service fee, brokerage, or other
valuable consideration to an agency or a person who does not sell, solicit, or negotiate
insurance in this state, unless the payment would constitute an inducement or commission
rebate under Section 
31A-23a-402
 or 
31A-23a-402.5
.
(4) (a) In selling a policy of title insurance, sharing of commissions under Subsection
(1) may not occur if it will result in:
(i) an unlawful rebate; 
or
[
(ii) compensation in connection with controlled business; or
]
[
(iii)
] 
(ii)
 payment of a forwarding fee or finder's fee.
(b) A person may share compensation for the issuance of a title insurance policy only
to the extent that the person contributed to the examination of the title or other services
connected with the title insurance policy.
(5) This section does not apply to:
(a) a bail bond producer or bail enforcement agent as defined in Section 
31A-35-102
and as described in Subsection 
31A-23a-106
(2)(c);
(b) a travel retailer registered pursuant to Part 9, Travel Insurance Act; or
(c) a nonlicensed individual employee or authorized representative of a licensed
limited line producer who holds one or more of the following limited lines of authority as
described in Subsection 
31A-23a-106
(2)(c):
(i) car rental related insurance;
(ii) self-service storage insurance;
(iii) portable electronics insurance; or
(iv) travel insurance.
Section 2. Section 
31A-23a-1101
 is enacted to read:
Part 10. Affiliated Business in Title Insurance
 31A-23a-1101.
Definitions.
As used in this part:
(1) "Affiliated business" means the gross transaction revenue of a title entity's title
insurance business in the state that is the result of an affiliated business arrangement.
(2) "Affiliated business arrangement" means the same as that term is defined in 12
U.S.C. Sec. 2602, except the services that are the subject of the arrangement do not need to
involve a federally related mortgage loan.
(3) "Applicable percentage" means:
(a) on February 1, 2020, through January 31, 2021, 0.5%;
(b) on February 1, 2021, through January 31, 2022, 1%;
(c) on February 1, 2022, through January 31, 2023, 1.5%;
(d) on February 1, 2023, through January 31, 2024, 2%;
(e) on February 1, 2024, through January 31, 2025, 2.5%;
(f) on February 1, 2025, through January 31, 2026, 3%;
(g) on February 1, 2026, through January 31, 2027, 3.5%;
(h) on February 1, 2027, through January 31, 2028, 4%; and
(i) on February 1, 2028, through January 31, 2029, 4.5%.
(4) "Associate" means the same as that term is defined in 12 U.S.C. Sec. 2602.
(5) "Division" means the Division of Real Estate created in Section 
61-2-201
.
(6) "Essential function" means:
(a) examining and evaluating, based on relevant law and title insurance underwriting
principles and guidelines, title evidence to determine the insurability of a title and which items
to include or exclude in a title commitment or title insurance policy to be issued;
(b) preparing and issuing a title commitment or other document that:
(i) discloses the status of the title as the title is proposed to be insured;
(ii) identifies the conditions that must be met before a title insurance policy will be
issued; and
(iii) obligates the insurer to issue a title insurance policy if the conditions described in
Subsection (6)(b)(ii) are met;
(c) clearing underwriting objections and taking the necessary steps to satisfy any
conditions to the issuance of a title insurance policy;
(d) preparing the issuance of a title insurance policy; or
(e) handling the closing or settlement of a real estate transaction when:
(i) it is customary for a title entity to handle the closing or settlement; and
(ii) the title entity's compensation for handling the closing or settlement is customarily
part of the payment or retention from the insurer.
(7) "New or newly affiliated title entity" means a title entity that:
(a) is licensed as a title entity for the first time on or after May 14, 2019; or
(b) (i) is licensed as a title entity before May 14, 2019; and
(ii) enters into an affiliated business arrangement for the first time on or after May 14,
2019.
(8) "Ownership affiliated business arrangement" means an affiliated business
arrangement based on a person or a person's affiliate having a direct or beneficial ownership
interest of more than 1% in a title entity.
(9) "RESPA" means the federal Real Estate Settlement Procedures Act, 12 U.S.C. Sec.
et seq. and any rules made thereunder.
(10) "Section 8 of RESPA" means 12 U.S.C. Sec. 2607 and any rules promulgated
thereunder.
(11) "Sufficient capital and net worth" means:
(a) for a new or newly affiliated title entity:
(i) $100,000 for the first five years after becoming a new or newly affiliated title entity;
or
(ii) after the first five years after becoming a new or newly affiliated title entity, the
greater of:
(A) $50,000; or
(B) on February 1 of each year, an amount equal to 5% of the title entity's average
annual gross revenue over the preceding two calendar years, up to $150,000; or
(b) for a title entity licensed before May 14, 2019, who is not a new or newly affiliated
title entity:
(i) for the time period beginning on February 1, 2020, and ending on January 31, 2029,
the lesser of:
(A) an amount equal to the applicable percentage of the title entity's average annual
gross revenue over the two calendar years immediately preceding the February 1 on which the
applicable percentage first applies; or
(B) $150,000; and
(ii) beginning on February 1, 2029, the greater of:
(A) $50,000; or
(B) an amount equal to 5% of the title entity's average annual gross revenue over the
preceding two calendar years, up to $150,000.
(12) "Title entity" means:
(a) a title licensee as defined in Section 
31A-2-402
; or
(b) a title insurer as defined in Section 
31A-23a-415
.
(13) (a) "Title evidence" means a written or electronic document that identifies and
describes or compiles the documents, records, judgments, liens, and other information from the
public records relevant to the history and current condition of a title to be insured.
(b) "Title evidence" does not include a pro forma commitment.
Section 3. Section 
31A-23a-1102
 is enacted to read:
 31A-23a-1102.
Regulation of affiliated business -- Applicable law.
(1) Except as provided in this part, for purposes of state law, Section 8 of RESPA
governs an affiliated business arrangement involving a title entity.
(2) The division shall enforce the provisions of this part, including Section 8 of
RESPA.
(3) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
division may make rules necessary to implement the provisions of this part.
Section 4. Section 
31A-23a-1103
 is enacted to read:
 31A-23a-1103.
Affiliated business arrangements.
(1) An affiliated business arrangement between a person and a title entity violates
Section 8 of RESPA for purposes of state law if:
(a) the title entity does not have sufficient capital and net worth in a reserve account in
the title entity's name; or
(b) more than 70% of the title entity's annual title insurance business is affiliated
business on or after the later of:
(i) two years after a title entity begins an affiliated business arrangement; or
(ii) June 1, 2021.
(2) In addition to Subsection (1), the division may find that an affiliated business
arrangement between a person and a title entity violates Section 8 of RESPA after evaluating
and weighing the following factors in light of the specific facts before the division:
(a) whether the title entity:
(i) is staffed with its own employees to conduct title insurance business;
(ii) manages its own business affairs;
(iii) has a physical office for business that is separate from any associate's office and
pays market rent;
(iv) provides the essential functions of title insurance business for a fee, including
incurring the risks and receiving the rewards of any comparable title entity; and
(v) performs the essential functions of title insurance business itself;
(b) if the title entity contracts with another person to perform a portion of the title
entity's title insurance business, whether the contract:
(i) is with an independent third party; and
(ii) provides payment for the services that bears a reasonable relationship to the value
of the services or goods received; and
(c) whether the person from whom the title entity receives referrals under the affiliated
business arrangement also sends title insurance business to other title entities.
Section 5. Section 
31A-23a-1104
 is enacted to read:
 31A-23a-1104.
Annual affiliated business report.
Before March 1 each year, each title entity shall submit a report to the division that:
(1) contains the following for the preceding calendar year:
(a) the name and address of any associate that owns a financial interest in the title
entity;
(b) for each associate identified under Subsection (1)(a), the percentage of the title
entity's affiliated business that is the result of an affiliated business arrangement with the
associate;
(c) a description of any affiliated business arrangement the title entity has with a person
other than an associate identified under Subsection (1)(a);
(d) the percentage of the title entity's annual title insurance business that is affiliated
business;
(e) proof of sufficient capital and net worth; and
(f) any other information required by the division by rule;
(2) is certified by an officer of the title entity that the information contained in the
report is true to the best of the officer's knowledge, information, and belief.
Section 6. Section 
31A-23a-1105
 is enacted to read:
 31A-23a-1105.
Investigations.
(1) To enforce the provisions of this part, including Section 8 of RESPA, the division
may conduct a public or private investigation within or outside of the state as the division
considers necessary to determine whether a person has violated a provision of this part,
including Section 8 of RESPA.
(2) For the purpose of an investigation described in Subsection (1), the division may:
(a) administer an oath or affirmation;
(b) issue a subpoena that requires:
(i) the attendance and testimony of a witness; or
(ii) the production of evidence;
(c) take evidence;
(d) require the production of a book, paper, contract, record, other document, or
information relevant to the investigation; and
(e) serve a subpoena by certified mail.
(3) (a) A court of competent jurisdiction shall enforce, according to the practice and
procedure of the court, a subpoena issued by the division.
(b) The division shall pay any witness fee, travel expense, mileage, or any other fee
required by the service statutes of the state where the witness or evidence is located.
Section 7. Section 
31A-23a-1106
 is enacted to read:
 31A-23a-1106.
Disciplinary action.
(1) Subject to the requirements of Section 
31A-23a-1107
, the division may impose a
sanction described in Subsection (2) against a person if the person is:
(a) a title entity or a person previously licensed as a title entity for an act the person
committed while licensed; and
(b) violates a provision of this part, including Section 8 of RESPA.
(2) The division may, against a person described in Subsection (1):
(a) impose an educational requirement;
(b) impose a civil penalty in an amount not to exceed $5,000 for each violation;
(c) do any of the following to a title entity:
(i) suspend;
(ii) revoke; or
(iii) place on probation;
(d) issue a cease and desist order; and
(e) impose any combination of sanctions described in this Subsection (2).
(3) (a) If the presiding officer in a disciplinary action under this part issues an order
that orders a fine as part of a disciplinary action against a person, including a stipulation and
order, the presiding officer shall state in the order the deadline, that is no more than one year
after the day on which the presiding officer issues the order, by which the person shall comply
with the fine.
(b) If a person fails to comply with a stated deadline:
(i) the person's license is automatically suspended:
(A) beginning the day specified in the order as the deadline for compliance; and
(B) ending the day on which the person complies in full with the order; and
(ii) if the person fails to pay a fine required by an order, the division may begin a
collection process:
(A) established by the division by rule made in accordance with Title 63G, Chapter 3,
Utah Administrative Rulemaking Act; and
(B) subject to Title 63A, Chapter 3, Part 5, Office of State Debt Collection.
(4) The division may delegate to an administrative law judge the authority to conduct a
hearing under this part.
Section 8. Section 
31A-23a-1107
 is enacted to read:
 31A-23a-1107.
Adjudicative proceedings -- Review -- Coordination with
department.
(1) (a) Before an action described in Section 
31A-23a-1106
 may be taken, the division
shall:
(i) give notice to the person against whom the action is brought; and
(ii) commence an adjudicative proceeding.
(b) If after the adjudicative proceeding is commenced under Subsection (1)(a) the
presiding officer determines that a title entity has violated a provision of this part, including
Section 8 of RESPA, the division may take an action described in Section 
31A-23a-1106
 by
written order.
(2) In accordance with Title 63G, Chapter 4, Administrative Procedures Act, a person
against whom action is taken under this part may seek review of the action by the executive
director of the Department of Commerce.
(3) If a person prevails in a judicial appeal and the court finds that the state action was
undertaken without substantial justification, the court may award reasonable litigation expenses
to that individual or entity as provided under Title 78B, Chapter 8, Part 5, Small Business
Equal Access to Justice Act.
(4) (a) An order issued under this section takes effect 30 days after the service of the
order unless otherwise provided in the order.
(b) If a person appeals an order issued under this section, the division may stay
enforcement of the order in accordance with Section 
63G-4-405
.
(5) (a) Except as provided in Subsection (5)(b), the division shall commence a
disciplinary action under this chapter no later than the earlier of the following:
(i) four years after the day on which the violation is reported to the division; or
(ii) 10 years after the day on which the violation occurred.
(b) The division may commence a disciplinary action under this part after the time
period described in Subsection (5)(a) expires if:
(i) (A) the disciplinary action is in response to a civil or criminal judgment or
settlement; and
(B) the division initiates the disciplinary action no later than one year after the day on
which the judgment is issued or the settlement is final; or
(ii) the division and the person subject to a disciplinary action enter into a written
stipulation to extend the time period described in Subsection (5)(a).
(6) (a) Within two business days after the day on which a presiding officer issues an
order under this part that suspends or revokes a title entity's license, the division shall deliver
written notice to the department that states the action the presiding officer ordered against the
title entity's license.
(b) Upon receipt of the notice described in Subsection (6)(a), the department shall
implement the action ordered against the title entity's license.
(7) Upon receipt of a notice described in Subsection (6), the department shall take the
action described in the notice upon the title entity's license.
Section 9. Section 
61-2f-401
 is amended to read:
61-2f-401.
Grounds for disciplinary action.
The following acts are unlawful for a person licensed or required to be licensed under
this chapter:
(1) (a) making a substantial misrepresentation, including in a licensure statement;
(b) making an intentional misrepresentation;
(c) pursuing a continued and flagrant course of misrepresentation;
(d) making a false representation or promise through an agent, sales agent, advertising,
or otherwise; or
(e) making a false representation or promise of a character likely to influence,
persuade, or induce;
(2) acting for more than one party in a transaction without the informed consent of the
parties;
(3) (a) acting as an associate broker or sales agent while not affiliated with a principal
broker;
(b) representing or attempting to represent a principal broker other than the principal
broker with whom the person is affiliated; or
(c) representing as sales agent or having a contractual relationship similar to that of
sales agent with a person other than a principal broker;
(4) (a) failing, within a reasonable time, to account for or to remit money that belongs
to another and comes into the person's possession;
(b) commingling money described in Subsection (4)(a) with the person's own money;
or
(c) diverting money described in Subsection (4)(a) from the purpose for which the
money is received;
(5) paying or offering to pay valuable consideration, as defined by the commission, to a
person not licensed under this chapter, except that valuable consideration may be shared:
(a) with a principal broker of another jurisdiction; or
(b) as provided under:
(i) Title 16, Chapter 10a, Utah Revised Business Corporation Act;
(ii) Title 16, Chapter 11, Professional Corporation Act; or
(iii) Title 48, Chapter 3a, Utah Revised Uniform Limited Liability Company Act, as
appropriate pursuant to Section 
48-3a-1405
;
(6) for a principal broker, paying or offering to pay a sales agent or associate broker
who is not affiliated with the principal broker at the time the sales agent or associate broker
earned the compensation;
(7) being incompetent to act as a principal broker, associate broker, or sales agent in
such manner as to safeguard the interests of the public;
(8) failing to voluntarily furnish a copy of a document to the parties before and after the
execution of a document;
(9) failing to keep and make available for inspection by the division a record of each
transaction, including:
(a) the names of buyers and sellers or lessees and lessors;
(b) the identification of real estate;
(c) the sale or rental price;
(d) money received in trust;
(e) agreements or instructions from buyers and sellers or lessees and lessors; and
(f) any other information required by rule;
(10) failing to disclose, in writing, in the purchase, sale, or rental of real estate, whether
the purchase, sale, or rental is made for that person or for an undisclosed principal;
(11) being convicted, within five years of the most recent application for licensure, of a
criminal offense involving moral turpitude regardless of whether:
(a) the criminal offense is related to real estate; or
(b) the conviction is based upon a plea of nolo contendere;
(12) having, within five years of the most recent application for a license under this
chapter, entered any of the following related to a criminal offense involving moral turpitude:
(a) a plea in abeyance agreement;
(b) a diversion agreement;
(c) a withheld judgment; or
(d) an agreement in which a charge was held in suspense during a period of time when
the licensee was on probation or was obligated to comply with conditions outlined by a court;
(13) advertising the availability of real estate or the services of a licensee in a false,
misleading, or deceptive manner;
(14) in the case of a principal broker or a branch broker, failing to exercise reasonable
supervision over the activities of the principal broker's or branch broker's licensed or
unlicensed staff;
(15) violating or disregarding:
(a) this chapter;
(b) an order of the commission; or
(c) the rules adopted by the commission and the division;
(16) breaching a fiduciary duty owed by a licensee to the licensee's principal in a real
estate transaction;
(17) any other conduct which constitutes dishonest dealing;
(18) unprofessional conduct as defined by statute or rule;
(19) having one of the following suspended, revoked, surrendered, or cancelled on the
basis of misconduct in a professional capacity that relates to character, honesty, integrity, or
truthfulness:
(a) a real estate license, registration, or certificate issued by another jurisdiction; or
(b) another license, registration, or certificate to engage in an occupation or profession
issued by this state or another jurisdiction;
(20) failing to respond to a request by the division in an investigation authorized under
this chapter within 10 days after the day on which the request is served, including:
(a) failing to respond to a subpoena;
(b) withholding evidence; or
(c) failing to produce documents or records;
(21) in the case of a dual licensed title licensee as defined in Section 
31A-2-402
:
(a) providing a title insurance product or service without the approval required by
Section 
31A-2-405
; or
(b) knowingly providing false or misleading information in the statement required by
Subsection 
31A-2-405
(2);
(22) violating an independent contractor agreement between a principal broker and a
sales agent or associate broker as evidenced by a final judgment of a court;
(23) (a) engaging in an act of loan modification assistance that requires licensure as a
mortgage officer under Chapter 2c, Utah Residential Mortgage Practices and Licensing Act,
without being licensed under that chapter;
(b) engaging in an act of foreclosure rescue without entering into a written agreement
specifying what one or more acts of foreclosure rescue will be completed;
(c) inducing a person who is at risk of foreclosure to hire the licensee to engage in an
act of foreclosure rescue by:
(i) suggesting to the person that the licensee has a special relationship with the person's
lender or loan servicer; or
(ii) falsely representing or advertising that the licensee is acting on behalf of:
(A) a government agency;
(B) the person's lender or loan servicer; or
(C) a nonprofit or charitable institution; or
(d) recommending or participating in a foreclosure rescue that requires a person to:
(i) transfer title to real estate to the licensee or to a third-party with whom the licensee
has a business relationship or financial interest;
(ii) make a mortgage payment to a person other than the person's loan servicer; or
(iii) refrain from contacting the person's:
(A) lender;
(B) loan servicer;
(C) attorney;
(D) credit counselor; or
(E) housing counselor;
(24) as a principal broker, placing a lien on real property, unless authorized by law; [
or
]
(25) as a sales agent or associate broker, placing a lien on real property for an unpaid
commission or other compensation related to real estate brokerage services[
.
]
; or
(26) failing to timely disclose to a buyer or seller an affiliated business arrangement, as
defined in Section 
31A-23a-1101
, in accordance with the federal Real Estate Settlement
Procedures Act, 12 U.S.C. Sec. 2601 et seq. and any rules made thereunder.
Section 10. 
Repealer.
This bill repeals:
Section 
31A-23a-503
,
Controlled business in title insurance.