A licensee who has any affiliated business arrangement or
relationship with any provider of settlement services, as defined below, and
directly or indirectly refers business to that provider or affirmatively
influences the selection of that provider discloses the arrangement and any
financial interest to the person whose business is being referred or
influenced. The obligated disclosure is acknowledged by the separate signatures
of the person or persons whose business is being referred or influenced. The
disclosure is given and signed before or at substantially the same time that
the business is referred or the provider is selected. If the disclosure is made
on a separate form, the licensee retains a copy of the signed disclosure in the
transaction file for a period of five years after the execution.
(1) An affiliated business arrangement means
an arrangement in which a real estate licensee, or an associate of a real
estate licensee, has either an affiliate relationship with or a direct or
beneficial ownership interest of more than 1 percent in the business entity
providing the service or product.
a. An
associate means one who has one or more of the following relationships with a
real estate licensee:
(1) A spouse, parent, or
child of a real estate licensee;
(2) A corporation or business entity that
controls, is controlled by, or is under common control with a real estate
licensee;
(3) An employee, officer,
director, partner, franchiser or franchisee of a real estate licensee;
or
(4) Anyone who has an agreement,
arrangement or understanding with a real estate licensee or brokerage, the
purpose or substantial effect of which is to enable the real estate licensee to
refer for any service, settlement service, or business or product related to
the transaction and to benefit financially from the referral of that
business.
b. Settlement
services include services in connection with a real estate transaction
including, but not limited to, the following: mortgage or other financing;
title searches; title examinations; the provisions of title certificates, title
insurance, hazard insurance; services rendered by an attorney; the preparation
of documents; property surveys; the rendering of credit reports or appraisals;
pest, fungus, mechanical or other inspections; services rendered by a real
estate agent or broker; and the handling of the processing and closing of
settlement.
c. An affiliated
business arrangement does not include an arrangement in which a real estate
licensee, or an associate of a real estate licensee, gives or pays undisclosed
compensation in a transaction to any other licensee for a referral to provide
real estate brokerage services, including franchise affiliates, if there is no
direct or beneficial ownership interest of more than 1 percent in the business
entity providing the service. Referral fees or compensation paid by a licensee
to another licensee under these conditions are exempted from the disclosure
criteria.
(2) No
particular language is needed for the disclosure. To assist real estate
licensees and the public, the commission recommends the following sample
language:
Click here
to view Image
(3)
The term "franchise" has the same meaning as set forth in 24 CFR Chapter XX,
Section
3500.15(c) as of April 1995.
(4) The term "affiliate relationship" means
the relationship among business entities where one entity has effective control
over the other by virtue of a partnership or other agreement or is under common
control with the other by a third entity or where an entity is a corporation
related to another corporation as parent to subsidiary by an identity of stock
ownership.
(5) The term "beneficial
ownership" means the effective ownership of an interest in a provider of
settlement services or the right to use and control the ownership interest
involved even though legal ownership or title may be held in another person's
name.
(6) The term "direct
ownership" means the holding of legal title to an interest in a provider of
settlement services except where title is being held for the beneficial
owner.
(7) The term "control" as
used in the definition of "affiliate relationship" means that a person:
a. Is a general partner, officer, director,
or employer of another person;
b.
Directly or indirectly or acting in concert with others, or through one or more
subsidiaries, owns, holds with power to vote, or holds proxies representing
more than 20 percent of the voting interests of another person;
c. Affirmatively influences in any manner the
election of a majority of the directors of another person; or
d. Has contributed more than 20 percent of
the capital of the other person.
Notes
Iowa Admin. Code
r. 193E-7.9
ARC 7769C, IAB
4/17/24, effective 5/22/24
Adopted by
IAB
April 17, 2024/Volume XLVI, Number 21, effective
5/22/2024
Amended by
IAB
May 14, 2025/Volume XLVII, Number 23, effective
6/18/2025
