Perfecting a Claim for Relief from the Real Estate Recovery Fund
| Publication year | 2018 |
by Ronald T. Michioka
A consumer suffers losses because of the acts of a licensed real estate broker or real estate salesperson ("Licensee"), then finds that he or she is unable to recover those losses from the licensee who caused them. Litigation may produce a judgment that proves to be of little or no value because the Licensee is either missing or has no assets that can be attached to enforce the judgment. This results in the consumer being unable to satisfy the judgment. Is this the end of the search for relief? Not necessarily.
When all else fails, there is a measure of relief available from the Real Estate Recovery Fund ("Recovery Fund"). The Recovery Fund, for a variety of reasons, should be considered a last resort for the consumer, after having exhausted other legal remedies available through the judicial system. The amount recoverable is limited, and the consumer must relinquish all of his or her rights against the licensee in exchange for a limited payment that may not be sufficient to make the consumer whole. Nevertheless, the Recovery Fund at least offers a measure of relief that the consumer would not otherwise have. This article discusses what the consumer must do in order to demonstrate his or her entitlement to payment from the Recovery Fund.
The Recovery Fund was created in 1967 by Hawaii Revised Statutes ("HAW. REV. STAT.") Chapter 467 ("Statute") to provide relief to consumers "aggrieved" by the acts or omissions of duly-licensed real estate brokers and/or real estate salespersons. The Recovery Fund statute established the Recovery Fund "[t]o furnish financial protection to the consumer public . . . by providing a fund which, under certain circumstances, will satisfy unpaid judgments" in favor of the consumer and against a Licensee.1
The Recovery Fund is administered by the Real Estate Commission ("REC"), which is administratively attached to the Department of Commerce and Consumer Affairs ("DCCA") through the Professional and Vocational Licensing Division ("PVL"). Complaints against Licensees may also be filed with the enforcement arm of DCCA, the Regulated Industries Complaints Office ("RICO"), but the filing of such complaints will not entitle the consumer to relief from the Recovery Fund, which relief requires the commencement of a civil lawsuit or arbitration proceedings described below.
If qualified, an aggrieved consumer may recover up to $25,000.00 per transaction for "damages sustained" as a result of fraud, misrepresentation, or deceit by the Licensee. "Damages sustained" includes fees, costs and reasonable attorneys' fees.2 The phrase "damages sustained" refers to "compensatory damages" that compensate the injured party "for the injury sustained, and nothing more." "Damages sustained" does not include punitive or trebled damages designed to punish the wrongdoer as an example and deterrent to others and not to compensate the aggrieved consumer.3 The maximum liability of the Recovery Fund for any one Licensee is fixed at $50,000.00 by HAW. REV. STAT. § 467-24.
The Recovery Fund is not funded by taxes paid by the general public. Instead, by the authority of HAW. REV. STAT. § 467-16(b), Licensees fund the Recovery Fund by paying a "real estate recovery fund fee" at the time they apply for an original real estate license in Hawaii. If the license is not issued, the applicant is refunded the Recovery Fund fee. Additional assessments are provided for by HAW. REV. STAT. § 467-17(a) whenever the balance in the Recovery Fund is less than $350,000.00.
The path to proving entitlement to and receiving payment from the Recovery Fund is set out in the Statute and the Hawaii Administrative Rules ("HAR") Title 16, Chapter 99,4 as follows.
Conditions Precedent: First, the Licensee involved must have been "duly licensed" at the time of the acts or omissions that caused the consumer's losses. The term, "duly licensed," is...
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