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NEW JERSEY REGISTER
VOLUME 38, ISSUE 12
ISSUE DATE: JUNE 19, 2006
RULE PROPOSALS
Law And Public Safety
Division Of Consumer Affairs
State Board Of Real Estate Appraisers

 

Proposed Amendments: N.J.A.C. 13:40A-1.2, 4.5, 4.6 and 4.7
Proposed New Rule: N.J.A.C. 13:40A-1.3

Definitions; Scope of Practice; Trainee Permits

Authorized by: State Board of Real Estate Appraisers, Dr. James Hsu, Executive Director.

Authority: N.J.S.A. 45:14F-8.

Calendar Reference: See Summary below for explanation of exception to the calendar requirements.

Proposal Number: PRN 2006-190.

Submit written comments by August 18, 2006 to:
Dr. James Hsu, Executive Director
State Board of Real Estate Appraisers
Post Office Box 45032
124 Halsey Street
Newark, New Jersey 07101

The agency proposal follows:

Summary Pursuant to its rulemaking authority set forth in N.J.S.A. 45:14F-8(g), the State Board of Real Estate Appraisers (the Board), is proposing amendments to N.J.A.C. 13:40A-1 and 4. More specifically, the Board is proposing to amend the definition of "trainee" by deleting the term "licensed" from the definition. In conjunction with proposed new N.J.A.C. 13:40A-4.6(d), the Board is proposing this amendment to reflect that licensed real estate appraisers are prohibited from serving as supervising appraisers. The Board is proposing new rule N.J.A.C. 13:40A-1.3, which sets forth the scope of practice for licensed real estate appraisers, certified residential real estate appraisers and certified general real estate appraisers. The Board is proposing N.J.A.C. 13:40A-1.3(a) to establish that the scope of practice for licensed real estate appraisers is the appraisal of non-complex one to four residential units having a transaction value less than $ 1,000,000 and complex one to four residential units having a transaction value less than $ 250,000. Proposed new subsection (b) establishes that the scope of practice of appraisers with the certified residential real estate appraiser qualification is the appraisal of one to four residential units without regard to transaction value or complexity. In addition, the Board is proposing new subsection (c) which establishes that the scope of practice of appraisers with the certified general real estate appraiser classification is the appraisal of all types of property. Lastly, the Board is proposing new subsection (d) which provides that the scope of practice of appraiser trainees is the appraisal of those properties which the supervising appraiser is permitted to appraise. These limitations originate from the Real Property Appraiser Qualification Criteria, which are provided by the Appraiser Qualifications Board of the Appraisal Foundation.

The Board is also proposing amendments to Subchapter 4, Trainee Permits. The Board is proposing amendments to N.J.A.C. 13:40A-4.5, which provides for responsibilities of trainees. More specifically, the Board is proposing, in addition to the existing responsibilities outlined in N.J.A.C. 13:40A-4.5(b)1 through 5, that the rule require a trainee to comply with the provisions of the Uniform Standards of Professional Appraisal Practice. In addition, the Board is proposing a new subsection (c) which provides that the holder of a trainee permit issued by the Board shall be prohibited from soliciting and/or maintaining a direct relationship with a client, a party or parties who engage an appraiser by employment or contract in a specific assignment. The trainee is prohibited from collecting any fees from the client, except when acting as an agent of the supervising appraiser. The supervising appraiser shall ensure that any form of payment shall be directed to the supervising appraiser.

The Board is also proposing new subsection (d) which prohibits trainees from advertising. Any advertisement in the name of a supervising appraiser with whom the trainee is associated may include the name of the trainee by clearly indicating such person as a trainee. This shall not prohibit a trainee's use of standard business cards which clearly indicate such person as a trainee.

The Board is also proposing to amend N.J.A.C. 13:40A-4.6, which establishes the responsibilities of the supervising appraiser. The Board is proposing new subsection (b) to provide that supervising appraisers must be in good standing with the Board and must not have been subject to any disciplinary action, including revocation, suspension, or stayed suspension, by the Board, within three years from the date the supervision is to begin. Proposed new subsection (c) establishes that no appraiser may serve as a supervising appraiser until he or she has been a licensee of the Board for at least two years. In addition, the Board is proposing that as of the effective date of these proposed amendments, the Board will no longer accept applications by trainees who are to be supervised by a State licensed real estate appraiser. As a result, the Board is proposing at new subsection (e) that effective January 1, 2008, supervising appraisers shall be limited to those individuals who are certified by the Board as either a State certified general real estate appraiser or a State certified residential real estate appraiser. Proposed new subsection (e) permits a trainee, who is currently being supervised by a State licensed real estate appraiser, to complete his or her time with the supervising appraiser. In addition, the proposed new subsection serves as notice to trainees that the Board will no longer accept State licensed real estate appraisers as supervisors.

Existing subsection (b) of N.J.A.C. 13:40A-4.6 is being recodified as subsection (f). The Board is proposing to amend N.J.A.C. 13:40A-4.6(f)1ii to state that the supervising appraiser shall not only approve and sign, but also accept responsibility for, each appraisal report. In addition, the Board is proposing N.J.A.C. 13:40A-4.6(f)1iii to require the supervising appraiser to indicate, within the appraisal report, the name of the trainee providing significant real property appraisal assistance. The Board has defined "significant" as to include the exercise of appraisal knowledge and training, as opposed to clearly clerical or fact gathering tasks. The Board is also proposing additional duties and responsibilities at N.J.A.C. 13:40A-4.6(f) for a supervising appraiser. Additional duties and responsibilities include that a supervising appraiser shall not supervise more than three trainees at one time; the supervising appraiser shall personally inspect with the trainee the interior and exterior of each appraised property until the supervising appraiser determines that the trainee is competent in accordance with the Competency Rule of the Uniform Standards of Professional Appraisal Practice; the supervising appraiser shall prepare and furnish a signed statement describing the nature and extent of the assistance rendered to each trainee who provided services on an appraisal assignment; and upon the termination of the supervising appraiser and the trainee relationship, the supervising appraiser shall request an evaluation certification form from the Board and submit it to the Board within 30 days of receipt of the evaluation certification form. The Board is also proposing that if a supervising appraiser fails to comply with N.J.A.C. 13:40A-4.6, this may be deemed professional misconduct. The Board is also proposing amendments to N.J.A.C. 13:40A-4.7 which outlines what the real estate appraiser trainee log must contain and how it must be maintained. The Board is proposing new subsection (c) to outline the responsibilities of the trainee. According to proposed new subsection (c), a trainee must include in his or her log submitted to the Board only those appraisal reports which indicate that the trainee provided significant assistance; verify that his or her contribution to the report has been indicated in the report before entering the report into his or her log; and notify the Board immediately, in writing, if the trainee has provided significant real property appraisal assistance to a supervising appraiser with an appraisal report, and the supervising appraiser has not indicated that the trainee provided significant real property appraisal assistance in the report, and the scope of the trainee's contribution.

The Board is also proposing new subsection (d) which outlines that failure to comply with N.J.A.C. 13:40A-4.7 shall be grounds for denial of renewal of the trainee permit; revocation of the trainee permit; denial of experience credit for the entire year in which the lack of compliance occurred; and/or denial of licensure or certification. The Board has determined that the comment period for this proposal shall be 60 days; therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this proposal is excepted from the rulemaking calendar requirement.

Social Impact

The Board's proposed amendments will have a positive impact on the welfare of consumers by limiting the scope of practice with the type of license one holds with the Board. Since there are three tiers of appraisers, the Board is proposing that a licensed real estate appraiser be permitted to appraise only non-complex one to four residential units having a transaction value less than $ 1,000,000 and complex one to four residential units having a transaction value less than $ 250,000. The Board is proposing that a certified residential real estate appraiser be permitted to appraise one to four residential units without regard to transaction value or complexity. In addition, the Board is proposing that the scope of practice of appraisers with the certified general real estate appraiser classification is the appraisal of all types of property. Such amendments, which define an appraiser's scope of practice based upon his or her level of licensure, will impact all consumers who use their services.

The amendments to Subchapter 4, Trainee Permits, will also have a positive social impact upon consumers who utilize appraisal services. More specifically, the amendments to N.J.A.C. 13:40A-4.5 will have a positive social impact upon consumers because the amendments clearly define the activities a trainee is not permitted to perform. Therefore, these amendments clarify for consumers the distinction of duties between appraisers and trainees.

In addition, the amendments to N.J.A.C. 13:40A-4.6 will have a positive social impact upon consumers since these amendments outline the responsibilities of a supervising appraiser. The Board has amended N.J.A.C. 13:40A-4.6 to include additional responsibilities of the supervising appraiser. These proposed new subsections will have a positive social impact upon consumers by increasing confidence in the appraisal profession and enhancing the quality of appraisal services by setting forth the parameters of appropriate responsibilities.

Lastly, the amendments to N.J.A.C. 13:40A-4.7 will also have a positive social impact upon consumers who utilize appraisal services. These amendments provide what a trainee must include in his or her real estate appraiser trainee log. Mandating that each trainee maintain a log, with the required information, allows for the Board to ensure that trainees are only performing trainee activities and supervising appraisers are providing appropriate supervision.

Economic Impact

The proposed new N.J.A.C. 13:40A-1.3 may have an economic impact upon licensed real estate appraisers, certified residential real estate appraisers and certified general real estate appraisers since the new subsections outline the type of property each is permitted to appraise. For instance, a licensed real estate appraiser who has been performing non-complex one to four residential units having a transaction value of more than $ 1,000,000 and complex one to four residential units having a transaction value more than $ 250,000, would no longer be permitted to perform appraisals on these types of properties. Thus, such prohibitions could have an economic impact upon licensed real estate appraisers. The amendments to Subchapter 4 could also have an economic impact upon supervising appraisers. More specifically, the amendments to N.J.A.C. 13:40A-4.6(f)5 may have an economic impact upon supervising appraisers since the new rule does not permit a supervising appraiser to supervise more than three trainees at one time. As a result, supervising appraisers may experience an economic impact because the proposed rule may create a potential loss of income from trainee appraisals.

In addition, the amendments to N.J.A.C. 13:40A-4.6 may have an economic impact upon supervising appraisers who do not comply with the proposed regulations since the Board is proposing that failure to comply with the regulations may be deemed professional misconduct which may subject them to fines. Trainees may also be affected economically because the Board is proposing that failure to comply with N.J.A.C. 13:40A-4.7, Real estate trainee log, shall be grounds for either denial of renewal of the trainee permit; revocation of the trainee permit; denial of experience credit for the entire year in which the lack of compliance occurred; and/or denial of licensure or certification. Although the amendments to the rules may result in a negative economic impact upon licensees and trainees, any negative economic impact associated with the proposed amendments is strongly outweighed by the protections of the rules upon consumers.

Federal Standards Statement

A Federal standards analysis is not required because the proposed amendments and new rule are not subject to any Federal standards or requirements imposed by law, although the rules contain standards and requirements which are the same as those Federal standards set forth in the Uniform Standards of Professional Appraisal Practice (USPAP) published by the Appraisal Standards Board of the Appraisal Foundation, as well as standards set forth by the Appraiser Qualification Board of the Appraisal Foundation.

Jobs Impact

Proposed new N.J.A.C. 13:40A-1.3 may have an impact on jobs to the extent that the proposed new rule may limit the number of appraisals a licensee performs. However, the Board believes that the effect upon jobs will be minimal and that any negative affect upon a licensee is strongly outweighed by the protection the limitations afford to the public. The proposed amendments and new rule will not result in the generation or loss of jobs.

Agriculture Industry Impact

The Board believes the proposed amendments and new rule will have no impact upon the agriculture industry in New Jersey.

Regulatory Flexibility Statement

If, for the purposes of the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. (the Act), any of the approximately 2,830 real estate appraisers licensed by the Board who are qualified to be supervising appraisers or trainees are deemed "small businesses," then the following analysis applies. Proposed new N.J.A.C. 13:40A-1.3 imposes compliance requirements upon licensed real estate appraisers, certified residential real estate appraisers, certified general real estate appraisers and trainees. The proposed new rule defines the scope of practice for each licensee, certificate holder or trainee.

The proposed amendments to Subchapter 4 will continue to impose reporting, recording and compliance requirements upon licensees and trainees. The Board is proposing additional compliance requirements of trainees at N.J.A.C. 13:40A-4.5. These additional compliance requirements include that a trainee must comply with the provisions of the Uniform Standards of Professional Appraisal Practice. Pursuant to proposed new subsection (c), the holder of a trainee permit is prohibited from soliciting and/or maintaining a direct relationship with a client. In addition, the trainee is also prohibited from collecting any fees from the client, except when acting as an agent of the supervising appraiser. Pursuant to new subsection (d), trainees must not advertise; however, a trainee is permitted to use standard business cards which clearly indicate that he or she is a trainee.

N.J.A.C. 13:40A-4.6, Responsibilities of supervising appraiser, continues to impose compliance requirements on supervising appraisers as well as the proposed new subsections that will also impose compliance requirements on supervising appraisers. More specifically, proposed new subsection (b) requires that supervising appraisers must be in good standing with the Board and must not have been subject to any disciplinary action, including revocation, suspension, or stayed suspension by the Board, within the last three years. Proposed new subsection (c) provides that no appraiser may serve as a supervising appraiser until he or she has been a licensee of the Board for at least two years. Proposed new subsection (e) establishes that effective January 1, 2008, supervising appraisers will be limited to those individuals who are certified by the Board as either a State Certified General Real Estate Appraiser or a State Certified Residential Real Estate Appraiser. Pursuant to the proposed amendments at recodified N.J.A.C. 13:40A-4.6(f)1ii. and iii., the supervising appraiser must accept responsibility for each appraisal report and indicate within the appraisal report the name of the trainee providing significant real property appraisal assistance. N.J.A.C. 13:40A-4.6(f)5 imposes compliance requirements upon supervising appraisers. A supervising appraiser must not supervise more than three trainees at one time. In addition, N.J.A.C. 13:40A-4.6(f)6 imposes reporting and compliance requirements upon a supervising appraiser. A supervising appraiser must personally inspect, with the trainee, the interior and exterior of each appraised property until the supervising appraiser determines that the trainee is competent in accordance with the Competency Rule of the Uniform Standards of Professional Appraisal Practice. Upon making the determination of competency, the supervising appraiser must request a competency certification form from the Board. The supervising appraiser must submit the form, to the Board, that the trainee is competent to perform property inspections independently. N.J.A.C. 13:40A-4.6(f)7 and 8 also impose reporting and compliance requirements upon a supervising appraiser. N.J.A.C. 13:40A-4.6(f)7 requires the supervising appraiser to prepare and furnish a signed statement describing the nature and extent of the assistance rendered to each trainee who provided services on an appraisal assignment. This statement shall be placed in the workfile of the appraisal assignment. N.J.A.C. 13:40A-4.6(f)8 establishes that upon the termination of the supervising appraisers and the trainee relationship, the supervising appraiser must request an evaluation certification form from the Board. The supervising appraiser must submit, to the Board, the certification evaluating the activities performed by his or her trainee. N.J.A.C. 13:40A-4.6(f)9 imposes compliance requirements upon the supervising appraiser since failure to comply with N.J.A.C. 13:40A-4.6 may be deemed professional misconduct.

Proposed new subsection (c) at N.J.A.C. 13:40A-4.7 imposes compliance, recordkeeping and reporting requirements upon trainees. N.J.A.C. 13:40A-4.7(c)1 establishes that a trainee must include in his or her log, submitted to the Board, only those appraisal report(s) which indicates(s) that the trainee provided significant assistance. N.J.A.C. 13:40A-4.7(c)2 provides that the trainee shall verify that his or her contribution to the report has been indicated in the report before entering the report into his or her log. N.J.A.C. 13:40A-4.7(c)3 provides that the trainee must notify the Board immediately, in writing, if the trainee has provided significant real property appraisal assistance to a supervising appraiser with an appraisal report, and the supervising appraiser has not indicated that the trainee provided significant real property appraisal assistance in the report, and the scope of the trainee's contribution. Proposed new subsection (d) imposes compliance requirements since failure to comply with N.J.A.C. 13:40A-4.7 shall be grounds for denial of renewal of the trainee permit; revocation of the trainee permit; denial of experience credit for the entire year in which the lack of compliance occurred; and/or denial of licensure or certification.

Ultimately, any negative impact upon a licensee or trainee is strongly outweighed by the protection the restrictions afford to the public. In order to ensure that these protections are afforded to all consumers, the Board believes that the proposed amendments must be uniformly applied and has not provided differing compliance requirements for any licensees based on the size of the business.

No additional professional services will be needed to comply with the proposed new rule and amendments.

Smart Growth Impact

The Board does not believe that the proposed new rule and amendments will have any impact upon the achievement of smart growth or upon the implementation of the State Development and Redevelopment Plan.

Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):

SUBCHAPTER 1. PURPOSE AND SCOPE; DEFINITIONS; SCOPE OF PRACTICE

13:40A-1.2 Definitions

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise:

"Trainee" means an individual in the process of acquiring the hours of appraisal experience and qualifying education required for certification or licensure under the direct supervision of a [licensed or] certified appraiser pursuant to this chapter.

13:40A-1.3 Scope of practice

(a) The scope of practice of appraisers with the licensed real estate appraiser qualification is the appraisal of non-complex one to four residential units having a transaction value less than $ 1,000,000 and complex one to four residential units having a transaction value less than $ 250,000.

(b) The scope of practice of appraisers with the certified residential real estate appraiser qualification is the appraisal of one to four residential units without regard to transaction value or complexity.

(c) The scope of practice of appraisers with the certified general real estate appraiser classification is the appraisal of all types of property.

(d) The scope of practice of appraiser trainees is the appraisal of those properties which the supervising appraiser is permitted to appraise.

SUBCHAPTER 4. TRAINEE PERMITS

13:40A-4.5 Responsibilities of trainee

(a) (No change.)

(b) The holder of a trainee permit issued by the Board shall have the following duties and responsibilities:

1.-3. (No change.)

4. In the event a supervising appraiser can no longer provide direct supervision to a trainee, the trainee shall return the permit within 30 days to the Board; [and]

5. The Board shall reissue the permit to the trainee when the trainee has obtained a new supervising appraiser.

6. The trainee shall comply with the provisions of the Uniform Standards of Professional Appraisal Practice (USPAP).

(c) The holder of a trainee permit issued by the Board shall not solicit or maintain a direct relationship with a client, a party or parties who engage an appraiser by employment or contract in a specific assignment. The trainee shall not collect any fees from the client, except when acting as an agent of the supervising appraiser. The supervising appraiser shall ensure that any form of payment shall be directed to the supervising appraiser.

(d) The holder of a trainee permit issued by the Board shall not advertise. Any advertisement in the name of a supervising appraiser with whom the trainee is associated may include the name of the trainee by clearly indicating such person as a trainee. This shall not prohibit a trainee's use of standard business cards which clearly indicate such person as a trainee.

13:40A-4.6 Responsibilities of supervising appraiser

(a) Any individual designated as a "supervising appraiser" by the holder of a trainee permit shall acknowledge in writing to the Board that he or she agrees to perform all responsibilities set forth in [(b)] (f) below.

(b) Supervising appraisers shall be in good standing with the Board and shall not have been subject to any disciplinary action, including revocation, suspension, or stayed suspension, by the Board, within the last three years from the beginning of the supervision.

(c) No appraiser shall serve as a supervising appraiser until he or she has been a licensee of the Board for at least two years.

(d) Beginning on January 1, 2008, licensed real estate appraisers shall no longer be approved to serve as supervising appraisers. Beginning on (the effective date of this amendment), the Board will no longer accept applications by trainees who seek approval of a licensed real estate appraiser as a supervising appraiser.

(e) Beginning on January 1, 2008, only those individuals who are certified by the Board as either a State certified general real estate appraiser or a State certified residential real estate appraiser shall be a supervising appraiser.

[(b)](f) A supervising appraiser shall have the following duties and responsibilities:

1. The supervising appraiser shall at all times be responsible for and provide direct supervision of the work performed by the trainee. For purposes of this section, "direct supervision" means:

i. To personally review the work product of the trainee; [and]

ii. To approve [and], sign, and accept responsibility for each appraisal report including work product prepared by the trainee or in which the trainee has made a professional contribution and to sign all such reports and certify that all such reports have been independently and impartially prepared in compliance with the Uniform Standards of Professional Appraisal Practice, these rules and applicable statutory standards; and

iii. To indicate, within the certification section of the appraisal report, the name of the trainee providing significant real property appraisal assistance. For purposes of this subparagraph, "significant" means the exercise of appraisal knowledge and training and does not mean clerical or fact gathering tasks.

2.-4. (No change.)

5. A supervising appraiser shall not supervise more than three trainees at one time;

6. The supervising appraiser shall personally inspect, with the trainee, the interior and exterior of each appraised property until the supervising appraiser determines that the trainee is competent in accordance with the Competency Rule of the Uniform Standards of Professional Appraisal Practice. Upon making the determination of competency, the supervising appraiser shall request a competency certification form from the Board. The supervising appraiser shall submit, to the Board, within 30 days of receipt of the competency certification form, the certification that the trainee is competent to perform property inspections independently. Examples of competency include, but are not limited to, properly identifying the problem to be addressed, being familiar with a specific type of property, market, geographic area, or analytical method.

7. The supervising appraiser shall prepare and furnish a signed statement describing the nature and extent of the assistance rendered to each trainee who provided services on an appraisal assignment. This statement shall be placed in the workfile of the appraisal assignment.

8. Upon the termination of the supervising appraiser and the trainee relationship, the supervising appraiser shall request an evaluation certification form from the Board. The supervising appraiser shall submit, to the Board, within 30 days of receipt of the evaluation certification form, the certification evaluating the activities performed by his or her trainee.

9. Failure to comply with this section may be deemed professional misconduct.

13:40A-4.7 Real estate appraiser trainee log

(a)-(b) (No change.)

(c) The trainee shall:

1. Include in the appraisal log submitted to the Board only those appraisal report(s) which indicate(s) that the trainee provided significant assistance;

2. Verify that the trainee's contribution to the report has been indicated in the report before entering the report into the appraisal log; and

3. Notify the Board immediately, in writing, if the trainee has provided significant real property appraisal assistance to a supervising appraiser with an appraisal report, and the supervising appraiser has not indicated that the trainee provided significant real property appraisal assistance in the report, and the scope of the trainee's contribution. For purposes of this subsection, "significant" means the exercise of appraisal knowledge and training, and does not mean clerical or fact gathering tasks.

(d) Failure to comply with this section shall be grounds for:

1. Denial of renewal of the trainee permit;

2. Revocation of the trainee permit;

3. Denial of experience credit for the entire year in which the lack of compliance occurred; and/or

4. Denial of licensure or certification.



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