2.3 Pennsylvania Licensee Duties and Standards of Conduct

RELRA and the SREC regulations at 49 Pa. Code Subchapter E (Standards of Conduct and Practice) set the conduct rules every Pennsylvania licensee must follow. Violations expose the licensee to suspension, revocation, fines, and restitution.

Disclosure Requirements

Licensees must disclose to all parties:

Material Defects

A material defect is a problem with the property or its systems that has a significant adverse impact on value or that poses an unreasonable safety risk. Examples include a failing septic system, a cracked foundation, a leaking roof, or active termite infestation. Licensees must disclose material defects they actually know about; they are not required to inspect or investigate to find hidden ones.

Separately, Pennsylvania's Real Estate Seller Disclosure Law requires most residential sellers to complete a written Seller's Property Disclosure Statement before an agreement of sale is signed.

Offer Presentation

Licensees must present all written offers to the client:

• Promptly — without unreasonable delay
• All offers — even after the property is under an existing agreement of sale, unless the seller has waived this in writing
• In writing on request — the client can require copies

When Presentation Is Not Required

A licensee may withhold an offer only when the client has directed in writing not to present certain offers (for example, offers below a stated price). Always document such a directive.

Caution: A licensee may never reject or hide an offer to steer the deal toward a higher commission — that is a breach of loyalty and a disciplinable act.

Prohibited Conduct

RELRA section 604 lists acts that subject a licensee to discipline:

Deposit and Escrow Handling

Escrow rules are among the most heavily tested state-portion topics because they involve exact deadlines under 49 Pa. Code 35.324 and 35.325.

Where Deposits May Be Held

Pennsylvania permits earnest money to be held by:

1. The broker's escrow account
2. A title company or settlement agent
3. A real estate attorney's escrow account
4. Another holder agreed to in writing by the parties

Interest-Bearing Escrow

If money is expected to be held in escrow for more than 6 months, the broker is encouraged to use an interest-bearing escrow account. Interest is held and disbursed pro rata like the principal unless the parties agree otherwise, and the broker may not claim it (49 Pa. Code § 35.325(c)).

Disputed Deposits

If buyer and seller dispute who is entitled to the deposit, the broker must hold the funds in escrow and may not release them until the parties agree in writing, a court orders release, or another lawful resolution occurs.

Record Keeping

Under 49 Pa. Code 35.286, brokers must retain transaction and escrow records for at least 3 years following consummation of the transaction.

Note the 6-month rule for the Consumer Notice acknowledgment specifically; the general 3-year rule covers transaction and escrow records. Mixing these up is a classic exam trap.

Advertising Requirements

All advertising must:

• Include the broker's name exactly as registered with the SREC (blind ads are prohibited)
• Be accurate and not misleading about the property or terms
• Avoid discriminatory language barred by fair housing law

A salesperson may not advertise in their own name alone. If a salesperson's name or team name appears, the employing broker's name must appear with it. Misrepresenting features, price, or availability is a disciplinable act.

Worked Escrow Scenario

A salesperson receives a $5,000 earnest-money check on Tuesday afternoon. She must hand it to her employing broker by the end of Wednesday (the next business day). The broker must then deposit it by the end of the next business day in the office where escrow records are kept — unless both parties signed written permission to hold the check until the seller accepts, in which case the broker deposits within 1 business day of acceptance. Letting the check sit in a desk drawer over a weekend without that written permission violates 49 Pa. Code 35.324.

Summary of Key Conduct Deadlines

Memorize these exact intervals — the state portion frequently offers plausible wrong answers like "within 7 days" or "within 24 hours" to see whether you know the precise rule.