54 N.J.R. 488(a)

VOLUME 54, ISSUE 6, MARCH 21, 2022
RULE PROPOSALS

Reporter
54 N.J.R. 488(a)
NJ - New Jersey Register  >  2022  >  MARCH  >  MARCH 21, 2022  >  RULE PROPOSALS  >  LAW AND PUBLIC SAFETY -- DIVISION OF CONSUMER AFFAIRS

Interested Persons Statement 

INTERESTED PERSONS 
Interested persons may submit comments, information or arguments concerning any of the rule proposals in this issue until the date indicated in the proposal. Submissions and any inquiries about submissions should be addressed to the agency officer specified for a particular proposal. 
The required minimum period for comment concerning a proposal is 30 days. A proposing agency may extend the 30-day comment period to accommodate public hearings or to elicit greater public response to a proposed new rule or amendment. Most notices of proposal include a 60-day comment period, in order to qualify the notice for an exception to the rulemaking calendar requirements of  N.J.S.A. 52:14B-3. An extended comment deadline will be noted in the heading of a proposal or appear in a subsequent notice in the Register. 
At the close of the period for comments, the proposing agency may thereafter adopt a proposal, without change, or with changes not in violation of the rulemaking procedures at      N.J.A.C. 1:30-6.3. The adoption becomes effective upon publication in the Register of a notice of adoption, unless otherwise indicated in the adoption notice. Promulgation in the New Jersey Register establishes a new or amended rule as an official part of the New Jersey Administrative Code. 
Agency


LAW AND PUBLIC SAFETY > DIVISION OF CONSUMER AFFAIRS > STATE BOARD OF REAL ESTATE APPRAISERS

Administrative Code Citation


Proposed Amendments: N.J.A.C. 13:40A-1.3, 5.4, 5.6, and 7.5
Text

  Scope of Practice, Continuing Education, and Mixed Practice
Authorized By: State Board of Real Estate Appraisers, Charles Kirk, Executive Director.
Authority: N.J.S.A. 45:14F-8.
Calendar Reference: See Summary below for explanation of exception to calendar requirement.
Proposal Number: PRN 2022-033.
Submit written comments by May 20, 2022, to:

Charles Kirk, Executive Director
State Board of Real Estate Appraisers
PO Box 45032
Newark, New Jersey 07101

or electronically at:   http://www.njconsumeraffairs.gov/Proposals/Pages/default.aspx.

The agency proposal follows:
Summary
The State Board of Real Estate Appraisers (Board) is proposing amendments to its scope of practice, continuing education, and mixed practice rules at N.J.A.C. 13:40A to provide clarity and to update the rules. The Board is clarifying that complex residential property excludes a property that has any commercial use. Further, the Board is expanding the scope of topics covered in a required continuing education course on New Jersey law and rules to encompass the law and regulations concerning appraisal management companies. In addition, the Board proposes to delete the provisions that prohibit an appraiser from appraising his or her employing broker's listing and from conducting an appraisal on behalf of any real estate agent under the employ of the broker.  
The Board is proposing to amend N.J.A.C. 13:40A-1.3 to specify that complex residential property excludes a property that has any commercial use. The Board believes that this guidance is necessary because the absence of a uniform definition in the industry has led to confusion in the marketplace and results in appraisers performing appraisals beyond their scope of practice. Specifically, the Board proposes to amend subsections (a) and (b) to specify that licensed real estate appraisers and certified residential real estate appraisers, respectively, cannot appraise a property that includes any commercial use. The Board notes that these proposed amendments protect the public by ensuring that the regulated community and public are aware that the appraisal of commercial properties is limited to certified general real estate appraisers whose education and experience includes commercial properties.  
On May 15, 2020, the Appraiser Qualifications Board (AQB) of the Appraisal Foundation, a not-for-profit entity authorized by Federal law to set nationwide appraisal standards, adopted changes, effective January 1, 2021, to the Real Property Appraiser Qualification Criteria. Previously, licensed real estate appraisers were permitted to perform appraisals of complex one-to-four residential units with a maximum transaction value of $ 250,000. The newly adopted changes amend the scope of practice of licensed real estate appraisers to allow them to perform appraisals of complex one-to-four residential units with a transaction value up to $ 400,000. Consistent with the AQB's adopted change, the Board proposes to amend N.J.A.C. 13:40A-1.3(a) to increase the maximum transaction value of complex one-to-four-unit residential units from $ 250,000 to $ 400,000. The Board also proposes to amend N.J.A.C. 13:40A-1.3 to add a definition of a complex one-to-four-unit residential property appraisal that is consistent with AQB criteria.  
The Board proposes to amend N.J.A.C. 13:40A-5.4(b) to expand the topics required in the mandatory continuing education course on New Jersey law and rules governing the practice of real estate appraising to specifically encompass the law and regulations concerning appraisal management companies. This proposed amendment is consistent with the Board now registering and supervising State appraisal management companies since July 2019. Additionally, the Board is expanding the examples of acceptable continuing education course topics at N.J.A.C. 13:40A-5.6 to include: automated valuation models and artificial intelligence, fair housing laws, natural resources, environmental impacts on real estate, and developing opinions on real estate value that include intangible assets.  
In addition, the Board proposes to delete N.J.A.C. 13:40A-7.5(b)2 and 3 to reflect changes in the brokerage industry and to align its rules with those of other states' jurisdictions.  
These Board provisions currently prohibit an appraiser from appraising his or her employing broker's listing and from conducting an appraisal on behalf of any real estate agent under the employ of the broker. The Board notes that it enacted these provisions prior to the 2010 changes to the Uniform Standards of Professional Appraisal Practice (USPAP) ethics [page=489] rule mandating disclosure of conflicts to the client prior to services being retained concerning the property to be appraised. The Board believes that the USPAP ethics rule sufficiently protects clients and, therefore, N.J.A.C. 13:40A-7.5(b)2 and 3 are no longer necessary. In addition, the Board notes that because of the consolidation of the real estate brokerage industry over the past 15 years, there are only a handful of commercial real estate brokerages that handle leasing and sales of multi-tenanted properties. The Board further notes that the now smaller industry has multiple divisions, including appraisal divisions, that, under the Board's existing mixed practice rule, are forced to decline services because many of the appraisers hold a real estate license. The Board believes, therefore, that the existing prohibitions limit the public's access to a broad pool of qualified appraisers. Large brokerage companies employ in-house appraisers that are highly qualified to complete such assignments and if they are forced to decline work through association with the "mother" company by virtue of their real estate license, the public has a smaller pool of qualified professionals from which to choose. The Board also notes that New Jersey is the only state that prohibits mixed practice.  
The Board has determined that the comment period for this notice of proposal shall be 60 days; therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this notice is excepted from the rulemaking calendar requirement.  
Social Impact  
The Board believes that the proposed amendments at N.J.A.C. 13:40A-7.5 will have a positive social impact upon the regulated community by reducing the circumstances in which the appraiser cannot perform an appraisal due to a conflict, as well as a positive social impact on the public by expanding the available pool of real estate appraisers. The Board also believes that the proposed amendments at N.J.A.C. 13:40A-1.3 and 5.4 will have a positive social impact upon members of the regulated community and the public.  
The proposed amendments at N.J.A.C. 13:40A-1.3 clarify for the regulated community the scope of practice of licensed real estate appraisers and certified residential real estate appraisers. In addition, these proposed amendments protect the public by ensuring that the regulated community and the public are aware that the appraisal of commercial properties is limited to certified general real estate appraisers whose education and experience includes commercial properties.  
The proposed amendment at N.J.A.C. 13:40A-5.4 will ensure that certified and licensed real estate appraisers are familiar with legal and regulatory developments in the Board's oversight of appraisal management companies.  
Economic Impact  
The Board believes that the proposed amendments at N.J.A.C. 13:40A-7.5 will have a positive economic impact on the regulated community and the public by expanding access to the pool of qualified real estate appraisers. The Board does not believe that the proposed amendments at N.J.A.C. 13:40A-1.3 and 5.4 will have any economic impact on the regulated community or the public.  
Federal Standards Statement  
A Federal standards analysis is not required for the Board's proposed amendments because the proposed amendments are governed by N.J.S.A. 45:14F-1 et seq., and they do not exceed standards and requirements set forth by the AQB, which may be viewed as establishing and setting forth Federal standards and requirements.  
Jobs Impact  
The Board does not believe that the proposed amendments will either increase or decrease the number of jobs in the State.  
Agriculture Industry Impact  
The proposed amendments will have no impact on the agriculture industry in this State.  
Regulatory Flexibility Analysis  
The Board certifies approximately 1,075 general real estate appraisers, and 1,100 residential real estate appraisers, and licenses 310 residential real estate appraisers. Any certified or licensed real estate appraiser that is a "business which is resident in this State, independently owned and operated and not dominant in its field, and which employs fewer than 100 full-time employees" would constitute a "small business" within the meaning of the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. (RFA), N.J.S.A. 52:14B-17. In addition, certified or licensed real estate appraisers may be employed by a "small business" within the meaning of the RFA. To the extent a certified or licensed real estate appraiser qualifies as a "small business" or is employed by a "small business" under the RFA, the following analysis applies pursuant to N.J.S.A. 52:14B-19.  
The proposed amendments do not impose any new recordkeeping, compliance, or reporting requirements. There are no costs associated with the proposed amendments and the positive economic impact is discussed in the Economic Impact statement above. No professional services will be needed to comply with the proposed amendments. The Board believes that the proposed amendments must be uniformly applied to all licensed or certified real estate appraisers. Therefore, no differing compliance requirements are provided based upon the size of the business.  
Housing Affordability Impact Analysis  
The proposed amendments will have an insignificant impact on the affordability of housing in New Jersey and there is an extreme unlikelihood that the proposed amendments would evoke a change in the average costs associated with housing because the proposed amendments merely refine an existing regulatory scheme to bring it into further alignment with AQB and USPAP standards.  
Smart Growth Development Impact Analysis  
The proposed amendments will have an insignificant impact on smart growth and there is an extreme unlikelihood that the proposed amendments would evoke a change in housing production in Planning Areas 1 or 2, or within designated centers, under the State Development and Redevelopment Plan in New Jersey because the proposed amendments concern the practice of real estate appraisal.  
Racial and Ethnic Community Criminal Justice and Public Safety Impact  
The Board has evaluated this rulemaking and determined that it will not have an impact on pretrial detention, sentencing, probation, or parole policies concerning adults and juveniles in the State. Accordingly, no further analysis is required.  
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-1.3    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]   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]   $ 400,000.  
1.    "Complex one-to-four-unit residential property appraisal" means one in which the property to be appraised, the form of ownership, or the market conditions are atypical. Licensed real estate appraisers shall not appraise a property that includes any commercial use.  
(b) The scope of practice of appraisers with the certified residential real estate appraiser qualification is the appraisal of [one to four]   one-to-four residential units without regard to transaction value or complexity.  Certified residential real estate appraisers shall not appraise a property that includes any commercial use.  
(c)-(d) (No change.)  
SUBCHAPTER 5.   CONTINUING PROFESSIONAL EDUCATION  
13:40A-5.4    Special course requirement(s)  
(a) (No change.)  
(b) All licensed and certified real estate appraisers shall be required to complete a two-hour course on New Jersey law and rules governing the practice of real estate appraising. The course, at a minimum, shall include: the origin and history of the Real Estate Appraisers Act, the Board composition, scope of practice, mixed practice conflicts of interest, continuing education requirements and criteria, temporary visiting certificates, trainee and supervisor requirements, appraisal reporting, [page=490] [and] common deficiencies,   appraisal management companies, and the complaint process.  
13:40A-5.6    Acceptable course topics  
(a) The Board shall approve only those continuing education activities and course topics as are deemed by the Board to be consistent with the purpose of continuing education. Examples of such course topics may include, but are not limited to: changes in the Uniform Standards of Professional Appraisal Practice; ad valorem taxation; arbitration; business courses related to practice of real estate appraisal; construction estimating; land use planning; zoning and taxation; management, leasing, brokerage,   and  timesharing; property development; State law and rules governing the practice of real estate appraising; real estate appraisal (valuation/evaluations), law, litigation, financing, and investment; real estate appraisal related computer applications;   automated valuation models and artificial intelligence; real estate securities and syndication; real property exchange; green building; seller concessions;   fair housing laws; natural resources; environmental impacts on real estate; and developing opinions on real estate value in appraisals that also include personal property and/or [business value]   business value/intangible assets.  
(b)-(c) (No change.)  
SUBCHAPTER 7.   GENERAL PROVISIONS  
13:40A-7.5    Mixed practice; conflict of interest  
(a) (No change.)  
(b) A real estate appraiser, who is also a real estate licensee or who is employed as an appraiser by a licensed real estate broker, shall not prepare an appraisal upon a property while[:  
1. The]   the  real estate appraiser also is acting in the capacity of a real estate licensee for any party with respect to any transaction involving the property to be appraised[;].  
[2. The employing broker of the real estate appraiser is acting as a real estate licensee for any party with respect to any transaction involving the property to be appraised; or  
3. Any real estate licensee who is working for the employing broker of the real estate appraiser acts as a real estate licensee for any party with respect to such transaction.]  
(c)-(d) (No change.)