Arkansas Real Estate Commission to investigate FCRA director over 2% merit pay

The Arkansas Real Estate Commission is investigating Fort Chaffee Redevelopment Authority (FCRA) real estate transactions following a complaint filed against FCRA Executive Director Daniel Mann and FCRA.

In a letter dated Sept. 6, the Arkansas Real Estate Commission notified Mann and the FCRA that a complaint had been filed by Steve Beam, president of Steve Beam Construction, stating that Mann and FCRA may have violated state real estate licensing law.

Dalton Person, FCRA attorney, said the complaint states there is a violation in regards to Arkansas State Real Estate Law and The Real Estate Settlement Procedures Act (RESPA).

“RESPA is federal law that is not applicable to this,” Person said. “It has to do with real estate mortgage loans.”

“This complaint was filed by Steve Beam who is on a crusade against FCRA and the executive director,” Person added.

RESPA was signed into law in 1974 and has had a number of changes since it became effective in June 1975, “all with the intent of informing consumers of their settlement costs and prohibiting kickbacks that can increase the cost of obtaining a mortgage,” according to the National Board of Realtors website. The act was created to provide consumers with improved disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks.

The complaint contends that a stipulation in Mann’s contract that FCRA agrees to pay Mann a “merit compensation” of 2% of the sale price of all real property transactions in which FCRA is the seller of the property as long as he is the CEO.

Beam alleged Monday (Sept. 11) that the 2% commission has led to questionable real estate dealings.

“The way FCRA has dealt with buyers has just changed since this (commission) started. We, and you can ask all those doing business out there, purchasing land, never had these types of problems with Ivy (Owen, former executive director and CEO) and even with Daniel Mann before this was added,” Beam said. (Mann did not respond to Talk Business & Politics inquiries about this story.)

He mentioned FCRA dealings with the City of Barling, Alejandro Fuentes, the City of Fort Smith and others. He said though the contract called the bonus pay “merit pay,” it is indeed a commission on real estate transactions, which he contends is in violation of Arkansas real estate law.

The merit pay stipulation was not in Mann’s original contract when he was hired in 2019, Person said. It was added with the contract dated Dec. 16, 2021, Mann said previously.

“My understanding is that in lieu of any merit compensation Mr. Owen received irregular bonus payments,” Mann said. “One might think this would lead to the chief executive officer seeking to accept almost any offer to maximize merit pay, but that has not been the case. The FCRA continues to work towards only accepting offers that further the highest and best use of its land.”

Since the merit pay was added to the contract, the FCRA trustees have enacted policies that provide them with ultimate oversight of all real estate offers.

Beam said even though the 2% commission is listed as a merit pay instead of a commission it is still in violation of the Arkansas Real Estate Law. Commission on the sale of property is only to go the buying agent or selling agent in a real estate transaction in Arkansas, and the law stipulates that only licensed real estate can act as either a buying or selling agent. However, there are exceptions to the law, Person said, noting Arkansas Code 17-42-104. Among those exceptions is an exception for a person employed by the owner of the property being sold. In this case, Mann is employed by FCRA, which owns the property at Chaffee that is being sold.

“The (FCRA) board asked me to look into the legality of Mann receiving the merit pay a couple of years ago. My research showed it was legal and that is the same information I will use when I respond to this complaint,” Person said.

In October 2022, FCRA decided to end its use of real estate brokers, meaning the duties of selling the property now fall primarily to Mann. Mann said in March this had led to a significant reduction in expenses for the authority.