CHECKS AND BALANCES: FURTHER REFLECTION ON GOVERNOR BEVINS

EXECUTIVE ORDER AND THE KENTUCKY REAL ESTATE AUTHORITY1

By Andrew C. Weeks2 & Michael F. Lawrence3
December 8, 2016
Governor Bevins Executive Order No. 2016-859 has created a glaring conflict
between Kentuckys legislative and executive branches of government. The new makeup
of the four real estate boards affected are in direct violation of the Kentucky statutes that
formed the boards. A quick refresher on our system of checks and balances: generally, a
legislative statute takes precedence over an executive order. Whether Kentuckys new
Republican controlled senate and house changes the statutes to protect Governor Bevins
Executive Order remains to be seen. Furthermore, the Executive Order may miss the
entire point of the Supreme Court opinion on which it relies.
KRS 324.281 mandates that the Kentucky Real Estate Commission (KREC) shall
have five board members consisting of four licensed real estate agents and one citizen
who is unassociated with the industry. Governor Bevins new Board of Realtors consists
of three board members. All three new board members are licensed real estate agents.
This means there are no citizens unassociated with the industry on the board.
KRS 324A.015 mandates that the Kentucky Real Estate Appraisers Board
(KREAB) shall have five board members consisting of two licensed appraisers, one
citizen unassociated with the industry, and two members associated with the lending
industry. Governor Bevins new Board of Appraisers consists of three board members.
Two of the new board members are licensed appraisers and the third member is involved
in the lending industry. This means there are no citizens unassociated with the industry
on the board.
KRS 330.050 mandates that the Kentucky Board of Auctioneers (KBA) shall have
five board members consisting of four auctioneers and one citizen unassociated and
without a financial interest in the industry. Governor Bevins new Board of Auctioneers
consists of three board members. All three new board members are auctioneers. This
means there are no citizens unassociated with the industry on the board.
KRS 198B.704 mandates that the Kentucky Board of Home Inspectors (KBHI)
shall have nine board members consisting of five active licensed home inspectors, one
home builder, one licensed real estate agent or broker, one licensed manufactured home
1

This article is the second in a two-part series examining Kentucky Executive Order No. 2016-859 which
reorganized Kentuckys four real estate boards and created a new administrative agency to oversee them called
the Kentucky Real Estate Authority.
2
Andrew C. Weeks is an associate attorney with Lawrence & Lawrence, PLLC in Louisville, Kentucky. He graduated
magna cum laude from the University of Louisville Brandeis School of Law in May, 2016. He is licensed to practice
law in Kentucky. He can be contacted for questions at ACWeeks@RealLawKy.com.
3
Michael F. Lawrence is the senior partner at Lawrence & Lawrence, PLLC in Louisville, Kentucky. He has over 25
years of experience representing Kentuckys real estate professionals. He is licensed to practice law in all Kentucky
state courts, the Western District of Kentucky, the Eastern District of Kentucky, and the Sixth Circuit United States
Court of Appeals. He can be contacted for questions at MFLawrence@RealLawKy.com.

retailer or installer, and one citizen unassociated with the industry. Governor Bevins new
Board of Home Inspectors consists of three board members. Two of the new board
members are licensed home inspectors and the third member is a home builder
representative. This means there are no citizens unassociated with the industry on the
board.
The newly created Kentucky Real Estate Authority (KREA), not created pursuant
to a real estate industry statute, is to consist of five members. The Commissioner of the
Department of Professional Licensing is to appoint the executive director of the KREA
with written approval from the governor. The KREAs board is to consist of the Executive
Director of the KREA (Chair), the Chair of the Board of Realtors (currently a licensed
realtor), the Chair of the Board of Appraisers (currently from the lending industry), the
Chair of the Board of Auctioneers (currently a licensed auctioneer), and the Chair of the
Board of Home Inspectors (currently a licensed home inspector). Because the Executive
Director of the KREA has yet to be appointed, the KREA currently lacks even one citizen
unassociated with the industry (or non-market participant).
Aside from the Executive Orders conflict with Kentuckys legislative branch, the
Order misses the issues presented in the United States Supreme Court opinion on which
it relies, North Carolina State Board of Dental Examiners v. Federal Trade Commission,
135 S. Ct. 1101 (2015). In State Board of Dental Examiners, anti-trust immunity was not
given to board members because the Board, made up almost entirely of marketparticipants (dentists), were not subject to state oversight as they actively sought to
discourage their competitors from competitive activity under the guise of state
supervision. The issue was individuals whitening teeth who were not dentists. Under
North Carolina law whitening teeth is not practicing dentistry and thus the dentists were
exceeding the scope of their statutory limits. Furthermore, the Board, rather than use the
rulemaking process, sent cease and desist letters that were not reliant on statute or rule.
If the Board had instituted the rule-making process or filed suit rather than sent letters
that would not be subject to independent state supervision then the case may have ended
with a different result.
Since Governor Bevins Executive Order completely tramples the statutory limits
of Kentuckys real estate boards, it is in direct conflict with the underlying premise stated
in the State Board of Dental Examiners opinion. Stripping all four boards of their statutorily
required unassociated citizens at large (non-market participants) adds a layer of industry
bias to the regulatory process as well as exceeding Governor Bevins statutory authority.
Although Kentuckys real estate boards will now have state oversight through the
Department of Professional Licensing, they will not have a single non-market participant
involved in the process. More importantly, Kentuckys boards will still make the initial
decision regarding licensing issues and discipline. The boards could still send out
unsupervised cease and desist letters that were the very issue in the State Board of
Dental Examiners. State Board of Dental Examiners was as much about statutory bounds
and following the statutory rule making process as it was about state supervision of
boards made up of market participants. In State Board of Dental Examiners, the Board
could have filed suit rather than send individual letters or it could have initiated the rule
making process. Governor Bevins Executive Order has not added the necessary state
2

supervision at issue in State Board of Dental Examiners and has not addressed the
statutory limits issue presented in the opinion. By adding another layer of bureaucracy
and completely removing all citizens from the decision-making process Governor Bevin
has traded one problem for another. Is the newly minted Department of Professional
Licensing enough state supervision to promulgate regulations based solely on
recommendations of market participants; oversee the independent actions of Kentuckys
real estate boards; and meet the spirit and intent of North Carolina State Board of Dental
Examiners? I guess we will find out soon enough.