Legally speaking: So you’re transferring your license…
On February 2, 2015
By Peg Ritenour, OAR Vice President of Legal Services/Administration
Over the course of their real estate career, most agents usually work for more than one brokerage and some even transfer their license multiple times. This process of leaving a brokerage cannot only be emotional, but can involve issues regarding listings and commissions.
Whenever an agent is terminating a relationship with their broker the first thing that they should do is review any independent contractor agreement they may have with the brokerage and any relevant written brokerage policies regarding their rights and obligations upon termination. The Q &A below addresses some of the most common questions regarding listings when agents transfer their license and assumes that there are no such provisions addressing your rights and obligations regarding your listings.
Q: I am transferring my license to another brokerage and have several active listings. Can I take those with me to the new brokerage?
A: I am sure the decision to list with your brokerage also involved a desire by the sellers to have you represent them as the listing agent. However from a legal standpoint, the sellers entered into an exclusive right to sell agreement , under which the seller contractually agreed to be exclusively represented by the brokerage for the term of the listing. While some brokers in this situation may agree to release the listing, absent some provision to the contrary, the brokerage has no legal obligation to do so because you are leaving the brokerage. Therefore, these listings cannot be taken by you to the new brokerage without the broker’s consent.
Further, because listing agreements are considered to be personal service contracts, even if your current brokerage agrees to release these listings, you must also obtain the consent of the seller to be represented by the new brokerage to which you are transferring your license. Moreover, in some instances the seller may wish to continue to be represented by the current brokerage and not the brokerage to which you are transferring your license. However if the seller wants to follow you to your new brokerage (and the current brokerage agrees to release the listing) you should have the seller sign either a new listing or an assignment of the existing listing. In addition you will also need to give the seller your new brokerage’s Consumer Guide on Agency.
Q: Can I call the sellers whose properties I have listed before I leave to let them know that I am transferring and suggest they contact the broker to obtain a release of their listings? Can I offer the sellers a better commission rate at the new brokerage?
A: You need to be very careful about discussions with your sellers that involve terminating their current listing contract. Standard of Practice 16-20 of the NAR Code of Ethics provides that “REALTORS, prior to or after their relationship with their current firm is terminated, shall not induce clients of their current firm to cancel exclusive contractual agreements between the client and that firm.” Whether a REALTOR’s actions constitute a violation of this provision would be determined by a Professional Standards panel following a hearing at the REALTOR’s Local Board. Thus, I would not initiate any discussion of this nature with the seller and would certainly not offer them anything that could be construed as an inducement to pressure the broker for a release of their listing. In addition to the Code of Ethics, you should also review any independent contractor agreement you have with your broker as it could include a provision that you will not take any action that is detrimental to the brokerage.
Q: What if the sellers tell me they want to follow me to the new brokerage and the sellers are the one who initiates that discussion?
A: In this case I would merely tell the sellers that they have a contract with the current listing brokerage and that this is something they need to discuss with the broker and end the conversation.
Q: I mailed my application to transfer my license to the new brokerage, but it hasn’t been processed by the Division of Real Estate and Professional Licensing yet. I just got a call from a seller on a prospective listing. Although my license hasn’t transferred yet, is it ok for me to go on a listing presentation as long as another agent or manager from the new brokerage goes with me?
A: A salesperson can only act on behalf of a brokerage when the Division of Real Estate has actually issued a license in the name of the new broker. Until that happens you are technically still licensed with your “old” broker. Therefore, you should not make listing presentations or do anything on behalf of the new brokerage until your license has actually transferred to that new company.
Next week I will address commission issues that can arise when an agent transfers to a new brokerage.