The Best of the Legal Hotline: Changing Brokers


 Tracy Rucka  |    January 10, 2007
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Agents moving 

An agent is thinking about changing brokers. What is the process?

Abide by the contract 

The agent should read his or her independent contractor agreement, review office policies and follow all agent departure procedures. A comprehensive office policy will contain requirements regarding the timing of an agent’s notice to terminate; checkout procedures for handling files, lists of leads, computers, keys, signs, and lock boxes; guidelines for communication with sellers, clients and customers; and other matters.

Report changes to the Department of Regulation and Licensing (DRL) 

Within 10 days of termination, either the employee or the broker-employer must submit Form #766, Notice of Termination of Employment of Broker or Salesperson. There is no fee required with a notice of termination. If the departing licensee was a business representative of the real estate business entity, a Form #2018, Notification of Change in Structure of Licensed Real Estate Business Entity, is required if the broker is also resigning as a business representative.

To move the license to a new company the new broker completes Form #812, Notice of Real Estate Employment, which requires a $10.00 application fee. The licensee may act for the new broker-employer once Form #812 has been properly completed and mailed with the fee to the DRL. Forms are available online at http://drl.wi.gov/prof_docs_list.asp?profid=116&locid=0. It is prudent for both the former and future employing brokers and the licensee to use the DRL licensee lookup to assure proper processing with the DRL at http://online.drl.wi.gov/LicenseLookup/LicenseLookup.aspx.

Report changes to the local association

Updating REALTOR¬ģ membership is independent from reporting to the DRL, therefore the agent must also contact his or her local association to update the REALTOR¬ģ membership records.

New company, new listings? 

An agent is leaving a company and wants to list a seller’s property immediately with his new company. Can the agent terminate the listing and can the new company take the listing?

No, only the broker has the authority to sever the agency relationship with the agent’s sellers. The agent provides brokerage services under the authority of and on behalf of the broker-employer. Although the agent plans to leave the current real estate company, the agent owes a duty of loyalty to the current broker. Directing sellers to list with another company would violate that loyalty, and could constitute tortuous interference with contract. The termination provisions in the DRL-approved listings require broker approval to terminate or shorten the term of the listing.

A licensee who coaches a seller about how to terminate a listing or a buyer about how to terminate a buyer agency contract may be accused of license law and ethical violations. Such conduct may be viewed as giving legal advice in violation of RL § 24.06(1) and Article 13 of the Code of Ethics. It also may be seen as interference with the other broker’s agency contract in violation of Article 16 of the Code of Ethics. A person who interferes with a contract may also be sued in civil court if damages can be proved. Unless the broker agrees, all listings and buyer agency agreements remain with the broker.

Continuation of brokerage services 

Since the agent cannot terminate the listings, who will provide brokerage services to the clients the agent was working with after the agent leaves the company? Can the listing agent negotiate referrals to another agent in the company?

The broker has the authority to decide who will provide brokerage services. After the agent’s departure, regardless of the agent’s personal relationship with clients and customers, the agent will no longer have authority to provide brokerage services. Some brokers may service the clients themselves while others will assign other agents in the company to continue services.

If office policy allows agent-to-agent referral agreements, the broker’s consent should be obtained regarding another agent servicing customers and clients. If the in-house referral modifies the commissions in the originally negotiated independent contractor agreement it is best to document concurrence, in writing with both agents and brokers, to minimize later disputes.

Commissions 

Recently an agent left one real estate company to go to another company. Prior to the agent leaving, she wrote an offer for a buyer that was accepted by the seller. The property was listed by the broker of the first company. Will the commission for that transaction be paid directly to the agent or must it be paid through her new broker?

The broker of the first company may pay the agent directly. The payment is made pursuant to the independent contractor agreement between the first broker and the agent for the work that was done prior to the agent’s departure.

Entitlement to commission 

An agent has moved to a new company. Before he left he had written an offer on a property that was about to close. The former broker is keeping all of the commission. Can the former broker do this?

Wisconsin real estate statutes and administrative rules do not address commission policies between an employer/broker and a salesperson. The entitlement to a commission in this situation depends upon the contract between the broker and agent (i.e., independent contractor agreement, company policy and procedures manual). If the contract does not cover the situation, prior actions of the broker in this regard and the prevailing practice in the industry are factors the court would consider if the agent sues the broker.

The agent may attempt to have the dispute arbitrated at the local association, provided the previous broker agrees to arbitrate. Arbitrations between agents and their brokers are considered voluntary arbitration under Article 17 of the Code of Ethics.

An agent is no longer with her former broker; there were commissions due on six transactions. Now the broker informed the agent he would not be paying any of the commissions and declined participation in REALTOR¬ģ arbitration. What is the agent‚Äôs next step?

The agent’s right to commission(s) in each transaction depends upon the compensation agreement entered into between the agent and the broker. Generally, each transaction creates an independent claim for commission where an agent may bring a separate action in small claims court for each commission due.

Buyer agents 

An agent is considering changing brokers. The agent is a buyer agent for two transactions that will not close until after the change. Can the agent attend the closings after leaving the company and if so, in what capacity?

Like the listing contract, the buyer agency agreement is a contract between the buyer and the broker, not the agent. The broker’s agent solicits and enters into the buyer agency contract as the broker’s agent and on behalf of the broker. When an agent leaves the broker, the agent’s departure does not terminate the buyer agency or permit the agent to take the buyer with him/her to a new broker nor will the agent continue to provide services to the buyer.

Upon the agent’s departure from the company, the broker, or another agent assigned by the broker to the buyer, will provide brokerage services to complete the pending transactions. The departing agent may not engage in activity that would interfere with the agency relationship the broker has with the client. If the buyer calls the agent, the buyer should be referred to the broker or legal counsel.

Starting smarts 

Although brokers and agents may think it sounds pessimistic, make sure that the independent contractor agreement entered into by a new agent satisfactorily addresses what will happen should the relationship end. It is prudent and beneficial for both agents and brokers to have a comprehensive agreement regarding employment expectations. A broker is required by license law to provide written policies regarding the handling of leases, listing contracts, offers to purchase and other transaction documents. A good office policy also spells out the lines of authority, the process for dispute resolution and otherwise lays out the expectations and obligations of each of the parties. An agent should make sure to request a written copy these policies and a written independent contractor agreement that delineates the compensation agreement is a must. Get it in writing! The WRA Office Policy Manual Guide may be used as a template (www.wra.org/officepolicymanual).

Tracy Rucka is a Staff Attorney for the WRA.

 Editor’s note: The DRL became the DSPS in 2011. Information above may not be current. 

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