The Best of the Legal Hotline: Time to Transfer?


 Tracy Rucka  |    November 10, 2016
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In anticipation of license renewal season, the WRA Legal Hotline receives calls about licensees changing trains by moving from one firm to another firm, jumping off the train by contemplating retirement, or preparing to start a new journey with a new firm. If you are thinking about making a change, you have multiple tracks or relationships to consider: you and the DSPS/REEB, you and the firm, and you and the REALTOR® association.

You and the DSPS 

What paperwork needs to be sent to the DSPS if a licensee wants to leave the current firm? 

Form #766 Notice of Termination of Licensee Associated with Firm must be filed with the DSPS. The form is available online at dsps.wi.gov/Licenses-Permits/RealEstateBroker/REBRforms

If a licensee does not renew by December 14, does the firm need to notify the DSPS? 

Yes. Although it may seem counterintuitive, the #766 Notice of Termination of Licensee Associated with Firm must be filed for each licensee with a nonrenewed license. Brokers have a duty to assure that licensees are properly credentialed. Submitting form #766 is evidence the broker is complying with the supervision rule. 

Change of plans? If a licensee wants to renew after December 14, what is that process? 

The question of renewal includes a matter of timing. If a licensee does not renew before the end of the biennium, the licensee may renew late. If it is within a five-year period to renew late, the licensee must complete appropriate CE, pay the late fee and the license fee. After the five-year window passes, an individual would need to begin again with sales pre-licensing requirements to once again obtain a license. 

How does a broker go about closing a trust account when the broker plans on retiring? 

If a broker currently has a trust account and is thinking about closing it, the first question is whether the account includes any remaining client funds. The trust account must be kept open until no funds remain. At that point, if up to $300 of the broker’s personal funds remain in the account, the broker may withdraw the $300, and the account may be closed. Wis. Admin. Code § REEB 18.035(2) provides that when a trust account is closed, the broker should notify the DSPS by letter — there is no specific form. When notifying the DSPS, the broker should be sure to include the trust account name and number. The letter may be addressed to the Department of Safety and Professional Services, Division of Professional Credential Processing, 1400 E. Washington Ave., P.O. Box 8935, Madison, WI, 53708.

Can a licensee receive commission after choosing not to renew his or her license? 

No. The Real Estate Examining Board (REEB) recently stated a policy clearly indicating that in order for a broker to pay an individual a commission or referral fee, that individual must have a current real estate license. The individual must be licensed when the contract is entered into, when the commission or referral fee is earned, and at the time of payment.

Accordingly a broker may not offer to pay or pay a referral fee or commission to a person who does not have a valid and active license. 

You and the firm

How does the agent terminate from the firm? 

When jumping out, the agent should plan ahead and exit gracefully. A wise agent would review the ICA office policy and follow it. Some companies want notice; some do not. 

Can a licensee still receive commission or a referral fee after terminating from the firm? 

Yes, so long as the licensee renews his or her license, and the payment from the former broker is allowable under the independent contractor agreement. 

What about procuring cause after an agent terminates from a firm? 

In procuring cause analysis, an agent’s real estate brokerage activity is attributed to the firm with which the agent is associated. Presuming the uninterrupted series of events that resulted in the sale of the property to the buyer occurred during the agent’s association with the first firm, the first broker would have an expectation of the MLS offer of compensation based on the activity of the agent before the release. The agent’s right to compensation from the former employing broker would then be subject to the compensation and termination terms of the independent contractor agreement. The former firm may contact the listing company with inquiries about a procuring cause claim. 

How does a broker go about starting a new firm? 

An individual may create an LLC with the Wisconsin Department of Financial Institutions at www.wdfi.org. Once an entity is formed, for example an LLC, the entity may apply for a Real Estate Business Entity license with the Real Estate Examining Board at dsps.wi.gov/Licenses-Permits/RealEstateBusinessEntity/REBEforms, however, the REEB will only issue an entity license if there is an individual with a broker’s license for the entity. 

If an entity license is acquired, then the individual’s license and the entity license may be held by the brokerage firm. The agent may review company policy to determine if the firm wants the individual and entity license held with the broker. The independent contractor agreement may be modified to address the formation and payment of the entity. 

You and the REALTOR® association 

How does the DSPS differ from the REALTOR® association?

Keep in mind that REALTOR® association dues are separate and independent from your license renewal fees. 

Can a licensee renew his or her license, while choosing to not to stay with the firm and the REALTOR® association, and still do referrals? 

Yes, the negotiation of referral fees should be on a transaction-by-transaction basis and should be reduced to writing to assure enforceability. Before paying a commission or referral, the broker should check the licensure of the receiving licensee by using the DSPS license search online at app.wi.gov/licensesearch. Wis. Stat. § 452.19 limits the payment of referral fees, finder’s fees and commission splits to Wisconsin real estate licensees and persons regularly and lawfully engaged in real estate brokerage in another state. The referral fee may be paid to a person with either a broker or salesperson license. A licensee does not need to be currently employed by a broker to receive a referral fee. Pursuant to Wis. Stat. § 452.14(3)(f) and 452.19(2), any referral fee received by a licensee associated with a firm — whether licensed as a broker or a salesperson — in connection with a real estate transaction may be received only through the firm. A salesperson not associated with a firm, however, may make a referral and directly receive a fee.

See Legal Update 02.01 regarding referral fees agreements at www.wra.org/LU0201 and the checklist for referral fee agreements at www.wra.org/LU0212.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.

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