GREC REnews, Vol. 2, Issue 10 (Oct. 2006)

Georgia Real Estate Commission

GREC RENEWS

Volume 2, Issue 10 October 2006

2006 Dates to Note
October 6, 2006 Trust Account Seminar Columbus Board of Realtors (706) 323-1701
November 2&3, 2006 Georgia Instructors Training (GIT) Georgia Institute of Real Estate (404) 252-6768
November 28, 2006 Trust Account Seminar I-85 North Board of Realtors (706) 335-3044
December 14, 2006 Advanced Instructor Training Athens, GA
December 15, 2006 Annual School Meeting Georgia Center for Continuing Education Athens, GA
GREC Disciplinary Sanctions
INSIDE THIS ISSUE:
Real Estate Teams 1
Payment and Disclosure of Team Referrals 2
Focus on Terminology:
"Referral"

Being Part of A Real Estate Team
Some real estate professionals choose to combine talents and work as a "team." The license law does not identify or recognize the "team" concept as a legal entity. Thus, under the license law a "team" is merely a marketing strategy approved by the firm's broker. The broker, not the "team" leader, is ultimately in charge and responsible for the actions of the "team." Consider the following issues related to "teams:" The Commission issues only a broker's license to a business entity (e. g. a
corporation of an LLC). Such a firm must have a qualifying broker. Therefore, the Commission does not license a "team" made up of salespersons and/or associate brokers even though the "team" itself may be a business entity. The broker can pay commissions to a business entity that is a "team" only if the following conditions are met:
The business entity does not perform real estate brokerage activity. A "team" member earned the fee in behalf of the brokerage firm. The licensee being paid owns more than 20% of the unlicensed firm. The broker has written evidence that the licensee owns more than 20% of the business entity. The broker and the licensee have a written agreement authorizing payment of a commission. Even if licensees are members of a "team," the broker is the ultimate authority in charge of the "team's" brokerage activity. The "team's" division of duties to licensed and unlicensed assistants may even increase the responsibility and liability of the broker. The division of duties among "team" members is subject to the firm's brokerage policies. The broker may have conditions for the development of a "team" structure. In fact, the broker may choose to disallow or discourage "teams." The broker must have clear, written, independent contractor agreements with each licensee member of the "team." Forming a "team" or being a member of a "team" does not reduce an individual's responsibility under the license law.
The broker of a firm that includes a "team" must carefully make clear that the "team" cannot act autonomously. The broker is responsible for all brokerage activity involving the firm; and she needs to minimize her risk and liability by making it clear that each licensee is under her direction, whether acting as a member of a "team" or as an individual licensee.
References For this Article: GaCode GREC, and Georgia Realtor Magazine, "Team Real Estate," by Seth Weissman, October 2002.

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Georgia Real Estate Commission
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GREC

Focus on Terminology: "Referral"

Volume 2, Issue 9 September 2006

The term "referral" in real estate usually suggests involvement of two licensees, one referring a customer or client to the other, who performs the brokerage services. The referring agent typically expects to receive some type of compensation. The party being referred must be informed that the licensee will receive payment.
The act of referring someone does not have to be such a direct action. It may be simply a member of a team receiving a small percentage or a flat fee for performance of a small task in the transaction. Nevertheless, the referral must be disclosed. O.C.G.A. 43-40-25

Payment and Disclosure Of Referral Fees When Working As A Team

Only the broker can pay his licensees commissions and referral fees. Even if a real estate "team" is set up as a business entity and members of the "team" receive referral fees, the broker may chose to pay such fees directly to the "team" members or to the "team" leader. "Team" members cannot pay other "team" members commissions or referral fees unless they were first received from the "team's" broker.
Even if a member of the "team" is not the selling or buying agent, a full disclosure regarding any fees must be made to the parties involved.
Referrals within the same brokerage firm require the same disclosure as those between different brokerage firms. A referral fee cannot be paid unless the person being referred has been informed.
License Law [O.C.G.A. 43-4025 (a)] describes sanctions the GREC may impose upon licensees who fail to disclose the payment of fees. Those sanctions include: (1) refuse to grant or renew a license to an applicant; (2) administer a reprimand; (3) suspend a license; (4) revoke a license or approval; (5) revoke the license of a broker, qualifying broker, or associate broker and simultaneously issue such licensee a salesperson's license; (6) require reimbursement to the Commission for expenses incurred in conducting any proceeding under the
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'Georgia Administrative Procedure Act'; (7) impose a fine; (8) require completion of a course of study; (9) require reports on the trust account from an independent accountant; or (10) limit or restrict any license.
That list suggests that failure to disclose a referral fee could have significant, if not disastrous, results for a licensee.
O.C.G.A. 43-40-25 (b) provides that licensees shall not engage in any unfair trade practices of which 35 are specifically described. Referrals appear in particular in number 35.
(35) Failing to obtain a person's agreement to refer that person to another licensee for brokerage or relocation services and to inform such person being referred whether or not the licensee will receive a valuable consideration for such referral. Georgia Code 4340-25 Link
Just as every real estate broker must have certain policies and systems implemented, a real estate "team" needs to have policies and procedures mirroring those of the broker to ensure that disclosures are properly made and in a timely manner. A disclosure form designed to fit the unique practice of the real estate "team" is a possible solution.
However, remember that the real estate "team" is still under the direction and supervision of the qualifying broker of the brokerage firm.