Updated November 8, 2016 — A broker-associate’s employing broker will be public record beginning January 1, 2018. To view first tuesday’s analysis of this new law, see California Bureau of Real Estate (CalBRE) broker-associate employment to be public record.
Broker-associates enjoy the liberties of a broker license without the full responsibility of their own practice. How are they to be held accountable?
Broker-associates: Faux independents
Licensed real estate brokers have two options: work for themselves, or work for another broker. Each choice has its perks. However, when a broker chooses to work under another broker as a broker-associate, opportunities abound for the broker-associate to misbehave — and their supervising broker to shirk responsibility.
The California Bureau of Real Estate (CalBRE) currently does not publish the employing broker information for broker-associates on their online license lookup. A new bill introduced in February 2016 aims to increase public accountability for broker-associates, calling for the broker-associate’s relationship to their employing broker to be listed on their public license lookup.
Legal loopholes for broker-associates
Broker-associates are considered legally equal to sales agents when they work under another broker’s employment, meaning they are subject to the same limitations. For example, broker-associates are still considered “agents of the agent” acting on behalf of their employing broker. Both broker-associates and sales agents are considered associate licensees to the employing broker. [Calif. Civil Code §2079.13]
Further, the broker-associate’s employment agreement with their employing broker most often indicates the broker-associate (agent) agrees to provide real estate services to clients only on behalf of the employing broker. Thus, the scope of the broker-associate’s employment is limited in the same manner as that of a sales agent. [See RPI Form 505 and 506]
Editor’s note — Despite the obvious practicality of requiring a broker-associate to work only for a single broker, some employing brokers may not require broker-associates to agree to exclusive employment. This obligation or lack thereof is spelled out in the employment agreement provided by the employing broker.
Despite this equal standing as associate licensees, broker-associates are currently not held to the same accountability requirements regarding public information. For example, sales agents are required to notify the CalBRE immediately when they change employing brokers — but broker-associates are not. [Calif. Business and Professions Code §10161.8]
Contrarily, broker-associates are actively discouraged from naming their employing brokers on CalBRE forms, including the Broker Change Application, which all licensed brokers are required to use to update their personal information. The form instructions state:
When using the proper broker forms no reference should be made to the name (or fictitious name) of the broker for whom the broker-salesperson works. That type of information is irrelevant as there is no reference in the CalBRE records that such a working relationship exists.” [See RE 204]
If the CalBRE retains no record of a broker-associate’s employer, how is a client supposed to know who is responsible when a broker-associate mistreats them?
Existing accountability for broker-associates
Broker-associates are held accountable in everyday transactions when they follow protocol and list their employing broker on transaction forms. Exclusive employment agreements require the broker-associate — legally acting as an associate licensee, and thus an agent, of the broker — to name themselves as the agent of the transaction, and their employing broker as the broker of the transaction. [See RPI Form 102 and 103]
Additionally, agents are required to disclose their agency relationship as the buyer’s agent, seller’s agent or a dual agent in the purchase agreement. The purchase agreement also includes the employing broker’s information. [CC §2079.17; See RPI Form 150]
Thus, a client will have the employing broker’s information documented in the client’s employment agreement, or listing, with the broker-associate — if the broker-associate plays by the rules. However, some broker-associates may circumvent accountability by listing themselves as the broker of the transaction; since they have a broker’s license, the client is none the wiser and the employing broker exposed to risk gets none of the transaction fee.
Statutory guidance for broker-associate employment
In fact, there are several regulatory loopholes for broker-associates, mostly provided simply through vague regulatory language. For example, legal codes refer to broker-associates as associate licensees, but the CalBRE intentionally refers to them only as brokers. This language gap leaves room for inconsistent interpretations, resulting in abuse of broker-associate privileges and fee divisions — and many unanswered questions.
For example, since the CalBRE recognizes broker-associates as brokers, is a broker-associate able to work for multiple brokers?
The new bill seems to suggest they can. The bill states the licensee information made public by the CalBRE will, “if the associate licensee is a broker, identify each responsible broker with whom the licensee is contractually associated […].”
However, as mentioned above, standard employment agreements usually indicate the broker-associate is not to provide real estate services on behalf of anyone but the employing broker. When employment agreements dictate the broker-associate’s rights, then broker-associates may not work for multiple brokers, regardless of their broker’s license. [See RPI Form 505 and 506]
CalBRE responds to AB 2330
Dan Kehew, an attorney with the CalBRE, responded to first tuesday’s inquiries about the bill and appropriate broker-associate conduct. Officially, the CalBRE has not taken a stance in favor of or against the new bill.
Kehew stated the results of the bill, if it passes, are unclear. For now, the CalBRE can only anticipate requesting the voluntary disclosure of employment information from broker-associates in order to post it on the public license lookup.
Also, specific instances of broker-associate misbehavior injurious to the public and citing a need for the bill were not discovered. The CalBRE’s Enforcement branch indicated to Kehew discrepancies with advertising materials are the primary disciplinary scenarios at issue relevant to the bill.
The only definitive clarification provided is this: “There is no standard limiting contractual relationships.” Thus, neither California real estate law nor the CalBRE has limited broker-associates’ ability to work for multiple employing brokers. Instead, the employing broker’s contract with the broker-associate is the only determinant of a broker-associate’s employment limitations.
However, broker-associates with MLO endorsements need to ensure their employing brokers also have MLO endorsements.
Maintaining professionalism in real estate services
Until the bill is passed, it is up to employing brokers to maintain professional accountability for the broker-associates in their employment. Employing brokers are mandated to consistently supervise all agents in their practice to ensure they are upholding correct business practices — and that includes broker-associates. [Bus & P C §10177(h)]
As for broker-associates, knowledge of the limitations and requirements of their employment status is critical. Licensed brokers considering employment in another broker’s practice, or sales agents considering obtaining a broker license, need to understand the different responsibilities brokers incur when choosing to use their broker license as:
- a sole proprietor;
- a corporation; or
- a broker-associate.