BROKER ALERT
HANDLING INTRA-OFFICE AGENT DISPUTES
Recently, given the challenges in the real estate market, there has been an increase in agent disputes regarding commissions. The disputes become particularly challenging when the dispute is between two agents in the same office or licensed with the same broker. The following addresses recommendations to brokers regarding the handling of these disputes.
The California Association of Realtors’ Independent Contractor Agreement provides:
Paragraph 8C:
Partners, Teams, and Agreements with Other Associate-Licensees in Office: If Associate-Licensee and one or more other Associate-Licensees affiliated with Broker participate on the same side (either listing or selling) of a transaction, the commission allocated to their combined activities shall be divided by Broker and paid to them according to their written agreement. Broker shall have the right to withhold total compensation if there is a dispute between associate-licensees, or if there is no written agreement, or if no written agreement has been provided to Broker.
If agents cannot resolve their differences, it is recommended that brokers stay out of the dispute and hold the portion of the commission in dispute until either the agents resolve the issue or obtain an order affirming the entitlement to the commission.
Brokers should initially advise agents to work toward a resolution between themselves. While brokers can work toward facilitating that resolution, brokers must be careful not to favor one agent over another; brokers should remain neutral between the two agents. Brokers should not act as a “mediator” between the agents. If the agents resolve their differences, the brokers should require a written agreement signed by both agents instructing the broker as to how the commission should be paid. If the agents cannot reach resolution, the agents should proceed to a mediation either before the local association or the California Association of Realtors. If they still cannot resolve their dispute, they should proceed to an association arbitration. When the arbitration panel issues an award and it becomes final (after any appeals), the broker can release the commission in accordance with the panel’s decision.
Brokers need to be cautious in handling these disputes for a number of reasons. Brokers should seek to avoid becoming embroiled in an agent dispute. Not only will that cause disruption within the brokerage, but could lead to a claim being asserted by one of the agents or the other, which can get expensive.
DO NOT FORWARD TO SELLERS OR BUYERS. This Broker Alert is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.