Q: I have been approached by an Agent who holds a Salesperson’s License; she is affiliated with another Broker but she does not do a lot of listings or sales. She wants to hold my listings open on days when I am not available. She has also offered her services as a transaction coordinator and/or as my licensed assistant which is very appealing because I am swamped with work. Are there any potential problems with taking her up on some or all of these offers?
A: Yes, there are significant potential legal and business problems with her offers. This Tip will deal with each of the offered services.
ANOTHER BROKER’S AGENT HOLDING YOUR OPEN HOUSE
The standard Exclusive Authorization Listing Agreement is, as a matter of law, between the Seller and the Broker. The Seller’s Listing Agreement only authorizes the Broker, and its Agents, to perform licensee activities on behalf of the Seller. The Listing Agreement does not allow the Broker or its Agents to delegate any licensee activities to another Broker.
Conducting an open house has long been deemed by the DRE as performing licensee activities; thus, the only Agents who are legally authorized to conduct the Open House are those that are affiliated with the Broker who has the listing.
Agents who only have a Salesperson’s licensee can only affiliate with and work for one Broker. The only Broker who can supervise the licensed activities of that Salesperson is her Broker. If she were to conduct licensee activities on behalf of you and your Broker, she would be acting in violation of the DRE licensing laws and she would be acting in violation of her Independent Contractor Agreement with her Broker.
Under common law agency principles, allowing this Agent to conduct the Open House would mean that the Agent is acting as a subagent for you and the Seller. Any action or inaction on the part of that Agent which causes harm to people or property could create liability problems for you and the Seller and there may be no coverage under the Other Broker’s E&O policy for acts performed outside of the supervision of the Agent’s Broker.
There is also a potential problem in creating confusion in the mind of the public as to who that Agent is and her relationship to the Seller. The “For Sale” sign and advertisements would let the public know that your Broker has the listing; the other Broker’s Agent would probably have a difficult time explaining her status.
The only way that another Broker’s Agent could conduct Open Houses on your listings is if your brokerage and the Seller agree to co-list the Property with that other Broker and the other Broker would undoubtedly demand some portion of the Listing side commission. From a business standpoint, that is probably not desirable. Bringing in another Broker’s Agent to conduct the Open Houses may also send a signal to the Seller that you and your Brokerage cannot adequately service your client’s listing.
Another business consideration for the Seller’s Brokerage is that, although Open Houses can benefit the Seller, one reason Agents conduct Open Houses is to find prospective Buyers. Even without the legal and business constraints detailed above, letting another Broker’s Agent conduct your Open House takes buyer business away from you and your Broker.
ANOTHER BROKER’S AGENT SERVING AS A LICENSED ASSISTANT
One of the many benefits of having a licensed assistant is that the person can perform licensee activities. However, Agents who only have a Salesperson’s license can only affiliate with and work for one Broker. The only Broker who can supervise the licensed activities of that Salesperson is her Broker. If she were to conduct licensee activities on behalf of you and your Broker, she would be acting in violation of the DRE licensing laws.
She could also be acting in violation of her Independent Contractor Agreement with her Broker.
Most Brokerage operations have Policies and Procedures regarding who Agents can employ as a licensed assistant. Typically, the Brokerage requires that all licensed assistants must affiliate with (“hang their license”) with the Broker. This is a logical requirement for the legal reasons stated above but also for good business reasons including, but not limited to, the preservation of confidential client information and protection of Brokerage proprietary information. You could well be violating your agreement with your Broker in hiring another Broker’s Agent to act as your licensed assistant.
ANOTHER BROKER’S AGENT SERVING AS A TRANSACTION COORDINATOR
If you were to employ another Broker’s Agent to conduct unlicensed transaction coordination services, then that Agent could be acting in violation of her Independent Contractor Agreement with her Broker. More importantly, you would be sharing confidential client information and Brokerage proprietary information with another Broker’s Agent which could violate your Independent Contractor Agreement.
PRACTICE TIPS
- Every Brokerage should have a Company Policy & Procedures Manual outlining all requirements for who can, and who cannot, be used as a Licensed Assistant and/or a Transaction Coordinator. The best business practice is to not utilize the services of a licensed Agent who is affiliated with another Broker.
- Conducting an open house is deemed to be licensee activity and should only be conducted by Agents who are affiliated with the Broker who has the Listing.
- Agents who want to work with your Brokerage can be advised to consider becoming affiliated with your Brokerage.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip 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.
© Copyright Broker Risk Management 2019 06/07/19