It’s always the broker’s deal

Agents change brokers and brokerage affiliations. The state of the economy and the real estate market may affect the motivation behind the change but change is constant. Regardless of whether the real estate economy is in a “boom” or “bust” phase, agents want to take “their” clients with them when they change offices. Consistently, the PAR Hotline fields calls from agents whose brokers tell them “No”. Can the broker do this?

The simple answer is yes but it is important to understand the “why”. The licensing law and the related regulations require a broker to maintain a fixed office within Pennsylvania. The broker is then charged with the responsibility of directing and supervising each associate broker and salesperson who is affiliated with that broker. While it is true that the broker can designate some of the supervisory responsibilities to an associate broker, at the end of the day, the responsibility for the office and its licensees rests with the broker of record.

The law and the regulations also mandate any relationship requiring a consumer to pay a fee to be in writing and to contain certain provisions. The plain language in the law states that licensees bear the same relationship to the consumer as does the employing broker (except in designated agency transactions, which is a topic for a different day). As all brokers and salespeople know, a broker is prohibited from paying a commission to anyone except “their” agents or another broker. Similarly, salespeople are prohibited from accepting commissions from anyone except “their” broker.

When these requirements, limitations and prohibitions are read together, it becomes fairly clear that it is the broker who enters into a contractual relationship with the consumer and not the salesperson. As a result, it is the broker’s decision to allow or forbid an agent to “take their clients with them” when the agent changes brokers. However, this is not necessarily the final answer. Nothing in the licensing law or the regulations prohibits a broker from releasing a consumer from their contract with the broker so that the consumer is free to follow the agent to a new broker.

It is sound business practice for brokers and agents to reduce their working relationship to writing and it is while negotiating that contract with the broker that the salesperson should account for two things: (1) how will the salesperson get paid for pending transactions when the agent leaves the broker; and (2) which, if any, clients can the salesperson “take” with them if they leave the broker. By discussing these items at the beginning of the relationship when the broker and new (or potential) salesperson are on excellent terms both the broker and the agent can come to an agreement as to how this issue will be handled if it ever arises.