Where is the Office?

Thirty years ago, applying the rules for establishing a real estate office were fairly straightforward. You secured a physical location, set up some desks and conference rooms, put a sign outside, got a phone number and waited for the state Real Estate Commission to give its stamp of approval of the office. Once that was done, from that office, agents started serving clients with real estate needs.

But the advent of the internet, email and cell phones has reduced the frequency of going into the office to grab a stack of forms or to thumb through the latest MLS book that was delivered by mail. Never mind tossing into the mix the rise of corner coffee shops and fast casual restaurants conducive to business meetings. Let alone adding in something like a global pandemic and stay-at-home orders.

Through all this, the Legal Hotline continues to receive a lot of questions about real estate offices and where real activity can be properly conducted.

A proper real estate office is one devoted to conducting real estate transactions, where transactions can be conducted in privacy and the name on the brokerage license is displayed prominently in a permanent fashion outside of the office. It is important to remember that only a broker can establish a real estate office, including branch offices.

Before real estate activities can be performed at any real estate office – whether a main office or branch office – the office must be inspected and approved by the state Real Estate Commission. In addition to licensure, each office must be supervised by a broker (or an associate broker for branch offices). An additional requirement for each office, whether the main or a branch office, is that the broker must maintain a list of licensees employed or affiliated with the broker in that office.

The requirement for maintaining a licensed office does not require that licensee can only conduct real estate activity from a licensed office. Such a requirement would not only be impracticable, but also is likely not in the client’s best interest. Which then begs the question of how much of an agent’s work needs to be done from the licensed office. While there is no bright line rule, it is important to keep a couple of things in mind.

First, review any brokerage policies beyond the regulations about what activities can be done where. As much as you may think the broker’s policies are antiquated or do not make sense, the broker is the one who sets those policies. So before conducting business outside of the office, review any brokerage policies on the matter. If you have any questions, ask your broker.

Second, the licensed office is your office – not the workspace you keep at home or the conference room at your cousin’s business around the corner from your house you sometimes use out of convenience. While there is nothing inherently wrong with sometimes working from home or meeting a client at a coffee shop, you should never refer to these other places as your “office.” Doing so can set you and your broker up for an unwanted visit from the commission.

As an aside, while it’s possible to have a brokerage office located in a residence it is unlikely that the commission would approve a “home office” in an agent’s home because the regulations say that a branch office cannot be established to permit “an employee to carry on the business of the office for the employee’s sole benefit.”

Third, brokers are required to maintain transaction records at the office to enable proper inspection of records by the commission. Keeping paper copies of records anywhere except a licensed office can serve as the basis for a violation and sanction by the commission because they may not be properly secured and under the control of the broker. Transaction files also could be electronic, but again, must be under the control of the broker so they can access them if requested by an investigator. Keeping electronic files on a home computer and not as part of a brokerage system is equally problematic.

Finally, and to reiterate the first point, remember your broker is in charge with establishing office location(s) and policies. As much as technology makes it easier to work outside of the office, the basic rules still apply, including that your broker is in charge. Do not try to go around your broker to set up an alternative office, either for yourself or your team. Do not try to keep “your” client files at home or elsewhere, the clients belong to the broker and the files must be kept in the office. And any novel idea you have about getting around the rules will probably not work.