Internal commission disputes
A broker has two agents who have both worked with the buyer on one of the company’s listings. Both agents are claiming the selling side of the commission. How should this be determined? Is this a procuring cause dispute that must be taken to local association arbitration?
Each agent’s entitlement to commission is determined by the terms of the agent’s independent contractor agreement and the company’s office policy regarding commissions and dispute resolution. Procuring cause analysis will determine the result only if that is the standard used per the office policy in such situations. Arbitration at the local association is voluntary in this instance, dependent on the prior consent of all parties involved. Because there is no statute or rule for resolving commission disputes between brokers and their agents, the best practice is to have a comprehensive office policy in place to resolve in-house commission disputes.
Sales teams
Four agents who work together for a broker/company would like to form a team. They would like to structure it so commissions from the broker are paid to the team, and the team would then disburse the funds per the team members’ agreement. In other words, can the team leader (a licensed broker) be paid by a broker/company in his name and then pay the other team members for the commissions they have earned?
Wis. Stat. § 452.19 permits licensees to pay a fee or commission to other licensees for performing brokerage services. However, § 452.14 (3)(f) prohibits a salesperson from accepting payment for services in a real estate transaction from anyone but his or her broker. Accepting commission or a bonus directly from the team leader could place the team members’ licenses in jeopardy. Therefore, payment must be through the broker/company.
Similarly, Standard of Practice 16-15 states that a REALTOR® shall compensate the principal broker and shall not compensate, directly or indirectly, any licensees employed by or affiliated with another REALTOR® without the prior express knowledge and consent of the cooperating REALTOR® broker.
The team members and the broker/company may, however, establish a commission payment arrangement whereby the team may, with the broker’s consent, determine team members’ respective commissions. The broker also may establish office policies to regulate teams, if not already in existence. The team itself would be wise to have a team operating agreement relating to team member obligations and compensation.
Agent departures
When an agent leaves a company, does he or she have the right to take files, prospect lists, photos, computer software, party contact information, etc., from the office upon leaving? Under what state/federal statutes do these rules fall?
There are no specific real estate statutes or rules controlling these issues. Generally speaking, a departing agent who takes original files, photographs, computer software, etc., from the office is committing theft. The work done by an agent while with a company is performed on behalf of the company and “belongs” to the company. This is especially true when physical objects taken are the property of the company, such as original transaction files or a computer disc.
On the other hand, it may be very difficult to prevent a departing agent from having a duplicate list of prospects or something of that nature. Many agents may routinely have duplicate information on their computers or at home. All of this is, of course, subject to any specific written company policy relating to these subjects. A written office policy makes it easier to establish the broker’s rights and to pursue the taken items in court, if necessary.
Personal sales and purchases
Can a REALTOR® collect a commission on an investment property purchased for him or herself? What is the procedure?
As a principal in the transaction, that is, the buyer, the REALTOR® is not providing a brokerage service to another person for which a commission may be earned.
The first step when an agent wants to buy a property for him or herself is to check company policy regarding personal purchases. Some companies require licensees’ personal transactions to be run through the company, while others allow agents to negotiate directly, independent of the broker/company.
If office policy permits the buyer/licensee to proceed independently, the buyer/licensee may write his or her own offer, as the buyer, and negotiate an incentive from either the listing broker or the seller. An incentive from the seller may be requested in the offer. An incentive from the listing broker, on the other hand, should be negotiated separately, in writing, outside of the offer because the listing broker is not a party to the offer to purchase. It may be prudent to establish the incentive before submitting the offer to the listing broker. The seller must consent in writing to an incentive from the listing broker per § RL24.05(4), before the offer is accepted.
Detailed information is available in the April 2006 Broker Supervision Newsletter, online at www.wra.org/BSNApr06, and the “Best of the Legal Hotline: Personal Purchases and Sales” article in the March 2004 issue of Wisconsin Real Estate Magazine, online at www.wra.org/WREM/March04/LegalHotline.
Advertising
Must the company phone number and address, as well as the agent’s name and phone number, appear in all ads and signs? Or can an agent include just his or her home office phone number?
The general rules for advertising in Wis. Admin Code § RL 24.04 require that all advertisements be made in the name of the employing broker/company, so the company name, or a properly filed company trade name, must always be included. The company name or trade name must clearly indicate that the broker/company is a business concern and not a private party. The agent may not advertise in a manner that is false, deceptive or misleading, and advertising must portray a true picture. The rules, however, are silent on the use of the other items.
All advertising must be done under the broker’s supervision, so the broker’s/company’s office policy must also be consulted regarding any other advertising requirements established by the broker/company.
Incentives for buyers and sellers
What kind of incentives can agents offer to parties?
Wis. Stat. § 452.19 limits the payment of referral fees, finder fees and commission splits to Wisconsin licensees or persons lawfully and regularly engaged in real estate brokerage in another state. However, incentives may be offered to sellers or buyers to induce them to sell or purchase real estate. Party incentives can be offered in any amount as cash or as an item of personal property, such as a home warranty plan, gift certificate or appliance. Such incentives should be clearly documented prior to closing. The parties need to have a clear and thorough understanding of the incentive’s terms and conditions. This advance documentation of the party incentive helps establish that the incentive is not an illegal fee-splitting arrangement with a non-licensee.
Agents should always first check their broker’s/company’s office policy to see if there are any company guidelines or parameters with respect to offering party incentives.
For more information regarding broker and seller incentives, see the October 2006 Broker Supervision Newsletter at
www.wra.org/BSNOct06 and the article, “The Best of the Legal Hotline: Referral Fees, Incentives and Promotions” in the August 2005 edition of Wisconsin Real Estate Magazine at www.wra.org/WREM/Aug05/Hotline.
Requirements for office policy manuals
Wis. Admin. Code § RL 17.08 requires broker/employers to supervise the activities of their agents, provide access to a supervising broker for consultation regarding real estate practice issues, and review transaction contracts and trust account records. Brokers must also provide a written statement of office policies and procedures regarding the handling of listing contracts, offers to purchase, leases and other documents relating to transactions.
A basic § RL 17.08 policy manual includes the office’s policies and procedures for taking a listing, including guidelines for the use of approved listing contract forms and any preprinted office addenda, multiple representation, advertising and related topics. Procedures regarding offers, including client confidentiality, timely presentation, broker disclosure forms and counter-offers is also required, as are similar procedures for rental listings and lease negotiations.
Beyond this basic content, the scope of an office policy manual can be enlarged and customized to meet the needs of the particular broker/company. A comprehensive policy manual defines the respective rights and responsibilities of the broker and the agents. Topics might range from sold sign procedures to rules for personal transactions and even dress code and sales meeting policies. An office policy manual is also an invaluable tool for avoiding controversy and prolonged disputes by anticipating problems and providing dispute resolution mechanisms.
The WRA’s Office Policy Manual Guide and CD provides a fairly comprehensive starting place for brokers who want to write or update their office policy manual. Brokers can add and delete material, and modify and expand the policies and procedures included in the Guide to meet the needs of their respective offices. The guide may be ordered online at www.wra.org/pub239.
Editor’s note: The DRL became the DSPS in 2011. Information above may not be current.