First, let’s review terminology here so that everyone is on the “same page”. In Massachusetts, there are three primary statuses of real estate licensees (suspended and revoked licenses are not considered in this discussion): Active; Inactive and Expired.
1. “Active” status indicates that the licensee is in good standing with the Board of Registration of Real Estate Brokers and Salespersons, has completed the required number of continuing education credits during the prior renewal period and has paid the licensing fee for the current two-year period ending on his/her birthday. Individuals with active real estate licenses may lawfully engage in the business of real estate with members of the public and derive commission-based income or a salary from their employer from their efforts.
2. “Inactive” status indicates that the licensee is in good standing with the Board of Registration of Real Estate Brokers and Salespersons, has not completed the required number of continuing education credits during the prior renewal period, but has paid the licensing fee for the current two-year period ending on his/her birthday. Individuals who hold inactive real estate licenses may not engage in the business of real estate with members of the public, but may receive referral fees, except as described below.
3. “Expired” status indicates that the licensee is no longer in good standing with the Board of Registration of Real Estate Brokers and Salespersons, has not completed the required number of continuing education credits during the prior renewal period(s) and has not paid the licensing fee for the current (or past) two-year periods ending on his/her birthday. Individuals who hold expired real estate licenses may not engage in the business of real estate with members of the public and may not receive compensation for their services or receive referral fees.
Massachusetts General Law Chapter 112, Section 87XX ½ created an “inactive” license status for those licensees who have not completed the required continuing education credits. As inactive licensees are prohibited from affiliating with a broker, a referral fee may be paid to them directly. This is the only instance where a salesperson can receive a referral fee directly. Massachusetts General Law Chapter 112, Section 87RR requires that an active salesperson’s referral fee must be paid to the broker in which they are affiliated.
Most questions to the Broker Legal Hotline deal with salespersons who have left the business and are still in their two-year renewal cycle and are considered “active”, but are no longer actively selling real estate (i.e. they retired or permanently left the business). As stated above, the only way for a salesperson with an “active” license to be compensated is to be affiliated with a broker. Certain “referral only” brokerages have been established where “active but not practicing” licensees may hang their licenses solely to earn referral income. However, because of Mass General Law Chapter 112, Section 87XX ½, once a salesperson’s license becomes inactive, the individual is no longer allowed to hang their license with the referral only brokerage company. Therefore, many salespersons make the personal decision to keep their license "active"; a solid reason being that the referral only brokerage is responsible for collecting the fee from the referring brokerage, thus decreasing the amount of personal follow up necessary when trying to collect the referral fee from a brokerage who has been less than forthcoming with their obligations. On the downside, there typically are costs associated with belonging to a referral only brokerage.
It is important to note that a licensee with an “active” license cannot elect to become “inactive.” The change of status only becomes effective upon the next renewal period when the licensee pays a licensing fee and certifies that they have not obtained the required number of continuing education credits for the prior two-year period.