The GBAR Brokerage Counseling Line has received an increasing number of calls from members requesting information about setting up a Team and what are the Massachusetts regulations that cover Real Estate Teams within a brokerage. Other questions received, which are equally pertinent include advertising and worker classification issues by Teams and what rules or laws must be followed.
REALTORS® are subject not only to the licensure rules of the Commonwealth of Massachusetts, but also by The REALTOR® Code of Ethics and any local statutory or regulatory rules. Although a handful of states have implemented specific laws and regulations governing real estate teams, the Commonwealth of Massachusetts has not yet legislated any team-specific laws or regulations.
Even though no current laws or regulations surrounding Real Estate Teams in Massachusetts have been codified, there several rules (laws, regulations and Articles of the Code of Ethics) governing REALTORS® licensed in the Commonwealth that are of particular importance to teams.
When working in or managing a team, it may be easy to run afoul of these rules:
Real estate salespersons must be associated with a broker (254 CMR 3.00)
Real estate commission fees may only be paid to a broker (254 CMR 3.00)
Salespersons are prohibited from advertising in their own name and all advertisements must include the name of the broker (254 CMR 3.00)
REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional. (REALTOR® Code of Ethics, Art. 12)
The name of the REALTOR® firm must be disclosed in a reasonable and readily apparent manner in all advertisements (REALTOR® Code of Ethics, Art. 12, Standard of Practice 12-5)
Salespersons and brokers other than the Brokerage firm are prohibited from holding client funds, (254 CMR 3.00)
Agency disclosure issues including undisclosed dual agency (254 CMR 3.00); and
Non-licensed team members performing real estate activities reserved for licensees only (MGL c. 112, § 87RR).
*The following is meant to be representative, but is not an exhaustive list of all rules (as defined) pertaining to real estate Teams. Consultation with your legal advisor is recommended prior to setting up any real estate Team
"Broker" when defined above means the brokerage firm with which the Team is affiliated. Any commissionable transactions will always belong to the Brokerage firm, not the team as the Brokerage is the entity with which the public is engaging and because the team is not a separately licensed brokerage firm. It is also important that all advertising and communications with the public include, in a prominent manner, the name and contact information of the Brokerage firm, in addition to that of the Team.
Although the broker of record for a brokerage firm may have different policies and procedures for Teams separate from agents under their direct supervision and training, a broker of record may share, but cannot delegate its responsibility for supervision solely to a Real Estate Team or Team Leader. Ultimate responsibility for the action of all sales agents and broker-associates affiliated with the brokerage firm lies with the broker of record. Ultimately, “the buck stops here” with the broker of record, as he or she is both liable and responsible for the actions of all agents and team members affiliated with the brokerage.
In summary, if running a Team, remember one key thing: You are not a brokerage, so do not hold yourself out as one. Failure to adhere to these rules and regulations could result in an investigation by the Board of Registration, an ethics complaint, or even a 93A lawsuit from a disgruntled or potentially deceived client.
For more information, please see a selected list of articles and resources below, or contact William G. Mullen III, Esq, GBAR Legal Counsel & Director of Risk Management at 617-399-7842.