Lots of confusion over this one: What happens to an associate’s pending transactions if they depart one brokerage to work for another – do they stay with the original broker or transfer? Fla. law doesn’t offer rules, so it’s important to have a plan.
ORLANDO, Fla. – We cover a variety of topics in Florida Realtors Legal News, but here’s one that has had little coverage yet lots of calls to Florida Realtors Legal Hotline: What happens if an associate leaves a brokerage but has pending transactions? Does that transaction go with the agent to their new brokerage? Does it stay with the current brokerage and go to a new agent?
One thing to remember: the law doesn’t dictate the rules on this one. The associate and broker should have a plan in place that includes the answers to these questions. The problem? Far too many agents – meaning both associates and brokers – have no idea what the answers are.
Here is how many Legal Hotline calls go: An agent is considering leaving Brokerage A to join Brokerage B. Why? Could be for a number of reasons from just a change in scenery and a new fresh start somewhere else, to having an unfortunate falling out between the agent and brokerage. Regardless of the reason, the answer as to “What happens with my pending transactions?” rests on the terms of any independent contractor agreement the parties have and/or any brokerage policy and procedure manual.
When someone calls the Legal Hotline and asks about this scenario, one of the attorneys inevitably asks, “What does your independent contractor agreement say? Is there any brokerage policy and procedure manual that outlines what happens when an agent leaves during a pending transaction?”
I will be blunt: These questions are far too often met with crickets on the other end of the line. So let’s walk through some “good practices” when it comes to this issue to hopefully avoid problems down the road.
Associates
If you’re a sales/broker associate joining a brokerage, my guess is you’re generally asking about the brokerage’s business model and specifically asking what your commission split will be on transactions you handle. And why NOT ask that? It is an important question! This is many Realtors’ primary source of income, and you need to know the answer in order to plan your lifestyle; 100% understandable!
I emphasize this side of your initial conversations to point out that you should also be asking, at this same point in time, “What is the brokerage’s policy on pending transactions if I decide to leave?” Why should you be asking this question now? For the same reasons I’ve stated above regarding what you will be paid when you join the brokerage. This is your source of income and you need to know so you can plan accordingly.
I get it. It’s awkward to ask this question when you aren’t even working at the brokerage yet or maybe recently joined. But as I pointed out, the law doesn’t decide this issue. You need to ask the right questions and establish a clear exit strategy with the brokerage to avoid any surprises later.
Brokers
If you’re a broker/owner overseeing associates at your brokerage, a clear office policy on handling pending transactions if an associate leaves mid-transaction is, in my opinion, one of the most important things to establish in your business model.
Here’s the thing: There isn’t just one way to do handle this issue:
- Brokers can create a policy where exiting associates take their transactions with them, where Broker A assigns the deal over to Broker B.
- Brokers can say, “Nope! The transaction stays here, but we’ll pay you a split of the deal.”
- Brokers can also say, “When you leave, that’s it. We aren’t paying out anything.”
The point is that whatever system you select for your office policy, make that policy clear right from the start with a new associate, so that everyone is on the same page.
Another tip? Create some sort of reminder to update/maintain any independent contractor agreements you may use in your office. Regardless of which role you perform, associate or broker, it’s very important to get whatever your agreement is in writing. Even an email is better than some of the things we hear on the Legal Hotline: “I have no idea what my independent contractor agreement says!” or “I don’t know where it is because I signed it so long ago … I don’t even know if I still have one!” or, from brokers, “I don’t have a set procedure for renewing agent agreements in my office.”
A final note to associates: Remember, absent negotiation, the transaction belongs to the brokerage. If you’re an associate leaving a brokerage, you can’t just take the deal with you. If the transaction remains with Brokerage A and your license with Brokerage B, you can’t continue to work on that deal without risking a licensing law violation since associates may only work for one brokerage.
It can be an uphill battle if a recently departed associate wants to recover money they feel they deserve. Only broker/brokerages can receive real estate compensation, and they then pay an associate their portion of that compensation. Without something in writing or another indication of a broker-associate agreement, the brokerage holds the upper hand.
I’ve said it before in relation to sales contracts, but it fits here: Taking time to work out details at the start of a working relationship can avoid messy situations at the end.
Meredith Caruso is Associate General Counsel for Florida Realtors
Note: Information deemed accurate on date of publication
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