Legal Issues and the Real Estate Team
Published Friday, September 21, 2018
A Team Approach to Legal Issues
Mike Fair, Co-Director, Your House Academy
Real Estate Teams
Many top producers develop support teams to respond to the challenge of volume business and the need for superior customer service throughout the transaction. While teams may be profitable for the real estate brokerage firm and useful to the consumer, the team approach raises some legal flags for Illinois real estate brokerage firms.
In general, one or two high volume agents will pool their resources for marketing and administrative staff. The team leader usually is the top agent and they focus on new business, bringing in listings. The support members typically work with buyers. Sometimes these teams allow all members to list properties, but usually, the team leader brings in seller business.
Working with a team provides clients with enhanced customer service because the team works on the their behalf. Depending on team make-up, a client may have a listing specialist, buyer’s agent, closing coordinator as well as a marketing specialist. An experienced team can provide beneficial services and bring real value to the real estate transaction.
Illinois License Law and Real Estate Teams
The team concept is a business model, and teams are not a separate business entity or licensed as such. Sponsored by the same brokerage firm as their teammates, licensed team members are subject to the same regulation as any other sponsored licensee and must comply with the Illinois Real Estate License Act (Act) and the Illinois Real Estate License Act Rules (Rules). Be diligent in understanding the rules:
- The sponsoring broker is ultimately responsible for the oversight of the team and licensed members
- A licensee may be only employed by one sponsoring broker
- The sponsoring broker pays all licensed members of the team
- Each licensee on the team must have a written employment agreement with the sponsoring broker
- The team may not be a business entity within the sponsoring broker’s firm
The sponsoring broker should have written policy and procedures to address agency issues that might occur within the team’s business activities. Designated agency as outlined in the Illinois Real Estate License Act applies to teams. Under designated agency, one team member could represent a buyer, and another team member represents a seller. In this event, there is a legal obligation to protect confidential information from team members on opposing sides of a transaction. If the team practices disclosed dual agency, written disclosure and consent must be obtained before the members of the team act as dual agents.
Advertising and Use of Team Names
Advertising must be true and not misleading. The sponsoring brokerage firm’s name must be clearly evident in all advertising, including internet and social media. That is to say, the advertising must include the company name and any franchise affiliation and not just the team name. Anyone exposed to an advertisement should not only know the team name, but also the sponsoring broker's name.
It is important to consider that everyone from the team leader to a licensed personal assistant is an employee or independent contractor of the sponsoring broker. In other words, no licensed individual is an employee or contractor of the team and all licensed team members must have a written employment agreement with the sponsoring broker.
It is possible for a team member to employ an unlicensed assistant. An unlicensed assistant does not engage in licensed practice and is not covered under the License Act. However, the licensed team member hiring the assistant must follow any rules and regulations regarding employment, taxes, and withholdings.
The sponsoring broker ultimately is responsible for the activities of their sponsored licensees. The License Act requires written policy, supervision, and training. Best practices for the sponsoring broker include:
- Written employment agreements with all team members that address the role of the team, individual members and compensation
- Written policy regarding team business practices
- Training and team oversight
Key Point: A real estate team is not a business entity and all licensed team members are regulated by the Illinois Real Estate License Act and Rules.