Administrative Rules Update Brings Clarity to Brokerage Agreement Timing
The Joint Committee on Administrative Rules (JCAR) met recently and approved an update to the Administrative Rules (Rules) under the Illinois Real Estate License Act (Act). The revised regulations will be published in the Illinois Register soon. A draft of the Rules is available here.
The Rules provide clarification as to the timing of when a licensee should enter into a written brokerage agreement. The Rules apply not only to sales transactions, but also to property management and other forms of real estate brokerage. Remember that the Act governs all real estate brokerage activities, such as residential sales and rentals, commercial sales and rentals, property management when real estate licensed activities are performed, farm management, etc.
The key question for real estate licensees is when must the written brokerage agreement be in place? Here is the new language under Section 1450.770 of the Rules:
g) Licensees shall enter into a written brokerage agreement with a consumer who is a seller or owner prior to marketing or listing their real estate for sale or lease.
h) Licensees shall enter into a written brokerage agreement with a consumer who is a buyer or tenant prior to engaging in, or as soon as reasonably practical after performing any licensed activities intended to assist in the purchase or lease of real
i) A licensee with an executed written brokerage agreement to market or list real estate for sale or lease on behalf of a seller or owner may:
1) Perform licensed activities on behalf of the seller or owner with an unrepresented buyer or tenant, after providing written disclosure to the buyer or tenant that the licensee is not acting as their agent; or
2) Act as a dual agent upon execution of a written brokerage agreement with the buyer or tenant in compliance with Section 15-45 of the Act, prior to performing any licensed activities on behalf of the buyer or tenant.
On the seller’s or owner’s side, this is very straightforward, and it is quite common to sign the written listing agreement prior to marketing property for sale or rent.
On the buyer’s side, the Act and requirements for brokers and brokers who are REALTORS® might differ somewhat. The rule says prior to engaging in, or as soon as reasonably practical after performing any licensed activities intended to assist in the purchase or lease of real estate. The timeline for “as soon as reasonably practical” will be a fact-based analysis.
HOWEVER, brokers who are REALTORS®, pursuant to the NAR Settlement Agreement, must enter into a written agreement before they take a client on a physical or virtual showing or tour a residential property for sale. Note that as a practical business matter, this is a great time to get a written agreement signed by any broker.
Per the Rules, the written agreement may be non-exclusive or exclusive and must contain all the terms for a written agreement under the rules, e.g. the basis or amount of compensation and the timing for payment, identity of the brokerage company and the designated agent(s) for the buyers, signatures of the parties, duties of the broker and the clients, and the duration of the agreement.
Brokers should also check their individual brokerage office policies relating to written brokerage agreements.
Section i) of the Rules highlights the existing agency rules under the Act. Licensees are required to provide a notice of no agency to an unrepresented party. The Rule also reinforces the current dual agency requirements under Section 15-45 of the Act.
About the writer: Prior to joining Illinois REALTORS® in 2022, Victoria (Vicki) Munson was an attorney in private practice focusing on real estate and estate planning matters. She enjoyed assisting buyers and sellers in bringing their transactions to the closing table. Victoria earned her bachelor’s degree from Western Illinois University and her Juris Doctor from The John Marshall Law School.
