For whom may licensees work?

Have you ever found yourself in a situation where you should be asking yourself “Am I working for more than one sponsoring broker?” It’s an important question because this is a fundamental part of the Illinois Real Estate License Act. It states:

Section 10-20(a) of the Illinois Real Estate License Act of 2000 (RELA):
A licensee may perform activities as a licensee only for his or her sponsoring broker. A licensee must have only one sponsoring broker at any one time.

What does this provision really mean?

This provision simply states that a licensee must work for one, and only one, sponsoring brokerage company. In addition, there are rules provisions that state the licensee can only be sponsored by and work for one sponsoring broker whether the licensee is engaged in licensed activities or unlicensed activities (See subparagraph (f)) (bit.ly/RELA_Rules).

As simple as this sounds, here are some real-world examples to illustrate the common misunderstandings with this concept.

Legal Update Illinois REALTORS Magazine January 2018 - Teams

Scenario #1 – Licensee sponsored by one brokerage company sitting at an open house for another brokerage company’s listing

This is perfectly legit, correct?

No. By itself, this is not allowed.

The general rule is that Company A’s licensee would be acting on behalf of Company B, the listing company, by hosting Company B’s open house. As a result, without taking more steps, this would run afoul of RELA, Section 10-20(a).

To do this correctly, Listing Company B and Company A would need to consult their attorneys, insurers and any other trusted advisers so that the two real estate companies can enter a written agreement at the sponsoring company level. This agreement creates a sub-contract type of relationship, thus allowing Company A’s licensee to remain under his own company’s sponsorship. Company B has effectively contracted with Company A to host the open house. The agreement between A and B should consider each company’s rights, duties and responsibilities as well as division of compensation. Company A would need to be paid the agreed compensation directly, in turn paying its sponsored licensee per the terms of the licensee’s independent contractor or employment agreement with his own sponsoring company (Company A).

Companies A and B will need to determine whether such a contractual relationship makes good business sense for both companies before engaging.

Scenario #2 – Co-listings where Company A and Company B simply put both company names in the blank on an exclusive right to sell form

This is perfectly legit, correct? No, not without taking additional steps.

More steps are required to properly co-list a property for a seller client. The same concepts discussed in Scenario #1 above apply here. To enter a proper co-listing arrangement, the two listing companies need to consult with their attorneys, insurers and any other advisers to draft a document defining rights, duties, responsibilities, compensation, etc. for each company before placing both company names on the exclusive right to sell brokerage agreement with the seller client. Further, the listing agents need to continue to work for and be paid by their respective sponsoring brokerage companies.

Scenario #3– Licensed personal assistant (LPA) works for one sponsoring brokerage company as a “broker” and another sponsoring brokerage company as a clerical assistant

This is perfectly legit, correct? No, this is not correct.

Under RELA, the LPA is a licensee who is required to have one and only one sponsoring brokerage company. This “baby” can’t be divided, so the LPA must work for only one sponsoring brokerage company, where the LPA might perform both licensed and unlicensed activities. On the other hand, the LPA might do licensed activities for one sponsoring brokerage company, and find secondary employment with an unlicensed entity. For example, the LPA might serve as a clerical assistant in a dentist’s office, in addition to his work for the real estate brokerage company.

This scenario becomes a bit more complicated where the secondary employer is a builder. IF the builder is not a licensed real estate broker, theoretically the LPA could do unlicensed clerical work for the builder. This would not include activities such as showing the builder’s properties for sale or working with consumers on sales or rental transactions of the builder’s properties. However, the LPA could do this licensed work through the LPA’s sponsoring real estate company if the builder hires the LPA’s company. Conversely, if the builder is a licensed real estate brokerage company, the LPA must choose for which company the LPA will work.

Legal Update Illinois REALTORS Magazine January 2018 - Teams

Scenario #4 – Teams

Simply stated, RELA applies to any licensed member of a team in the same manner as it applies to any licensee sponsored by a real estate brokerage company.

What is a team? A team is really nothing, in that it is not (or should not be) a separate legal entity. The team should be a “functional unit,” group or combination of people (could be some licensed and some unlicensed) who elect to work together within a real estate brokerage company. If the team incorporates, or forms some other entity, then it needs to be its own sponsoring company and sponsor the licensees within the team; thus, separating itself from the original sponsoring entity. The Section 10-20(a) “one sponsor rule” applies in this situation.

Any licensed team member needs to be sponsored by the same real estate brokerage company as her “teammates,” and all licensees must have written independent contractor or employment contracts with the sponsoring company. (Classification as an independent contractor or employee requires more elaboration. Additional resources can be found here [bit.ly/IR_Teams (log on required)] and here [bit.ly/NAR_Teams]).

Some teams appear to be joining forces with licensees in other states or jurisdictions. On the face of things, this would seem to run afoul of RELA in several ways. One is that the Illinois licensed team member must only work for his Illinois licensed sponsoring brokerage company. Likewise, a licensed team member from another state would need to be licensed and sponsored by the Illinois brokerage company to work for and advertise Illinois based real estate brokerage business. In addition, advertising a team name must be true and not misleading in any way. While there might be ways for the brokerage companies to enter some sort of business relationship, simply agreeing to be “team members” will not be enough under RELA. Remember also, that just because a licensee belongs to a team within a local franchise, this does not mean the licensee is also part of a team from the same corporate brand or franchise in another location.

There are many other real-world examples of situations causing confusion surrounding the RELA requirement to work for only one sponsoring company. Hopefully, these examples shed some light on this concept and can help answer questions that arise.

For more on this and other legal topics, go to www.IllinoisRealtors.org/Legal or call the Illinois REALTORS® Legal Hotline.

About the Author:

Elizabeth A. (Betsy) Urbance, General Counsel and Vice President of Legal Services has served the association’s members as Legal Hotline Attorney since 1994. Urbance is a 1984 graduate of Western Illinois University and received her law degree from the University of Missouri School of Law in 1987. She is licensed in both Illinois and Missouri.