The hotline regularly receives trouble calls when associated licensees want to change brokerages (and/or change teams) when issues such as: clients, pendings, leads, compensation, referrals, files, bills, and equipment issues are disputed.
Unfortunately during the hotline, many members state that there is no written legal agreement covering these issues. That lack of a written legal agreement can lead to a recommendation to hire trial lawyers asap. To help avoid litigation: Some of these licensees decide to remain in place for as long as they can prior to leaving in order to close as many of their deals as possible before departure and to avoid legal disputes that may arise upon announcing their decision to leave.
It is human nature for ill will to arise when an associated licensee and their brokerage and or their team decide to unilaterally or mutually part ways.
One idea for a solution to these issues is to legally agree in writing on all separation issues.
The parties (licensee, brokerage, team) can be prudent and hire attorneys to draft this legal "separation" agreement when the licensee is joining a brokerage or team and while everyone is optimistic about the new business venture.
Some hotline callers refer to this agreement similarly to a prenuptial agreement made upon entering a marriage to handle issues that may arise in a future separation.
"RECOMMEND THE ASSOCIATED LICENSEE AND BROKERAGE/TEAM AGREE ON TERMS NOW THAT ADDRESS ALL POSSIBLE FUTURE SEPARATION ISSUES USING LAWYER DRAFTED AGREEMENTS."
Perhaps checkbox options for a lawyer drafted independent contractor (IC) associated licensee agreement with their brokerage/team could include the following, along with agreement on common separation disputed issues such as leads, compensation, referrals, files, bills, and equipment issues:
[ ] Associated Licensee (IC) cannot solicit/take clients/pendings. Post separation pending commission split changes to ________________________________________.
[ ] Associated Licensee (IC) can take clients/pendings who are requesting to move for an upfront fee of $______ or a referral fee agreement between the two brokerages of $_______.
[ ] Associated Licensee (IC) can work former clients/pendings only if the brokerages (old/new) agree on a subagency agreement drafted by lawyers that covers all subagency issues such as compensation, duties, liabilities responsibilities, insurance, indemnification, and hold harmless.
Perhaps, similar language could be used in attorney drafted team formation and team separation agreements.
Article 16, Standard of Practice 16-20
REALTORS®, prior to or after their relationship with their current firm is terminated, shall not induce clients of their current firm to cancel exclusive contractual agreements between the clientand that firm. This does not preclude REALTORS® (principals) from establishing agreements with their associated licensees governing assignability of exclusive agreements. Generally, a buyer or seller cannot unilaterally terminate a buyer’s agreement and a listing agreement.
WARNING: Without cause for termination or without the mutual agreement of the brokerage, a buyer or seller attempting to terminate their agency agreement could create liability for themselves. The clients should be advised by their attorney as to their rights under their agency agreements.
If disputes arise, SCR offers a mediator list of trained mediators to help mediate settle issues that are disputed. Mediation can help avoid expensive, lengthy, and worrisome litigation.
https://www.screaltors.org/mediation/
Worst case scenarios without the above mentioned lawyer drafted agreements can include litigation, ethics complaints, license law complaints, loss of compensation, settlement, upset people, loss of future business and personal relationships, bad social media reviews, mistakes, etc.
Posted by: Byron King on 01/25/22 (This information is only accurate as of 01/25/22. You must contact SCR for updates and changes to this information after 01/25/22 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org or email byron at screaltors.org)
This information is not legal advice. This information is intended only to provide general information and may not be relied upon as specific legal guidance. Legal counsel should always be consulted before acting in reliance on this information.