Employee vs. Contractor

In the world of California real estate, relationships between agents and brokers are critical to the effective functioning of the industry. One of the key aspects of these relationships is determining whether a real estate agent is an employee or an independent contractor, which has significant implications for both the agent and the broker. Here we explore this important topic.

Employee Status vs. Contractor (Employee vs. Contractor Status)

In California, a real estate agent is an agent of the real estate broker, regardless of whether he or she is an employee or independent contractor. However, the distinction between employee and independent contractor is essential and carries significant differences in terms of responsibility and control.

• Employee: A real estate agent who is an employee is subject to the direction and control of the broker. The broker is responsible for supervising and directing the agent's activities. The employee follows the broker's instructions and is under his direction.
• Independent contractor: An agent who is an independent contractor has greater autonomy. Although still an agent of the broker, an independent contractor determines how he performs his work and is responsible to the broker only for the results of his work, not for how those results are achieved.

Importantly, whether employees or independent contractors, real estate agents must comply with state and local regulations and standards governing the industry.

Employment and Termination

California law establishes certain requirements regarding the employment and termination of real estate agents. Here are some key guidelines:

• Mandatory Notification: A broker must immediately notify the Commissioner in writing upon employing or terminating the employment of a real estate agent. This notification is essential to maintain an adequate record of active agents in the industry.
• Change of Responsible Broker: If an agent changes responsible brokers, they must make certain changes to their license. This includes crossing out the name of the previous broker on the agent's license and writing or typing the name of the new responsible broker on the back of the license, dating and initialing the change.

Employment Contract

Every real estate broker in California must have a written agreement with each real estate agent, whether a sales agent or an associate broker. This written agreement is essential to establish the terms and conditions of the working relationship between the broker and the agent. It also ensures that both parties understand their roles and responsibilities.

In summary, the distinction between employee and independent contractor is critical in agent-broker relationships in California and has significant legal implications. Additionally, having written employment agreements is essential to ensure a clear and well-defined employment relationship between parties involved in the real estate industry in the state.

Commissions and Fees

In the world of real estate in the United States, it is essential to understand how commissions and fees work on transactions. Here we explore who can give and receive compensation, as well as the rules that govern this crucial aspect of the industry.

Who may give and receive compensation

Commissions on real estate transactions can only be paid to a licensed real estate broker. In turn, that broker can pay a licensed real estate agent, whether a sales agent or an associate broker, as long as that person has a written contract with the broker. This written contract is essential to clearly establish the terms and conditions of compensation.

It is important to keep the following key rules in mind:

• Sales Agents: A sales agent may not be employed by or accept compensation from anyone other than the broker with whom they are currently licensed. This ensures that compensation flows through the broker and that sales agents are legally authorized to receive commissions only through their broker.
• Compensation Payment: A sales agent may not pay compensation for performing any of the activities for which a real estate license is required to any other real estate licensee, except through the real estate broker under whose license they are operating.

In short, commissions in real estate transactions are strictly managed and designed to ensure that only licensed professionals receive compensation and that it flows through the appropriate channels. This helps maintain integrity and legality in the real estate industry in the United States.

Compensation Agreements

They are an essential component of transactions for both the broker who sells a property (listing broker) and the broker who buys it (selling broker). Here we look at the key aspects of these agreements and what they should contain.

Listing Broker

A listing broker must have a valid, written contract with the principal on whose behalf they are acting. This contract is essential and ensures that both parties clearly understand their obligations and the terms of the sale. Importantly, this rule applies to residential real estate transactions with four units or less.

Selling Broker

A selling broker must either have a valid written agreement with the buyer, tenant/lessee, or lender, or must be the “predicating cause” of the sale, lease, or loan. This ensures that the buying broker has a clear and defined role in the transaction and is properly authorized to act on behalf of the buyer.

Form and Content of the Agreement

Importantly, the amount or rate of compensation cannot be part of a paper agreement for the sale of residential real estate consisting of four or fewer units or the sale of a mobile home. These agreements must contain a 10-point bold note indicating that real estate commissions are not set by law and can be negotiated. This information is essential to ensure transparency and understanding in real estate transactions.

In summary, compensation agreements are a critical component of real estate transactions in the United States and are designed to protect both brokers and clients by clearly establishing the terms of compensation and roles in the transaction.

Business Place

The place of business is a fundamental element for licensed real estate brokers. Here we explore the key issues relating to authorized places of business and notification requirements.

Authorized Business Places

A licensed real estate broker must have and maintain a defined place of business in the State of California that serves as its office for the conduct of business activities. This office is where the broker's license is displayed and where personal consultations with clients are carried out. Importantly, a real estate license does not authorize the licensee to conduct business in any location not specified in the real estate license.

Office Reporting Requirement

Each licensee must provide the Commissioner with a current office address or shipping address, a current telephone number, and a current email address that the licensee uses to conduct any licensed activity.

Change of address

Each licensee must inform the Commissioner of any change in office address or shipping address, telephone number or email address. no later than 30 days after making the change. This ensures that the Commissioner and interested parties are aware of the location and up-to-date contact information of the licensed real estate broker.

In summary, having a licensed place of business and keeping contact information up to date are essential requirements for licensed real estate brokers in California. This ensures transparency and effective communication in real estate transactions in the state.

Brokerage Supervision

Brokerage supervision is a fundamental part of the real estate industry in the United States. Here we explore the key aspects related to brokerage supervision according to the regulatory framework and the obligations of brokers.

Broker Obligations

Brokers have an obligation to exercise reasonable supervision over the activities of their salespersons or, in the case of a corporate broker, to exercise reasonable supervision and control over the activities of the corporation for which a real estate license is required. estate.

It is important to note that a real estate sales agent does not have the authority to act independently of the broker who employs him or her. The supervising broker must establish policies, rules, procedures and systems to monitor the conduct of broker and sales associates.

Regulations

State and local regulations also play a crucial role in overseeing brokerage. In accordance with the California Code of Regulations (CCR), specific requirements are established for supervision, including reasonable supervision and control of the activities of brokers and salesperson agents.

In summary, brokerage supervision is essential to ensure ethical and professional conduct in the real estate industry. Brokers have the responsibility of establishing and maintaining effective systems of supervision for their associates and employees, which contributes to maintaining high standards in the real estate business.

License Retention

License retention is a fundamental aspect that regulates the maintenance and custody of real estate licenses. We will explore how salesperson license retention is handled under the California Code of Regulations (CCR).

Retention of Salesperson's License

A real estate salesperson's license is maintained at the principal office of the responsible broker until it is canceled or until the salesperson stops working for the broker. This means that the physical license is kept at the broker's premises and is not the property of the salesperson, even though they are the person to whom the license was granted.

When a salesperson ends their employment relationship with the broker, the broker has the obligation to return the license certificate to the salesperson within a period of 3 business days from termination. This ensures that the salesperson has possession of their license once they have stopped working with that specific broker.

In summary, license retention is an important process to ensure proper oversight and custody of real estate salesperson agent licenses in California. These regulations help maintain integrity and transparency in the real estate industry by ensuring that licenses are available and in the hands of salespeople when they need them, even after changing employers.

Branches and Managers

Branch operations are a key part of a real estate brokerage's expansion and growth. We will explore how branches and managers operate in compliance with the California Business and Professions Code (BPC).

Branch Office License

A real estate broker must obtain a license for each branch office the broker maintains within the state of California. The license application must indicate the name of the person and the locations of the places of business. It is the Commissioner's responsibility to determine whether a location requires a branch license.

Appointment of Manager

A responsible broker may appoint a licensee as manager of a branch office and delegate to the licensee the responsibilities of overseeing operations and supervising licensees and office personnel employed at the branch office.

Importantly, despite the delegation of responsibilities, the responsible broker remains responsible for the actions of the named manager. If the appointed manager fails to adequately supervise the branch's licensed activities, he or she is subject to disciplinary action.

The appointment of the manager must be made through a written contract in which the manager accepts the delegated responsibility. To be eligible for appointment, a vendor license holder must not:

• Have a restricted license.
• Be or have been subject to an exclusion order.
• Have less than two years of full-time real estate experience within five years prior to appointment.

The responsible broker must immediately notify the Commissioner in writing whenever the appointment of a branch manager is terminated or changed.

In short, branches and managers play a crucial role in the expansion of real estate businesses in California. Responsible brokers may appoint managers to oversee branch operations, but they remain responsible for their actions and must comply with requirements set by state regulations.

Brokerage Activities: Recordkeeping Requirements

Maintaining accurate and complete records is essential for transparency and compliance with state and local regulations. We will explore recordkeeping requirements under the California Code of Regulations (CCR) and the California Business and Professions Code (BPC).

Required Records

A broker must maintain copies of all listings, deposit receipts, canceled checks, trust records and other documents that the broker has executed or obtained in connection with any transaction that Requires a real estate broker's license. However, the broker is not required to retain electronic messages of an incidental and non-material nature.

Retention Period

The period of records retention is 3 years, counted from the closing date of the transaction or from the listing date if the transaction is not consummated. This 3-year rule also requires a Multiple Listing System (MLS) to retain listings and related information for 3 years from the date the information was placed on the MLS.

Audits

After receiving a notice, the books, accounts and records must be available for examination and copying by the Commissioner during regular business hours. If there is sufficient cause, the records are subject to audit without further notice, although the audit cannot be of a harassing nature.

Sanctions (Penalties)

The real estate broker must pay the costs of any audit in which the Commissioner finds that the broker has committed a violation related to the manipulation of funds, as defined by law or regulations. If the broker does not pay the audit costs within 60 days after sending a billing notice, the Commissioner may suspend, revoke, or deny renewal of the broker's license. This suspension or denial remains in effect until the fee is paid or the broker's right to renew a license expires. Additionally, the Commissioner may sue to recover the cost of an audit in any court of competent jurisdiction.

The DRE may suspend or revoke the license of any licensee who knowingly destroys, alters, or conceals a record required to be maintained or that relates to the Commissioner's audit or examination. Complying with record-keeping requirements is essential to maintaining integrity and compliance in the California real estate industry.