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21 Cards in this Set

  • Front
  • Back
The responsible broker is the agent of the client; a salesperson or broker who
associates their license with the responsible broker is an agent of the responsible
broker and works under the direction and supervision of the responsible broker.
Furthermore, 22TAC 535.154(e)) states: “Because salespersons may lawfully engage
in brokerage activity only when they are associated with, and acting for, a broker, a
listing may be solicited and accepted only in a broker’s name. Advertisements
concerning a broker’s listings must include information identifying the advertiser as a
real estate broker or agent.” Furthermore, the associate may not accept compensation
directly without the consent of the sponsoring broker [TRELA 1(d); 22 TAC 535.3
Listing agreements, buyer-representation agreements and property
management agreement create the agency relationship between the responsible broker
and the client (buyer/tenant or seller/landlord). An independent contractor agreement
would exist between a broker and a salesperson or broker licensee whose license was
associated with the principal broker.
The employer-employee relationship would allow the broker to exercise
control over such activities as what, where, when, and how duties are performed. A
broker treating an associated licensee as an independent contractor more generally
controls what the independent contractor does but not necessarily how the work is
perform. The more control the broker exerts over the sponsored licensees, the more
likely IRS would consider the sponsored licensee to be an employee instead of an
independent contractor.
The state license held by a broker associate is the same as that of the
responsible, or principal, broker. The associate broker may theoretically do any of
the things the principal broker is authorized to do under TRELA, including
advertising and taking listings in their own name and actually running another
brokerage operation. Such freedom of action is generally not permitted by the
principal broker who may be held just as accountable for the acts of broker associates.
In fact, TRELA 1.(c) holds the principal broker responsible “for all acts and conduct
performed under this Act by the broker or by a real estate salesperson associated with
or acting for the broker.” TRELA 2.(4) does not limit the definition of a
“salesperson” to those holding a salesperson license but rather a “person associated
with a Texas licensed real estate broker for the purposes of …” performing brokerage
activities on behalf of the broker.
IRS would of course prefer that licensees be classified as employees because
the broker could then be held accountable for collecting and paying taxes on behalf of
the employee. However, the broker would not necessarily be shielded from IRS
regulations simply because the written contract with associates states the associates
are independent contractors (i.e., self-employed and thus responsible for paying their
own business expenses and taxes). The more control the broker exerts over what,
how, when and where the duties are performed, the more likely IRS might rule that
“if it walks like a duck, quacks like a duck…” it must be an employer!
(p.226) Compensation between brokers and their associates is set by mutual
agreement between the two parties. TRELA and TRELA are silent on this matter.
(p.227) 22 TAC 535.1.(c) states that a person “must be licensed…to show a broker’s
listings, solicit listings of real property..” or perform any other act of brokerage. The
personal assistants will frequently act as host or hostess at an open house “provided
the unlicensed person engages in no activity for which a license is required.”
(p.227) MLS’s are sometimes viewed as employment agreements amongst the
members of the MLS. As discussed in detail in Chapter 6, offers of subagency
through the MLS are now at the discretion of the listing broker.
(p.227) Only REALTORS® are eligible to participate in MLS activities sponsored
by local REALTOR® boards; however, non-REALTOR® broker licensee may still
voluntarily contract with any broker licensee to arrange for cooperation and/or
compensation between brokerage firms.
(p.229) TRELA 14(a) states that a “licensed broker may pay a commission to a
licensed broker of another state if the foreign broker does not conduct in this state any
of the negotiations for which the fee, compensation, or commission is paid.” 22
TAC 535.147(a) defines “any other state” as “the states, territories, and possessions
of the United States and any foreign country or governmental subdivision thereof.”
Employment Contracts with Consumers
Listing and/or Buyer’s Representative Agreements
Property Management Agreements
Employment: Brokers & Principals….
Financial Duties
Pay Brokerage Expenses
Income Tax on Compensation Received
Employment: Brokers & Principals
Requirements For Recovery of Commission
Duly licensed at time service began
Written & Signed Compensation Agreement
Buyer Advised To Check Title
Employment: Brokers & Associates…
General guidelines
Sponsoring broker, aka principal broker
Respondeat Superior
Associate = agent of the broker
Rules for salespersons and broker associates
TREC Not Involved in Contractual Agreements
Between Brokers and Associates…
Employee vs. Independent Contractor…
Employee vs. Independent Contractor…
Broker engages associates as
employees or
Independent contractors
May establish either
Agreement should be in form of written contract
Between Brokers and Associates…
…Employee vs Independent Contractor
Broker exercises certain controls
Withholds taxes, Social Security, benefits
Independent contractor
Broker controls what, not how
Broker must not furnish normal employee benefits
Contract should specify tax responsibility
Between Brokers and Associates
Salesperson Compensation
Established by mutual agreement of broker and associate
Typically associate shares in commissions earned by broker
Many compensation plans available
Personal Assistants
Licensed vs Non Licensed
Not Likely an Independent Contractor
Consult Competent Tax Advisor
Between Brokers & Subagents
MLS Subagency Agreements
Non-MLS Subagency Agreements
Agreements Between Brokers
Listing Commissions
Buyer Broker Agreement for Compensation
Potential Problems
Other Compensation Issues
Sharing commission with non licensee prohibited except:
$50 rule
Unlicensed Brokerage Owners
Sharing income vs. performing brokerage activities
Foreign Brokers
Another state or another country
Suggestions for Brokers
Document Relationships with Associates in Written Employment Contract
Follow IRS Guidelines re: Independent Contractor Status