Clients, Contracts, Code…Oh My!

“I’m so excited, I’ve gotten my broker’s license; talked with my attorney and accountant and am all set to open up my new real estate firm.  Plus, all my clients are coming with me!” … As staff of the Association, we have heard this pronouncement on many, many occasions.  It’s such an exciting time for a newly minted broker of record, with so many different tasks to be accomplished and a lot of energy, not to mention money, being expended.  But, WAIT!

Unless expressly written in your Independent Contractor Agreement, or in office policy, those clients are not yours.  Did you know, contacting them and encouraging them to leave their current brokerage to join you in your new one is a violation of the Code of Ethics?  Article 16 of the Code of Ethics says this:

‘Article 16: Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other Realtors® have with clients. (Amended 1/04)’

So what can you do, what do you say?  These can be tough waters to navigate.  You can let the party know that you’ll be opening your own firm and that XYZ broker will continue to serve their selling or buying needs.  This is the time to be a stand up REALTOR®, and not say anything disparaging about the firm or its agents.  Not only is that the professional and right thing to do, but doing otherwise could also be a violation of the Code of Ethics, under Article 15.  If the client wants to speak with you about how to ‘get out of’ their Exclusive Right to Sell Agreement or their Exclusive Right to Buy Agreement; you must remind them that they have signed a legal, two-party document, and that you’d be happy to speak with them about how you can serve them once their Agreement has ended, but that you cannot interfere with that Agreement.  Only with both parties agreeing to release the other from their obligations, can these agreements be terminated.  That is a discussion you need to stay out of.

It’s always best for brokers and associates to have an Independent Contractor Agreement that spells out the details of rights and responsibilities and how compensation, clients, fees, etc. will be handled upon termination of the relationship.  There is an agreement that has been created by and vetted by MAR legal counsel.  You’ll find a copy here:  MAR_IndpendentContractorAgreement  If you have any questions about any of the items in this agreement, or the terms, please contact your legal counsel for advice.  Brokers should also have solid office procedures in place for this, and many other situations.  NAR has provided some resources on their website:  Field Guide to Real Estate Office Policy Manuals.

Thinking about opening an office in the near future?  We have some guidelines that may assist you.  As always, your legal counsel and your accountant are your best resources in this venture – seek their advice!

Finally, for reference, here’s a copy of the 2014 Code of Ethics:  2014_COE_Pamphlet