As you know, Alabama law requires real estate salespersons to be licensed under a qualifying broker. This means that most real estate companies have one or more salespersons, with each salesperson operating under a qualifying broker. At times, salespersons change companies and qualifying brokers. Below are some issues to consider before and after a salesperson transfers, including policies to adopt, records to maintain and a word of warning on breaking existing agency agreements for personal gain.

Notice and Fee (Ala. Code § 34-27-34)

• Notice – Before changing qualifying brokers, a salesperson or associate broker must give notice to the Alabama Real Estate Commission (AREC). The salesperson’s current qualifying broker must receive a copy of the notice.
  
  
• Transfer Request – The new qualifying broker must send to AREC a transfer request and a statement assuming liability for the salesperson or associate broker.
  
  
• Pay Fee – The salesperson or associate broker must pay AREC a $25 fee for a new license certificate for the unexpired term of his or her original license. Note that the licensee cannot perform actions requiring a license under the new qualifying broker until the new certificate has been issued.
  
  
• Online Transfer – The tasks mentioned above can be accomplished on AREC’s website here. On the website, salespersons can fulfill the notice requirement and pay the fee and brokers can satisfy the requirement to provide a transfer request and liability assumption statement.
  
  
• Effective Date – If the transfer request is sent by certified or registered mail with all required forms, the license certificate and payment of any fees, the paid receipt for the certified or registered mail can serve as evidence of a new license. Assuming all documents are in order and fees paid, the transfer’s effective date is the date of mailing on the mail receipt. If the mailed transfer request is incomplete, the missing forms or fees must be submitted and paid within 10 days or the transfer will be null and void. (Ala. Reg. Rule 790-x-2-.14).

Agency Office Policy – Disclosure and Acknowledgement

License law requires brokers to adopt a written office policy on the different types of brokerage service arrangements that the broker’s licensees may offer or accept. Qualifying brokers must provide his or her licensees with a copy of the policy and explain the policy to all licensees on a yearly basis. Each year, the licensees should sign a form that explains and acknowledges receipt of the policy. When new salespersons are employed, this disclosure must be provided and acknowledged. See Ala. Code § 34-27-83.

Listings and Pending Sales

One issue that may come up when salespersons change qualifying brokers is what to do with listings and pending sales. Here are some things to consider:

• Contract Terms Govern – The agreement between the salesperson and company or qualifying broker should have a provision governing a change of brokers (in addition to termination of employment). The provision should define what happens to the salesperson’s pending sales and listings and at what point a salesperson is entitled to a commission when leaving to join another company. Even if the provision is not in the independent contractor’s agreement, the company should have a policy on what happens in this situation, and each licensee should sign it. The agreement terms or policy, if agreed upon by the salesperson, dictate whether payment of commission and how much is owed to departing salespersons.
  
  
• Commission - Under Alabama license law, every salesperson must be paid by his or her qualifying broker. When a salesperson changes qualifying brokers but is owed money under his or her contract for an upcoming sale, the salesperson still must receive the money from his or her qualifying broker. The new and old qualifying brokers should work out how the transferring salesperson receives the commission, assuming the salesperson is entitled to one under his or her contract.
  
  
• Induce Me Not - A word of warning related to transfers and existing clients. Both Alabama license law and the REALTOR® Code of Ethics place limitations on transferring salespersons seeking the clients of the prior firm.
  
  
  • License Law - Alabama license law prohibits licensees from inducing a party to a contract to terminate the contract and enter a new contract, where the new contract personally benefits the licensee. See Code § 34-27-36(a)(13). Salespersons leaving one company to join another must be mindful of this rule. Failure to abide by it can result in a fine of between $100 and $2,500 and/or suspension or revocation of a real estate license.
    
    
  • REALTOR® Code of Ethics – Article 16 of NAR’s Code of Ethics places limitations on solicitations by REALTORS® of another licensee’s client. Standard of Practice 16-20 goes into further detail, prohibiting REALTORS® from inducing a client to cancel an exclusive contractual agreement between the client and the REALTORS® existing or prior firm. The provision does go on to allow REALTOR® principals from entering agreements with associated licensees that govern assignability of exclusive agreements.

Charles Sowell, former longtime General Counsel at the Alabama Real Estate Commission, wrote an article on this topic in 2004 (article here – scroll to page 2).

Records Maintained

Records required to be maintained by the qualifying broker should be kept by the qualifying broker. Under Alabama license law and accompanying regulations, qualifying brokers must maintain certain records for three years. Records to be kept include “all contracts, leases, listings and other records pertinent to real estate transactions . . .”, as well as a copy of the estimated closing statement, or net sheet, when required to be provided, and records pertaining to trust funds. See Ala. Code § 34-36(a)(31); Ala. Admin. R. 790-x-3-.04; Ala. Code § 34-27-36(a)(8(c).

Other records must be provided upon inspection by the Real Estate Commission. These include items such as closed transaction files, real estate licenses, the office policy on R.E.C.A.D. and all pending sales files. A more complete list can be found in Alabama Administrative Rule 790-x-3-.09.

Rabbit Trails 

• Business License - Because salespersons fall under the business license of the real estate company, the business license of the new or old real estate company should not be impacted when a salesperson changes brokers. However, if the business license fee is based on the business’s income, a new salesperson may impact the business license fee by increasing the income.

• Changing Home Address – Even when a salesperson simply changes a home address, the salesperson must notify the Real Estate Commission within 30 days. Ala. Code § 34-27-35(h).

Additional Materials

Links to several additional articles are included below.

• Document Retention by Charles Sowell (page 4)
• Commissions – “A Quiz On Getting Paid” by Charles Sowell (page 1)
• “Retention Strategies for Brokers” – from NAR
• “Systems for Tracking Agent Onboarding” – from NAR
  
  

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