IAR's Chief Legal Counsel Steve Bochenek shares some frequently asked questions and answers as part of the May edition of DR Legal News. IDFPR also has a Q&A , which can be found here.

Post-transition and Renewal Frequently Asked Questions

The following are questions and answers addressing business practice issues that you may be faced with following the transition and renewal date of April 30, 2012.  Please be advised that the FAQs address situations that may arise.  However, the answers can vary on a case by case basis depending on your unique facts and circumstances.  The following are offered as a guide and not as specific legal advice for your unique situation.

Q1.      I am the managing broker for our brokerage company.  What responsibility do I have to make sure that our sponsored licensees have transitioned or renewed their real estate brokerage license?

A1.      As the managing broker for your brokerage company the Illinois Department of Financial and Professional Regulation ("DFPR") will consider you as the responsible party with your brokerage company for making sure that all sponsored licensees who are continuing in the business have transitioned or renewed their license as provided by statute.  Failure to do so may subject you to discipline.

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Q2.      As managing broker for a brokerage company what should I do to insure that all of our sponsored licensees have transitioned or renewed as of April 30, 2012?

A2.      April 30, 2012 is the transition and renewal date.  All individuals who held a salesperson license must have transitioned to a broker's license by April 30, 2012.  This means they would have obtained the broker's license or, at a minimum, have completed all the requirements to transition to the broker's license and applied to the DFPR no later than April 30, 2012.  Probably the best way to begin checking on your sponsored licensees is either to check the DFPR's website, to see which of your individuals who held a salesperson's license now holds a broker's license, or to ask those individuals who have a salesperson's license to give you the best evidence they have available to them that they have completed the requirements to transition and have applied to the DFPR by April 30, 2012 for the broker's license.  In regards to the sponsored licensees who were brokers prior to April 30, 2012 they either need to transition to a managing broker's license (no need to be designated as such with DFPR) or renew their broker's license by April 30, 2012.  If a person is retaining the broker's license they would simply need to complete 12 hours of continuing education ("CE") and submit their application and pay the fee for renewal of their license.  Again you can check on line with DFPR to determine their status or ask your sponsored licensees for the best information or evidence available to them that they have met the requirements and submitted the renewal application along with payment. Those of your sponsored licensees who were brokers and transitioned to the managing broker's license would not have to renew their license as of April 30, 2012.  Thus, if these sponsored licensees can provide you with information showing that they have either obtained or applied for the managing broker's license by April 30, 2012 there is no need for them to produce a renewal application or evidence of obtaining CE by April 30, 2012.  In addition, if you have any leasing agents they are not required to renew as of April 30, 2012.  The renewal date for leasing agents is July 31, 2012.

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Q3.      What do you mean by best evidence or best information?

A3.      Best information or best evidence is going to vary from situation to situation.  However, such information or evidence may include a copy of a canceled check to DFPR, other proof of payment to DFPR, a copy of an application, proof of mailing, prints of computer screens when an application was transmitted to DFPR, return mail receipts, transcripts of completion of requisite education, proof of passing the transition exam or proficiency exam, and other similar types of evidence that would lead one to believe that the necessary education, or testing has been completed and an application submitted to DFPR by April 30, 2012.

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Q4.      Is there anything else I need to do as managing broker with regards to a sponsored licensee as of April 30, 2012?

A4.      You may want to review your independent contract or employment agreement with the sponsored licensees to determine if any changes are needed to those agreements to reflect a new status of licensure.

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Q5.      As a managing broker, if I determine that one of the company's sponsored licensees, to the best of our information, has not submitted an application to transition or to renew their license by April 30, 2012 what steps should I take?

A5.      If a person was a salesperson and there is no information that would lead you to believe that they have transitioned to a broker's license prior to May 1, 2012 or at least submitted an application for that transition to the DFPR by April 30, 2012, it would be prudent to direct that individual not to provide any brokerage services on behalf of the company until they can provide some evidence that they have transitioned to the broker's license or until they have obtained the necessary education and passed the licensing test required by the Real Estate License Act ("Act").  If the person agrees that they have not transitioned and do not intend to transition then you should sign off on their license and return it to the DFPR, make sure that they are not providing brokerage activities on behalf of your company, remove their name from advertising and terminate any independent contractor or employment agreement.

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Q6.      I am the owner of a brokerage company.  Our company had a managing broker, with a managing broker license, designated with DFPR to manage our company.  That person left our brokerage company after May 1, 2012.  The company has no other sponsored licensees who have a managing broker's license.  What can our company do at this point in time to replace the managing broker and remain licensed?

A6.      Your brokerage company really has two options.  The first would be to locate an individual with a managing broker's license with another company or who is self-sponsored and retain their services to be the managing broker for your company.  The second option is to find an individual who is a sponsored licensee of your company, with at least two years of experience, who is willing to be a managing broker and obtain the managing broker license.  That individual would be named with DFPR as the managing broker for your company, even though they do not yet have the managing broker license.  Pursuant to Section 1450.550(a) of the Rules that individual will have a period of 90 days to take the necessary education and pass the required test to obtain the managing broker license. During the interim your company remains properly licensed.

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Q7.      I am a sole proprietor and was not aware of the need to transition to the managing broker license by April 30, 2012.  Can I take advantage of the provisions of Section 1450.550(a) of the Rules on May 1, 2012 and designate myself as a managing broker to DFPR which would then give me 90 days to take the required education to obtain the managing broker's license.

A7.      Our best advice is that this rule will probably be interpreted by DFPR as not being applicable to a sole proprietor who simply missed transitioning by April 30, 2012.  Rather, we believe this rule will be construed by DFPR to be available to a brokerage company or sole proprietor who has a managing broker in place as of May 1, 2012, with the managing broker license, and then has that managing broker leave that position.  This would reflect an interpretation that this particular provision was intended to allow the brokerage company the opportunity to replace a properly licensed and designated managing broker.  The sole proprietor who has simply failed to transition would not be in that position as of May 1, 2012.

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Q8.      If I am a sole proprietor who has failed to transition by April 30, 2012 do I have any other options?

A8.      Most importantly you need to make sure you submitted or submit a renewal application for your broker's license and complete the twelve hours of required CE so that you can maintain your broker's license.  Other than that your options would appear to be two.  The first would be to go to work for a brokerage company that is properly licensed and has a managing broker in place as of May 1, 2012.  You would become a sponsored licensee with that brokerage company and would need to do business for and advertise under the name of that company.  The second option would be for you to set up a corporation or other entity, of which you could be the sole owner, and hire or retain the services of an individual who has a managing broker license and is not affiliated with any other company.  This person would be designated with the DFPR as the managing broker for your new company.  Your license would then be sponsored by the new company.  You would also need to advertise and do business under the name of the new company.  This may well mean that your advertising will be different from your existing advertising unless the new company files for an assumed name which is the same as your sole proprietorship name.  Under this scenario you could then continue to advertise under the same name. You will also then have time to take the necessary education and testing required to obtain the managing broker license.

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Q9.      Our company is the listing broker on a property and the cooperating broker is a sole proprietor.  The property was shown prior to May 1, 2012 and a contract was entered into by the prospective buyer and seller prior to May 1, 2012.  The transaction is closing on May 15, 2012.  I am certain that the cooperating broker did not transition and is not licensed as a real estate licensee after April 30, 2012.  Can I pay the cooperating broker's share of the commission to the individual who is the sole proprietor and cooperating broker?

 

A9.      Under the particular factual situation presented the cooperating broker's share of the commission can be paid to the sole proprietor who is no longer licensed.  This answer is appropriate in this particular situation because the brokerage activities which resulted in the transaction occurred while the individual was licensed, that is, prior to May 1, 2012.  The closing on the transaction merely provided the funds to pay the fee or commission which was earned prior to May 1, 2012.  Thus, payment of the commission to the cooperating broker who is no longer licensed is appropriate.

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Q10.    The same as the prior question, except that the activities relating to the showing of the property occurred prior to May 1, 2012 but no contract was entered into until after May 1, 2012.  Should the cooperating broker's share of the commission be paid to the individual who is a sole proprietor but is no longer licensed after April 30, 2012?

A10.    This is a bit of a closer question as we move more into the procuring cause area.  However, ordinarily the signing of a contract for the purchase and sale of the real estate is the event that signifies or is evidence that the listing and cooperating broker have earned a commission or fee from the seller.  Since under this factual situation no contract was signed until after April 30, 2012, it would appear that some of the brokerage activities that entitled the licensee to compensation occurred when the individual who is the sole proprietor is no longer licensed.  Thus, payment of the fee or commission of the cooperating share to that individual would not be appropriate since those licensed activities occurred when the individual was no longer licensed under the Act.  Any issues regarding the payment of this fee would probably need to be resolved through litigation as opposed to mandatory arbitration since the individual who was the sole proprietor licensee is no longer licensed and thus could not be a member of the REALTOR® organization.  Arbitration could be agreed to by both parties.  Also, under the Act you need to hold a license in order to pursue litigation in the courts to recover a commission so it is possible that any lawsuit brought to recover the cooperating broker's commission or fee would be dismissed by the court.

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Q11.    Do these rules apply in the same fashion to a brokerage company?

A11.    These rules would not apply in the same fashion to a licensed brokerage company as long as it has a licensed managing broker designated as such with DFPR.  The reason for this is that the brokerage company's license extends through October 31, 2012.  Thus, the brokerage company is still going to be licensed after April 30, 2012.  The only exception to this, as indicated above, would be if that brokerage company did not have a managing broker designated with DFPR.  In some limited situations DFPR can, under Section 1450.700(c) of the Rules, grant the brokerage company permission to continue to act on an emergency basis without a managing broker.

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Q12.    What if I am fairly certain or know for certain that one of the sponsored licensees in the cooperating brokerage company has not transitioned and is not currently licensed?  Does that change the answer?

A12.    No, this does not change the answer since the offer to pay the cooperating brokerage fee is to the brokerage company and not to any sponsored licensee and the brokerage company still has an active license (so long as there is a managing broker designated as such with DFPR).  Whether or not the cooperating brokerage company pays the individual who is not licensed is up to that cooperating broker.  Payment of an individual who is not licensed by that brokerage company may cause the cooperating brokerage company problems under the Act and with DFPR but that is an issue for the cooperating broker and not for your company who is simply paying the cooperating fee to the cooperating brokerage company.  The managing broker of the company that has the listing may want to make the managing broker of the cooperating brokerage company aware of your concerns regarding that individual and their non-licensure status but this would not typically be reason to fail to pay the cooperating broker's fee.

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Q13.    Will the DFPR website be current as of May 1, 2012 so that I can determine who is properly licensed?

A13.    No, the DFPR website will not as of May 1, 2012, show all of the licensees who have transitioned or renewed their license.  It takes some period of time to process all of the last minute applications for licensure renewal and transition and the website of DFPR will be updated as that information is available.  However, this does not mean you should not check the DFPR website.

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Q14.    How long will it take DFPR's website to be current for individuals who have applied for transition or for renewal of a license by April 30, 2012?

A14.    No definite answer can be given to this question and part of the answer will depend upon how many transition applications and renewal applications are received by DFPR or are postmarked or in some other manner delivered to DFPR during the last several weeks of April.  However, DFPR has indicated that it hopes to have the transition and renewal process completed by the end of May, 2012 at which time the information on the website will be updated and reflect whether a person or company has an active license. DFPR will try to update this information as quickly as possible as it is to the benefit of DFPR and all licensees to have accurate information available as to who or what entities are properly licensed. 

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Q15.    What if I have a question about the licensure status of a company or individual after April 30, 2012? 

A15.    You should check the DFPR website.  If the website shows that a person has transitioned or renewed their license then you should need to look no further.  This should also be true as to the status of a company license shown on the website. However, remember that the website will not be completely up to date until the transition/renewal process is complete which hopefully will be around the end of May. Only at that time will the DFPR website accurately reflect those licensees who have not transitioned or renewed and those companies that are inoperative because of no licensed managing broker.

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Q16.    Will I be subject to discipline for dealing with or paying an individual or company that is not licensed after April 30, 2012? 

A16.    There is no universal answer to this question.  It will be based upon the facts and circumstances.  You cannot simply ignore information that you may know regarding a person or entity not being properly licensed.  However, as a licensee you are not charged with being an investigator or verifying that a person is properly licensed after April 30, 2012.  Totally accurate information simply will not be available for some period of time.  However, you cannot ignore information you have which leads you to believe that a person is not properly licensed.

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Q17.    What if I have other questions about post-transition issues that arise?

A17.    You can contact DFPR for an answer to your particular question.  Other options include listening to a webinar that was presented by the Illinois Association of REALTORS® ("IAR") on April 26, 2012 which dealt with a number of these issues and which is available through the IAR website.  Also, IAR will have frequently asked questions posted on IAR's website for your review or you can contact the IAR Legal Hotline regarding your questions.

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Q18.    What happens to the listing if a salesperson, who is sponsored by a sponsoring brokerage company and is the designated agent on a listing in a local/regional Multiple Listing Service (MLS), either failed to transition or chose not to transition to a broker’s license and is no longer licensed on May 1, 2012,?

A18.    Due to the fact that the MLS participant is really the company as opposed to the sponsored licensee, the managing broker for the sponsoring brokerage company could simply appoint an additional or new designated agent to take over the listing and see the listing through to completion/closing of the transaction.

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Q19.    Same facts as above, except the listing belongs to a one-person sole proprietorship where the sole proprietor broker failed to transition to managing broker and did not renew his broker’s license. What happens to the listing in this situation?

A19.    The listing will be considered void because the agreement is with someone who is no longer licensed.  The listing should be removed from the MLS.  The sellers would be free to enter a new listing agreement with a properly licensed sponsoring brokerage company.   Any new sponsoring broker should take care not to induce sellers to breach a valid listing but can assist those sellers after learning that their prior listing broker is no longer licensed.

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Q20.    What happens to the listings if the one-person sole proprietor renewed his broker’s license and formed a separate corporation that is now licensed as a real estate brokerage corporation, and then hired a new managing broker licensee to manage the newly licensed company? 

A20.    The broker licensee who is the owner of the new sponsoring brokerage corporation could assign the listings that belonged to his sole proprietorship to the new brokerage corporation.  The new managing broker might then appoint the former sole proprietor/owner of the corporation as the designated agent for the listing.

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Q21.    Same facts as above except rather than forming a new licensed real estate brokerage corporation, he becomes sponsored by an existing licensed real estate brokerage company?

A21.    As the sole proprietor on the listings of his former “company,” he could assign those listings to his new sponsoring real estate brokerage company, and then the managing broker of the new sponsoring real estate brokerage company could appoint him to be the designated agent on those listings.

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Q22.    A salesperson licensee did not transition to the broker license by April 30, 2012.  The sponsoring brokerage company took a listing on which she was the designated agent on May 15, 2012.  A sales contract was signed by the seller and buyer on July 15, 2012.  After that the salesperson took the 90 hour pre-license course, passed the state exam and received her new broker’s license on July 30, 2012.  The listing closed on August 15, 2012.  Could the “new” broker licensee receive any share of the commission from this transaction?  (Assume the managing broker did appoint a duly licensed designated agent to serve the seller clients).

A22.    No. The licensee was not licensed during the performance of licensed brokerage activities so she could not be compensated by the sponsoring broker.  She could be paid going forward for any licensed brokerage activities performed while operating under her new license beginning on the day she became re-sponsored.  (We do not address the possibility that DFPR might refuse to issue a new license if there is any finding of prior unlicensed practice).  There is also a possibility that the sponsoring broker’s license could be subject to discipline by DFPR for allowing the unlicensed practice of real estate subjecting its license to discipline.  One possible form of discipline could involve payment of a fine in the amount of the commission paid to the sponsoring broker on that transaction. 

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Q23.    It is May 1, 2012 and I don’t have my license back from DFPR. What should I do to continue practicing real estate?

A23.    Build a file.  In other words, make sure your file includes documentation that you could present to another broker who might ask if you are properly licensed, or to a DFPR official that might be following up with you on the status of your applications to transition and/or renew your real estate license.  Here are some examples of items that you could include in your file:

  • For a broker renewing your broker license
    • A copy of your completed renewal application postmarked or emailed on or before April 30, 2012.
    • A copy of your cancelled check or a screen print receipt of credit/debit card payment of your renewal fee paid to DFPR.
    • Copies of your transcripts showing you have completed your continuing education (CE) requirements.
    • A copy of your new 45 day permit/sponsor card if you no longer manage an office and now have a new sponsoring broker.
  • For a salesperson who transitioned to the broker license
    • A copy of your completed transition application (if sent before February 1, 2012) with a postmark or email date included. 
    • A copy of your completed transition/renewal application (if sent after February 1, 2012) with a postmark or email date on or before April 30, 2012.
    • Copies of your cancelled checks or screen print receipts of credit/debit card payments for both the transition fee and the renewal fee paid to DFPR.
    • Copies of your transcript showing you took and passed the 30 hour transition course and exam or a copy of evidence showing your passing score for the AMP proficiency exam.
    • Copies of your transcripts showing you have completed 18 hours of required CE if you took and passed the proficiency exam to transition to the broker license.
  • For a broker who transitioned to the managing broker license
    • A copy of your completed transition application postmarked or emailed on or before April 30, 2012.
    • A copy of your cancelled check or a screen print receipt of credit/debit card payment of your transition fee paid to DFPR.
    • Copies of your transcript showing you took and passed the 45 hour transition course/exam or a copy of evidence showing your passing score for the AMP proficiency exam.

 

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