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How’d You Do?

Surprised by some of the answers? Sometimes there’s a fine line between doing something the right way and doing it the wrong way. In real estate, avoiding the wrong way could mean the difference between losing and keeping your license.

While a sales associate (or broker-associate) may form a corporation under Section 475.161, Florida Statutes and thereafter receive commissions through the corporation, the requirements of the statute must be followed. They are:
• A sales associate may form only a professional corporation (commonly referred to as a professional association or P.A.), a professional limited liability company or a limited liability company.
• The entity must be formed in the sales associate’s legal name.
• The sales associate must register the entity with the Department of Business and Professional Regulation (DBPR)/Division of Real Estate (DRE) so that the DBPR/DRE can issue a license to the sales associate using the entity designation.
Tom and Tammy failed to follow the statute’s requirements in a number of ways. 

As previously stated [Florida Statute 475.161], a license issued “shall be issued in the licensee’s legal name only. …”  Therefore, Tom and Tammy wouldn’t be allowed to register their jointly formed corporation, “The Tom and Tammy Team Inc.,” with the DBPR/DRE.

Additionally, the type of entity that a sales associate may form under the statute is limited to a professional corporation, professional limited liability company or a limited liability company. So, in order to comply with the requirements of the statute, Tom and Tammy would each need to form one of the above entities, in his or her legal name, and then register that entity with the DBPR/DRE. 

Thereafter, Tom could receive the commissions he earned while licensed with Todd in the name of his entity, and Tammy could receive the commissions she earned while licensed with Todd in the name of her entity.

Section 475.011, Florida Statute, sets forth a number of exemptions from the licensing requirements of Chapter 475. Under the exemption outlined in Section 475.011(2), Florida Statutes, an unlicensed person is permitted to work for an owner-developer selling, exchanging or leasing the owner-developer’s real property, provided that he or she is paid by the owner-developer strictly on a salaried rather than a transactional basis.

Although Bill is a licensed sales associate, this exemption would still apply to his employment with Ken’s company since Ken’s company would pay him on a salaried rather than a transactional basis.

Under the real estate license law, therefore, Bill would not be prohibited from having his sales associate license registered with Ted’s brokerage company while being employed by Ken’s development company.

However, Bill should review his employment agreement (written independent contractor agreement, company policy manual, etc.) with Ted to ensure that he’s not prohibited from working for an owner-developer while licensed with him.

Providing a comparative market analysis, broker price opinion or opinion of value of real property is a real estate brokerage activity.

Under the real estate license law, a sales associate is prohibited from collecting any compensation in connection with his or her performance of brokerage activity directly from a customer.

Instead, the license law mandates that the compensation be paid to the sales associate’s broker/brokerage firm, which can then pay the sales associate pursuant to their agreement. 

The activities that Steve is engaging in on Christy’s behalf are not real estate brokerage activities that fall within the purview of the real estate license law. 

Therefore, it is not a violation of the license law for him to be paid directly by Christy for performing these activities on her behalf.

This article was written by FAR’s Law and Policy Department.