About that Money: Handling Commissions and Deposits
When providing real estate services, sales associates and broker associates often have broad autonomy. When receiving and handling money, however, license law limits their options.
ORLANDO, Fla. – What is supposed to happen when an associate receives funds related to a real estate transaction, such as an escrow deposit under a sales contract or a deposit under a lease?
The good news is that the answer is very simple. Under Florida Administrative Code Section 61J2-14.009, “Every sales associate who receives any deposit, as defined in Rule 61J2-14.008, F.A.C., shall deliver the same to the broker or employer no later than the end of the next business day following receipt of the item to be deposited.”
Note that the definition of deposit is broadly defined, so the safe answer for associates is to get money related to a real estate transaction out of their own hands and into the hands of their broker as quickly as possible, no later than the next business day.
How about receiving payment for real estate services the associate provided? This should come from just one source – the brokerage firm (or owner/developer, if that is where the license is registered). Section 475.42(1)(d), Florida Statutes provides “A sales associate may not collect any money in connection with any real estate brokerage transaction … except in the name of the employer and with the express consent of the employer …” There is one small exception, where a broker can give a closing agent written authorization to pay an associate directly at a real estate closing.
Can an associate form an entity to receive commissions? Yes, if the entity complies with Section 475.161, Florida Statutes, which permits the Florida Real Estate Commission (FREC) to “license a broker associate or sales associate as an individual or, upon the licensee providing the commission with authorization from the Department of State, as a professional corporation, limited liability company or professional limited liability company. A license shall be issued in the licensee’s legal name only and, when appropriate, shall include the entity designation.”
The wording of that statute confuses quite a few people, so read on to see a step-by-step picture of how this works.
Let’s say you are an associate whose legal name (as registered with FREC) is Anna Marie LeBeau. If you choose to form a limited liability company, then the name of your limited liability company must be “Anna Marie LeBeau, LLC.” This LLC should be a single person entity (just one member) and should not have a fictitious name, or DBA.
The second step is to register the entity with FREC. You can do this by submitting form DBPR RE 16. Section II of this form asks for your name and license number before providing two check-the-box sections. In your case, you would check the box “Add” followed by “LLC” before signing and submitting the form.
The third and final step is to inform your broker that future commission checks or other payments you earn for licensed real estate activity should be paid to Anna Marie LeBeau, LLC instead of your personal name. You can show your broker proof of the new entity by verifying your license on the website myfloridalicense.com. If you have successfully completed steps one and two, your license should now include the letters “LLC” after your name.
Finally, what can an associate do if a client or customer refuses to pay money owed for real estate services the associate provided? They can encourage the broker to take action – but they can’t take matters into their own hands, since Section 475.42(1)(d), Florida Statutes provides that “… no real estate sales associate … shall commence or maintain any action for a commission or compensation in connection with a real estate brokerage transaction against any person except a person registered as her or his employer at the time the sales associate performed the act or rendered the service for which the commission or compensation is due.”
In other words, they look to the broker to see if the broker is willing to pursue an unpaid commission.
Joel Maxson is Associate General Counsel for Florida Realtors
Note: Information deemed accurate on date of publication
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