ADRE Model Broker Policy Manual-Commissions Part 2

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Deferred Commission

This section should cover:

  • How any deferred commissions received will be paid to sales associates.
  • If a beneficial interest can be assigned to a sales associate and under what circumstances.
  • How assigned commissions are handled with regard to the Internal Revenue Service, Form 1099’s, etc.

Commissions Shared Between or Among Sales Associatesmoney

This section should cover:

  • How shared commissions will be handled.
  • What type of agreement should be drawn?
  • Whether broker approval is required.
  • What happens if a commission is shared without broker approval (e.g., who will receive it, whether verbal agreements are allowed, etc.).
  • That shared commissions and referral fees paid to someone outside the Company are to be paid by the Company, not by the Sales Associate.
Quick Quiz

Fill in the Blank:
That shared and referral fees paid to someone outside the Company are to be paid by the Company, not by the Sales .

Commission Disputes

This section should cover:

How commission disputes between Sales Associates are to be handled, such as:

  • Whether there must be a written agreement and what happens when there isn’t;
  • Will there be an internal arbitration process;
  • Whether the Broker will mediate or arbitrate the matter.
  • If the Sales Associate takes a separate action outside the policies, who pays for any expense and, if unauthorized, what are the consequences.

According to A.R.S. § 32-2152(B), the real estate Commissioner is precluded from entertaining complaints regarding the earning, splitting or non-payment of compensation.

32-2152. Action by broker or salesperson to collect compensation

B. The commissioner shall not entertain complaints regarding purely civil disputes between licensees concerning the earning, splitting or nonpayment of compensation.

Quick Quiz

Fill in the Blank:

If the Associate takes a separate action outside the policies, who pays for any expense and, if unauthorized, what are the .

Commission Rate(s) Schedule

Each broker independently determines commission rate(s) schedules. This section should cover:

  • Any minimum acceptable cooperating commission accepted without prior approval of the Broker when representing buyers.
  • Any minimum acceptable listing commission without prior approval of the Broker.

Compensation Schedule

This section should cover:

  • Sales Associate compensation splits, schedules, and timing.
  • Errors and Omissions Insurance deductions and whether they are related to the Sales Associate’s compensation level.
  • Compensation paid after termination.
  • How bonuses are to be paid and divided.
Quick Quiz

Fill in the Blank:

Any acceptable listing commission without prior approval of the .

Out of State/Out of Area Co-Brokerage

This section should cover:

  • How Broker will cooperate with out of state/area Sales Associates and Brokers when offers are presented.
  • How broker will compensate out of state/area Sales Associates and Brokers when offers are presented.
  • Commission agreements must be in writing.

Compliance with A.R.S. § 32-2163 is required to enter into a cooperating agreement with non-Arizona real estate brokerages. All negotiations in Arizona and with people owning property in Arizona must be conducted through the Arizona Broker.

32-2163. Unlawful acts; out-of-state broker; cooperation agreement

A. It is unlawful for any licensed broker in this state to employ or compensate, directly or indirectly, any person for performing any of the acts within the scope of this chapter if the person is not also a licensed broker in this state or a salesperson licensed under the broker employing or compensating him, except that a licensed broker in this state may pay compensation to and receive compensation from a broker lawfully operating in another state.

B. Notwithstanding that according to subsection A of this section a licensed broker in this state may pay to and receive compensation from an out-of-state broker, this authority shall not be construed to permit an out-of-state broker to conduct activity in this state that would otherwise require a broker’s license issued by the department.

C. A licensed broker in this state may cooperate with an out-of-state broker who would otherwise require licensure in this state if:

1. The licensed broker and the out-of-state broker enter into a written cooperation agreement before the out-of-state broker conducts any activity otherwise requiring a broker’s license according to this chapter. The cooperation agreement shall include the following:

(a) A list of the real estate activities to be conducted by the out-of-state broker.

(b) A statement that the out-of-state broker agrees to fully comply with the laws of this state and submit to the regulatory jurisdiction of the department for activities subject to real estate broker licensure according to this chapter.

(c) A statement that the licensed broker in this state understands and accepts responsibility for the acts of the out-of-state broker.

2. All negotiations in this state or with people who own property in this state are conducted through the licensed broker in this state.

3. The licensed broker in this state assumes all responsibility for the acts of the out-of-state broker.

4. All principal funds handled by either the licensed broker in this state or the out-of-state broker are subject to the deposit and handling requirements of section 32-2151.

D. The offering of real estate brokerage services specified by section 32-2101, paragraph 48 for compensation or any other thing of value pertaining to real property located in this state through an internet web site constitutes activity that requires a broker’s license issued by the department.

E. This section does not allow an out-of-state broker who is not licensed in this state to list, market or advertise in this state real property located in this state for sale, lease or exchange.

F. Signs shall not be placed on real property in this state by an out-of-state broker. An out-of-state broker shall not use a cooperation agreement as authority to sell, lease, rent, exchange or attempt to sell, lease, rent or transfer real property to a resident of this state.

Quick Quiz

Fill in the Blank:
The broker in this state assumes all responsibility for the acts of the out-of-state .

Referral and Finder’s Fees11825b

This section should cover:

How outgoing referral fees should be paid:

  • That they must be paid only to a licensed broker
  • Whether a copy of that broker’s license must be included in the transaction file
  • That no fees may be paid to unlicensed people or entities

How incoming referral fees are handled:

  • That they are paid only to the Company
  • If and how they will be split with the Company
  • Whether a form is required to be used for either incoming or outgoing referrals

Whether the Company pays finder fees to unlicensed tenants of apartment complexes. (see A.R.S. § 32-2176 for guidance).

32-2176. Payment of finder fees to apartment tenants; limits; prohibited activities; civil penalty; definitions

A. Notwithstanding sections 32-2155, 32-2163 and 32-2165 or any other provision of this chapter, a property management firm or a property owner may:

1. Pay a finder fee to an unlicensed person who is a tenant in an apartment complex managed by the firm or owned by the owner.

2. Authorize a residential leasing agent or manager to deliver a finder fee to an unlicensed person who is a tenant in an apartment complex managed by the residential leasing agent or manager. A residential leasing agent or manager may not receive a finder fee. This prohibition does not affect the ability of a residential leasing agent or manager to receive a bonus pursuant to Section 32-2121, subsection A, paragraph 6.

B. A finder fee paid according to this section shall not exceed a two hundred dollar credit toward or reduction in the tenant’s monthly rent. A resident may receive multiple finder fees according to this section up to five times in any twelve month period.

C. A tenant shall limit the tenant’s activities according to this section to referring prospective lessees to the owner or the owner’s agent and shall not do any of the following:

1. Show a residential dwelling unit to a potential lessee.

2. Discuss terms or conditions of leasing a dwelling unit with a prospective lessee.

3. Participate in the negotiation of the leasing of a dwelling unit.

D. Nothing in this section permits an unlicensed person to advertise or otherwise promote the person’s services in procuring or assisting in procuring prospective lessors or tenants of apartment units.

E. For a licensee who pays a finder fee in violation of this section, for each violation, the department may suspend or revoke the licensee’s license or impose a civil penalty according to section 32-2153.

F. For this section:

1. “Finder fee” means a fee paid to a person for introducing or arranging an introduction between the parties to a transaction involving the rental of an apartment unit.

2. “Property owner” means a person who is exempt from the licensing requirements of this chapter according to section 32-2121, subsection A, paragraph 1.

3. “Residential leasing agent or manager” has the same meaning prescribed in section 32-2121, subsection A, paragraph 6.

Quick Quiz

Fill in the Blank:
A finder fee pursuant to this section shall not exceed a two hundred dollar credit toward or reduction in the tenant’s rent.

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