ADRE Model Broker Policy Manual-Commissions

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Commissions

Collection of Commissions

This section should cover:

  • Costs of recovering any commissions and who pays for the costs: the Company, Sales Associate, or someone else.
  • Division of any forfeited earnest money deposit.
  • Reduction of commission negotiated by the sales associate, permissions required, etc.
  • Payment of Commissions

This section should cover:

  • Only licensed Sales Associates can be paid a commission.
  • A licensed real estate Sales Associate can only be paid by the Sales Associate’s Broker.
  • That commissions are paid to the Sales Associate in accordance with the Associate’s commission agreement with the Company.
  • Whether the Broker of the Company has authorized the escrow company to pay commissions directly to the Sales Associate on the Broker’s behalf.
  • What date determines which month the transaction closed (if commission on a transaction is determined on a per monthly basis).
  • What fees will be deducted from the commission (such as Errors and Omissions Insurance (E & O)).
  • If commission checks received need to clear the bank before payment to the Sales Associate is made.
Quick Quiz

Fill in the Blank:
A licensed  estate Sales Associate can only be paid by the Sales Associate’s .

Pursuant to A.R.S. § 32-2155:

  • A broker shall employ and pay only active licensees for performing acts which require a real estate license.
  • A licensee shall accept employment and compensation as a licensee only from the legally licensed broker to whom the licensee is licensed.
  • If the licensee is licensed through a professional corporation or a professional limited liability company, the employing broker may pay and the licensee may receive compensation only through the licensed professional corporation of which the licensee is an officer and shareholder or the licensed professional limited liability company of which the licensee is a member or manager.
NOTE: 32-2155. Restriction on employment or compensation of person as broker or salesperson

A. A broker shall employ and pay only active licensees, and a licensee shall accept employment and compensation as a licensee only from the legally licensed broker to whom the licensee is licensed. If the licensee is licensed through a professional corporation or a professional limited liability company, the employing broker may pay and the licensee may receive compensation only through the licensed professional corporation of which the licensee is an officer and shareholder or the licensed professional limited liability company of which the licensee is a member or manager.

B. It is unlawful for a person, firm or corporation, whether obligor, escrow holder or otherwise, to pay or deliver to anyone compensation for performing any of the acts specified in this chapter, as a broker, who is not licensed at the time the service is rendered. An identification card or certificate of license issued by the state real estate department showing that the person, firm or corporation holds a license for the year in which the payment is made or earned shall be sufficient proof to relieve from any penalty for a violation of this section the obligor, escrow holder or other people who relied in good faith on the card or certificate.

Quick Quiz

Fill in the Blank:
A shall employ and pay only active licensees, and a licensee shall accept employment and compensation as a licensee only from the licensed broker to whom the licensee is .

C. A real estate broker or real estate salesperson shall not collect compensation for rendering services in negotiating loans secured by real property unless all of the following apply:

1. The broker or salesperson is licensed according to title 6, chapter 9 or is an employee, officer or partner of a corporation or partnership licensed according to title 6, chapter 9.

2. The broker or salesperson has disclosed to the person from whom the compensation is collected that the broker or salesperson is receiving compensation both for real estate brokerage, when applicable and for mortgage broker services.

3. The compensation does not violate any other state or federal law.

D. Notwithstanding subsection An of this section, brokers licensed under this chapter may employ residential leasing agents or managers of residential rental properties, as prescribed by section 32-2121, subsection A, paragraph 6. The exemption of residential leasing agents or managers of residential rental property under Article 2 of this chapter shall not be construed to exempt the designated broker from the responsibility to exercise reasonable supervision over these leasing agents or managers.

All shareholders, members or managers of a licensed professional corporation or licensed professional limited liability company must hold active real estate licenses (A.R.S. § 32-2125(B)).

NOTE 32-2125. Licenses for corporations, limited liability companies or partnerships

B. An employing broker may engage the services of salespersons and associate brokers who act through and on behalf of professional corporations or professional limited liability companies that are licensed by the department. A designated broker who acts on behalf of an employing real estate entity is permitted to become a professional corporation or a professional limited liability corporation. Any person so engaged shall be separately licensed. The department shall issue to or renew a license under this subsection only for a professional corporation or a professional limited liability corporation whose shareholders, members or managers hold active real estate licenses. A corporation licensed under this subsection shall meet the requirements of title 10, chapter 20. A limited liability company licensed under this subsection shall meet the requirements of title 29, chapter 4, article 11. A professional corporation or professional limited liability company shall not be licensed as an employing broker.

The Company is responsible for the acts of all Sales Associates and other employees acting within the scope of their employment (A.A.C. R4-28-1103(D)).

R4-28-1103. Broker Supervision and Control

D. An employing broker is responsible for the acts of all associate brokers, salespersons, and other employees acting within the scope of their employment.  A Sales Associate’s professional corporation (PC) or professional limited liability company (PLLC) is not a legal business entity under which a Sales Associate may conduct real estate activity, though it may be used for the payment of commissions. Commissions are to be paid by the broker to the licensed PC or PLLC, and the PC or PLLC may only pay ADRE licensed registered members of that PC or PLLC licensed under the paying broker; not licensees who are non-members, nor unlicensed individuals. 

Quick Quiz

Fill in the Blank:
An broker is responsible for the acts of all associate brokers, salespersons, and other employees acting within the of their employment.

Pursuant to SPS 2005.08:

When a Sales Associate has rightfully earned a commission while in the employ of a broker, and in agreement with their agreement, that broker shall pay the license, even though the licensee may have left the employ of that broker.

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