Notes From the Legal Hotline: February 2022

February 1, 2022

- By The MAR Legal Team

Q: A salesperson in my office has set up an LLC; can I pay their commission to the LLC?

A: No. A broker may only pay fees and commissions from real estate transactions to an affiliated salesperson, broker, or a business entity with a corporate broker license. Commissions may not be paid to an unlicensed LLC. To take advantage of the benefits available to corporations, the LLC, or other corporate entity, must first be licensed with the Board of Registration of Real Estate Brokers and Salespersons.

Any business entity seeking a corporate broker’s license must have an officer or partner individually licensed as a broker by the Board before a license will issue to the corporation. This individual serves as a representative of the entity, and only a broker-officer or partner may obtain the broker’s license on behalf of the corporation. The Board cannot issue a salesperson’s license to a corporation or license a corporation that only has a salesperson serving as an officer or partner.

A broker who chooses to affiliate with another broker is not subject to this same limitation. Any broker, regardless of whether they are a broker of record, broker-owner, or an associate broker, may establish a corporate entity to receive their real estate fees and commission so long as the entity is also licensed. The licensing restriction is specific to individuals holding a salesperson’s license.

Failure to properly license a corporation, or pay commissions to an unlicensed corporation, may result in punishment from the Board.

Q: I received a deposit check with an offer; at what point should this be deposited?

A: The Regulations contained within 254 CMR 3.00 require that funds received during the pendency of a transaction be immediately deposited into a bank escrow account unless otherwise agreed to by the parties. Once the parties have entered into a binding contract for the purchase of a property, absent any agreement to the contrary, any monies received are required to be turned over to the broker and immediately deposited into an escrow account. Although the Regulations do not require earnest money deposit checks to be deposited prior to the seller’s acceptance of the offer, the receiving party of such funds must still take proper care to ensure the security of those funds until they are required to be deposited or returned to the issuing party.

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Written by: Justin Davidson, General Counsel; Catherine Taylor, Associate Counsel; and Jonathan Schreiber, Legislative & Regulatory Counsel.

Services provided through the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service.  The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at legalhotline@marealtor.com.