Teams in the Real Estate Industry
Purpose: This bulletin explains the advertising requirements for teams and other issues that arise from the team concept.
This bulletin applies to all real estate and mortgage broker professionals.
What is a team?
A team is two or more real estate or mortgage broker professionals who work together on a regular basis, represent themselves to the public as one entity, and typically designate themselves a name that indicates they are a team or group.
Teams create their own administration that may mimic the appearance of a brokerage in order to retain and service clients. These relationships can cause regulatory confusion from the team’s perspective, and confusion from consumers with whom they are entering into agreements.
The Real Estate Act Rules (Rules) require industry professionals to deal or trade only in the name that appears on their licence and in the name of their brokerage. Industry professionals must clearly indicate the brokerage name in their advertisements. They may include other identifiers (i.e. franchise names, team names, a branding name) in their advertisements.
It is extremely important for consumer protection for consumers and other industry professionals to identify the industry professional’s brokerage.
The core of the issue is whether the team is operating as a brokerage by holding themselves out as a brokerage, either through their advertisements or through business practices. Teams are not to operate as brokerages within a brokerage. Should RECA receive a complaint about a team or team member’s behaviour, one of the issues RECA will look into is whether the team is holding itself out as a brokerage.
Issues that may arise from the team concept
The team concept can lead to a couple of areas of confusion with respect to advertising. Advertising a team name or a “brand” complies with legislation as long as that other identifier is in addition to a clearly indicated brokerage name. Typical advertising for teams has a larger font for the team name and a much smaller font for the brokerage name. If you do not clearly indicate the brokerage name, this may be conduct deserving of sanction. The confusion of consumer is often because of the relative dominance of the font used for the team name versus the brokerage name. It could be misleading if it is an attempt to create independence from the brokerage and other industry professionals of the brokerage. Industry professionals should also avoid the use of identifiers in their branding efforts that people typically associate with brokerages, such as realty and real estate.
To advertise that a potential client will hire an entire “team” for the same price as a single industry professional may mislead a consumer. In a common law brokerage, all industry professionals of the brokerage work for the client. Consumers think they hire the team leader and they never see the team leader after they sign the relationship documents. RECA advises industry professionals to remove such claims from their websites and other forms of advertising.
2. Public confusion
RECA receives complaints about teams that look like they are a brokerage such as having their own storefront location. In many situations, consumers believe that the team leader is the broker. This is of concern, as consumers may not know who to turn to if there is a problem with the team. It is important that consumers understand a team member’s relationship with a brokerage and the distinction that a team leader is not necessarily the broker.
3. Problems with incentives and inducements
Only a brokerage can offer incentives and inducements, and only if every brokerage industry professional offers those incentives and inducements. A team cannot offer its own incentives and inducements to clients or potential clients. If a team offers to guarantee the sale of the home, it needs to be a brokerage guarantee and incentive. All clients of the brokerage are entitled to the same incentive, regardless of the industry professional with whom they work.
4. Problems with office management and supervision
Brokers remain responsible for the actions of all brokerage industry professionals and support staff, including teams. Brokers may not absolve themselves of responsibility for team members and staff simply because a team has a separate office location or a distinct “brand.” A problem exists where a broker does not have control over and access to trade and deal records from team members. The Rules require the brokerage maintain its records at the brokerage’s registered business office.
Brokers can delegate brokerage authority in writing for supervision of the activities of the team to a team leader. The broker is ultimately responsible for the actions of all persons acting on behalf of the brokerage.
Where a team maintains a business office that is separate from the brokerage’s office, the brokerage may maintain records in multiple offices to facilitate trade or deal activities in various geographical locations. The broker must have access to the records and offices. The brokerage policy and procedures will dictate how the brokerage temporarily stores the records.
5. Problems with unlicensed assistants
The broker may not be aware or part of the hiring and/or supervision of any assistants working for a team or an individual. The broker is responsible for the actions of all individuals acting/working on behalf of the brokerage. Brokers are responsible to ensure industry professionals and unlicensed assistants, even if part of a team, comply with privacy and confidentially provisions of the Rules. The broker and team leader must ensure they receive privacy consent from clients for the unlicensed assistant who is not a brokerage employee. The typical relationship agreements give consent to industry professionals and brokerage employees not assistants of an industry professional.
6. Problems with commission flowing between associates of the team
If a “team leader” takes a portion of a commission from a team member’s transaction (i.e. acts like a broker) before processing a transaction through their brokerage, it is a violation of the Real Estate Act (Act). All commissions and transactions must flow through the brokerage and only the brokerage. If any person receives money in connection with a trade or deal, they must hold a licence with the brokerage.
All payments must go through the brokerage, not the team, even though the team may have a separate public identity, separate offices and separate assistants.
7. Team members from different brokerages
If you have a situation where team members hold a licence with different brokerages you must:
- clearly identify the team members and respective brokerages in all advertisements
- clearly indicate the brokerage names in all buyer and seller brokerage agreements
- clearly indicate the brokerages on all purchase contracts where there is commission sharing
- have co-brokering agreements where appropriate
- have appropriate privacy, confidentiality and information-sharing agreements between clients and the brokerages
The potential for conflicts of interest and a breach of real estate legislation increases when team members are from multiple brokerages.
8. Bait and switch schemes
Consumers complain to RECA after they interview a team leader to determine if they will work with that individual that once they sign the relationship agreement, the client does not see or hear from the team leader. This creates confusion for the client and a feeling of abandonment. Some consumers use the phrase “bait and switch” to describe this relationship. Where a team leader does the initial interview with a client or potential client, they should clearly disclose in writing at that time that they would not be directly working with the client.
Issues the broker should address
A contract between the brokerage and the team members should be in place to identify the roles and responsibilities of the respective parties, privacy issues with client and brokerage information, brokerage requirements for a team, policy and procedures of the brokerage, payment of commissions and any other contractual items.
2. Relationship between brokerage and team members
It is important for the broker to know how the team will operate within the brokerage, and to meet regularly to ensure the team operates within the brokerage’s policies and complies with appropriate legislation. The broker is responsible to manage and supervise team members.
3. Record keeping
The brokerage is responsible to maintain all records at the brokerage’s business address in RECA’s database. Industry professionals should be aware that they must give all records to the brokerage in compliance with the brokerage policy and procedures.
The brokerage must have a team advertising policy for industry professionals to understand brokerage and regulatory requirements. RECA’s Advertising Guidelines may assist to develop a brokerage policy.
5. Unlicensed assistants
The Rules, Personal Information Protection Act and/or the Personal Information Protection and Electronic Documents Act require all industry professionals to get consent from the client to collect their personal information and to keep a client’s personal information confidential. The brokerage must limit access to client files to the industry professional who is associated with the file, and the administrative staff of the brokerage. If team members hire unlicensed assistants that are not employees of the brokerage, the team leader and broker must ensure that the unlicensed assistant does not access client files or information or receive client consents. There may be liability for the brokerage for the activities of unlicensed assistants for unlicensed activity or other issues. The brokerage should have policies to cover these issues.
6. Policies and procedures
A brokerage should create policies and procedures for teams in a brokerage. This will assist the team to act appropriately and follow all privacy, record keeping, advertising, complaint handling and any other requirements of the brokerage. The brokerage should address policies in the following areas:
- duties the broker delegates to the team leader or team members
- communicate the policies to all brokerage industry professionals and staff
- contractual arrangements with the team leader and team members
- guidelines and constraints for the operation of the team
- advertising guidelines to clearly indicate the brokerage’s name, ensure advertisements do not mislead and notify the brokerage and give access to all websites the team administers on behalf of the brokerage
- prohibit offering incentives and inducements that are not brokerage incentives and inducements
- access by the broker or other broker delegate to team offices and records
- process to hire, terminate and supervise unlicensed staff and who must be a brokerage employee
- process to maintain brokerage records and the provision of all trade or deal records to the brokerage
- process to deal with public complaints or concerns
- process and formula to share team commissions
- Real Estate Act – sections 1(x), s.17
- Real Estate Act Rules – sections 13, s.44, s.49, s.50(b)(c), s.51(1)(e)(f), s.52, s.54(1), s.66(b)(c), 67(d)(f), 70(1)