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Massachusetts Real Estate Teams
Teams have become an increasingly popular structure for real estate offices throughout Massachusetts. As with any emerging practice, many Realtors® have been looking for guidance with regard to establishing and maintaining teams. Although a handful of states have implemented specific laws and regulations governing real estate teams, Massachusetts does not have any team-specific laws or regulations at this time. Existing laws and regulations, however, do apply to teams.
What restrictions are there on advertising as a Team?
The same rules that apply to advertising for Brokers and individual Realtors® apply to teams. The Realtor® Code of Ethics, Article 12, covers advertising extensively. When advertising as a team, it may be easy to forget the basis rules of advertising:
The team cannot advertise only their name – the broker affiliation must appear on all advertisements;
The Realtor® firm name must appear in a reasonable and readily apparent manner in all advertisements; and
All communications from the Team must be honest and truthful and present a true picture.
In addition to the requirements in the Realtor® Code of Ethics, state regulations require that all advertisements include the name of the real estate broker or brokerage.
It is critical to remember that Teams are not brokerages and should not act as such. It must be clear to other Realtors®, prospective clients, and the general public that the Team is a subdivision of a brokerage and not an independent company.
How is a Team paid?
Due to the nature of the Team structure, a Team may often appear to be an independent company; however, the Team leader is not necessarily a broker, and, as such, payments may not be made to the Team, but must be made to the broker and distributed as per the brokerage’s policy. All salespersons that are part of a team must be affiliated with a broker. Additionally, the Team may not operate its own escrow account or hold client funds in any manner. The funds must be paid into an account maintained by the broker.
The key thing to remember with running a Team is that a Team is not a brokerage and should not be held out as one. Failure to adhere to these rules and regulations could result in an investigation by the Board of Registration, an ethics complaint, or even a 93A lawsuit from a deceived client.
Many Realtors® have questions about establishing business entities – primarily LLCs – to receive their commission payments. Fees and commissions earned from a real estate transaction, however, may only be paid to a licensed salesperson or broker. They cannot be paid to an unlicensed LLC (or other unlicensed entity). If you wish to take advantage of the benefits available to corporations, you must first license your LLC with the Board of Registration of Real Estate Brokers and Salespersons (the Board).
The Board requires licensing for all business entities, including corporations, limited liability companies (LLC), partnerships, limited liability partnerships (LLP), associations or societies that engage in real estate brokering. It further requires any business entity seeking a corporate broker’s license to have an officer or partner individually licensed as a broker by the Board before it will issue a license to the entity. The broker-officer or partner serves as a representative of the entity and only a broker-officer or partner can obtain a broker’s license on the entity’s behalf. If at any time the entity does not have a broker-officer or partner the entity’s license will cease until the broker officer or partner is replaced. The Board cannot issue a salesperson’s license to a business entity or license a business entity that has only a salesperson (and not a broker) serving as an officer or partner.
Failure to properly license a business entity that engages in real estate may result in punishment from the Board. A recent case, Michael Thomann v. Board of Registration of Real Estate Brokers and Salesmen, decided by the highest court in Massachusetts, the Supreme Judicial Court (SJC), highlights the importance of properly licensing business entities. In that case, the Board alleged that Thomann had bought and sold real estate on behalf of clients through an unlicensed LLC. Thomann denied the allegations arguing that he conducted all of the brokering activity under his individual real estate broker’s license and not through the LLC. The Board suspended Thomann’s license to practice real estate for 10 days. Thomann appealed the decision, but ultimately, the SJC agreed with the Board that Thomann had illegally engaged in the business of real estate brokering through the unlicensed LLC. The lesson from the law and this case is clear: make sure both you and your business entity are properly licensed.
If you ever have any questions or concerns about licensing brokering entities, reach out to the MAR Legal Hotline at 1-800-370-5342.
More information on applying for a real estate business license may be found here: https://www.mass.gov/files/documents/2018/03/07/application-process.pdf.
Notes From the Legal HotlineFebruary 2020Q. What does the new guidance from HUD on assistance animals mean?
A. The guidance issued by HUD on January 28, 2020 explains how housing providers should handle requests for reasonable animal-related accommodations to comply with the Fair Housing Act The full guidance can be found here: https://www.hud.gov/sites/dfiles/PA/documents/HUDAsstAnimalNC1-28-2020.pdf.
While this notice does not change the law, it clarifies how to handle circumstances that are often confusing. The guidance includes a step by step analysis for requests for a reasonable accommodation for an assistance animal, specifically noting the differences between service animals (i.e. dogs trained as guide dogs) and emotional support animals and what questions a housing provider may ask in each situation.
Of particular note, the guidance differentiates between those animals which are commonly kept in household and those animals which may be considered unique. If an animal is commonly kept in a household, such as a dog, cat, small bird, rabbit, hamster, gerbil, other rodent, fish, turtle, or other small domesticated animal, the reasonable accommodation should be granted if the requestor has provided reliable information confirming the disability-related need for the animal. In those situations where the accommodation request is for a unique animal, the person making the request then has a “substantial burden of demonstrating a disability-related therapeutic need for the specific animal of the specific type of animal.”
Additionally, as a best practice, the guidance recommends that individuals seeking a reasonable accommodation for an assistance animal have their health care professional provide the following information:
(1) whether the patient has a physical or mental impairment;
(2) whether the patient’s impairment(s) substantially limits one or more major life activity or major bodily function; and
(3) whether the patient needs the animal.
Further, if the request is for a unique animal, the following information would be helpful in supporting that request:
(1) the date of the last consultation;(2) any unique circumstances justifying the need for the particular animal; and
(3) whether the health care professional has reliable information about the specific animal or whether they specifically recommend the animal.
Keep in mind, however, that the aforementioned items are not required.
Due to the complexity of requests for reasonable accommodations, it is recommended that a housing provider seek legal advice prior to denying a request.
Q. My client is not listening to anything I tell them – can I cancel our contract?
A. No. Neither party to the contract has the ability to unilaterally terminate a contract prior to its expiration. If you find yourself in a difficult situation with a client take the opportunity to discuss with your client whether they are feeling the same way. Often times these conversations can lead to a satisfactory resolution – either there is mutual agreement to cancel the contract, or you find a path forward together. In those particularly trying situations where the client does not want to release you from the contract, or is reluctant to change their behaviors, you continue to be bound by your fiduciary duties and the REALTOR® Code of Ethics to follow the lawful instructions of your client and represent their interests.
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 firstname.lastname@example.org.