The Department was asked about associate brokers’ employing brokers paying them commissions.  The scenario questioned was:  John at one time owned ABC Realty, Inc., was its principal associate broker, and employed several salespersons.  Later, John became disinterested in managing salespersons and running the day-to-day brokerage operation.  He transferred all of his salespersons to other offices.  John got licensed as an associate broker for XYZ Realty, Inc.  John kept the ABC Realty, Inc. corporation active.  He renewed both the corporation broker license and his associate broker license for that corporation.   John has asked the broker for XYZ Realty, Inc. to make commissions generated by John payable to ABC Realty, Inc. rather than paying them to John personally.

Q:  Would XYZ Realty, Inc. violate license law and rules by complying with John’s request?

A:  Section 2510 of the Code mandates that salespersons only accept commissions from employing brokers.  Although Rule 201(3) requires that associate broker and salesperson licenses shall only be issued to individuals, the Code and Rules are silent regarding how licensed associate brokers receive earned commissions.  Further, the Code provides a prohibition in Section 2512(h) against brokers paying commissions for regulated acts to persons not licensed.

The Department has historically held that the employing broker to whom the associate broker is licensed (at the time the associate broker performed the regulated acts that resulted in earning the commission) is the determining factor regarding how that associate broker receives payment.  In this scenario, both XYZ Realty, Inc. and ABC Realty, Inc. are licensed brokers.   The Department’s response to the question and the change in position is that John’s request that XYZ Realty, Inc. pay ABC Realty, Inc. a commission he earned would not be considered a violation.  Licensees with questions can contact the Department regarding clarification as needed.