The Utah Real Estate Commission is at it again, updating the rules to help agents and brokers better protect their clients. In this case, they are addressing the topic of how to handle when a broker dies unexpectedly, or becomes incapacitated. Check out proposed rule R162-2f-202e.
Prior to this new rule, there have been no laws providing a way for a brokerage that is a sole-proprietor, or single owner company to continue business if it were to lose its broker and owner. We had several instances in a short period of time where smaller brokerages found themselves in this very predicament. They needed to take care of their clients, but by the rules, the brokerage was simply dissolved.
This new proposed rule would offer some options for brokerages to handle an unexpected loss of the broker In a few ways.
Read the proposed rule here in this PDF.
Designate a Replacement Beforehand
This rule will allow a brokerage to write up a succession plan for the company. They can put in writing the agreement that if the broker dies or becomes unable to perform their duties, that a specific new broker will automatically take over the role of Principal Broker. That way the company doesn’t automatically lose its registered status with the Division of Real Estate for not having an active broker.
If the replacement broker is already licensed as a broker, meaning that they have already completed the education requirements, testing, and obtained a broker license, and are currently an Associate Broker with the same company, then all they need to do when this happens, is to notify the Division of Real Estate who they are, and that they are taking over as Principal Broker. No other requirements needed, it can be a nice clean transition.
If the replacement broker named is not already licensed, if they haven’t already completed the regular state requirements to be a principal broker, then the real estate commission will have to approve the change. Or if they are a licensed Associate Broker, but they are not currently affiliated with the company who needs a replacement, then the commission will also have to approve. Best would be to have a backup licensed broker all ready to fill the role.
14 Day Grace Period
The new proposed rules gives a brokerage up to 14 days to designate a new principal broker, or to appoint an associate broker with the company to be a temporary acting principal broker, which we’ll describe more next.
Temporary Acting Broker
Another new rule would allow the commission to assist a company that lost its broker by appointing a temporary person to fill the role as Acting Principal Broker. They would have to do this within 14 days in order to avoid their company stopping all activity.
This new Acting Principal broker could serve for a maximum of 4 months, but hopefully won’t be needed for that long. They won’t have all the same legal abilities that a regular principal broker would have. This isn’t a shortcut to getting to be a broker without completing all the same requirements. No, the Acting Principal Broker is really just a placeholder, someone to take the reigns and make sure that all the transactions are completed in a timely manner, that all the earnest money is handled correctly, and that all the clients are well taken care of with any transactions that are in progress.
What can’t an Acting Principal Broker do? They can’t enter any new agency agreements. They can’t sign any new clients. They can’t start any new agreements with any new buyers, sellers, leasers, owners, whoever. And the agents in the brokerage can’t either. Any agent that is out there working hard to earn business will not be happy that they cannot sign any new clients, and so we can see that 4 months is going to be plenty of time for an Acting Principal Broker. The agents will be asking to have a permanent principal broker appointed as soon as possible.
2 Additional Rule Changes
The new rule filing specifies a couple other small rule changes.
First, a licensed broker that comes in from out of state will only need to complete the Utah law hours of required education, so long as they can document their license history. See proposed rule R162-2f-202b.(3).
And second, sales agents in Utah that want to get their broker license, will need to be sure to follow the rules that say they not only need to have written agency agreement with their clients, with their own name listed, but also that they will need to disclose their agency relationship in any contracts that they assist their client in completing, whether a real estate purchase contract, lease, rental agreement, management agreement, or anything else. If they don’t have their name listed on both of these agreements, then they won’t get experience points to qualify them to get licensed as a broker in Utah. See Proposed rule R162-2f-202b.(2).
These rules are currently available for public comment, if you want to give feedback, or if you have any suggestions on how these rules can be improved. Public comment period ends on 7/31/2023.
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