License Law Rewrite Implications for Managing Brokers

By Steve Bochenek, IAR Legal Counsel

No doubt all of you are aware of the Real Estate License Act Rewrite (RELA Rewrite) which was signed by Governor Quinn and effective December 31, 2009. This article will address some of the changes in the RELA Rewrite that will be important to you from a managing broker or sponsoring broker perspective.

The Illinois Association of REALTORS® (IAR) has substantial information available concerning the RELA Rewrite on a website specifically designed to provide information regarding the RELA Rewrite. That website is www.IARlicenselaw.org. You are encouraged to visit that website, if you have not already done so, as there is a wealth of material regarding the changes that were made, including frequently asked questions, video discussions of various aspects of the RELA Rewrite as well as links to modified forms.

The change of license categories from “salesperson” and “broker” to “broker” and “managing broker” and the transition rules related to that change seem to be attracting most of the attention and questions. However, since those changes are not effective until 2011 there are probably more immediate issues under the RELA Rewrite for you to address. We will discuss those changes first and then discuss the change in license categories and the transition rules.

Notice of Designated Agency
One of the key provisions of the RELA Rewrite deals with the increased emphasis on providing a notice of designated agency. Section 15-35 of the RELA is the pertinent section regarding this disclosure. It is clear after the RELA Rewrite that the notice of designated agent must be given in writing and a copy of that notice must be retained by your brokerage company. This is not just true for sellers or owners but it is also true for buyers and tenants. Further, the notice is not only required for those parties who enter into a transaction through the assistance of your company but it is required to be given to all clients that one of your sponsored licensees represents as a designated agent.

Your brokerage company will want to make sure that all sponsored licensees are aware of this requirement to provide the notice of designated agency. The process is fairly simple when there is an exclusive marketing agreement or listing agreement as the name of the designated agent is usually disclosed in that document. The process is not quite as simple with a prospective buyer or tenant as there may be no signed agreement for representation purposes. Notwithstanding that fact there is still a requirement of providing a written notice to that buyer or tenant as to who their designated agent will be.

New Forms: Designated Agency, Contemporaneous Offers, Exclusive Representation
IAR has modified several forms with regards to the notice of designated agency. These forms
are available through www.IARlicenselaw.org. However, your company must also develop a methodology for retaining copies of these disclosure forms. Keeping the notice in a transaction file for a seller may be a fairly simply process. However, you may want to establish a new practice for retaining copies of notices of designated agency to buyers or tenants. There may not be any transaction file for these buyers or tenants as there may not be a resulting transaction. However, you may wish to just keep a general file for all copies of notices of designated agency to buyers or tenants.

Another new form required by the RELA Rewrite is a Notice of Contemporaneous Offers. This requirement is added to Article 15 of RELA so that multiple buyers or tenants being represented by the same designated agent will know if that designated agent is submitting offers on behalf of two or more buyers or tenants at the same time. RELA does not preclude this activity but now requires a written disclosure if that is occurring. Chances are that this will not happen that often. However, since this is a new requirement you will want to have forms available to your sponsored licensees to make the disclosure as well as a mechanism to retain copies of those forms. With regards to forms I would also recommend to you the modified exclusive marketing or representation agreements available through the IAR. These have been modified not so much as a result of the RELA Rewrite but have been modified to incorporate the new protected class of “order of protection,” to include choices with regards to Internet advertising to be made by sellers or owners of property and to incorporate changes to the dual agency disclosure language, when that disclosure is incorporated into the representation agreement. You also need to be aware that there were a few changes to the language in the dual agency disclosure document required by statute. If you use that dual agency disclosure as a stand alone document you will need to modify those forms or modify the language in the representation or marketing agreement if that is your method of making the dual agency disclosure.

Office Policy Requirement
One other key change with regards to business practices is the requirement for an office policy. Many of you probably already have an office policy in place. However, if not, the RELA Rewrite now requires such a policy and gives examples of the kinds of topics that might be included in that policy. One other change that you will probably want to note to your sponsored licensees is additional provisions concerning Internet advertising in Section 10-35. In particular, the modifications deal with certain Internet advertising practices that might be considered deceptive or misleading, including a failure to remove Internet advertising that is out of date.