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Minimum Service Requirements Under the Real Estate License Act of 2000 The Illinois Association of REALTORS initiated legislation in the spring 2004 session of the Illinois General Assembly to promote greater professionalism and accountability in the real estate industry. The legislation addressed continuing education requirements for licensed real estate salespersons in Illinois and broker-management continuing education, and it included provisions concerning exclusive brokerage agreements and minimum service requirements. Senate Bill 2887, which amended the Illinois Real Estate License Act of 2000 (the Act), was signed by the Governor on August 19, 2004, and for the most part the provisions of that legislation were effective immediately. In 2003, the Illinois Association of REALTORS conducted member focus groups across the state. As a result of these focus groups, a task force was formed to study supervision, consumer protection and agency under the Act. The central theme was consumer-oriented; that is, what activity is needed to protect and inform the public while increasing the levels of broker knowledge and competency under the Act. The definition of exclusive brokerage agreement and the requirement to provide minimum services were added to address two issues: one, the consumer having an expectation of services that had been reduced or eliminated without full disclosure and/or an insufficient definition of exclusive brokerage agreement; and two, a licensed agent being placed in a position of undisclosed dual agency. Legislation was drafted by the Illinois Association of REALTORS to more adequately define these standards and address continuing education requirements. The Illinois Department of Financial and Professional Regulation (IDFPR) was involved from the onset and supported the initiatives of SB 2887. Exclusive Brokerage Agreement Defined Prior to the adoption of this legislation, the Act and the rules under the Real Estate License Act of 2000 did not contain a definition of an exclusive brokerage agreement. Rather, the only requirement under the Act and its rules was that if a licensee entered into an exclusive brokerage agreement that the agreement must be in writing. This legislation changed that by adding a definition of exclusive brokerage agreement to the Act. The definition of exclusive brokerage agreement is contained in Section 1-10 of the Act and reads as follows: “‘Exclusive brokerage agreement’ means a written brokerage agreement that provides that the sponsoring broker has the sole right, through one or more sponsored licensees to act as the exclusive designated agent or representative of the client and that meets the requirements of Section 15-75 of this Act.” There are three key components to this definition: (1) An exclusive brokerage agreement must be in writing. (2) The exclusive brokerage agreement should provide that the sponsoring broker has the sole right to act on behalf of the client, through one or more designated agents. (3) An exclusive brokerage agreement must meet the requirements of Section 15-75 of the Act. Section 15-75 of the Act contains the minimum service provisions. Required Minimum ServicesThe minimum services required under the Act in all exclusive brokerage agreements are set forth in new Section 15-75. The sponsoring broker, through its sponsored licensees, must: 1) Accept delivery of and present to the client all offers and counteroffers to buy, sell or lease the client’s property or the property the client seeks to purchase or lease; 2) Assist the client in developing, communicating, negotiating, and presenting offers, counteroffers and notices that relate to the offers and counteroffers until a lease or purchase agreement is signed and all contingencies are satisfied or waived; and 3) Answer the client’s questions relating to the offers, counteroffers, notices and contingencies. In short, the sponsoring broker’s job, through its designated agents, is to assist in the “brokerage” of real estate, which is producing a buyer for a seller’s property or a tenant to lease a landowner’s property, providing assistance through the negotiation process until a deal is reached. The essence of agency is assisting the client throughout the negotiation process, particularly in situations where the client is prohibited from seeking the assistance of any other real estate broker. This is not to say that the services provided will be exactly the same in all situations. The client may be more or less involved in the negotiation process, but the fact remains, the agent acting under the exclusive agreement will be duty-bound to remain in that process to some extent. If the client does not accept this, then perhaps the client does not want to sign an exclusive agreement, but an open one instead, since the minimum services are not required by the Act in those situations. Rationale for the Required Minimum Services The answer is two-fold. First, the required minimum services help to protect the consumer client. Second, the required minimum services help prevent potential agency issues for the agent in the transaction who might represent the opposing party. On the issue of consumer protection, if a seller client, for example, has signed an exclusive right to sell agreement with a sponsoring broker, no licensee sponsored by any other broker may assist the seller should he or she have any questions. If no minimum services are required, then the seller may be effectively left without any assistance if the seller’s own broker does not assist the seller and other agents could not assist the seller because of the existence of the exclusive agreement. On the issue of agency, assume as above, that a seller client has signed an exclusive right to sell agreement. A buyer agent brings a buyer to the seller represented by an exclusive broker. If no minimum services are required, the buyer’s agent might be directed to contact the seller directly. The buyer’s agent follows these directions and contacts the seller. The seller finds himself at a loss relative to the negotiation process and has some questions. He begins to ask questions of the buyer’s agent that are really more appropriate for his own agent. The buyer’s agent is in a very difficult position because he can’t be a disclosed dual agent since the seller has previously signed an exclusive agreement with his own agent, yet the seller’s agent is not involved in the process. In fact, it is a violation of the Act for the buyer’s agent to interfere with the exclusive brokerage agreement of the listing agent. Legislation Is Business-Model Neutral and Fee-Structure NeutralThe amendments to the Act are both business-model neutral and fee-structure neutral. These amendments will apply to commercial and builder/developer brokerage agreements as well as sales of existing residential properties. Further, there is nothing in this legislation dealing with fee structure. Relative to Multiple Listing ServicesThese amendments do not deal with multiple listing services. However, there is the possibility that if a multiple listing service has a policy that the multiple listing service will only accept exclusive brokerage agreements for entry into the multiple listing service, that the legislation could have an impact upon those listings placed in multiple listing services. However, the decision as to whether entry into a multiple listing service is limited to exclusive brokerage agreements is an independent business decision that will be made by each local multiple listing service. The Act repeals the "grandfather clause" for continuing education. According to the Illinois Department of Financial and Professional Regulation, Division of Banks and Real Estate, the Act requires that anyone licensed for 15 years prior to January 1, 1992, is no longer exempt from continuing education.
Broker-Management Continuing Education The Act requires real estate brokers to take an additional six hours of continuing education every two years dealing specifically with broker-management issues. The Act also allows the IDFPR the option of contracting with a provider to develop one uniform broker management continuing education course that will be offered by all continuing education course providers. This will provide for consistency in content in the broker-management course.
The Act allows a broker to change license status to "salesperson" at any renewal date.
Course Exemption for Baccalaureate Degree Deleted The Act deletes the exemption from taking pre-license courses for persons who receive a baccalaureate degree that includes courses involving real estate. This ensures that new licensees receive coursework that specifically deals with the regulatory and practice provisions spelled out in the Real Estate License Act.
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