License Law: The Deposit, the Out-of-State Referral, and the Unlicensed Cousin
Daniela has been a salesperson at Harborline Realty (broker of record: Priya) since 2019. She lists 24 Maple Street at $589,000. Three problems land in one week. (1) The buyer's agent on the deal, Marcus, holds an active Rhode Island broker license but no Massachusetts license; he negotiated the price and now asks for a $6,000 referral fee out of the commission. (2) Daniela's cousin Tom, who is unlicensed, hosts a Sunday open house, quotes the asking price, tells visitors the seller will include the washer and dryer, then emails a buyer a filled-in offer form. (3) A traveling seller hands Daniela a $12,000 deposit check payable to Harborline Realty and asks her to hold it until the P&S is signed. Priya is away for two weeks, so Daniela deposits the check in her personal checking account and writes a receipt.
1. What is wrong with Daniela's handling of the $12,000 deposit, and what should have happened instead?
Read the worked answer
What went wrong
- In Massachusetts a salesperson cannot hold or escrow client funds. Only the brokerage (the licensed broker) - or an escrow agent or attorney designated in the offer or P&S - may hold a deposit.
- The check belonged in the brokerage's escrow/trust account, never in a personal or operating account. Placing it in a personal account is commingling and conversion. It jeopardizes Daniela's license, Priya's license and the firm, and it is a c. 93A / 254 CMR problem even if the money is later returned intact.
- Correct handling: deliver the check to the broker or named escrow agent, obtain a written receipt from that holder, and enter the item on the escrow ledger. A broker who goes away without leaving a written escrow procedure in place has a supervision failure.
- The funds belong to the transaction, not to Daniela or Priya. Disbursement requires a written release signed by both buyer and seller, or a court order/arbitration award. Paying the seller on his unilateral demand would compound the violation.
2. May the $6,000 be paid to Marcus? May any fee be paid to Tom?
Read the worked answer
Marcus - no, not as described.
- Compensation for brokerage services on Massachusetts property may be paid only to a person licensed in Massachusetts, and it must flow from brokerage to brokerage, in writing. Marcus's Rhode Island license does not authorize him to broker a Massachusetts transaction, and Massachusetts does not give him automatic reciprocity.
- His negotiation of the $589,000 price was itself unlicensed activity in Massachusetts.
- Lawful routes: Marcus obtains a Massachusetts license (or affiliates with a Massachusetts broker), or the fee is paid to a Massachusetts-licensed broker in the transaction and split broker-to-broker.
Tom - no.
- An unlicensed person may not receive a commission, referral fee, or any share of compensation for brokerage activity. Paying Tom would be a direct violation and would jeopardize the firm's licenses.
- Tom may be paid an hourly wage by the brokerage for clerical work, with nothing tied to whether the property sells.
3. Which of Tom's open-house activities crossed the line, and who is responsible for them?
Read the worked answer
Permissible (ministerial only)
- Greeting visitors, distributing pre-printed fact sheets that show the list price, open-house hours and directions, and taking names - provided he identifies himself as an unlicensed assistant and discusses no terms.
Not permissible
- Telling visitors the seller will include the washer and dryer. That is negotiating a term of the transaction.
- Quoting what the seller 'will take,' giving price or condition opinions, or discussing financing and title.
- Filling in an offer form or advising a buyer on terms. That is unlicensed brokerage activity and risks unauthorized practice of law.
Responsibility
- Daniela must supervise Tom, and Priya, as broker of record, is answerable for the conduct of unlicensed staff. The firm should have a written policy listing what an unlicensed assistant may and may not do. 'He is just my cousin helping out' is not a defense.