The Unlicensed Assistant, the Lapsed Salesperson, and the Unlicensed Branch
Dana is the qualifying broker at Lakeshore Realty in Traverse City, supervising 14 licensees from a main office plus a Petoskey branch that opened nine weeks ago. Dana never applied for a separate license for the branch, and the Petoskey sign and ads read 'Lakeshore Realty.' Priya, Dana's unlicensed marketing assistant, writes the classified ads, staffs open houses alone, and last Sunday told visitors the seller 'would seriously consider anything over $400,000.' Marcus, a salesperson, let his license lapse for nonrenewal; his renewal paperwork was submitted April 10 and is still pending. He kept showing property through May and wrote two offers that were accepted, and Dana intends to pay him his 60% split when those deals close.
1. Sort Priya's three activities into permitted and prohibited, and explain Dana's supervisory exposure.
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Governing idea: Article 25 of the Occupational Code requires a license for brokerage services - listing, selling, offering to negotiate, negotiating a sale, purchase, exchange, or lease. Clerical and ministerial work does not require a license; anything that involves terms, price, or solicitation does.
1. Writing classified ads - permitted, with conditions. Ad copy is clerical. It stays permitted only if the broker reviews/approves it and the ad identifies the licensed name of the brokerage (and the broker's contact information as required by rule). Ads written as if the assistant were the licensee are not acceptable.
2. Staffing open houses alone - permitted only for host functions. Greeting visitors, handing out flyers, and unlocking the door are clerical. The moment the assistant answers questions about price, terms, financing, condition, or invites a visitor to work with the firm, she is performing licensed activity. Michigan rule does not let an unlicensed person 'hold' an open house as the firm's representative in substance.
3. Telling visitors the seller would consider 'anything over $400,000' - prohibited twice over. It is negotiating on the seller's behalf without a license, and it also breaches the broker's fiduciary duty of confidentiality by exposing the seller's negotiating position to strangers.
Dana's exposure: a broker must supervise and control licensees and employees. Aiding or permitting unlicensed brokerage activity exposes Dana to Board discipline (reprimand, fine, suspension, or revocation), civil liability to the seller, and possible criminal exposure for Priya. Corrective steps: pull Priya from unsupervised open houses, restrict her to clerical tasks, document the retraining, and notify the firm's attorney/E&O carrier.
2. Marcus's license lapsed but his renewal is pending. May Dana pay him a share of the two accepted deals? What must happen to those transactions?
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No payment for the unlicensed period. Compensation for brokerage services may be paid only to a licensed person. A pending renewal is not a license; until the license is actually issued, Marcus was unlicensed, and sharing commission with him for activity conducted while unlicensed is itself a violation - one that cannot be cured by the later renewal.
The commission belongs to the broker, not the salesperson. The service provision agreement runs between the client and the brokerage, so Dana may still collect. What she cannot do is split it with Marcus for work he did while unlicensed.
The two files need remediation:
- Marcus must stop all licensed activity immediately.
- A currently licensed representative of the brokerage should review, and where necessary re-execute or ratify, the offers and any agency disclosures so the file reflects a licensed person.
- The parties must be told that Marcus was not licensed during that period - that is a material fact about the transaction, not an internal personnel matter.
- If a party objecting wants out, expect a rescission claim; a mutual release and earnest money refund may be cheaper than litigation.
Takeaway the exam tests: the split is not a payroll question, it is a licensing question.
3. What is wrong with the Petoskey branch, and what corrective steps should Dana take?
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Every office must be separately licensed. A branch office needs its own license and its own designated supervising broker or associate broker physically responsible for that office. Operating a branch under the main office's authority means the Petoskey location has been conducting brokerage without a license since it opened.
Advertising compounds it. Signage and ads at an unlicensed location identifying a licensed-sounding name mislead the public and are a separate rule violation. Team or brand names may be used only in a way that also clearly identifies the licensed brokerage.
Corrective steps:
- Stop new business at the branch or route it through the licensed main office until the branch license issues.
- File the branch application, pay the fee, and designate a supervising associate broker.
- Correct signage and all advertising to the exact licensed name.
- Self-report the gap to the licensing agency rather than waiting for a complaint - self-reporting and prompt correction are mitigation, not a defense.
- Document the timeline, because the Board will ask how long it ran and whether consumers were harmed.
Judgment point: 'we were about to file' is not a defense. The violation runs from the day the branch opened for business.