FACTS:
XYZ Realty has two affiliated brokers, the BIC and a provisional broker. A consumer contacts XYZ Realty to inquire about a property listed by the brokerage. The provisional broker answers the call. During the conversation, first substantial contact is established. The provisional broker asks the consumer for their email address and sends the Working With Real Estate Agents Disclosure (WWREA) electronically and immediately reviews it with them. After the disclosure is provided, the consumer decides to allow the provisional broker/brokerage to represent their interests in the transaction. Next, the consumer enters into a written buyer agency agreement that authorizes designated dual agency. The consumer further tells the provisional broker they are preapproved for a $600K mortgage.
The provisional broker notifies the BIC about the brokerage’s new client and their preapproval amount for a mortgage. The BIC reviews the agency agreements, disclosures, and provisional brokers’ client notes. While reviewing the information, the BIC informs the provisional broker that their seller-client previously authorized designated dual agency in their listing agreement. The BIC also states they will notify the seller that they are now in a designated dual agency relationship. The BIC then designates the provisional broker as the agent for the buyer-client and themself as the designated dual agent for the seller-client.
The BIC reassures the provisional broker that the information they submit in the transaction file will not be disclosed to the seller-client; however, to comply with License Law and Commission rules, they must submit all their transaction records to the brokerage so the BIC can review them.
ISSUE: Did the BIC and provisional broker comply with Rule 58A .0104?
ANALYSIS: No. Rule 58A .0104(j) specifies that a broker-in-charge shall not act as a designated broker for a party in a real estate sales transaction when a provisional broker under his or her supervision will act as a designated broker for another party with a competing interest.
License Law and Commission rules state that a designated dual agent may be non-provisional or provisional brokers. Further, a BIC can be a designated broker for a party in a real estate sales transaction. However, the BIC cannot act as the designated dual agent for a party in a real estate sales transaction when a provisional broker under their supervision acts as a designated dual agent for another party with a competing interest.
In this scenario, the BIC and the provisional broker indicated to the seller-client and buyer-clients incorrectly that XYZ Realty could practice designated dual agency. Under License Law and Commission rules, it is not permissible for XYZ Realty to practice designated dual agency because there are only two affiliated brokers in the brokerage, the BIC and the provisional broker. Rule 58A .0104(j) clearly indicates that a BIC may not be a designated broker for a party in a real estate transaction if a provisional broker under their supervision is the designated broker for the competing party.
If the BIC wants XYZ Realty to practice designated dual agency, the BIC must have more affiliated brokers under their supervision. If the BIC has more affiliated brokers under their supervision, the BIC may represent a party in a designated dual agency transaction if a non-provisional broker is the designated dual agent for the competing party.
However, the Commission states a best practice for BICs is to not represent a party in a designated dual agency situation. If BICs adopt this practice it can reduce the chance that a BIC may violate Commission rules for either, (1)failing to maintain and review transaction records, or (2) learning confidential information about the other party and using or (failing to use) that confidential information to the advantage of their client in a designated dual agency situation.
BICs should establish policies and procedures to ensure compliance with License Law and Commission rules.
If a BIC chooses to be one of the designated dual agents in a transaction, the BIC would need to designate another broker in the office to collect/review records from the transaction for the client the BIC is not designated to represent. This will essentially prevent the BIC who is a designated dual agent from having access to confidential information about the other party in the transaction. It may also provide comfort to the other designated dual agents that they can provide records in compliance with Rule 58A .0108(d) and not have their client’s confidential information inappropriately shared with the other party in a designated dual agency transaction.
If the BIC and their provisional broker act as designated dual agents for competing parties in a transaction, they may be subject to disciplinary action by the Commission for failing to adhere to Rule 58A .0104.
Resources:
N.C.G.S. § 93A-6(a)(8), and 93A-6(a)(10)
License Law and Commission Rules: Rule 58A .0104(j)
Articles: 2022-2023 General Update Course
BICs and Designated Dual Agency Transactions- Room for Conflicts
Video: https://share.synthesia.io/1bba22d8-cc03-4eba-af98-634e78a07d49
Congratulations on receiving your hard-earned real estate license. What a great feeling after all that work! Once you have celebrated your accomplishment, you might wonder what the next step is. So glad you asked…there are three possible paths:
1. If you wish to begin working as a real estate broker as soon as possible: First, you must locate a supervising Broker-in-Charge (BIC) so you can activate your license. Consider interviewing with several brokerage companies to identify a work culture that appeals to you. The BIC of the company you select must agree to actively supervise your brokerage activities. Once a completed REC Form 2.08 License Activation and Broker Affiliation has been electronically submitted, you may begin your real estate practice under your BIC’s supervision.
2. If you wish to remain on inactive status and begin working as a broker later: Once you have your real estate license number, you can begin and even complete your 90 hours of Postlicensing education without activating your license. All provisional brokers (not just those on active status) are required to complete this educational series within 18 months of initial licensure. This will remove the provisional status of your license so that when you are ready to activate your license, it will be as a “full” broker.
3. If you wish to remain on inactive status indefinitely: As long as you renew your real estate license every year between May 15 and June 30, you are not required to complete any education or affiliate with any BIC. Be aware that this course of action can result in extensive educational requirements when you do decide to activate your license, depending on how long you wait to activate.
4. Recommendation: Regardless of which of the above paths you choose, you are strongly encouraged to complete the mandatory 8 hours of Continuing Education each year after your first license renewal. It will make activation much easier.
Provisional brokers will remain on inactive status until they affiliate with a designated broker-in-charge.
1. While on inactive status, brokers are not permitted to perform any brokerage activities, including making referrals. Commission Rule 58A .0504(a)
2. Postlicensing education must be completed within 18 months of the date of initial licensure. Commission Rule 58A .1902
For example, if the broker was first licensed on September 1, 2024, they must complete all Postlicensing courses by March 1, 2026. As soon as the courses are completed, so long as on or before the 18 months ends, the provisional status will be automatically removed.
Postlicensing education includes the following three 30-hour courses:
301 – Broker Relationships & Responsibilities;
302 – Contracts and Closing; and
303 – NC Law, Rules, and Legal Concepts.
3. Provisional brokers must complete continuing education each year by June 10 prior to the second renewal of their license. This requirement is separate from and in addition to Postlicensing education. Commission Rule 58A .1702.
4. All provisional brokers must renew their licenses between May 15 and June 30 of each year. Commission Rule 58A .0503
Whether the initial licensure date is September 1 or May 1, all brokers must renew their broker licenses on or before June 30 each year. There is a $45 fee to renew a broker license.
Are you interested in affiliating a provisional broker? Have you completed the License Activation and Affiliation (Form 2.08) for the provisional broker?
Pursuant to Rule 58A .0506(b), a BIC is responsible for the submission of the License Activation and Affiliation Form 2.08 for provisional brokers under their supervision. The rule provides that if the provisional broker and broker-in-charge do not receive written acknowledgment from the Commission within 30 days of the date shown on the form, the provisional broker must cease brokerage activities pending receipt of the written acknowledgment from the Commission.
If you have additional questions, visit the Commission’s website.
While Commission rules allow brokers to complete their Update course anytime between July 1 and June 10, it is highly recommended to take it as early as possible. This will ensure you are up to date on the latest law and rule changes. If you wait until the spring, you may find the material covers changes that have already been in effect since the previous July, leaving you without the necessary information to conduct your business appropriately.
How do you find an Update Course near you?
A statewide CE Course Schedule is available on the Commission’s website. To search for courses, visit the Commission’s homepage (www.ncrec.gov), click on the Education menu, and select Search CE Course Schedule. You can search by course title, city, county, sponsor or instructor name, or date range.
Stay informed and compliant by taking your Update course early during the license year.