The sudden death or incapacity of a Broker-in-charge or Qualifying Broker can change things in an instant. What happens when the Broker-in-charge or Qualifying Broker becomes incapacitated or even dies? That depends on whether or not the Broker-in-charge (“BIC”) or Qualifying Broker (“QB”) has a Succession Plan in place.
According to a North Carolina broker who recently went through this situation, the transition can be CHAOS! You think there is always time but, suddenly, “Tom” and other brokers at the firm were thrust into a situation where they had a brokerage without a BIC/QB and without a plan. Tom’s advice to all is to have a plan in place long before you think you need one. Whether a Sole Proprietor, LLC, or Corporation, a Succession Plan is a must.
Commission Rule 58A.0512 addresses what can be done when the BIC who is a sole proprietor dies or becomes incapacitated. Upon receipt of a written notification and certified copy of a court order appointing an executor, administrator or fiduciary, the Commission can issue a temporary license, valid for one year, to the BIC’s administrator. This temporary license allows the administrator to handle the distribution of trust money held and commissions owed to the BIC/sole proprietor at the time of the BIC’s death or incapacity. But remember that this is only to wrap up the business, and to allow final disbursements. Existing listings, sales contracts, or property management agreements must be transferred to a new broker.
There is so much more to be handled and so much more to consider. What if this is not a sole proprietor but a licensed firm or a sole proprietorship with multiple affiliated brokers? What if the firm/sole proprietorship wants to continue conducting brokerage activity? In order to continue conducting brokerage activity, a new BIC (and possibly QB) still needs to be designated. Has anyone even considered who that would be and if that person is eligible to hold BIC or QB status? And will that new BIC and/or QB have all of the information needed to run the business? Will the new BIC and/or QB know where to find or have access to trust and business accounts, agency agreements, and all other information necessary to continue to run the business?
Similar to having a written firm policy and procedures manual, a Succession Plan can ensure a smooth transition in the event of an unforeseen loss. You may consider having a broker or two in training to be the new BIC, not just in the situations of death or illness, but in the event you take that extended vacation you have been dreaming about. You might consider who your firm’s qualifying broker is. Is this the same person as the BIC? Should the QB and BIC be the same person? Is there someone else who can step up as QB if a replacement is also needed?
This article is full of questions for you to consider, but you provide the answers. The bottom line is, it is your business, your plan and your decision – IF you plan ahead. Consult an attorney and accountant and decide what is best for you and your situation. Be prepared. No one wants to think of a situation where they are injured, incapacitated or pass away but if you face these possibilities early, you help your loved ones, business associates, and clients in both dealing with loss and moving forward smoothly and with as little disruption as possible.