MAR Online Blog

 Q: Can commissions be paid to an LLC?

A: Whether commissions can be paid to an LLC depends on how the LLC is established and by whom. First and foremost, Massachusetts real estate licensing laws prohibit the sharing of fees, commissions, or other valuable consideration with an unlicensed individual. This restriction extends to corporate entities, such as LLCs, which must be validly licensed. For a corporation to become licensed, Massachusetts General Laws Chapter 112, Section 87UU mandates that a partner or officer of the corporation hold an individual broker’s license. This means that the corporate entity must have its own corporate broker’s license in addition to the officer’s individual broker’s license. If the principal no longer holds an active broker’s license, the corporation also loses its valid license. As a result of this requirement, salespersons may never receive real estate commissions through an LLC or other corporate entity. For individuals with a broker’s license, setting up an LLC to receive commissions is possible, provided the entity is properly licensed, which includes obtaining a separate broker bond.

Q: At what point should a check received with an offer be deposited? 

A: The Regulations contained within 254 CMR 3.00 require that funds received during the pendency of a transaction be immediately deposited into a bank escrow account unless otherwise agreed to by the parties. Once the parties have entered into a binding contract for the purchase of a property, absent any agreement to the contrary, any monies received are required to be turned over to the broker and immediately deposited into an escrow account. Although the Regulations do not require earnest money deposit checks to be deposited prior to the seller’s acceptance of the offer, the receiving party of such funds must still take proper care to ensure the security of those funds until they are required to be deposited or returned to the issuing party.  

Q: How should a REALTOR® respond when a client asks a legal question?

A: Given the nature of the real estate profession, it is not uncommon for REALTORS® to receive questions from clients seeking what amounts to legal advice. REALTORS® must walk a fine line between representing their clients’ interests without engaging in the unauthorized practice of law. REALTORS® may not provide legal advice or draft legal documents or clauses. 

REALTORS® may assist clients with completing standard form contracts, such as those contained within the MAR Forms Library; however, if the need arises to includemake modifications to a standard form orto included additional language or clauses to a standard form, legal counsel should be engaged.  

The unauthorized practice of law is not only a violation of Massachusetts law but is also expressly prohibited in the REALTOR® Code of Ethics. Article 13 of the Code goes so far as to place an affirmative obligation on a REALTOR® to recommend that legal counsel be obtained when the interests of a party to the transaction requires it. While clients may at time be resistant to hiring an attorney for assistance, doing so is in the best interests of the client and the REALTOR®. As with any recommendation or advice given to a client, it should be put in writing.  

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Written by: Justin Davidson, General Counsel; Catherine Taylor, Associate Counsel; Kate Berard, Associate Counsel; and Jonathan Schreiber, Legislative & Regulatory Counsel.  

Services provided through the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service.  The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at legalhotline@marealtor.com.