Keith Mack
The relationship between law and real estate is a complex one. In some places, such as California, it is not considered unethical for an attorney to also be a licensed real estate broker, and the state implicitly recognizes this as an ethical combination of pursuits. However, attorneys undertaking this dual role must be cautious, as it increases the risk of violating Rules of Professional Conduct. In Texas, a licensed attorney who wants to become a real estate broker must meet the standard requirements, including education, examination, and experience. In New York, real estate brokers must be licensed in the state to be entitled to a brokerage commission. Florida does not mandate attorney involvement in real estate transactions, but many states do, and legal counsel is available for real estate agents and brokers facing complaints or disciplinary proceedings.
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What You'll Learn
Attorneys can become real estate brokers
To become a real estate broker, an attorney must first become licensed as a real estate sales agent and then review the education and experience requirements for becoming a broker. They must meet all the standard requirements, including education, examination, and experience, for the issuance of a broker license. Many of the college and law school courses completed by attorneys could count toward these educational requirements.
Real estate brokers and real estate agents perform many of the same tasks, such as supporting their clients and assisting them with making informed decisions. However, real estate lawyers have more knowledge of real estate laws and are licensed to handle real estate transactions. They can provide accurate legal information and work in their client's best interest when selling or buying a property.
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Attorneys can act as dual real estate agents and brokers
In Texas, a licensed attorney is not exempt from the standard requirements for becoming a real estate broker. This means that they must meet the standard requirements, including education, examination, and experience, for the issuance of a real estate sales agent license and then a broker license. However, college and law school courses completed by the attorney could count toward the education requirements. Transcripts would need to be evaluated to determine whether the attorney may receive credit for any applicable courses.
In California, it is not deemed unethical for an attorney to engage in the dual occupations of attorney and real estate broker in connection with the acquisition of real property on behalf of a client. However, attorneys are cautioned that the practice of dual occupations does create an increased risk of a violation of the Rules of Professional Conduct.
Dual agency, where a single agent represents both the buyer and the seller, can save time and effort when navigating the home sale process. However, it may not be in the best interest of both clients, as the agent will be interested in closing the deal without much concern for negotiation details. This is because they will get a commission from both the buyer and the seller, so it is in their best interest to close the sale as near the asking price as possible.
In New York, a real estate broker must be licensed in the State of New York to be entitled to a brokerage commission.
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Law offices can provide legal services for real estate agents and brokers
Real estate agents and brokers often require legal services, and law offices can provide these services. For example, the Leighton Hyde Law Office in Tampa, Florida, offers legal services for real estate agents and brokers, including affordable annual retainer agreements for year-round guidance on legal issues. They also act as a closing agent, issuing title policies, and handling all aspects of a real estate closing.
In addition, law offices can assist real estate agents and brokers with landlord-tenant legal issues, such as preparing commercial or residential leases and providing representation in eviction actions. They can also provide strategic planning, evidence and witness gathering, and representation at arbitration hearings for Realtors® involved in financial disagreements with other Realtors®.
Another area where law offices can provide legal services for real estate professionals is in disputes over brokerage commissions. For example, a real estate attorney in New York, Gary Wachtel, frequently litigates whether a real estate broker is entitled to a brokerage commission. Similarly, the Leighton Hyde Law Office offers assistance with financial disputes between real estate salespeople and brokers over commission payments, which are typically governed by independent contractor agreements.
Law offices can also help real estate agents and brokers navigate regulatory and disciplinary issues. For instance, in Florida, complaints about the conduct of real estate agents are governed by the Department of Business and Professional Regulation (DBPR) and the Florida Real Estate Commission (FREC). A real estate agent under investigation by the DBPR or served with a formal complaint is entitled to legal counsel during this process, which may affect their license to practice.
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Real estate brokers must be licensed in their state
Real estate brokers are required to have a license in their state. In the state of California, the Department of Real Estate (DRE) is responsible for issuing real estate broker licenses. To obtain a license, individuals must meet specific requirements, including age, residency, honesty, and experience. They must also pass a written examination and complete the necessary college-level courses.
In Texas, the Texas Real Estate Commission (TREC) oversees the licensing of real estate brokers. Attorneys interested in becoming real estate brokers must first obtain a real estate sales agent license and then meet the education and experience requirements for a broker license. Texas law also requires all business entities engaged in real estate brokerage activity to be licensed and to designate an individual with an active Texas real estate broker license to act on their behalf.
New York also requires real estate brokers to be licensed in the state. This is important as it exempts them from certain requirements, such as having written agreements, and it entitles them to brokerage commissions.
It is important to note that requirements may vary by state, and individuals interested in becoming real estate brokers should consult their state's specific guidelines. For example, in Texas, TREC does not require a pre-inspection or employment contract for inspectors, but this may differ in other states. Understanding the specific requirements and regulations in one's state is crucial for compliance and successful practice as a real estate broker.
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Real estate brokers are entitled to brokerage commissions
Real estate brokers are typically paid on a commission basis, usually 2-3% of the sales price. In California, a real estate broker earns a commission when they produce a "ready, willing, and able" buyer to purchase a property and are the "procuring cause" in effectuating the sale.
In New York, a real estate broker earns their commission when they produce a lessee who is ready, willing, and able to enter into a lease on terms acceptable to the lessor. A contract cannot be implied in fact where there is an express contract covering the subject matter involved. The broker's services must have been performed under circumstances that notify the recipient that the services were being performed for them and not another person. The recipient must also understand that the services were rendered with the expectation of a commission.
A real estate broker must be licensed to earn a commission. A licensed attorney who wants to become a broker must first meet the requirements to become a licensed real estate sales agent and then a broker.
Real estate agents can negotiate commission percentages with brokers when they are first hired, and this typically becomes the routine percentage for commission splits. Common commission splits include 50/50, 60/40, and 70/30.
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Frequently asked questions
Yes, a law office can also be a real estate brokerage. In California, it is not considered unethical for an attorney to engage in the dual occupations of attorney and real estate broker. However, attorneys are cautioned that the practice of dual occupations creates an increased risk of a violation of the Rules of Professional Conduct. In Texas, a licensed attorney will need to meet all the standard requirements, including education, examination, and experience, for the issuance of a real estate license.
The requirements to become a real estate brokerage vary depending on the state. In California, an attorney acting as a real estate broker must be a member of the State Bar. In Texas, a licensed attorney will need to meet the standard requirements, including education, examination, and experience, for the issuance of a real estate sales agent license and then a broker license.
Yes, a law office can provide legal services for real estate agents and brokers. For example, the Leighton Hyde Law Office in Florida offers a range of services, including assistance with landlord-tenant legal issues, contract review and negotiation, and representation during the purchase and sale of residential and commercial real estate. The Leighton Hyde Law Office also provides legal counsel for real estate agents under investigation or facing formal complaints.
