Licensee conduct rules: advertising, commissions, referral fees, rebates, conflicts, unlicensed assistants, sign crossing

Bottom line: these are the day-to-day conduct rules. Most of them boil down to three habits: put the brokerage's name on everything, get paid only through your employing broker and only pay licensed people, and disclose in writing anything that could look like a hidden interest.

Advertising and names

Advertising is any public message to promote your services or a property: signs, websites, social posts, emails, flyers.

• You may do brokerage business only in the name that appears in the Commission's records, and a broker can be licensed under only one brokerage firm (Rule 6.10.A.1-2).
• All advertising must be done clearly and conspicuously in the brokerage firm's name. The one exception is a broker advertising property the broker personally owns that is not listed with the firm (Rule 6.10.A.4).
• Do not mislead the public about who you or your firm is (Rule 6.10.A.3). A firm may use a trade name (a business name other than its legal name) if it is filed with the Commission, and only one trade name (Rule 6.10.A.5, 7).
• A firm using a trade name or trademark it does not own must show a statement such as "Each office independently owned and operated" (Rule 6.10.A.6).
• No professional designation unless you are in good standing and it can be verified (Rule 6.10.A.8).
• Websites and email: each viewable page of your electronic media shows the firm name, and expired listings come down within 3 days (Rule 6.10.D.1). If space is tight, put the firm name within the first click (Rule 6.10.D.4).
• Sales data ads must cite the source and say, if true, that the sales were not necessarily yours and only show trends (Rule 6.10.E).
• You may advertise another broker's listing only with written permission and with that firm clearly shown (Rule 6.10.F). The price in an ad is the price agreed between broker and owner (Rule 6.10.G).

Team names

A team is two or more brokers in the same firm who cooperate on an ongoing basis to do a substantial part of their work together (Rule 1.52). A team name cannot include: Realty, Real estate, Realtors, Company, Corporation, Corp., Inc., LLC, LP, LLP, or any term implying a separate company (Rule 6.10.B.1). Every team ad must clearly show the firm's legal or trade name (Rule 6.10.B.2). The firm must give the names of team members to a consumer, the Commission, or another broker who asks (Rule 6.10.B.3). Team names cannot be lent to brokers outside the firm (Rule 6.10.B.4).

Commissions only through the employing broker

An employed broker may accept a commission only from the employing broker (C.R.S. 12-10-221). Deposits and other money you receive go to your employing broker as soon as practicable (C.R.S. 12-10-217(1)(g)). Never pay a commission or any valuable consideration for brokerage work to someone who is unlicensed (C.R.S. 12-10-217(1)(l)). The one carve-out is a finder's fee or share of a commission on a cooperative sale paid to a broker licensed in another state or country. For that referral to a broker licensed elsewhere, that broker must actually have referred a client and reside and keep an office there, and all advertising, negotiating and contracting for the Colorado property must be done by a Colorado-licensed broker (Rule 6.21.C).

Referral fees

A referral fee is any fee paid to someone for sending you business, other than a cooperative commission between a listing and selling broker (C.R.S. 12-10-304(2)(b)(III)). You may pay or receive one only if it follows the federal Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. sec. 2601, and there is reasonable cause (C.R.S. 12-10-304(1)). Reasonable cause means one of three things: an actual introduction of business was made, a contractual referral fee relationship exists, or a contractual cooperative brokerage relationship exists. Demanding a referral fee without reasonable cause "interferes with the brokerage relationship," and a person hurt by a violation can sue for actual damages, up to three times actual damages more, and attorney fees (C.R.S. 12-10-304(2), (3)).

Rebates, gifts and other things of value

Contract papers must itemize each Thing of Value (money or tangible assets, Rule 1.54) paid or received and say who gets it (Rule 6.14.A.1). Never hide a cash-back or credit.

Settlement service inducements

A settlement service is anything provided for a closing: title work, title insurance, lender services, appraisal, inspection, escrow, an attorney (C.R.S. 12-10-218(1)(c)). An affiliated business arrangement is when a settlement provider, or someone related, owns more than 1 percent of or is affiliated with another provider and refers business to it (C.R.S. 12-10-218(1)(a)). It is allowed only if the referrer is paid solely as a return on investment (C.R.S. 12-10-218(2)(a)). Required: written, signed disclosure to all parties when an offer is fully executed (C.R.S. 12-10-218(2)(b); Rule 6.18). You may not require the use of a particular provider (C.R.S. 12-10-218(2)(c)), and you may not give or accept any kickback for sending settlement business (C.R.S. 12-10-218(2)(d)). Where there is a federally related mortgage, a broker may not give or accept anything of value for a referral between settlement providers; otherwise, referral compensation must be disclosed in writing at the time of referral (Rule 6.21.B). Brokers also report the arrangements to the Commission, and employing brokers annually (Rule 6.18.C).

Conflicts of interest and your own deals

A conflict of interest is a real or apparent competing personal or professional interest that may affect how you serve a client (Rule 1.13). You have a continuing duty to disclose known conflicts in writing (Rule 6.17.A). If you buy, sell or lease property on your own account, you must say you are a licensed broker in the contract or a concurrent writing (Rule 6.17.B). Property managers must disclose any ownership, financial or family interest in a vendor they pick (Rule 6.17.C). If you use an option to purchase in a listing, you must tell the owner your full profit in writing and get written consent (C.R.S. 12-10-217(1)(u)).

Documents, copies, retention

• Give duplicates of every document you prepare to all consumers when prepared (Rule 6.14.A.2). Give a closing statement and a signed duplicate of the listing and sales contract (C.R.S. 12-10-217(1)(j); Rule 6.19).
• Keep transaction files 4 years from closing or from the date an unsold listing expires (Rule 6.20; C.R.S. 12-10-217(1)(k)). Electronic copies are fine (Rule 6.24).

Listings and practice of law

Listing contracts must be in writing before you perform services, and must have a definite end date (Rule 6.14.C, D). A holdover clause (a commission after the listing expires) can cover only people and properties you negotiated on and named in writing during the term (Rule 6.14.E). A broker engagement contract for residential premises cannot run with the land, cannot be assigned without the owner's notice and agreement, and cannot create a recordable lien; offering one that does is a deceptive trade practice (C.R.S. 12-10-403.5(2), (3)). Brokers may not file or threaten liens or lis pendens to collect a residential commission before getting a judgment (Rule 6.22.B). Giving legal advice is practicing law: brokers must not advise on title exceptions, must urge consumers to talk to an attorney, and may not charge a separate fee to prepare legal documents (Rule 6.14.B, F, G).

Unlicensed assistants

The employing broker must supervise all unlicensed employees, including secretaries, bookkeepers and personal assistants (Rule 6.3.A.2; C.R.S. 12-10-222). An unlicensed assistant may not do any licensed act for pay, such as negotiating, listing, or selling (C.R.S. 12-10-201(6)(a)). Rule 1.61 shows the limits for an unlicensed on-site manager in rentals: fill in blanks on lease forms as a scrivener, show available units, quote prices set by the owner or broker, arrange maintenance, and collect rent. They must not negotiate material lease terms (Rule 6.3.E.5). A broker who is not the owner's broker may not give property access info to an assistant without the owner's broker's authorization (Rule 6.16).

Sign crossing

You must not negotiate a listing directly with a consumer you know has an unexpired exclusive listing with another firm (Rule 6.15.A). If the consumer contacted you and you did not start the talk, you may discuss terms of a future listing, or take one that takes effect when the old one ends (Rule 6.15.B). You must ask whether a listing is in effect and get written confirmation that it expired or ended (Rule 6.15.C). If the consumer wants out of an active listing, tell them to see an attorney (Rule 6.15.D).

Office policy manual

The employing broker must adopt a written brokerage relationship policy (Rule 6.4.A), and written office policies that apply to all associates, are given to and signed by each associate, set procedures for designating who works with consumers, and protect confidential information (Rule 6.4.B). The employing broker also needs a written policy for destroying personal identifying information (Rule 6.4.C).

Example with real numbers

A $500,000 sale pays the listing firm 3 percent = $15,000. The firm splits 70/30 with its associate: associate gets $10,500, paid by the employing broker, never directly by the seller. A broker licensed in Texas sent the buyer: paying a 25 percent referral fee = $3,750 is allowed if that Texas broker actually referred the client and resides there. Paying the same $3,750 to a friend with no license is a violation of C.R.S. 12-10-217(1)(l), with a possible fine of up to $2,500 per offense. If the same broker buys a $400,000 investment house for herself, the contract must also say that she is a licensed broker.