Chapter 2 - The Georgia Real Estate License Law
At the completion of this chapter, students will be able to do the following:
1) List the steps that need to be taken in order to obtain a real estate salespersons license in Georgia.
2) Identify at least two types of brokerage relationships.
2.1 The Georgia Real Estate Commission
This chapter in the course will cover Chapter 520-1 of the Georgia Rules and Regulations, which lays out Georgia's Licensure and Brokerage laws.
This is a very important law for any real estate salesperson or broker in the State of Georgia, as it lays out many of the laws and rules that must be followed on a day-to-day basis.
We will summarize the more important sections of the law. This way you will have a better understanding of what the law covers and where to find the right bit of information if you ever need to reference back to this law during your practice as a real estate salesperson.
We’ll start by going over the pertinent key terms and the organization of the George Real Estate Commission and the Commission's operations.
Let’s jump in and get started!
The following key terms are defined in Rule 520-1-.02.
Agency refers to a real estate broker's relationship with a client via the client's express written agreement.
Applicant refers to someone who has completed the requirements for a license, submitted a complete application and paid the correct fee.
Brokerage engagement refers to a written contract between a buyer, seller, tenant or landlord and the broker. The engagement includes consideration for duties that the broker performs, such as producing a buyer for a listed property or a property for a buyer willing and able to purchase real estate. The same holds true for a broker either listing an available rental or producing a renter for available rental property. The engagement may also be for property management.
Contracts included are an open listing contract, exclusive listing contract, buyer broker agreement, community association management agreement, property management agreement, and exclusive tenant representation contract.
A Brokerage relationship is an agency (or non-agency) relationship between the broker and their client (or customer) under a brokerage engagement.
A Buyer is someone looking to acquire an interest in real estate.
A Candidate for Licensure is anyone pursuing a license who has completed the requirements, such as completing an application and paying the required fees.
Client refers to someone in a brokerage engagement with a broker.
Customer means a person who has not entered into a brokerage engagement with a broker but for whom a broker may perform ministerial acts in a real estate transaction.
Dual agents represent both the buyer and seller or both the tenant and landlord in the same transaction.
Firm is the partnership, corporation, sole proprietorship or limited liability company licensed as a broker.
Ministerial acts are tasks that don't require a broker's discretion or individual judgment.
Now, let’s dive into the first section of the Georgia Licensure and Brokerage laws.
Organization of the Commission (Rule 520-1-.01)
The Commission includes a chair and vice chair, elected at the beginning of each year or when the position becomes vacant. The Georgia Real Estate Commission is based in Atlanta, Georgia.
Appearances Before the Commission
Requests to appear before the Commission must be in-writing and submitted to the Commission's official address. The Commissioner schedules time at the monthly meeting for the first three people or groups to submit a request before the first day of the preceding month. Scheduled appearances are limited to 15 minutes. At the end of the session, the commission may allow unscheduled people to speak for up to five minutes.
Example: Amelia Padron wishes to appear before the court in April. To do so, she must submit a written request by the end of business hours on March 1st.
Amendments to Rules
Anyone can petition the Commission to change, promulgate, or repeal a rule. The petition must be in-writing, signed and notarized. The Commission has 30 days to approve or deny the suggested changes, per the state's Administrative Procedure Act.
Example: The Commission receives a written notice to amend a rule, but the petitioner hasn't signed or notarized the request. The Commission is not obligated to respond until the petition is submitted in the correct format.
The Commission can make a declaratory ruling on statutory provisions or any Commission Rules. The request must be in-writing, signed and notarized. The Commission has 60 days to respond to the request for a declaratory ruling or to refer the request to the Attorney General for a decision.
Example: The Commission receives a complex request for a declaratory ruling with wide legal implications. The Commission can seek the advice of the Attorney General rather than announce a decision.
Commission Operations (520-1-.03)
The Commission is also responsible for providing records on any licensee.
Certifications of License History
Upon written request, the Commission provides a history of a licensee's records for the five years immediately preceding the written request.
Maintenance of Records
The Commission maintains investigative files under for the following terms:
- Forty years for investigative files where disciplinary action is imposed or a payment is made from the recovery fund.
- Fifteen years for other files.
Example: Tammy Weaver from Atlanta submits a written request for the records of a real estate broker she plans to hire to list her property. She has heard rumors that the broker was involved in some shady deals. The Commission provides files that show the broker has been fined twice for unethical conduct, so Tammy decides to take her business elsewhere.
Return of Wall Certificate and Pocket Card
If a broker's license is suspended or revoked, they must surrender their license wall certificate and pocket card to the Commission. Brokers also must turn in the wall certificate of any real estate agent working under them.
2.2 Rule 520-1-.04 Obtaining a License
This lesson covers how to obtain a real estate license in Georgia and summarizes Rule 520-1-.04 of the Georgia Rules and Regulations. To obtain a license you will successfully complete the educational requirements, take and pass a state exam, find a broker and apply for your licensure.
Let’s start with the fees you can expect to pay.
Rule 520-1-.04 (1) covers the fees involved in obtaining a license issued by the Georgia Real Estate Commission.
New applicants pay a fee to get their original license and an annual renewal fee for the first four years of their licensure. These fees are due during your birthday month. If a firm activates and pays for an individual’s license, the fees are due on the anniversary of the license activation.
Fees for licenses issued by the Georgia Real Estate Commission are as follows:
- The activation fee to apply for a license as an individual or associate broker, salesperson, or community association manager is $45. The activation fee for a new firm, school or instructor is $75. Both fees include $20 toward the Real Estate Education, Research and Recovery Fund.
- Renewal fees covering a four-year period are $125.00 for each broker and approved school. Individual licensees and instructors pay $125.00. However, if paid through the Commission's online renewal system, the fees are reduced to $100.
- Reinstating a license suspended due to nonpayment or failure to meet educational requirements is $100 if submitted within four months of the lapse.This fee increases by $25.00 for each month or portion of a month thereafter. If your license is lapsed for more than 5 years, you must retake the state exam.
- $25 for the following: failure to notify the Commission of change of address within 30 days; failure to notify the Commission when you’ve registered with a new broker or applied for voluntary inactive status due to the broker’s choice or your own, and for incomplete applications returned by the commission.
- $100 for returned checks or disputed credit card charges for fees owed to the Commission.
- Instructors and school applicants applying for original approval must pay four calendar years in advance for all fees due to the Commission.
Rule 520-1-.04 (2) summarizes the required experience for a broker’s license.
Brokers applying for a license in Georgia face certain requirements.
First, a candidate for a broker or an associate broker's license can fulfill the experience requirement based on experience in another state. Typically, they must prove to the Commission that they had an active license for three out of five years just prior to applying for their license. If complete records aren’t available, the candidate must meet the following conditions:
- the candidate obtained the experience within five years of applying for a Georgia license;
- the candidate’s previous jurisdiction can show that the applicant had a license during the previous five years.
Second, the Commission can also consider the following:
- transaction files showing brokerage activity within the past five years;
- an affidavit from a licensed broker who the applicant was associated with stating the following:
- 1) the broker is currently licensed,
- 2) the dates the broker was associated with the applicant, and
- 3) the number and type(s) of transactions completed.
For candidates who were brokers in another state, the candidate can submit an affidavit stating that:
- they were licensed,
- the dates the candidate was licensed, and
- the number and type(s) of transactions
Candidates can also present affidavits from three brokers attesting that the candidate operated as a broker and when.
For example, Dalton White was a broker in Florida for two years prior to moving to Georgia. The Florida Real Estate Commission shows no record of Dalton’s broker license. He submits sales and closing documents he has handled in the last two years. He asks three brokers he has dealt with to submit affidavits of Dalton’s participation in transactions with them.
Next, we will discuss the examination process.
This is covered under Rule 520-1-.04 (3)
If you want to get your license in Georgia, you must first pass the state exam for a real estate broker or agent. The criteria for the test and minimum score are published prior to the time the test is administered.
Active Military and Reservists Point Preference
Candidates who are eligible active duty military and reserve personnel receive a 5-point credit. For the community association manager or salesperson exam, points are added to the overall grade. For the broker exam, points are added to the Information Gathering section and to the Decision Making section.
For example: If you serve in the army reserve and are studying to be a broker, you effectively get 10 points added to your score, 5 points in each of Information Gathering and Decision Making sections. This can improve your chances of passing the exam.
Disabled Military and Veterans
Disable active duty military, reservists and veterans disabled in active duty receive 5 points for the community association manager or sales agent exams and five points each for Information Gathering and Decision Making sections of the broker exam.
The extra credit provided to military personnel is contingent upon honorable discharge.
For example, Caroline Martinez served in Afghanistan and was injured by an IED. She lost the use of both legs and is classified as 50 percent disabled. Caroline has applied to take the broker exam and will receive an additional five points each for Information Gathering and Decision Making sections of the broker exam on top of her total points earned.
What If You Have a License from Another State?
A candidate for licensure who has moved to Georgia from another state or someone applying for non-resident licensure can get a license without a full examination or education requirements. However, the candidate needs to provide an original certification issued less than 12 months prior to their Georgia application for a license. This holds true if the candidate:
1. has passed an exam for the same type of license they want in Georgia;
2. has completed all pre-license and continuing education requirements of the other state;
3. has a license in good standing with the other state; and,
4. has never had disciplinary action applied by the other state’s licensing body.
For example, Chad Frank has moved from Pennsylvania to Georgia. He has a broker’s license in Pennsylvania but has received disciplinary action for negligence within the past two years. In this case, Chad isn’t eligible to apply for a license in Georgia based on his PA license.
Providing Answers or Information About the Exam
Any applicant, examinee, candidate or licensee who supplies others with information about the content of a qualifying exam administered by the Commission shall be denied a license and face permitted sanctions.
In addition, approved schools, instructors and staff members cannot get information from examinees about what’s on qualifying exams from the Commission. They are prohibited from accepting any information except that which is approved by the Commission.
Violation of these rules can result in denial of an approved license, suspension or withdrawal of approved status, or sanctions on individual instructors and schools.
Written Permission to Sit for an Exam
The Commission’s written permission is needed to take a licensing test unless you are qualifying for or reinstating a license covered by the exam. Examples include someone who holds a license issued for reciprocity instead of by examination, or to those required to retake a qualifying exam as part of a disciplinary matter.
Rule 520-1-.04 (4) covers applications for licensure.
Applications for a license, renewal, change or transfer of license must be submitted on approved forms. Each form may require the email address and the name of your firm. If you need to change a trust account, email address, regular address, or your name, it can be done via letter or email.
If the application, change of information, or fee must be filed with the Commission, it can be personally delivered to the Commission’s offices, mailed via the USPS, sent via private courier or delivery, faxed, or emailed if no payment is needed.
If a licensee submits a form on an outdated version, they may be asked to fill it out again. Failure to supply all the information such as paying the proper fee, attaching required documents, and submitting illegible responses, can result in a request to re-submit the form. Failing to disclose a criminal conviction or disciplinary action may result in a falsified application.
For example, If you use an old printed version of a form, you may have to complete the form again. It’s always a good idea to print out the latest version. Otherwise, it could delay your application process.
The Commission provides reasonable accommodation to disabled candidates sitting for an exam as per the Americans With Disabilities Act. Submit the request in writing by the application deadline, indicated in Disability Accommodation Guidelines.
Whenever an applicant submits an original application on paper for approval as a school or an instructor, the Commission must keep the paperwork for15 years. Any other paper application should be kept for one year, and the Commission shall keep electronic licensing records for 15 years.
Rule 520-1-.04 (5) covers application deadlines.
Once you pass the community association manager's or salesperson's examination, you must apply for an active or inactive license within three months or pay twice the fee to apply afterward. If you don’t activate your license in 12 months from the date of your exam, you have to retake the exam. Applicants for a community association manager's license must submit proof of passing the Community Association Manager's pre-license course and an applicant for a salesperson's license must submit proof they completed the Salesperson's pre-license.
For example, Max Sorrels takes the salesperson’s exam in January and finds a broker who is willing to nurture a new agent and applies to activate his license in March. Since he has applied to activate his license within the allowed three months, he follows the application deadlines for a salesperson.
Once you pass the broker's examination, you have to submit an application within 12 months to become a broker or broker agent. After 12 months, you must retake the exam. You must show proof that you held an active license for three out of the past five years. If your prior licensure was with another state, you must present the relevant license. Brokers from other states must provide certification from the state where they served as brokers. This must be issued within 12 months of the application to be a broker in Georgia.
For example, Simone Jones passed her broker exam on April 1st but did not apply to be a broker agent until May 15th of the following year. Under the rules for application deadlines, she must retake the exam.
Rule 520-1-.04 (6) covers the name of a firm on an application.
A broker operating as a sole proprietor must use the same name on the license as a sole proprietor and on the broker's certificate of licensure.
For example, Jed Lafferty plans to open a brokerage as a sole proprietorship using his real name. His brokerage certificate will include his full name, Jediah Lafferty Jr.
Any corporation applying for a brokers license must submit its corporate charter, registered with the Secretary of State’s Corporation Division, with the broker application. Any corporate trade name should be certified by the Clerk of the County. A name change of any kind requires a new broker’s certificate to be issued.
Any partnership that applies for a broker license must submit a copy of its partnership agreement and its Certificate of Trade Name, filed with the Clerk of the County. The trade name is shown on the broker's certificate for the partnership.
For example, Ana Brown and Lottie Tanner, long-time business associates, decide to form a partnership for their real estate brokerage. Their Partnership is certified as ABLT Realty, and this is the entity name that must appear on the brokerage license.
Limited Liability Companies
Any limited liability company, or LLC, must include its certificate of authority issued by the Secretary of State's office. If the LLC wants to use a trade name, it must submit a copy of the trade name, certified by the clerk of the county. If the LLC wants to use a trade name on the certificate of authority to conduct business in Georgia, it should provide a certified copy of its trade name or the revised certificate of authority. The new name is shown on the brokerage license.
A franchisee applying for a brokerage must include the franchise name in a way that distinguishes it from other franchisees registered with the Commission. To do so, both the franchise name and the firm's name from the partnership agreement, corporate charter, or certificate of authority.
Rule 520-1-.04 (7) covers criminal history reports.
Within 60 days of application for licensure, a candidate or applicant must pay for and provide the following:
- A certified criminal history report from the Georgia Crime Information Center. It should show whether the applicant has a criminal history. Or;
- Candidates from other jurisdictions must provide the equivalent information from their state, province or territory.
If the criminal history report shows that the candidate has a record in another jurisdiction, or the applicant can’t obtain a report, the applicant must provide fees, fingerprints and authorization for the Commission to get a report from the FBI’s Federal Crime Information Center.
For example, Darryl Jones moved from Louisiana, where he was a broker, to Georgia, where he is applying for a broker license. Darryl tried several times to obtain a criminal history report from the appropriate authorities. Since he couldn’t get the required information, Darryl will need to provide fingerprints, fees and authorization for the Commission to obtain the FBI report.
Rule 520-1-.04 (8) addresses applicants with convictions.
Whenever a candidate for licensure or an applicant reveals that such candidate or applicant for licensure has a criminal conviction, they must provide the accusation, citation, information or indictment leading to the conviction, as well as a certified copy of the sentence.
Rule 520-1-.04 (9) addresses applicants with disciplinary actions.
If you’ve been subject to disciplinary actions, it has to be reported to the Georgia Real Estate Commission. Provide the allegations and the final order of the licensing agency.
For example, Geraldine Lee has a nursing license and faced disciplinary actions for negligence early in her career. She must report this incident to the Commission before she completes her application to become a real estate agent.
Rule 520-1-.04 (10) addresses incomplete applications.
The Commission, at its discretion, can determine that an application is incomplete unless the fees and experience are deemed insufficient. The Commission might decide not to process the application until the requirements are met.
Rule 520-1-.04 (11) covers preliminary decisions for convictions or disciplinary actions.
The Georgia Annotated Section 43-40-15 gives the Commission the right to deny a license to an applicant with prior criminal convictions or disciplinary actions from any licensing body. Because the process to obtain a license involves a commitment of time and money, the Commission permits applicants to request a preliminary decision before they undertake the education and examination. Preliminary decisions aren’t binding. However, the Commission may determine that a favorable preliminary decision is its final decision.
If you seek a preliminary decision, you have to submit a certified copy of the indictment and conviction or the disciplinary action assigned by another licensing authority. Provide additional information pertinent to your individual circumstances.
For example, Geraldine Lee wants to become a real estate agent in Georgia but faces a minor infraction that led to disciplinary action when she was a nurse. She decides to request a preliminary decision prior to taking the required educational courses. Geraldine has to provide a copy of the disciplinary action imposed by the nursing licensing board as well as a copy of the complaint made against her.
Adverse Preliminary Decisions
An adverse preliminary decision doesn’t prevent you from becoming an applicant by completing the education, experience, and exam requirements. If the Commission denies your application based on a conviction or disciplinary action, you have the right to a hearing for a final determination.
Rule 520-1-.04 (12) addresses requests for a hearing after the Commission denies an application.
According to the Georgia Code, Sections 43-40-8 and 43-40-9, as well as the Commission’s Rules and Regulations, applicants can request a hearing if their application is denied due to conviction or prior disciplinary action. After receiving notification that their application is denied, the applicant has 60 days to make a written request to the Real Estate Commission for a formal hearing.
If an applicant doesn’t make a written request within 60 days, they can’t request a hearing without retaking the education requirements and exam for licensure.
Rule 520-1-.04 (13) covers military spouses and transitioning service member applications.
As of July 1, 2017, transitioning service members and military spouses might qualify for expedited processing if they have paid the fees and meet the application requirements for the license they wish to obtain.
2.3 Rule 520-1-.05 Maintaining a License
In this lesson, we’ll discuss how to maintain your Georgia real estate license, which can be found in the Georgia Real Estate Commission Rule 520-1-.05.
Let’s begin with the required education for salespersons in order to maintain their license.
The Official Code of Georgia Annotated, or OCGA, consists of all the laws in Georgia. The OCGA Section 43-40-8(d) says that every salesperson has to provide the Commission with evidence that they completed a 25-hour post-license course within one year of obtaining their license.
Salespersons have to complete their course within one year unless they qualify for a six-month extension.
For example, salesperson Iris Miller is a new salesperson who is called out of the country to care for a sick relative. She asks for a six-month extension, which is approved. In this case, Iris has to complete her 25-hour post-license course within 18 months of receiving her license.
Sometimes a non-resident salesperson has completed a post-license course similar to Georgia’s. As long as the course was completed prior to receiving a Georgia license, the salesperson doesn’t have to take the Georgia post-license course.
For example, Hans Rosenstein moved from Florida, where he was a sales agent, to Georgia. Hans completed his post-license course in Florida, a state considered similar to Georgia in terms of real estate law. Hans doesn’t have to take the post-license course in Georgia.
To renew an active license, a salesperson must finish 36 hours of continuing education during the renewal period.
Licensees have to complete three hours of continuing education covering license law within every renewal period.
Next, we will talk about the difference between active and inactive licenses.
Salespersons in Georgia may have an inactive or active license. This section explores the difference between the two.
We are starting with the requirements for an active Georgia salesperson, associate broker or community association manager. These licensees must be active under a Georgia broker. An active Georgia licensee can also affiliate a license with a broker out-of-state if all of the following conditions are met:
1.The other state's laws allow dual licensing, and
2. The Georgia licensee has the written permission of their Georgia broker to affiliate with a broker from another state.
For example: Forrest Ellison just got a license in Georgia and wants to keep his Florida license active as well. However, Florida doesn’t allow dual licensing. Therefore, Forrest cannot have a license in both states.
A salesperson can’t begin the activities of real estate until their broker receives their wall hanging. The same holds true if the salesperson is active under a limited liability company, partnership, corporation or sole proprietorship.
A “Change Application” to the Commission is required before a licensee begins to work under another broker or as a qualified broker themselves.
Salespeople who wish to activate a license on inactive status must complete the continuing education requirements that would have been due if they remained active, unless they have already done so. Alternately, they can also requalify as a new applicant.
Inactive licensees can’t practice as a real estate broker, associate broker, salesperson, or community association manager. This includes leasing, sales, property management services, community association management services and any other brokerage activity.
An inactive licensee can perform real estate activities for an unlicensed person who owns the property. To reinstate their license, they must reapply as a new applicant.
For example, Jolie Harper is a licensed real estate agent in a Georgia brokerage. She is offered a job selling condos for the unlicensed owner-developer. Jolie must inactivate her license and will have to reapply if she decides to practice as a salesperson under a brokerage again.
Next, let’s cover how renewals work for Georgia real estate salespeople.
If renewal fees aren’t paid, all licenses will lapse. For an individual, that’s the last day of their birth month. For a firm acting as a broker, the deadline is the last day of the month four years after the original license was issued.
How do you reinstate a lapsed license?
Any licensee whose license lapsed for failure to complete education requirements and pay the required fees can get their license reinstated. The conditions include simply paying the appropriate fee and completing the required continuing education.
A salesperson who doesn’t pay a renewal fee and lets their license becomes inactive can reactivate their license within two years of the date the license lapsed.
Any lapse longer than two years and under five years can be reinstated by paying back fees and taking the appropriate class. These classes include:
- For community association managers, the Community Association Managers Prelicense Course
- For a salesperson, the Salesperson's Prelicense Course; and,
- For brokers or associate brokers, the Brokers Prelicense Course.
These courses have to be taken within one year.
For example, Adam Jones is a broker who let his license lapse three years ago. He must pay the renewal fee and take the Brokers Prelicense course within a year of the time he pays the renewal fee.
Any licensee who doesn’t pay a renewal fee can also retake and pass the appropriate exam for that license including the national portion.
Any license that lapsed for more than five years requires that the applicant re-qualify as an original applicant.
If you don’t take the 25-hour post-license course and let your license lapse, you have to reapply as an original applicant.
For, example, Maeve O’Donnell doesn’t take the post-licensing course within one year of receiving her license. She then lets her license lapse for more than five years—at which time she needs to reapply as an original applicant.
Next, we will address the rules behind notification of legal action or change of address.
You must notify the Commission in writing if you get a final disposition from a court decision or administrative board ruling. The notice of civil or administrative rulings is due to the Commission within ten days and should include a copy of any final order by the agency or court. The same applies to any conviction and must include a copy of the accusation, indictment or conviction.
For example, Donna Yap is a salesperson in Atlanta. A client has filed a case against her in a civil court action. Fortunately, the final disposition is in Donna’s favor. Even still, she must send a written notice to the Commission within 30 days of the judgment.
Each approved school, licensee or approved instructor must notify the Commission within one month of a change in mailing address or residence. The same goes for a change of email address, if applicable.
For example, Prince Stover moves his Athens brokerage to a location with more foot traffic. He must notify the Commission within 30 days of his new address.
Now, let’s take a look at the rules surrounding nonresident licensure and brokerages.
Nonresident licensees must decide whether to stay active or become inactive. There may be additional administrative steps, which we will discuss next.
Nonresidents who meet all the requirements by the O.C.G.A. Section 43-40-9 and the Commission can obtain a nonresident license.
Licensees who move to another state may qualify for nonresident licensure if they request a change in status from resident to nonresident. They must also sign a Consent to Jurisdiction and agree in writing to cooperate if the Commission initiates an investigation.
A nonresident broker may be the qualifying broker for a limited liability company, corporation or partnership. They can also be the qualifying broker for an out-of-state limited liability company or corporation licensed by the Commission and acknowledged by the Corporation Division of the Secretary of State.
For example, Giselle Alvarez lives in Florida and is a Georgia nonresident broker. She can act as the qualifying broker for Best Brokerage, a corporation, in Savanna.
Georgia licensees who move out of state can place their licenses on inactive status if they don’t want to become a nonresident license. This prevents termination of their license. Licensees with an inactive status can’t conduct brokerage business until they become Georgia residents and comply with the appropriate reactivation provisions of O.C.G.A. Section 43-40-12.
Any nonresident licensee who doesn’t pay their renewal as an applicant can reactivate their license as long as they kept an active license in their own state of residence, and they complete the Georgia continuing education requirements.
Georgia licensees are restricted to performing real estate services within the state. The only exceptions are those with a valid license in another state.
For example, Virginia Belle is a nonresident Georgia broker. She is not licensed in another jurisdiction and can therefore only perform real estate services in Georgia.
Our final topic in this lesson is how you can keep your wall certificate and wallet card upon your retirement.
If you retire after 20 years of actively using your license, you can keep your wall certificate.
2.4 Rule 520-1-.06 Brokerage Relationships
In this lesson, we’ll review Rule 520-1-.06, which covers brokerage relationships between a Georgia real estate licensee and their clients. There are many different types of relationships with different responsibilities in terms of the representation and responsibilities of the licensee.
The two main types of brokerage relationships are brokerage engagements and management agreements. This section also covers community association managers surety and insurance, and the Disclosure of Brokerage Relationship rules and requirements.
Let’s start with real estate brokerage engagements.
In brokerage engagements, each brokerage agreement has to include the terms of the agreement and an expiration date. When the engagement is entered into, the licensee is obligated to provide original copies of the agreement to all parties involved.
Net brokerage agreements give the seller a set amount of money, with the broker walking away with the rest of the proceeds. Net brokerage agreements are illegal in Georgia. Therefore, the agreement must clearly specify the broker’s fees so that the client can calculate the price of the property versus the broker’s fees.
For example, Andrew writes a contract that guarantees seller Warren $100,000 for his property, while Andrew walks away with any amount resulting from a sales price over $100,000. However, if the home sells for less than $100,000, Drew must make up the deficit. Even if Warren is happy with this arrangement, net brokerage agreements are illegal in Georgia and Andrew is risking his license with this rather shady deal.
Next, we’ll discuss real estate management agreements in Georgia.
Management agreements involve licensees with property management relationships with their clients. Any written property management agreement must identify the property being managed and list the terms and conditions of the manager’s responsibilities.
The management agreement specifies how income is transmitted to the owner and what kind of reporting will be provided on (at least) an annual basis. Any expenses managed by the broker must be included in the agreement, including how payments are funded.
For example, Owen’s Condos hires licensee Brook White to manage its commercial multi-family condominium complex. The management agreement specifies that Brook will collect the rent and manage maintenance and other costs of operations as well as provide a profit and loss statement and cash flow statement to the owners on a quarterly basis. Brooks other responsibilities are also detailed in the agreement.
In addition, the management agreement has to include the commission the broker receives and state when it gets paid. If there are security deposits and prepaid rent associated with managing the property, the agreement should specify whether the broker or owner collects these funds.
Each document must include an effective start and end date, be signed by the owner and licensee and lay out the terms of the agreement. A legible copy of each agreement must be provided to the owner or their authorized agent when the owner signs the agreement.
Next, we turn to the rules governing fidelity bonds and insurance for Community Association Managers.
Community association managers may need to obtain a fidelity bond or the appropriate insurance if they meet certain thresholds. A CAM licensee manages a community and maintains, collects, controls or disburses funds belonging to the community association. If the amount of these transactions exceeds $60,000 at any time, a fidelity bond or insurance is required.
For example, CAM licensee Brook White collects monthly rents of $55,000 and security deposits of up to $10,000 on a monthly basis. Since this amount exceeds the $60,000 threshold, Brook must obtain a fidelity bond and insurance.
The bond or insurance has to be written by an insurance company licensed by the state of Georgia, and the coverage amount must cover the maximum amount the broker is exposed to while managing the property. Additionally, the minimum coverage must equal or exceed the total of three months worth of assessments plus the reserve fund total.
The insurance has to name the community association as an insured and cover the brokers partners and employees who also help manage the property. The bond or insurance must specify a 30-day notice by the insurance company before canceling or modifying the policy, except for the nonpayment of the insurance premium, which only requires a 10-day notification.
The final topic in this lesson discusses the disclosure of brokerage relationships.
Licensees aren’t allowed to buy or lease properties that are listed with the licensee or the licensee’s firm. The only exception is when the licensee clearly reveals their role as buyer or tenant to the seller or landlord, respectively. Similarly, a licensee must include a clause in the contract revealing whether they are the seller or landlord to the buyer or tenant, respectively.
For example, Amy is a real estate broker who lists a property for James but later decides to purchase the property as an investment. Amy must include a clause in the contract stating that she plans to purchase the property or she must give up her role as the listing agent.
If the licensee is acting as a dual agent, the contract must disclose who is paying the licensee. This disclosure must be made no later than the first offer to sell, buy, lease or exchange real property.
Any commissions paid to licensees representing other parties must be approved in writing by all parties.
2.5 Rule 520-1-.07 Management Responsibilities of Real Estate Firms
In this lesson, we’ll cover Rule 520-1-.07, which outline the management responsibilities of real estate firms.
Let’s start with the rules surrounding the name of a firm. A broker can’t do business under a name that’s different from the license issued.
For example, if a broker wants to open a brokerage under a fictitious name, the brokerage license must be under that fictitious name.
There are also responsibilities held by brokers and qualifying brokers.
First, a real estate broker is responsible for the licensees affiliated with their brokerage. Consequently, the broker is responsible if any of their salespersons violate the real estate rules and regulations for Georgia. Similarly, the broker is expected to teach their licensees the provisions of the License Law and to notify the Georgia Real Estate Commission of any related violations.
Next, we turn to the rules surrounding the change of qualifying broker.
If the qualifying broker of a corporation, partnership or limited liability company resigns, dies or is discharged, the entity has 60 days to find a qualifying broker. In case no qualifying broker is found, the brokerage must stop all real estate services.
For example, Broker Gabe Newman passed away suddenly, leaving 10 agents without a broker. A new qualifying broker must be assigned to the 10 agents within 60 days.
A licensed broker can serve more than one brokerage, but qualifying brokers affiliated with multiple firms have to follow certain guidelines. If a broker wants to serve as a broker for multiple firms, they have to notify each firm in writing of their intent to do so.
There is a specific process to follow when transferring licenses from one firm to another.
Brokers enter into a written agreement specifying how a licensee under them will be compensated. Besides the requirement for an agreement, the Commission doesn't regulate or enforce the provisions of these agreements. A dispute between licensees cannot serve as grounds for the broker refusing to release the licensee. The Commission also doesn't settle disputes between licensees.
For example, Monica Vincent is a broker with licensee Dale Berner working under her. Dale finds a broker who will give him a higher commission cut and asks Monica to return his wall certificate to the Commission so that he can hang his license with the new broker. Monica threatens to keep his certificate and appeal to the Commission, but Dale reminds her that the Commission prohibits both actions.
A broker must sign a release form upon request by a licensee. At the same time, the wall certificate of licensure is sent to the Commission. If the licensee wishes to deliver the wall certificate personally, it has to be done as quickly as possible.
For example, Salesperson Sandy tells her broker she plans to leave the brokerage and asks the broker to sign the release form. The broker does so right away, knowing it's required by the law. The broker gives the wall certificate to Sandy to pass on to her new broker.
The departing licensee forfeits any pending listings and customers gained while under the broker. All keys and related contracts must be passed back to the broker, and the licensee has one month to transfer their license to the new broker. When a licensee terminates the relationship with their broker, the licensee cannot contact any of the broker's customers under a listing or management agreement before the contract expires. This means that any pending contracts, listings or buyers remain with the broker not the salesperson.
For example, Christopher Kent finds a new broker and lets his current broker, Carmel Carey, know that he is leaving the firm. Carmel reassigns Christopher's clients to another salesperson in the brokerage.
Finally, when the brokerage begins to hire, both the firm and the affiliated licensees are responsible for support personnel. An example of support personnel would be an administrative assistance, which is common among brokers and salespersons who have many clients they are working with. Support personnel can't perform all activities of real estate. Instead, they can provide administrative duties that don't require discretion or the exercise of judgment.
For example, Sallie Mae works for Broker Amy Davis and performs administrative duties. Sallie should not write real estate contracts or show houses to clients since she isn't a licensed realtor.
Understanding the rules that apply to your transfer or role are vital in order to avoid any pitfalls and getting called to appear before the Commission. These rules provide protection for licensees who want to smoothly transition their license from one brokerage to another. They also govern the management of a broker's staff and affiliated licensees.
2.6 Rule 520-1-.08 Managing Trust Accounts and Trust Funds
In this lesson, we will discuss the Georgia Real Estate Commission Rule 520-1-.08, which deals with Trust Accounts and Trust Funds. Let’s start with the Designated Trust or Escrow Account.
Brokers can have more than one trust or escrow account as long as they inform the Commission with the account information within one month of its creation. Licensees have to give any cash, checks or other consideration to their designated broker as soon as possible. This extends to consideration received as a result of property owned by the licensee in the form of a security deposit or other funds related to the property.
Brokers must keep any consideration received in a trust or escrow account registered with the Commission. If the account is interest-bearing, the broker must obtain instructions on how to distribute any interest received, and these instructions must be signed by all parties.
In some cases, a broker maintains their own funds in a trust or escrow account. Here are the rules governing how these accounts can be used:
- The broker can maintain a minimum balance required by the financial institution plus a reasonable amount for any service charges to be paid.
- The broker can place commissions due to them in the broker’s trust or escrow account if the accounting system properly accounts for them. Each month, the broker must remove any funds exceeding the minimum amount allowed.
- Checks made out to the broker can be used to withdraw funds from the account.
For example, Broker Brody receives a commission check and has a software-based accounting system that properly tracks all deposits and withdrawals for trust and escrow accounts. He has met the requirements and can deposit the check in the account.
Now, we turn to the accounting requirements of trust and escrow accounts.
Every broker has to maintain an accounting system to include the following information:
- Names of the buyer and seller or names of the tenant and landlord
- Amount and date of funds deposited
- Identification of property
- The amount, date and payee of checks drawn on each transaction.
For example, Broker Brody forgot to include the address of the property when documenting the transaction. He hasn’t properly identified the property and fails the accounting requirement for trust and escrow accounts.
The following rules govern disbursements from a broker’s trust funds.
If a broker uses trust funds contrary to any contract for real estate, they will be considered incompetent to safeguard the public interest.
A broker can fulfill their duty to account by using the trust or escrow account in different circumstances like:
- rejection of an offer
- withdrawal of an offer
- distribution of funds at the closing
- distribution of funds based on a written agreement (of all parties) which is separate from the contract to hold the funds
- filing of an interpleader action
- distribution of funds based on court order
- to fulfillment of a contract requiring the deposit of funds
A broker cannot disburse funds until they have reasonable assurance that all funds have been received. If the broker makes a disbursal without the agreement of all parties, all parties must receive written notice.
For example, Broker Brody receives a court order to disburse money to the seller of the property in a transaction. He complies, but the buyer complains. As long as all parties are notified in writing, Brody has satisfied his duty to account since he received a court order to do so.
A broker can claim earnest money as their commission in connection with a real estate transaction if:
- In a rental agreement the tenant has taken possession of the property
- A sales transaction has closed or expired; or,
- The broker received written agreement from all parties that the broker is entitled to a commission.
Refunds of earnest money are credited at closing or paid by check. The total of all checks should reflect a zero balance except for the broker’s commission.
If a licensee owning an escrow or trust account files for bankruptcy, they must notify the Commission immediately.
For example, Broker Brody files for bankruptcy but doesn’t notify the Commission. He has failed to comply with this Commission rule.
Property Management or Association Management trust accounts can also be set up by brokers who are managing a property for rental or assessment purposes. These accounts have to be separate from the brokers other accounts.
The Commission must be granted access to examine trust accounts during the renewal process or at any time for a reasonable cause. Further, the broker has to reconcile the account each month and has to provide a written account of the reconciled balance. The broker’s trust liability is the total deposits required, received, and held by the broker during a transaction.
For example if Broker Brody forgets to reconcile his trust and escrow accounts for two months in a row he is out of compliance with the reconciliation requirement of the Commission.
During the renewal process, the broker submits the following information to a Renewal Trust Account Examination:
- A summary of broker's trust account(s), and
- A report from a Certified Public Accountant
Note: Both must be filed on forms approved by the Commission.
For example, Broker Brody submits a report from his CPA but it’s not on a form approved by the Commission. In this case, Brody hasn’t met the requirements of the Renewal Trust Account Examination.
In the case of Abandoned Funds, a real estate licensee can’t disburse any funds from a trust account unless:
- Written authorization requires a disbursal,
- The licensee has satisfied the requirements of the Disposition of Unclaimed Property Act; or,
- The licensee is following a court order.
Finally, when a licensee owns a portion of the property and receives trust funds on the property, those funds must be placed in a trust account.
Understanding the rules associated with escrow and trust accounts is important for all licensees, not just brokers and broker agents. If a broker fails to follow the rules of the Commission, they are ultimately responsible. However, salespersons under a broker are impacted by the decisions of their brokers. So, it’s essential for all licensees to understand the regulations.
2.7 Rule 520-1-.09 Advertising
In this lesson, we will cover the advertising rules set forth under rule 520-1-.09. Let’s start with a couple of definitions.
This rule defines "advertising" or "advertisement" as any method, manner or activity conducted to inform the general public of real estate for rent, lease, sale or exchange.
"Media" includes photos, print, broadcast, and Internet outlets. Examples of this are magazines, newspapers, posters, flyers, billboards, business cards, videos, radio, signs and television. Licensees also advertise via directional, “sold,” “for sale," and "for lease” signs. There are many other examples of media, such as social media and billboards and our list is just a sampling.
For example, John Duck is a broker in Savannah. He advertises a historic building for sale in a local history magazine and also creates a social media campaign to get the word out to local agents and brokers. This means John advertised using magazines and social media channels.
Now, let’s go through advertising rules outlined in the law.
First and foremost, misleading advertising that misrepresents real estate property is strictly prohibited. Licensees who witness false or misleading advertising should take steps to prevent it.
For example, Brian has a sales agent who submits advertising copy for a local newspaper. The ad is for a studio apartment with a view facing an alley and dim lighting. Brian has seen pictures of the apartment and is surprised to read in the ad that it allegedly "has bright natural lighting and a view of the cityscape." He reprimands the agent and orders him to retract the ad since it contains misleading advertising.
Next, written permission to advertise is required prior to advertising property for rent, sale, lease or exchange. A licensee can’t advertise any real estate unless they have written permission from the owner or the owner's authorized agent.
For example, Vanessa Roker is a sales agent in Butler, Georgia. She would like to put together a social media campaign to help move a property that isn't selling. She must get the written permission of the owner to do so. This is typically written into listing agreement.
Next, discriminatory advertising is prohibited. A licensee cannot advertise a property using references to a certain color, race, color, sex, familial status, handicap, religion or national origin.
For example, Alma Solaris is the broker for a landlord renting a two-bedroom apartment in Atlanta. The landlord prefers to rent to African American renters only and asks Alma to include that in the advertising. Alma informs her client that is a violation of the real estate laws in Georgia and she will not be able to comply with his request.
Internet Advertising has specific rules to follow. Any Internet advertising must contain the name and telephone number of the licensee's brokerage on each web page, with limited exceptions. If the brokerage has a trade name or franchise name, it has to be included prominently in the advertising. Additionally, when advertising specific real estate in any format, brokers must include the firm name and telephone number. This should be the firm name registered with the Commission and a telephone number. There's an exception where local laws forbid using the firm's name on certain signage.
Finally, licensees cannot advertise as principals. A licensee can't advertise real estate in such a way as to indicate that the offer to buy, sell, rent or exchange real estate is from a private individual rather than a licensee.
All advertising by licensees under a broker, including salespersons associate brokers and community association managers, must be directly supervised by the broker and include the name of the firm. This means that licensees cannot advertise the services of real estate under their own name.
In addition to the specific rules above, whenever contacting members of the public, licensees must identify themselves as a licensee.
For example, Joyce O'Keefe is a sales agent in Bowman, Georgia. She decides to go through a list of prospects that she has purchased to see if anyone is interested in buying or selling a home. Joyce poses as a survey taker in an attempt to build up a list of warm prospects. This is a violation of the law for advertising.
This lesson covered the rules for real estate advertising practices in Georgia. Now that you have a better understanding of the basics, you should be better prepared to practice ethical and legal advertising for your client.
2.8 Rule 520-1-.10 Handling Real Estate Transactions
In this lesson we will cover handling real estate transactions, which falls under Rule 520-1-.10.
The first topic is presenting offers. When representing the seller or buyer, a licensee is obligated to present any signed offer to procure or lease the property. If the licensee receives an offer from someone they don’t represent, a copy must be given to the licensee who represents that person.
When preparing or signing an offer or brokerage engagement, the licensee has to include the license numbers of each firm and licensee. This must be the six-digit assigned by the Commission.
For example, the license number for the sales agents and brokerages must be included in the transaction documents. This also makes it easier for clients to communicate with the Commission if needed.
A licensee has the responsibility to distribute all documents used in a real estate transaction to anyone who signs the document.
A broker should keep copies of documents and records for three years. This includes brokerage engagements, sales contracts, leases, closing statements and any documents for a real estate transaction
For example, Glenn Thomas is a broker who sold a house for the Houstons two and a half years ago. Glenn must retain all documents related to the sale of the home for at least six more months.
Here's another example, Tina Ray contracted Glen to sell her home two years ago, but the home did not sell. Since Tina and Glenn signed a brokerage contract, that must be kept for another year to meet the requirement of this rule.
The falsification of transaction documents is prohibited, as is misleading representatives. A licensee cannot falsify a record or knowingly allow a record to be falsified, either orally or in writing, by a third party. This rule covers the following misinformation:
- Any amount other than the real lease, sales, or exchange price
- Any amount except the real down payment
- Any amount except the real security deposit, earnest money or other funds
- A payment of funds in cash when it was made in another form
- Any contrivance meant to deceive a buyer, seller, or lessee or another licensee.
The final section of this lesson covers disclosures of rebates, commissions, fees and other considerations.
First, any disclosures required by the OCGA by a licensee to a principal must be made prior to receiving payment of fees, rebates and commissions. This applies to brokerage agreements, management agreements and any other written real estate agreement.
Second, in the case of a licensee who refers a principal to another licensee for real estate services due to relocation, the payment of fees, commissions and other considerations shall be made known in writing to the principal by the date of closing on the sale, purchase or exchange of property.
Third, any disclosures required in the OCGA must adhere to the requirements of all federal laws regarding the payment or receipt of anything of value for referral services or products during a real estate transaction.
Under this rule, the term “licensee’s principal” refers to either a client or customer of a real estate broker, if the customer is primarily working with the licensee and not another broker or agent.
Licensees can rebate any part of a fee, commission or other compensation to a principal for services related to the sale, purchase, lease or exchange of real estate. The rebate must be disclosed on the closing statement. The licensee cannot mislead another licensee, lender, principal title or government entity regarding the source of money used to complete the real estate transaction.
Also, no disclosure is required for products, services, gifts or other consideration that a licensee gives a principal as long as these items aren’t related to the real estate transaction.
For example, sales agent Lisa Pringle sells the McDonalds' home to a buyer that Lisa procured and that is related to Lisa. Lisa negotiated a $30,000 discount off the original sales price from motivated sellers. In exchange for the lower sales price, Lisa promises to the McDonalds new living room furniture for another home she plans to sell to them. This is a violation of the rules for consideration unless Lisa discloses it on the closing documents, during the sale of the McDonalds' house.
This concludes the lesson on handling real estate transactions. Hopefully, you now have a better understanding of the guidelines set forth in the rule.
2.9 Rule 520-1-.11 - Rule 520-1-.13 Licensees Acting as Principals / Business Brokerage / Fair Housing
We’ll start this lesson by briefly discussing Rule 520-1-.11 regarding licensees acting as principals.
Under this Rule, sales agents and associate brokers have to notify their broker in writing of any properties they are buying, selling or exchanging if the licensee has whole or partial ownership in the property.
For example, Tessa Coventry owns two rental properties. She plans to list one for sale on the MLS. By law, Tessa must notify her broker that she plans to sell a property she owns.
If a licensee makes an offer on a property as part of a brokerage engagement or an extension of an engagement, the terms and conditions of the engagement must be set down in a written contract. The same is true if the licensee buys one property to enable a client to buy another.
For example, Kit Benning is a sales agent who decides to buy a property currently listed for her clients, the Winstons. Kit finds a home that the Winstons wish to purchase. While drawing up the sales contracts, she makes her purchase of the Winstons home contingent on their extending the brokerage engagement by 60 days to allow time for the closing. This meets the requirement of the Rule.
Licensees advertising real property for themselves have to follow the advertising requirements set forth in Rule 520-1-.09.
Next, we’ll briefly cover Rule 520-1-.12 regarding business brokerage.
According to the Rule, a person who sells a business for a client must be a licensed real estate broker or sales agent. Unlicensed brokers aren’t authorized to sell, negotiate or secure prospects for available businesses in return for consideration.
For example, Jacob Brown knows the owner of a restaurant in downtown Atlanta. The owner confides to Jake that she wants to sell her business. Luckily for the business owner, Jacob knows someone looking to buy an established restaurant. Jacob asks a real estate buddy to draw up the sales contract. Jacob asks for a commission since he was the procuring cause of the sale. However, Jacob doesn't have a real estate license in Georgia, so he isn't entitled to any commissions for the services of real estate.
Finally, we’ll discuss Rule 520-1-.13 regarding fair housing.
According to the Rule, licensees cannot discriminate against a prospective buyer or seller based on color, religion, sex, race, familial status, national origin or handicap. They also cannot insinuate that any person moving into a geographic area might lower property values or change the makeup of the neighborhood based on a protected status. Also, licensees cannot state that any individual in a protected status would cause an increase in criminal activity or drag down the quality of area schools.
For example, Rachel Roads is a sales agent in Savannah. She is showing homes to a Christian couple who inform her that they don't want to live in a neighborhood with Jewish residents. Rachel has to inform her clients that she cannot discriminate based on religion and will be unable to filter home searches to areas with a low percentage of Jewish residents.
It is important to note that no licensee can refuse the right to purchase, sell, lease or rent a property based on color, sex, national origin, race, religion, handicap, or familial status.
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