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Transferring Brokerages: Rules and Tools for Louisiana Real Estate Agents

Louisiana real estate agents considering a move to another real estate brokerage may find themselves intimidated by the process.  With potentially numerous listing agreements in place, deals under contract, ongoing relationships with buyers, and contractual obligations to a current broker, there is certainly a lot to consider.  But the logistics of a transfer—and the rules that govern—aren’t really as complicated as they may seem.  This article will walk Louisiana real estate agents through the process of transferring to a new real estate broker.

What happens to my listing agreements?

Under Louisiana law, a listing agreement must be between a client and a broker—not an individual agent.  In this regard, the Louisiana Real Estate Commission’s rules say:

Listings and other agreements for real estate brokerage services must be solicited under the name of the broker corporation or supervising broker. These agreements shall be signed by the broker or by a sponsored licensee acting under written authority of the sponsoring broker.

See LREC Rules and Regulations (“LREC Rules”), Ch. 18, §1801.  Technically, what this means is that the brokerage has all rights to listing contracts and can prevent an agent from taking a listing with her.

In practice, however, many brokerages do not want to enforce listing agreements with clients who want to work with their agent—not the brokerage he happened to be with when signing the listing agreement.  Reputable brokerages, therefore, ordinarily make it a policy that agents can “take their listings” with them if they decide to move to another Louisiana real estate brokerage.  Athena Real Estate’s policy, for example, is generally that agents can take their listings with them if they leave the brokerage.  (One exception is often for listings currently pending/under contract.  Brokerages generally won’t allow agents to take those with them, so most agents choose to “close out” any pending deals before making a move.)

What do I tell my clients?

Even the most inflexible brokerages are often reluctant to enforce a listing agreement with a client who has expressed the desire to “stick with” his agent.  Although clients are entitled to make such an assertion, agents must take care not to give a client advice on how to convince a brokerage to cancel a listing agreement.  The LREC rules say agents basically cannot “coach” a client on how to “get out” of a listing agreement:

It is unlawful for any person, licensed or unlicensed, to interfere with the contractual relationship between a licensee or registrant and a client by counseling a client or another licensee or registrant on how to terminate or amend an existing contractual relationship between a licensee or registrant and a client. . . .

See La. Rev. Stat. § 37:1447(C)(2017).

But this provision does not prevent an agent from announcing to clients the agent is moving to a new brokerage.  Indeed, it would be unprofessional for an agent to vanish without communicating a move to a new brokerage to a client.  Such communication crosses the line, however, when the agent suggests ways to convince the existing brokerage to cancel a listing agreement.

What if I’m under contract and what if I signed a non-compete?

Many brokerages require that agents sign contracts with a defined term, often one year.  Some of these contracts even include non-compete provisions that prevent an agent from working for any other brokerage in the area.

The enforceability—and application—of the period of time a contract requires an agent to stay with a particular brokerage will depend on the provisions of her contract.  Often, contracts allow agents to cancel early “for cause”—meaning that the broker did not do what it said it would, as stated in the contract.

Some contracts go a step further than a basic “term” and include non-compete provisions.  As such provisions are disfavored under Louisiana law, non-compete clauses in Louisiana brokerage contracts must strictly comply with certain statutory requirements.

First, the rules require that a non-compete provision in an agent’s contract be in bold faced letter of a font size of not less than 10-point type, and the provision must give the agent the right to “back out” within three days of signing the contract:

[A non-compete provision in a real estate agent’s contract] shall be unenforceable and an absolute nullity unless the licensee shall have the right to rescind the non-compete agreement until midnight of the third business day following the execution of the non-compete agreement or the delivery of the agreement to the licensee, whichever is later. In any agreement between the broker and licensee, which includes a non-compete agreement, the non-compete agreement shall be prominently displayed in bold-faced block lettering of not less than ten-point type.

See La. Rev. Stat. § 37:1448.1(A)(2017).

In addition, the general non-compete statute in Louisiana, La. Rev. Stat. § 23:921, applies to agreements between real estate salespersons and brokers just like all other contracts.  Under the statute, non-compete clauses are valid only if (1) the non-compete obligation is for a maximum of two years; (2) the provision specifies specific parishes in which the salesperson can’t compete, and (3) the broker who required the non-compete actually does business in the specified parishes.

If the non-compete agreement doesn’t comply with any of the foregoing, then it is completely unenforceable.  Even so, before assuming your broker won’t enforce a non-compete, it often makes sense just to ask.  Even if unwilling to allow an agent to entirely “walk” from a non-compete obligation, a broker may be willing to negotiate for an early departure on certain terms.

Logistics – what paperwork do I need to file to get my Louisiana real estate license transferred to a new broker?

The paperwork required to transfer a Louisiana salesperson’s license to a new brokerage is relatively basic.  An agent just needs to file two forms (both available on the LREC web site):

  • Termination of Sponsorship Form. This form must either be signed by the existing broker, or the agent must send the LREC a copy of proof that notice was sent to her existing broker by registered or certified mail.  In either case, the form must be returned to the LREC within five days of when it is signed.
  • Request to Transfer License to New Broker Form. This form must be signed by the agent AND the new broker.

In addition, there is a $35 fee for transferring to a new broker.  If you are considering making a transfer, ask your new broker if they will send you copies of the forms to sign electronically.  The broker might even pay the transfer fee for you.  Athena does.

Conclusion

For most, the prospect of change can cause unease.  But often a move away from a stale, stodgy operation to a fresh, enlivened one can be invigorating.  Of course, in the end, everyone’s situation is different, and only you can decide if—and when—a move is right for you.  It certainly takes courage to step out of your comfort zone, even if you know it will be for the best long-term.

At Athena, we understand how intimidating a move to a new broker can seem.  So we do everything we can to make the transition as smooth and seamless as possible.  Run by a pair of corporate attorneys, Athena provides helpful guidance on the paperwork and steps necessary to complete a transfer.  And each lateral agent is assigned a transition team to help with preparing new marketing materials, developing a marketing plan, making announcements to existing clients, photo shoots, and other steps necessary to hit the ground running.  Often, we may pay for the cost of replacement signs and materials, and for established agents we offer a sign-on bonus, in addition to the aggressive commission compensation structure we offer to all our agents.

Give us a call or send us an email if you want to learn more.  We’d love to talk with you.

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