Proposed requirements increasing a real estate brokerage's supervision of its agents is raising concerns in the industry. The Maryland Real Estate Commission is expected to vote on the proposals Wednesday.
Real estate agents are considered by law to be independent contractors and under minimal supervision of their brokerages.
Agents work for themselves. They aren't paid unless they transact business. They don't get reimbursed for their expenses, and they don't receive health and other benefits or paid vacations.
The traditional employer-employee relationship does not exist. Yet an agent's ability to do business only flows from the brokerage, which in most cases just gives a salesperson a desk and a phone.
And the only thing a brokerage is responsible for, according to current regulations, is to "exercise reasonable and adequate supervision over the activities of [their salespeople]."
But, after an almost year-long study by an ad hoc committee of commissioners and industry professionals, it has become apparent to the commission that change is needed.
"The supervision language as written is almost nonenforceable," said Elizabeth A. Beggs, executive director of the Maryland Real Estate Commission.
Although the final proposals are still being worked on, the commission in its latest drafts would require a brokerage to exercise closer supervision of its real estate agents.
Among other things, the proposals would require proof that agents attended sales meetings and that they discussed advertising language, contract provisions or listing terms with their supervisors.
The proposal also would require brokers to hold training and education sessions "on at least a bimonthly basis."
"They are looking for stronger, clearly defined language to enforce supervision. That is the most simple way of putting it," Beggs said.
"I can tell you from our perspective, we look at it as being a solution in search of a problem," said Bill Castelli, who handles legislative affairs for the Maryland Association of Realtors. "But the reality of it is that the last couple of years, the number of complaints filed against real estate agents fell as the transactions have increased."
According to statistics from the commission, 356 complaints against brokerages and agents were filed with the commission for fiscal year 1999, the lowest since 600 were received in 1994.
"There are people on the commission who have been concerned that in a couple of anecdotal cases, they [the commissioners] didn't have the authority they needed [to take action]," Castelli said.
However, Beggs said that even though the number of complaints has dropped, the reality is that most complaints still revolve around supervision.
"If the law or the regulations are weak in the language for enforcement, for an alleged violation, for the failure to supervise, then you really do need to look at how you can get stronger regulations to enforce," Beggs said.
But brokerages are wary of placing mandatory requirements on agents.
"The basic word on preserving independent contractor status is that the word 'control' does not exist in that relationship," said James P. O'Conor, chief executive officer of O'Conor, Piper & Flynn ERA.
"The way to preserve independent contractor relationships is that you must not 'control' your agents to the point that they must be at a sales meeting; they must do this, they must do that.
"I have almost 2,100 sales associates, and they are going to say that Jim O'Conor, you are responsible for every action of those 2,100 people? You do, to the best of your ability, tell [agents] what the rules and regulations are and this is what you have to do. Mistakes are going happen time to time, and all you can do is minimize those things."
Likewise, Patrick J. Kane, vice president of Coldwell Banker Grempler Realty Inc., said the Towson firm takes a number of steps to supervise its associates.
"I have my managers document when they are going to discuss certain issues lead paint, fair housing, unscrupulous lending practices," he said. "I have them send out advance notice to let people know that they are going to talk about this. It is just short of a mandatory meeting because it is an independent contractor relationship.
"But then we take roll and then we try to warn our sales associates that if there is a problem, you could be waiving your errors and omissions insurance if you decided that you weren't going to come to this very important briefing."
What concerns Castelli most is the fear that new language would make the brokerage liable for aspects of the business that are not part of the transaction.