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Last month, lawmakers in Connecticut passed a new law that will significantly regulate how teams can operate. The biggest news is that the law will limit what teams can call themselves, potentially forcing teams up and down the state to rebrand. However, the law also has various other components, such as the requirement for teams to register with the state.
Connecticut is a small state, and in the grand scheme, the law will impact only a small percentage of the total number of teams in the U.S. But the episode also represents a standout chapter in a story about growing regulation for teams all across the country. Indeed, this isn’t the first time regulators have put real estate teams in their crosshairs, and it surely won’t be the last.
To get a sense of what team regulations already exist, here is some of the previous reporting we’ve done here at Inman:
This 2016 South Carolina law included a variety of regulations about advertising, management and team names — the most notable of which was that teams could no longer use the terms “realty,” “real estate,” “realtors,” or similar terms.
The rule emerged out of concerns that consumers were being misled into thinking teams were actually brokerages. At the time, Nick Kremydas — the CEO of South Carolina Realtors — cited complaints about teams and ultimately described the rule as a compromise. Despite that framing, however, brokers such as Stephen Cooley argued at the time that the rules would ultimately force teams to undertake costly rebranding efforts.
Like the 2016 law in South Carolina, this 2017 episode in California revolved around concerns about consumers mistakenly thinking that teams are brokerages. Unlike the South Carolina case, however, the California situation didn’t involve a new law but rather an alert from state regulators letting agents know that if they mislead consumers they could face fines, license revocations and even criminal prosecution.
The alert specifically warned against using terms such as “real estate” — as in and agent named John Doe running a team called “Doe Real Estate” — that might give the impression the team is a brokerage.
The 2017 warning was the second such alert regulators in the Golden State issued, with the first coming in 2015.
In the fall of 2018, the National Association of Realtors (NAR) noted that more than a quarter of U.S. Realtors were members of teams. The trade group also found that teams were growing in popularity and, as a result, were likely to attract the attention of government regulators in the future.
At the time, NAR found that 24 states already had teams-focused rules on the books. Though those rules tended to be “relatively minimal,” according to NAR, the growth of teams could ultimately end up spurring more extensive regulation down the road.
In July, Connecticut Gov. Ned Lamont signed a law requiring teams to pay an annual registration fee, and to follow strict rules regarding how they brand themselves. The law lets teams use the word “team,” but bars them from including “group,” “company,” “LLC” or anything else “that implies that the team is a business entity,” according to the text of the new law.
The rules are among the more draconian regulations regarding teams and could theoretically force the majority of teams in Connecticut to quickly rebrand before January when the rules kick in. In response, team leaders in the state have sharply criticized the law and in some cases threatened a class action lawsuit.