So what’s in a name? According to Juliet, in Act 2, Scene 2 of Romeo and Juliet, “That which we call a rose by any other name would smell as sweet.” In other words, “nothing.” “Au contraire,” states Gov. Ned Lamont of Connecticut who, short weeks ago, signed into law Public Act No. 21-167 entitled “An act concerning licensing requirements for real estate brokers, salespersons and teams.”
At its heart, the bill is designed to remove consumer confusion between what constitutes a real estate broker and a real estate team. Since most teams operate under a brokerage, and the broker has the responsible license, it is critical that both entities be clearly identified and delineated.
Thus, many states have laws designed to ensure that a consumer, when seeing a team’s advertising, are aware that they are dealing with two separate entities.
While a team, by definition, can be as small as two persons, ironically, it is not uncommon for a team to be the largest entity inside a given brokerage and to produce more transactions than the rest of the agents in the brokerage combined.
Additionally, large teams can easily generate substantially more business than the smaller brokerages that dot their region. At the heart of the issue is the disparity between how teams can operate versus how a brokerage does business, and ensuring that consumers understand the differences.
California, as an example, has a two-tiered agent/broker system, and real estate agents must operate under a licensed broker. As a result, many California teams are led by agents, not brokers, and must adhere to strict state guidelines delineating what they can be called and how they can advertise to ensure consumers understand that the team, in and of itself, does not have the responsible license.
While it’s completely understandable that agents in Connecticut are extremely frustrated at the impending rule changes, it is also important to look at things from the state’s perspective.
A quick survey of varying state’s rules governing teams reveals a quagmire of contradictory legislation. As an example, some states forbid teams from using the word, “Group.” Other states forbit the inclusion of any type of corporate identity, such as Inc, Corp, LLC, or LLP. Some insist that at least one team member’s full name be in the name. Advertising rules also vary from state to state.
While this may seem to be a non-issue for many teams, consider those operating in multiple states, many of which have contradictory regulations. Additionally, companies such as Keller Williams allow teams to have expansion groups located in market centers across the country.
In our case, we had to come up with a completely separate umbrella name to operate expansion teams in other states, along with a different logo.
What’s in a name? Evidently, when it comes to real estate teams, everything. With the goal of protecting consumers and bringing rules into alignment with other states, Connecticut’s rule changes are not only understandable, but may foreshadow things to come in other states as well, joining those states who have already had such rules in place for some time.
As teams continue to evolve and grow ever more pervasive in the real estate landscape, some commonality from state to state could be a welcome change.
Carl Medford is the CEO of The Medford Team.