Hamptons Real Estate Brokers Are Asking, “What’s in a Name?”

According to the New York State Department of State, the department that has jurisdiction over real estate licensees, the answer is the potential for fines, suspension, and revocation of licenses.

The issue has gained attention among the real estate community, mainly due to the new advertising guidelines issued by the DOS for real estate brokers effective January 2, 2014, in particular, the use of corporate titles, such as president, vice president, senior vice president, executive vice president, and managing director.

In an attempt to clarify this issue, on April 26, 2013, the Department of State, (DOS), issued an opinion which prohibits the use of such titles unless the individual is a corporate broker. The license law of the State of New York prohibits individuals licensed as associate brokers or salespersons from being officers in a brokerage corporation.

According to Alfred M. Fazio, Esq. this is not new. “This position has not changed over the years considering that Article 12-A and the Rules and Regulations governing real estate brokerage have always prohibited the use of titles in advertising. First and foremost, the Real Property Law section 440(2) indicates that an associate broker is considered exactly as a salesperson other than the fact that an associate broker and not a salesperson can manage a real estate office.”

Based on the statement issued by the DOS, New York State Association of Realtors Counsel S. Anthony Gatto, Esq. has taken the same position. “I am, therefore, of the opinion that brokerages may not provide corporate titles to agents for marketing or other purposes.”

Mr. Fazio: “In the past, when DOS issued violations on a substantive complaint issued by a consumer, we were successful in negotiating Consent Orders which removed any fine or violation because of the corporate title. Those days are now behind us. In each and every case being investigated by DOS, it is reviewing the advertising policies of the firm by accessing the firm’s website, email correspondence from the agents and business cards.”

To give the issue of violation of license law and regulations some context, a broker is charged with responsibility of supervising and training associate brokers and salespersons in their employ, whether that be as independent contractors or employees. If the license of a salesperson or associate broker is suspended or revoked, they may not conduct business or receive commissions. A suspension is for a fixed period of time, not more than one year. A revocation is for a period more than a year and may not apply for a license for at least one year from the date of revocation. If the broker’s license is suspended, all of the licenses of the associate brokers and salespersons are suspended. They must find a new supervising broker to continue to conduct business as a real estate agent. A real estate broker may also be held liable for the misconduct of the associate brokers and salespersons in their employ. A license law violation may also be judged a misdemeanor, prosecuted by New York’s Attorney General, punishable by a fine up to $1,000 and up to one year in jail.

Real Estate brokerage is a licensed profession. Those who are licensed have both fiduciary responsibilities and the duty of fair and honest dealing towards the public. Those who are unaware of these responsibilities or casual about their observance, run a serious risk, and subject themselves to disciplinary actions by the DOS and civil suits.