In this News:

• Dealing with the NAR Settlement Agreement
• The MREC's New Online Licensing System
• Record Retention

Dealing with the National Association of REALTORS^® Settlement Agreement

Many things have changed in the world of the real estate business over the past couple of years.  Not the least among them are huge settlement agreements entered into between the National Association of REALTORS^® (NAR) and several of their co-defendants as a result of class-action civil suits that were filed in federal court and which, in October 2023, the plaintiffs won with a jury award of $1.8 billion against the big franchisors and NAR.

Even though they are not subject to the court's decision or the settlement agreements, MAREP members have been reporting challenges in their practices.  So, here the key points of the settlement agreement so you can decide what your business should do.  We also have updated some of our forms and added a few new ones that contain language that will accommodate REALTORS^® and others with which you might need to cooperate.

1. The New Requirements are NOT the Result of a New Law!  Many licensees are telling their buyers that there is a new "law" that requires them to sign a buyer agency agreement before they can show them any properties.  THIS IS NOT TRUE.  The changes are the result of a settlement agreement signed by the defendants and approved by the Court in a major class-action lawsuit.  MAREP members ARE NOT subject to the court's judgment or the settlement agreement unless they were members of the NAR or any of the franchises that were defendants in the lawsuits during the time period from about 2015 to October 2023.
2. Offers of Cooperative Compensation can No Longer be Made through the Multiple Listing Service (MLS).  The plaintiff sellers in the lawsuits claimed that REALTORS^® were forcing their members to offer to pay a 3% cooperative commission to buyers' agents who procured the buyers for properties that were marketed through the MLS, and that the sellers could have paid much lower commissions if the listing brokers were not obligated to share their compensation with buyers' agents.  The jury agreed.  So, in the settlement agreement, the defendants agreed not to offer cooperative compensation through the MLS.  Offers of cooperation may still be made using the MLS, but, if there is to be any cooperative compensation, it must be agreed to in a separate agreement between the listing broker and cooperating broker.  MAREP members were already doing this, so it should present no problem for them.
3. Required Buyer Agreements.  MLS participants that are working with buyers must enter into written agreements with the buyers before touring a home.  The agreements must state that the compensation paid to the brokers is a negotiated amount and not set by law and that the buyer will never be required to pay more compensation to the broker than the amount shown in the agreement.  Some important points to remember about this requirement are:
   1. the agreement need not be a buyer agency agreement.
   2. sellers' agents and subagents are not required to have the buyers sign an agreement.
   3. Sections 339.710 through 339.855 of Missouri's real estate License Law make it clear that Missouri licensees ARE NOT presumed to be sellers' or buyers' agents unless they have a signed agency agreement with the party they represent.  Transaction brokers who expect to receive compensation from the party they are assisting are required to have a signed transaction brokerage agreement with that party.  So, nothing has really changed with regard to having a signed agreement with the party that is paying you.
4. The Court's Judgment and Resulting Settlement Agreements DO NOT Apply to MAREP members who were not members of NAR or one of the franchises that were defendants in the lawsuits between 2015 and 2023.  For this reason, most MAREP members are NOT covered by the lawsuits or any resulting settlement agreement.
5. There are still some defendants that have appealed the results of the original lawsuit and many expect that the case will be overturned in that appeal.
6. MAREP members who are concerned that the lawsuits and resulting settlement agreements might affect them should seek their own legal counsel.

The MREC has a New Online Licensing System!

MOPRO, Missouri's Division of Professional Registration's online system is now up and running.  All Missouri real estate licensees should access the system and set up their accounts so that they can monitor their license status, change their licenses (transfers and changing license types), apply for new licenses, renew licenses, pull up and print out or save copies of their licenses, complaint filing and monitoring and more through their accounts.  To access the system, go to:  https://mopro.mo.gov/license/s/ and click on the "Register" button in the upper right side of the screen.

Confused About How Long You Should Keep Copies of Files, Books and Records?

In July 2018, the MREC published a Newsletter that contained the answers for you.  The following is a copy of that article:

Record Retention; What Must be Kept and for How Long?
(By Burgandy Nelson, Examiner)

Retaining complete and accurate files of all real estate activities is a requirement for all brokers and brokerages. However, no one wants boxes of useless paperwork cluttering their office space. What documentation must be kept and how long must it be retained to stay compliant with Missouri Real Estate Commission regulations?

According to 20 CSR 2250‐8.160 (1) Every broker shall retain for a period of at least three years true copies of all business books; accounts, including voided checks, records; contracts; brokerage relationship agreements; closing statements and correspondence relating to each real estate transaction that the broker has handled.

20 CSR 2250‐8.160 (2) also states……..Retain for a period of three years true copies of all property management agreements, correspondence or other written authorization relating to each real estate transaction relating to leases, rentals or management activities…….

So, what does that mean? For a minimum of three years, the broker must retain the following real estate records:

General office records – All real estate brokers/brokerages must retain these records:

• Brokerage office policy
• Correspondence relating to real estate transactions – faxes, emails, letters, etc.
• Copy of commission and referral checks/check stubs issued from the broker/brokerage
• Broker Disclosure Form used

Relating to Sales Activities:

• Contracts – including all addenda, amendments, counters, legal descriptions, etc.
• Brokerage relationship agreements ‐ listing agreements and buyer/tenant agency agreements – including all amendments
• Closing statements for both sides of the transaction
• Mutual releases on down transactions
• Receipts for earnest money and/or a copy of the earnest money check(s)

Relating to Property Management Activities:

• Property management agreements
• Disclosures to tenants
• Vendor invoices/receipts for bills paid for properties managed
• Owner/financial statements for properties managed
• Copies of receipts for cash received by the brokerage

Relating to Escrow Accounts:

• Account Records
  • Bank statements
  • Cancelled or imaged checks and deposits
  • Deposit receipts
  • Voided checks
• Business Books
  • Bank reconciliations
  • Liability records
  • Check register and deposit records
  • Cash receipts and deposits ledgers
  • Check stubs
• Any other necessary documents so that the adequacy of the escrow account may be determined at any time (339.105.3 RSMo.).

Records must be retained for at least three years from the date of transaction completion. For a sales transaction, this typically means from the date of closing or mutual release date. On a disputed transaction, this means three years from the last anticipated closing date; or, if the broker holds the earnest money, 3 years after the funds are disbursed to the State Treasurer’s office or to the contract party, per court order. For property managers, this means the date of termination of the lease or management agreement, which could greatly extend the records retention period.
Records may be kept in paper or electronic format, however all records must be made available for inspection by the Commission at all times during regular business hours at the broker’s regular place of business. Missouri, unlike other states, does not have any specific file organization or transaction numbering requirements. Please remember that brokers cannot charge a fee for retaining records.

HINT: If MREC staff should request a transaction file from you, in addition to the contract, addenda, amendments, earnest money receipt and closings statements, be sure to include all corresponding brokerage service agreements (listing, buyer agency, etc.), as well as copies of checks or check stubs for any referral fees or commissions paid by the brokerage.

Agents and property managers are required to give, immediately, all money and transaction documents to the supervising broker. Agents may maintain copies for their own files.

Property management records may be released to the owner(s) or transferred to another broker. The transferring broker must obtain a written detailed receipt or transmittal letter signed by all parties to the transaction (original broker, owner (s), and [if applicable] the broker receiving the records). The receipt or transmittal letter should detail all records that were released and to whom.

Confidentiality requirements do not end at the completion of the transaction. This is especially important to note in offices where designated agency is practiced. Designated agency requires that the broker and agents designated to represent their client are the only agents that have access to the transaction file. To avoid breaches of confidentiality, always ensure that the proper protections are maintained to ensure confidentiality in designated agency transactions.

If a brokerage closes or has its’ license revoked, records must still be stored for a minimum of three years. If a broker or brokerage’s license is suspended, records must be stored for the duration of the suspension.

Remember these are the MREC’s requirements for retaining records. Other agencies (IRS, DOR, etc.) may have different expectations for the length of time to retain financial or other records.

HINT: Checklists are a great way to ensure that files are complete and not missing any necessary items.

RULE: 20 CSR 2250‐8.160 (1) “…Every broker shall retain for a period of at least three years true copies of all business books; accounts, including voided checks, records; contracts; brokerage relationship agreements; closing statements and correspondence relating to each real estate transaction that the broker has handled…”

RULE: 20 CSR 2250‐8.160 (2) …also states…….. "Retain for a period of three years true copies of all property management agreements, correspondence or other written authorization relating to each real estate transaction relating to leases, rentals or management activities…”

MAREP

Phone: (417) 505-8019 • E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.