New Jersey Administrative Code
Title 11 - INSURANCE
Chapter 5 - REAL ESTATE COMMISSION
Subchapter 4 - EMPLOYMENT PRACTICES/OFFICE AND LICENSEE SUPERVISION
Section 11:5-4.1 - Licensee business relationship agreements; commissions; accounting to salespersons and referral agents; actions for collection of compensation

Universal Citation: NJ Admin Code 11:5-4.1

Current through Register Vol. 56, No. 18, September 16, 2024

(a) Prior to a salesperson or referral agent engaging in any real estate brokerage activity, a broker and the salesperson or referral agent must enter into and sign a written agreement that contains the terms of their business relationship. Such agreement shall contain terms including, but not limited to, the following:

1. The rate of compensation to be paid to the salesperson or referral agent during his or her affiliation with the broker;

2. A promise by the broker to pay to the salesperson or referral agent his or her portion of commissions earned within 10 business days of their receipt by the broker or as soon thereafter as such funds have cleared the broker's bank, or in accordance with another payment schedule explicitly set forth in the written agreement;

3. The rate of compensation payable to the salesperson or referral agent on transactions which close and, if applicable, on renewals which occur subsequent to the termination of the salesperson's or referral agent's affiliation with the broker; and

4. A provision that any future changes to the agreement will not be binding unless the changes are contained in a writing signed by both parties.

(b) A copy of the fully executed agreement shall be provided to the salesperson or referral agent upon the commencement of his or her affiliation with the broker, and the original thereof shall be maintained by the broker as a business record in accordance with 11:5-5.5.

(c) All compensation paid to brokers shall, unless debited from funds held in escrow in accordance with 11:5-5.1(d), be deposited into the general business account of the broker within five business days of their receipt by the broker.

(d) If any monies due a salesperson or referral agent under the terms of the written agreement with their broker are not paid within 10 business days of the broker's receipt of such funds or promptly thereafter upon their having cleared the broker's account, the broker shall provide to the salesperson or referral agent a complete written explanation of the failure to pay such monies.

(e) Within 30 days of the termination of the affiliation of a salesperson or referral agent with a broker, the broker shall provide a complete written accounting of all monies due the salesperson or referral agent as of the date of termination and/or which may become due in the future. If any sums so accounted for are not in accord with the terms of the post-termination compensation clause in the written agreement between the broker and the salesperson or referral agent, the broker shall give a complete written explanation of any difference to the salesperson or referral agent with the accounting.

(f) A broker must maintain copies of the following documents and proof of delivery of the document to the salesperson or referral agent for six years: agreements as described in (a) above; explanations of the failure to pay compensation due a salesperson or referral agent on a timely basis as described in (d) above; and accountings and explanations regarding compensation due a salesperson or referral agent subsequent to the termination of their affiliation with a broker as described in (e) above.

(g) If the Commission confirms that a broker has complied with the requirements imposed by this section, the Commission will not further investigate a complaint alleging the non-payment of a commission by a broker to a salesperson or referral agent unless such complaint is accompanied by a copy of an arbitration decision or the equivalent, or a copy of a judgment of a court of competent jurisdiction secured by the salesperson or referral agent against the broker. Unless appealed, the failure by a broker to pay monies awarded to a salesperson or referral agent under the terms of any such decision or judgment within 30 days of its effective date shall subject the broker to sanctions pursuant to N.J.S.A. 45:15-17.

(h) Broker, salesperson and referral agent licensees may only bring or maintain actions in the courts of New Jersey for the payment of compensation due them for brokerage services performed as provided in 45:15-3.

1. The Commission interprets the language "at the time the alleged cause of action arose" as used in 45:15-3 to mean at the time that the brokerage services which form the basis for the alleged claim to compensation were rendered. For example, at the time when a property was listed for sale or rental by a licensee.

2. The Commission does not interpret the language "at the time the alleged cause or action arose" as requiring that the licensee must have been actively licensed at the time that the compensation allegedly due was to have been paid. For example, the Commission does not construe this language as requiring licensure at the time of the renewal of a lease to enable a claimant to sue for compensation based upon a promise, made or in effect when the lease was originally executed, to pay additional consideration to the claimant in the event that the lease was renewed.

(i) All references to "salesperson" in this section include individuals licensed as broker-salespersons. All references to "non-payment of a commission" in this section shall be construed to include the non-payment of other forms of compensation.

(j) The Commission interprets "employment agreement," "employ," and "employing broker" in N.J.S.A. 45:15-1 et seq., and this section to permit an employment relationship or an independent contractor relationship between a broker and a broker-salesperson, salesperson, or referral agent.

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