ARC 8856C

ARC 8856C

Proposing rulemaking related to brokerage agreements and listings
and providing an opportunity for public comment

A Regulatory Analysis for this rulemaking was published in the Iowa Administrative Bulletin on November 13, 2024. A public hearing was held on the following date(s):

●December 5, 2024

Any persons who intend to attend the public hearing and have special requirements, such as those related to hearing or mobility impairments, should contact the Commission and advise of specific needs.

ITEM 1.Amend rule 193E—11.1(543B) as follows:

193E—11.1(543B) Listing brokerageBrokerage agreements. All listingbrokerage agreements arewill be in writing, properly identifying the property and containing all of the terms and conditions under which the property is to be sold, including the price, the commissionamount of compensation to be paidwith disclosure that states compensation is negotiable and not set by law, the signatures of all parties concerned and a definite expiration datenot to exceed one calendar year in length from the effective date, for properties with at least one but not more than four dwelling units. The agreement contains no provision requiring a party signing the listing to notify the broker of the listing party’s intention to cancel the listing after such definite expiration date. An exclusive agencybrokerage agreement or exclusive right to sell listingagreement clearly indicates that it is such an agreement. A legible copy of every written listingbrokerage agreement or other written authorization is given to the owner of the propertyclient by a licensee as soon as the signature of the ownerclient is obtained.

1.A listing agreement should properly identify the property and contain the terms and conditions under which the property is to be sold, including but not limited to the list price and any compensation to be earned from the sale of the property.

2.A buyer representation agreement is required for all properties. Open houses or auctions are exempt from usage of a buyer representation agreement.

11.1(1) A licensee cannot solicit or enter into a listing or brokerage agreement with an ownera buyer or seller if the licensee knows or has reason to know that the ownerbuyer or seller has a written unexpired exclusive agencybrokerage agreement or exclusive right to sell listing agreement to the property with another broker, unless the ownerbuyer or seller initiates the discussion and the licensee has not directly or indirectly solicited the listing or brokerage agreement.

a.However, if the ownerbuyer or seller initiates the discussion, the licensee may negotiate and enter into a listing or brokerage agreement that will take effect after the expiration of the current listingbrokerage agreement.

b.If the ownerbuyer or seller initiates the discussion, the licensee may inform the ownerbuyer or seller that the ownerbuyer or seller needs to allow the current listingbrokerage agreement to expire or obtain a mutually acceptable cancellation from the listing broker before any further discussion can take place.

11.1(2) A real estate licensee cannot negotiate a sale, exchange, or lease of real property directly with an ownera seller if it is known that the ownerseller has a written unexpired contract in connection with the property whichthat grants an exclusive right to sell to another broker, or which grants an exclusive agency to another broker.

11.1(3) A real estate licensee cannot negotiate a sale, purchase, exchange, or lease of real property directly with a buyer or seller if it is known that the buyer or seller has a written unexpired exclusive brokerage agreement with another broker.

11.1(3) 11.1(4) A listing agreement cannot be assigned, sold, or otherwise transferred to another broker without the express written consent of all parties to the original agreement.All brokerage agreements are written and cannot be assigned, sold, or otherwise transferred to another broker without the express written consent of all parties to the original agreement unless the terms of the agreement state otherwise. Upon termination of association or employment with the principal broker, the affiliated broker associate or salesperson cannot solicit, take, or use any written brokerage agreements secured during the association or employment. Said brokerage agreements remain the property of the principal broker and may be canceled only by the broker and the client.

11.1(4) 11.1(5) Net listing barred. No licensee makes or enters into a net listing agreement for the sale of real property or any interest in real property. A net listing agreement is an agreement that specifies a net sale price to be received by the owner with the excess over that price to be received by the broker as commissioncompensation. The taking of a net listing is unprofessional conduct and constitutes a violation of Iowa Code sections 543B.29(3) and 543B.34(8).

ITEM 2.Rescind rule 193E—11.2(543B).

ITEM 3.Renumber rules 193E—11.3(543B) to 193E—11.5(543B) as 193E—11.2(543B) to 193E—11.4(543B).

ITEM 4.Amend renumbered rule 193E—11.2(543B) as follows:

193E—11.2(543B) Brokerage agreementsCooperation, compensation, and compliance. All brokerage agreements are written and cannot be assigned, sold, or otherwise transferred to another broker without the express written consent of all parties to the original agreement, unless the terms of the agreement state otherwise. Upon termination of association or employment with the principal broker, the affiliated broker associate or salesperson cannot take or use any written brokerage agreements secured during the association or employment. Said brokerage agreements remain the property of the principal broker and may be canceled only by the broker and the client.

11.2(1) Every written brokerage agreement includes, at a minimum, the criteria set forth in Iowa Code section 543B.57543B.56A and the following provisions:

a.All brokerageBrokerage agreementswill contain a statement disclosing the brokerage policy on cooperating with and compensating other brokerages or the other parties’ agent in the sale, lease, rental, or purchase of real estate, including whether the brokerage intends to sharesplit the compensation with other brokerages and any other method for negotiating compensation for another party’s broker. Such disclosure serves to inform the client of any policy that would limit the participation of any other brokerage; and

b.All listing contracts and all brokerage agency contractsagreements comply with Iowa real estate law and commission rules, including, but not limited to, rules 193E—11.1(543B) and 193E—11.43(543B) and 193E—Chapter 15.

11.2(2) No licensee makes or enters into a brokerage agreement that specifies a net sale, lease, rental, or exchange price to be received by an owner and the excess to be received by the licensee as a commission.

11.2(3) The taking of a net brokerage agreement is unprofessional conduct and a practice that is harmful or detrimental to the public and constitutes a violation of Iowa Code sections 543B.29(3) and 543B.34(8).

11.2(4) 11.2(2) Duration of relationship. The relationships commence at the time of the brokerage agreement and continue until closing of the transaction or performance or completion of the agreement by which the broker was engaged within the term of the agreementand not exceeding 12 months. If the transaction does not close, or the agreement for which the broker was engaged is not performed or completed for any reason, the relationship ends at the earlier of the following:

a.AnyThe date of expiration agreed upon by the parties; or

b.Any termination by written agreement of the parties.

11.2(5) 11.2(3) Obligation terminated. In addition to any continuing duty or obligation provided in the written agreement or pursuant to Iowa law and commission rules, a broker or brokerage engaged as a seller’s or landlord’s agent, buyer’s or tenant’s agent, subagent, or dual agent and affiliated licensees have the duty after termination, expiration, completion, or performance of the brokerage agreement to:

a.  and b. No change.

11.2(6) 11.2(4) Compensation. In any real estate transaction, the broker’s compensation may be paid by the seller, the buyer, the landlord, the tenant, a third party, or the sharing or splitting of a commission or compensation between brokers.

a. No change.

b.Written permission of the client is needed as follows:

(1)A seller’s or landlord’s agent may share the commission or othersplit compensation paid by such seller or landlord with another broker, with the written consent of the seller or landlord.

(2)A buyer’s or tenant’s agent may share the commission or othersplit compensation paid by such buyer or tenant with another broker, with the written consent of the buyer or tenant.

(3)Without the written approval of the client, a seller’s or landlord’s agent cannot propose to the buyer’s or tenant’s agent that such seller’s or landlord’s agent may be compensated by sharingsplitting compensation paid by such buyer or tenant.

(4)Without the written approval of the client, a buyer’s or tenant’s agent cannot propose to the seller’s or landlord’s agent that such buyer’s or tenant’s agent may be compensated by sharingsplitting compensation paid by such seller or landlord.

c. No change.

d.A licensee cannot accept, receive or charge an undisclosed commissioncompensation for a transaction.

e.A licensee cannot give or pay an undisclosed commissioncompensation to any other licensee for a transaction, except payment for referrals to other licensees, including franchise affiliates, to provide real estate brokerage services, if there is no direct or beneficial ownership interest of more than 1 percent in the business entity providing the service.

f. No change.

g.A licensee cannot give any undisclosed credit against commissioncompensation due from a client or licensee to any party to a transaction.

h.A licensee cannot accept, receive or charge any undisclosed payments for any services provided by any third party to any party to a transaction including, but not limited to, payments for procuring insurance or for conducting a property inspection related to the transaction.

i.  to k. No change.

11.2(7) Solicitation of brokerage agreements. A licensee cannot advise, counsel, or solicit a brokerage agreement from a seller or buyer, or landlord or tenant, if the licensee knows, or acting in a reasonable manner should have known, that the seller or buyer, or landlord or tenant, has contracted with another broker for the same brokerage services on an exclusive basis.

a. This rule does not preclude a broker from entering into a brokerage agreement with a seller or buyer, or landlord or tenant, when the initial contact is initiated by the seller or buyer, or landlord or tenant, and the licensee has not directly or indirectly solicited the discussion, provided the brokerage agreement does not become effective until the expiration or release of the current brokerage agreement.

b. A brokerage agreement cannot be assigned, sold, or otherwise transferred to another broker without the express written consent of all parties to the original agreement.

11.2(8) 11.2(5) Any commissioncompensation or fee in any brokerage agreement is fully negotiable among the parties to that brokerage agreement. Once the parties to a brokerage agreement have agreed to a commissioncompensation or fee, no licensee other than a party to that brokerage agreement attempts to alter, modify, or change or induce another person to alter, modify, or change a commissioncompensation or fee that has previously been agreed upon without the prior written consent of the parties to that brokerage agreement.

11.2(9) 11.2(6) The seller or landlord may, in the brokerage agreement, authorize the seller’s or landlord’s broker to disburse part of the broker’s compensation to other brokers, including a buyer’s or tenant’s broker solely representing the buyer or tenant.

11.2(10) 11.2(7) Nothing contained in this rule shall obligate any buyer or tenant or seller or landlord to pay compensation to a licensee representing the buyer or tenant or seller or landlord in a real estate transaction unless the buyer or tenant or seller or landlord has entered into a written brokerage agreement with the broker specifying the compensation terms and conditions, in accordance with Iowa real estate license law and commission rules.

ITEM 5.Amend renumbered rule 193E—11.3(543B) as follows:

193E—11.3(543B) Terms or conditions. A licensee cannot write, prepare or otherwise use a contract containing terms or conditions that would violate real estate laws in Iowa Code chapter 543B or commission rules.The broker is responsible to ensure that all preprinted documents and forms used are in compliance with these rules.

The broker is responsible to ensure that all preprinted documents and forms used are in compliance with these rules.

ITEM 6.Adopt the following new rule 193E—11.5(543B):

193E—11.5(543B) Enforcing a protective clause. To enforce a protective clause beyond the expiration of an exclusive brokerage agreement, there must be a provision for the protective clause in the brokerage agreement that establishes a definite protection period. In writing and prior to the expiration of the brokerage agreement, the broker furnishes to the party the names and available contact information of persons to whom the property was presented or a list of each property that was shown during the active term of the brokerage agreement and for whom protection is sought. Delivery is by personal or electronic service with written acknowledgment of receipt, or by regular mail or certified mail postmarked prior to the expiration of the brokerage agreement, return receipt requested.

ITEM 7.Amend subrules 11.6(1) and 11.6(2) as follows:

11.6(1) A licensee cannot pay a commissioncompensation, any part of a commissioncompensation, or valuable consideration to an unlicensed third party for performing brokerage functions or engaging in any activity that needs a real estate license. Referral fees or finder’s fees paid to unlicensed third parties for performing brokerage activities, or engaging in any activity that needs a real estate license, are barred.

11.6(2) In a brokerage agreement, the broker is principal party to the contract. The broker may, with proper disclosure, pay a portion of the commissioncompensation earned to an unlicensed seller, landlord, buyer, or tenant that is a principal party to the brokerage agreement. This will be deemed a reduction in the amount of the earned commissioncompensation.