What the New Broker Succession Rule Means

During the August TREC Meeting, the Commission adopted new rule 535.124, Death of a Designated Broker, to detail agency practice and provide better guidance in the event the designated broker of a licensed business entity dies.

Under TREC rules, the death of a sponsoring or designated broker will cause any sponsored sales agent's license to become inactive, meaning the sales agent cannot perform any real estate services that require a license-even if the agent is in the middle of a transaction. This is true regardless of whether the agents are sponsored by an individual broker or a business entity broker.

The new rule gives business entities and sponsored sales agents 14 days from the broker's death before their licenses go inactive, so they have time to designate a new broker that satisfies the requirements without having to go inactive and disrupting business.

Scenario 1: Death of an Individual Broker Who Sponsors Sales Agents

If a sales agent is sponsored by an individual broker (and not the designated broker for a business entity), the sponsored sales agent's license will become inactive. Importantly, the agent can quickly utilize TREC's Online Relationship Management Tool and request a new broker, typically without any delay.

Scenario 2: Death of a Designated Broker (TREC Rule 535.124)

For a business entity to obtain a broker's license, the entity must name a designated broker that satisfies certain requirements. According to The Real Estate License Act (TRELA) and TREC rules, a designated broker must hold an active broker's license in good standing and have managing authority for the business entity (think a corporate officer, an LLC manager, an LLC member with managing authority, or a general partner).

Similarly, when a designated broker for a business entity dies, the business entity license becomes inactive, as does any sponsored sales agent's license. However, because the business entity still exists (and possibly representation agreements as well), then in most cases, the sponsored sales agent is not going to want to find a new broker. The entity simply needs to designate a new broker with TREC and the sponsored sales agents can resume business. Still, as outlined above, this new designated broker can't just be anyone: TREC has to verify that the new broker is in good standing and has managing authority for the entity. And if this new broker doesn't have this authority already, it can take time to get it. This is where TREC Rule 535.124 comes into play.

The new rule is effective September 11, 2024.