Tennessee Real Estate Broker Exam — All Questions

A Tennessee affiliate broker closes a sale. Under Tenn. Code Ann. section 62-13-312(b)(11), the affiliate broker may accept the commission from:

• a.the seller directly, provided the closing attorney records the payment
• b.the cooperating firm that represented the buyer in the sale
• c.any licensee who took part in negotiating the transaction
• d.the licensed broker with whom the affiliate broker is affiliated✓

Tenn. Code Ann. section 62-13-312(b)(11) makes it a ground for discipline for an affiliate broker to accept a commission or any valuable consideration for the performance of any act specified in the chapter from any person except the licensed real estate broker with whom the licensee is affiliated. The money must therefore run from the closing to the firm and from the firm to the affiliate broker. Section 62-13-302(a) is the mirror image: it is unlawful for a licensed broker to employ or compensate a person who is not a licensed broker or affiliate broker, though a Tennessee broker may pay a cooperating broker licensed in another state if that nonresident conducts none of the negotiations in Tennessee. Rule 1260-02-.41(2) applies the same restriction to licensees advertising as a team.

Tenn. Comp. R. and Regs. 1260-02-.01 permits a Tennessee licensee to be engaged only by a principal broker who is:

• a.a member in good standing of a national real estate franchise or cooperative advertising network
• b.engaged primarily in the real estate business and accessible during normal daytime working hours✓
• c.licensed as a broker in Tennessee and in at least one adjoining state simultaneously
• d.a resident of the same Tennessee county in which the firm's registered office is located

Tenn. Comp. R. and Regs. 1260-02-.01(2) states that a licensee may be engaged only by a principal broker who is engaged primarily in the real estate business and accessible during normal daytime working hours. Paragraph (1) is the companion condition on the office itself: no licensee shall engage in any real estate activity in any office unless there is a principal broker devoted to the full time management of that office. Rule 1260-02-.38 shows what happens when that fails, giving a firm at most thirty days after the death, resignation, termination, or incapacity of its principal broker, extendable once so that a new principal broker is in place no later than the sixty-first day. Franchise membership, a license in another state, and county residency are not conditions of affiliation anywhere in the rules.

An affiliate broker at a Tennessee firm commits a violation of the license act. Reading Tenn. Code Ann. section 62-13-310(c) together with section 62-13-312(b)(15), the principal broker:

• a.is automatically suspended for the same period of time that the affiliate broker is suspended
• b.is liable to the Commission for treble the amount of commission earned on that transaction
• c.faces discipline only for the broker's own failure to exercise adequate supervision✓
• d.must surrender the firm license until the Commission has completely closed the matter

Tenn. Code Ann. section 62-13-310(c) provides that any unlawful act or violation of the chapter by an affiliate broker may not be cause for the suspension or revocation of the license of the broker with whom the affiliate broker is affiliated. Discipline in Tennessee is therefore not vicarious. What does reach the principal broker is the broker's own conduct: section 62-13-312(b)(15) makes it a ground for discipline to fail to exercise adequate supervision over the activities of any licensed affiliate broker. Tenn. Comp. R. and Regs. 1260-01-.16(2)(a) gives a concrete example, providing that a principal broker's failure to ensure that affiliated licensees carry errors and omissions insurance constitutes failing to exercise adequate supervision. Automatic parallel suspension, treble liability, and surrender of the firm license appear nowhere in the act.

A Tennessee firm's principal broker dies. The Commission must be notified within ten days, and under Tenn. Comp. R. and Regs. 1260-02-.38 the firm may be permitted to keep operating without a principal broker for an initial period not exceeding:

• a.thirty (30) days✓
• b.seven (7) days
• c.ninety (90) days
• d.one hundred eighty (180) days

Tenn. Comp. R. and Regs. 1260-02-.38(1) requires the Commission to be notified within ten days of the death, resignation, termination, or incapacity of a principal broker, and requires a plan addressing the continuation of operations to be submitted at the time of notification. Paragraph (2) allows the Commission, in its discretion and on the merits of each case, to permit the firm to continue operating without a principal broker for a period not to exceed thirty days from the date of that event. Paragraph (3) lets the executive director grant one thirty-day extension where the firm demonstrates compliance with its approved plan, so that a new principal broker must be in place no later than the sixty-first day. Paragraph (4) makes failure to comply grounds for a civil penalty or closure of the firm.

A Tennessee affiliate broker is released from a firm. Under Tenn. Comp. R. and Regs. 1260-02-.02, the licensee must complete the administrative measures for a change of affiliation or retirement within ten days of the release and:

• a.may not engage in any activity defined in section 62-13-102 until the transfer is processed✓
• b.may keep working for the former firm until the Commission processes the transfer
• c.may begin work at the new firm as soon as the principal broker has signed the release form
• d.may hold two active Tennessee licenses for as long as the transfer remains pending

Tenn. Comp. R. and Regs. 1260-02-.02(2) requires the licensee, within ten days after the date of release, to complete the required administrative measures for either change of affiliation or retirement, and provides that the licensee shall not engage in any activities defined in section 62-13-102 until a change of affiliation is received and processed by the Commission. Failure to comply may draw disciplinary action. Paragraph (1) ends the former principal broker's supervisory responsibility for the licensee's future acts upon the Commission's receipt of the release form or online submission, which is precisely why the licensee may not continue working for the old firm. Paragraph (3) treats an online transfer as complete only when the receiving principal broker has verified an active license and current errors and omissions coverage and the signed submission and payment are in. Section 62-13-309(e) bars holding more than one license at a time.

When a Tennessee licensee terminates affiliation with a firm, Tenn. Comp. R. and Regs. 1260-02-.02 permits the licensee to take or use property listings and buyer representation agreements secured through the firm:

• a.whenever the licensee personally procured each of those agreements
• b.only if the principal broker specifically authorizes it in writing✓
• c.whenever the client signs a statement asking to move with the licensee
• d.only after the Commission has processed the change of affiliation form

Tenn. Comp. R. and Regs. 1260-02-.02(4) provides that when a licensee terminates affiliation with a firm, the licensee shall neither take nor use any property listings or buyer representation agreements secured through the firm unless specifically authorized by the principal broker in writing. The listing is a contract between the client and the firm, not between the client and the individual licensee, which is why the licensee's own effort in procuring it does not change the answer and why the client cannot unilaterally reassign it. Paragraph (5) obliges the principal broker to grant a demanded release promptly, and rule 1260-02-.39 confirms that commissions already earned under the principal broker remain payable after a transfer, retirement, broker release, expiration, or the licensee's death.