(In Memoriam) Understanding Designated Brokerage: Notes from the Field


August 9, 2014

After a distinguished career with the U.S. Air Force, Rick Madden began a new career in real estate where he worked in sales and as a broker, then as a trainer before moving to the Division of Real Estate. In his role at the Division Mr. Madden led the industry into the new era of online education. He worked closely with ARELLO, CAR and VanEd to help gain approval for the (then) new 168-hour pre-licensing courses. After retiring from the Commission he became a Senior Instructor with VanEd, even instructing for a year from Germany. In August of 2007 Rick was again an industry leader accepting an appointment to the first Education Task Force appointed by the Colorado Real Estate Commission. After retiring he spent time with friends and family and volunteering with his favorite charities, including Habitat for Humanity. 

On August 8, 2014 Rick Madden passed away peacefully. All of us at VanEd, and in fact all who knew Rick, have been enriched by working with and knowing him. We send our support and share in the sorrow of his passing. In honor of his time with us and his unassailable contribution to the real estate industry we are re-posting one of his posts written during his time with us here at VanEd.

God Speed, Sir. You will be missed.

 

A Policy Manual Prescription – or Why Are We Doing This?

One of the common misconceptions surrounding designated brokerage in Colorado - now years after its inception - is that a designated broker is a form of brokerage relationship. And, to compound the misunderstanding, the statue requires employing brokers to designate in writing a broker to serve a buyer/seller/tenant/landlord.

Designated brokerage is NOT a brokerage relationship. There are only two of those in Colorado - agency and transaction brokerage. A different statute requires a written office policy delineating the broker's choice(s) - a topic for another article. Designated Brokerage was formed to sever the brokerage relationship in multi-person brokerages from the firm, the employing broker and any employed associate brokers within the firm - period. Designated brokerage should not be uttered in the same breath with - nor written in the same office policy statement as - the type of brokerage relationships.

So in Colorado we have a statutory make-work requirement. 1)...must appoint a designated broker in writing.  2) Oops,that's to much paperwork so the commission wrote a rule (E-38) enabling an employing broker to write an office policy that says one or more of 7 different things.

The result is that office policies are written which copy the verbatim the verbose Rule E-38, with no thought as to applicability within the office. So, why are we doing all of this anyhow? Property restructured, the statue could simply decree what designated brokerage is AND indicate the signs of its implementation.

Since it does not, however, here is a suggested, condensed office policy that could apply in any office policy manual and perhaps save several trees along the way. In fact it might even serve as a template for a revised Rule E-38...

Broker Designation Policy

          "In this firm, a broker who signs any commission-approved employment (listing) contract, or "Brokerage Disclosure to Buyer" form, is automatically designated to serve that client in a brokerage relationship that does not extend to he firm or any other licensee. [If the broker signs as a member of a recognized team within the firm, then both the designation and the brokerage relationship extend to all members of the team.**] The employing broker has the right and duty to insure unbroken continuity of that designation by notifying the client in writing of additional or replacement designated brokers as necessary." (Reference C.R.S. 12-61-803(6)(a) and Commission Rule E-38)

** this statement should be included only if a separate policy in the manual permits and details the process for formation and approval of teams.

Next time, let's look at what's really happening with the choice of brokerage relationships. In the meantime, let's keep it real, and simple.

 

Guest Author and Senior Instructor Rick MaddenRick_madden is a former DRE staff member and school administrator. He was an educator, reviewer and trainer for various entities including VanEd.

Mr. Madden's experience, compassion and humor will be missed by all who knew him. 

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