1.3 Michigan License Types and Broker Supervision

Michigan recognizes several types of real estate licenses with specific requirements and authorities.

License Types

Individual Licenses

Salesperson

A salesperson is licensed to perform real estate activities but must work under an employing broker. Salespersons cannot:

• Operate independently
• Receive compensation directly from the public
• Supervise other licensees
• Maintain their own trust accounts

Associate Broker

An associate broker holds a broker license but chooses to work under another broker. They have the same supervision requirements as salespersons while working in this capacity.

Broker

A broker can operate independently and supervise salespersons and associate brokers. In Michigan, the broker who supervises a brokerage is the employing broker.

Entity Licenses

Michigan allows various business entities to hold real estate licenses:

The designated broker is personally responsible for:

• Supervision of all licensees
• Trust account management
• Compliance with licensing laws
• All real estate activities of the entity

Employing Broker Responsibilities

The employing broker must:

1. Supervise all licensees affiliated with the brokerage
2. Maintain written policies for supervision and compliance
3. Handle trust funds in accordance with LARA rules
4. Review advertising and marketing materials
5. Retain records for required periods
6. Respond to LARA inquiries and investigations

Supervision Requirements

Adequate Supervision

Michigan law requires brokers to provide "adequate supervision" which includes:

• Regular review of transactions
• Training and guidance for licensees
• Oversight of advertising and communications
• Trust fund supervision
• Ensuring compliance with license law

Broker Liability

The employing broker is responsible for:

• Acts of affiliated licensees within scope of license
• Trust account compliance
• Proper supervision
• Advertising and marketing compliance

Key Point: The employing broker can be disciplined for the acts of affiliated licensees if those acts result from inadequate supervision.

Branch Offices

Brokers operating from multiple locations must:

1. Notify LARA of each branch office location
2. Maintain supervision at each location
3. Keep records accessible
4. Display license at each location

License Transfers

When a salesperson changes employing brokers:

1. Current broker releases the salesperson
2. New broker submits employment certification to LARA
3. Salesperson cannot practice during the gap
4. License remains valid but inactive until new employment is certified

Compensation Rules

In Michigan:

• Salespersons receive compensation only from their employing broker
• No direct payment from clients to salespersons
• Commission splits are negotiable between broker and salesperson
• Referral fees to licensed parties only (with disclosure)

Payment Between Brokers