Does your real estate broker have a licence?

Buying or selling a house is the largest transaction most people ever make, and it almost always goes through a broker. This 1994 Act is what says what you can demand of them. Three things you can check the same day: the licence must be displayed at their office, their advertisements must carry their name and licence number, and there is a public registry on the Department of State’s portal showing — besides their details — the record of any complaints finally adjudicated against them. And two things that protect your money: your deposit goes into a separate escrow account, and every licensee posts a bond you can claim against directly.

This guide is written for whoever hires, not for whoever gets licensed, so what matters most is knowing when the Act applies and when it does not. Article 36 is broad: any person or entity that, directly or indirectly for another and with the intention or promise of receiving compensation, offers, attempts or agrees to carry out a real-estate transaction shall be considered a broker, salesperson or firm. But Article 33 lists five exceptions: lawyers in their professional relations with their clients; attorneys-in-fact regarding their principals’ property; executors, accounting-partitioners and judicial administrators over estate assets; those acting by designation of the courts or federal or state agencies; and owners selling their own real property “when not habitually engaged in the sale of real estate.” That last one explains why the neighbour selling their own house needs no licence.

Information pending verification.

Information pending verification.

1. 1

   Step 1: The public registry, and what it carries that almost nobody looks at

   It is the most useful tool in the whole Act and it is written into Article 9(d). The Board must keep an updated professional registry of every licence it issues, “public and available on the Department of State’s web portal,” with the name, licence number, date obtained, years in practice, postal address, email and telephone. And with this: “Detail of any complaints finally and firmly adjudicated against the broker, salesperson or real-estate firm, including the date, a brief summary of the grounds that gave rise to it, the outcome of the proceedings, and a description of any disciplinary action taken by the Board, if any.” Further, the court and DACO must send the Board a copy of every final and firm decision so it publishes the full text. The Act gives no internet address and we do not guess government addresses: look for it on the Department of State’s portal.

2. 2

   Step 2: The two blacklists the Board must publish

   That same Article 9(d) orders two further publications that are worth gold before signing anything. The first: the Board “must also make available to the general public, continuously and up to date, a list with the names of those natural and/or juridical persons the Board knows or has come to know are performing broker, salesperson or real-estate firm functions without the required licence.” And it adds that when the Board so determines it “must request the intervention of the Department of Justice.” The second: a list, also continuous and updated, “with the names of those brokers, salespersons or real-estate firms whose licences are or are declared inactive.”

3. 3

   Step 3: What you can check at the office and in the advert

   Two checks that need no phone call. Article 18 closes by saying the licence “must be displayed to the public at the Broker’s, Salesperson’s or Real Estate Firm’s place of work,” and Article 31(12) makes it a proscribed practice “Not to display to the public at their place of work the licence issued by the Board.” The second sits in Article 31(6), which proscribes “Using in any advertisement or promotional medium only a telephone number and/or address, without indicating the name of the broker or firm concerned, as well as their licence number to operate.” An advert with just a mobile number and a photo of the house breaches that provision.

4. 4

   Step 4: Where your deposit has to be

   Not in the business account nor the broker’s personal one. Article 21(a): the broker or firm “shall keep an account (designated ‘Special Account’) at a bank established in the Commonwealth of Puerto Rico, which shall be kept separate from the business’s operating account or their personal account, and into which they shall deposit all down payments, good-faith deposits or other trust deposits received by them, their associates, their salespeople or their employees from any buyer or entity, until the transaction for which they were deposited is completed or ends, and they must account for them when the transaction is completed or ends.” Subsection (b) requires filing with DACO, within thirty days of receiving the licence, a bank certification with name, address, telephone and account number, keeping a file of all funds, and — worth knowing — filing “a written authorisation empowering the Department of Consumer Affairs to review the escrow account.” Article 31(4) proscribes commingling your funds with their own, and 31(19) using them for their own benefit without written authorisation.

5. 5

   Step 5: If the financing falls through, the deposit is yours

   It is the provision most needed and it sits in Article 31(11). It proscribes “Retaining any deposit when the transaction or arrangement for which that deposit was made does not take place without fault of the buyer.” And it defines both sides. There is no fault “where the financial institution denies the buyer financing because they did not qualify to execute and perfect a real-estate transaction, after having fully met the other legal requirements and obligations proper to this type of business.” There is fault “where they lie, intentionally omit or delay the delivery of information, voluntarily take a loan or assume an obligation during the financing application process, with the intention of being denied financing.” The Act sets you a task: “A copy of the document stating the denial shall be delivered by the buyer to the contracted real-estate broker.” And an exception: if financing is granted and the non-faulty buyer decides not to accept it, and that ends the transaction, the prohibition does not apply.

6. 6

   Step 6: The bond, and whom you can sue

   Article 13 requires, before issuing the licence, a bond in favour of the Commonwealth and deposited with the Board “for the sum of ten thousand (10,000) dollars in the case of Broker or Salesperson licences and twenty thousand (20,000) dollars in the case of a Real Estate Firm,” issued by an authorised insurer within thirty days of the licence being granted or renewed. The licensee must tell DACO the insurer’s name, physical and postal address and telephone. The bond answers for any loss or damage caused by breaching this Act. And the paragraph worth having to hand: “A person who suffers loss or damage due to any action or omission by a Broker, Salesperson or Real Estate Firm may bring an action seeking indemnity for the loss or damage suffered against the insurance company directly, against the Broker, Salesperson or Real Estate Firm, or against both.” It adds that revoking the licence does not affect the bond as to claims for acts before the revocation.

7. 7

   Step 7: The practices the Act forbids

   Article 31 carries twenty-three and these are the ones that come up most in a real sale. Acting for more than one party without everyone’s express consent (1). Improperly retaining documents or money (2). Offering a property for sale without the owner’s consent (3). Failing to supply the parties, at closing, with all the information and documents the laws require (8). Making an exclusive or semi-exclusive brokerage contract without explaining terms, conditions and expiry date — and the Act adds that “automatic renewal clauses shall not be permitted in brokerage contracts” (9). Charging commission to more than one party unless they agree (10). Discriminating by race, colour, religion, sex, physical or mental disability, family status or national origin (15). “Deliberately concealing essential information about a property’s conditions, with the intent of inducing a party to conclude the transaction on terms that, had they known, they would not have transacted on or would have paid a lower price” (17). Not diligently presenting, retaining or delaying any offer (18). And telling the client a deposit is in their hands “when in reality it does not exist” (20).

8. 8

   Step 8: The two written advisories you are owed

   Two Article 31 subsections that protect exactly where most money is lost. (16) proscribes “Prior to executing a brokerage or net-listing contract, failing to properly advise the client on the scope of the transaction and the convenience of using the services of a professional appraiser.” (22) goes further and leaves a trail: it proscribes “Failing to notify and advise the owner prior to signing the brokerage contract, and the prospective buyer prior to executing an option or sale contract, in writing and as part of it, on the need and convenience of carrying out a physical inspection of the property by a professional duly licensed by the Commonwealth of Puerto Rico,” and adds that “The owner or the prospective buyer shall certify with their signature that they have received the advice from the broker.” If nobody mentioned an appraiser or an inspection before you signed, there are two provisions to quote.

9. 9

   Step 9: Where you complain, and the step the Act requires first

   The consumer forum is DACO. Article 23 empowers it to supervise the real-estate business, to investigate on its own initiative or at a party’s request and to “Consider and adjudicate the complaints filed by consumers under this Act,” using the powers of Act No. 5 of 23 April 1973. But it carries a procedural condition worth meeting before filing: “On filing the complaint, the complainant shall state that they previously required the owner, developer, broker, salesperson or Real Estate firm to cease and desist from the proscribed act or practice or to comply with the relevant provisions, without their having done so.” That is: first you ask them in writing, and you state that in the complaint. The same article lets DACO “order the freezing of the posted bond” while the proceeding or complaint runs, and where it finds a proscribed practice it must notify the Board within no more than ten working days.

10. 10

    Step 10: What can happen to someone practising without a licence

    The Act separates the penalties and they are worth knowing. Article 34(a): whoever without a licence engages in the profession, “or who employs another unlicensed person for this practice, commits a misdemeanour and on conviction shall be punished with a fine of five hundred (500) dollars or imprisonment for a period not exceeding six (6) months or both penalties”; the Board suspends the licence for a year after conviction and, on repeat, the right to practise is permanently lost. Article 35 adds the administrative route: “Every violation of this Act’s provisions shall be punishable by the imposition of an administrative fine, up to a maximum of ten thousand (10,000) dollars per infraction, by the Department of Consumer Affairs.” And Articles 34 and 36 close with a hard rule: “The commission of a single act by a person who is required to hold a licence, without having one, shall constitute a violation of this Act, provided further that each act shall constitute a separate offence.”

The Board of Brokers, Salespersons and Real Estate Firms is attached to the Department of State and is what issues, renews, suspends and revokes licences and publishes the professional registry on the Department’s portal. Consumer complaints go to the Department of Consumer Affairs (DACO), which considers and adjudicates them under this Act and Act No. 5 of 1973, and which may freeze the bond while the proceeding runs. The Act publishes no address, telephone, hours or internet address for either, and we do not invent them.

• Not searching the name in the Department of State’s public registry, which carries finally adjudicated complaints.
• Trusting an advert with just a phone number: Article 31(6) requires the broker’s or firm’s name and licence number.
• Not asking to see the licence displayed at the place of work, which Article 18 requires and 31(12) protects.
• Handing over the deposit without asking about the escrow account: it cannot go into the broker’s operating or personal account.
• Accepting that they keep your deposit when the bank denied you financing through no fault of yours.
• Not giving the broker a copy of the financing denial document, which the Act makes your task.
• Signing a brokerage contract with an automatic renewal clause: the Act does not permit them.
• Filing the DACO complaint without first requiring the broker in writing to cease and desist.
• Forgetting there is a $10,000 or $20,000 bond you can claim against directly with the insurer.

These are the government pages this guide is based on.

• Departamento de Estado de Puerto Rico

  Departamento de Estado

  bvirtualogp.pr.gov