Ensuring Broker Compliance

BY SCOTT LEDERER

As Executive Director of the Maryland Real Estate Commission (MREC), it is my responsibility—and privilege—to ensure that all licensees, including brokers, uphold the highest standards of professionalism and accountability in all aspects of real estate practice. To that end, I want to take this opportunity to remind all brokers about our continued efforts to monitor and support compliance across the state.

One of the key tools in our compliance program is field auditing, conducted by our experienced auditor, Patrick Richardson, who brings 26 years of dedicated service with the MREC. Patrick is actively conducting random, unannounced audits throughout the state. These audits are not only essential to maintaining consumer trust but are also intended to support brokers by identifying areas for improvement before they become liabilities.

Areas of Focus in Current Brokerage Compliance Audits

During these audits, Patrick will be focusing on several core compliance areas, including but not limited to:

Proper maintenance and reconciliation of escrow accounts

• Verifying that escrow deposit funds are received (deposited) promptly according to the sales contract and Maryland law

• Ensuring accurate and timely recordkeeping

• Confirming that trust account ledgers are current and balanced

• Ensuring there is no evidence of co-mingling of funds between escrow accounts and operations accounts

Brokerage office signage

• Confirming that exterior signage is compliant with state regulations

• Ensuring that all required information is clearly and prominently displayed

• Verify each broker’s address matches the location listed with the Commission

Record retention

• Reviewing that transaction records are stored and accessible for the required timeframe

• Verifying compliance with electronic recordkeeping standards where applicable

Licensing compliance

• Ensuring that all licensees operating under the brokerage are properly licensed and in good standing

• Checking that the brokerage license is valid and displayed appropriately

Advertising practices

• Confirming that all advertising materials include the brokerage name as registered with the Commission

• Reviewing whether all advertising complies with Maryland’s advertising regulations

These audits are designed to support brokers in meeting regulatory requirements and to protect the public interest. Brokers are encouraged to take this opportunity to review their current procedures and make any necessary adjustments. As always, the Commission is here to assist with questions and provide guidance.

Broker Compliance: Best Business Practices for Effective Supervision

In addition to escrow and signage compliance, Broker supervision remains a foundational responsibility—and legal obligation—under Maryland law. Ensuring that your licensees are operating within the scope of the law not only protects consumers but also protects your brokerage from liability.

Proper broker supervision is more than periodic check-ins; it involves establishing clear systems, policies, and ongoing oversight. The MREC encourages brokers to adopt the following best business practices to help maintain compliance and foster a culture of ethical, professional conduct.

1. Written Policies and Procedures

• Maintain and distribute a current policy manual outlining brokerage expectations for handling transactions, disclosures, advertising, escrow, and recordkeeping.

• Update policies regularly to reflect changes in Maryland law and Commission regulations.

• Utilize resources available from Maryland Realtors to assist in developing a policy and procedures manual.

2. Regular Training and Communication

• Conduct regular training sessions for agents on legal updates, MREC regulations, and internal procedures.

• Hold routine office meetings as required by law to review compliance topics and answer questions.

• Reach out to me, as Executive Director, if you’d like me to attend office meetings to answer questions and reinforce compliance.

3. Transaction File Reviews

• Implement a structured process for reviewing transaction files prior to closing.

• Check for complete documentation, proper disclosures, and signed agency forms (if required).

4. Advertising Review

• Require pre-approval of all agent advertising, including digital and social media content.

• Ensure the brokerage name appears as registered with the Commission on all promotional materials and all other requirements, as provided in MREC’s Advertising Checklist.

5. Escrow Oversight

• Monitor escrow accounts personally or assign the task to a qualified, supervised individual.

• Reconcile accounts monthly and document all deposits, withdrawals, and related correspondence.

6. License and Status Verification

• Maintain an up-to-date roster of affiliated licensees and their license status.

• Promptly notify the Commission of any changes in affiliation, team structure, or license status.

7. Physical and Virtual Office Compliance

• Ensure your brokerage, whether physical location or virtual, complies with Maryland’s signage and accessibility requirements.

• Keep business and transaction records securely stored and accessible for inspection.

By maintaining proactive supervision, brokers can significantly reduce compliance risks and contribute to raising professional standards across the industry. The Commission views brokers as key partners in our mission to protect the public and promote fairness and transparency in real estate transactions.

If you have any questions about best practices or would like additional resources, please don’t hesitate to contact the Commission directly. We are here to help.

As Executive Director, one of my top priorities is to open and strengthen the lines of communication between the MREC and our licensed brokerages. I firmly believe that when brokers and the Commission are engaged in ongoing dialogue, there is a greater understanding of expectations, clearer guidance on regulatory requirements, and stronger alignment in our shared mission to protect consumers and uphold the integrity of the real estate profession.

I encourage all brokers to reach out with questions, concerns, or suggestions. Together, we can continue building a professional environment where compliance is not just expected, but second nature, protecting all parties involved in our work.

Thank you for your continued partnership and dedication to excellence in Maryland real estate.

Scott Lederer is the Executive Director of the Maryland Real Estate Commission.