A new law that was just passed in Connecticut is set to impose strict rules on real estate teams, including how they are allowed to name themselves, prompting concerns from some leaders about consumer confusion as well as costly and rushed rebranding efforts.
The law — which Gov. Ned Lamont signed in July and which goes into effect in January — touches on a variety of real estate licensing issues and generally aims to clarify what actually counts as a team. To that end, it defines a team as “a group of at least two licensed real estate brokers or real estate salespersons who are affiliated with the same sponsoring real estate broker and engage in advertising as a group using a team name.” The law also requires teams to register with the state and initially pay $565, followed by a yearly renewal fee of $375.
More significantly, the law also includes rules about how teams can name themselves. For starters, Connecticut teams will now have to use the full name of one of their members or include the full name of their sponsoring brokerage.
Teams are also free to use the word “team,” but can’t use other terminology, including “group,” “company,” “LLC” or anything else “that implies that the team is a business entity,” the law states.
In practice this means something like “The Bob Smith Team” would be allowed, but “The Smith Group” would not.
This naming rule is likely to cause a shock wave in Connecticut’s real estate community. A review of Real Trends’ 2021 rankings showed that dozens of the state’s top teams use language such as “group” in their name. Few of those teams are currently branded around an agent’s full name, and fewer still incorporate brokerage identification. Now, on Jan. 1, 2022, such team names will be illegal.
The result is that the new law could ultimately impact the branding of at least hundreds of agents in Connecticut.
Team leaders who spoke with Inman for this story said that means extra costs.
Byron Lazine — who leads the One & Company team with William Raveis Real Estate, and who is also an Inman contributor — spoke positively about the law’s inclusion of a definition for teams, saying it will create a useful standard.
“I think that’d be a good thing,” he added.
But he was significantly more concerned about other aspects of the law. He characterized the ongoing fee structure as a new “tax,” and said that he’ll have to embark on a major rebranding effort.
That rebranding process will involve changing copy on multiple websites, including Lazine’s own site as well as others that he uses for things like lead generation. Logos, bios and other text will have to be updated, and ultimately the process could take the team anywhere from a week to a month.
“It will be a significant loss of income for a lot of teams that have to change everything,” Lazine told Inman.
John Coppola made a similar point. Coppola runs the Coppola Team, which is also with William Raveis, and pointed out that teams will have to change everything from yard signs to business cards. In the end, he estimated teams would end up spending “at least $1,000” and as much as $10,000 complying with the new branding requirements.
“It’s going to add quite a bit of expense,” he said.
Like Lazine, Coppola also characterized the yearly fee as “a new way to tax teams,” and said the law overall has “us scratching our heads.”
“The license for a team is actually more than it costs me for my brokers license,” he noted.
Coppola also worried that abruptly changing names and branding could ultimately confuse consumers who over the years have become familiar with their local real estate teams.
“Many of us have been using these names for over a decade,” Coppola added.
Daniel Burgio — who is one of the leaders of the Burgio Souza Group at William Raveis — told Inman in an email that he and his team “feel it is important for all real estate teams to identify what brokerage company they are affiliated with.” And he said that they “appreciate concern about public perception and consumer uncertainty, and we agree that more should be done to associate teams with their sponsoring brokers.”
But like others who spoke with Inman, Burgio ultimately called the law’s effective requirement of a “complete re-branding of every team” something that is “above and beyond necessity.”
“We feel it is an overreach to force teams to completely change their names that we have worked long and hard on branding, not to mention the cost associated with that branding,” Burgio added. “We’ve worked hard to develop a brand that identifies with us and our team. To ask us to rebrand after years of marketing and brand development will undoubtedly have a direct effect on our business.”
Though the new law has been working its way through the state legislature since March, it landed on some Connecticut agents’ radar thanks to emails from trade group Connecticut Realtors (CTR). The group provided Inman with one of those emails, which states that the rules emerged from “concerns about a lack of transparency as to what was being advertised to the public as a real estate entity.”
“Concerns included the creation of names without a legal authority to operate without a business license or any visual or apparent relationship between what was being advertised and its connection to the real estate brokerage agency,” the email continues.
The email adds that a “workgroup at the Connecticut Department of Consumer Protection (DCP)” considered those concerns. The email also notes that state regulators believed “that teams could not advertise to provide real estate brokerage services since they were not licensed businesses” — a position that seemingly could have resulted in teams effectively being regulated out of existence.
The email concludes that CTR advocated to make sure teams could ultimately continue to advertise in the state.
Inman reached out to the DCP with several questions, including about the “workgroup.” However, a spokesperson for DCP said she was not familiar with the workgroup and referred the question to the CTR, saying “this was their proposal.”
Regarding the interpretation that teams couldn’t advertise, the spokesperson said “real estate agents and brokers from different firms could not advertise together as a team because there was no regulatory framework to ensure full disclosure for consumers.”
David Brooke, who runs the Brooke Group with eXp Realty, acknowledged that concerns about teams exist and told Inman that the goal of holding teams accountable was a good one. But, he also said that in an effort to address some issues regulators have gone too far with the law.
“They’re throwing the baby out with the bathwater,” he said, adding that six months is not an adequate amount of time to pull off a full rebranding. “I have 40 something agents. I’ve got billboards up.”
Whatever ultimately happens, the episode highlights the intense attention teams currently garner. Though teams were first pioneered by Keller Williams in the 1990s, the concept has also since become an integral part of much newer brokerages, such as eXp Realty and Compass, both of which have grown at breakneck speeds lately. The idea is that forming a team allows an agent to create a unique brand identity and expand in new areas, without having to take on the added burden of forming an actual brokerage.
In 2016, the National Association of Realtors (NAR) reported that there were between 35,000 and 50,000 teams operating in the U.S., with the country likely to hit 100,000 teams in the coming years. By 2018, a NAR survey of thousands of agents found that more than a quarter were members of a team.
Given this reality, it’s perhaps not surprising that regulators are increasingly looking to codify how teams operate. And back in 2018, NAR said that more regulation was likely in store for real estate teams, and it revealed that 24 states had already put rules on the books.
“These regulations may continue to be relatively minimal, limited largely to advertising rules,” Elizabeth Mendenhall, who was NAR’s president at the time, said in a 2018 statement. “Yet, as teams continue to develop and as the practice continues to evolve, it is possible that more extensive regulations will also develop and evolve.”
The new Connecticut law appears to represent NAR’s prediction coming true. And as a result it could hint at a possible new chapter in the way regulators approach teams.
For the time being it remains to be seen how the Connecticut situation will play out. If no one does anything at this point, the law will simply go into effect in January and the state’s real estate teams will have to comply.
However, some team leaders hope that doesn’t happen. Among them, Brooke — who has been communicating with other top team leaders — said he’d like to see the law repealed before January. Barring that, he has a plan B.
“I’m talking to my lawyers today,” he said. “We’re going to form a class action lawsuit.”
Email Jim Dalrymple II