Can a Tennessee real estate broker have a title company disburse the commission instead of doing it personally?

Plain-English summary

Attorney General Herbert Slatery III answered two questions from the Tennessee Real Estate Commission about who can physically disburse a real estate commission. Both questions reduced to the same point: must the principal broker personally write the check?

The opinion concluded no. Tenn. Code Ann. § 62-13-312(b)(11) prohibits an affiliate broker from accepting a commission "from any person, except the licensed real estate broker with whom the licensee is affiliated." The AG read "from" in its plain dictionary sense as referring to the source or origin of the funds. The principal broker had to be the source. But nothing in Title 62, Chapter 13 required the principal to handle the mechanics of the disbursement personally. Delegating the actual cutting of the check to a title company at closing did not break the chain, because the title company was acting on the principal broker's behalf. The affiliate, in turn, could lawfully take the commission disbursed by that delegated agent.

The conclusion mattered because the common Tennessee closing practice was already this: title companies (or closing agents) wrote the commission checks at the closing table. The AG's opinion confirmed that this widespread practice was consistent with the licensing statute, so long as the disbursing party was acting on the principal broker's instructions.

Currency note

This opinion was issued in 2021. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did this opinion address whether a closing agent could keep part of the commission?
A: No. The opinion only addressed whether someone other than the principal broker could disburse the commission as the principal's delegated agent. It did not address whether the title company or closing agent could itself receive a portion of the commission.

Q: What was the affiliate broker prohibited from doing?
A: Under § 62-13-312(b)(11), an affiliate broker could not accept a commission "from any person" other than the principal broker with whom the affiliate was licensed. The AG read this as a limit on the source of the commission, not on the identity of the courier who handed over the check.

Q: Did this opinion change Tennessee real estate practice?
A: It did not. The AG was answering a TREC inquiry about an existing common practice (title companies cutting commission checks at closing) and confirmed that the practice was lawful under the statute as it then stood. The opinion is best read as a clarification rather than a change.

Q: What was TREC's role here?
A: The Tennessee Real Estate Commission, established under § 62-13-203(a), administers the Real Estate Broker License Act and has authority to discipline licensees who violate it. The TREC chair asked the AG for guidance because the statute's "from" language could be read either narrowly (only the principal broker can hand over the check) or broadly (the principal must be the source, but mechanics are flexible). The opinion adopted the broader, plain-meaning reading.

Q: How does this interact with written agency agreements under § 62-13-401?
A: The AG noted that both the principal and the affiliate could enter written agency agreements with parties to a real estate transaction under § 62-13-401. The opinion treated those agreements, plus general agency law, as the legal mechanism by which a title company became a delegated disburser. Written delegation was the cleanest path; oral or informal arrangements likely worked too, but documenting them protected everyone.

Background and statutory framework

The Tennessee Real Estate Broker License Act, Tenn. Code Ann. tit. 62, ch. 13, established two licensing categories: a "real estate broker" (the principal who solicits, negotiates, and contracts with parties to a real estate transaction) and an "affiliate real estate broker" (a person who works under contract with a principal broker to participate in those activities). The statutory definitions appear at § 62-13-102(3) and § 62-13-102(4)(A) and turn on the broker's role and method of compensation.

The Act gave TREC, under § 62-13-203(a), responsibility for administering the licensing scheme. TREC's enforcement tools included suspension and revocation, and § 62-13-312 listed the grounds. Subsection (b)(11) targeted commission integrity: an affiliate broker could not "accept" a commission or any valuable consideration from any person except the affiliated principal broker. The provision was designed to prevent affiliates from cutting side deals with sellers, buyers, or third parties that might bypass the principal's oversight and the disclosure framework that goes with it.

The interpretive question was about the word "from." The AG drew on Webster's Collegiate Dictionary's definition of "from" as indicating "source or origin," and concluded that the statute required the principal broker to be the source of the commission, not the physical hand that passed it across the table. That reading let practical closing mechanics (title companies disbursing on behalf of brokers) coexist with the statute's protective purpose.

The AG also pointed to the absence of any provision in § 62-13-401 (the written-agreement section) requiring the principal broker to personally handle disbursement. The Act regulated the substance of agency relationships but stayed silent on the bookkeeping. That silence supported the delegated-disbursement reading.

Citations and references

Statutes (as of 2021):
- Tenn. Code Ann. § 62-13-102(3) (definition of "affiliate real estate broker")
- Tenn. Code Ann. § 62-13-102(4)(A) (definition of "real estate broker")
- Tenn. Code Ann. § 62-13-203(a) (TREC administering authority)
- Tenn. Code Ann. § 62-13-312(b)(11) (commission-source restriction on affiliate brokers)
- Tenn. Code Ann. § 62-13-401 (written agency agreements)

Authority on plain-meaning interpretation:
- Webster's Collegiate Dictionary 527 (2d rev. ed. 2001)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2021/op21-01.pdf

Original opinion text

Best-effort reproduction; the linked PDF is authoritative.

Disbursement of Real Estate Commissions

Question 1

Does Tenn. Code Ann. § 62-13-312(b)(11) allow for any person or entity, other than an affiliate real estate broker who is affiliated with a licensed principal real estate broker, to disburse a commission, or any valuable consideration, for the performance of the acts specified in the Tennessee Real Estate Broker License Act?

Opinion 1

Yes. Nothing in Title 62, Chapter 13, prohibits a licensed principal real estate broker from delegating to a title company or other party the authority to disburse commissions.

Question 2

Does an agency relationship created by Tenn. Code Ann. § 62-13-401, or by common contractual or agency law, allow a licensed principal real estate broker to contractually delegate the broker's duty to disburse a commission, or any valuable consideration, for the performance of the acts specified in the Tennessee Real Estate Broker License Act?

Opinion 2

Yes. A licensed principal real estate broker may contractually delegate the broker's duty to disburse a commission or other consideration for a real estate transaction.

ANALYSIS

Taken together, the two questions posed may be restated as asking in essence whether the principal real estate broker must personally disburse the commission(s) associated with a real estate transaction or whether the principal broker may contractually delegate the disbursement of commissions to a third party. The short answer to that question is yes, the principal broker may contractually delegate to a third party, such as a title company, the duty and authority to disburse the commission in a given transaction.

The Tennessee Real Estate Broker License Act creates a licensing category for a "real estate broker" and a separate licensing category for an "affiliate real estate broker." The Tennessee Real Estate Commission (TREC) is the state agency responsible for administering the Act's licensing provisions. See Tenn. Code Ann. § 62-13-203(a).

The Act generally defines a real estate broker as

any person who, for a fee, commission, finders fee or any other valuable consideration or with the intent or expectation of receiving a fee, commission, finders fee or any other valuable consideration from another, solicits, negotiates or attempts to solicit or negotiate the listing, sale, purchase, exchange, lease or option to buy, sell, rent or exchange for any real estate or of the improvements on the real estate or any time-share interval . . . , collects rents or attempts to collect rents, auctions or offers to auction or who advertises or holds out as engaged in any of the foregoing.

Tenn. Code Ann. § 62-13-102(4)(A). The Act defines an "affiliate real estate broker" as "any person engaged under contract by or on behalf of a licensed broker to participate in any activity" described in the above-quoted definition of "real estate broker." Tenn. Code Ann. § 62-13-102(3).

The Act contemplates that both the principal broker and the affiliate broker may negotiate for and receive commissions from a party to a real estate transaction. See Tenn. Code Ann. § 62-13-102(3) and (4). The Act also recognizes that both the broker and the affiliate broker may enter written agreements with parties to a real estate transaction establishing the terms and conditions of any agency relationship with a party to the transaction. See Tenn. Code Ann. § 62-13-401.

Under the Act, however, an affiliate broker may accept commissions only "from" the affiliate's principal broker. See Tenn. Code Ann. § 62-13-312(b)(11) (authorizing TREC to suspend or revoke the license of any affiliate broker who accepts "a commission or any valuable consideration . . . from any person, except the licensed real estate broker with whom the licensee is affiliated"). But the Act does not specifically place responsibility for personally disbursing commissions on the principal broker. See Tenn. Code Ann. § 62-13-401. "From" is commonly used to indicate the "source or origin" of something. Webster's Collegiate Dictionary 527 (2d rev. ed. 2001). When the common meaning of "from" is applied in this statutory context, it is clear that the principal broker must be the source or origin of the commission; however, there is no statutory requirement that the principal broker personally handle and distribute all commissions related to the sale.

Accordingly, nothing in the Act appears to prohibit, for example, the common practice of real estate brokers contracting with title companies to disburse commissions at real estate closings. And nothing in the Act would prohibit the affiliate broker from receiving a commission disbursed by such a third party, as long as the third party is acting, pursuant to such a contract, at the direction of the principal broker, since the affiliate broker would be, in effect, receiving the commission from the principal broker through the principal broker's delegated agent.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

MARY ELLEN KNACK
Senior Assistant Attorney General

Requested by:

The Honorable John Griess
Chairman
Tennessee Real Estate Commission
500 James Robertson Parkway
Nashville, Tennessee 37243