New York State Licensing Law

Unit 1: License Law and Regulations

Think of Article 12-A of the New York Real Property Law not just as a set of rules to memorize for the exam, but as your career survival guide. Why? Because before 1922, the real estate market was the Wild West—full of scams and "let the buyer beware" tactics. Today, these laws exist to protect the public, but they also protect you. Understanding license law ensures you get paid your commissions legally, keeps you out of court, and prevents you from accidentally committing a misdemeanor that could end your career before it starts. Let's master the rules of the road.

Learning Objectives

  • Explain the purpose of Article 12-A and the role of the Department of State (DOS).

  • Distinguish between a Broker, Associate Broker, and Salesperson.

  • List the specific education and experience requirements for obtaining a license.

  • Describe the "Blind Ad" prohibition and how to advertise legally.

  • Define "commingling" and explain the rules regarding client funds.

  • Identify the penalties for license law violations, including revocation and Article 78 proceedings.

  • [Explain the Property Condition Disclosure Act and the liability involved.

1. The Power Players: Who Regulates You?

As a real estate professional in New York, you answer to the Department of State (DOS), Division of Licensing Services. They are the authority that issues your license, and they are the ones who can take it away. While New York does not have a "Real Estate Commission" like other states, we do have the State Board of Real Estate. This 15-member board (including the Secretary of State) helps create rules, approves schools, and oversees the industry.

Critical Warning: Violating license law isn't just a slap on the wrist; it is a misdemeanor. It is punishable by a fine of up to $1,000 and/or one year in jail.

Who Needs a License?

You generally need a license if you perform any real estate act (selling, renting, negotiating, exchanging) for another person and for a fee.

Exceptions: You do not need a license if you are:

  • An owner selling your own property.

  • An attorney licensed in NY (though they must get a broker's license to employ salespeople).

  • A public official or someone acting under a court order (like an executor or guardian).

  • A building superintendent or maintenance worker employed by one owner to collect rent.

2. Categories of Licensure

In New York, there is a clear hierarchy of licenses. Understanding where you fit is essential for your daily operations.

The Three Main Licenses

  1. Real Estate Broker: The "Captain of the Ship." A broker can operate their own business and hire others. They are responsible for the supervision of everyone under them.

  2. Real Estate Salesperson: This is likely you. You may perform real estate activities, but only under the supervision of a sponsoring broker. You cannot work independently, and you cannot accept commission from anyone except your sponsoring broker.

  3. Associate Real Estate Broker: An individual who has all the qualifications of a broker (passed the broker exam) but chooses to work under another broker’s sponsorship. They legally have the status of a salesperson in the office hierarchy.

[Image suggestion: A pyramid diagram showing the Broker at the top, Associate Brokers in the middle, and Salespeople at the base, with arrows indicating supervision flows down and commission flows down.]

Dual Licensure

It is possible to hold more than one license. For example, you could be a salesperson for a broker in Manhattan and a broker for a different firm in Montauk. This is called dual licensure.

3. Getting Your License: The Requirements

The barrier to entry protects the industry. Here is what you need to achieve before you can practice.

Salesperson vs. Broker Checklist

Requirement

Salesperson

Broker

Minimum Age

18 years old

20 years old

Citizenship

Legal right to work in U.S.

U.S. Citizen or Permanent Resident

Education

77-hour pre-licensing course

152 hours total (77-hr salesperson + 75-hr broker course)

Experience

None required

Two years full-time as a salesperson (3,500 points) or 3 years equivalent experience

Exam

Pass NY State Exam

Pass NY State Exam

Sponsorship

Must have a sponsoring broker

Can work independently

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Note on Points: Broker applicants use a "point system" to prove experience. For example, a closed residential sale might be worth 250 points. You need a total of 3,500 points to qualify.

The Exam and Application

  • The Test: You must bring a photo ID and pay $15 for the written exam.

  • The Application: Once you pass, you apply online. Your sponsoring broker must "accept" you in the system before your license is issued.

  • The Pocket Card: Your broker holds your actual paper license in their office (it must be displayed!). You will carry a pocket card with your photo and license data. You must show this on demand.

Fees

Fees are paid to the Department of State. Licenses are valid for two years.

License Type

Initial/Renewal Fee

Term

Salesperson

$65

2 Years

Broker

$185

2 Years

Written Exam

$15

Per attempt

Change of Broker

$20

N/A

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4. Keeping Your License: Renewals and Changes

To stay active, you must renew your license every two years.

  • Continuing Education (CE): You are required to complete 22.5 hours of CE every two years.

  • Mandatory Topic: Included in those hours must be 3 hours of Fair Housing/Discrimination training.

  • Grandfather Clause: If a broker was licensed continuously for 15 years prior to July 2008, they may be exempt from CE. If you are a new agent, this exemption does not apply to you.

Changing Brokers

If you leave your broker, your former broker files a "termination of association." You then file a "change of association" online with your new broker and pay a $20 fee. You cannot practice real estate in the gap between brokers.

5. Violations: How to Lose Your License

As a mentor, I cannot stress this enough: strict adherence to these rules is non-negotiable. The DOS investigates complaints and can suspend or revoke your license.

The "Big Three" Violations

  1. Commingling: A broker must never mix client funds (deposits, rent) with their own business or personal funds. Client money must go into a separate, federally insured Escrow Account.

  2. Net Listing: This is illegal in New York. A net listing is where a seller tells you, "I want $200,000 for the house, you keep anything above that." This creates a conflict of interest.

  3. Blind Advertising: An ad that lists a phone number or address but fails to clearly identify the name of the brokerage is a blind ad. It is illegal. The public must know they are dealing with a licensed real estate firm.

Other Critical Infractions

  • Kickbacks: You cannot share your commission with an unlicensed person. (Exception: You can offer a rebate to a principal in the transaction, like the buyer or seller, with full disclosure).

  • Unauthorized Practice of Law: Do not draft legal documents. Use standard forms. Do not give legal advice.

  • Vicarious Liability: A broker is responsible for their salespeople. If you break the law, and your broker knew (or should have known) and kept the profit, they are liable too.

Appeals

If the DOS revokes your license, you have the right to appeal to the NY Supreme Court. This legal appeal process is called an Article 78 Proceeding.

6. Disclosures and Property Conditions

Transparency is your shield against lawsuits.

Property Condition Disclosure Act

Sellers of residential real property (1-4 units) must complete a Property Condition Disclosure Statement.

  • The Rule: It must be provided to the buyer before they sign a contract.

  • The Penalty: If the seller refuses to provide it, the buyer receives a $500 credit at closing.

  • Agent Role: You should provide the blank form, but do not fill it out for the seller. That is their liability, not yours.

The "Uncapped" Truth

Sellers must disclose the existence of any known uncapped natural gas wells on the property.

Guided Reading Questions

Use these questions to test your understanding of the text above.

  1. If a salesperson commits a violation and the broker accepts the commission knowing about the violation, what legal concept makes the broker responsible?

  2. What is the specific term for the illegal practice of mixing client funds with the brokerage's operating funds?

  3. You see an advertisement that says: "Lovely 3BR Home, $500k. Call 555-0199." Why is this ad illegal in New York?

  4. How many hours of Continuing Education (CE) must a licensee complete every two years, and what specific topic must be included?

  5. Explain the "Article 78 Proceeding" and when a licensee would utilize it.

  6. If a seller refuses to sign the Property Condition Disclosure Statement, what is the financial consequence at closing?

  7. What is the minimum age difference between a licensed salesperson and a licensed broker?

Glossary

  • Article 12-A: The section of the NY Real Property Law that governs the licensure of real estate brokers and salespeople.

  • Blind Ad: An illegal advertisement that fails to indicate that the advertiser is a real estate broker or prohibits the public from knowing the legal name of the brokerage.

  • Commingling: The illegal practice of mixing client funds (escrow) with personal or business funds.

  • Kickback: An unearned fee paid to a licensee or an unlicensed person for a referral; generally illegal unless fully disclosed and consensual, or prohibited entirely in certain contexts.

  • Net Listing: An illegal listing agreement where the broker keeps any amount over a specific price set by the seller.

  • Pocket Card: A wallet-sized ID issued by the DOS containing the licensee’s photo and license information; must be carried at all times.

  • Article 78 Proceeding: The judicial appeal process used to challenge a decision made by a government body (like the DOS) in court.

  • Reciprocity: An agreement between states to allow a licensee in one state to easily obtain a license in another; NY currently has no reciprocity with other states.

  • Sponsor: The licensed real estate broker who employs and supervises a salesperson or associate broker.

  • Vicarious Liability: A situation where one party (the broker) is held partly responsible for the unlawful actions of a third party (the salesperson).