Committee hears changes to real estate license law to clarify referrals and out‑of‑state broker sharing

House Bill 1125, a package of clarifications to North Dakota's real estate license law, drew testimony Tuesday from the bill sponsor and both the regulator and trade association representing brokers and agents.

Representative Scott Lausser, R‑Minot, sponsor of the agency prefile bill, told the House Industry, Business and Labor Committee the measure is intended to clarify how referrals and broker compensation sharing work and to align statute with administrative practice. "In our industry we've got 1,500,000 realtors that are trying to change the way they've always done business," Lausser said, outlining why the commission and association sought clearer statutory language.

The bill makes five specific clarifications to chapter 4323 of the North Dakota Century Code, the executive director of the North Dakota Real Estate Commission said. Jeannie Prahm, the commission's executive director, told the committee adding the word "refers a prospect" simply clarifies that a referral that results in compensation requires a license. "Compensation means you need a license for a referral," Prahm said. She also said the bill would restate in statute language already contained in administrative rule allowing North Dakota brokers to divide or share commissions with licensed out‑of‑state brokers so long as those out‑of‑state brokers do not carry on negotiations in North Dakota.

The sponsor and witnesses described the national backdrop for the changes: a Missouri lawsuit against the National Association of Realtors and six national broker franchises that challenged longstanding compensation practices. Lausser described the verdict and subsequent settlement and said the industry has already changed practices and a standard purchase agreement statewide was implemented. He gave settlement figures during his remarks and urged caution in drafting: "...the National Association of Realtors and 6 national franchises lost in Missouri. And that was a $1,800,000,000 settlement... Ultimately, the realtor settled at $418,000,000 payable over 4 years." The committee was told the settlement and private litigation spurred changes in industry practice, though Prahm said the commission's proposed statutory changes were not triggered by that suit.

Jill Beck, CEO of the North Dakota Association of Realtors, testified in support and said her organization participated in commission meetings and the bill reflects input from licensees. "We are in full support of what is being changed," Beck said.

Committee members questioned several provisions, including the change that would let broker applicants sit for the broker licensing exam before completing pre‑licensure coursework, and language that moves specific renewal dates to a date "set by the commission" rather than fixed calendar dates. Prahm said the statutory change would leave renewal dates unchanged immediately but would allow the commission to alter dates by administrative rule rather than by statute.

Lausser asked the committee to hold the bill to allow him to file a short amendment clarifying that the bill addresses sharing compensation between brokers on the same side of a transaction and does not codify compensation sharing between a seller's and buyer's broker that was at issue in the national litigation. The committee agreed to hold the bill for the amendment and took no final vote Tuesday.

The committee also heard questions about wholesaling disclosure language, the effective date of industry practice changes (August 17, 2024 in committee testimony) and administrative details of enforcement and renewals.