Brokerage Liability and Compliance
What a Texas Brokerage Owner Carries for E&O, Compliance and Supervision
Updated
Bottom line: A Texas brokerage owner answers for the designated broker seat, proof of E&O in some ownership setups, sponsored agents' ads and conduct, current written policies, broker CE and at least four years of transaction records.
What does TREC ask of the brokerage entity itself?
Before any supervision duty, there is a seat to fill. Under TREC's rule, a business entity that wants to receive or keep a license names one individual to act for it. That person has to hold an active Texas broker license, be in good standing, and serve as an officer, manager or general partner of the entity.
Proof of E&O turns on ownership. TREC's Certificate of Insurance for a Broker Business Entity is the form that shows the entity maintains errors and omissions insurance in one situation: when the designated broker owns less than 10% of the entity.
For an owner planning succession, that seat is often the harder question. A buyer for the business is one thing. A licensed individual willing to act as designated broker is another, and the entity's license depends on the second.
What does a broker answer for when a sponsored agent is the one accused?
For TREC, a complaint filed against one of your sponsored sales agents counts as a complaint against you as well. It does so for two purposes: deciding whether you were involved in the alleged violation, and deciding whether you supervised the agent properly.
Advertising works the same way. TREC tells agents that their sponsoring broker is responsible for making sure their ads follow the Commission's advertising rules. An ad that breaks those rules can bring discipline for the agent and the broker both.
Every sponsored agent's brokerage work runs through you. TREC says a sales agent may lawfully do that work only while associated with, and acting for, a sponsoring broker, at all times.
What policies and training does a Texas broker keep current?
TREC expects a broker to keep written policies and procedures, current rather than filed once, that make sure each sponsored sales agent follows the advertising rules.
The training requirement reaches the people doing the supervising too. Broker applicants, brokers and delegated supervisors each complete TREC's six-hour Broker Responsibility Course, which counts toward their 18-hour continuing education requirement.
How long do transaction records have to stay available?
TREC requires a broker to keep specific types of records for at least four years, and the period runs from the date of a closing or the termination of a contract. The records have to be kept in a format the Commission can get at readily.
Because the clock starts at each closing or termination, the newest files carry the longest obligation. An owner stepping back needs to settle who keeps those files readily available until their four years have passed.
What are E&O claims costing right now?
HousingWire's report from the NAR 2025 NXT conference quotes Stecker of Victor Insurance: his firm paid $37 million in E&O claims in 2024, and the average paid loss for a real estate agent rose 60% over the past ten years.
In the same HousingWire report, the South accounted for 33% of all E&O claims Victor Insurance sees, and the Midwest had the smallest share at 19%. HousingWire also reports negligence as the most common claim type in 2024, with 3,450 claims, ahead of misrepresentation at 2,097.
How does Real Brokerage split E&O between the agent and the firm?
Real Brokerage's knowledge base puts the agent's own individual E&O policy first: where that policy covers a claim, it is the primary coverage. Real's firm policy may then, if the claim is covered, sit behind it as excess coverage.
Real also states that its CBR fee is a separate charge from any E&O premium.
Where a state requires state-specific E&O, Real says agents working there obtain and pay for that policy. Its state-by-state list names the states that require licensed agents to carry an individual primary policy meeting state guidelines alongside Real's firm-level coverage, with each state's minimum limits and maximum deductibles.
What changes for an owner who stops running the brokerage?
The duties above attach to the designated broker and the licensed entity. TREC requires every sponsored agent to act through a sponsoring broker, so an owner who steps back with no buyer and no successor broker leaves each agent needing a sponsoring broker of their own.
At Real Brokerage, an agent's own E&O policy is primary and the firm's policy may add excess coverage, if covered. For your agents, the insurance question becomes a question about their individual policies. We are Houston Properties Team, Powered by Real Brokerage, and we can walk you through how that works for an owner and their agents before you decide anything.
Filed in Real Brokerage, for agents who are broker owners.
Questions & answers
What do Houston agents ask about this?
Does a Texas business entity broker have to show TREC proof of E&O insurance?
TREC's Certificate of Insurance for a Broker Business Entity is the form an entity uses as proof that it maintains errors and omissions insurance when its designated broker owns less than 10% of the entity. Separately, to receive or keep a license, the entity has to name one individual to act for it. That person must hold an active Texas broker license, be in good standing, and be an officer, manager or general partner.
The designated broker requirement applies whatever the ownership split. For an owner thinking about succession, that seat often matters as much as the sale itself. Under TREC's rule, an entity without a qualifying licensed individual in the role cannot receive or maintain its license. The successor question is usually about a broker license before it is about a buyer.
Is a Texas broker on the hook when someone files a complaint against one of their agents?
For supervision, yes. TREC treats a complaint filed against a sponsored sales agent as a complaint against the broker too. That lets the Commission decide whether the broker was involved in the alleged violation and whether the broker supervised the agent properly. On advertising, TREC says the sponsoring broker is responsible for an agent's ads meeting its rules, and that both the agent and the broker can be disciplined when an ad breaks them.
TREC also expects a broker to keep written policies and procedures current so that each sponsored sales agent follows the advertising rules. The reach of that supervision is wide. A sales agent may lawfully do brokerage work only while associated with, and acting for, a sponsoring broker at all times. Every piece of that work runs through the broker who sponsors them.
How long does a Texas broker have to keep transaction records?
TREC requires a broker to keep specific types of records for at least four years, counted from the date of a closing or from the termination of a contract. The records have to be in a format the Commission can get readily. The count runs from each closing or terminated contract, so every file starts its own four-year period.
The newest files set the longest obligation. An owner who is winding down or selling needs a clear answer on who keeps those recent files readily available until each file's four years have passed after its closing or termination.
At Real Brokerage, whose E&O policy pays first, the agent's or the firm's?
Under Real Brokerage's knowledge base, an agent's individual E&O policy provides primary coverage for the agent if the claim is covered. Real's own E&O policy may, if covered, provide excess coverage. Real also states that its CBR fee is not an E&O insurance premium. In states that require state-specific E&O, the agents there obtain and pay for that policy themselves.
Real keeps a state-by-state list of the states that require licensed agents to carry an individual primary E&O policy meeting state guidelines, alongside Real's firm-level coverage. The list gives each state's minimum limits and maximum deductibles. If you are weighing a move for yourself and your agents, read that list for the state you are licensed in.