Massachusetts Real Estate Brokerage Requirements for Archiving Text "Material Communications"

In Massachusetts, real estate brokerages are required to retain transaction-related records to comply with state regulations and protect against legal risks. While the law does not explicitly mention text messages, communications that qualify as "material" to a real estate transaction must be treated as part of the transaction records under the general rules governing real estate brokers.

1. Applicable Regulations for Record Retention

The Massachusetts Board of Registration of Real Estate Brokers and Salespersons outlines record-keeping requirements in the Code of Massachusetts Regulations (254 CMR 3.00):

• Record Retention Period: Brokers must retain all transaction-related records for at least three years from the date of the transaction or the termination of the brokerage agreement.

  • See 254 CMR 3.00(10) for details on general record-keeping obligations.

2. Definition of "Material Communications"

While Massachusetts regulations do not define "material communications" explicitly, any written or electronic communication that affects the terms, conditions, or execution of a real estate transaction could be considered material. Examples include:

• Negotiations of contract terms.

• Amendments or addenda to agreements.

• Client instructions affecting the transaction.

Text messages falling into these categories may be deemed "material" and should be retained accordingly.

3. Case Law on Electronic Communications

Massachusetts case law affirms that electronic communications, including text messages, can constitute binding agreements:

• St. John’s Holdings, LLC v. Two Electronics, LLC, 2016 WL 1460477 (Mass. Land Court):

  • The court held that a series of text messages containing material terms and electronic signatures satisfied the Statute of Frauds (M.G.L. c. 259, § 1), making the communication legally binding.

This precedent underscores the importance of treating text messages as part of transaction records when they include material terms or affect the transaction.

4. Practical Guidance for Compliance

Given the absence of explicit statutory language addressing text messages, brokerages should adhere to the following best practices:

1. Incorporate Text Messages into Record Retention Policies:

   • Ensure that all material communications, regardless of format (email, text, or other), are documented and retained for at least three years to comply with 254 CMR 3.00(10).

2. Use Archiving Technology:

   • Employ tools that automatically archive and organize electronic communications, including text messages, to ensure accessibility and compliance.

3. Educate Agents:

   • Train agents to identify material communications and ensure they are properly documented.

   • For example, agents should forward relevant text messages to a central repository or include them in transaction records.

4. Maintain Consistency with Other Records:

   • Include text messages alongside other documents, such as listing agreements, offers, purchase and sale contracts, and agency disclosures.

5. Penalties for Non-Compliance

Failure to retain material communications as part of transaction records may lead to:

• Disciplinary action by the Massachusetts Board of Registration of Real Estate Brokers and Salespersons.

• Legal risks if a dispute arises and records of material communications are unavailable.

Key Takeaways

• Under 254 CMR 3.00, Massachusetts brokers must retain all transaction-related records for at least three years.

• Text messages containing material terms, negotiations, or instructions may qualify as part of the transaction records.

• The case law (St. John’s Holdings, LLC) demonstrates that text messages can be legally binding, emphasizing the need to archive them for compliance.

Implementing robust policies and tools for capturing and retaining material communications in text messages will help brokerages comply with state laws and reduce legal risks.

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Sample: Text Archive for Real Estate

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Massachusetts Mortgage Originators

In Massachusetts, mortgage originators are subject to specific record-keeping requirements to ensure compliance with state regulations. While the regulations do not explicitly mention text messages, any electronic communications pertinent to mortgage transactions are considered part of the required records.

Record Retention Requirements:

• Mortgage Lenders: According to 209 CMR 42.09(1)(a), mortgage lenders licensed under M.G.L. c. 255E, § 2 and 209 CMR 42.04 must retain copies of various documents for a minimum of three years after the final payment is made on any mortgage loan or the loan is sold, whichever occurs first. These documents include mortgage loan applications, required disclosures, notes, closing documents, rate lock commitments, results of automated underwriting submissions, and correspondence, including electronic communications.

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• Mortgage Brokers: Per 209 CMR 42.09(1)(b), mortgage brokers licensed under M.G.L. c. 255E, § 2 and 209 CMR 42.07 are required to retain similar documents for at least three years after a mortgage loan is made. This includes mortgage loan applications, required disclosures (whether provided by the broker or lender), notes, closing documents, rate lock commitments, results of automated underwriting submissions, and correspondence, including electronic communications.

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• Unclosed Loan Applications: For mortgage loan applications that do not result in a closed loan (e.g., denied, withdrawn, or abandoned applications), 209 CMR 42.09(1)(c) mandates that licensees retain all applicable books and records for a minimum of three years after the date the loan application is taken or the date the licensee makes a credit decision, whichever is later.

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Inclusion of Text Messages:

While the regulations do not specifically reference text messages, the term "electronic communications" encompasses all forms of digital correspondence relevant to mortgage transactions. Therefore, text messages that contain material information or directives related to a mortgage transaction should be retained as part of the official record.

Best Practices for Compliance:

1. Implement Archiving Solutions: Utilize technology that can capture and store electronic communications, including text messages, to ensure all relevant interactions are archived appropriately.

2. Establish Clear Policies: Develop internal policies that require the documentation and retention of all material communications, regardless of the medium, to maintain comprehensive records.

3. Educate Staff: Ensure that all employees and agents understand the importance of retaining electronic communications and are trained in the proper procedures for doing so.

Adhering to these practices will help mortgage originators in Massachusetts comply with state regulations and maintain thorough records of all transactions.

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