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Legal IssuesPart 1: Licensed to what?
Part 1 of a 2-part series that describes what licensees can and can’t do.
What are real estate brokers or salespersons licensed to do? According to RELRA (Real Estate Licensing and Registration Act), a broker:
- Negotiates with or helps a person acquire an interest in real estate via purchase or lease. Â
- Negotiates the listing, lease, sale, purchase, exchange or timeshare for any real estate.Â
- Manages real estate and/or holds him/herself out as a real estate consultant.
Of course, a broker also advertises or markets real estate — whether for sale or rent — and performs a comparative market analysis. All of these actions are performed for a “fee, commission or other valuable consideration.” A salesperson is someone who is employed by a broker to do all the things a broker does — except a salesperson may not hold to him/herself out as a “consultant.”
There are several exceptions to this rule. Attorneys, for example, are not required to be licensed to transact in real estate. Attorneys-in-fact (more commonly known as powers-of-attorney) are also exempt from licensure, provided the power of attorney is not being used to circumvent RELRA’s requirements. Also exempt are officers or employees of a partnership or corporation whose principal business is to discover, extract, distribute or transmit energy or mineral resources (think Marcellus Shale), so long as leasing or purchasing the real estate is a common and necessary transaction in the conduct of the business.
Owners of property do not need to be licensed to sell or lease their own property. When the property is owned by a partnership or corporation, however, this exemption is restricted: no more than five partners or five officers may be exempt from licensure and all other employees must be licensed before they act as real estate salespersons.Â
Those employed by an owner to manage or maintain multi-family residential property may not have to be licensed. But if they’re not licensed, they can’t negotiate the terms or conditions of a lease or hold money on behalf of a tenant, other than for the landlord. Such individuals may not make any decisions about the property or suitability of a current or prospective tenant. They may only show apartments, provide information about the rent, provide copies of building rules and regulations and convey decisions about rental applications.
Whether someone has to be licensed can be a troubling issue, particularly when managing property. If you are being asked to manage property or if you are considering hiring a person to manage property for you, it is best to consult with an experienced real estate attorney to understand when a license is required.
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Brett Woodburn, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. |
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Brett Woodburn’s response to Teresa Wagaman: Whether you need a license is a question that gets too close the giving of legal advice for me to comfortably answer. What I can offer is this: the Real Estate Licensing and Registration Act defines a real estate broker as one who “negotiates with or aids any person in locating or obtaining for purchase, lease or an acquisition of any interest in any real estate;” “ negotiates the … lease … for any real estate;” or “manages any real estate”. A salesperson is defined to include the following: one who will “lease or rent or offer to lease, rent or place for rent any real estate or collect or offer to collect rent for the use of real estate for or in behalf of any real estate broker…” Similarly, the regulations state that “a salesperson may assist I property management if the salesperson’s work is supervised and controlled by the employing broker. The salesperson may not independently negotiate the terms of a lease nor execute a lease on behalf of the lessor.” You might want to consult with your attorney.
I was just reading your article and I have a further question. I am employed by a general contractor as an office manager, his wife and he has approximately 20 units they personally own and rent out. They have me doing the advertising and showing of the apartments, getting the credit check fee and doing the background check and writing the leases and collecting the money, maintaining/coordinating the maintenance of the units and evicting tenants if necessary. Should I hold a license in real estate to be doing these functions? I have an accounting degree (my specialize field) and I’m a notary but not a licensed real estate person.
There is no requirement that anyone use a licensee when selling or leasing their own property. However, if the owner is a licensee and is NOT listing their property through a broker (theirs or an unrelated broker) then the licensee must identify his/her licensed status in the advertisement.
If, however, a licensee lists the property for sale or rent with a broker, then the licensee must disclose his/her licensed status in writing before the Agreement is executed.
Brett,
I must say I don’t think I have ever seen so many comments to one post!!!
The portion that hits home most is the “Managing Real Estate” As a Broker (& Property Manager) many abuses by unlicensed people & sales persons not under their Broker’s Supervision. To most they see nothing wrong with it… I doubt a Salesperson would place ads and take referrals from Sellers or Buyers and not tell their Broker… but for some reason when it comes to Property Management some agents seem to think it is okay to take clients on the side. Even worse is a broker that is aware of it but lets the Agent do as they please, the Law is clear that they can only assist and the Broker must retain all decision making authority. Lastly but not least is the handy man, contractor, etc that for a fee will watch the property make choices as to the who, what, when, where & how of the operation of the property. Will negotiate, will make the leasing choices or will operate “just inside” the law enough not to be caught. REALLY STEAMS ME!!!
I think this type of article is awesome and the more it is reinforced to the brokers, agents, etc what they can and can’t do… perhaps the standard will be elevated and we will have a “true profession” Thank you for sharing this with us all and I look forward to part two…
Brett.
Commenting on “owner of property do not need to be licensed to sell or lease their own property”, should not be misconstrued to mean that licensed agents can sell their own properties with no involvement by their Broker. From handling deposits to contract prep to Disclosures, licensees must always name their broker and operate openly as if this were a listed property.
Hi Brett,
The beginning of the article clearly states what A LICENSED BROKER CAN DO and then come the 3 bullet points
Viki
Vicki,
I don’t think anyone would dispute the fact that traditional condominiums are real estate (it’s a more interesting discussion if you are talking about verticle condos). Whether or not you need a license to manage, however, is dependent upon what the ‘manager’ is doing. Although the topic is a bit more complex, this article touches on what an unlicensed manager can do.
interesting information. In the third bullet, it mentions manage real estate!
Condominiums are real estate! However, the two times I contacted the PAR legal Hotline AND the real estate commission, I was informed no license was require unless the were leasing or selling.
It clearly states in the bullet you need to be a broker if managing property. Hellooooo. Condominiums are real estate.
This information is very useful. I am licensed as a real estate instructor and a certified trainer for Buffini Company. Thank you for putting this information together in a one page document that can be distributed at our sales meetings. HarryMcCarty16@msn.com
Very useful info. Thanks!
While I agree that a Salesman may not hold himself out to be a consultant, how about an Associcate Broker who manages a satellite office or one who had been in Business for himself, retired but kept the License active then came back 2 years later as an Associate Broker with another firm
This article refers to a salesperson as someone “who is employed by a broker. . .” This is different than calling a salesperson an “employee”. Whether an individual is an employee, an agent, or an independent contractor, when you hire that individual to do a job, they are employed by you. It is a subtle but distinct difference.
Brett just one question: Why are Agents refered to as employees of the Broker when in PAR’s form Broker/Salesperson Independent Contractor Agreement Para! line 13 it states That the agent must pay for everything and can’t be treated as an employee in reguard to Workmans Comp and all taxes along with all licenses required. This then makes the agent self employed does it not?
Great post…there are a lot of folks out there masquerading as property managers when they have never seen the inside of a real estate classroom and owners aren’t even checking out their credentials and licensure.
Brett, great job…I will use this in my MCE training as a handout for the Real World Real Estate program.
Thanks so much.
Great post Brett, and many agents and consumers are often confused about this!