Unlicensed Property Management Services

property manager

UNLICENSED PROPERTY MANAGEMENT SERVICES
Chapter 475 – Regulation of Real Estate Brokers

A common question which arises in the field of property management is: “what property management services require a real estate brokers license?” Chapter 475 of the Florida Statutes regulates the regulation of professions and occupations, specifically real estate brokers and sales associates.  

The statute defines a “broker” broadly to include persons who, for compensation, take any part in the procuring of sellers, purchasers, lessors, or lessees of business enterprises, business opportunities, or the real property of another. Florida Statute §475.01(3) list the actions which shall constitute acting as a broker, broker associate, or sales associate, and includes any instances when a person

 

“for another, and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation or valuable consideration therefor”:

  • appraises, auctions, sells, exchanges, buys, rents, or offers, attempts or agrees to appraise, auction, or negotiate the sale, exchange, purchase, or rental of business enterprises or business opportunities or any real property or any interest in or concerning the same, including mineral rights or leases, or 
  • advertises or holds out to the public by any oral or printed solicitation or representation that she or he is engaged in the business of appraising, auctioning, buying, selling, exchanging, leasing, or renting business enterprises or business opportunities or real property of others or interests therein, including mineral rights, or 
  • takes any part in the procuring of sellers, purchasers, lessors, or lessees of business enterprises or business opportunities or the real property of another, or leases, or interest therein, including mineral rights, or 
  • directs or assists in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a sale, exchange, or leasing thereof, and who receives, expects, or is promised any compensation or valuable consideration, directly or indirectly therefor; 
  • advertise rental property information or lists. 
  • undertakes to list or sell one or more timeshare periods per year in one or more timeshare plans on behalf of any number of persons.

 

 

Penalties for Violations

 

Thus, pursuant to the statute, any person who performs these activities has to be licensed as a real estate broker. Chapter 475 also provides the penalties for acting in these capacities without a license. Under § 475.42(1)(a) a person may not operate as a broker or sales associate without being the holder of a valid and current active license therefor. Any person who violates this paragraph commits a felony of the third degree. Furthermore, under § 475.43 if a party has sold, leased, or let real estate, the title to which was not in the party when it was offered for sale, lease, or letting, it shall be a presumption that such party was acting or attempting to act as a real estate broker, and the burden of proof shall be upon him or her to show that he or she was not acting or attempting to act as a broker or sales associate. 

 

Exemptions from the License Requirement

           

Section 475.011 provides for only few specific exemptions from the general rule requiring the “actor” to have a real estate brokers license.

            Namely, no license is required in the event a person is acting as an attorney in fact for the purpose of the execution of contracts or conveyances only; as an attorney at law; as a certified public accountant; as the personal representative, receiver, trustee, or general or special magistrate under, or by virtue of, an appointment by will or by order of a court of competent jurisdiction; or as trustee under a deed of trust, or under a trust agreement, the ultimate purpose and intent whereof is charitable, is philanthropic, or provides for those having a natural right to the bounty of the donor or trustor. 

            In addition, no license is required for any individual, corporation, partnership, trust, joint venture, or other entity which sells, exchanges, or leases its own real property; however, this exemption shall not be available if and to the extent that an agent, employee, or independent contractor paid a commission or other compensation strictly on a transactional basis is employed to make sales, exchanges, or leases to or with customers in the ordinary course of an owner’s business of selling, exchanging, or leasing real property to the public.

 

APPLICATION THROUGH CASE LAW

           

            There are not many cases discussing whether certain acts without a license are permissible as the statute has a pretty comprehensive definition but still there are some interesting cases in which the court has ruled on challenges to the statute.

 

            For instance, in Bockar v. Sakolsky, 592 So.2d 251 (Fla. 3d DCA 1991), the question presented was whether an unlicensed real estate salesman employed by an owner-developer of real property who, by a contractual arrangement, is paid a nominal salary plus a commission on sales, may maintain an action against the employer for unpaid commissions. A summary judgment was entered against the employee on a holding that section 475.42(1)(d), prevents an unlicensed salesman from suing for a real estate brokerage commission. The majority opinion found that “Only salaried real estate salespersons who do not receive commissions for the sale or lease of real property may sue for compensation earned without being a licensed real estate salesperson or broker” and affirmed. 

Florida Courts have also held that estoppel is not applicable in this context. “Permitting equitable recovery in this case would allow Plaintiff to take an end run around Florida’s real estate sales regulatory scheme and would directly conflict with the legislative purpose of the statute. Moreover, the only located case law on this issue, set forth by the Fifth District Court of Appeal in Marks, demonstrates that the statutory bar is intended to apply to claims in law and in equity. Marks, 540 So.2d at 140. Plaintiff has cited no case in which any court found that a real estate sales associate could use equitable principles to avoid Section 475.42(1)(d), Florida Statutes, and recover unpaid commissions directly from an entity registered as his or her broker and employer.” Scachitti v. DMC Real Estate Dev., Inc., 2008 U.S. Dist. LEXIS 93302 (M.D. Fla. Nov. 10, 2008). 

In Meteor Motors, Inc. v. Thompson Halbach & Assoc., 914 So.2d 479 (Fla. 4th DCA 2005), Florida’s Fourth District Court of Appeal had the opportunity to construe the definition of the term “business broker”. There, the court considered a case where an unlicensed “business broker” found a buyer for the stock in an automobile dealership. Id. at 481. When discussing whether chapter 475 concerned only sales of real estate, the court determined that “a closer reading of the statute demonstrates that it regulates business brokers without any connection to real estate” and the court invalidated the broker’s commission contract, holding that Fla. Stat. § 475.41 prevented the broker from enforcing his commission fee contract. Id. at 481. Other Florida cases have also determined that Fla. Stat. § 475.01 regulates “business brokers” without any connection to real estate. See, e.g., Marks v. M.S.F. Management Corp., 540 So.2d 138, 141 (Fla. 5th DCA 1989); Hannan v. City Federal Sav. and Loan Ass’n, 500 So.2d 235, 235 (Fla. 4th DCA 1986).  

Similarly, in Fla. Real Estate Com. v. Reliable Rental Ag., Inc., 209 So. 2d 675, 676-77 (Fla. 3d DCA 1968) the court found that a rental agency and its president were operating as real estate brokers without a license in violation of Fla. Stat. ch. 475 when they were managing the rental properties of others for compensation, by advertising and renting the properties to tenants and quoting and collecting rental for the owners. The court also considered the fact that the rental agency was not just involved in a single leasing transaction, which could have been regarded as an uncompensated incidental service to the owners but on the contrary, this was essential part of the rental agency’s services.

 

Does a “Property Manager” Require a Real Estate Brokers License?

            Probably yes. If the property manager for compensation takes any part in the procuring of sellers, purchasers, lessors, or lessees of business enterprises, business opportunities, or the real property of another, then he would be regulated under Florida Statute 475 and cannot provide such services without a real estate brokers license.