What Functions May an Apartment Manager Perform Without a Real Estate License?
It can be a complicated task to successfully navigate the maze of Colorado laws and regulations regarding what type of real estate functions, especially property management functions, require a real estate license. The laws and regulations themselves sometimes lack clear and specific requirements and definitions. Often time’s regulators at the Colorado Real Estate Commission (CREC) publish position statements seeking to clarify the law on a certain point. Earlier this year, the CREC published Position Statement No. 42 entitled “Commission Position on Apartment Building or Complex Management” seeking to clarify what functions an on-site manager may perform without a real estate license.
When Is a License Required For Property Management?
Under Colorado law, the definition of conduct requiring a license is broad. For example, a licensed real estate broker is defined as someone who, among other things, is involved in “[s]elling, exchanging, buying, renting, or leasing real estate, or interest therein, or improvements affixed thereon; [o]ffering to sell, exchange, buy, rent, or lease real estate, or interest therein, or improvements affixed thereon; [n]egotiating the purchase, sale, or exchange of real estate, or interest therein, or improvements affixed thereon.” In the property management world, the conduct that is generally perceived to require a license is the listing of a rental property for rent; negotiation of lease terms; the acceptance, management of rent and disbursement of rental income funds; as well as other conduct. For these reasons, property managers that perform these functions for an owner of rental property require a Colorado real estate license.
Do On-Site Apartment Managers Require a License?
There are, however, various exceptions to these requirements. For example, Colorado law expressly states that certain types of conduct do not require a real estate license, including “[a] regularly salaried employee of an owner of an apartment building or complex who acts as an on-site manager of such an apartment building or complex. This exemption applies only in respect to the customary duties of an on-site manager performed for his or her employer.” Historically, the property management community has pointed to this exemption to licensing requirements in taking the position that on-site apartment managers do not require a license. The Colorado Real Estate Commission has generally abided by this understanding.
Recently, the CREC recently adopted Position Statement 42 which apparently sought to clarify, among other things, which “customary duties” of an unlicensed apartment manager are acceptable. The “customary duties” listed in Position Statement 42 make a few things clear. First, the CREC apparently perceives the standard apartment manager functions as perfectly acceptable, including showing available apartment units to prospective renters; collecting and processing basic rental application information; offering to prospective renters basic information about the rental price set by the owner; delivering paperwork to tenants and owners; acting as scrivener in completing predetermined lease terms and other preprinted forms; collecting and depositing rent; scheduling maintenance.
Secondly, the list of “customary duties” does, however, suggest that the CREC has concerns about certain property management functions which require a real estate license, but that unlicensed on-site managers may be commonly performing. These areas of concern include actively offering or marketing available units for rent and negotiating lease terms. The CREC’s list of permissible “customary duties” for unlicensed apartment managers expressly excludes these marketing and negotiating functions which the CREC apparently believes should be the sole province of either owner principals or their licensed real estate agents.
Position Statement 42 also points out that if an apartment manager is going to execute leases on behalf of an owner, such apartment manager better have an executed Power of Attorney expressly granting him or her such authority. Further, it is important to have a clear written policy in place for an on-site manager to follow setting forth the duties, responsibilities and limitations of the on-site manager. Obviously, any such policy should be in compliance with Position Statement 42 regarding which functions a unlicensed on-site manager may perform and which he or she may not.
Importantly, there is nothing precluding an owner from using a licensed real estate broker as a property manager or using a broker to supervise an on-site apartment manager. In fact, Position Statement 42 expressly contemplates such a scenario which may provide the benefit of reducing the supervisory burden on the owner. In such cases, however, a licensee needs to be especially careful to provide adequate supervision and to ensure that the written policy clearly delineates who has what responsibilities.
Going forward, it will be interesting to observe any action the CREC takes to implement and enforce Position Statement 42.
This article is intended to provide general information and, therefore, should not be treated as legal advice. If you have been sued for a deficiency or have questions about a specific legal issue, nothing will substitute for the advice of a qualified attorney.