#1 way to lose your Ohio real estate license: Property management mistakes
On December 16, 2013
By Peg Ritenour, OAR Vice President of Legal Services/Administration
Over the last few years, the area of property management has been the top source of license law violations found by the Ohio Real Estate Commission. This is largely due to a lack of awareness of the license law requirements in this area. Foremost among these is the misconception that agents can manage property for others in their own name or that it can be conducted through a separate entity.
To help REALTORS comply with the license law requirements in this area, OAR developed a White Paper on this topic several years ago. Whether you are thinking about getting into this field or have been doing property management for a while, this is a must read for all REALTORS to make sure it is being done correctly. The following are samples of the types of questions answered in the White Paper on Property Management…
Q: As a broker, can I conduct property management in a different business name than the listing and sales portion of my brokerage?
A: No. A brokerage is only authorized to conduct real estate business in one name — the name that appears on its license. All of the business of the brokerage, including property management must be done in that one name.
Q: One of my sales agents wants to handle the rental of a duplex his father owns. My brokerage doesn’t do property management. Can he do this on his own?
A: The leasing or managing of real estate for a fee, commission or anything of value, is activity that requires a real estate license. Therefore if the agent is being compensated for leasing or managing this duplex, this activity must be done in the name of his broker. The fact that the property is owned by a relative does not matter.
Q: Do real estate agents licensed with my brokerage have to lease their own rental properties through my company?
A: There is no legal requirement that agents purchase, sell or lease their own property through the broker with whom they are licensed. However, a broker can require this as a condition of working for the brokerage. If a broker wants to impose this requirement upon his agents, it is advised that this be set forth in the independent contractor agreement with the agent and/or in the broker’s policy manual.
Q: When do you need a property management trust account? What if I am only managing one property?
A: A broker who engages in the management of any property must have a property management trust account. All rents, security deposits, and other monies received by the broker in connection with the management of that property must be deposited in that trust account, unless otherwise agreed.
Q: I have had a property listed for several months with little activity. The seller wants me to find a tenant and lease it. Do I have to have a property management trust account?
A: No. If you are only leasing the property for the owner, you are not required to have a property management trust account. Such an account is only required if you are going to be managing the rental for the owner, i.e., collect rents, pay bills for the owner, etc.
Q: Can a broker have more than one property management trust account, for example one for each owner?
A: Yes. Each account must contain the broker’s name as it appears on his/her license and must be designated as a “property management trust account.” Additional descriptive terms can be added to distinguish the accounts from one another (i.e. Breckenridge Apartment, John Jones Properties).
Tags: Commercial, legal