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Legally speaking: Are agency documents required when leasing or managing property?

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By Lorie Garland, OAR Assistant Vice President of Legal Services

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, “Legally Speaking” spotlights some of the timely questions that are being asked by REALTORS. This week involves questions pertaining to property management…

Q: My brokerage will soon begin to offer property management services for both residential and commercial property. I am working with my company attorney to develop a property management agreement and other necessary documents. Does Ohio license law have requirements for a property management agreement? Is the Consumer Guide to Agency Relationships or the Agency Disclosure Statement required when managing or leasing property?

A: Ohio license law requires that all written agency agreements contain certain requirements. An agency agreement is defined as “a contract between a licensee and a client in which the client promises to pay the broker a valuable consideration, or agrees that the licensee may receive a valuable consideration from another, for performing an act that requires a real estate license under this chapter.” A property management agreement would fall within the definition of an agency agreement and therefore must contain the following requirements:

  1. A definite expiration date.
  2. If the property management agreement is for managing residential property, the required fair housing language and logo.
  3. A place for the licensee and the owner to sign and date the agreement.
  4. The licensee must provide a copy of the signed agreement to the owner.

The Consumer Guide to Agency Relationships is required in the following transactions:

  1. The sale or lease of vacant land;
  2. The sale of a parcel of real estate containing one to four residential units;
  3. A residential lease where the term of the lease is more than 18 months.

A brokerage providing property management services would only be required to use the Consumer Guide if the services they will perform includes the rental of a residential property where the lease could be for a term of more than 18 months. In this case, the Consumer Guide is required to be provided to the owner before the property is shown or marketed. Therefore, this must be done at the time the property management agreement is entered into with the owner.

The only time the Consumer Guide would be required to be provided to a potential tenant is if the tenant is looking for residential property and the lease could be over 18 months.

If the rental property is residential and the lease could be over 18 months, the Consumer Guide to Agency Relationships should be provided to the potential tenant before the earliest of the following events:

  • Pre-qualifying the tenant;
  • Requesting specific financial information;
  • Showing property (other than at an open house);
  • Discussing the making of an offer to lease; or
  • Preparing an offer to lease.

The Consumer Guide is not required for residential leases 18 months or less or commercial, industrial, or retail leases of any duration.

As with the Consumer Guide to Agency Relationships, a licensee is not required to use the Agency Disclosure Statement for residential leases of 18 months or less. However, the Agency Disclosure Statement is required for commercial, industrial or retail leases of any duration and all residential leases over 18 months. On those leases, licensees working directly with a tenant, whether as a tenant’s agent or the landlord’s agent, must provide the tenant with the Agency Disclosure Statement no later than the time the tenant is ready to make an offer to lease the property. The tenant signed Agency Disclosure Statement must be given to the landlord prior to presenting him with the tenant’s offer to lease.

 

Legal articles provided in the OAR Daily Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney. 

Tags: legal, Legally Speaking