Commission Rule C-24 allows for management entities. However, the affiliate entity must be under common ownership and control of the ownership entity. The rule does not define what constitutes a controlling interest. Assuming the landlord does require a broker’s license, there are several major areas of regulatory compliance issues that then need to be addressed. Those areas include: disclosure of brokerage relationships, use of non-Commission approved forms, trust account maintenance, creation of a written Office Policy Manual, creation of a written Management Contract and appropriate supervision of non-licensed employees.
DISCLOSURE OF AGENCY RELATIONSHIPS In the traditional sale of real estate, the broker’s role can be difficult for a consumer to judge. Generally, brokers work for either the buyer or the seller. Which party the broker is working for is a critical issue because it dictates whose interest the broker is obligated to look out for, who the broker is obligated to share confidential information with and who is obligated to pay for the broker’s services. The classic confusion of roles came from the interaction of the “listing” broker and the “selling” broker. The listing broker is the person who signs a contract with the seller to put the house on the market as available for sale. It is pretty apparent to everyone involved that the listing broker is working for and represents the seller. The selling broker is the person who brings the buyer’s offer to the transaction. Thinking casually about the interaction, the selling broker would appear to be the buyer’s representative (or agent) in the transaction. However, the selling broker is typically compensated directly by the listing broker with a portion of the listing broker’s commission. This has the legal effect (based on principal/agency laws) of making the selling broker an agent of the listing broker. As the listing broker represents (serves as agent for) the seller, the selling broker as agent for the listing broker becomes a subagent to the seller and legally responsible to the seller. This situation of the selling broker appearing to represent the buyer, but really representing the seller, created reoccurring situations of buyers telling brokers things they shouldn’t and expecting broker loyalty that legally didn’t exist. The buyer was typically left unrepresented in a real estate transaction, even though it was the buyer who was bringing all the money to the table to make the transaction possible. In a typical apartment leasing situation, these sub-agency problems have no practical bearing. When an applicant walks into a leasing office and deals with a leasing representative, there is no implication or question that the agent might be representing the applicant. It is obvious to all involved that the landlord’s staff represents the landlord (in the same way it’s obvious that a grocery clerk represents the store not the shopper).