Obligations of property managers in NJ: Are You Violating the Law?

 

An employee must be licensed if they list a unit for sale or lease (this would include preparing or placing advertisements – offering or attempting to offer real estate or an interest therein or soliciting/assisting or directing in the procuring of prospects) negotiating or signing a lease, collecting or attempting to collect rent, and negotiating a loan secured or to be secured by mortgage or other encumbrance upon or transfer of any real estate for others … 
Some employees need not be licensed, including secretaries, bookkeepers, construction or maintenance personnel, or independent contractors who service the utilities, but do not have contact with tenants or prospective tenants.
Titles are sometimes misleading and cannot be relied upon; it is the actual function that makes the difference. For example, a “superintendent” who makes repairs and manages utilities would not be considered involved in a real estate transaction, but if that “superintendent” negotiated leases or collects rent, then that person would be considered as engaging in a real estate transaction, and would have to be licensed by the appropriate State Agency. 
According to New Jersey statute (N.J.S.A. 45:15-1) no person shall engage either directly or indirectly in the business of a real estate broker, broker-salesperson, salesperson or referral agent, temporarily or otherwise, and no person shall advertise or represent himself as being authorized to act as a real estate broker, broker-salesperson, salesperson or referral agent, or to engage in any of the activities described in R.S.45:15-3, without being licensed so to do as hereinafter provided.
As defined by N.J.S.A. 45:15-2 "Engaging in business" is any single act, transaction or sale shall constitute engaging in business within the meaning of this article.
The difference between a “broker” “salesperson” “broker-salesperson” or “referral agent” is spelled out in the legislation. That is to say, a broker is essentially self-employed, whereas the other categorized persons are employed by and operate under the supervision of a licensed real estate broker.
(N.J.S.A. 45:15-3) A real estate broker, for the purposes of R.S.45:15-1 et seq., is defined to be a person, firm or corporation who, for a fee, commission or other valuable consideration, or by reason of a promise or reasonable expectation thereof, lists for sale, sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of real estate or an interest therein, or collects or offers or attempts to collect rent for the use of real estate or solicits for prospective purchasers or assists or directs in the procuring of prospects or the negotiation or closing of any transaction which does or is contemplated to result in the sale, exchange, leasing, renting or auctioning of any real estate or negotiates, or offers or attempts or agrees to negotiate a loan secured or to be secured by mortgage or other encumbrance upon or transfer of any real estate for others …
A real estate salesperson, for the purposes of R.S.45:15-1 et seq., is defined to be any natural person who, for compensation, valuable consideration or commission, or other thing of value, or by reason of a promise or reasonable expectation thereof, is employed by and operates under the supervision of a licensed real estate broker to sell or offer to sell, buy or offer to buy or negotiate the purchase, sale or exchange of real estate, or offers or attempts to negotiate a loan secured or to be secured by a mortgage or other encumbrance upon or transfer of real estate, or to lease or rent, or offer to lease or rent any real estate for others, or to collect rents for the use of real estate, or to solicit for prospective purchasers or lessees of real estate, or who is employed by a licensed real estate broker to sell or offer to sell lots or other parcels of real estate, at a stated salary, or upon a commission, or upon a salary and commission, or otherwise to sell real estate, or any parts thereof, in lots or other parcels. [Italics added, to emphasize the activities commonly included in the services of a “property manager.”]
A real estate broker-salesperson, for the purposes of R.S.45:15-1 et seq., is defined to be any natural person who is qualified to be licensed as a real estate broker but who, for compensation, valuable consideration or commission, or other thing of value, or by reason of a promise or reasonable expectation thereof, is employed by and operates under the supervision of a licensed real estate broker to perform the functions of a real estate salesperson as defined herein.
A real estate referral agent, for the purposes of R.S.45:15-1 et seq., is defined to be any natural person employed by and operating under the supervision of a licensed real estate broker whose real estate brokerage-related activities are limited to referring prospects for the sale, purchase, exchange, leasing or rental of real estate or an interest therein. Referral agent licensees shall only refer such prospects to the real estate broker through whom they are licensed as a referral agent and shall only accept compensation for their activity as a referral agent from that broker. A referral agent shall not be employed by or licensed with more than one real estate broker at any given time. No person may simultaneously be licensed as a referral agent and a real estate broker, broker-salesperson or salesperson and no person licensed as a referral agent may engage in the business of a real estate broker, broker-salesperson or salesperson to an extent beyond that authorized by their status as a licensed real estate agent.
No person, firm, partnership, association or corporation shall bring or maintain any action in the courts of this State for the collection of compensation for the performance of any of the acts mentioned in R.S.45:15-1 et seq. without alleging and proving that he was a duly licensed real estate broker at the time the alleged cause of action arose.
No person claiming to be entitled to compensation as a referral agent, salesperson or broker-salesperson for the performance of any of the acts mentioned in R.S.45:15-1 et seq. shall bring or maintain any action in the courts of this State for the collection of compensation against any person, firm, partnership or corporation other than the licensed broker with whom the referral agent, salesperson or broker-salesperson was employed at the time the alleged cause of action arose and no action shall be brought or maintained without the claimant alleging and proving that he was a duly licensed real estate referral agent, salesperson or broker-salesperson at the time the alleged cause of action arose.
It is irrelevant who (whether an owner or a tenant) provides the compensation to a person performing any of the services listed above: Per (N.J.S.A. 45:15-17) m. Accepting a commission or valuable consideration as a real estate broker-salesperson, salesperson or referral agent for the performance of any of the acts specified in this act, from any person, except his employing broker, who must be a licensed broker; or r. Charging or accepting any fee, commission or compensation in exchange for providing information on purportedly available rental housing, including lists of such units supplied verbally or in written form, before a lease has been executed or, where no lease is drawn, before the tenant has taken possession of the premises without complying with all applicable rules promulgated by the commission regulating these practices. 
This article was prepared by Mahlon Fast, J.S.C. Ret. currently counsel with Ehrlich, Petriello, Gudin & Plaza, P.C. headquartered in Newark, NJ. It is not, nor is it intended to be, legal advice. You should consult an attorney or other qualified professional to discuss your particular matter. Judge Fast can be reached at (973) 854-6713 or by e-mail at Mfast@epgp-law.com

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