Is paying a consultant with no license commission even legal?

Question

OK, so this is something I had no idea about but was just brought to my attention. I used to be a property manager for an apartment community, and I also was responsible for my leasing consultants getting paid their commission every time they got an apartment leased.

I never thought anything of it, but I was speaking to a licensed broker whom informed that "technically speaking", it was illegal for me to actually manage a property as well as pay commission to my agents on the landlord's behalf because I was not a licensed real estate agent nor were any of my agends.

Has anyone ever heard of this? Is this an actual law? I'm looking it up and I can't find anything on it, but this broker definitely knew what he was talking about... This is in the state of Ohio if that helps at all.

Thank you in advance!

Bob Okenwa · Answer

@Isaiah WilliamsI have heard of this and it is an actual law in Arizona. Only licensed individuals can earn a commission for real estate transactions. Not sure how things are in Columbus, but I'd reach out to your states' real estate board/commission/department for clarification on what can and cannot be done without a real estate license.

Jim Cummings · Answer

@Isaiah Williams. If you worked for and only Leased Properties owned by your employer (In Texas) you would be OK. For Example: If you worked for ABC Property Company, and assisted people in Leasing from XYZ then you were in violation of the RE Licensing Act in Texas. If you think, you are in violation of the Licensing Act, I would be very quiet about what you have done in order to not attract attention, and would certainly cease any ongoing activity or stiff fines could be in your future.

James Wise · Answer

Proceed with caution my man. Ohio has issued some HUGE fines for unlicensed activity. Below are some cases where the fines were as high as $1.5 million for unlicensed activity.

James Wise · Answer

How were you paid though? Hourly + commission or what?

James Wise · Answer

Yes he was correct. You must be a licensed agent or broker to earn commissions. One does not need to be a licensed individual if they are leasing properties out for an employer on an hourly or salaried basis. However to be compensated primarily though commissions without being unlicensed is a big no no. Here are the laws in regards to this stuff.4735.01 [Effective Until 3/20/2019] Real estate broker definitions.As used in this chapter:(A) "Real estate broker" includes any person, partnership, association, limited liability company, limited liability partnership, or corporation, foreign or domestic, who for another, whether pursuant to a power of attorney or otherwise, and who for a fee, commission, or other valuable consideration, or with the intention, or in the expectation, or upon the promise of receiving or collecting a fee, commission, or other valuable consideration does any of the following:(1) Sells, exchanges, purchases, rents, or leases, or negotiates the sale, exchange, purchase, rental, or leasing of any real estate;(2) Offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental, or leasing of any real estate;(3) Lists, or offers, attempts, or agrees to list, or auctions, or offers, attempts, or agrees to auction, any real estate;(4) Buys or offers to buy, sells or offers to sell, or otherwise deals in options on real estate;(5) Operates, manages, or rents, or offers or attempts to operate, manage, or rent, other than as custodian, caretaker, or janitor, any building or portions of buildings to the public as tenants;(6) Advertises or holds self out as engaged in the business of selling, exchanging, purchasing, renting, or leasing real estate;(7) Directs or assists in the procuring of prospects or the negotiation of any transaction, other than mortgage financing, which does or is calculated to result in the sale, exchange, leasing, or renting of any real estate;(8) Is engaged in the business of charging an advance fee or contracting for collection of a fee in connection with any contract whereby the broker undertakes primarily to promote the sale, exchange, purchase, rental, or leasing of real estate through its listing in a publication issued primarily for such purpose, or for referral of information concerning such real estate to brokers, or both, except that this division does not apply to a publisher of listings or compilations of sales of real estate by their owners;(9) Collects rental information for purposes of referring prospective tenants to rental units or locations of such units and charges the prospective tenants a fee.(B) "Real estate" includes leaseholds as well as any and every interest or estate in land situated in this state, whether corporeal or incorporeal, whether freehold or nonfreehold, and the improvements on the land, but does not include cemetery interment rights.(C) "Real estate salesperson" means any person associated with a licensed real estate broker to do or to deal in any acts or transactions set out or comprehended by the definition of a real estate broker, for compensation or otherwise.(D) "Institution of higher education" includes all of the following:(1) A state institution of higher education, as defined in section 3345.011 of the Revised Code;(2) A nonprofit institution issued a certificate of authorization under Chapter 1713. of the Revised Code ;(3) A private institution exempt from regulation under Chapter 3332. of the Revised Code, as prescribed in section 3333.046 of the Revised Code.(4) An institution with a certificate of registration from the state board of career colleges and schools under Chapter 3332. of the Revised Code that is approved to offer degree programs in accordance with section 3332.05 of the Revised Code.(E) "Foreign real estate" means real estate not situated in this state and any interest in real estate not situated in this state.(F) "Foreign real estate dealer" includes any person, partnership, association, limited liability company, limited liability partnership, or corporation, foreign or domestic, who for another, whether pursuant to a power of attorney or otherwise, and who for a fee, commission, or other valuable consideration, or with the intention, or in the expectation, or upon the promise of receiving or collecting a fee, commission, or other valuable consideration, does or deals in any act or transaction specified or comprehended in division (A) of this section with respect to foreign real estate.(G) "Foreign real estate salesperson" means any person associated with a licensed foreign real estate dealer to do or deal in any act or transaction specified or comprehended in division (A) of this section with respect to foreign real estate, for compensation or otherwise.(H) Any person, partnership, association, limited liability company, limited liability partnership, or corporation, who, for another, in consideration of compensation, by fee, commission, salary, or otherwise, or with the intention, in the expectation, or upon the promise of receiving or collecting a fee, does, or offers, attempts, or agrees to engage in, any single act or transaction contained in the definition of a real estate broker, whether an act is an incidental part of a transaction, or the entire transaction, shall be constituted a real estate broker or real estate salesperson under this chapter.(I)(1) The terms "real estate broker," "real estate salesperson," "foreign real estate dealer," and "foreign real estate salesperson" do not include a person, partnership, association, limited liability company, limited liability partnership, or corporation, or the regular employees thereof, who perform any of the acts or transactions specified or comprehended in division (A) of this section, whether or not for, or with the intention, in expectation, or upon the promise of receiving or collecting a fee, commission, or other valuable consideration:(a) With reference to real estate situated in this state owned by such person, partnership, association, limited liability company, limited liability partnership, or corporation, or acquired on its own account in the regular course of, or as an incident to the management of the property and the investment in it;(b) As receiver or trustee in bankruptcy, as guardian, executor, administrator, trustee, assignee, commissioner, or any person doing the things mentioned in this section, under authority or appointment of, or incident to a proceeding in, any court, or as a bona fide public officer, or as executor, trustee, or other bona fide fiduciary under any trust agreement, deed of trust, will, or other instrument that has been executed in good faith creating a like bona fide fiduciary obligation;(c) As a public officer while performing the officer's official duties;(d) As an attorney at law in the performance of the attorney's duties;(e) As a person who engages in the brokering of the sale of business assets, not including the sale, lease, exchange, or assignment of any interest in real estate;(f) As a person who engages in the sale of manufactured homes as defined in division (C)(4) of section 3781.06 of the Revised Code, or of mobile homes as defined in division (O) of section 4501.01 of the Revised Code, provided the sale does not include the negotiation, sale, lease, exchange, or assignment of any interest in real estate;(g) As a person who engages in the sale of commercial real estate pursuant to the requirements of section 4735.022 of the Revised Code.(2) A person, partnership, association, limited liability company, limited liability partnership, or corporation exempt under division (I)(1)(a) of this section shall be limited by the legal interest in the real estate held by that person or entity to performing any of the acts or transactions specified in or comprehended by division (A) of this section.(J) "Disabled licensee" means a person licensed pursuant to this chapter who is under a severe disability which is of such a nature as to prevent the person from being able to attend any instruction lasting at least three hours in duration.(K) "Division of real estate" may be used interchangeably with, and for all purposes has the same meaning as, "division of real estate and professional licensing.(L) "Superintendent" or "superintendent of real estate" means the superintendent of the division of real estate and professional licensing of this state. Whenever the division or superintendent of real estate is referred to or designated in any statute, rule, contract, or other document, the reference or designation shall be deemed to refer to the division or superintendent of real estate and professional licensing, as the case may be.(M) "Inactive license" means the license status in which a salesperson's license is in the possession of the division, renewed as required under this chapter or rules adopted under this chapter, and not associated with a real estate broker.(N) "Broker's license on deposit" means the license status in which a broker's license is in the possession of the division of real estate and professional licensing and renewed as required under this chapter or rules adopted under this chapter.(O) "Suspended license" means the license status that prohibits a licensee from providing services that require a license under this chapter for a specified interval of time.(P) "Reactivate" means the process prescribed by the superintendent of real estate and professional licensing to remove a license from an inactive, suspended, or broker's license on deposit status to allow a licensee to provide services that require a license under this chapter.(Q) "Revoked" means the license status in which the license is void and not eligible for reactivation.(R) "Commercial real estate" means any parcel of real estate in this state other than real estate containing one to four residential units. "Commercial real estate" does not include single-family residential units such as condominiums, townhouses, manufactured homes, or homes in a subdivision when sold, leased, or otherwise conveyed on a unit-by-unit basis, even when those units are a part of a larger building or parcel of real estate containing more than four residential units.(S) "Out-of-state commercial broker" includes any person, partnership, association, limited liability company, limited liability partnership, or corporation that is licensed to do business as a real estate broker in a jurisdiction other than Ohio.(T) "Out-of-state commercial salesperson" includes any person affiliated with an out-of-state commercial broker who is not licensed as a real estate salesperson in Ohio.(U) "Exclusive right to sell or lease listing agreement" means an agency agreement between a seller and broker that meets the requirements of section 4735.55 of the Revised Code and does both of the following:(1) Grants the broker the exclusive right to represent the seller in the sale or lease of the seller's property;(2) Provides the broker will be compensated if the broker, the seller, or any other person or entity produces a purchaser or tenant in accordance with the terms specified in the listing agreement or if the property is sold or leased during the term of the listing agreement to anyone other than to specifically exempted persons or entities.(V) "Exclusive agency agreement" means an agency agreement between a seller and broker that meets the requirements of section 4735.55of the Revised Code and does both of the following:(1) Grants the broker the exclusive right to represent the seller in the sale or lease of the seller's property;(2) Provides the broker will be compensated if the broker or any other person or entity produces a purchaser or tenant in accordance with the terms specified in the listing agreement or if the property is sold or leased during the term of the listing agreement, unless the property is sold or leased solely through the efforts of the seller or to the specifically exempted persons or entities.(W) "Exclusive purchaser agency agreement" means an agency agreement between a purchaser and broker that meets the requirements of section 4735.55 of the Revised Code and does both of the following:(1) Grants the broker the exclusive right to represent the purchaser in the purchase or lease of property;(2) Provides the broker will be compensated in accordance with the terms specified in the exclusive agency agreement or if a property is purchased or leased by the purchaser during the term of the agency agreement unless the property is specifically exempted in the agency agreement.The agreement may authorize the broker to receive compensation from the seller or the seller's agent and may provide that the purchaser is not obligated to compensate the broker if the property is purchased or leased solely through the efforts of the purchaser.(X) "Seller" means a party in a real estate transaction who is the potential transferor of property. "Seller" includes an owner of property who is seeking to sell the property and a landlord who is seeking to rent or lease property to another person.(Y) "Resigned" means the license status in which a license has been voluntarily and permanently surrendered to or is otherwise in the possession of the division of real estate and professional licensing, may not be renewed or reactivated in accordance with the requirements specified in this chapter or the rules adopted pursuant to it, and is not associated with a real estate broker.(Z) "Bona fide" means made in good faith or without purpose of circumventing license law.(AA) "Associate broker" means an individual licensed as a real estate broker under this chapter who does not function as the principal broker or a management level licensee.(BB) "Brokerage" means a corporation, partnership, limited partnership, association, limited liability company, limited liability partnership, or sole proprietorship, foreign or domestic,that has been issued a broker's license. "Brokerage" includes the affiliated licensees who have been assigned management duties that include supervision of licensees whose duties may conflict with those of other affiliated licensees.(CC) "Credit-eligible course" means a credit or noncredit-bearing course that is both of the following:(1) The course is offered by an institution of higher education.(2) The course is eligible for academic credit that may be applied toward the requirements for a degree at the institution of higher education.(DD) "Distance education" means courses required by divisions (B)(6) and (G) of section 4735.07, divisions (F)(6) and (J) of section4735.09, and division (A) of section 4735.141 of the Revised Code in which instruction is accomplished through use of interactive, electronic media and where the teacher and student are separated by distance or time, or both.(EE) "Licensee" means any individual licensed as a real estate broker or salesperson by the Ohio real estate commission pursuant to this chapter.(FF) "Management level licensee" means a licensee who is employed by or affiliated with a real estate broker and who has supervisory responsibility over other licensees employed by or affiliated with that real estate broker.(GG) "Principal broker" means an individual licensed as a real estate broker under this chapter who oversees and directs the operations of the brokerage.Amended by 131st General Assembly File No. TBD, HB 532, §1, eff. 4/6/2017.Amended by 129th General AssemblyFile No.127, HB 487, §101.01, eff. 9/9/2012.Amended by 129th General AssemblyFile No.28, HB 153, §101.01, eff. 9/29/2011.Effective Date: 04-05-2002; 10-12-2006; 2008 HB562 09-22-2008 .Note: This section is set out twice. See also § 4735.01, as amended by 132nd General Assembly File No. TBD, SB 263, §1, eff. 3/20/2019.

Isaiah Williams · Answer

@James WiseTo be fair, they did make it a requirement for me to enroll in the courses to get my license and I'm still working towards it today, but after that they allowed me to do commission.

James Wise · Answer

Lol. Well when you guys were hourly it was legal. So that's cool at least lol. Once you made the switch to commission only it was definitely a license law violation. Hourly is fine. Hourly with bonus is fine. Commission only requires a license.

Isaiah Williams · Answer

@James WiseStraight commission. I was started off hourly and I'll admit I was the one whom asked to be taken off hourly and just do commission. I made a lot more that way and they were quick to say yes.

Isaiah Williams · Answer

@Bob OkenwaYeah I got all the details about it as well from them... It's definitely illegal. It honestly looks like it is in all states unless you are being paid by the hour as well as a small commission

Isaiah Williams · Answer

@James WiseOh my gosh.... I'm reading all of this (only about half way through) and there is nearly a dozen major violations the company I used to work for are involved in. I truly had no idea though. This is a major rental company with over 7000 units and 15 communities throughout the city.... Thank you so much for all of this info I need to do A LOT of research on how to frame my own business. A lot of this I had no idea I was in violation of as well!!!