Going to jail for managing without license?

[Curtis N.]

In Virginia, a property manager must have a brokers license. What happens if your clients are okay with the fact that you don't have ANY license? Do they throw you in jail for managing someone else's property?! Seriously though, what's the risk to the PM for operating without the license? I was asked by a friend to manage his property when he's out of the country for an extended period. He has a very expensive home in Arlington and trusts me to care for it more than some actual PM. I told him I would do it as a favor for very little money but now that I'm starting to think about all the rules, I'm having second thoughts. I already have an LLC that's under my umbrella liability policy that I'm using for my own management so that is there but from the license standpoint, I got nothin'. I know that I can just outsource to a broker but A) that defeats the point if someone else actually ends up managing it - he doesn't want that and B) I'm not charging him enough to cover outsourcing. I was considering doing a workaround like me actually signing a lease with him and then sub-leasing it out while passing him the collected rent minus my fee as my actual rent. However, his employer is going to reimburse him for his PM fees because of the job move, but in order for that to happen, they need invoices from a company stating the fees so this method wouldn't really work for that. Thoughts??

[Lisa Doud]

Curtis,

  First let me state that I was in the same position as you are right now in april of 2009.  My husband an I had 15 units, and a lot of the people at his Command where he worked (he was active duty Navy) were transferring and asked for help managing their property while they were gone.  So I like you already had my property management S corp opened, and went to register for NARPM (National Association of Residential Property Manager's) and I was very disappointed when I found out that they wouldn't accept me because Virginia Required that you have a minimum Sales licenses.  

Then I started doing my research, and this is what I found out.   

Code of Virginia § 54.1-2105.2. Cease and desist orders for unlicensed activity; civil penalty.

A. Notwithstanding any other provision of law, the Board may issue an order requiring any person to cease and desist from acting as a real estate broker or salesperson when such person is not licensed by the Board in accordance with this chapter. The order shall be effective upon its entry and shall become final unless such person files an appeal with the Board in accordance with the Administrative Process Act (§ 2.2-4000 et seq.) within 21 days of the date of entry of the order.

B. If the person fails to cease and desist the unlicensed activity after entry of an order in accordance with subsection A, the Board may refer the matter for enforcement pursuant to § 54.1-306.

C. Any person engaging in unlicensed activity shall be subject to further proceedings before the Board and the Board may impose a civil penalty not to exceed $1,000 for any real estate transaction or the compensation received from any such real estate transaction, whichever is greater. Any penalties collected under this section shall be paid to the Literary Fund after deduction of the administrative costs of the Board in furtherance of this section.

So the answer to your question is No you will not go to jail, however you can face a pricey Penalty. 

But there are also exemptions, and and here is the other part....

• §54.1-2103 Exemptions
• a.The provision of this chapter shall not apply to:
• 1.Any person, partnership, association or corporation, on their regular employees, who as owner or lesser perform any of the acts enumerated in §54.1-2101 with reference to property owned leased by them, where the acts are performed in the regular course of or the management of a property and its investment therein;
• 2.Any person acting without compensation as attorney-in-fact under a power of attorney issued by a property owner solely for the purpose of authorizing the final performance required of such owner under a contract for the sale lease purchase, or exchange of real estate;
• 3.Services rendered by an attorney-at law in the performance of his duties as such;
• 4.A person acting as a receiver, trustee in bankruptcy, administrator or executor, any person selling real estate under order of the court;
• 5.A trustee under a trust agreement, deed of trust, or will, or the regular salaried employee thereof;

So if you are not interested in getting licensed, and don't want to manage any more, then I would say have your friend give you a power of attorney to manage the property for him.  

If you want to be licensed (which might be a good thing for you as an investor) you need to do your research and find a real estate firm that you can affiliate with that won't charge you an arm and leg.  

Hopefully hou have got the answers that you need.

Take care