How can I help my friend manage a property without a license

Question

My friend in Colorado wants me to manage their property for a fee. In the State of Colorado for this type of business I would apparently need a license, which I am not planning to obtain for a while. My friend and I are in good relationship (fingers crossed, hopefully our business together is not going to ruin this) yet we both want to have something on paper between us. BTW I live in Colorado too.

My question is: what would be a possible arrangement between two of us to have me perform management function and be paid for it without violating the code?

I am not an expert in this but something that comes to my mind is this:

Would it be possible for my friend to setup an LLC, in which I may or may not be a member (that's an open question) and hire me as an employee for this company to manage his own property? Basically this breaks down into a few questions:

- With this arrangement will his participation in LLC, which manages his own property, be treated as "managing his own property" for legal purposes?

- Would my participation in that LLC negate this assertion? Would it be different if I own minority stake?

- Would my being employed by his company and reporting to him as CEO of that company allow me to effectively perform any functions that he delegates me? Meaning from a legal standpoint.

I would appreciate a real advice and not suggestions like "Go get yourself a license" or "Go talk to your attorney" because I am doing this already and that's clearly the way to go yet I am looking for a viable workaround for the time being. Thank you!

JD Martin · Answer

I don't know the specific laws in Colorado, but generally you are going to be safe as long as:1. You don't make independent determination on the tenant;2. You don't make independent actions on default (eviction, etc)'3. You don't act in a fiduciary manner (i.e. holding deposits).If you clear those hurdles, then you can more or less be "contracted help", because your friend will be making the important decisions that would otherwise be made by a property manager. This leaves you with showing properties, processing applications to your friend, coordinating repairs, etc. Those are all things your friend could contract with anyone to perform that wouldn't make them the "property manager". You generally don't want to hold money, determine that the tenant is in default of the lease and act on it, or make the determination of initial tenancy. Those are all licensed events in most states. Everything else will end up in some gray area, and as long as you are doing this "for a friend" and not intentionally circumventing licensing laws to operate as a professional property manager without license, you will probably be OK. I say probably because it's always possible for someone to file a complaint against you, but what you are and are not doing will go a long way towards whether the complaint goes anywhere.

Yvonne H. · Answer

You rent from your friend, with a contract that allows subletting, subject to the requirements set forth in your contract. You sublet to another tenant for an amount higher than what your contractual rent is.

Chris Lopez · Answer

@Denis Khlaponin You just posted to a public forum that is searchable on Google how you can willingly break the law. If anything were to happen, they have a public record of you discussing how to break the law. That's high risk in my book.Plus, if there were a major issue or an insurance claim, you and your friend could be left high and dry. This is speculation, but I see insurance lawyers using this is an immediate out to not cover any claims or lawsuits.Either get your license (it's not hard in CO) or don't take the risk. Low upside, high downside.

Drew Fein · Answer

@Denis K., management of real estate for a fee or compensation requires a real estate license. The statute is broad and pretty all-encompassing. I know it's not what you want to hear, but the previous commenters are correct in that there isn't a workaround. You can self-manage your own property (which requires you own a certain percent of the property), or you can manage property as a licensed CO real estate broker. *NOT LEGAL ADVICE: The information presented is not legal advice, is not to be acted on as such. Communications through this forum do not create an attorney-client relationship.*

Max T. · Answer

Get added to title. Have a written agreement between you and friend. You're allowed to manage any property that you have ownership interest in, with or without a license.

Nathan Gesner · Answer

@Denis Khlaponin I don't think you can do it. READ THIS

Drew Fein · Answer

I believe for purposes of an LLC it's a 20%+ ownership interest, but I'd have to revisit the statute. *NOT LEGAL ADVICE: The information presented is not legal advice, is not to be acted on as such. Communications through this forum do not create an attorney-client relationship.*

Denis K. · Answer

Thank you @Drew Fein! What is the mminimum percentage may I ask?

Denis K. · Answer

Thank you Yvonne. I thought of having master lease with my friend. Of course it has its own pros and cons but the most important question is: would subletting of someone else's property be an activity that require real estate license? How does this work in your state?Anyone could clarify for Colorado?

Denis K. · Answer

Thank you everyone for posting your comments. My question was exactly of how not to break the law. Since I am not a lawyer and genuinely ignorant of the specific statutes in Colorado (and in other states for that matter) I came to this forum to get broader understanding of what would be against the law and what wouldn't.Yet as I stated in my original post talking to a real estate attorney and eventually getting a license is still a plan.Prior to getting the latter I would like to understand in what capacity I can legally help my friend. (I did not solicit their contracting me instead they came to me asking for help. This is more of a courtesy rather than business proposal on my end.)Any constructive suggestions and references like ones from JD Martin, Nathan G and Max T would be much appreciated.