CT Association of Realtors Issues Real Estate Licensing Warning to Builders:
(from HBA of CT LETTER, Sept./Oct. 2002, p.5-6)
In order to avoid action by the Connecticut Real Estate Commission, the CT Association of Realtors (C.A.R.) has informed us that, based on complaints received by C.A.R. from its members, too many home builders are under the mistaken impression that their employees are exempt from real estate licensing.
As defined in state statute (see below), if employees of a builder sell to or negotiate the sale of homes with buyers, the employee needs to be licensed as a real estate broker, or at least a real estate agent working under a licensed broker. This Special Supplement to the HBA of CT LETTER clarifies the law for our builder members on the issue.
Confusion over the builder employee issue dates back to 1987 when the employee exemption was changed. But as background, builders should note that a broker is defined in CT general statutes, at section 20-311, as:
“(A) any person, partnership, association, limited liability company or corporation which acts for another person or entity and for a fee, commission or other valuable consideration, lists for sale, sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of, an estate or interest in real estate …., and (B) any person, partnership, association, limited liability company or corporation employed by or on behalf of the owner or owners of lots or other parcels of real estate, at a stated salary, upon commission, upon a salary and commission basis or otherwise to sell such real estate, or any parts thereof, in lots or other parcels, and who sells or exchanges, or offers, attempts or agrees to negotiate the sale or exchange of, any such lot or parcel of real estate.”
The operative language of the broker definition is acting for another and for a fee (which includes regular employee compensation). The owner and employee exceptions are as follows:
“Sec. 20-329. Exceptions concerning the licensure of brokers and salespersons. The provisions of this chapter concerning the licensure of real estate brokers and real estate salespersons shall not apply to: (1) Any person who as owner or lessor performs any of the acts enumerated in section 20-311, with reference to property owned, leased or sought to be acquired or leased by the person, or to the person’s regular employees who are employed as on-site residential superintendents or custodians, with respect to the property so owned or leased or sought to be acquired or leased when such acts are performed in the regular course of, or incident to, the management of such property and the investment therein; ….[exceptions (2) through (10) are not applicable].”
Public Act 87-319 added the underlined language above.
In 1997 (ten years after the owner’s employee exemption was narrowed), some absurd confusion surfaced regarding whether an owner of a building business himself, since company owners are also employees of such company, had to meet the narrow employee exemption of the statute to sell the business’s real estate.
At that time, to clarify that owners of a building business are exempt from real estate licensing regardless of their own functions as an employee, the HBA of CT presented certain questions to C.A.R. and to the Dept. of Consumer Protection (DCP) (which regulates real estate brokers and salespersons). Our owner exemption questions were answered by the Real Estate and Professional Trades Division of DCP in August 1997 and verified the following:
We were advised by legislative leaders at the time that there was no need to seek any owner exemption clarification because the law was on our side. But, as pointed out in C.A.R.’s most recent letter to us, while owners are exempt from real estate licensing, that does not exempt the need for non owner employees to be properly licensed. Unless the narrow statutory definition of the employee exemption is met, non owner employees must be licensed as a broker, or at least as a salesperson working under a licensed broker.
This was confirmed in a 1999 Declaratory Ruling of the Connecticut Real Estate Commission (Docket No, DR99-1), which states:
“[W]e interpret the [employee exemption from licensing] as requiring all of the following conditions for the exception to apply: the individual must (1) be a regular employee, (2) be employed as a superintendent or a custodian, (3) work on a residential site where he engages in licensed activities; and (4) reside at the location where he works and engages in those activities.”
Any individual employee of a business, including an owner, can become a licensed broker to sell the real estate of that business and other employees can become licensed salespersons working under that broker.
Another alternative is to give any person selling or negotiating the sale of real estate, or performing any of the functions outlined in sec. 20-311, an ownership interest in the business that owns the real estate. Such person would then meet the ownership exception.
We hope this information assists you in understanding the real estate licensing laws regarding owners and employees of building businesses who sell homes or manage their own real estate. If you have any questions, please call Bill Ethier, the HBA of CT’s EVP/CEO at 860-216-5858.