I’m New to North Carolina,
Is My Management Company Required to Have a Broker-In-Charge?
By: Kristen Wills – North Carolina and Virginia Licensed Managing Attorney with Brownlee Whitlow & Praet, PLLC
As a general rule, in North Carolina, a commercial or residential property manager must be a licensed real estate broker. (NC. Gen. Stat. 93A-1). A Real Estate Broker, as described in the Real Estate License Law, is any person, partnership, corporation, limited liability company, association, or other business entity who, for compensation or valuable consideration, negotiates the purchase or sale or exchange of real estate, or who leases or offers to lease, or who sells or offers to sell leases of whatever character, or rents or offers to rent any real estate or the improvement thereon for others. (N.C. Gen. Stat. 93A-2(a)). As such, any person or company that transacts real estate business, which includes management of residential rental housing for compensation, must first obtain a real estate license with the North Carolina Real Estate Commission, unless they qualify for the limited exemption. Failure to comply with this rule could result in cease-and-desist letters directing management to obtain license or cease management. In addition, failure to comply with this rule could lead to civil and criminal penalties.
A common myth within the industry is that a property owner who creates a separate management company to manage a number of properties owned by that owner, does not need to be licensed by the North Carolina Real Estate Commission if that owner of the property and management entity share a common ownership. If the property owner owns a management company to manage its property, the member or principal owner of that management company will need to have a license to be a broker in charge unless the exemption applies. The exemption in North Carolina only applies when the closely held business entities (Owner of Property and Management Company) have no more than two owners; one owner is a common owner; and that owner owns at least 50% interest in both of the business entities involved, i.e. the Owner of the Property and Management Company. Notice that all three elements must be met for the exemption to apply. This situation is rare, and in all other cases the Management Company’s member or principal must be a licensed broker in charge.
As such, if you are thinking about securing commercial or residential rental property assets in North Carolina along with creating a separate management company, or if your management company finds that it requires a licensed broker in charge, please plan ahead. One challenge in the licensure process is identifying a qualifying real estate broker and a broker in charge. As the qualifying broker must be a manager of the management company. Otherwise, you would need to seek a qualifying broker via third-party vendor, and such a vendor would have to become a manager or owner of the management company. Failure to comply with the rules of the North Carolina Real Estate Commission can lead to disciplinary actions, license suspension, or a letter of reprimand. If you need assistance in working through these challenging issues please don’t hesitate to reach out to our office!
*The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information in this article is for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. Viewers of this material should contact their attorney to obtain advice with respect to any particular legal matter. No viewer of this material should act or refrain from acting on the basis of information in this presentation without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this article does not create an attorney-client relationship between the reader and Brownlee Whitlow & Praet, PLLC or any contributing law firms. All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed.