What Is a Rent-A-Broker?

The term, Rent-a-Broker, in the context of property management, is often detected based on a few aspects of the business model.

Do any of these apply to the California brokerage where you are the Designated Officer and Broker of Record?

  • Undesignated trust account
  • No monthly reconciliations / separate beneficiary records
  • Unauthorized signatory on trust account
  • Unlicensed employees engaging in activity requiring a license
  • Failure to supervise the brokerage’s compliance with the real estate law – meaning you are the broker in name only, often for a relatively low monthly payment

In addition, is the business model one that will comply with the real estate law?

Can the business entity be licensed? Is the proposed broker an officer or director of the corporation?

When a prospective broker-officer applicant completes the required licensing paperwork to become the Designated Officer for a license corporate brokerage, they must agree to the following terms (among others):

I hereby grant to the Real Estate Commissioner of the State of California and his authorized Department of Real Estate representatives, pursuant to Business and Professions Code 10145 and 10146, the authority to examine the financial records of any trust fund account maintained by this corporation in a financial institution, wherever located, for any period of time in which I hold a real estate license or have the right to renewal of such real estate license or which relates to a transaction which occurred when I held such a real estate license. I understand that the information to be obtained from the financial records of the corporation trust fund account(s) is for the purpose of aiding the Commissioner in his statutory duty to enforce the provisions of the Real Estate Law.

Best Practice Tip:

To brokers who have been approached by business investors seeking to hire you in order to launch and operate a property management brokerage – consider an in-depth legal consultation before involving your name and your license with the venture.