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Management Companies – Act Now on Real Estate Commission Threat

A report of the CAI Pennsylvania Legislative Action Committee
Ed Hoffman, Esq., CCAL, Chair
Marshal Granor, Esq., CCAL, Delegate

As we have reported previously, a community association manager is being prosecuted by the Pennsylvania Real Estate Commission (the “REC”) for practicing “property management” without a real estate broker’s license. This is extremely important because REC’s argument is that they are empowered to oversee “property management.” Therefore, REC believes that they must regulate community association management companies.

In a recent virtual meeting of management companies of the chapter, two thirds of participating management companies indicated they do not have a real estate broker’s license. Should an unfavorable decision by the Real Estate Commission occur, the costs of compliance for every community association management company managing in Pennsylvania will be considerable. (Click here to view the session slides from this meeting)

What’s the difference between property management and community association management? According to CAI’s M100: Essentials of Community Association Management course, the role of a community association manager includes:

  • Roles and responsibilities of owners, committees, and board members
  • 10 steps to developing rules
  • How to maintain records for legal support of board actions
  • Manager’s role in organizing and assisting in board meetings
  • Manager’s role in preparing the draft budget
  • Seven characteristics of an effective collection policy
  • Overview of financial operations
  • Characteristics of insurance as a contract
  • How to develop effective maintenance records
  • How to prepare a bid request for RFP
  • Key contract provisions

This role is dramatically separate and distinct from the role of a Real Property Leasing Agent and/or Real Estate Broker:

  • List properties for sale or rent
  • Prepare leases
  • Show properties for rent
  • Help the landlord to select owners or occupants
  • Perform credit checks
  • Perform criminal background checks
  • Collect rent & remit to landlord
  • Collect and hold security deposits, per statute
  • Properly dispose of security deposits
  • Enter into a property management contract with a landlord-owner
  • Assist landlord with ordering and overseeing repairs
  • Rehabilitate an individual dwelling to prepare for new occupancy.

Should the current REC enforcement action result in an unfavorable outcome for the management company in question, every community association management company in the Commonwealth of Pennsylvania will likely be required to have a PA Broker’s license to continue to manage community associations. In order to have and maintain a PA Broker’s license, you need to:

  • Be 21 or over and a high school graduate
  • Complete 16 credits (240 hours) approved broker real estate education
  • Have worked three (3) years as a licensed real estate salesperson
  • Document 200 points earned by specific real estate sales and rental experience (selling, listing, renting, etc.)
  • Pass the Brokers’ license exam

CAI anticipates that a hearing will be scheduled soon in this case. If the REC finds the manager guilty of performing real estate tasks without a broker’s license, there will be fines and sanctions. This will likely open the door to additional prosecutions of community association management firms throughout the Commonwealth of Pennsylvania. The alternative of conceding to the REC and getting a real estate brokers license is expensive and time consuming.

Note that the REC also expects all the community association managers working for a licensed firm will, themselves, also be licensed.  Obviously, unless you or someone in your organization already has a real estate broker’s license and uses it for your CIOC management, to get a Broker’s license at the very least would take four to five years, and each individual manager also the time and expense for classes and exams.

What can you do right now?

CAI recommends you contact the Pennsylvania State Real Estate Commission and tell them that your company does not manage real estate and you should not be regulated as a real estate broker. Contact information is below:

Pennsylvania State Real Estate Commission
P.O. Box 2649, Harrisburg, PA 17105-2649
Phone – (717) 783-3658
Fax – (717) 787-0250

Also, we recommend you, your managers and homeowners in your community associations contact your state senator and state representative to educate them on this important issue. Click this link to find out who you state legislators are.

CAI will keep you updated on this issue.