Investor · Bloomfield, CT · Member since 2016 · 86 posts · 25 votes
In Connecticut, I understand that property managers hired by property owners must be licensed.
One of the exceptions is if you're managing your own property or you're an on-site employee managing the property.
Here's my question. If I buy a property with a partner under a 50/50 LLC, can I setup a separate DBA to receive rent checks that are simply passed through 100% to the LLC (e.g., there's no fee for the property management service)?
Alternatively, can I just setup a DBA or assumed name for the LLC itself and use that?
Real Estate Broker · Hugo, MN · Member since 2016 · 688 posts · 596 votes
10y
Your law sound similar to mn state law. The intent of the law is to keep people without knowledge of fair housing, deposit funds, etc from setting up shop without a licensed broker overseeing them.
The law is meant to protect the investor and renters (the exception is for the owners is because it isn't right for a owner to not to be able to rent there own property and would result in many properties being empty for longer periods)
As an owner setting up the dba is not circumventing anything so long as you have an interest in the property. We set up dba llcs for each individual property.
This is just my understanding of the law in my state. Be sure to speak to an attorney to be sure.
Real Estate Broker · Granby, CT · Member since 2015 · 694 posts · 317 votes
10y
A non owner is not allowed to collect rent money without being a licensed property manager or real estate broker. Be very careful. depositing "client funds," is delicate.
Real Estate Broker · Hugo, MN · Member since 2016 · 688 posts · 596 votes
10y
Your law sound similar to mn state law. The intent of the law is to keep people without knowledge of fair housing, deposit funds, etc from setting up shop without a licensed broker overseeing them.
The law is meant to protect the investor and renters (the exception is for the owners is because it isn't right for a owner to not to be able to rent there own property and would result in many properties being empty for longer periods)
As an owner setting up the dba is not circumventing anything so long as you have an interest in the property. We set up dba llcs for each individual property.
This is just my understanding of the law in my state. Be sure to speak to an attorney to be sure.
Hi Phillip, where in the law does it say the managers need to be licensed? Can you point me to that information?
Craig, please see bold/underlined text below from CT Law:
Sec. 20-311. Definitions. As used in this chapter, unless the context otherwise requires:
(1) “Real estate broker” or “broker” means (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, or a resale of a mobile manufactured home, as defined in subdivision (1) of section 21-64, or collects or offers or attempts to collect rent for the use of 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;
Investor · Bloomfield, CT · Member since 2016 · 86 posts · 25 votes
10y
@Rick Santasiere and @Jonathan Makovsky, I'm trying to reconcile the language to make sure what I want to do is OK (short of talking to an attorney, which comes next).
First, the statue Jon quotes includes the phrase "and for a fee, commission or other valuable consideration" as a prerequisite to the list of things a broker does (including collecting rent). If I'm passing through 100% of the rent from the collecting party to the owner, that doesn't seem to violate this statute.
"...no licensing is required if the business is hired to maintain the grounds, collect rent or perform bookkeeping services but will not be showing property or negotiating leases."
In my example, the rent-collection business would:
Collect rent (but do no other activities)
Pass through rent 100% so would not be receiving compensation (that's the definition of "hired" isn't it?)
It seems that there should be no issue with setting up a DBA or LLC simply to collect rent, without being a broker, since it is for no fee/commission/consideration of any kind.
Real Estate Broker · Granby, CT · Member since 2015 · 694 posts · 317 votes
10y
It almost makes perfect sense that if you are a member of the LLC or DBA you could collect the rent, but I am not an attorney. I would call the state to make sure your interpretation is correct.