Cape May, NJ · Member since 2015 · 23 posts · 3 votes
Just as the title states Do I need a license to market a sandwich lease option in NJ.
I'm looking at a property that I would like to sadwitch lease option but I'm curious if I market the property for rent am I doing the job of a property manager and in my state a property manager needs a license.
Or am I close enough as the owner where I can market my own property.
Generally, as long as you are acting as the principal to the transaction, you don't need a license. A license for a real estate agent or property manager is for people that earn income/commissions by acting on the behalf of another person to protect and progress their client's interests. You would be acting on your own behalf to protect and progress your own interests.
But, make sure that your lease agreement with the owner/seller acknowledges and approves you as the sandwich lease investor, to be allowed to sublease and market the property under your control during your lease/option term. Its best to have it clearly in writing from the owner granting you permission to handle the property, for your benefit, while its under your control. Just be clear and upfront in disclosing your plans for the property in the beginning. Makes things so much better when everyone understands and agrees, and significantly reduces liabilities...
The exact verbiage and terms would depend on your state's laws and what you and the seller are comfortable with and agree to, in a signed contract.
thank you for the very clear and informative response. I still plan to contact a lawyer but I wanted to gain this information before walking Into the conversation blind.
@Mike B. how is he not acting as an agent and collection a commission in this section?
@William M. it's a wide practice that heavily unregulated but heavily fined by the RE Commission. If they decide you're acting as an agent without a license:
The investor has a lease with a property owner. Investor pays the property owner monthly rent and often an option fee. Agents never pay property owners anything. Investor then has signed agreement/permission from owner to sublease. Investor then locates and screens tenants. Investor charges rent to new tenant that is higher than what investor pays to owner. Investor is often responsible for maintenance and utilities in addition to the monthly rent payment to the owner and will cover rent when vacant. An agent never does these things either. In reality, the investor could actually live in the property, but instead they choose to excerise their permissable ability to sublease the property and profit from the spread during the lease term. In a sandwich lease, the investor remains involved and on the hook as a principal lesee/optionee throughout the lease term. Since the investor is profiting from the spread, the are not actually commissioned by anyone other than themselves. No one has hired the investor to perform any service. The investor holds no fiduciary duty and is not conducting negotiations or making decisions for/on tge behalf/at the benefit of anyone. The investor acts on his own behalf for his own benefit. The property owner never pays a dime to the investor. The new tenant is not even paying a finders fee or any other payment for service, they're just paying rent, as tenants, to the investor who controls the property.
As I mentioned before, all this would depend on your state's laws and what you and the seller are comfortable with and agree to. It may not be appropriate in every case. Investors should always complete their own research, due diligence, and consult with the proper professional services to their satisfaction, and act accordingly in good faith.
For these main concepts is why I and many other investors nationwide do not feel that the investor is performing as an agent.