At their meeting on April 6, 2021, the Colorado Real Estate Commission (“the Commission”) adopted revisions to Commission Position Statement 20. This important position statement provides the real estate broker with guidance regarding the broker’s supervision responsibilities regarding unlicensed and licensed Real Estate Administrative Professionals (“REAPs”) as employees or independent contractors, and the tasks that they are allowed to perform on behalf of brokers.
“REAPs” typically consist of unlicensed on-site managers, assistants, bookkeepers, transaction coordinators, short sale coordinators, and secretaries to name a few. This position statement helps to clarify the duties that a licensed “REAP” can perform versus those of one that is unlicensed. The position statement further discusses the brokerage relationship that is necessary under the particular circumstances and what the broker’s responsibilities are in relation to that individual.
It is imperative that a broker working with a real estate administrative professional understands and adheres to the applicable statutes and Commission rules that apply when utilizing these professionals. A review of these applicable sections below in conjunction with the revised Commission Position Statement 20 will provide insight and direction on how to stay compliant when a broker has a “REAP” perform functions on their behalf.
§12-10-221, C.R.S. (Broker Remuneration), sets forth that it is unlawful for a real estate broker in the employ of another broker to accept a commission or valuable consideration for the performance of brokerage services from any person except the broker’s employer, who shall be a licensed real estate broker.
§12-10-222, C.R.S. (Acts of Third Parties–Broker’s Liability), states that a broker can be liable for the actions of a third party if the real estate broker had actual knowledge of an unlawful act or violation or had been negligent in the supervision of employees.
Rule 1.58. (Unlicensed On-Site Manager), sets forth this definition as: an unlicensed person who fills in blanks, as a scrivener, on lease forms, shows prospective tenants available units, quotes rental prices established by the owner or Broker, arranges for maintenance, and collects monies, including security deposits and rents. A brokerage firm which employs an unlicensed on-site manager must do so either as a regularly salaried employee or as an independent contractor, and pay the unlicensed on-site manager through the brokerage firm. The salary may include rent value or other non-commission income.
Rule 5.1. (Establishment of Internal Accounting Controls) states that a brokerage firm or broker who receives money belonging to others must establish written accounting control policies and procedures,which must include adequate checks and balances over the financial activities of the broker, brokerage firm, and unlicensed persons, as well as manage the risk of fraud or illegal acts.
Rule 5.3.C. (Accounts in the Name of the Brokerage Firm or Broker), sets forth that the employing broker or independent broker are responsible for, must maintain and be able to withdraw money from each separate account, but may authorize other licensed or unlicensed cosigners. However, such authorization will not relieve the employing broker or independent broker of any responsibility under the Commission statutes and these rules.
Rule: 6.3.A.2. (Employing Broker’s Responsibilities and Supervision), states an employing broker must also supervise all unlicensed employees, including, but not limited to, unlicensed on-site managers, secretaries, bookkeepers, and personal assistants of associate brokers.
Rule: 6.3.E. (Supervision of Unlicensed On-Site Manager), states an employing broker must:
- Actively and diligently supervise all activities of any unlicensed on-site manager or delegate that supervisory authority;
- Require the unlicensed on-site manager to report directly to either the employing broker or a supervisory broker;
- Require the unlicensed on-site manager to account for and remit all monies, including rents and security deposits, collected on behalf of the employing broker or owner to the employing broker or supervisory broker;
- Ensure that property maintenance scheduled by the unlicensed on-site manager is performed in accordance with the property management agreement; and
- Instruct the unlicensed on-site manager not to negotiate any of the material terms of a lease or rental agreement with a consumer.