REAL ESTATE ‑- LICENSES ‑- SALE ‑- RESPONSIBILITIES OF LICENSED REAL ESTATE SALESMAN AND HIS BROKER UNDER CERTAIN CIRCUMSTANCES

REAL ESTATE ‑- LICENSES ‑- SALE ‑- RESPONSIBILITIES OF LICENSED REAL ESTATE SALESMAN AND HIS BROKER UNDER CERTAIN CIRCUMSTANCES

A licensed real estate salesman, in engaging in rental transactions involving his own, personally owned, real property, is not statutorily required to process those transactions through his real estate broker; however, the broker may, as a condition of employment, impose such a requirement and, in any event, could, depending upon all factual circumstances, be held legally responsible for his salesman's conduct in connection with the latter's rentals of his own property.

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                                                                 October 5, 1978

Honorable Richard M. "Dick" Bond
State Representative
427 House Office Building
Olympia, Washington 98504                                                                                                               Cite as:  AGLO 1978 No. 32

Dear Sir:

            By recent letter you posed the following factual situation:

            "Licensed real estate salesman or associate broker 'A' works for and is licensed under Broker 'B'.  'A' owns in his own right a small apartment and an office building.  He manages said properties himself, seeks his own tenants, collects his own rents, etc., always revealing the fact that he is a licensed salesman or associate broker but not running any of these transactions through Broker 'B'."

            You then requested our opinion on two related questions which we paraphrase as follows:

            (1) Is "A" required to process his rental transactions through his broker, "B's," office?

             [[Orig. Op. Page 2]]

            (2) Is broker "B" in some manner responsible for those transactions even though they are not processed through his office?

            We respond to your first question in the negative as qualified in our analysis and your second question in the manner stated therein.

                                                                     ANALYSIS

            The real estate licensing act, in RCW 18.85.110, provides an exemption from the act for the following:

            ". . . (1) any person who purchases property and/or a business opportunity for his own account, or that of a group of which he is a member, or who, as the owner or part owner of property, and/or a business opportunity, in any way disposes of the same; . . . (5) any owner of rental or lease property, members of the owner's family whether or not residing on such property, or a resident manager of a complex of residential dwelling units wherein such manager resides; nor, (6) any person who manages residential dwelling units on an incidental basis and not as his principal source of income so long as that person does not advertise or hold himself out to the public by any oral or printed solicitation or representation that he is so engaged."

            Question (1):

            From the limited facts supplied, and unless there are some undisclosed facts to the contrary, we would conclude that "A" would not be required to obtain a real estate license in order to engage in his personal rental activities.  We find no provisions either in chapter 18.85 RCW or in the state real estate division's regulations (chapter 308-24 WAC) which require a licensed salesman's personal rental activities to be processed through his broker's office.  Our direct answer to your first question, as a matter of law, is thus in the negative.

            This response does not, however, mean that it would be improper for the real estate broker, "B," to require, as a  [[Orig. Op. Page 3]] condition of association with his real estate salesmen, that any such personal transactions involving their own real estate be processed through the broker's office.  The lack of certainty as to the broker's responsibility for such personal real estate transactions by his salesmen, as next explained in response to your second inquiry, could form the basis for such a requirement by the broker.

            Question (2):

            The real estate act provides that a real estate salesman's license must be retained by his designated broker.  RCW 18.85.320.  The act also makes the broker responsible for the conduct of such licensees, as follows:

            "Responsibility for any salesman, associate broker or branch manager in conductcovered by this chapter shall rest with the broker to which such licensees shall be licensed.

            ". . ."  (RCW 18.85.155) (Emphasis supplied)

            A failure by the broker to meet this responsibility constitutes a basis for the suspension or revocation of the broker's license.  See, RCW 18.85.230(25) which states this ground as follows:

            "(25) In the case of a broker licensee, failing to exercise adequate supervision over the activities of his licensed associate brokers and salesmen within the scope of this 1972 amendatory act;"

            As earlier explained in responding to your first question, the activity of an owner in renting his own property can be performed in a manner which is entitled to an exemption from the real estate act.  Therefore, the individual engaging in that activity is not required to obtain a real estate license.  However, in the situation which you have described, the individual who is engaging in that activity is also licensed as a real estate salesman under chapter 18.85 RCW.

            RCW 18.85.230, in providing grounds for the suspension or revocation of a license, authorizes a suspension to be based upon actions by a licensee "regardless of whether the transaction was for his own account or in his capacity as a broker. . . ."  Thus, under the license suspension statute, if "A," in  [[Orig. Op. Page 4]] managing the rental of his own property, engages in activities which would constitute grounds for the revocation or suspension of his license as enumerated in RCW 18.85.230, such an action could be commenced and sustained notwithstanding the fact that the activities were for his own account rather than in a representative capacity.  Thus, "A's" conduct in real estate transactions is to that extent covered by the real estate licensing law by virtue of the fact that he possesses a real estate license.

            With that in mind we turn, once again, to RCW 18.85.155, which makes the real estate broker responsible for his licensed salesmens' "conduct covered by this chapter."  Further, as we have earlier noted, under RCW 18.85.230(25) the broker has an obligation to exercise adequate supervision over the activities of his licensed salesmen.

            In the final analysis, the question of whether a real estate broker has met that obligation in a given case will involve a factual determination in light of the total circumstances.  The fact that those circumstances involved a transaction by a licensee which was not required to be, and was not, processed through the broker's office would be a factor which would substantially diminish the responsibility of the broker.  We do not, however, believe that this factor, by itself, would entirely eliminate the broker's responsibility.

            We trust that the foregoing will be of assistance to you.

Very truly yours,

SLADE GORTON
Attorney General

EDWARD B. MACKIE
Deputy Attorney General