A clarification of licensure requirements for paid property services and vacation rental activities was recently published as a licensee advisory by the California Bureau of Real Estate (CalBRE).

The advisory is the CalBRE’s response to complaints against sales agents and unlicensed individuals attempting to apply the “transient occupancy” exemption from real estate licensing to perform rental activities requiring a license.

When is a license required for property management?

An individual or corporation is required to hold a broker license when they perform any of the following services on behalf of another in exchange for a fee:

  • listing real estate for rent or lease;
  • marketing the property to locate prospective tenants;
  • listing prospective tenants for the rental or lease of real estate;
  • locating property to rent or lease;
  • selling, buying or exchanging existing leasehold interests in real estate;
  • managing income-producing properties; or
  • collecting rents from tenants of real estate. [Calif. Business and Professions Code §10131(b)]

A licensed sales agent may also perform the above property management activities. However, they are required to be employed and supervised by a licensed broker. [Bus & P C §10132]

As always, real estate sales agents may never act or market themselves as independent agents, whether they are representing a seller or buyer in a sales transaction, referring or acting as a mortgage loan originator (MLO), or performing property management services.

While a broker license is required when performing property management services on behalf of an owner, a broker license is not required of anyone who manages their own rental property.

Importantly for this discussion, CalBRE broker licensure requirements do not apply to:

  • a manager of a hotel, motel or auto and trailer park;
  • a resident manager of an apartment building or complex;
  • employees of a resident manager;
  • a person or company that arranges transient occupancies; and
  • an employee of a property management company who is supervised by a licensed broker or their licensed sales agent when they:
    • show rental units and common areas to prospective tenants;
    • provide and accept preprinted rental applications;
    • respond to inquiries from prospective tenants about an application;
    • accept security deposits, rents and deposits or fees for credit checks and administrative costs;
    • provide information about rental rates and terms of a lease or rental agreement;
    • accept signed lease and rental agreements from prospective tenants. [Bus & P C §10131.01(a)]

Short-term rental exemption

The “transient occupancy” licensing exemption — the focus of the CalBRE’s recent advisory — does not require a broker license for property managers of short-term occupancies, erroneously also called vacation rentals, in:

  • single family residences (SFRs);
  • common interest developments (CIDs); or
  • apartment units. [Bus & P C §10131.01(a)]

A residential occupancy is a short-term stay, not a rental at all, when the total period of occupancy is for a term of 30 days or less. As a transient occupant, called a guest, the occupancy is subject to the collection, payment and accounting for local occupancy taxes for the stay. [Calif. Civil Code §1940]

The CalBRE reports some unscrupulous sales agents and unlicensed individuals are attempting to use the short-term transient occupancy exemption:

  • to enter into property management agreements; and
  • manage properties with rental terms longer than 30 days.

All this conduct is done under the guise of a short-term rental — a clear violation of California’s Real Estate Laws.

To best get a sense of the distinction between a rental and a transient occupancy, transient occupants are not tenants and do not rent; they are guests. They check in and check out, and their occupancy is called a stay, never a tenancy which is a rental of any type. Unlike tenants, transient occupants are not evicted since they do not hold a tenancy estate. Rather, the key is changed, they are locked out or the police remove the occupant after the day and hour of check out. [See RPI Forms 592, 593 and 594]

Rental agreements using the language of “short-term rental” do not establish a transient occupancy. Worse, they do not meet the transient occupant exemption’s guidelines when the occupant intends to remain in the premises for longer than 30 days. Thus, property management services for properties rented under these agreements require a broker license.

Penalties for violations

Violations of California’s Real Estate Law expose both unlicensed property managers and the property owners who compensate them to monetary liabilities.

Unlicensed individuals and sales agents who perform property management services without broker supervision are subject to:

  • a fine of up to $20,000; and/or
  • imprisonment in a county jail for up to six months. [Bus & P C §10139]

Unlicensed corporations performing property management services are subject to a fine of up to $60,000. [Bus & P C §10139]

Property owners who compensate unlicensed and unsupervised individuals are also subject to a fine of up to $100 per offense. [Bus & P C §10138]

In addition to state fines, independent sales agents who perform property management services without an employing broker are also subject to administrative discipline by the CalBRE, such as license suspension or revocation. [Bus & P C §10138]

The CalBRE notes it is open to receiving complaints against unlicensed property management activities and will carefully investigate claims of licensure exemption to ensure property managers meet exemption rules or are adequately licensed.