Disclosing Licensed Status When Selling Own Property

Brett M. Woodburn, Esquire

Often licensees calling the Hotline ask, "Who needs to know I'm a REALTOR® when my family or my company sells property?" Salespersons and brokers are often faced with the situation of selling their own property. Most know, or should know, that disclosing their licensed status is required when they sell property they own. What many are less clear about, is whether they need to disclose their licensed status when a member of their family or a business entity, in which they are an owner or a partner, sells property. Do REALTORS® need to disclose their relationship under these circumstances? The answer is: it depends.

It is a violation of the Pennsylvania Real Estate Licensing and Registration Act ("RELRA") for a licensee not to disclose their licensed status to a buyer or lessee when selling or leasing real estate they own. This disclosure must be made before the consumer signs a lease or agreement of sale. Furthermore, the licensee must disclose his licensed status in the advertisement unless the property is listed for sale or lease with a real estate company. Occasionally we will hear of the licensee who wants to handle the sale of their own property privately; there is absolutely nothing wrong with this practice, the licensee has to remember to put in any advertisement (including internet ads) that they are a licensee.

How does this requirement affect a licensee when he or she has a role as a principal in an entity that owns property? It depends on the entity and how the property is owned. For example, if the licensee is a member of a general partnership and the partnership owns the real estate, the licensee is obligated to disclose his licensed status. If, however, the licensee is a shareholder in a corporation and the corporation owns the property, the duty to disclose should be more closely examined. Is the licensee an officer? Is the corporation a close corporation? How many shareholders are there, and is the corporation properly run? These are all factors affecting whether the duty to disclose is triggered. The safest practice? Disclose.

A corresponding obligation is found in Article Four of the NAR Code of Ethics:

REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner's agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser's representative.

This disclosure must be provided in writing prior to the signing of any contract.

The similarities between RELRA and the Code of Ethics are easy to identify. The differences are critical for REALTORS® because they require disclosure in more instances and, importantly, do not apply to all licensees. First and foremost, the Code of Ethics requires a REALTOR® to identify their "true position" to a seller or seller's agent, even when their sole role is as an agent. Thus, if you are acting as a buyer's agent for your daughter and son-in-law, you have to tell the listing broker of that familial relationship, even if you are not accepting a commission! The same disclosure requirements hold true for REALTORS® buying property or acquiring interest in properties (perhaps as a partner in a partnership, or as a shareholder in a corporation). Finally, the ethical obligations require REALTORS® to disclose any interest they have in a property. This disclosure obligation is more far reaching than that which is in RELRA. As noted above, there may be some forms of corporate ownership that do not trigger RELRA's disclosure requirements, but they would trigger the disclosure requirements set forth in the Code of Ethics.

As a REALTOR® you subscribe to a higher standard of practice than do other non-REALTOR® licensees. The NAR Code of Ethics establishes obligations on REALTORS® that extend beyond those that are required by the laws of Pennsylvania. This means that REALTORS® may have to disclose certain personal/ business information that another licensee can withhold; and you (as a REALTOR®) may be held to responsible for the breach of ethics if you do not disclose your interest in the transaction to a non-REALTOR® licensee.