For some reason there’s been a recent surge of questions on the PAR Legal Hotline about brokers and agents wanting to know about practicing in multiple brokerages — whether and how brokers can open additional brokerages, and whether it’s possible for agents to practice real estate at different brokerages simultaneously. Let’s just jump right in:
Q: I’m the broker of a residential sales brokerage and I’d like to expand to property management. Do I need to open a new brokerage just for property management?
A: No. Pennsylvania law doesn’t distinguish between different types of real estate practice, so any brokerage entity is legally permitted to practice any type of real estate activity — residential, commercial, property management, etc. — and any brokerage can do multiple types of practice under one brokerage license.
That said, there may be legal and risk management reasons to want to operate multiple brokerages for multiple lines of practice. Always speak with your attorney, accountant and errors and omissions insurance carrier about whether it makes more sense to operate a single brokerage or multiple brokerages in your specific business case.
Q: I’m the broker of a residential sales brokerage and one of my agents wants to start doing property management. Do I have to allow it?
A: No. Just because a brokerage can engage in the practice of any type of real estate doesn’t mean that the broker/brokerage must allow agents to do any type of practice that they want. One of the biggest reasons to limit scope of practice is that the broker needs to be competent to manage that type of practice — don’t allow property management if the broker can’t effectively supervise the work of agents. Also, many brokerage E&O policies may carve out coverage for certain types of practice (like property management), which dramatically increases your legal risks.
Q: I’m a broker of record. If I wanted to open a second brokerage firm, could I be the broker of record for both at the same time?
A: Yes. Commission policy allows a broker of record to have an infinite number of licenses for different firms at the same time. Of course, that means the broker of record is responsible for management of all those brokerages, so there will be some point at which it becomes impractical or impossible to have too many offices under the management of a single broker. Be sure to speak with your brokerage attorney about what sorts of policies and procedures you need to lower your risk.
Q: My broker operates two brokerages with different practices. Can I have my salesperson license affiliated with both firms so I can do both types of transactions?
A: No. Commission policy allows salespersons and association brokers to have only one active license, and for that license to only be affiliated with one brokerage at a time. The fact that the two brokerages may have common ownership and/or management does not matter; unless you’re a broker of record (see previous question), you can only perform licensed real estate activity for one brokerage at a time. Period.
Q: I’ve decided to open a second brokerage as the broker of record. Can I operate both brokerages out of the same physical office?
A: Yes, but you need to keep their real estate operations separate. For example, you will need a totally separate brokerage license with a new broker of record license, which means your office will need to be inspected a second time, you’ll need a second sign, a second escrow account, separate client files, etc.
Even more importantly, remember that since salesperson and associate broker licensees can only perform licensed activity for a single brokerage (see previous question), your affiliated licensees can only work for one brokerage or the other. Make sure you have very clear policies in place that limit agents so they’re not able to access client records or transactional details from the brokerage they’re not affiliated with.
Q: I’m a salesperson for Brokerage A. Can I own and operate my own property management firm while continuing to work for Brokerage A doing sales?
A: Please read this answer carefully and multiple times.
Technically, yes, as there is no limitation on who can own a brokerage firm. A salesperson (or even a non-licensee) can own a brokerage. But — and this is huge — the owner of the firm cannot engage in licensed real estate activity on behalf of the brokerage if they do not hold a license with that firm.
The easy part of the answer is that the salesperson/owner will need to hire a broker of record to handle all management of the office. The more complicated part is that the salesperson/owner can’t help out with anything that requires a license — showings, lease negotiations, giving transactional advice to other licensees who work there, etc. They can potentially make certain straight-up business decisions and can certainly collect an owner’s draw from corporate profits, but they cannot do anything with that firm that would require a real estate license. That can be really hard, so make sure you have very strong policies in place to avoid that (and a broker of record willing to tell you to back off when you get close to the line).
Also, you’d need to run this by your current broker. They may not want someone working for them who owns a competing brokerage firm, and/or they may want to implement very specific policies and procedures to ensure they are protecting client confidentiality and minimizing potential conflicts. Or to put that more simply, the salesperson might want to keep working at their current firm, but the broker may not see it the same way.