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Trial Result Could Impact Pennsylvania Real Estate Activity

By: Brian Carter, Esq. on in

A real estate-related case, which could impact the licensing requirements in Pennsylvania, has been revived following a decision by the Pennsylvania Supreme Court in May.

PAR has been tracking Ladd v. State Real Estate Commission since it was originally filed in 2018. Though the case had previously been dismissed by the Commonwealth Court, on May 19, 2020, the Pennsylvania Supreme Court issued a decision reviving the case and sending it back to proceed to trial. The final outcome of the case could impact the licensing requirement for those engaging in Pennsylvania real estate activity.

Sara Ladd, a New Jersey resident, owned two properties in the Pocono Mountains that she used as short-term rentals. Over time, she began managing similar properties for several neighbors in the Pocono Mountains. At no point has Ladd ever obtained a license to conduct real estate activity.

The Pennsylvania State Real Estate Commission brought a licensing enforcement action against Ladd, claiming Ladd’s activity required a Pennsylvania real estate license. At that time, she shut down her business and filed a case in the Commonwealth Court’s original jurisdiction claiming that the licensing requirement is unconstitutional as it applies to her and she should not be required to obtain a real estate broker’s license to run her business. Although the Commonwealth Court is usually an appellate court, in this instance, for reasons not important to our discussion, the Commonwealth Court was acting as a trial court.

Without getting into the procedural details, the commission opposed Ladd’s claim and argued that the licensing law is constitutional, and the Commonwealth Court should dismiss the case. The Commonwealth Court agreed with the commission and dismissed the case.

Ladd then appealed the decision to the Pennsylvania Supreme Court. The Supreme Court reversed and reinstated Ladd’s case to proceed before the Commonwealth Court. In doing so, the court held that the requirements of the license law were too onerous for the type of business she was conducting and could unconstitutionally infringe upon her right to pursue her chosen occupation.

It is important to note what the Supreme Court’s decision does not do. Contrary to the claims of some news reports, this decision does not actually make any changes to the existing real estate licensing requirement in Pennsylvania. Nor does the decision eliminate the requirement for maintaining a physical office location nor the educational requirements to become licensed.

All this decision does is decide, on procedural grounds, that Ladd will be allowed to make her case that the licensing law requirements, as applied to her business of managing short-term rentals, is unconstitutional.

PAR will continue to closely monitor the case as it develops since the outcome could impact license law in various ways. PAR will determine whether and when it may be appropriate for us to consider participation in some way.

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Comments (13)

Comments

  • Lawrence J. Dellegrotto   June 8, 2020 at 7:21 am

    Thanks for the Update. I have been following this case for some time. The outcome will be interesting.

    Reply to Lawrence J. Dellegrotto
  • Nella Genovese   June 8, 2020 at 8:03 am

    If she was managing only her own properties, no license but when managing other owner’s properties, she should have a real estate license, even if she has a business license.

    Reply to Nella Genovese
  • Nancy Wright   June 8, 2020 at 8:13 am

    I appreciate the update. Thanks

    Reply to Nancy Wright
  • Mary Reiling   June 8, 2020 at 9:34 am

    If she is managing just her own, there should be no problem. If she is getting paid to do business for others, she should be required to get a PA license and take the continuing education just like the rest of us.

    Reply to Mary Reiling
  • Michele Frederick   June 8, 2020 at 10:39 am

    I would agree that she needs a license if she’s managing other people’s properties. I’ve seen this quite frequently and it’s time somebody establishes case precedent on it.

    Reply to Michele Frederick
  • José M Rodriguez   June 8, 2020 at 10:53 am

    We appreciate the follow up!!

    Reply to José M Rodriguez
  • Adam Shapiro   June 8, 2020 at 2:51 pm

    zyes, she definitely should have a license if she is managing rentals in PA other than her own.

    Reply to Adam Shapiro
  • Jerry Busch   June 8, 2020 at 4:48 pm

    Based on her interpretation we do not need a license for any profession including the attorneys arguing her case. It doesn’t infringe on her rights she still has the right just go get a license! I would ask why is there a license requirement for any profession. Protect the public.

    Reply to Jerry Busch
  • Michelle Strange   June 8, 2020 at 10:50 pm

    I would be curious to know if our real estate recovery fund, that we pay into yearly could go towards any mistakes she ever makes. I personally feel she needs a licence to manage other persons property, so that the public can be protected.

    Reply to Michelle Strange
  • Myrna Malkin   June 8, 2020 at 10:50 pm

    I don’t understand why this is even a question. Our licensing laws are in place to protect the public. Whenever someone is being paid for real estate-related service, the public should be protected. The process likely involves access to individual’s personal financial information, handling of deposit monies, collecting rents, and perhaps writing up leases. No question that licensure should be required. On a similar note, there is a high rise condominium building in my area that had an on-site property management company. There were a lot of seniors who lived in the building, although it was not a 55 plus community. When individuals would pass away, the property manager would befriend the family and convince them to allow her to try to find a buyer. She did not hold a real estate license and would charge a commission much less than what Realtors would charge. At the time, the condos were in high demand. prospects would call or come to the reception area and the property manager would show available condos. I know someone who purchased a condo with this unlicensed property manager preparing the Agreement of Sale and other documents. She seriously over paid for her condo and ended up selling it several years later for around a third of what she had paid for it. It was really tragic that she had no representation in the process. By the way, as far as I know there was no litigation. But, when the property management company found out what was going on they swiftly fired the manager. All this to say, there is a reason why licensing laws are in place. The problem is that if it is OK for unlicensed individuals to manage properties for a profit, then having an arrangement with sellers to procure buyers might also be OK.

    Reply to Myrna Malkin
  • Debbie Karner   June 12, 2020 at 9:00 am

    You say Pota”to I say Potat’o! She’s practicing real estate whether leasing for others for short term rentals or long term rentals. She’s not running a bed and breakfast! What if I cut and styled hair for money and advertise my services as a hair loss company but don’t get a beautician license? Is PA restricting my right as a business owner?

    Reply to Debbie Karner
  • Evan H   June 12, 2020 at 9:32 am

    “the requirements of the license law were too onerous” LOL. It takes what, about 2 weeks to get a RE license? Good thing she isn’t infringing on appraisal activities and required to get that license!

    Reply to Evan H
  • Anna   August 10, 2020 at 3:39 pm

    This case is interesting, however she is fighting the wrong fight as the development in which she owns the properties, has covenants attached to the deeds, that does not allow rentals. In my opinion the case if frivolous.

    Reply to Anna

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