opinion
If you’re thinking of helping a friend, neighbor or relative buy, sell, or rent a home, apartment or commercial property, you’d better think again. Conducting such activities without the benefit of a real estate license is against the law.
In 2008, the New Mexico Real Estate Commission fined two Ruidoso-area property managers $1,000 each for managing 12 rental complexes without a license. At the time, their actions were considered a misdemeanor under New Mexico law. Were those managers found guilty of such behavior today, they’d be facing felony charges.
That’s because a change in the law that went into effect July 1, 2011, makes it a fourth-degree felony to “lease, rent, manage, sell, exchange, auction or option property for others without a real estate broker’s license.” The penalty for conducting such activities can carry a fine of up to $5,000 and 18 months in jail on each count, according to former NMREC Chief Investigator Walter Mullen. Keep in mind that selling or leasing one’s own property without a license is perfectly legal.
New Mexico law also states that “the attorney general or the district attorney of the judicial district in which the person resides or the judicial district in which the violation has occurred or will occur may, upon application of the commission, maintain an action in the name of the state to prosecute the violation or to enjoin the proposed act or practice”.
While the practice is particularly pervasive in tourist-driven communities, similar situations have occurred right here in Las Cruces. In one instance, a father advertised his daughter and son-in-law’s home for sale in a local newspaper and negotiated on their behalf when a buyer decided to make an offer.
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On another occasion, a local homeowner assisted his next-door neighbor by advertising and showing the neighbor’s property to prospective renters, eventually executing a lease on the owner’s behalf. In neither case were the kind-hearted helpers licensed to conduct such activities. Lucky for them no one complained, so the violations went unnoticed and unpunished (as far as I know).
As is the case with many laws, there is a loophole available to family members who assist with the sale or lease of another family member’s property. That loophole comes in the form of a power of attorney. A power of attorney is a written authorization to represent or act on another's behalf in private affairs, business, or some other legal matter. Keep in mind that the loophole applies only to family members.
While the law pertaining to real estate sales is exceedingly clear, the rules concerning renting and leasing are more complex. It is for that reason that landlords and tenants alike should familiarize themselves with The New Mexico Owner-Resident Relations Act, which is the definitive guide to renting and leasing residential properties in New Mexico.
Another aspect of the real estate business that is prohibited by both state and federal law and which often put real estate brokers behind the eight ball has to do with referral fees (also known as kickbacks). It is not uncommon for real estate brokers to acknowledge referrals from friends, relatives, past clients and others by giving something of value to the person providing the referral.
In some cases, brokers pay the referring party a portion of the brokerage fee generated from the transaction. In other instances, gifts, such as a weekend hotel stay or a night on the town, are given in lieu of cash. Whether the gift is in the form of cash or merchandise, furnishing such a gratuity to anyone other than another licensed real estate broker is highly illegal.
Real estate is a serious and complicated business that is best handled by individuals who have the background, training and legal authority to oversee the process. Buyers, sellers, landlords and tenants can be easily deprived of the rights and obligations they enjoy under the law when the rules, regulations and laws are not followed to the letter.
See you at closing.
Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at Gary@GarySandler.com or 575-642-2292.
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