OFFICIAL OPINION No. 12

OFFICIAL OPINION No. 12 Real Estate Commission-Rental listing agencies-Real estate broker 1. Rental listing agencies, which aRsemble lists of apartments and homes for a rent, make them available for a fee, and extensively advertise the availability of such housing, are practicing real estate brokerage within the meaning of Section 2 (a) of the Real Estate Brokers License Act of 1929, 63 P .S. §432 (a) and must be licensed in accordance with Section 6 thereof, 63 P.S. §436. Harrisburg, Pa. January 25, 1973 Honorable Vincent J. Fumo Commissioner Bureau of Professional and Occupational Affairs Harrisburg, Pennsylvania Dear Commissioner Fumo : You have requested our opinion as to whether rental listing agencies, several of which have recently appeared !n Pennsyl- vania must be licensed as real estate brokers. Specifically, you have 'referred to one such organization, in Philadelphia known as "Homefinders." 26 OPINIONS OF THE ATTORNEY GENERAL It appears that these listing agencies assemble lists or apart- ments or houses for rent and make them available for a fee to those who wish to consult them. It appears that many of the listings are simply taken from other ~lassified advertisements in the newspapers and are often unavailable for rent when the customer attempts to rent the apartment or house. The_ listing agencies apparently do not enter int<;> any agreement. with the owner or with the customer; they simply make available the list to the customer. They receiv~ no commission. ~hen ~nd if a lease is negotiated, nor do they m any way participa~e m the actual consummation of a lease agreement. They receive only the initial fee, usually in the amount of $2q.oo. The agencies advertise extensively in the classified sect10n of the news- papers.I Section 2 of the Real Estate Brokers License Act of 1929, 63 P.S. §432 (a), contains the definition of a real estate broker.2 Section 6 of the Act, 63 P.S. §436, makes it unlawful for any person to act as a real estate broker or in the capacity of a real estate broker without first obtaining a license. Other states which have faced the same question as that pre- sented have held that the rental listing agency type of operation (specifically, "Homefinders") is practicing real estate brokerage. For example, the Attorney General of Delaware on October 16, 1972 rendered an official opinion holding that "Homefinders" was operating illegally under Delaware law in that it was en- gaged in the business of a real estate broker or salesman with- out being registered and without a certificate of registration is- 1. Sample advertisements are found both in the usual "For Rent" sections or in sections headed "Apartment Services." They advertise listings of apartments and homes generally and specifically (although no actual ad· dresses are listed) and are generally indistinguishable from advertise· ments by brokers and owners except for the statement of "Fee" or "$20.00 F ee." One such advertisement states: "Let the Largest Listing Co. in this Area Get Your Next Home or Apartment." 2. This section provides in pertinent part: "The term 'real estate broker' shall include all persons, copartnerships, associations, and corporations, foreign and domestic, who, for another and for a fee, commission, or other valuable consideration, shall sell, exchange, purchase, or rent, or shall ne· gotiate the sale, exchange, purchase, or rental, or shall offer or attempt to negotiate the sale, exchange, purchase, or rental, or shall hold himself or themselves out as engaged in the business of selling, exchanging, pur· chasing or renting of any real estate, interest in real estate, the property of another, whether the same shall be located within the State of Pennsyl· vania, or elsewhere, or shall collect or offer or attempt to collect rental for the use of real estate, the property of another, or shall negotiate or offer or attempt to negotiate a loan, secured or to be secured by mortgage or other encumbrance upon or transfer of any such real estate . .. One act in consideration of compensation, by fee, commission or otherwise, of buying, selling, renting or exchanging any such real estate of or for an· other, or attempting of offering so to do, or negotiating a loan upon or or leasing or renting or placing for rent any such real estate, or collect· ion of rent therefrom, shall constitute prima facie evidence that the per· son, copartnership, association, or corporation, so acting or attempting to act, is a real estate broker within the meaning of this act." OPINIONS OF THE ATTORNEY GENERAL 27 sued by the Delaware Real Estate Commission. The Delaware statute in question is similar to Pennsylvania's. Furthermore, as the opinion of the Attorney General of Delaware points out, an injunction was granted in Texas v. Homefinders of America, Inc., No. 72-2559 (District Court of El Paso, Texas). In that case, Homefinders was enjoined from holding out to the public that it was engaged in the business of providing rental real estate. We are further advised that similar injunctions have been granted in Florida at the behest of the Florida Real Estate Com- mission. See Florida Real Estate Commission v. Sgro and Homefinders of Florida, Case 71-24171 (Circuit Court of Dade County); Florida Real Estate Commission v. Thompson t/a Homefinders, Case No. 72-922 (Circuit Court of Duval County); Florida Real Estate Commission v. Gorson and Garcia t/a Home Rental Service, Case No. 72-1473 (Circuit Court of Broward County). We believe that Pennsylvania law is in accord. In the words of the Real Estate Brokers License Act, note 2, supra, we be- lieve that these rental listing agencies do " ... for another and for a fee, commission, or other valuable consideration ... ne- gotiate the ... rental, or . .. offer or attempt to negotiate the . .. rental, or . .. hold ... themselves out as engaged in the business of ... renting of any real estate, interest in real estate, the pro- perty of another .... " In Verona v. Schenley Farms Co., 312 Pa. 57, 167 A. 317 (1933), the Court held that a person who had brought to the attention of a prospective buyer the attributes of another's real property which eventually resulted in the consummation of a sale was practicing real estate brokerage within the mean- ing of the Act, and was therefore not entitled to collect the fee which had been promised him because he was unlicensed. The Court held that his activities, limited though they were, con- stituted "negotiations" within the meaning of the Act. The Court stated ( 312 Pa. at 61) : "The Legislature was of course familiar with the great variety of real estate brokerage contracts made from time to time, and the definition of real estate broker must be understood in the light of the common know- ledge on the subject; some idea of the varied scope of such contracts may be obtained by examining the cases cited in [citations omitted]." The Court further stated that the Act was intended to pre- vent frauds upon the public and, therefore, even though it im- poses penalties, it is not to be construc~ed st~ictly, but fair_ly and liberally in order to carry out the mtent10n of the Legis- lature. Verona was followed in Alford v. Raschiatore, 163 Pa. Superior Ct. 635, 63 A. 2d 366 ( 1949) in which an individual who "knew people" found someone interested in the seller's land, brought the parties together, and a sale was consummated. 28 OPINIONS OF THE ATTORNEY GENERAL Suit was brought for a commission promised and plaintiff ~on­ tended that he had not been acting as a real estate broker smce he did not pretend that he had "negoti,ated" any~hing but mere- ly brought the parties to each others attention. T_he Court nevertheless denied recovery, holding ( 163 Pa. Superior Ct. at 639): "We cannot give to the word 'negotia~e,' in the sei;ise intended by the Legislature, the strict construct10n contended for by appellee. If we should so do, it would preclude from the regulatory purpose of the Act a great percentage of brokers and salesmen who norm- ally do no more than acquaint prospective buyers and sellers with the location and price of available proper- ty, and who annually comply with the licensing feature of the Act in the belief that they are covered by it."3 Similarly, in this case, the listing of the properties and mak- ing such lists available for a fee has as its intention the bring- ing of parties together in an amicable frame of mind to enter into a lease. We further believe that where a person holds him- self out as having rental listings much in the way that a real Rstate broker usually does, that it was the intention of the Leg- islature to include such person within the definition and sub- ject him to appropriate regulation. It is therefore our opinion, and you are so advised, that the activities carried on by the various rental listing agencies constitute the practice of real estate brokeraQ"e under the licensing act and require that they be appropriately licensed. 4 In accordance with this opinion, we are prepared to take and br ing injunctive action against any of these rental listing agen- cies which are not licensed and which fail to become licensed which you bring to our attention. Sincerely yours, GERALD GORNISH Deputy Attorney General ISRAEL p ACKEL Attorney General 3. The court cited with favor Baird v . K rancer, 138 Misc. 360, 246 N.Y.S. 85 ( 1930 ) , where the Court sa id that the essentia l feature of broker's em- ployr.1ent is to bring the parties together in an amica ble frame of mind so that they may work out the terms of their a greement, but that it is of no importance that the broker participate in working out that agreement. 4. This opinion is not intended to cover the case of institutions which main- tain housing lists for prospective students or ernployes, or lists ma inta in- ed by non-profit orga niza tions for th~ benefit of members or interested pa rties to. accomplish social goals, wh1c!1 do. not involve the payments of fees. But 111 this case, where the _wo~~ - 1s. bemg done "for a fee, commis- s10n, or other val~iabl~ cons1derat1on, 1t 1s clear that the practice of real estate brokerage is bemg earned on. OPINIONS OF THE ATTORNEY GENERAL 29