Licensing of owners and managers?

Real Estate Weekly, May 26, 1993 by Lois Weiss

Bills to require the licensing of most owners and managers of residential property have been introduced in the New York State legislature.

While one bill was introduced by Senator Donald - M. Halperin of Brooklyn at the urging of the New York Association of Real Estate Managers, another bill, sponsored by Assemblyman Ivan C. Lafayette of Jackson Heights, was motivated by the theft of money from a Queens co-op several years ago. Other residential real estate groups, however, are unhappy with the measures for a variety of reasons.

Licenses Owners

The Halperin measure, S3982 has as its Assembly sponsor, Assemblyman Daniel L. Feldman of Brooklyn. It exempts only tenant associations, owners of owner-occupied dwellings or an owner of a building containing six units or less that the owner self-manages. Additionally, it exempts regularly salaried officers or employees of managers who do not perform management services or whose compensation is not keyed upon the performance of management services. It also grandfathers those with proof of two years experience.

This bill is geared towards the education and competency of property managers and directs the Secretary of State to approve institutions to give courses that would include studies in operations, maintenance, security, energy conservation and basic legal principles of contracts, tenant and labor relations and agency.

There would be an application fee of $50 as well as an examination fee. The license fee would be $150 subject to a 10 percent increase every two years but there would also be a $150 annual registration fee.

Penalties range from $500 to $2,500 for issues involving licensing requirements while the attorney general is empowered to pursue criminal penalties. The offender can also be liable to the aggrieved party for a penalty of up to three times the money received as compensation or profit.

Aimed at Co-ops

Lafayette's bill is geared only toward cooperative and condominium management and those who collect and disburse money on behalf of such entities. It calls for a $400 application fee and $250 two-year renewal fee but there is no educational requirement.

The manager would have to identify the buildings managed within 10 days, report a change in financial circumstances" within five days as well as make an annual expense report filing.

Under the license, a manager is required to show evidence of financial security in the form of a bond or guarantee from a financial institution.

Real estate and security brokers, as well as licensed bankers and attorneys would be exempt from the licensing requirement but would still have to register buildings and prove financial security.

Fines would range up to $5,000 for not following licensing requirements to the pursuit of criminal actions by the attorney general and payments after suit to aggrieved parties of up to four times the sum of compensation or profit.

Thomas Raffaele, counsel to Lafayette, said they recently met with the Real Estate Board of New York, which has made some suggestions with regard to both the approach of the bill and its details that they would be exploring this week. Complaints included its preoccupation with the financial stability of managers as well as its lack of competency requirements. That bill, A6739 has no Senate sponsor.

The Apartment Owners Association, Inc. (AOA) President Irwin Gumley, who is also president of Gumley-Haft Inc. said he participated in the REBNY meeting and was most disturbed by the bonding requirements, which he deemed "outrageously high."

Gumley thinks all real estate managers should be at least licensed real estate salespersons and brokers and if anything, he noted, those requirements should be "tightened up."

Richard Stone, a property manager and president of the New York Association of Realty Managers (NYARM), which has its own certification program, believes the Halperin bill is the best of the two. "Our whole thrust is to do something beneficial for the industry," he explained. I'm hoping that some of the groups with clearly identified, respected program will be able to provide the basic educational requirements."

Stone felt the two years was aimed at gathering more support and thought 10 years of experience would be a better indication of competency.

In a recent newsletter to NYARM members, Stone wrote the "new respect will translate into even better compensation for property managers. After all," he continued, "a better managed property will run far more economically, more than justifying and certainly offsetting increased manager fees and salaries."

That concept has Federation of New York Cooperatives President Charles Rappaport hopping mad. "What a bunch of malarkey!," he said. "The fact that the person is licensed in and of itself does not guarantee competency," he noted, pointing to attorneys, accountants and even automobile drivers. "Licensing isn't going to make good managing agents."

Rappaport believes the vast majority of managers are doing a competent job now and if they aren't, the building will switch because there is enough competition to ensure that happens. He noted the boards already have a pool of people to chose from with professional certification from organizations like NYARM and the Institute of Real Estate Management (IREM).