If my Tennessee LLC owns a property, can the LLC sell or rent it without a real estate broker license, and what about partial owners or members of the LLC?

Subject

Scope of Exemptions in the Tennessee Real Estate Broker License Act

Plain-English summary

The Real Estate Broker License Act of 1973 (Tenn. Code Ann. §§ 62-13-101 to -604) requires a broker license unless an exemption applies. Section 62-13-104(a) sets out six exemptions, including the owner and corporate exemptions. The Department of Commerce and Insurance asked the AG how those two exemptions apply to entity owners.

The owner exemption in § 62-13-104(a)(1)(A) excuses "[a]n owner of real estate with respect to property owned or leased by such person" from the licensing requirement. The Act defines "person" to include corporations, companies, partnerships, firms, and associations. The AG concluded that "owner" therefore covers corporations, LLCs, LLPs, and other business entities, all of which can use the owner exemption for their own property.

The corporate exemption in § 62-13-104(a)(1)(F) is narrower. It applies only to foreign or domestic corporations acting through duly authorized officers, and only when the transaction is incident to the corporation's management of its own real estate. Importantly, it does not cover compensation that depends on the value of the property. Because the corporate exemption uses the word "corporations," it does not extend to LLCs, LLPs, or partnerships. Those entities have to rely on the owner exemption.

The AG also drew three additional lines: (1) a partial owner is exempt only as to the share of the property it owns, not the property as a whole; (2) a lessee qualifies as an "owner" through its leasehold interest, but only with respect to that leasehold; and (3) a person who owns a stake in an LLC that owns real estate does not have an "interest in" the real estate itself, so the owner exemption does not flow through. Tenn. Code Ann. § 48-215-101(a) says an LLC member has no interest in specific LLC property.

Currency note

This opinion was issued in 2019. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Does my Tennessee LLC need a real estate broker license to sell its own property?

According to this 2019 opinion, the LLC itself may use the owner exemption for property it owns or leases. The AG expressly said that this exemption covers only the owner, not its agents, officers, or employees. An individual acting for the LLC cannot claim the LLC's owner exemption merely by being its officer or employee; a separate exemption would have to apply.

What's the difference between the owner exemption and the corporate exemption?

The owner exemption (subsection 104(a)(1)(A)) is broad in covered entities (any "owner of real estate") but narrow in scope (only the owner itself). The corporate exemption (subsection 104(a)(1)(F)) is narrow in covered entities (only corporations, not LLCs or partnerships) but allows the corporation to act through duly authorized officers. The corporate exemption also has a "compensation" carve-out: it does not apply when a person performs broker-defined acts for compensation that is dependent on or directly related to the value of the property.

What if my LLC and a co-investor each own half of a building?

The opinion answered this: a partial owner is exempt under the owner exemption only with respect to its share. The LLC could conduct broker-type activities involving its own ownership interest without a license, but a transaction involving the property as a whole, or any portion the LLC did not own, would require a license.

I'm a passive member of an LLC that owns rental property. Am I personally an "owner of real estate"?

No. The opinion was specific: under § 48-215-101(a), an LLC member "has no interest in specific LLC property." The LLC itself owns the real estate. A member who tries to invoke the owner exemption based on the LLC's property ownership cannot do so. The exemption attaches to the entity that holds the legal interest, not its members or shareholders.

Does a tenant qualify as an "owner"?

To a limited extent. The Act defines "real estate" broadly to include "leaseholds, as well as any other interest or estate in land," § 62-13-102(14). A lessee owns a leasehold and so qualifies as an "owner" for that interest. But the lessee can only invoke the exemption for transactions involving its own leasehold. Activities involving the underlying ownership interest held by others would still require a license.

What about a vacation rental company?

Subsection 104(b) covers "vacation lodging services" with a qualified exemption: such a service does not need a licensed broker supervising the business, but it does need a separate vacation lodging service firm license. The AG noted that a business entity that owns the lodging operation can also rely on the owner exemption, which the opinion treated as broader than the vacation-lodging carve-out.

Background and statutory framework

The Real Estate Broker License Act requires a license for broker activity unless an exemption applies. The opinion considers the owner and corporate exemptions in § 62-13-104(a)(1), using the Act's definitions of "broker" and "real estate" in § 62-13-102.

The owner exemption covers the entity that owns or leases the property. The separate corporate exemption can cover a corporation acting through a duly authorized officer when the transaction is incident to management, lease, sale, or other disposition of its real estate. That corporate exemption does not apply to the broker-defined acts described in the opinion when the person's compensation depends on or directly relates to the property's value.

The opinion quotes § 48-215-101(a): "A member has no interest in specific LLC property. All property transferred to or acquired by an LLC is property of the LLC itself." It therefore declines to extend the LLC's owner exemption to a person who merely owns all or part of the LLC.

Citations

• Tenn. Code Ann. §§ 48-215-101(a), 62-13-101 through -604 (Real Estate Broker License Act of 1973)
• Tenn. Code Ann. §§ 62-13-102, 62-13-103, 62-13-104
• Tenn. Att'y Gen. Op. 14-27 (Mar. 6, 2014)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2019/op19-15.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
September 16, 2019

Opinion No. 19-15

Scope of Exemptions in the Tennessee Real Estate Broker License Act

Question 1
Does "owner" in Tenn. Code Ann. § 62-13-104(a)(1)(A), which is part of the Tennessee Real Estate Broker License Act, include corporations, limited liability companies, limited liability partnerships, or other business entities?

Opinion 1
Yes. The context makes clear that "owner" refers to a "person" who owns or leases real estate, and for purposes of § 62-13-104 "person" is defined as "any natural person, corporation, company, partnership, firm or association." Tenn. Code Ann. § 62-13-104(a)(1)(A), (b)(1)(B). Thus, "owner" includes corporations, limited liability companies, limited liability partnerships, and other business entities, all of which may be "owners" covered by the exemption provided for in § 62-13-104(a)(1)(A).

Question 2
Can business entities other than corporations, such as limited liability companies and partnerships, qualify for the "corporate exemption" in Tenn. Code Ann. § 62-13-104(a)(1)(F)?

Opinion 2
No. Business entities other than corporations qualify, if at all, only for the "owner exemption" provided for in Tenn. Code Ann. § 62-13-104(a)(1)(A).

Question 3
Would a corporate entity that owns less than 100% of a particular property be exempt from the broker license requirement with respect to that property?

Opinion 3
The corporate entity would be exempt from the license requirement only with respect to activities involving the specific portion of the property it owns. The license requirement would apply to any actions involving the property as a whole or specific parts of the property that the corporate entity did not own.

Question 4
Is a lessee of property an "owner" of real estate who may qualify for the "owner exemption" in subsection (a)(1)(A)?

Opinion 4
Yes, but only with respect to the lessee's ownership interest in the lease, not with respect to the entire property.

Question 5
Does an individual or entity who owns a percentage of a limited liability company, which in turn owns 100% of a piece of real estate, qualify for the "owner exemption"?

Opinion 5
No.

ANALYSIS

Under the Tennessee Real Estate Broker License Act of 1973 (the "Act"), "persons" who act as real estate brokers in Tennessee must be licensed by the Tennessee Real Estate Commission. See Tenn. Code Ann. §§ 62-13-101 to -604; Tenn. Att'y Gen. Op. 14-27 (Mar. 6, 2014). "Person" as used in the Act includes both individuals and specified business entities. See Tenn. Code Ann. § 62-13-102(13).

Any person who falls within the statutory definition of "broker" in Tenn. Code Ann. § 62-13-102(4) must obtain a license to act as a broker unless one of the exemptions in § 62-13-104 applies. See id. §§ 62-13-103, -301.

Section 62-13-104(a) establishes six exemptions from the license requirement. Relevant here are the "owner exemption" and the "corporate exemption." The owner exemption in subsection (a)(1)(A) provides that the Act does not apply to "[a]n owner of real estate with respect to property owned or leased by such person." Similarly, the corporate exemption in subsection (a)(1)(F) provides that the Act does not apply to foreign or domestic corporations when they are "acting through an officer duly authorized to engage in real estate transactions" and "the transaction occurs as an incident to the management, lease, sale or other disposition of real estate owned by the corporation." But this corporate exemption does not apply to "a person who performs an act described in § 62-13-102(4)(A) [i.e., the acts that define 'broker'], either as a vocation or for compensation, if the amount of the compensation is dependent upon, or directly related to, the value of the real estate with respect to which the act is performed." Id. § 62-13-104(a)(1)(F).

In addition to the six absolute exemptions in subsection 104(a), subsection 104(b) provides a qualified exemption from the license requirement for persons who provide a "vacation lodging service," as defined by the Act. A vacation lodging service is not "required to have a licensed real estate broker supervising the business" but is "required to have a vacation lodging service firm license." Id. § 62-13-104(b)(2).

1. Corporations, limited liability companies (LLCs), limited liability partnerships (LLPs), and other business entities are "owners" as that word is used in Tenn. Code Ann. § 62-13-104(a)(1)(A). The context makes clear that "owner" in subsection (a)(1)(A) refers to a "person" who owns or leases real estate, and for purposes of § 62-13-104 "[p]erson . . . means any natural person, corporation, company, partnership, firm or association." Tenn. Code Ann. § 62-13-104(a)(1)(A), (b)(1)(B). Thus, "owner" includes corporations, LLCs, LLPs, and other business entities, all of which may be "owners" covered by the exemption provided for in § 62-13-104(a)(1)(A).

Accordingly, the owner exemption applies to a corporation, LLC, LLP, or other business entity with respect to property owned or leased by it. That subsection (a)(1)(F) provides a separate, specific exemption for corporations and their officers does not alter that conclusion. As explained below, the corporate exemption in subsection (a)(1)(F) applies to a different set of entities in distinct circumstances and furthers separate interests. Nothing in the Act indicates that the exemptions are mutually exclusive, or that more than one exemption could not apply in particular circumstances.

In sum, the owner exemption in subsection (a)(1)(A) thus exempts all "owners," including corporations, LLCs, LLPs, and other business entities, from the broker license requirements of the Act. The owner exemption would also exempt a business entity that owns a vacation lodging service from the more limited requirement in § 62-13-104(b) that it have a vacation lodging service firm license. But the owner exemption in subsection (a)(1)(A), unlike the corporate exemption in subsection (a)(1)(F), exempts only the owner itself, not the owner's agents, officers, or employees.

2. As this Office explained in a 2014 opinion, the corporate exemption in subsection (a)(1)(F) applies only to foreign or domestic corporations and does not apply to LLCs, LLPs, or other business entities. See Tenn. Att'y Gen. Op. 14-27 (copy attached).

3. A corporate entity that owns less than 100% of a parcel of real estate would be exempt from the license requirement under the owner exemption in subsection (a)(1)(A) only with respect to the portion of the property it owned. The owner exemption applies only to the "property owned or leased by such person." Accordingly, an owner, whether a business or an individual, may engage in covered activities without a license only with respect to its specific portion of the property. Partial owners are not exempt from the license requirement with respect to real estate activities involving the entire parcel because that would necessarily involve property they did not own.

4. The owner exemption expressly applies to a lessee's ownership interest in leased property. The license requirement "does not apply to[] [a]n owner of real estate with respect to the property owned or leased by such person." Tenn. Code Ann. § 62-13-104(a)(1)(A) (emphasis added). And the Act defines "real estate" to include "leaseholds, as well as any other interest or estate in land." Id. § 62-13-102(14). A lessee owns a leasehold in the property, and thus owns "real estate" within the meaning of the owner exemption. As explained above, however, a lessee would be exempt from the license requirement only with respect to that leasehold and would not be exempt for broker activities involving ownership interests in the property held by others.

5. The owner exemption in subsection (a)(1)(A) applies only to "[a]n owner of real estate." Under the plain meaning of the text, the exemption would not apply to an individual or entity who had an ownership interest in an LLC that itself was the owner of real estate. "Real estate" is limited in the Act to "interest[s] or estate[s] in land." Tenn. Code Ann. § 62-13-102(14). A person who owns all or part of an LLC does not have any estate or interest in the real estate owned by the LLC. See id. § 48-215-101(a) ("A member has no interest in specific LLC property. All property transferred to or acquired by an LLC is property of the LLC itself."). The owner of the LLC would thus not be an "owner of real estate" entitled to the owner exemption.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

JAMES P. URBAN
Assistant Attorney General

Requested by:
Mr. Carter Lawrence
Interim Commissioner, Tennessee Department of Commerce and Insurance
500 James Robertson Parkway
Davy Crockett Tower
Nashville, Tennessee 37243-5065