Does a Virginia company managing short-term condo rentals need a real estate broker's license?

Plain-English summary

In January 2013, Bedford County Commonwealth's Attorney Randy Krantz asked the AG whether a company that managed short-term (under-30-day) rentals of individually-owned condominium units had to be licensed as a real estate broker. The factual setup: a condominium where individual owners (often absentee investors) leased their units; a management company set up shop in the building's lobby (leasing that unit from its owner), entered separate management agreements with each willing condo owner to solicit, book, and collect for short-term stays, and held a state Department of Health hotel license to operate. Bedford County treated the facility like a hotel for transient occupancy tax purposes. The AG concluded the management company nonetheless needed a real estate broker's license.

The statutory rule is broad: a real estate broker is "any person or business entity . . . who, for compensation or valuable consideration . . . leases or offers to lease, or rents or offers for rent, any real estate or the improvements thereon for others." Even "[o]ne act for compensation or valuable consideration of . . . renting, or offering to rent real estate, except as specifically excepted in § 54.1-2103," is enough to make a person a broker. The Code draws no distinction between renting generally and short-term or transient rentals.

The exemption the management company seemed to want was the one available to those "who as owner or lessor perform any [brokerage service] with reference to property owned or leased by them," done "in the regular course of or incident to the management of the property and the investment therein." The problem, the AG noted, is that the management company did not own or lease the condo units; it only held a management contract with each unit's owner, and leased only the lobby unit. So it did not fit the exemption's predicate, and none of the other exemptions in § 54.1-2103 applied.

Could the company instead rely on a hotel license? A hotel license must be issued to the owner or lessee of the hotel, and the State Board of Health defines a "hotel" as an establishment offering transient lodging that consists of two or more lodging units. Only the common owner or common lessee of multiple lodging units may be issued such a license. Here, the units were owned individually by absentee investors, with no entity owning or leasing multiple units in common, so there was no ability to obtain a hotel license that would fit. The Department of Health's issuance of a hotel license did not change the brokerage analysis.

The AG noted a path forward: if the management company acquired the proper license, its employees might be exempted under § 54.1-213(C), provided its requirements were satisfied. The opinion did not endorse any specific structure beyond holding that, on the facts presented, broker licensing was required.

Currency note

This opinion was issued in 2013. 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.

Background and statutory framework

Virginia's real estate broker licensing scheme protects the public from "fraud, misrepresentation and imposition of dishonest and incompetent persons." The scope is intentionally broad: anyone leasing or renting real estate for others for compensation falls within the definition. The General Assembly set out exemptions in § 54.1-2103, including the one for owners or lessors performing brokerage acts incident to managing their own property and their investment.

The hotel exemption operates indirectly. A hotel operator, which must be the owner or lessee of the whole hotel, is renting its own property and so falls within the owner-or-lessor exemption. The Board of Health's definition of "hotel" requires two or more lodging units, and only the common owner or common lessee of multiple lodging units may be issued a hotel license, which is what makes the hotel route work for traditional hotels but not for an aggregator of individually-owned condominium units.

The opinion fits into a line of AG opinions reading the broker statute broadly: a 1989 opinion treated a home builder's referral incentive program as requiring broker licensing, and a 1973-74 opinion treated a home-finding liaison business as broker activity.

Common questions

Q: Does a Virginia property manager handling short-term rentals for condo owners need a real estate broker's license?
A: Per this opinion, yes, if the manager does not own or lease the units. The broker statute sweeps in even one act of leasing or renting real estate for others, and the owner-or-lessor exemption requires the manager to actually own or lease the property.

Q: Does a state Department of Health hotel license substitute for a real estate broker license?
A: No. Even though the management company had obtained a hotel license, the AG noted that a hotel license must be issued to the owner or lessee of the hotel. Where individually-owned condo units are aggregated and there is no common owner or lessee, the structure does not fit the hotel definition, regardless of how the Health Department processed the application.

Q: Can the management company become exempt by getting a broker's license and putting its employees under the broker?
A: The AG suggested that route. If the management company acquires the proper license, its employees may be exempted under § 54.1-213(C), provided its requirements are satisfied. But the entity itself would need to be licensed.

Q: Does it matter whether the rentals are under 30 days?
A: Not for broker licensing. The Code does not distinguish between renting generally and short-term or transient rentals for broker-license purposes. The 30-day threshold matters for transient occupancy tax, not for real estate broker law.

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2013/12-003_Krantz.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

January 17, 2013

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

The Honorable Randy C. Krantz
Commonwealth's Attorney, Bedford County
Post Office Box 1071
Bedford, Virginia 24523

Dear Mr. Krantz:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You inquire whether the owner of a company that manages short-term transient occupancy rentals of fewer than thirty days for a condominium complex is required to obtain a real estate broker's license before managing rentals of the condominium units.

Response

It is my opinion that a management company that manages short-term transient occupancy rentals of fewer than thirty days for a portion of the condominium units in a condominium must be licensed with the Virginia Real Estate Board and must employ a licensed real estate broker before renting or offering to rent those condominium units on behalf of the units' owners.

Background

You describe a condominium where the units are individually owned, often by absentee owners for rental and investment purposes, and rented to guests on a short-term basis of fewer than thirty days per guest. You note that a management company has entered into a separate transient occupancy management agreement with each condominium unit owner desiring its services to solicit and book short-term occupancies, maintain a reservation system, and accept occupancy payments on behalf of the unit owner. The management company provides its services from the condominium's lobby, which itself is a unit within the condominium, and the management company leases the lobby from the owner of the lobby unit. The company does not otherwise lease any of the units from their owners. You relate that the management company has obtained a license from the Virginia Department of Health to operate a hotel on the premises. You indicate that Bedford County considers the condominium facility to resemble a hotel and requires the management company to collect transient occupancy taxes for each short-term rental.

Applicable Law and Discussion

Under Virginia law, a real estate broker is "any person or business entity . . . who, for compensation or valuable consideration (i) sells or offers for sale . . . or (ii) leases or offers to lease, or rents or offers for rent, any real estate or the improvements thereon for others." Notably, the Code of Virginia does not create a distinction between "renting" generally and "short-term" or "transient" rentals for the purposes of real estate broker licenses. Further, "[o]ne act for compensation or valuable consideration of . . . renting, or offering to rent real estate, except as specifically excepted in § 54.1-2103, shall constitute the person . . . a real estate broker or real estate salesperson." "[T]o protect the public from the fraud, misrepresentation and imposition of dishonest and incompetent persons," no individual or corporation may perform such services without being licensed as required by the Virginia Real Estate Board.

There are several exemptions to the licensing requirement. Pertinent to your inquiry, a hotel may avail itself of the exemption provided for those "who as owner or lessor perform any [brokerage service] with reference to property owned or leased by them, where the acts are performed in the regular course of or incident to the management of the property and the investment therein[.]" Hotels in the Commonwealth are licensed separately by the State Board of Health, which defines as a "hotel" those establishments that offer transient lodging consisting of two or more lodging units. Critically, because a hotel license must be issued to the owner or lessee of the hotel, only the common owner or common lessee of multiple lodging units may be issued a license to operate a hotel. Thus, typically the owner of a hotel and its employees are exempt from having a real estate broker's license before renting lodging units in the hotel.

In contrast, in the scenario you describe, the condominium units are individually owned and not owned or leased collectively by the management company. Because no combination of multiple units will have a common owner, there will be no ability to obtain a hotel license. Based on the facts presented, the management company and its employees would not qualify for any of the enumerated exemptions from licensure set forth in § 54.1-2103. The management company and its employees, if not employees of the individual unit owners, therefore will not be exempt from the Virginia Real Estate Board's licensing requirements.

I note that under certain circumstances, should the management company acquire the proper license, its employees may be able to be exempted under § 54.1-213(C), provided its requirements are satisfied.

Prior opinions of this Office have concluded that the requirement to be licensed as a real estate broker or real estate salesperson applies in a variety of contexts. See 1989 Op. Va. Att'y Gen. 287, 288 (a home builder's referral incentive program giving a home purchaser a monetary credit toward settlement or a dinner or ski weekend in return for the buyer referring another person to purchase from the home builder would constitute activity that would require the referring party to be licensed); 1973-74 Op. Va. Att'y Gen. 287, 288 (a "home-finding" business serving as a liaison between a prospective lessee or buyer and the lessor or seller of a home must be licensed even if the business operates through brokers or other sales agents).

Conclusion

Accordingly, it is my opinion that a management company that manages short-term transient occupancy rentals of fewer than thirty days for a portion of the condominium units in a condominium must be licensed with the Virginia Real Estate Board and must employ a licensed real estate broker before renting or offering to rent those condominium units on behalf of the units' owners.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General