Request By:
Ms. Susan G. Stopher
Education Director
Kentucky Real Estate Commission
100 East Liberty Street
Suite 204
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; Greg Holmes, Assistant Attorney General
You have requested the opinion of this office concerning the scope of the Kentucky Real Estate Commission's authority to regulate the activities of brokers. The specific question you raise is whether a broker who is an owner of a corporation owning real estate can be held responsible for his real estate activities pertaining to property which the corporation owns.
The Kentucky Real Estate Commission, like any administrative entity, is a creature of statute and must therefore find authorization for any of its activities within that statute.
Department for Human Resources v. Sterns Coal, Ky., 563 S.W.2d 471 (1978);
Courtney v. Island Creek Coal Company, 474 F.2d 468 (6th Circuit 1973);
Johnson v. Correll, Ky., 332 S.W.2d 843 (1960).
Any authority which the Kentucky Real Estate Commission has to regulate the real estate activities of a broker must therefore be granted to the Commission by Chapter 324 of the Kentucky Revised Statutes, the statute which created the Kentucky Real Estate Commission and which defines the scope of its authority. KRS 324.151, KRS 324.160, and KRS 324.281 grant to the Commission, inter alia, the authority to conduct hearings and institute disciplinary proceedings against brokers whose conduct is inconsistent with the provisions of KRS Chapter 324. The investigative and disciplinary provisions of KRS Chapter 324 are specifically addressed to the conduct of "brokers" . KRS 324.010(1)(a) defines a broker as:
(1) As used in this chapter, unless the context requires otherwise:
(a) "Broker" means any person who for a fee, commission, compensation or other valuable consideration sells or offers for sale, buys or offers to buy, or otherwise deals in time sharing options, or negotiates the purchase or sale of exchange of real estate, or who leases or offers to lease, or rents or offers for rent, or refers or offers to refer for the purpose of securing prospects, any real estate or the improvements thereon for others, as a whole or partial vocation."
Subsection 2 of KRS 324.010 defines the application of the statute as:
"(2) One act for a fee, commission, compensation or other valuable consideration of buying or selling real estate of or for another, or offering for another to buy, sell or exchange real estate, or leasing, renting or offering to rent real estate, or referring or offering to refer real estate for the purpose of securing prospects, or otherwise dealing in options or time sharing shall constitute the person performing, offering or attempting to perform such act as a broker or sales associate."
It is thus clear from the provisions of KRS Chapter 324 that that Chapter is intended to apply to the real estate activities of persons acting in the capacity of broker or sales associate. There is no statutory authorization for the Commission to investigate or discipline brokers acting solely as owners of real estate. The answer to the question you have raised therefore turns upon whether the broker is acting for himself or for another party with respect to real estate activity. An individual who, though licensed as a broker, is acting for himself as an owner of real estate is not subject to the disciplinary provisions of KRS Chapter 324.
Your question, however, specifically poses the problem of a broker who is acting for a corporation, even though he is himself a shareholder in that corporation. The law has long treated the corporation as a separate entity for any number of legal purposes. A corporation may sue and be sued in its own name, is taxed, and in general is treated as a "person" under the law. A broker who acts for a corporation in transactions pertaining to real estate is therefore acting in his capacity as a broker by representing a third party, (i.e., the corporation). It is therefore the view of this office that the Kentucky Real Estate Commission may, consistently with the provisions of KRS Chapter 324, hold a broker who is an owner of a corporation responsible for his real estate activities pertaining to real estate which is owned by that corporation.