Colorado Real Estate Journal -
Virtually all businesses involve an interest in real property, such as a lease, so the state of Colorado generally requires business brokers to have a real estate license. General Background. C.R.S. § 12-61-102 states that “it is unlawful for any person, firm, partnership, limited liability company, association, or corporation to engage in the business or capacity of real estate broker in this state without first having obtained a license from the Real Estate Commission.” In Brakhage v. Georgetown Assocs. Inc., the Colorado Court of Appeals further explained that “negotiate,” “includes the act of bringing two parties together for the purpose of consummating a real estate transaction.” The court explained that “negotiate” included as little as introducing the buyer to the seller or vice versa, and it concluded that there was no distinction between that minimal level of interaction with the transaction and active participation in the intimate details of the sale. In spite of doing “nothing more than introduce the parties who later consummated the transaction,” the court in Brakhage “deemed” him a real estate broker. The court refused to recognize “a distinction between a finder who merely introduces prospective buyers and sellers and a broker who participates in the details of the transaction.”
The Business Brokerage Context. Business brokerage consists of assisting in the purchase or sale of the ownership interest in a business. A person who engages in business brokerage involving a business that owns any interest in real estate must comply with Colorado real estate license law. In addition to the broad definition of “negotiate” in C.R.S § 12-61-101(2)(a), that section of the statute also broadly defines the sale of real estate to include the sale of the ownership interest in a business that “directly or indirectly” effectuates the transfer of ownership of real property.
In the case of Broughall v. Black Forest Dev. Co., the Colorado Supreme Court concluded that when the Legislature adopted the “broad language” of the statute, it intended to “require a finder or business broker to have a real estate broker’s license if the sale of the business includes a transfer of any interest in real estate.” Applying that definition to the sale of a radio station, the court there found that the transfer of the leasehold interest in the station’s building as a part of the sale of the business fell within the statute; therefore, the business broker needed a real estate broker’s license to be compensated for work on the transaction. Even if the transaction only involves the sale of the stock of a business, an actor negotiating the sale is defined as a broker when that sale of the business involves the “change in ownership or interest … in a business which owns an interest in real estate.” Additionally, the court in Barton v. Sittner held that the act of “offering to negotiate” the sale of a business with assets that include a leasehold interest in real estate brings the actor within the definition of a person requiring a real estate broker’s license. As this analysis by Colorado courts demonstrates, any person performing business brokerage that is in some way related to a change in ownership of an interest in real estate requires a real estate broker’s license. Most of the license law affecting business brokerage evolved prior to the information age. Now, it is not uncommon for entrepreneurs to establish valuable business out of their homes. The seller of such a business neither transfers nor terminates an interest in real estate. If the buyer operates the business out of his or her existing home, then the transaction involves no interest in real property and arguably the broker of the sale in unregulated. Otherwise, if an interest in real property, such as a lease, is being transferred, terminated or established, then any person who helps the buyer and seller find each other should have a real estate license. * Disclaimer: Content is general information only. Information is not provided as advice for a specific matter, nor does its publication create an attorney-client relationship. Laws vary from one state to another. For legal advice on a specific matter, consult an attorney.