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December 19, 2017 • Stay Connected!

QUESTION:  I know it is okay to refer contractors to our clients and the conventional wisdom is to refer at least three and let the client choose who they prefer to work with. After making those referrals, many brokers step back and let the client make the decisions. However, I think many brokers get way too involved in this process and are actually acting as General Contractors without being licensed to do so. It happens with Staging, Home Repairs and Improvements, Painting, Landscaping, etc. If the broker selects the contractor, directs and oversees their work, and makes payment arrangements with the client, aren't they acting as a General Contractor illegally? We are licensed to perform "real estate services", but I don't think that means acting as a GC. Wouldn't brokers who take on these roles, need to also get licensed, bonded and insured as a General Contractor? This issue is very widespread and has been happening for a long time. Your thoughts please?

ANSWER:  The Contractor Registration Act (RCW 18.27) controls the answer to this question and defines "general contractor" as follows:
(5) "General contractor" means a contractor whose business operations require the use of more than one building trade or craft upon a single job or project or under a single building permit. A general contractor also includes one who superintends, or consults on, in whole or in part, work falling within the definition of a contractor.
Contractor is defined as:
(1)(a) "Contractor" includes any person, firm, corporation, or other entity who or which, in the pursuit of an independent business undertakes to, or offers to undertake, or submits a bid to, construct, alter, repair, add to, subtract from, improve, develop, move, wreck, or demolish any building, highway, road, railroad, excavation or other structure, project, development, or improvement attached to real estate or to do any part thereof including the installation of carpeting or other floor covering, the erection of scaffolding or other structures or works in connection therewith, the installation or repair of roofing or siding, performing tree removal services, or cabinet or similar installation; or, who, to do similar work upon his or her own property, employs members of more than one trade upon a single job or project or under a single building permit except as otherwise provided in this chapter.  (b) "Contractor" also includes a consultant acting as a general contractor. (c) "Contractor" also includes any person, firm, corporation, or other entity covered by this subsection (1), whether or not registered as required under this chapter or who are otherwise required to be registered or licensed by law, who offer to sell their property without occupying or using the structures, projects, developments, or improvements for more than one year from the date the structure, project, development, or improvement was substantially completed or abandoned. A person, firm, corporation, or other entity is not a contractor under this subsection (1)(c) if the person, firm, corporation, or other entity contracts with a registered general contractor and does not superintend the work.
The Contractor Registration Act also includes a "strict enforcement" provision which is fairly unusual in Washington law. This tells courts that the law must be applied as written, without leniency. That provision is as follows:  
RCW 18.27.005
Strict enforcement.
This chapter shall be strictly enforced. Therefore, the doctrine of substantial compliance shall not be used by the department in the application and construction of this chapter. Anyone engaged in the activities of a contractor is presumed to know the requirements of this chapter.
The answer to the question asked is that if a RE broker intentionally or inadvertently performs the job of a general contractor, then the RE broker violates the Contractor Registration Act, unless that RE broker also has the appropriate contractor's license. Coordination of many home improvement projects would easily fall under the heading of work required to be performed by a licensed, general contractor. Violation of the Contractor Registration Act exposes broker to penalties imposed by the Department of Labor and Industries as well as civil remedies for any damaged consumer.
Of additional concern ... not only may the RE broker violate the Contractor Registration Act by providing general contractor activities without a license, broker's unlicensed activity is also, likely, uninsured. Broker's firm's E&O policy insures against errors and omissions in the provision of RE Brokerage Services. It does not likely insure against errors and omissions in the provision of unlicensed general contractor activities.


The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to . Please tell us your NRDS number when you e-mail the Hotline with your question.

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Tax Reform Update
With the anticipated passage of the final tax reform package late tonight or night or early tomorrow morning, Washington REALTORS® President Margo Willis issued the following statement: “While this bill is significantly better for homeowners than the original proposals from the House and Senate, we still have some concerns that it could add to the affordability challenges in our largest counties. That said, we appreciate that Congress listened to NAR and 1.2 Million REALTORS® nationwide and...
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Registration for Legislative Day!
Washington REALTORS® come from all over the state for this event. Join us in Olympia on January 17-18. Network, have fun at the Installation Banquet, and visit Legislators on the Hill with your peers. Be a part of an event that helps shape the real estate industry. Bring members from your office.  Hill Day (Thursday) is free for first-time attendees!
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5 simple New Year's Resolutions for Brokers
(Source: Inman) The first rule of resolutions is they need to be attainable. The easier a resolution is, the more likely we are to reach it, which makes us feel good about ourselves. And everyone knows confident agents sell more homes.
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Client Share: Benefits of Working with a REALTOR
(Source: NAR Economist Outlook) The 2017 Profile of Home Buyers and Sellers identified the top benefits that buyers listed of working with a real estate broker...Feel free to share this with your potential clients.

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Legal Hotline Video:
New Series Kicks Off on Form 35
In this episode of Legal Hotline, Annie kicks off a new series about the use of Form 35 (the Inspection Contingency Addendum)... Annie starts with the question: Can Buyer terminate the Purchase & Sale Agreement, using the Inspection Contingency, without ever performing a formal inspection of the property? Watch now to hear Annie's answer.  
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Primary Mortgage Rates Survey
(updated every Thursday)  Source:  Freddie Mac
 December 14, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.93%  3.36%  3.36%
 Fees & Points  0.5
 Margin  N/A  N/A  2.75

 December 7, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.94%  3.36%  3.35%
 Fees & Points  0.5
 Margin  N/A  N/A  2.75

 November 30, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.90%  3.30%  3.32%
 Fees & Points  0.5
 Margin  N/A  N/A  2.74

 November 22, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.92%  3.32%  3.22%
 Fees & Points  0.5
 Margin  N/A  N/A  2.74

 November 16, 2017  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  3.95%  3.31%  3.21%
 Fees & Points  0.5
 Margin  N/A  N/A  2.74

Date Class Location CE  
Intro to WA Landlord Tenant Law
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26-JAN Current Issues in WA Residential RELangley3.0More info...
26-JANThe Best of the Legal Hotline Langley4.0More info...
14-FEB NAR Code of EthicsBellingham3.0More info...
28-MAR NAR Code of EthicsWalla Walla  3.0 More info...
28-MAR Current Issues in WA RE Walla Walla 3.0More info...

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