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One need not possess a real estate broker's license for merely identifying and advising a client about a purchase of a business. Unless such an advisor's actions are covered by Mich. Comp. Laws § 2501(d) -- that is, unless its activities can reasonably be characterized as selling, buying, or negotiating the purchase or sale of real estate for another for a fee, it is not required to possess a real estate license.
G.C. Timmis & Co. is a registered investment advisor, but it is not a licensed real estate broker. G.C. Timmis introduced itself to Guardian Alarm Co., a security-systems company, in order to discuss how it might assist the latter in acquiring other security-systems companies. According to G.C. Timmis, the parties entered into an oral contract, which specified that G.C. Timmis would receive a "success fee" for any company G.C. Timmis contacted on Guardian’s behalf that Guardian subsequently purchased. G.C. Timmis eventually introduced Guardian to a company, MetroCell, a subsidiary of Rao Corporation. Subsequently, Guardian purchased the alarm contracts of MetroCell and its customers, and G.C. Timmis sought the "success fee." However, Guardian refused to pay, claiming that REBA precluded G.C. Timmis from bringing suit because G.C. Timmis had acted as an unlicensed real estate broker. The trial court denied Guardian’s motion for summary disposition, concluding that there was a genuine issue of material fact regarding whether G.C. Timmis had acted as a "real estate broker." The Court of Appeals, in a two-to-one decision, reversed.
Did the Court of Appeals err in ruling that G.C. Timmis was precluded from seeking compensation for its service because it was not a licensed “real estate broker”?
The Court of Appeals held that " G.C. Timmis’ activities constituted 'negotiations [for] the purchase or sale or exchange of a business' as contemplated by the act and that, therefore, G.C. Timmis was required to procure a real estate brokers license in order to collect fees for its service." In reaching this conclusion, the appellate court relied on Cardillo v. Canusa Extrusion Engineering Inc., observing that G.C. Timmis “found business assets for defendant to purchase, conduct which falls squarely within the definition of activities performed by a "real estate broker" under the act. . . . It is clear that [G.C. Timmis’] conduct in attempting to locate business assets for purchase by [Guardian] constitutes action of a "real estate broker" as defined by the statute.” Thus, under Cardillo, one must be a licensed real estate broker when one merely performs one of the "usual functions" of a real estate broker, including among other things "finding" a purchaser for real estate. However, REBA does not require one to be a licensed real estate broker when one merely performs a "usual function" of a real estate broker, such as "finding" a purchaser. Rather, REBA expressly requires that one be a licensed real estate broker only if, for a fee, one "sells or buys" real estate or "negotiates" a real estate transaction for another. Accordingly, to the extent that Cardillo holds otherwise, it reads too much into § 2501(d), and, thus, the Court rejects its interpretation of this provision.