Section 10131 of the California Business and Professions Code lists the professional activities that require a real estate broker license. Brokers licensed by the California Bureau of Real Estate (CalBRE) may hire licensed agents as well as unlicensed assistants to perform administrative activities on their behalf and on behalf of their agents, provided that these unlicensed assistants operate under the broker’s supervision and control.
Brokers face considerable risk if agents are not properly trained and supervised, particularly with regard to managing issues related to fair housing and environmental regulations. Brokers who allow agents to make major mistakes can end up sharing in the penalties, both financial and legal. California real estate brokers can easily find themselves with their professional real estate licenses at risk, sometimes unknowingly, by committing violations such as putting unlicensed staff in charge of key areas of responsibility, under supervising office staff, not keeping adequate records, not keeping documents secured and not meeting other CalBRE regulatory requirements. There is no statute of limitation for the filing of a disciplinary action by a California licensing board.
Real estate brokers in California often find themselves facing a Bureau of Real Estate (BRE) broker office survey initiated due to a complaint made by a third-party. These BRE broker office surveys are intended to identify broker compliance violations including lack of oversight of salespersons and trust fund violations, among others. BRE investigators use Form RE 539 to scrutinize broker office policies and procedures and often sample transaction files and broker accounting records to test for compliance with transaction and trust fund records. A broker office survey which identifies violations can result in a lengthy and costly BRE audit, disciplinary proceedings against a broker’s license and potentially criminal charges if fraud or unlicensed staff is involved.
The 5 most common ways a California broker can put their broker’s license in jeopardy with the CalBRE include:
- ALLOWING ACTIVITIES TO BE PERFORMED BY UNLICENSED STAFF
Similar to other licensed professions in California, if a real estate broker allows an unlicensed employee to perform actions requiring a license, they are subject to disciplinary sanctions by the BRE. Examples of this include not referring respondents from cold calls to licensed brokers to discuss specific services available from a broker or property solicitation issues, showing a property at an open house and discussing terms and conditions of a potential sale or specific property features, not reviewing advertisements, reports and documents with a licensed broker before submitting these to outside parties to a transaction etc.
- TRUST FUND VIOLATIONS
Holding funds in trust for a real estate client can result in disciplinary action if a broker either shorts a client financially by diverting funds for their own use or co-mingling funds with their business accounts or if they simply don’t maintain accurate trust records. In many cases, these types of real estate broker violations will also result in criminal charges.
- FAILURE TO SUPERVISE SALES PEOPLE OR REAL ESTATE ACTIVITIES
Licensed real estate brokers in California are required to adequately supervise sales people in their brokerages. Similarly, if a broker is an officer of a corporation, they are required to supervise the corporation’s licensed real estate-related activities.
If a real estate broker misrepresents material facts during a real estate transaction requiring a license, this is considered a misrepresentation violation. This includes failing to disclose facts that a principal should be made aware of as well as incorrectly portraying any material fact through a direct statement.
- CRIMINAL CONVICTION & FAILURE TO REPORT A CRIMINAL CONVICTION
As in other licensed disciplines, failure to report and conviction for a crime which is “substantially related” to real estate is grounds for disciplinary action for an agent or broker on the part of the BRE. Included in this scope of criminal actions are drug and alcohol related crimes, fraud, theft, tax evasion, bribery, embezzlement, dishonesty, and misrepresentation.
If you are a California real estate agent or broker and you have received notification that you will be asked to participate in a Bureau of Real Estate (BRE) broker office survey or you have received an Accusation from the CalBRE, you should immediately retain the services of a qualified licensing attorney. In addition, if your situation involves a criminal act of any sort, you need the advice of a lawyer who is skilled in both criminal and licensing law.
The Law Offices of Lucy S. McAllister have successfully represented a wide range of California licensed real estate professionals and we are experienced in handling all types of licensing accusations and licensing issues as well as criminal cases. Let us help you protect your professional license, your reputation, and your livelihood.