How to Stay Out of Trouble with the DRE: The Five Most Common Violations
Compliance is a significant challenge for many real estate brokers and salespersons, and while some have mastered it, many continue to struggle. The following is a list of five common areas of violations, which we have prepared with the goal of educating licensees about the potential pitfalls in their industry.
As part of its attempts to defend the public and promote integrity within the real estate industry, the California Department of Real Estate urges real estate consumers and professionals to stay up-to-date on the most common Real Estate Law violations enforced by the DRE and practical strategies to help you avoid them. If you have questions or concerns about a DRE violation, contact a California professional license defense lawyer from Gould, Hahn, & Reinhardt today.
Violations of Record Keeping and Trust Fund Accounts
Trust account record-keeping and handling have long been an area of intense scrutiny with the Department of Real Estate. When a broker is responsible for maintaining and holding trust funds on behalf of someone else, the mishandling or misuse of those funds can lead to substantial penalties and possibly even criminal charges. Common violations involve not maintaining accurate records for every transaction, failing to routinely reconcile trust accounts, and commingling trust funds with personal or business funds.
Trust fund shortages can be the result of improper handling of client funds or poor record-keeping, and such issues are often brought to light in a DRE audit. Brokers are expected to promptly deposit trust funds into the correct account, whether that be directly into the trust account, a neutral depository, like an escrow account, or to the principal. Failing to follow these procedures can pave the way for severe penalties, such as the revocation or suspension of your professional license.
Violations for Failing to Supervise
Brokers are required to supervise the activities of their salespersons as well as the operations of any real estate enterprise for which they are responsible. Failing to provide adequate supervision can result in misconduct and violations that impact both the broker’s and the salesperson’s license. This includes allowing unqualified individuals to act without supervision and failing to scrutinize unlicensed and licensed activities within the organization.
Violations for Unlicensed Activity
Allowing unlicensed individuals to conduct real estate activities for which a license is required is also a common violation. Brokers are liable for making sure that anyone conducting licensed real estate activities under their supervision is appropriately credentialed. Their duties include maintaining systems that adequately track continuing education requirements and license renewals, confirming that salespeople have active licenses, and that unlicensed staff are not engaging in activities for which a license is required.
Violations for Misrepresentation
A misrepresentation is the failure to disclose material facts or a false statement made in a real estate deal. A misrepresentation may be accidental or deliberate, and either could lead to serious penalties. Concealing important facts or failing to supply correct information can harm clients and give rise to legal repercussions for the salesperson or broker.
Criminal Convictions – Reporting Requirements and Cause for Discipline
Criminal charges are also a common source of DRE disciplinary actions, and a licensee can be disciplined for the criminal conviction as well as failing to report the charges. According to Section 10186.2 of the California Business and Professions Code, licensees must report the filing of any felony charges within thirty (30) days. Criminal convictions – whether felony or misdemeanor – must be reported within thirty (30) days from the date of conviction. Such convictions will often form the basis for a disciplinary action against a licensee, and failure to comply with the aforementioned reporting requirements will constitute further grounds for disciplinary action.
Do You Need a California Professional License Defense Lawyer?
Real estate licensees need to implement a comprehensive, multi-pronged approach to regulatory compliance from the off. Without performing the steps mentioned earlier, licensees risk walking a very fine line; one where a single misstep can jeopardize their career, reputation, and license.
Take the time to study and understand the applicable laws and requirements, ask questions when uncertain, anticipate potential issues and create preventive solutions, and, if necessary, don’t hesitate to seek the advice of a California professional license defense lawyer at Gould, Hahn, & Reinhardt. Call (800) 428-2207 or fill out the contact form on our website to schedule your confidential legal consultation.