Applicable Laws and Regulations Bus. & Prof. Code Section Responsibility of Corporate Officer in Charge Regulation 2725 – Broker Supervision over activities of his or her salespersons 13
Broker-Salesperson Relationship Agreements Must be written. Contract provisions that attempt to limit liability for broker’s failure to supervise or salesperson’s wrongful acts committed while performing licensed activities are contrary to the law. 14
Responsibilities Salespersons can only perform licensed activities under the real estate broker that they are licensed under. All compensation must be paid from the broker. 15
Fiduciary Duty Licensees owe a fiduciary duty to exercise reasonable care, skill, and diligence to their principal. Misrepresentations, concealment, dishonest dealing, or fraud committed by a salesperson may lead to discipline of broker’s license for violations of the Real Estate Law, including for the failure to supervise. 16
Broker’s Responsibilities Brokers are required to supervise the activities of salespersons and employees to ensure full compliance with the Real Estate Law. Brokers are required to review all documents prepared by the salesperson. Brokers are required to retain records for (3) three years. 17
Delegation of Duty to Supervise Regulation 2724 allows a broker to delegate the responsibility of supervising unlicensed persons acting as apartment, hotel, motel, or trailer park managers under certain conditions. –Case example: Property management 18
Disciplinary Action A broker may be subject to discipline if he or she fails to reasonably supervise the activities of his or her salesperson or, as the designated broker for a corporate broker, fails to supervise and control the activities of the corporation. 19
Guilty Knowledge Bus. and Prof. Code Section provides that no violation by a salesperson is grounds for the revocation or suspension of his or her employing broker unless, after a hearing, it is found that that the broker had guilty knowledge of the violation. 20
Willful Blindness A broker who does not have guilty knowledge because he or she failed to supervise a salesperson, may still be disciplined for negligent supervision. 21
Case Example - Diaz Brokers are required to supervise all of salesperson’s licensed activities, not just those that benefit the broker or corporation. 22
DON’Ts Fail to keep track of salesperson’s transactions. Fail to supervise branch office(s). Allow unlicensed entities to operate from your branch office. Allow your salespeople to work for or accept compensation from others for activities requiring a real estate license. 23
Tom Pool Assistant Commissioner
Investigative - New Investigative Follow-Up Investigative – Other Routine - New Routine - Follow-Up
Types of Audits Closed Statewide – 2014
Types of Audits Closed Statewide – 2010
Audits Closed by Activities Statewide – 2014
Findings of Audits Closed, 1/1/14 – 12/31/14
Trust Fund Shortages $6,483, in total trust fund shortages in 2014 Breakdown by real estate activity: $5,622, – Property Management $194, – Mortgage Loans $568, – Broker Escrow $68, Subdivisions $28, – Sales
The Basics: Policies, rules, procedures and systems to review, oversee, inspect and manage A broker shall establish a system for monitoring compliance with such policies, rules, procedures and systems. The form and extent of such policies, rules, procedures and systems shall take into consideration the # of salespersons employed and the # and location of branch offices.
Considerations: Do signed, dated broker-salesperson agreements include duties and supervision? Is there regular reporting by agents to the broker, or scheduled update meetings? Is there a separation of duties in the area of trust fund handling and accounting?
Considerations: Does broker look into activities of salesperson, broker-associates? Is there a visible, active presence? Is there a training program for salespersons? Given the private information contained in files, how are files secured? What does the trust account situation look like?
Bureau of Real Estate Audit Section Contact: Dan Sandri – Assistant Commissioner, Audits
Tom Pool Assistant Commissioner Licensing & Administration
Generally, on-time renewal applications are processed in received date order. Licensees who submit their renewal on time can continue working pursuant to after license expiration date. Late renewals on a priority basis as those individuals can not work while their license is expired.
The Career Compass CE Provider Law Requires Written Exams/Students Must Pass CalBRE Received Complaints Resulting Investigations The Career Compass Issued Certificates w/o Exams 5/28/14 CalBRE Withdrew all of Course Approvals 5/28/14 Instructor Wellington Pendell Lost Approved Status Licensees were denied CE Credit Actions Posted
Continued to Operate after May 28, 2014 by: Associating with an approved CE provider Tina L. Parker Wayne Rapp Gold Coast Schools Investigation Findings: Knowingly disseminated advertising or promotion materials that include false and/or misleading statements or representations as to CAREER COMPASS’s authorization to sponsor or promote CE coursework.
1/1/18, 2015 Desist and Refrain Order Served Order states that the Career Compass Inc, Wellington D. Pendell, Tina L. Parker and Wayne Rapp must: “Desist and Refrain from stating or implying that they, or any of them, are approved by the Bureau to act as a sponsor of an educational offering without having complied will all the provisions of Code Section and Section 3006 et seq. of the Regulations.”
AB 2540 (Dababneh) – Contact Information Requires current: mailing address telephone number electronic mail address Applies only to contact information that he or she maintains or uses to perform any activity that requires a real estate license Update within 30 days after making the change.
This power point presentation will be made available in its entirety on the CalBRE website.