Real Estate Compliance Consultant and Former California Real Estate Department (DRE) Investigator Summer Goralik stresses the importance of maintaining an active real estate license. Visit the original article on his blog here.
In the world of real estate compliance, a rule of thumb is to keep your license in good standing. By good standing, I mean, active, valid and not subject to any formal disciplinary action. While seemingly simple, failure to do so can wreak regulatory havoc, not only for the licensee who, for example, lets their license expire or expire, but also for the oblivious responsible broker who neglects to supervise and to monitor this area of compliance.
While there are a myriad of requirements and compliance issues that impact real estate licensees, the purpose of this article is to highlight the fundamental task and importance of being successful. renew your real estate permit. Certainly, the topic of license renewals could cover several different elements, including the application and / or the process itself, the disclosure issues required by the DRE on the renewal form and, of course, the completion of continuing education. . However, this article will focus on unintentional license lapses and / or expirations, and the domino effect of violations that may occur.
Trends in violations
While this topic is always important and timely, I happen to have witnessed a slight increase in such violations. As a real estate compliance consultant and former California Department of Real Estate investigator, I constantly review DRE’s public enforcement measures. Such actions provide a great deal of information about the types of violations that take place in the industry, the non-compliance issues that the ERD deems “formally” justifiable, and their disciplinary responses to those issues. After reviewing some of their recent actions over the past few months, there have been a few cases filed in a short time involving the initiation of controlled acts by agents whose expired licenses Where expired.
In addition, I have worked with several clients who have been contacted by DRE regarding unlicensed activities initiated by agents whose licenses have expired. Together, these public actions and DRE investigations serve as the ultimate reminder of simple license compliance (keeping your license active / unexpired while conducting licensed activity), but more importantly, the scope of the DRE and its regulatory response to these. basic types of failures in licensees.
Certainly, the best way to educate licensees about license renewals (which have gone wrong) is to present the related and problematic scenarios involved that undoubtedly expose licensees to regulatory risk. Here are some scenarios that I have recently observed in this area.
For example, if an agent unknowingly lets his license expire or expire and continues to carry on real estate activities, the agent has engaged in unauthorized activity in violation of the law on real estate. Aside from the agent’s illegal activity, there is potential collateral damage with any license expiration. If the agent carried out these unauthorized activities on behalf of an affiliated real estate broker and the broker compensates that agent for such activities, then the broker has also broken the law. More specifically, the broker is guilty of retaining or employing, and remunerating, an unauthorized person to perform controlled acts.
Common license flub: no broker affiliation
Another example might look like the following: An agent renews their license by completing and submitting the DRE Vendor Renewal Application (DRE RE 209 form) on time, but incorrectly completes it by accidentally dissociating themselves from their home affiliate brokerage. Concretely, the holder wrongly certifies that he will no longer exercise real estate at the time of renewal and, in turn, fails to complete the information of his affiliated broker and to obtain the signature of his broker. In turn, these actions place the agent’s license status in no broker affiliation (NBA) status, or essentially, the non-working status. Note that if you think you are safe from this type of problem since you are renewing your license using the DRE eLicensing portal (online electronic licensing system), you are unfortunately not. This same scenario can also occur via eLicensing, if the questions are answered incorrectly.
Speaking of the DRE eLicensing portal, here are a few more examples I have come across. Using eLicensing, an agent renews their license, on time, and fails to provide the correct affiliate broker license number and email address; or the agent provides the correct information, but the renewal request is never certified by the broker for any reason (for example, the broker did not receive the email or ignored the e-mail). -mail inadvertently). Either way, the agent unintentionally disaffiliates his license from his broker’s license and places himself in NBA status with the DRE.
Now here’s where this topic gets more troubling. If an agent accidentally (or not) disaffiliates his license from his broker, transferring his status to “NBA” during the renewal process, the DRE does not alert the broker responsible for this license change. Therefore, if an agent believes he has renewed on time and continues to carry out real estate activities on behalf of his brokerage, and the broker does not know that the agent’s license is no longer active and properly affiliated, then the agent and the broker inadvertently engaged in violations of the law; activity not authorized by the agent, and illegal employment / compensation by the affiliate broker.
The “responsible” responsible broker
As a compliance consultant who has helped brokers and agents navigate these types of situations and related DRE investigative investigations, it is a painful endeavor for the parties involved. As a result of these errors, the agent and the responsible broker face potential licensing discipline. But, let’s be clear. It’s not just the agent’s fault. The responsible affiliate broker also bears some responsibility.
It should be emphatically noted that a responsible broker is required to supervise and monitor, among other things, the activities of their agents and the expiration of licenses, which should also include the successful renewal of licenses. It is not enough to remind agents to renew their licenses on time. Agent licenses should be monitored by the responsible broker to ensure that the proper renewal and continued affiliation with the broker’s license is successful.
It is important to mention: Whether the agent intentionally or accidentally fails to renew or renew properly and continues to perform controlled acts on behalf of the brokerage, the result is the same. The oblivious agent and broker have both engaged in real estate law violations. And even if you claim that the violations only occurred for a short period of time, I can assure you that the agent and broker still risk the review, investigation and possible formal action of the ERD.
Steps to ensure compliance
In order to avoid such non-compliance and unnecessary regulatory risk, and quite frankly, learn from the mistakes of others, here are some compliance tasks to consider:
- All Licensees: Protect your real estate license by simply committing to ensuring that it is active and valid always. I realize this is an obvious reminder and should be an easy task, but we know from the broad outlines of the situations above that this simple endeavor does not ‘is apparently not without regulatory risk. By the way, if we have learned anything here, we also know that this task goes beyond ensuring that the renewal has taken place in a timely manner (by the affiliate agent or broker), but also includes active confirmation that the renewal process was successful and completed correctly.
- Agents: If you are filing your renewal request by mail, agents should review these forms with their brokers to ensure they are completed correctly before submitting them to ERD. This will hopefully ensure that the application is completed correctly and signed by the agent and broker. If you are renewing your real estate license through the DRE eLicensing portal, in addition to ensuring that all questions are answered correctly, agents should also ensure that their brokers certify the renewal request through DRE’s eLicensing portal and continually check their license status to confirm that the renewal was successful. If done correctly, the agent’s license status should be active / unexpired and still affiliated with the broker.
- Responsible Brokers: Since brokers cannot expect any warning or notification from the ERD when one of their agents inadvertently disaffiliates from the brokerage during the renewal process, responsible brokers should monitor the agent license renewal process. Responsible brokers may require their agents to notify the brokerage when renewing their licenses and ensure that they receive notifications from the ERD to certify their agent’s renewal requests through eLicensing. In addition, brokers should check the status of the agent’s license after the renewal application has been submitted to the ERD to confirm that the renewal process has been properly completed and successful. By carrying out such checks and more closely agent license monitoring, errors or problems, if any, can be quickly identified and resolved, ensuring that all licensees are authorized to conduct real estate licensing activity on behalf of the brokerage.
Keep in mind that these types of activities are in fact part of the duties required of a responsible broker under the law. A responsible broker is required to track and monitor the activities of its agents and licensees, and brokerage houses must have systems in place to ensure that agents perform licensing activities with active licenses and valid at all times.
Finally, as an additional exercise, you can ensure, as part of a broker’s normal transaction review and approval process, that your brokerage is continually verifying and confirming license status agents who are engaged in licensed activities on behalf of the brokerage (for example, taking listings, drafting offers and closing deals).
I realize that it is not rocket science. But it is obviously not that simple or straightforward otherwise there would be no disturbing anecdotes to share. In conclusion, the first chapter on compliance is to prioritize your real estate license. If a license holder drops that particular ball, you might not get a second chance, or at least not without the headache of regulatory review and / or the costly impact of potential discipline. formal (and public).