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California Breach of Fiduciary Law and the Statute of Limitations 4 years says caselaw

February 3, 2012 By California DRE Defense Lawyer Leave a Comment

CALIFORNIA BREACH OF FIDUCIARY DUTY UPDATE

California real estate brokers often call us to discuss audits, investigations, and accusations they are facing with the California Department of Real Estate (“DRE”).

One of the issues that comes up in audits and investigations is the brokers duty to keep and maintain records of their real estate transactions.  Typically, we give the boilerplate answer under the code (California Business and Professions Code Section 10148):

(a) A licensed real estate broker shall retain for three years copies of all listings, deposit receipts, canceled checks, trust records, and other documents executed by him or her or obtained by him or her in connection with any transactions for which a real estate broker license is required. The retention period shall run from the date of the closing of the transaction or from the date of the listing if the transaction is not consummated. After notice, the books, accounts, and records shall be made available for examination, inspection, and copying by the commissioner or his or her designated representative during regular business hours; and shall, upon the appearance of sufficient cause, be subject to audit without further notice, except that the audit shall not be harassing in nature.

So, taking this, general compliance with the DRE would require maintaining real estate records for three years.  However, what about the situation where a California real estate company, or broker gets sued for a breach of fiduciary duty?  What is the statute of limitations on a breach of fiduciary duty claim in California?

The answer according to a new California court of appeal case is 4 years.  See Thompson v. Canyon, 198 Cal.App.4th 594.  Here is what the court said in the case:

E. The cause of action for breach of fiduciary duty is timely under the applicable statute of limitations, Code of Civil Procedure section 343 (9) The Code of Civil Procedure does not specify a statute of limitations for breach of fiduciary duty. The cause of action is therefore governed by the residual four-year statute of limitations in Code of Civil Procedure section 343 governing “[a]n action for relief not hereinbefore provided for” in the code. (See Rylaarsdam, supra, ¶ 4:1791.).

Given the Thompson case, it may be wise for a California real estate professional to keep their real estate transaction files for a period of four or more years, in the event they become involved in a breach of fiduciary duty lawsuit, so that you are better able to defend yourself.  This article is general legal information only and not legal advice.  The case is subject to change.  If you are facing a breach of fiduciary duty lawsuit, and need a California Real Estate lawyer to represent you consider hiring Attorney Steve Vondran.  More information about general California Real Estate compliance can be found here.  Mr. Vondran is licensed to practice law in CA and AZ.

 

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Need help filling out California RE 515 form?

January 12, 2012 By California DRE Defense Lawyer Leave a Comment

If you are convicted of a crime in California, this may have an impact on your California Real Estate license.  Especially if your license was already in restricted status.  If you are convicted of a crime (for example a DUI, assault, battery, shoplifting, forgery, fraud, marijuana possession etc.) there may come occasion that the DRE requests that you fill out RE form 515 and RE 515D (Conviction Detail Report).  These forms ask you to disclose the nature of convictions and details involving the crime.

If you are dealing with these types of issues, you may want to consider having a California DRE Defense lawyer review your case and assist you in preparing these forms.

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Attorney Steve discusses the California Realtor Duty to Arbitrate

December 22, 2011 By California DRE Defense Lawyer Leave a Comment

Here is an article I just wrote that explains, in general terms, what you face in a real estate arbitration before the board in California.

Attorney Steve Primer on California Realtor Arbitration involving procuring cause, MLS violations, and Realtor Ethics Violations PDF

 

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Primer on California Administrative Procedures Act

November 19, 2011 By California DRE Defense Lawyer Leave a Comment

 

When a California DRE licensed broker or salesperson faces an administrative hearing involving their license (ex. a hearing to determine whether the broker’s license should be revoked or suspended) the California Adiministrative Procudure Act applies.

For example, say a California Real Estate Broker was charge with committing one or more of the following acts:

These are a few of the typical types of violations that we see following a DRE audit or investigation.  These types of violations will typically lead to the filing of an accusation.  Once a broker or real estate licensee gets served wtih an accusation, if they plan to contest the matter they must file a NOTICE OF DEFENSE.  A hearing before the Office of Administrative Hearings (OAH) is set.  During this phase of waiting for the hearing date, the licensee may seek to obtain a copy of the DRE file, and seek to negotiate a stipulated settlement with the DRE attorney handline the matter.
This article talks about some of the key procedures of the Administrative Procedures Act that impact the dealings between the broker or salesperson (or their DRE Defense lawyer) and the representative for the Department of Real Estate (DRE).  Here are a few provisions to be aware of if you are in this setting.
I.  NOTICE OF DEFENSE
§ 11506. Filing of notice of defense; Contents; Right to hearing on the merits
(a) Within 15 days after service of the accusation the respondent may file with the agency
a notice of defense in which the respondent may:
(1) Request a hearing.
(2) Object to the accusation upon the ground that it does not state acts or omissions upon
which the agency may proceed.
(3) Object to the form of the accusation on the ground that it is so indefinite or uncertain
that the respondent cannot identify the transaction or prepare a defense.
(4) Admit the accusation in whole or in part.
(5) Present new matter by way of defense.
(6) Object to the accusation upon the ground that, under the circumstances, compliance
with the requirements of a regulation would result in a material violation of another
regulation enacted by another department affecting substantive rights.
(b) Within the time specified respondent may file one or more notices of defense upon any
or all of these grounds but all of these notices shall be filed within that period unless the
agency in its discretion authorizes the filing of a later notice.
(c) The respondent shall be entitled to a hearing on the merits if the respondent files a
notice of defense, and the notice shall be deemed a specific denial of all parts of the
accusation not expressly admitted. Failure to file a notice of defense shall constitute a
waiver of respondent’s right to a hearing, but the agency in its discretion may nevertheless
grant a hearing. Unless objection is taken as provided in paragraph (3) of subdivision (a), all
objections to the form of the accusation shall be deemed waived.
(d) The notice of defense shall be in writing signed by or on behalf of the respondent and
shall state the respondent’s mailing address. It need not be verified or follow any particular
form.
(e) As used in this section, “file,” “files,” “filed,” or “filing” means “delivered or mailed” to
the agency as provided in Section 11505.
II.  RIGHT TO DISCOVERY
In order to find out the strenghts and weakness of the case the DRE and the licensee typically engage in discovery.  The APA permits this.  HERE ARE SOME OF THE DISCOVERY PROVISIONS:
§ 11507.6. Request for discovery
After initiation of a proceeding in which a respondent or other party is entitled to a hearing
on the merits, a party, upon written request made to another party, prior to the hearing and
within 30 days after service by the agency of the initial pleading or within 15 days after the
service of an additional pleading, is entitled to (1) obtain the names and addresses of
witnesses to the extent known to the other party, including, but not limited to, those intended
to be called to testify at the hearing, and (2) inspect and make a copy of any of the following
in the possession or custody or under the control of the other party:
(a) A statement of a person, other than the respondent, named in the initial administrative
pleading, or in any additional pleading, when it is claimed that the act or omission of the
respondent as to this person is the basis for the administrative proceeding;
(b) A statement pertaining to the subject matter of the proceeding made by any party to
another party or person;
(c) Statements of witnesses then proposed to be called by the party and of other persons
having personal knowledge of the acts, omissions or events which are the basis for the

proceeding, not included in (a) or (b) above;

(d) All writings, including, but not limited to, reports of mental, physical and blood
examinations and things which the party then proposes to offer in evidence;
(e) Any other writing or thing which is relevant and which would be admissible in
evidence;
(f) Investigative reports made by or on behalf of the agency or other party pertaining to the
subject matter of the proceeding, to the extent that these reports (1) contain the names and
addresses of witnesses or of persons having personal knowledge of the acts, omissions or
events which are the basis for the proceeding, or (2) reflect matters perceived by the
investigator in the course of his or her investigation, or (3) contain or include by attachment
any statement or writing described in (a) to (e), inclusive, or summary thereof.
For the purpose of this section, “statements” include written statements by the person
signed or otherwise authenticated by him or her, stenographic, mechanical, electrical or
other recordings, or transcripts thereof, of oral statements by the person, and written reports
or summaries of these oral statements.
Nothing in this section shall authorize the inspection or copying of any writing or thing which
is privileged from disclosure by law or otherwise made confidential or protected as the
attorney’s work product.
§ 11511. Depositions
On verified petition of any party, an administrative law judge or, if an administrative law
judge has not been appointed, an agency may order that the testimony of any material
witness residing within or without the state be taken by deposition in the manner prescribed
by law for depositions in civil actions under Title 4 (commencing with Section 2016.010) of
Part 4 of the Code of Civil Procedure. The petition shall set forth the nature of the pending
proceeding; the name and address of the witness whose testimony is desired; a showing of
the materiality of the testimony; a showing that the witness will be unable or cannot be
compelled to attend; and shall request an order requiring the witness to appear and testify
before an officer named in the petition for that purpose. The petitioner shall serve notice of
hearing and a copy of the petition on the other parties at least 10 days before the hearing.
Where the witness resides outside the state and where the administrative law judge or
agency has ordered the taking of the testimony by deposition, the agency shall obtain an
order of court to that effect by filing a petition therefor in the superior court in Sacramento
County. The proceedings thereon shall be in accordance with the provisions of Section
11189.
SUBPOENAS – California Code of Civil Procedure
Code of Civil Procedure
§ 1985. Subpoena; Issuance; Affidavit
(a) The process by which the attendance of a witness is required is the subpoena. It is a
writ or order directed to a person and requiring the person’s attendance at a particular time
and place to testify as a witness. It may also require a witness to bring any books,
documents, or other things under the witness’s control which the witness is bound by law to
produce in evidence. When a county recorder is using the microfilm system for recording,
and a witness is subpoenaed to present a record, the witness shall be deemed to have
complied with the subpoena if the witness produces a certified copy thereof.
(b) A copy of an affidavit shall be served with a subpoena duces tecum issued before trial,
showing good cause for the production of the matters and things described in the
subpoena, specifying the exact matters or things desired to be produced, setting forth in full
detail the materiality thereof to the issues involved in the case, and stating that the witness
has the desired matters or things in his or her possession or under his or her control.
(c) The clerk, or a judge, shall issue a subpoena or subpoena duces tecum signed and
sealed but otherwise in blank to a party requesting it, who shall fill it in before service. An
attorney at law who is the attorney of record in an action or proceeding, may sign and issue
a subpoena to require attendance before the court in which the action or proceeding is
pending or at the trial of an issue therein, or upon the taking of a deposition in an action or
proceeding pending therein; the subpoena in such a case need not be sealed. An attorney
at law who is the attorney of record in an action or proceeding, may sign and issue a
subpoena duces tecum to require production of the matters or things described in the
subpoena.
§ 1985.2. Subpoena requiring attendance of witness; Notice
Any person who is subpoenaed to appear at a session of court, or at the trial of an issue
therein, may, in lieu of appearance at the time specified in the subpoena, agree with the
party at whose request the subpoena was issued to appear at another time or upon such
notice as may be agreed upon. Any failure to appear pursuant to such agreement may be
punished as a contempt by the court issuing the subpoena. The facts establishing or
disproving such agreement and the failure to appear may be proved by an affidavit of any
person having personal knowledge of the facts.
§ 1985.3. Subpoena duces tecum for production of personal records; Definitions;
Application of section
(a) For purposes of this section, the following definitions apply:
(1) “Personal records” means the original, any copy of books, documents, other writings,
or electronic data pertaining to a consumer and which are maintained by any “witness”
which is a physician, dentist, ophthalmologist, optometrist, chiropractor, physical therapist,
acupuncturist, podiatrist, veterinarian, veterinary hospital, veterinary clinic, pharmacist,
pharmacy, hospital, medical center, clinic, radiology or MRI center, clinical or diagnostic
laboratory, state or national bank, state or federal association (as defined in Section 5102 of
the Financial Code), state or federal credit union, trust company, anyone authorized by this
state to make or arrange loans that are secured by real property, security brokerage firm,
insurance company, title insurance company, underwritten title company, escrow agent
licensed pursuant to Division 6 (commencing with Section 17000) of the Financial Code or
exempt from licensure pursuant to Section 17006 of the Financial Code, attorney,
accountant, institution of the Farm Credit System, as specified in Section 2002 of Title 12 of
the United States Code, or telephone corporation which is a public utility, as defined in
Section 216 of the Public Utilities Code, or psychotherapist, as defined in Section 1010 of
the Evidence Code, or a private or public preschool, elementary school, secondary school,
or postsecondary school as described in Section 76244 of the Education Code.
(2) “Consumer” means any individual, partnership of five or fewer persons, association, or
trust which has transacted business with, or has used the services of, the witness or for
whom the witness has acted as agent or fiduciary.
(3) “Subpoenaing party” means the person or persons causing a subpoena duces tecum
to be issued or served in connection with any civil action or proceeding pursuant to this
code, but shall not include the state or local agencies described in Section 7465 of the
Government Code, or any entity provided for under Article VI of the California Constitution
in any proceeding maintained before an adjudicative body of that entity pursuant to Chapter
4 (commencing with Section 6000) of Division 3 of the Business and Professions Code.
(4) “Deposition officer” means a person who meets the qualifications specified in Section
2020.420.
(b) Prior to the date called for in the subpoena duces tecum for the production of personal
records, the subpoenaing party shall serve or cause to be served on the consumer whose
records are being sought a copy of the subpoena duces tecum, of the affidavit supporting
the issuance of the subpoena, if any, and of the notice described in subdivision (e), and
proof of service as indicated in paragraph (1) of subdivision (c). This service shall be made
as follows:
(1) To the consumer personally, or at his or her last known address, or in accordance with

Chapter 5 (commencing with Section 1010) of Title 14 of Part 3, or, if he or she is a party, to

his or her attorney of record. If the consumer is a minor, service shall be made on the
minor’s parent, guardian, conservator, or similar fiduciary, or if one of them cannot be
located with reasonable diligence, then service shall be made on any person having the
care or control of the minor or with whom the minor resides or by whom the minor is
employed, and on the minor if the minor is at least 12 years of age.
(2) Not less than 10 days prior to the date for production specified in the subpoena duces
tecum, plus the additional time provided by Section 1013 if service is by mail.
(3) At least five days prior to service upon the custodian of the records, plus the additional
time provided by Section 1013 if service is by mail.
(c) Prior to the production of the records, the subpoenaing party shall do either of the
following:
(1) Serve or cause to be served upon the witness a proof of personal service or of service
by mail attesting to compliance with subdivision (b).
(2) Furnish the witness a written authorization to release the records signed by the
consumer or by his or her attorney of record. The witness may presume that any attorney
purporting to sign the authorization on behalf of the consumer acted with the consent of the
consumer, and that any objection to release of records is waived.
(d) A subpoena duces tecum for the production of personal records shall be served in
sufficient time to allow the witness a reasonable time, as provided in Section 2020.410, to
locate and produce the records or copies thereof.
(e) Every copy of the subpoena duces tecum and affidavit, if any, served on a consumer
or his or her attorney in accordance with subdivision (b) shall be accompanied by a notice,
in a typeface designed to call attention to the notice, indicating that (1) records about the
consumer are being sought from the witness named on the subpoena; (2) if the consumer
objects to the witness furnishing the records to the party seeking the records, the consumer
must file papers with the court or serve a written objection as provided in subdivision (g)
prior to the date specified for production on the subpoena; and (3) if the party who is
seeking the records will not agree in writing to cancel or limit the subpoena, an attorney
should be consulted about the consumer’s interest in protecting his or her rights of privacy.
If a notice of taking of deposition is also served, that other notice may be set forth in a single
document with the notice required by this subdivision.
(f) A subpoena duces tecum for personal records maintained by a telephone corporation
which is a public utility, as defined in Section 216 of the Public Utilities Code, shall not be
valid or effective unless it includes a consent to release, signed by the consumer whose
records are requested, as required by Section 2891 of the Public Utilities Code.
(g) Any consumer whose personal records are sought by a subpoena duces tecum and
who is a party to the civil action in which this subpoena duces tecum is served may, prior to
the date for production, bring a motion under Section 1987.1 to quash or modify the
subpoena duces tecum. Notice of the bringing of that motion shall be given to the witness
and deposition officer at least five days prior to production. The failure to provide notice to
the deposition officer shall not invalidate the motion to quash or modify the subpoena duces
tecum but may be raised by the deposition officer as an affirmative defense in any action for
liability for improper release of records.
Any other consumer or nonparty whose personal records are sought by a subpoena
duces tecum may, prior to the date of production, serve on the subpoenaing party the
witness, and the deposition officer, a written objection that cites the specific grounds on
which production of the personal records should be prohibited.
No witness or deposition officer shall be required to produce personal records after receipt
of notice that the motion has been brought by consumer, or after receipt of a written
objection from a nonparty consumer, except upon order of the court in which the action is
pending or by agreement of the parties, witnesses, and consumers affected.
The party requesting a consumer’s personal records may bring a motion under Section
1987.1 to enforce the subpoena within 20 days of service of the written objection. The
motion shall be accompanied by a declaration showing a reasonable and good faith attempt
at informal resolution of the dispute between the party requesting the personal records and
the consumer or the consumer’s attorney.
(h) Upon good cause shown and provided that the rights of witnesses and consumers are
preserved, a subpoenaing party shall be entitled to obtain an order shortening the time for
service of a subpoena duces tecum or waiving the requirements of subdivision (b) where
due diligence by the subpoenaing party has been shown.
(i) Nothing contained in this section shall be construed to apply to any subpoena duces
tecum which does not request the records of any particular consumer or consumers and
which requires a custodian of records to delete all information which would in any way
identify any consumer whose records are to be produced.
(j) This section shall not apply to proceedings conducted under Division 1 (commencing
with Section 50), Division 4 (commencing with Section 3200), Division 4.5 (commencing
with Section 6100), or Division 4.7 (commencing with Section 6200) of the Labor Code.
(k) Failure to comply with this section shall be sufficient basis for the witness to refuse to
produce the personal records sought by a subpoena duces tecum.
(l) If the subpoenaing party is the consumer, and the consumer is the only subject of the
subpoenaed records, notice to the consumer, and delivery of the other documents specified
in subdivision (b) to the consumer, is not required under this section.
§ 1985.1. Agreement to appear at time not specified in subpoena
Any person who is subpoenaed to appear at a session of court, or at the trial of an issue
therein, may, in lieu of appearance at the time specified in the subpoena, agree with the
party at whose request the subpoena was issued to appear at another time or upon such
notice as may be agreed upon. Any failure to appear pursuant to such agreement may be
punished as a contempt by the court issuing the subpoena. The facts establishing or
disproving such agreement and the failure to appear may be proved by an affidavit of any
person having personal knowledge of the facts.

§ 1024. Subpoenas; Motion for a Protective Order

(a) Subpoena forms are available from OAH. Subpoenas may also be issued pursuant to
section 11450.20(a).
(b) A Motion pursuant to section 11450.30 for a protective order, including a Motion to
quash, shall be made in compliance with Regulation 1022. The Motion shall be made within
a reasonable period after receipt of the subpoena. The person bringing the Motion shall
Serve copies of the Motion on all parties and persons who are required by law to receive
notice of the subpoena.
III.  MOTIONS FOR CONTINUANCE OF THE HEARING MAY BE FILED WITH GOOD CAUSE

§ 1020. Motion for Continuance of Hearing
(a) A Case filed with OAH is assigned to the Presiding Judge until reassigned to another
ALJ.
(b) A Motion to continue a Hearing shall be in writing, directed to the Presiding Judge, and
Served on all other parties.
(c) Before filing the Motion, the moving party shall make reasonable efforts to confer with
all other parties to determine whether any party opposes the Motion and to obtain future
dates when all parties are unavailable for Hearing over the next six months and at least
three alternative preferred future Hearing dates.
(d) The Motion shall include all facts which support a showing of good cause to continue
the Hearing, as well as:
(1) the Case name, and OAH Case number;
(2) the date, time and place of the Hearing;
(3) the address and daytime telephone number of the moving party;
(4) the name, address and telephone number of all other parties;
(5) a list of all previous Motions to continue the Hearing and the dispositions thereof;
(6) whether or not any party opposes the Motion;
(7) any future dates when the parties are unavailable for Hearing over the next six months
and any preferred future Hearing dates obtained pursuant to paragraph (c);
(8) if the moving party has not included all of the information required pursuant to this
paragraph (d), the reasons why it is not included;
(9) a reference to any legal or other requirement to set the Hearing within a certain period
of time, and whether or not the parties have waived the requirement.
(e) If the Motion is not timely pursuant to section 11524(b) or other applicable law, the
Motion shall include all facts justifying the lack of timeliness.
(f) The Motion may include a proposed order granting the continuance.
(g) Any party may request a written order from OAH reflecting the disposition of the
Motion.
IV. EVIDENCE AT THE HEARING ON ACCUSATION

Evidence at DRE hearing – informal evidence rules apply, including hearsay evidence.

§ 11513. Evidence
(a) Oral evidence shall be taken only on oath or affirmation.
(b) Each party shall have these rights: to call and examine witnesses, to introduce
exhibits; to cross-examine opposing witnesses on any matter relevant to the issues even
though that matter was not covered in the direct examination; to impeach any witness
regardless of which party first called him or her to testify; and to rebut the evidence against
him or her. If respondent does not testify in his or her own behalf he or she may be called
and examined as if under cross-examination.
(c) The hearing need not be conducted according to technical rules relating to evidence
and witnesses, except as hereinafter provided. Any relevant evidence shall be admitted if it
is the sort of evidence on which responsible persons are accustomed to rely in the conduct
of serious affairs, regardless of the existence of any common law or statutory rule which
might make improper the admission of the evidence over objection in civil actions.
(d) Hearsay evidence may be used for the purpose of supplementing or explaining other
evidence but over timely objection shall not be sufficient in itself to support a finding unless
it would be admissible over objection in civil actions. An objection is timely if made before
submission of the case or on reconsideration.
(e) The rules of privilege shall be effective to the extent that they are otherwise required
by statute to be recognized at the hearing.
(f) The presiding officer has discretion to exclude evidence if its probative value is
substantially outweighed by the probability that its admission will necessitate undue
consumption of time.
A.  USE OF AFFIDAVITS AT THE HEARING ON THE ACCUSATION IS OKAY.
§ 11514. Affidavits
(a) At any time 10 or more days prior to a hearing or a continued hearing, any party may
mail or deliver to the opposing party a copy of any affidavit which he proposes to introduce
in evidence, together with a notice as provided in subdivision (b). Unless the opposing
party, within seven days after such mailing or delivery, mails or delivers to the proponent a
request to cross-examine an affiant, his right to cross-examine such affiant is waived and
the affidavit, if introduced in evidence, shall be given the same effect as if the affiant had
testified orally. If an opportunity to cross-examine an affiant is not afforded after request
therefor is made as herein provided, the affidavit may be introduced in evidence, but shall
be given only the same effect as other hearsay evidence.
(b) The notice referred to in subdivision (a) shall be substantially in the following form:
The accompanying affidavit of (here insert name of affiant) will be introduced as evidence
at the hearing in (here insert title of proceeding). (Here insert name of affiant) will not be
called to testify orally and you will not be entitled to question him unless you notify (here
insert name of proponent or his attorney) at (here insert address) that you wish to crossexamine
him. To be effective your request must be mailed or delivered to (here insert name
of proponent or his attorney) on or before (here insert a date seven days after the date of
mailing or delivering the affidavit to the opposing party).
B. THE ADMINISTRATIVE LAW JUDGE CAN BE ASKED TO TAKE “OFFICIAL NOTICE” OF CERTAIN MATTERS
§ 11515. Official notice
In reaching a decision official notice may be taken, either before or after submission of the
case for decision, of any generally accepted technical or scientific matter within the
agency’s special field, and of any fact which may be judicially noticed by the courts of this
State. Parties present at the hearing shall be informed of the matters to be noticed, and
those matters shall be noted in the record, referred to therein, or appended thereto. Any
such party shall be given a reasonable opportunity on request to refute the officially noticed
matters by evidence or by written or oral presentation of authority, the manner of such
refutation to be determined by the agency.
V.  POTENTIAL OUTCOMES OF OAH HEARING ON DRE ACCUSATION

A.  After decision of ALJ agency has 100 days to decide what to do:

(2) Within 100 days of receipt by the agency of the administrative law judge’s proposed
decision, the agency may act as prescribed in subparagraphs (A) to (E), inclusive. If the
agency fails to act as prescribed in subparagraphs (A) to (E), inclusive, within 100 days of
receipt of the proposed decision, the proposed decision shall be deemed adopted by the
agency. The agency may do any of the following:
(A) Adopt the proposed decision in its entirety.
(B) Reduce or otherwise mitigate the proposed penalty and adopt the balance of the
proposed decision.
(C) Make technical or other minor changes in the proposed decision and adopt it as the
decision. Action by the agency under this paragraph is limited to a clarifying change or a
change of a similar nature that does not affect the factual or legal basis of the proposed
decision.
(D) Reject the proposed decision and refer the case to the same administrative law judge
if reasonably available, otherwise to another administrative law judge, to take additional
evidence. If the case is referred to an administrative law judge pursuant to this
subparagraph, he or she shall prepare a revised proposed decision, as provided in
paragraph (1), based upon the additional evidence and the transcript and other papers that
are part of the record of the prior hearing. A copy of the revised proposed decision shall be
furnished to each party and his or her attorney as prescribed in this subdivision.
(E) Reject the proposed decision, and decide the case upon the record, including the
transcript, or upon an agreed statement of the parties, with or without taking additional
evidence. By stipulation of the parties, the agency may decide the case upon the record
without including the transcript. If the agency acts pursuant to this subparagraph, all of the
following provisions apply:
(i) A copy of the record shall be made available to the parties. The agency may require
payment of fees covering direct costs of making the copy.
(ii) The agency itself shall not decide any case provided for in this subdivision without
affording the parties the opportunity to present either oral or written argument before the
agency itself. If additional oral evidence is introduced before the agency itself, no agency
member may vote unless the member heard the additional oral evidence.
(iii) The authority of the agency itself to decide the case under this subdivision includes
authority to decide some but not all issues in the case.
(iv) If the agency elects to proceed under this subparagraph, the agency shall issue its
final decision not later than 100 days after rejection of the proposed decision. If the agency
elects to proceed under this subparagraph, and has ordered a transcript of the proceedings
before the administrative law judge, the agency shall issue its final decision not later than
100 days after receipt of the transcript. If the agency finds that a further delay is required by
special circumstance, it shall issue an order delaying the decision for no more than 30 days
and specifying the reasons therefor. The order shall be subject to judicial review pursuant to
Section 11523.
(d) The decision of the agency shall be filed immediately by the agency as a public record
and a copy shall be served by the agency on each party and his or her attorney.

B.   Administrative Law Judge can demand you pay restitution (loss of DMV license):
§ 11519.1. Order of restitution for financial loss or damages
(a) A decision rendered against a licensee under Article 1 (commencing with Section
11700) of Chapter 4 of Division 5 of the Vehicle Code may include an order of restitution for
any financial loss or damage found to have been suffered by a person in the case.
(b) The failure to make the restitution in accordance with the terms of the decision is
separate grounds for the Department of Motor Vehicles to refuse to issue a license under
Article 1 (commencing with Section 11700) of Chapter 4 of Division 5 of the Vehicle Code,
and constitutes a violation of the terms of any applicable probationary order in the decision.
(c) Nothing in this section is intended to limit or restrict actions, remedies, or procedures
otherwise available to an aggrieved party pursuant to any other provision of law.
VI.  REINSTATEMENT OF DRE LICENSE AFTER ONE YEAR

Reinstatement of License after one year (California Attorney General can weigh in):
§ 11522. Reinstatement of license or reduction of penalty
A person whose license has been revoked or suspended may petition the agency for
reinstatement or reduction of penalty after a period of not less than one year has elapsed
from the effective date of the decision or from the date of the denial of a similar petition. The
agency shall give notice to the Attorney General of the filing of the petition and the Attorney
General and the petitioner shall be afforded an opportunity to present either oral or written
argument before the agency itself. The agency itself shall decide the petition, and the
decision shall include the reasons therefor, and any terms and conditions that the agency
reasonably deems appropriate to impose as a condition of reinstatement. This section shall
not apply if the statutes dealing with the particular agency contain different provisions for
reinstatement or reduction of penalty.
THESE ARE SOME OF THE GENERAL THINGS TO KEEP IN MIND IN REGARD TO A DRE HEARING.  AS ALWAYS, CALIFORNIA REAL ESTATE LICENSEES ARE FREE TO REPRESENT THEMSELVES IN THESE HEARINGS, BUT PRUDENCE DICTATES THAT IT MIGHT BE WISE TO HAVE A CALIFORNIA DRE DEFENSE LAWYER REPRESENT YOU.
OUR FIRM ENGAGES IN THESE TYPES OF REPRESENTATIONS AND CAN ASSIST IN DRE AUDITS, HEARINGS, INVESTIGATIONS, DESIST AND REFRAIN LETTERS AND DRE ACCUSATIONS.  WE CAN BE REACHED AT  (877) 276-5084.  THIS IS AN ADVERTISEMENT AND COMMUNICATION PURSUANT TO STATE BAR RULES.

 

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Attorney Steve Vondran discusses DRE accusations and SB 94 defense for California Real Estate Brokers

November 7, 2011 By California DRE Defense Lawyer Leave a Comment

Here is a video that discusses the general process a California real estate broker or licensee will face when dealing with a DRE accusation or license audit.

Here is another blog we just posted dealing with California SB 94, the MARS rule and Foreclosure Consultants.

 

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Social Media legal issues may require a social media use policy

October 25, 2011 By California DRE Defense Lawyer Leave a Comment

We just posted a blog on the top 10 social media issues to consider when bringing on new real estate agents, and taking into account the brokers duty to supervise certain activities of its agents, employees, and contractors.

Here is a link to the social media lawyer blog post.

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If you are convicted of a crime can the California Department of Real Estate refuse to issue you a real estate license?

September 30, 2011 By California DRE Defense Lawyer Leave a Comment

ISSUANCE OF A REAL ESTATE LICENSE IN CALIFORNIA FOLLOWING CRIMINAL CONVICTIONS

If you have been convicted of a crime and later you want to apply for a real estate license in California, will you be able to obtain your real estate license (assuming you pass the real estate exam)?  This is an important question that requires a look at the rules, laws and regulations that govern this situation.  This article will attempt to provide a general overview and general discussion of the factors the DRE may look at when determining whether or not they want to grant you a real estate license in California.

In California, the DRE will look at your application for a salesperson license to see what you have listed in Part D – “Background Information.”  Specifically, the following section which states “CRIMINAL CONVICTIONS“.  This is the section where you need to disclose ALL of your criminal convictions that have occurred in your past.  When I say ALL, I mean ALL.  Here is an example of what you must disclose if you want to try to secure your real estate license:

  • All felonies that you have ever been convicted of (examples may include: murder, burglary, money laundering, any federal crime, tax evasion, rape, assault with deadly weapon, bribery, felony DUI, etc.)
  • All misdemeanors you have ever been convicted of (examples may include:  shoplifting, drunk driving, larceny, writing bad checks, etc.)

Note that many people may ask or wonder “do I have to be convicted in order to have to report the crime on the DRE real estate application?”  NO is the short answer to that question.

In fact, here is what the CRIMINAL CONVICTION section of the DRE license application (form 435) reads:

“Convicted” as used in Item 1 includes a verdict of guilty by judge or jury, a plea of guilty, a plea of nolo contendere (i.e., “no contest”), or a forfeiture of bail in the courts (including military courts) of any state, commonwealth, possession or country. All convictions must be disclosed, no matter how long ago they occurred, even if the plea or verdict was set aside, the conviction dismissed or expunged, or you have been pardoned. Convictions occurring while you were a minor (under 18 years of age) must be disclosed unless the record of the conviction has been sealed under Section 1203.45 of the California Penal Code or Section 781 of the California Welfare and Institutions Code.

The DRE also has another publication that you can review that discusses the guidelines for reporting. You can find that in their Instructions to License Applicants handbook.

This handy booklet also addresses some of the issues relating to your disclosure requirements on the salesperson license application.

Specifically, in regard to reporting criminal convictions it states:

Honesty — License applicants must be honest and truthful. Conviction of a crime may result in the denial of a license. Failure to disclose any criminal violation or disciplinary action in an applicant’s entire history may also result in denial of a license.

This section makes it clear to the real estate applicant IF YOU ARE NOT SURE IF YOU SHOULD REPORT A CRIMINAL VIOLATION THEN YOU ARE BETTER OFF DISCLOSING IT.  If the DRE commissioner believes you are not being candid, this could cause you problems in getting a real estate license issued even after you pass your state examination.

In section XIII of the instructions to license applicants guide, the DRE offers this advice:

Answer truthfully and completely!

Read the questions on the application carefully and answer truthfully and completely. Provide ALL information requested. Failure to disclose disciplinary actions or crimes which occurred in your entire history may be considered an attempt to obtain a license by fraud or misrepresentation and could result in the denial of your license application. Irrespective of any advice that may be received from others, the license applicant alone is responsible for disclosing accurate and complete information.

When in doubt, disclose!

In the event you have one or more offenses to report, please take extra care to disclose all actions and convictions regardless of how long ago they occurred, or whether or not a conviction has been expunged under Penal Code Section 1203.4, or a similar statute. The failure to disclose charges/convictions will result in substantial delays in the processing of your application and may also result in denial of the license application.

“Convicted” includes a verdict of guilty by a judge or jury, a plea of guilty, a plea of nolo contendre, or a forfeiture of bail in the courts (including military courts) of any state, commonwealth possession or country). All convictions must be disclosed no matter how long ago they occurred, even if the plea or verdict was set aside, the conviction was dismissed or expunged or you have been pardoned. Convictions occurring while you were a minor (under 18 years of age) must be disclosed unless the record has been sealed under Section 1203.45 of the California Penal Code or Section 781 of the California Welfare and Institutions Code.

Carefully review your entire history and provide complete and accurate information.

___________________________________________________________________________________________________________________________

So that is a pretty comprehensive list of what you must disclose. If you get caught not disclosing something, expect big trouble in being able to obtain your real estate license.  You cannot say you weren’t warned.

Again, they are doing everything can to alert you of your obligation as a real estate license applicant.

__________________________________________________________________________

Now, there are some other things to look at in regard to the topic of what the DRE will be looking at, and what standards they may use in determining whether or not they will agree to issue a real estate sales or broker license to you.

California Business and Professions Code Section 10177 discusses grounds that may result in a denial or revocation of a real estate license in California:

Here one of the main points of this code section as it relates to criminal background:

The commissioner may suspend or revoke the license of a real
estate licensee, or may deny the issuance of a license to an
applicant, who has done any of the following........

(b) Entered a plea of guilty or nolo contendere to, or been found

guilty of, or been convicted of, a felony, or a crime substantially
related to the qualifications, functions, or duties of a real estate
licensee, and the time for appeal has elapsed or the judgment of
conviction has been affirmed on appeal, irrespective of an order
granting probation following that conviction, suspending the
imposition of sentence, or of a subsequent order under Section 1203.4
of the Penal Code allowing that licensee to withdraw his or her plea
of guilty and to enter a plea of not guilty, or dismissing the
accusation or information.

But this begs the question, what is a “crime substantially

related to the qualifications, functions, or duties of a real estate
licensee?"
Commissioner's regulation 2910 helps illuminate the meaning of this phrase:


Article 18.5. Substantial Relationship and Rehabilitation Criteria 

2910. Criteria of Substantial Relationship.  

(a) When considering whether a license should be denied, suspended or revoked on the basis of the conviction of a crime, or on the basis of an act described in Section 480(a)(2) or 480(a)(3) of the Code, the crime or act shall be deemed to be substantially related to the qualifications, functions or duties of a licensee of the Department within the meaning of Sections 480 and 490 of the Code if it involves:

(1) The fraudulent taking, obtaining, appropriating or retaining of funds or property belonging to another person.

(2) Counterfeiting, forging or altering on of an instrument or the uttering of a false statement.

(3) Willfully attempting to derive a personal financial benefit through the nonpayment or underpayment of taxes, assessments or levies duly imposed upon the licensee or applicant by federal, state or local government.

(4) The employment of bribery, fraud, deceit, falsehood or misrepresentation to achieve an end. REGULATIONS OF THE REAL ESTATE COMMISSIONER 339 

(5) Sexually related conduct affecting a person who is an observer or non-consenting participant in the conduct or convictions which require registration pursuant to the provisions of Section 290 of the Penal Code.

(6) Willfully violating or failing to comply with a provision of Division 4 of the Business and Professions Code of the State of California.

(7) Willfully violating or failing to comply with a statutory requirement that a license, permit or other entitlement be obtained from a duly constituted public authority before engaging in a business or course of conduct.

(8) Doing of any unlawful act with the intent of conferring a financial or economic benefit upon the perpetrator or with the intent or threat of doing substantial injury to the person or property of another.

(9) Contempt of court or willful failure to comply with a court order.

(10) Conduct which demonstrates a pattern of repeated and willful disregard of law.

(11) Two or more convictions involving the consumption or use of alcohol or drugs when at least one of the convictions involve driving and the use or consumption of alcohol or drugs.

(b) The conviction of a crime constituting an attempt, solicitation or conspiracy to commit any of the above enumerated acts or omissions is also deemed to be substantially related to the qualifications, functions or duties of a licensee of the department.

(c) If the crime or act is substantially related to the qualifications, functions or duties of a licensee of the department, the context in which the crime or act were committed shall go only to the question of the weight to be accorded to the crime or acts in considering the action to be taken with respect to the applicant or licensee.

AS THIS SECTION POINTS OUT, THE DRE WILL LOOK INTO DRUG AND ALCOHOL ISSUES ESPECIALLY WHERE DRIVING IS INVOLVED.

___________________________________________________________________
Section 2746 of the Commissioners Regulations discusses when a real estate broker may denied a real estate license.  This section states:

2746. Corporate Real Estate Brokers, Officers, Directors and Shareholders.  

(a) At the time of application for, or in the reinstatement of, an original real estate broker license, the designated officer shall file a background statement of information for each director, the chief executive officer, the president, first level vice presidents, secretary, chief financial officer, subordinate officers with responsibility for forming policy of the corporation and all natural persons owning or controlling more than ten percent of its shares, if such person has been the subject of any of the following:

(1) Received an order or judgment issued by a court or governmental agency during the preceding 10 years temporarily or permanently restraining or enjoining any business conduct, practice or employment;

(2) Has had a license to engage in or practice real estate or other regulated profession, occupation or vocation denied, suspended or revoked during the preceding 10 years;

(3) Engaged in acts requiring a real estate license of any state without the benefit of a valid license or permit authorizing that conduct during the preceding 10 years which have been enjoined by a court of law or administrative tribunal;

(4) Been convicted of a crime which is substantially related to the qualifications, functions or duties of a licensee of the Department as specified in Section 2910 of these Regulations (excluding drunk driving, reckless driving and speeding violations).

Hopefully this gives you an idea of what the DRE is looking for when deciding whether or not to issue a real estate license to a salesperson, or broker seeking licensing.

About Steve Vondran, Esq.

Mr. Vondran was a former mortgage loan officer prior to becoming an attorney.  He also has experience selling residential and commercial real estate (Daum Commercial Real Estate).   He has passed broker examinations in both Arizona and California and his practice centers around Business, Real Estate, and Social media legal matters with a particular focus on representing California and Arizona real estate brokers.

If you are facing a DRE hearing, audit, investigation, accusation, or simply seeking to have the DRE issue you a real estate license we are here to help.  We can help package your application up with a detailed history of all your criminal convictions, evidence of rehabilitation and submit you to the DRE.  Sometimes it is nice to have someone fighting for you and to tell your story in the best possible manner.  We can be reached at (877) 276-5084 for a discussion of your case.

Additional Resources

(1) DRE license applicant checklist

(2) Our firm website

(3) California Department of Real Estate website

(4) Here is a list of Frequently Asked Questions on this topic from the DRE website

 

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Intellectual Property and Social Media issues for the real estate professional

August 31, 2011 By California DRE Defense Lawyer Leave a Comment

The modern-day real estate professional is faced with many issues that deal with intellectual property and social media.  Here are a few of things to consider:

1.  Real Estate website - do you collect personal information online, such as mortgage information?  Do you have a privacy policy in place?  Does your website use images, pictures, slogans?  This may raise various intellectual property issues such as copyright and trademark.  Have you ensured there are no copyright violations on your websites, blogs, or other social media platforms?  Do you have policies and procedures in place to make sure your agents are not infringing the intellectual property rights of others?

2.  Trade Secrets - do you share or disclose corporate trade secrets with your agents?  If so, do you have a trade secrets program in place that is designed to safeguard your trade secrets?  Do you address intellectual property and trade secrets in your independent contractor agreements?  What happens when your licensed individuals no longer work for you?  Do they get to keep their websites and blogs?  Can they take and use your customer lists or leads?  Have you addressed this in a written agreement?

3.  Do your or your licensed agents engage in social media marketing campaigns such as email blasts, internet advertising, pay-per-click? Do you comply with the DRE advertising rules and other applicable laws dealing with advertising?

4.  Do your or your agents use viral video to try to attract new clients?  Is someone illegally using your videos to promote their own business or using your copyright work in an infringing manner?

5. Are you illegally using another companies trade name, domain names etc. to market your business, for example, in keywords on a wordpress website?  Is this legal?

6.  Are you choosing names for products, or a company name or DBA that may be infringing on the name, or trademark of another company?  Did you perform a detailed search before choosing your name or domain name? You would hate to invest all that time and money in marketing your company, only to find out someone else beat you to the name and they decide they want to sue to stop you.  Have you considered this possibility?

7.  Are you or your agents engaged in acts of libel, slander (defamation) on the internet, including on twitter, facebook, chat boards, or elsewhere?  Have you addressed these potential issues in any written independent contractor agreement, or company policy handbook?  These “digital defamation” issues can wreak havoc on your if faced with a lawsuit.

8.  Do you routinely monitor the internet to see if there other companies are defaming your or your brand or your services?   Are you dealing with issues or a complaint from the Better Business Bureau (BBB) that involve “reputation management.”

9.  Do you have a policy in place for dealing with facebook ads, and other online ads?

10.  Do you have a chief privacy officer able to respond to consumer complaints over data use, identity theft, etc?

These are just some of the issues that come to mind.  If your company would like to engage an attorney seminar speaker to address these issues, and/or would like your contracts updated to deal with these types of issues, contact the law offices of Steven C. C. Vondran, with offices in California and Arizona at (877) 276-5084.

 

 

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Understanding the Branch Office in California for the DRE Licensee

August 31, 2011 By California DRE Defense Lawyer Leave a Comment

 

One way a California real estate or mortgage broker may choose to try to grow their business is by opening new offices and recruiting new agents for those offices, whether to broker mortgage loans, or perform other licensed activity.  Whenever a California Broker is considering this option, there are a few consideration that should be taken into account.  These are just a few things to consider:

1.  Make sure the DRE is aware of your branch office where licensed activity is being conducted.

California Civil Code Section 10163 discusses branch offices:

California Business and Professions Code Section 10163


If the applicant for a real estate broker's license
maintains more than one place of business within the State he shall
apply for and procure an additional license for each branch office so
maintained by him. Every such application shall state the name of
the person and the location of the place or places of business for
which such license is desired. The commissioner may determine whether
or not a real estate broker is doing a real estate brokerage
business at or from any particular location which requires him to
have a branch office license.

As this points out, if you maintain a “place of business” other than your real estate headquarter, you need to inform the DRE.  Whether or not you are conducting business out of an office is a determination that may be made by the commissioner.  This comes up sometimes in DRE audits and investigations.  If you have other offices that you are doing business out of (often triggered by the use of a business card with the address, or website that references the address, etc.) the DRE auditors may question why you have not applied for a branch office.  Applying for a branch office in California for a DRE licensee is easy.  Just click on this DRE branch office form – Form 203 and review the instructions.

The California Department of Real Estate (“DRE”) has also provided a Broker Self Compliance Checklist which addresses the Branch office issue.

Here is a snippet from the DRE Self-Audit checklist:
Licensing Compliance
1. Do you have a branch office license for each location from which you conduct business? (B&P
10163) …………………………………………………………………………………………………………………..
You may only operate your business from the main office address printed on your license
certificate unless you have a branch office license for other locations.

In fact, failing to maintain a proper mailing address for a branch office could be charged as a violation of Commissioner Regulation 2715 which involves:

Commissioner’s Regulations

2715 Licensee’s failure to maintain current business or mailing

address with DRE.

There is more detailed information on Commissioners Regulation 2715 on this website.

I also found this on the DRE website in regard to branch offices:

A broker/corporation is authorized to conduct business only at the address listed on his/her license. If the broker/corporation maintains more than one place of business within the State, he/she shall apply for and procure an additional license for each branch office so maintained. The application for a branch office license must state the name of the person and the location of the place or places of business for which the license is desired.

The branch office address must be a physical California address, not just a Post Office Box or a Private Mail Box, as the main office address.

__________________________________________________________

SO WHEN IN DOUBT, SUBMIT THE BRANCH OFFICE APPLICATION.

__________________________________________________________

Some other issues to consider in running a real estate branch office in California:

1.  The designated officer must still supervise the activities of the branch office (A California real estate broker has a duty to supervise all licensed activity)

2.  There is a new law that looks poised to pass which may allow a designated officer to delegate responsibilities for the branch to other licensees, who will be liable for conduct in that office (SB510).

I have uploaded a PDF of the proposed California Branch office law here.

California SB 510 Branch office law

Looks like it recently passed the California legislature on August 2011 and is awaiting signature from the Governor before being passed into law.  You will note there is a requirement of a written agreement if you want to delegate authority to a licensee in the branch office.  We can assist you with these types of agreements, and other broker related agreements such as partnership agreements, independent contractor agreements, etc.

3.  If you are entering into a partnership arrangement with some other party, you will want to consider having a clearly defined agreement that sets forth the rights, duties, terms, and responsibilities of each party to the contract.

4.  Before you lease a new office space, you may want to have a California Real Estate lawyer review your lease.  Make sure you are not getting yourself into a nightmare.  Some virtual office centers may appear enticing, but when you look into the fine print, you may not like what you see.  There are a lot of landlord-tenant issues that might arise, and it is good to know what you are agreeing to before you sign the paperwork.  Don’t forget, picking the right location for your branch office is a big consideration as well.

5.  You will probably need to look into joining local real estate associations and MLS.

 

The foregoing are only some of the general considerations when deciding to open a branch office.  If you need to review your business operations, update your independent contractor agreements, submit for a DRE branch office, draft or review a partnership agreement, or need help in any other aspect of your real estate brokerage, contact us at (877) 276-5084.  Most people have found our rates to be very reasonable, and our goal is to help you succeed in the business of real estate!

 

 

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Listen to our Real Estate Radio show that discusses DRE audits and accusations

August 10, 2011 By California DRE Defense Lawyer Leave a Comment

If you are a broker looking to find a California Real Estate lawyer to represent you in a California Department of Real Estate (“DRE”) investigation in regard to any of the following:

  • DRE audit
  • DRE hearing
  • DRE investigation
  • DRE accusation
  • DRE admissions
  • DRE surrender of a license
  • SB94 issues
  • Foreclosure Consultant Issues
  • DRE disciplinary matter
  • Other civil or criminal matter involving the practice of real estate or your real estate license

Contact us to discuss your situation.  You can also listen to our Real Estate Blog Radio show here.

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DRE is beefing up its investigation of loan modification activities. A good DRE Defense lawyer can assist you.

January 29, 2011 By California DRE Defense Lawyer Leave a Comment

We are seeing more and more people coming under DRE licensing scrutiny.  If you are facing a DRE accusation contact us at (877) 276-5084.

Filed Under: Department of Real Estate Defense Lawyer Tagged With: ,

Are you a California Mortgage Broker and SAFE Act Compliant?

January 6, 2011 By California DRE Defense Lawyer Leave a Comment

THE SAFE ACT: CALIFORNIA RULES FOR COMPLIANCE

The recent “Mortgage Meltdown” and “Foreclosure Crisis” has turned the real estate industry upside down and paved the way for new rules for Real Estate Professionals. One of the newest rules is the SAFE ACT. This act was crafted by the Federal Government to abolish shoddy residential lending and protect mortgage borrowers. The SAFE ACT institutes a system for licensing and regulating loan originators. California adopted the SAFE ACT by enacting SB36 and requires all loan originators to comply with the new rules by January 1, 2011 and obtain BOTH a California DRE License as well as a MLO Endorsement.

Formerly, loan officers, also known as “loan originators,” were often just commissioned salespeople with no special training to help borrowers understand and select the right loan.  Worse still – in many cases, loan companies hired “loan specialists” who had no license at all. The SAFE ACT increases transparency and ethical reporting standards for mortgage loan originators. These provisions include:

  • Criminal history & record information checks,
  • Federal originator I.D. numbers,
  • Credit report checks,
  • Tracking of consumer complaints,
  • National & State Testing,
  • National pre-licensure and continuing education,
  • Bond and recovery fund requirements,
  • Greater accountability to the public provided free of charge via the internet.

The SAFE ACT applies to both current DRE license holders and new licensees. All Brokers, Salespersons, Underwriters, Processors, Independent Contractors etc. must obtain a Mortgage Loan Originator License Endorsement. Below are some helpful definitions from the SAFE ACT.

  • MLO – Mortgage Loan Originator is a person:
    • Who takes Residential Mortgage Loan Applications; or
    • Who negotiates terms of a residential loan
    • And will be compensated for arranging the loan
    • Residential Loan
      • Secured by real property with a dwelling
      • Dwelling is a residential structure (1-4 units)
    • Independent loan processors/underwriters
      • Must comply with SAFE Act licensing requirements

GENERAL REQUIREMENTS FOR COMPLIANCE WITH CALIFORNIA SAFE ACT:

Pre-License Education:  All new applicants on or after 1/2/2011 must have completed 20 hours of NMLS approved pre-license education.  EXISTING REAL ESTATE LICENSEES will not need 20 hours of NMLS approved pre-license education if all other MLO requirements are met by 12/31/2010. (This is currently under review as California and the Federal system are reviewing the current education requirements)

Continuing Education:  All licensees must take 8 hours of NMLS continuing education in 2011 in order to renew for 2012.

“SAFE ACT” MLO (Mortgage Loan Originator) Test:  All licensees must pass the National and State component of the SAFE MLO test by 12/31/2010.

Criminal Background Check:  All applicants must submit fingerprints through NMLS for a criminal background check by 12/31/2010.

Credit Report:  All applicants must authorize a credit report through NMLS by 12/31/2010.

Endorsement applications: Must be submitted electronically to the NMLS&R by September 15, 2010 to be issued by January 1, 2011

FORMS REQUIRED:

  • Application forms are filed on-line on the NMLS system
    • MU 4- salespersons, brokers, or broker-officers performing MLO activities
      • Includes brokers or designated corporations broker-officers who only supervise other MLO licensees
  • MU 1- licensed brokers who run their own company must file as a sole proprietor
  • MU 1-corporations which employ licensees performing MLO activates must file as a corporation
  • MU 2- is filed in conjunction with any MU 1 filing-this is a no fee filing which lists details on owners, officers, and control persons
  • MU 3-must be filed by any broker or corporation to establish a branch office location where MLO activities are performed
  • For brokers or corporations
    • DBA’s (trade names), and branch office locations used for mortgage loan origination activities must be established on DRE record before adding to NMLS record
  • For salespersons or broker associates
    • If in the employ of a broker or corporation must have employing entity create a company relationship after completing their MU 4 and establish sponsorship with employing entity

HELPFUL LINKS & NUMBERS:

www.dre.ca.gov – California Department of Real Estate

Licensing Questions/SAFE ACT Compliance – (877) 373-4542

http://www.dre.ca.gov/ppt/SAFE_DRE_9-28-10.pps

(Power Point Presentation by California DRE)

http://www.dre.ca.gov/lic_safe.html#1 – California Department of Real Estate Licensing Requirements

http://www.ffiec.gov/safeact.htm – Federal Government SAFE ACT site (FFIEC)

If you are a Real Estate or Mortgage Professional and need help determining if the SAFE ACT applies to you, call The Law Offices of Steven C. Vondran. The Law Offices of Steven C. Vondran can help in DRE Defense, SAFE ACT Compliance, and Broker Compliance.

Call (877) 276-5084 or visit us at www.vondranlaw.com.

You can follow us on Twitter at http://twitter.com/VondranLaw

__________________________________________________

The Law Offices of Steven C. Vondran

DRE Defense Lawyer, Broker Defense Attorney, Broker Compliance

General Real Estate Law

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California Breach of Fiduciary Duty – Ballon payment loan leads to $200,000 punitive damage award in Wyatt case.

December 31, 2010 By California DRE Defense Lawyer Leave a Comment

CALIFORNIA REAL ESTATE BROKERS MUST UNDERSTAND THE FIDUCIARY DUTY TO THE LOAN BORROWER.

We recently had a client come to our office for legal advice in regard to suing her real estate broker for a breach of the broker fiduciary duty.  As we all learned early on in our real estate broker training, the fiduciary duty is a duty of “TRUST” and the highest duty known to law.  As I tell people, it means you better treat your clients the same as you would your own mom, dad, brother or sister (assuming you care about them of course).  The fiduciary duty means a duty of care, loyalty, dilligence, disclosure of relevant facts in a transaction, etc.

Yet when it comes to balloon loans (loans where all the borrower is normally doing is paying interest on the loan and there is a big balloon payment due in 5 or 10 years, this is a tricky subject.  The mortgage broker must answer honestly questions posed by the borrower in regard to these types of loans and what they mean.  When the real estate broker withholds information, or fraudulently conceals certain information or fails to accurately explain the true nature of the balloon feature, this can lead to legal liability.  I would argue the same applies to explaining the “option arm loan, pick-a-pay and negative amortization loans.

One of the key cases addressing the real estate broker fiduciary duty in regard to balloon loans is Wyatt v. Union Mortgage Company, 598 P.2d 45 (1979) out of the Supreme Court of California.  In this case the Court discussed the brokers duty.

The Court first discussed the role of the Loan Broker in California:
A mortgage loan broker is customarily retained by a borrower to act as the Borrower’s agent in negotiating an acceptable loan. All persons engaged in this business in California are required to obtain real estate licenses. (Bus. & Prof.Code, ss 10130 and 10131, subd. (d).) Thus, general principles of agency (Civ.Code, ss 2228 and 2322, subd. 3) combine with statutory duties created by the Real Estate Law (see Bus. & Prof.Code, s 10176, subds. (a), (i)) to impose upon mortgage loan brokers an obligation to make a full and accurate disclosure of the terms of a loan to borrowers and to act always in the utmost good faith toward their principals. “The law imposes on a real estate agent ‘the same obligation of undivided service and loyalty that it imposes on a trustee in favor of his beneficiary.’ (Citations.) This relationship not only imposes upon him the duty of acting in the highest good faith toward his principal but precludes the agent from obtaining any advantage over the principal in any transaction had by virtue of his agency. (Citation.)” (Batson v. Sterehlow (1968) 68 Cal.2d 662, 674-765, 68 Cal.Rptr. 589, 597-598, 441 P.2d 101, 109- 110) A real estate licensee is “charged with the duty of fullest disclosure of all material facts concerning the transaction that might affect the principal’s decision. (Citations.)” (Rattray v. Scudder (1946) 28 Cal.2d 214, 223, 169 P.2d 371, 376; see also Realty Projects, Inc. v. Smith, (1973) 32 Cal.App.3d 204, 210, 108 Cal.Rptr. 71; Smith v. Zak (1971) 20 Cal.App.3d 785, 792-793, 98 Cal.Rptr. 242.).
The Court then discussed the loan at issue in the Case:
In the present case, respondents testified they did not read the stack of written loan documents before signing them in 1966. However, respondents did ask the broker about the rate of interest, late payments, and the size of the balloon payment due at the end of the loan period. In response to their questions, respondents received the materially misleading and incomplete information already described in this opinion.  Given this evidence, the jury justifiably concluded that Stockton did not satisfy its fiduciary obligations of disclosure and good faith toward its principal in regard to the 1966 loan.

The Court laid out the general legal principle in regard to the fiduciary duty of the loan broker in California to their borrower client:
Principles of agency combined with statutory duties created by real estate law to impose upon mortgage loan brokers an obligation to make a full and accurate disclosure of terms of a loan to borrowers and act always in utmost good faith toward their principals. In addition, A real estate licensee is charged with duty of fullest disclosure of all material facts concerning transaction that might affect principal’s decision.
The Court then analogized to insurance disclosures:

“ ‘It is a matter almost of common knowledge that a very small percentage of policyholders are actually cognizant of the provisions of their policies . . . The policies are prepared by the experts of the companies, they are highly technical in their phraseology, they are complicated and voluminous. . . . The insured usually confides implicitly in the agent securing the insurance, And it is only just and equitable that the company should be required to call specifically to the attention of the policyholder such provisions as the one before us.’ ” (Motor T. Co. v. Great American Indem. Co. (1936) 6 Cal.2d 439, 444, 58 P.2d 374; Glickman v. New York Life Ins. Co., supra, 16 Cal.2d at pp. 631-632, 107 P.2d 252.). The reasoning of these cases applies to transactions with mortgage loan brokers as well. Here, the record discloses that respondents were persons of modest means and limited experience in financial affairs, whose equity in their home was their principal asset. They retained a mortgage loan broker to negotiate for them highly complex loan terms and they may be assumed to have justifiably relied on the latter’s expertise. Against such a backdrop, the broker’s failure to disclose orally the true rate of interest, the penalty for late payments or the swollen size of the balloon payment clearly constituted breach of the broker’s fiduciary obligations. It is noteworthy also that the provisions regarding interest rate, late charges and balloon payment were highly unfavorable to the borrower and yet the broker made no attempt to draw his clients’ attention to these matters.
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AS THIS CASE POINTS OUT, A CALIFORNIA REAL ESTATE BROKER OUGHT TO FULLY DISCLOSE THE TRUE NATURE OF THE LOAN TO THE BORROWER, INCLUDING SPECIFICALLY EXPLAINING THE BALLOON, OR NEGAM FEATURE TO THE BORROWER.  WOULD BE WISE TO PUT THIS IN WRITING AND GET A SIGNATURE ON IT.  FAILURE TO COUNSEL AND FULLY DISCLOSE COULD LEAD TO HUGE LIABILITY AS IT DID IN THIS CASE.  THE COURT FOUND FOR THE BORROWER AND AWARDED $200,000 IN PUNITIVE DAMAGES.

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Understanding the DRE Accusation Process

December 25, 2010 By California DRE Defense Lawyer Leave a Comment

If you have undergone an Audit and Investigation by the DRE and are facing an “Accusation” you may be wondering what you legal rights are and how you should respond.  Here is a basic overview of what happens when you receive an “accusation” from the California Department of Real Estate.

(1) You will be served with a Copy of the Accusation from the DRE which document is a formal complaint which generally seeks to revoke your real estate license.  The Accusation will set forth the charges against you and the code sections you are alleged to have violated.  The accusation must be clear and unambiguous or you can object on these grounds.

(2) You will then have 15 days to file a Notice of Defense (usually included in the materials you receive from the DRE) which asks you if you want to challenge the accusation.  If you do not make some type of response within 15 days you waive your right to a hearing.  This is why it is CRITICAL to contact a DRE Defense Lawyer the minute you receive an accusation to chart out a potential litigation strategy.

(3) You may want to seek to settle the matter by providing exonerating evidence, or else challenge the accusation by demanding an Administrative hearing.

(4) You have the legal right to review the investigation file that is being used against you.  You must make a written demand for this.

(5) You also have the legal right to present evidence on your behalf, and call witnesses, for example.

(6) If you go to trial, you will probably want to be represented by a DRE defense lawyer.

(7) If you do not win at the hearing, you have a legal right to appeal your case to the State Court system by filing for a writ of mandate against the DRE in Superior Court.

This is a basic overview of the process you can expect when facing a DRE Accusation.  Should you wish to discuss your case and your options contact us at (877) 276-5084.

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Attorney Steve Vondran is a lawyer licensed to practice law in California and Arizona, and is also a licensed real estate broker in both states.  During the loan modification BOOM, Mr. Vondran represented approximately 60 companies in getting legally approved to accept advance fees, submit verified accountings, and has represented California brokers in DRE Audits and investigations.   He has experience with the California Consultant Law, SB 94, and other laws impacting real estate brokers including trust accounting rules and regulations.

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ARE YOU BEING CHARGED WITH A VIOLATION OF SB 94? DO YOU NEED A REAL ESTATE SB 94 LOAN MODIFICATION LAWYER TO REPRESENT YOU IN LITIGATION AND ARBIRTATION? A FEW THINGS TO THINK ABOUT.

October 2, 2010 By California DRE Defense Lawyer Leave a Comment

There are more and more lawyers out there now seeking to sue DRE licensed Brokers for a violation of SB94.  Some lawyers are making claims for thousands of dollars and threatening civil, DRE discipline, and even criminal charges against brokers (although attorneys are not ethically permitted to make such threats of criminal of DRE administrative disciplinary charges, they often do).

Here are the main claims that may be asserted against a mortgage broker who was performing loan modification and the potential for litigation arises: 

(1)   Misrepresenting what the final loan modification terms will be (ex. Promising a loan modified payment of $1,500 or promising principle reduction that never happened, etc.) either orally, in writing, or on the internet. 

(2)   Fraud – taking money for a loan modification and then not doing anything.  Sometimes this is a simple misunderstanding in that the broker submits everything and then the lender or loan servicer claims it never got the clients financial documents.  We see this a lot too, but in reality, the lenders and servicers are often so screwed up they cannot find the documents that were legitimately sent.  However, there are also legitimate instances of fraud where nothing is done on the file after the advance fee was collected. 

(3)   Violation of California Civil Code Section 2924 et seq. (California’s Foreclosure Consultant Law) for accepting advance fees on files that have received a NOD (Notice of Default). 

(4)   Failure to have or use a proper “advance fee agreement” that has received a “letter of non-objection” from the California Department of Real Estate. 

(5)   Failure to provide proper accountings for advance fees collected / failure to put advance fees in a trust account. 

(6)   Accepting, demanding, claiming, charging, or collecting an advance fee AFTER October 11, 2010 (after the passage of California SB 94). 

NOTE:  This seems to be a hot new area for civil litigation attorneys mainly charging brokers who DO HAVE AND DID HAVE AN APPROVED ADVANCE FEE AGREEMENT AT THE TIME OF COLLECTING PART OF THE ADVANCE FEE, BUT THEN WHO THEN TOOK UNPAID PORTIONS OF THE ADVANCE FEE OWED (PURSUANT TO ITS LAWFULLY SIGNED CONTRACT) AFTER SB 94 WAS PASSED.  MEAINING, THE BROKER WAS OWED MONEY, PERFORMED SERVICES UNDER THE ADVANCE FEE AGREEMENT, AND THEN TRIED TO COLLECT MONEY IT WAS ENTITLED TO UNDER THE AGREEMENT AFTER OCTOBER 11, 2009.  This is a technical point, and you might not think this is a violation, but the California DRE issued this FAQ Sheet discussing this point: http://www.dre.ca.gov/pdf_docs/FAQsSB94.pdf.  This point seems open to interpretation.  Also see the DRE letter that was sent to most brokers who had an approved advance fee agreement http://www.dre.ca.gov/pdf_docs/SB94WebAnnouncement(brokers).pdf. 

(7)   Unfair Competition (California Business and Professions Code Section 17220). 

(8)   False Advertising (California Business and Professions Code Section 17500). 

(9)   Violation of SB 94 for breaking the loan modification agreement into pieces in an effort to “get around” SB 94 prohibitions against advance fees.  Yes, some people (including lawyers and attorneys) still try to get-around SB94 by breaking the loan modification process into pieces (ex. Contract to review / contract to submit / contract to negotiate the loan / contract to review final paperwork).  See the DRE FAQ sheet above, it appears at least the DRE legal counsel disapproves of this approach designed to skirt the law. 

(10)    Breach of fiduciary duty 

      Other claims are of course possible, but these are some of the basic causes of action you can expect to see if sued as a broker for loan modification activities.  Coincidentally, these are some of the same charges that the DRE may investigate in a hearing, investigation, or DRE audit of the Broker. 

      If you are faced with these types of charges you may want to consider hiring a SB 94 Lawyer to assist you in your legal defense, which may include preparing for litigation or arbitration, or possibly a DRE audit. 

      To discuss your case in confidence, please contact us at (877) 276-5084.  We assist California licensed real estate brokers and salespeople up and down the state of California in these types of cases.  Steve Vondran, Attorney is a real estate lawyer licensed to practice law in California and Arizona.  He is also a licensed Broker in both states. 

This is a communcation and advetisement pursuant to state bar rules.

 

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California Department of Real Estate discloses top 10 violations found in a DRE audit!

July 26, 2010 By California DRE Defense Lawyer Leave a Comment

DRE TOP TEN VIOLATIONS LIST!  Here is a link to their story:http://www.dre.ca.gov/lic_top_ten.html

Here are the bullet points:

  • B & P Code Section 10148 – Retention of Records
  • Regulation 2731 – Use of False or Fictitious Name
  • Regulation 2831 – Trust Fund Records To Be Maintained
  • Regulation 2831.1 – Separate Record for Each Beneficiary or Transaction
  • Regulation 2831.2 – Trust Account Reconciliation
  • Regulation 2832.1 – Trust Fund Handling for Multiple Beneficiaries (Trust Fund Shortage)
  • Regulation 2832 – Trust Fund Handling
  • Regulation 2834 – Trust Account Withdrawals
  • B & P Code Section 10145/ Regulation 2835 – Commingling
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DRE ISSUES CONSUMER WARNING – ADVANCE FEES FOR LOAN MODIFICATION ARE ILLEGAL.

July 25, 2010 By California DRE Defense Lawyer Leave a Comment

HELPING HOMEOWNERS IS AGAINST THE LAW?

The California legislature passed a bill known as SB 94 on October 11, 2009.  The law prevents ANYONE (even attorneys) from accepting advance fees for loan modification and loan forebearance work.  Since most lenders and brokers are not willing to work on a contingency fee (i.e. hope they get the mod and hope you are happy with the mod and hope you pay for the mod), you can consider this another victory for the lenders!

Here was the  governor’s point of view: http://www.prweb.com/releases/loan-modifications/california/prweb2618464.htm

And here is a text to the actual proposed bill: http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_94_cfa_20090327_152419_sen_comm.html

Interstingly, the California State bar supported the bill. See http://docs.google.com/gviewa=v&q=cache:wFiRUorfdIAJ:bog.calbar.org/docs/agendaItem/Public/agendaitem1000004814.pdf+california+state+bar+sb94+july+22,+2009&hl=en&gl=us

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Well the last year has been pretty crazy in the loan modification business.  We have seen lots of companies being shut down by the California Department of Real Estate and California State bar (ex. brokers, attorneys, “attorney-backed” and “attorney-based” law centers and fictional “law groups” etc.) who were found out as being nothing more than scams, shams, and ripoff artists.

Some of the reasons these companies were the subject of cease and desist (or desist and refrain) letters is the following:

-They held themselves out as loan modification specialists and loan modification experts when in fact they had no special skill, training, experience, or track record.
-They took advance fees without the proper advance fee agreement that received a letter of non-objection from the DRE.
-They collected advance fees but failed to properly place funds in a Client trust account.
-They failed to properly provide verified accountings as required by the California Department of Real Estate.
-They failed to have all of the loan modification advertising approved by the DRE.
-They took files that were in notice of default (this applies to the non-attorneys) in violation of the Foreclosure Consultant Law.
-The committed other acts of outright fraud, misrepresentation, deceit and false advertising.
-In the case of Loan Modification Attorneys they may have illegally partnered with non-attorneys (such as brokers and foreclosure consultants) that would not only tout the attorneys services – taking the form of an illegal runner or capper – but also illegally splitting what could be construed as a legal fee, and engaging in other shady conduct that violates an attorneys code of ethics.
-In addition, Post SB94, some entities accepted an advance fee in violation of SB94 which prohibits both attorneys, brokers, and foreclosure consultants from accepting any type of advance fee for loan modification or foreclosure forbearance work.
-They failed to provide refunds when their contracts stated they would, or where verbal representations of 100% money back guarantee were given.

Yes, there were a whole lot of callous and cavalier people/companies raking homeowners over the coals for their own personal gain, and without any morals or scruples.  I guess you could say there were a bunch of Bernie Madoff’s in the loan modification business.  From what we could tell, the Attorney loan mod scammers often were either the “newbie” Attorneys who had no clue what was going on and didn’t care (and may have had a hard time finding legal jobs in the tough economic climate following law school) and/or 20 or 30 year attorneys who could care less whether or not the State bar stripped their license to practice law (I think some of these attorney violators were racking up so much money, and trying to ship it off-shore for their retirement purposes).  In fact, we heard one Southern California Attorney, who was disbarred for his loan modification shennanigans, had over 1,700 loan files that he had charged over $6,000 a piece to help modify their loans (yes, that is about 11 million dollars).  This information was relayed to our office by the Federal Trade Commission (FTC) who helped stopped the attorneys scam, and put the joker out of business.

Other attorney/brokers that we have seen have been callous and calculating, and when approached with demands for loan modification refunds, have simply said “if you sue me I will file bankruptcy…”  This is the attitude of a lot of scammers. There was one scammer that our office dealt with, Mr. Jason Adelman of Bakersfield (we believe he was runnning a Nevada Company), who agreed to settle his loan modification scam suit, but then disappeared starting up a new “Investment” company in the Bakersfield area.   Our information also shows that this guy is a youth football coach and/or little league coach in the Bakersfield area.  This guy failed to have an approved advance fee agreement, and failed to perform reasonable services or provide refunds upon demand.

This is just a flavor of the things we saw from the loan modification side of life in 2010.  Taking this for what it is, and given the large number of complaints from California homeowners dealing with these types of heartless vultures, it is no wonder SB 94 was passed.

Now some “enterprising” lawyers (one in particular in southern california) have broken their loan modification contract into THREE PIECES (charging for each service after it is performed) in an effort to snub their noses at SB 94.  This particular firm is also bringing in about 200 files per month, or so we are told.  This is the nature of the loan modification beast in California, and homeowners are advised to be very suspect and wary when dealing with a loan modification company.  Do not pay any advance fees for loan modification work to either an attorney, “law center,” “law group,” “Attorney-based” company, foreclosure consultant etc.

In many cases, as a homeowner, you can try to do your own loan modification.  Yes, it will most likely not be an easy task as most will testify.  However, you should try to contact your lender and see if they are willing to work with you, and submit your financial documentation and see if they will provide you any type of loan modification assistance.  Loans are getting modified, but not always on the terms the homeowner wants.  If you are lucky, and if you have a bona fide hardship, and meet the financial criteria, you may be able to save yourself some money by doing your own modification.

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Here are a few types of DRE violations that may land a California Real Estate Broker or Real Estate licensee in HOT WATER!!

July 25, 2010 By California DRE Defense Lawyer Leave a Comment

IN HOT WATER? If you are a California Broker or real estate licensee facing any of the following discipline charges (or fighting a lawsuit involving any of the legal issues listed below) don’t go it alone.  You should have a real estate attorney on your side to review the charges and properly advise and defend you.

Steve Vondran, Attorney at law, is both a real estate broker and Attorney practicing in the State of California and Arizona.  If you are having issues gaining admission as a licensee or facing disciplinary charges contact us immediately.  Here are but a few of the types of charges we can represent you in:

I. Violations of Commissioner’s Regulations

2725 – Broker Supervision

A broker shall exercise reasonable supervision over the activities of his or her salespersons.  Reasonable supervision includes, as appropriate, the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage:

(a) Transactions requiring a real estate license.

(b) Documents which may have a material effect upon the rights or obligations of a party to the transaction.

(c) Filing, storage and maintenance of such documents.

(d) The handling of trust funds.

(e) Advertising of any service for which a license is required.

(f) Familiarizing salespersons with the requirements of federal and state laws relating to the prohibition of discrimination.

(g) Regular and consistent reports of licensed activities of salespersons.

The Form and extent of such policies, rules, procedures and systems shall take into consideration the number of salespersons employed and the number and location of branch offices.

A broker shall establish a system for monitoring compliance with such policies, rules, procedures and systems.  A broker may use the services of brokers and salespersons to assist in administering the provisions of this section so long as the broker does not relinquish overall responsibility for supervision of the acts of salespersons licensed to the broker.

II. Violations of the Business and Professions Code

498.  A board may revoke, suspend, or otherwise restrict a license on the ground that the licensee secured the license by fraud, deceit, or knowing misrepresentation of a material fact or by knowingly omitting to state a material fact.

10130. It is unlawful for any person to engage in the business, act in the capacity of, advertise or assume to act as a real estate broker or a real estate salesman within this state without first obtaining a real estate license from the department.  The commissioner may prefer a complaint for violation of this section before any court of competent jurisdiction, and the commissioner and his counsel, deputies or assistants may assist in presenting the law or facts at the trial.  It is the duty of the district attorney of each county in this state to prosecute all violations of this section in their respective counties in which the violations occur.

10137. It is unlawful for any licensed real estate broker to employ or compensate, directly or indirectly, any person for performing any of the acts within the scope of this chapter who is not a licensed real estate broker, or a real estate salesman licensed under the broker employing or compensating him; provided, however, that a licensed real estate broker may pay a commission to a broker of another State.

No real estate salesman shall be employed by or accept compensation from any person other than the broker under whom he is at the time licensed.

It is unlawful for any licensed real estate salesman to pay any compensation for performing any of the acts within the scope of this chapter to any real estate licensee except through the broker under whom he is at the time licensed.

For a violation of any of the provisions of this section, the commissioner may temporarily suspend or permanently revoke the license of the real estate licensee, in accordance with the provisions of this part relating to hearings.

10176. The commissioner may, upon his or her own motion, and shall, upon the verified complaint in writing of any person, investigate the actions of any person engaged in the business or acting in the capacity of a real estate licensee within this state, and he or she may temporarily suspend or permanently revoke a real estate license at any time where the licensee, while a real estate licensee, in performing or attempting to perform any of the acts within the scope of this chapter has been guilty of any of the following:

10176(a) Making any substantial misrepresentation.

10176(b) Making any false promises of a character likely to influence, persuade or induce.

10176(c) A continued and flagrant course of misrepresentation or making of false promises through real estate agents or salespersons.

10176(d) Acting for more than one party in a transaction without the knowledge or consent of all parties thereto.

10176(e) Commingling with his or her own money or property the money or other property of others which is received and held by him or her.

10176(f) Claiming, demanding, or receiving a fee, compensation or commission under any exclusive agreement authorizing or employing a licensee to perform any acts set forth in Section 10131 for compensation or commission where the agreement does not contain a definite, specified date of final and complete termination.

10176(g) The claiming or taking by a licensee of any secret or undisclosed amount of compensation, commission or profit or the failure of a licensee to reveal  to the employer of the licensee the full amount of the licensee’s compensation, commission or profit under any agreement authorizing or employing the licensee to do any acts for which a license is required under this chapter for compensation or commission prior to or coincident with the signing of an agreement evidencing the meeting of the minds of the contracting parties, regardless of the form of the agreement, whether evidenced by documents in an escrow or by any other or different procedure.

10176(h) The use by a licensee of any provision allowing the licensee an option to purchase in an agreement authorizing or employing the licensee to sell, buy, or exchange real estate or a business opportunity for compensation or commission, except when the licensee prior to or coincident with election to exercise the option to purchase reveals in writing to the employer the full amount of licensee’s profit and obtains the written consent of the employer approving the amount of the profit.

10176(i) Any other conducts, whether of the same or a different character than specified in this section, which constitutes fraud or dishonest dealing.

10176(j) Obtaining the signature of a prospective purchaser to an agreement which provides that the prospective purchaser shall either transact the purchasing, leasing, renting or exchanging of a business opportunity property through the broker obtaining the signature, or pay a compensation to the broker if the property is purchased, leased, rented or exchanged without the broker first having obtained the written authorization of the owner of the property concerned to offer the property for sale, lease, exchange or rent.

10176(k) Failing to disburse funds in accordance with a commitment to make a mortgage loan that is accepted by the applicant when the real estate broker represents to the applicant that the broker is either of the following:

(1) The lender.

(2) Authorized to issue the commitment on behalf of the lender or lenders in the mortgage loan transaction.

10176(l) Intentionally delaying the closing of a mortgage loan for the sole purpose of increasing interest, costs, fees, or charges payable by the borrower.

10176(m) Generating an inaccurate opinion of the value of residential real property, requested in connection with a debt forgiveness sale, in order to do either or both of the following:

(1) Manipulate the lien holder to reject the proposed debt forgiveness sale.

(2) Acquire a financial or business advantage, including a listing agreement that directly results from the inaccurate opinion of value, with regard to the subject property.

10177.  The commissioner may suspend or revoke the license of a real estate licensee, or may deny the issuance of a license to an applicant, who has done any of the following, or may suspend or revoke the license of a corporation, or deny the issuance of a license to a corporation, if an officer,    director, or person owning or controlling 10 percent or more of the corporation’s stock has done any of the following:

10177(a) Procured, or attempted to procure, a real estate license or license renewal, for himself or herself or a salesperson, by fraud, misrepresentation, or deceit, or by making a material misstatement of fact in an application for a real estate license, license renewal, or reinstatement.

10177(b) Entered a plea of guilty or nolo contendere to, or been found guilty of, or been convicted of, a felony, or a crime substantially related to the qualifications, functions, or duties of a real estate licensee, and the time for appeal has elapsed or the judgment of conviction has been affirmed on appeal, irrespective of an order granting probation following that conviction, suspending the imposition of sentence, or of a subsequent order under Section 1203.4 of the Penal Code allowing that licensee to withdraw his or her plea of guilty and to enter a plea of not guilty, or dismissing the accusation or information.

10177(c)    Knowingly authorized, directed, connived at, or aided in the publication, advertisement, distribution, or circulation of a material false statement or representation concerning his or her designation or certification of special education, credential, trade organization membership, or business, or concerning a business opportunity or a land or subdivision, as defined in Chapter 1 (commencing with Section 11000) of Part 2, offered for sale.

10177(d) Willfully disregarded or violated the Real Estate Law (Part 1 (commencing with Section 10000)) or Chapter 1 (commencing with Section 11000) of Part 2 or the rules and regulations of the commissioner for the administration and enforcement of the Real Estate Law and Chapter 1 (commencing with Section 11000) of Part 2.

10177(e) Willfully used the term “realtor” or a trade name or insignia of membership in a real estate organization of which the licensee is not a member.

10177(f) Acted or conducted himself or herself in a manner that would have warranted the denial of his or her application for a real estate license, or has either had a license denied or had a license issued by another agency of this state, another state, or the federal government revoked or suspended for acts that, if done by a real estate licensee, would be grounds for the suspension or revocation of a California real estate license, if the action of denial, revocation, or suspension by the other agency or entity was taken only after giving the licensee or applicant fair notice of the charges, an opportunity for a hearing, and other due process protections comparable to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340), Chapter 4 (commencing with Section 11370), and Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), and only upon an express finding of a violation of law by the agency or entity.

10177(g) Demonstrated negligence or incompetence in performing an act for which he or she is required to hold a license.

10177(h) As a broker licensee, failed to exercise reasonable supervision over the activities of his or her salespersons, or, as the officer designated by a corporate broker licensee, failed to exercise reasonable supervision and control of the activities of the corporation for which a real estate license is required.

10177(i) Has used his or her employment by a governmental agency in a capacity giving access to records, other than public records, in a manner that violates the confidential nature of the records.

10177(j) Engaged in any other conduct, whether of the same or a different character than specified in this section, which constitutes fraud or dishonest dealing.

10177(k) Violated any of the terms, conditions, restrictions, and limitations contained in an order granting a restricted license.

10177(l) (1) Solicited or induced the sale, lease, or listing for sale or lease of residential property on the ground, wholly or in part, of loss of value, increase in crime, or decline of the quality of the schools due to the present or prospective entry into the neighborhood of a person or persons having a characteristic listed in subdivision

(a) or (d) of Section 12955 of the Government Code, as those characteristics are defined in Sections 12926, 12926.1, subdivision

(m), and paragraph (1) of subdivision (p) of Section 12955, and  Section 12955.2 of the Government Code.(2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code.  With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1).

10177(m) Violated the Franchise Investment Law (Division 5 (commencing with Section 31000) of Title 4 of the Corporations Code) or regulations of the Commissioner of Corporations pertaining thereto.

10177(n) Violated the Corporate Securities Law of 1968 (Division 1(commencing with Section 25000) of Title 4 of the Corporations Code)) or the regulations of the Commissioner of Corporations pertaining thereto.

10177(o) Failed to disclose to the buyer of real property, in a transaction in which the licensee is an agent for the buyer, the nature and extent of a licensee’s direct or indirect ownership interest in that real property. The direct or indirect ownership interest in the property by a person related to the licensee by blood or marriage, by an entity in which the licensee has an ownership interest, or by any other person with whom the licensee has a special relationship shall be disclosed to the buyer.

10177(p) Violated Article 6 (commencing with Section 10237). If a real estate broker that is a corporation has not done any of the foregoing acts, either directly or through its employees, agents, officers, directors, or persons owning or controlling 10 percent or more of the corporation’s stock, the commissioner may not deny the issuance of a real estate license to, or suspend or revoke the real estate license of, the corporation, provided that any offending officer, director, or stockholder, who has done any of the foregoing acts individually and not on behalf of the corporation, has been completely disassociated from any affiliation or ownership in the corporation.

III. Violation of the Financial Code

4975 (a) (1)   Any licensed person who violates any provision of Section 4973,          4979.6, or 4979.7 shall be deemed to have violated that person’s licensing law.

(2)  After a knowing and willful violation, the licensing agency may bring a proceeding to suspend the license of the licensed person for not less than six months and not more than three years.

4975(b) After a knowing and willful violation resulting in a second or subsequent administrative or civil action, the licensing agency may bring a proceeding to permanently revoke the license of the licensed person or impose any lesser licensed sanction for at least three years.

4975(c) A licensing agency may exercise any and all authority and powers available to it under any other provisions of law, to administer and enforce this division including, but not limited to, investigating and examining the licensed person’s books and records, and charging and collecting the reasonable costs for these activities.  The licensing agency shall not charge a licensed person twice for the same service.  Any civil, criminal, and administrative authority and remedies available to the licensing agency pursuant to its licensing law may be sought and employed in any combination deemed advisable by the licensing agency to enforce the provisions of this division.

4975(d) Nothing in this section shall be construed to impair or impede a licensing agency’s authority under any other provision of law.

IV. Problems Gaining Admission as a DRE Real Estate Licensee (Or Being Reinstated)

V. DRE Audits for California Licensed Loan Modification Companies

There are quite a few investigations and audits underway involving loan modification and trust account activities.  Our firm help set up over 50 brokers to legally perform in the loan modification business.  We are familiar with the legal and compliance issues involved with short sales, loan modification and other loss mitigation services.

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