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.