Understanding the Branch Office in California for the DRE Licensee

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!