Real Estate Broker

Common License Violations

Becoming a real estate broker in California takes work. Even after obtaining your license, there are many legal expectations and a level of responsibility with your profession. Your profession comes with many legal expectations and a high degree of accountability. The most common violations that could result in disciplinary action from the California Bureau of Real Estate are:

Fraudulent Activities

In real estate, where life-changing decisions and significant investments are made, honesty is the foundation of your professional duty. As such, fraudulent activities are among the most severe violations investigated by the Bureau. Any misstep in this area can result in severe penalties.

Examples of pitfalls include:

• Misrepresentation of property details. You must give prospective buyers truthful and comprehensive information. For example, defects or conditions may affect the property's value or desirability.
• False advertising. Exaggerating features, misstating square footage, or leaving out the necessary disclosures mislead buyers.
• Unintentional errors can be disastrous if they impact a buyer’s decision-making process.

Financial Misconduct

Below are the misconducts that undermine trust and attract legal and professional consequences:

• Commingling funds. When a broker mixes client funds with personal or business funds, it is called commingling. California law requires that client funds such as escrow deposits be held in separate trust accounts to keep them whole. Commingling occurs even with a minor act, like using client funds to pay business expenses.
• Conversion of funds. This is the unauthorized use of a client’s money for personal gain or for some purpose other than the client intended it to be used. In real estate, this means diverting escrow funds, deposits, or other client-held money without proper authorization. Such actions could attract embezzlement charges under California law.
• Failing to account for funds. It happens when you cannot clearly explain or document how you handle client funds due to negligence, poor record-keeping, or deliberate misconduct.

Agency Violations

You commit agency violations when you:

• Refuse to disclose dual agency relationships. Dual agency relationships occur in California when you work for both the buyer and the seller in the same transaction.
• Do not fulfill their fiduciary duties. You breach fiduciary duty when you do not act in your client’s best interest through negligence, misrepresentation, or self-dealing. This can include:
• Failing to disclose important property information
• Mishandling confidential information
• Steering clients to decisions that are in your financial interest 
• Conceal conflicts of interest. A broker must inform clients of any personal or financial interests in a transaction that might affect their objectivity as a broker. An example would be recommending a service provider you are interested in without letting your client know.

Licensing Law Violations

Maintaining your real estate broker license requires adhering to California's licensing laws. Some common violations are operating without a license, not renewing your license when you should, or neglecting to continue education.

One of the most egregious breaches of California law is operating without a real estate broker license. Engaging in brokerage activities without proper authorization violates the California Business and Professions Code, regardless of whether you have never obtained a license or allowed it to lapse. This offense will expose you to administrative sanctions from the Department of Real Estate and a misdemeanor in the state and, therefore, will subject you to criminal prosecution for unlicensed activity.

Brokers are required by California law to renew their licenses every four years. Failure to meet this requirement can cause you to lose or have your license suspended. In addition, if you run transactions while your license is expired, they could be invalidated, which means you could be sued by your clients or disciplined.

In California, as with many states, real estate brokers must complete 45 hours of approved continuing education before every renewal cycle, including ethics, agency, trust fund handling, and risk management. Neglecting this obligation sends a message that professional standards are not being followed, and the DRE may scrutinize it and impose penalties.

The License Defense Process

Knowing each phase affecting your case is helpful as a real estate broker involved in disciplinary procedures. These phases include:

Investigation Phase

The defense process begins with an investigation by the California Department of Real Estate (DRE). The information gathered will be used to charge a suspect in court.

Evidence collection involves these phases, where the police analyze electronic transaction records, communication history, and balance sheets to detect violations. You should ensure your documents are well-arranged, accurate, and easily retrievable. Any deviation or omission indicates a crime commission.

Interviewing witnesses is another aspect of this phase. Witnesses could include clients, colleagues, and other people involved in your real estate transactions. They provide investigators with statements that could implicate you. You need to obtain witnesses who can give positive reports of your activities and guarantee they can describe those observations coherently and honestly.

Administrative Hearing

In the administrative hearing, evidence is reviewed, arguments are made, and decisions about your professional life are made. The primary purpose is to assess whether the broker, in this case, you, have violated licensing laws or professional regulations.

Here, you will encounter three principal parties during the hearing:

1. The respondent or the accused broker
2. The prosecutor or the licensing board
3. The non-adversarial decision maker or the administrative law judge (ALJ)

The licensing board must prove your alleged misconduct, and they only need to do so by a preponderance of the evidence, which is a lower standard than beyond a reasonable doubt.

The hearing goes through several quite distinct stages:

• It starts with a motion for directions, where each party makes a statement of their case
• The hearing of evidence follows. Here, witnesses speak, documents are tendered, and submissions are made regarding the allegations.
• After all the proceedings, both parties present their final arguments and argue why the ALJ should agree.
• Finally, the ALJ issues a written decision on the case. It includes the findings of facts made, legal analysis made, and any recommended penalties.

Potential Penalties

If an administrative hearing shows you are guilty of the accusations against you, the penalties are severe. The penalties set reflect the type and severity of the violations to discourage the same in the profession. These include:

• License Suspension

A suspension means you are barred from practicing as the broker for a given time, usually within a set time frame. This penalty is supposed to provide time for correction, for example, to finish education or prove that specific requirements are met.

At this stage, one is virtually out of their profession for a period, which leads to work loss and deterioration of the professional status.

• License Revocation

Revocation is a severe penalty that means your career as a licensed real estate broker. Sometimes, you can regain your license after satisfying several conditions. Revocation can only be acted on where:

• The respondent has engaged in fraud
• The respondent has persistently breached the code
• Where the conduct is likely to cause serious harm to clients or the public

• Fines

Fines may be served independently or in combination with license suspension or revocation. The amount usually depends on the type of violation, the damage done to the financial position, and legal requirements and recommendations. Even though one may pay a fine, it is harsher than the suspension of a license. However, it may be costly, in addition to other professional losses.

• Probationary Periods and Additional Conditions

Sometimes, the licensing board does not proceed with suspension, revocation, or impose a probationary period. At the same time, you will be allowed to continue practicing with certain limitations, like you will be required to undergo an audit, take an ethics course, or practice under supervision. Although probation is an opportunity to continue practicing with a license, you will be subjected to restrictions as you practice, which may slow down your practice.

Find a San Luis Obispo Real Estate Broker Defense Attorney Near Me

You want to act quickly if facing accusations or investigations regarding your real estate broker license. There are always penalties for violating the license, including losing your license, suspension, or even having to pay a fine. You should keep a close eye on your work and any potential problems that may arise that will require you to fight for your license. This is where the services of a competent license defense attorney come in handy.

At San Luis Obispo License Attorney, we can help with legal proceedings, whether financial misconduct, agency violations, or any kind of misconduct. We are dedicated to offering the legal advice you require to safeguard your career. Our services are based on the belief that the best defense is preventive, so we recommend you start as soon as possible. Call us at 805-465-2766 to speak with our skilled attorneys.