How To Lose a License

Writing for a California school, this article is focused towards California. However, the principles contained are the same for every state. 

Like any professional license, a real estate licensee can have his or her license suspended or revoked for various reasons. Criminal conduct is one of those, which makes sense considering the responsibilities of a real estate agent. Few people would want to be represented by someone they do not trust while relying on that person for financial advice, showing their home, and handling the paperwork to buy or sell property.

Passing the California real estate exam does not equal an endorsement of one’s character and there are a lot of reasons why trust in your real estate agent is important. The good news is that in California, if a real estate licensee breaks the law there is a possibility that they will have their license suspended or revoked, protecting potential clients. 

The California Bureau of Real Estate (CalBRE) runs background checks before granting licenses and reserves the right to deny them if an applicant has been convicted of a “substantially related crime”. Sections 480 and 490 of the Business and Professions Code define this as an act that may be deemed substantially related to the qualifications, functions, or duties of a real estate licensee, with more specific details of applicable conduct available here. Because the background check process involves fingerprinting, CalBRE is notified by the Department of Justice and the Bureau immediately begins an investigation to determine if the crime is substantially related. Disciplinary action can then be taken, including suspension or revocation of the license.

While this seems to be conveniently outlined by the law, below are a few cases that show how broad the phrase “substantially related crime” is. We have pulled real examples of disciplinary action from the CalBRE “Verify a License” section on their website, but have chosen to leave the individuals at the center of these cases relatively anonymous out of professional courtesy and good taste. 

Case #1 is relatively straightforward—a real estate broker failed to properly oversee trust funds in his control and negligently allowed a shortage of $111,828.27 to occur. It was determined to not be a case of intentional mismanagement. and the broker license was revoked with a right to a Restricted license. The broker went on (a few years later) to regain a non-restricted broker’s license. 

In Case #2 a real estate salesperson was convicted of two misdemeanor counts of cruelty to a child in connection with public intoxication. CalBRE believed that the cruelty to a child convictions were serious enough to revoke the salesperson license because of the threat of substantial injury to the children. Although CalBRE offered a path to a Restricted license, it doesn’t appear that the licensee performed the required steps to obtain this. 

In Case #3 a real estate salesperson was convicted of felony assault and his license was revoked as the crime was substantially related to the qualifications, function, and duties of a real estate licensee. In this case there has been no action to restore the license or grant a restricted license to the offender.

What these three cases illustrate is CalBRE’s commitment to maintaining the standards of the real estate profession. The system in place recognizes, assesses, and meets a crime with appropriate disciplinary action. Few would argue that Case #1 and Case #3 should be met with identical punishment and they were not. While there is always the possibility for poor judgment or an appeals court overturning a CalBRE decision (which has happened), the system is in place for a reason and often functions well.

On top of the potential for a loss of license, if an agent or broker is a REALTOR® and is found to be in violation of the REALTOR® Code of Ethics, disciplinary action from the local REALTOR® association can include fines and suspension of REALTOR® membership. Many crimes would result in a violation of this code, so criminal offenses can be met with considerable consequences even if CalBRE or the courts decide that a license will not be suspended or revoked. 

Do you know people affected by these policies? Should they be more or less strict? If you aren't in California, what is this process like in your state?