Are you ready to go from Real Estate Broker to Real Estate salespersons because you don't fully understand the duty to supervise?
This is an important notice about something that I know everyone already knows, but may not truly understand. This article is based on things that I seen in my practice and that I am learning right now regarding how the California Department of Real Estate views the broker's duty of supervison versus how some brokers see it, and deal with it. As a licensed real estate broker myself (I practiced real estate before becoming a lawyer), I already knew about the duty to supervise, but I realized that maybe I didn't truly know it as in-depth as I should and as I am learning the DRE see the issue.
With the rise of "e-brokers" and "rent-a-brokers" and the growth of the mobile worker, and the home-based mobile agent, the DRE is starting to take a very serious look (at least in my honest opinion) at what brokers are doing to comply with the real estate law and commissioner regulations as it relates to supervision. In fact, I would be very surpised if any of us brokers could recite the rule verbatim. Give up? Well here is the book rule:
The broker's duty of supervision
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.
Got all that? Suffice it to say this is something to really think about and to ask yourself - could I defend my role as supervise if the DRE investigated or auditied my firm tomorrow?
I do not say this to scare you, I write this to let you know what the rule is, and what you need to think about in your real estate practice.
In my practice as a DRE defense lawyer, I handle not only compliance consulting, but also cases where brokers are facing accusations (a formal complaint seeking to discipline your real estate license) and I see first hand the real risks taht are involved when you are accused of failure to supervise. For example, did you know that if you are faced with an accusation, the DRE may seek to discpline your real estate license by reducing you from a real estate broker to a real estate salesperson? Are you ready for that? This is one very realistic discipline you could face. That is where things really get tense. All for what? For not being able to document your compliance with this rule that I think many of us only generally understand.
At any rate, make sure you can defend your practices, especially as you seek to grow, and as you employ more mobile (work at home) agents, mobile agents, and the like. While you may not want to "micromanage" you have to have policies and procedures in place to be able to oversee licensed activity in a manner that will satisfy the Department.
We provide consulting packages which are much less expensive than hiring our firm to defend your real estate license in an accusation. We can help you make sure you comply with Rule 2725 and other real estate rules and regulations including trust accounting. As I tell most people, the best money spent on lawyers (like doctors) is keeping you out of problems in the first place.
We can be reached at (877) 276-5084.
Thank you.
Attorney Steve Vondran
this is an advertisement and communication. This is not legal advice.
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