CalBRE Broker Office Survey - what's this?

2017 CalBRE real estate updates from Attorney Steve®

Introduction

Our firm has helped numerous real estate companies across the state of California in a wide variety of BRE compliance issues.  From advanced fee agreements, to statement of issues response, to defending in BRE audits, investigations and accusations.  Recently, it has come to our attention that more brokers are receiving “broker office survey” letters which come across as very informal but which could pack a serious compliance punch.  This blog talks about these letters and what you should do when you receive a letter.

What does the audit  letter say?

The letter may come from an auditor or supervising auditor of the California Bureau of Real Estate.  It will inform you of an appointment date with you to “examine your books and records relating to licensed real estate activity.”  You will be given a date, time and location for the audit appointment (i.e. at your office on a certain date/time).  The letter will go on to tell you that:

“The purpose of the examination is to determine whether you are in compliance with the provisions of the real estate law.”  The handling of trust funds may be specifically related.  You should note that several years back one of the chief lawyers at the Bureau told me that “all property managers in CA will eventually be audited, it is not a question of IF, but WHEN.”  This may be slowly coming true. 

The letter will go on to request certain documents be provided such as: 

• Bank records (general and trust account)
• Trust fund receipts and disbursement records
• Separate beneficiary records (many property managers I have dealt with do not know what these are – a  serious problem)
• Bank signature cards verifying the account is a trust account
• Cancelled checks and deposit slips
• Salesperson licenses and independent contractor agreements
• Property management files
• You may be asked to present a list of properties managed
• Number of owners
• Average rents collected
• Types of properties managed (ex. duplex, triplex, SFR)

The actual records requested may vary. 

Is this a full-blown compliance audit?

These are not advertised as a full-blown audit (which can last several days to over a week or more and take a lot of time), but a few hours at your office might be all an auditor needs to see there is substantial non-compliance and suggest either a full blown audit, or else move immediately to a cite and fine or filing of an accusation with the Office of Administrative Hearings (“OAH”) which then essentially sets your case for a hearing.  So while it looks informal, in my opinion they should be treated as a full scale audit.

Will this lead to a formal accusation?

I have not seen any information that indicates these informal type of “surveys” will not lead to either a “cite and fine” (essentially a traffic ticket that can go as high as $2,500) or an accusation (a formal complaint filed against the licensee which can lead to license discipline such as suspension, restriction, or revocation of a real estate license).  These can be devastating because they go on your BRE public records database and the public can search these.  Not good.  And these negative marks on your record can stay on the database for 10 years or more.  This shows why it is important to be as ready as possible for the audit visit, and to minimize your violations so as to avoid any accusation.  Lately, we have seen the DRE very aggressive in taking cases to a hearing so licensees need to take these letters very, very serious.  No kidding.

Top 10 BRE compliance issues 

Here are the top compliance violations I have seen over the years: 

1. Failure to maintain records of real estate transactions for 3 years
2. Failure to put BRE license number on website and advertising materials
3. Using unlicensed (unrecognized) DBA’s
4. Missing disclosures (ex. MLDS)
5. Accepting advance fees (without an approved agreement)
6. Comingling trust funds with personal funds
7. Failure to supervise licensed real estate activity (note: "rent-a-broker" problem)
8. Failure to have a properly designated trust account
9. Failure to maintain trust fund records (general ledger, separate beneficiary, and monthly reconciliations)
10. Trust fund shortages 

How we can help

We can help you prepare for the BRE office visit.  We can provide you with common questions we have heard over the years sitting in client offices with our real estate broker and sales clients.  We can get you up to speed so you are ready to respond and to help you get your “ducks in a row” the best you can given the short notice normally provided.  If you need an extension on the office visit, in some cases we may be able to make that happen as well.  We have helped many companies from San Diego to Sacramento and property management companies both large and small.  Call us at (877) 276-5084 for a free consultation if you received a letter.

Watch our popular Compliance Videos

When it comes to hiring a lawyer to help with California Department of Real Estate compliance experience matters.  With our firm, the proof is in the pudding and we are a leader in providing FREE VIDEO INFORMATION to the real estate community.  Here are some of our most popular videos.  These can also help you get into the compliance frame of mind before the auditor shows up.

1. Overview of BRE accusation process
2. Duty to keep records 10148
3. Broker duty of supervision (note the “rent-a-broker” problem)
4. What is a cite and fine?
5. Property management audits in California
6. CalBRE branch office requirements
7. Property management software triggers audit
8. Desist and refrain letters explained 
9. Possible types of DRE discipline to a licensee
10. Trust fund accounting violations

Contact a BRE compliance defense law firm

We have helped a ton of companies over the past 13 years and we can help you.  Call us at (877) 276-5084 to discuss your case in confidence.  Here is a good compliance guide from the real estate department to review.  In most cases we are able to offer low flat rate fees (predicatble legal fees).