Real Estate Compliance Consultant, Former California Department of Real Estate (DRE) Investigator Summer Goralik shares tips on keeping a valid real estate license. Visit the original post on her blog. here…
In the real estate compliance world, one basic rule of thumb is to keep your license in good shape. By good standing, I mean active, valid and not subject to any formal disciplinary action. While seemingly simple, failure to do so can lead to regulatory violations, not only for the licensee, who, for example, allows license expiration, but also for the unsuspecting responsible broker who neglects oversight and control in this area of compliance.
While there are many requirements and concerns that affect real estate licensees, the purpose of this article is to highlight the fundamental challenge and importance of a successful renewal of real estate license… Admittedly, a license renewal topic can cover several different elements, including the application and / or the process itself, DRE-required renewal disclosures and, of course, the implementation of continuing education. However, this post will focus on inadvertent license expiration and / or expiration, and the domino effect of violations that may occur.
Although this topic is always relevant and relevant, it just so happened that I witnessed a surge in such violations. As a real estate compliance consultant and former investigator for the California Department of Real Estate, I regularly review DRE’s public enforcement actions. Such actions provide an opportunity to better understand the types of violations that are taking place in the industry, the issues of non-compliance that the DRE considers “formally” applicable, and their disciplinary responses to such issues. After examining some of their recent actions over the past few months, several licensing cases have been filed in a short period of time by agents whose licenses expired or expired…
In addition, I have worked with several clients who have been contacted by DRE regarding unlicensed activity by expired agents. Together, these public actions and DRE investigations serve as the ultimate reminder of simply complying with licensing requirements (keeping your license active / not expired while conducting licensing activities), but more importantly, the reach of DREs and their regulatory responses to these types of core failures through licensees.
Admittedly, the best way to inform licensees about license renewals (what went wrong) is to demonstrate associated and problem scenarios that clearly expose licensees to regulatory risk. Below are the scenarios I’ve seen in this area recently.
For example, if an agent unknowingly gives an expiration or expiration of his license and continues to engage in real estate, then the agent is involved in unlicensed activity in violation of real estate law. In addition to illegal activities of the agent, the expiration of the license can lead to collateral damage. If an agent performed these unlicensed acts on behalf of an affiliated real estate broker, and the broker pays compensation to that agent for such actions, then the broker also violated the law. In particular, the broker is guilty of withholding or hiring and compensating an unlicensed person for performing licensed activities.
Another example might look like this: an agent renews his license by completing and submitting in time a renewal application from DRE for the seller (form DRE RE 209), but does not fill it out correctly due to accidental disconnection with his affiliated broker. In particular, the licensee incorrectly certifies that he will no longer engage in real estate during the renewal, and in turn, cannot fill out his affiliate broker information and obtain his broker’s signature. In turn, these actions place the agent’s license status in no brokerage affiliation (NBA) status, or in fact, non-working status. It should be noted that if you believe that you are immune to this type of issue because you are renewing your license using the DRE (Online Electronic Licensing System) electronic licensing portal, then unfortunately you are not. The same scenario can happen with electronic licensing if the questions are answered incorrectly.
Speaking of the DRE e-licensing portal, here are a few more examples I came across. By using an e-license, the agent renews his license in time and cannot provide the correct affiliate broker license number and email address; or the agent provides the correct information, but the renewal application is never certified by the broker for any reason (for example, the broker did not receive the email or accidentally ignored it). Either way, the agent inadvertently revokes their broker’s license and assumes NBA status in the DRE.
And this is where this topic becomes even more alarming. If an agent accidentally (or not) revokes his broker’s license by transferring his NBA status during the renewal process, DRE will not alert the broker in charge of this licensing change. Consequently, if the agent believes that he renewed on time and continues to engage in real estate on behalf of his broker, and the broker does not know that the agent’s license is no longer valid and is not properly bound, then both the agent and the broker are unintentionally involved in violations of the law; unlicensed activity of an agent, and illegal employment / compensation affiliated broker.
As a compliance consultant who helps brokers and agents navigate these situations and related DRE investigations, it is a painful endeavor for the parties involved. Because of these errors, the agent and the broker in charge face potential licensing discipline. But let’s be clear. It’s not just the agent’s fault. The affiliated broker in charge also has certain responsibilities.
It should be especially noted that responsible broker is required to monitor and control, among other things, the activities of its agents and the expiration of the license, which must also include the successful renewal of licenses. It is not enough just to remind agents to renew their licenses on time. Agent licenses must be monitored by the responsible broker to ensure successful renewals and permanent adherence to the broker’s license.
It is important to note that whether the agent intentionally or accidentally fails to perform the renewal or renewal properly and continues to perform licensed activities on behalf of the broker, the outcome will be the same. Both the unsuspecting agent and the broker violated the Real Estate Act. And even if you claim that the violations took place only for a short period of time, I can assure you that the agent and broker are still under threat of scrutiny, investigation and possible official action by DRE.
To prevent such non-compliance and unnecessary regulatory risk and, frankly, to learn from the mistakes of others, there are several compliance challenges to consider:
- All Licensees: Protect your real estate license by simply making sure it is active and valid always. I understand that this is an obvious reminder and should be an easy task, but we know from the diagram of the above situations that this simple enterprise is obviously not free from regulatory risks. By the way, if we learned something here, we also know that this task goes beyond checking the timeliness of the update (by an agent or affiliated broker), but also includes active confirmation that the update process was successful and completed correctly.
- Agents: When applying for an extension by mail, agents should review such forms with their brokers to ensure they are completed correctly before submitting them to DRE. We hope this will ensure that the application is correctly completed and signed by the agent and broker. When renewing your real estate license through the DRE electronic licensing portal, in addition to answering all the questions correctly, agents should also ensure that their brokers certify a renewal application through the DRE electronic licensing portal and continually check the status of their licenses to ensure that the renewal was successful. If done correctly, the agent’s license status should be active / not expired and still associated with the broker.
- Responsible brokers: Since brokers cannot expect any alerts or notifications from DRE when one of their agents inadvertently leaves the brokerage company during the renewal process, responsible brokers must monitor the agent’s license renewal process. Responsible brokers may require their agents to notify the brokerage firm when renewing their licenses and to make sure they receive notifications from DRE to certify their agents’ applications for renewal through the electronic licensing system. In addition, brokers should check the agent’s license status after the renewal application has been submitted to the DRE to confirm that the renewal process has been correctly completed and successful. By performing such checks and more carefully monitoring agent licenseserrors or problems, if any, can be quickly identified and rectified, ensuring that all licensees are authorized to carry out licensed real estate activities on behalf of the broker.
Remember that these activities are in fact part of the obligatory duties of a responsible broker under the law. The responsible broker should monitor and control the activities of their agents and licensees, and brokerage companies should have systems to ensure that agents continue to carry out licensing operations with active and valid licenses.
Finally, as a bonus exercise, you can make sure, as part of the broker’s normal transaction review and approval process, that your broker is constantly reviewing and approving license status agents who engage in licensed activities on behalf of the brokerage company (for example, accepting a listing, writing offers, and closing deals).
I understand that this is not rocket science. But this is obviously not so simple and straightforward, otherwise there would be no problematic anecdotes to share. In conclusion, the first chapter on compliance is to prioritize your real estate license. If the licensee throws that particular ball, you may not have a second chance, or at least without the headaches of regulatory scrutiny and / or the costly implications of potential formal (and social) discipline.