DRE Hot Seat: The buck stops with the designated broker — always

This article is part of an ongoing series covering violations of real estate law. Here, the Department of Real Estate (DRE) revoked the California real estate license of a broker who failed to properly supervise their corporation’s activities as the designated officer.

In March 2022, the California Department of Real Estate (DRE) decided by default decision to revoke the license of Stacy La Vance Meadows, a broker since 2008 operating out of Culver City, California. The decision became effective August 2022.

Meadows was the designated officer of Be Commercial Real Estate, Inc. (BECREI), a real estate corporation, from April 2016 through April 2020. As designated officer, Meadows was required to comply with supervisory requirements.

BECREI was a corporation formed in August 2015 by L T Butler. Butler was a broker since 1981 and had their license revoked in 1999. Butler was the sole officer and director, according to the California Secretary of State.

In December 2015, Meadows applied for a corporate license with the DRE on behalf of BECREI. Meadows claimed to be Vice President and certified that a Corporation Background Statement was not needed for any other officers. By failing to provide a Corporation Background Statement for Butler, Meadows failed to disclose the prior revocation of Butler’s broker license.

In January 2018, the California Secretary of State suspended BECREI’s powers, rights and privileges.

Meadows submitted a Corporation Change Application on behalf of BECREI to the DRE in July 2018, notifying a change in the corporation’s main and mailing address. Meadows failed to notify the DRE of the Secretary of State’s suspension over BECREI’s corporation status.

The DRE received a complaint from a buyer alleging fraud and dishonest dealings by Butler and BECREI from 2017 through 2019 on an out-of-state property in Ohio. When questioned by the DRE, Meadows claimed Butler was the owner of the company and Meadows never knew what Butler was doing with the company, including having no knowledge of the out-of-state sale. In April 2019, Butler died.

Meadows omitted BECREI’s suspension and Butler’s ownership from the DRE and failed to properly supervise the Ohio transaction. Thus, Meadows failed to adequately supervise BECREI’s activities as required. [Calif. Business and Professions Code §10159.2; Bus & P C §10177(d)(h)(g)]

“Rent-a-broker” barred

Disciplinary cases the DRE investigates often stem from complaints about real estate transactions in which the designated broker responsible for supervising was an absentee “rent-a-broker.”

A rent-a-broker refers to a broker who is the broker of record on the DRE’s records, but who delegates all actual responsibility to another individual, shirking their mandated supervisory responsibility.

This other individual may often be the true owner of the company who lacks the qualifications to manage a real estate business. [See Summer 2010 Real Estate Bulletin]

Brokers are to always ensure strict standards are adhered to when conducting all aspects of real estate brokerage activities. As part of this, brokers therefore also need to ensure the honest and proper conduct of their employees — including the owners.

Related article:

DRE Compliance Goals – For Brokers

A broker may establish rules and procedures to meet supervisory responsibilities in a written employment contract. [See RPI e-book Real Estate Practice, Chapter 1]

The employment contract details the duties of the sales agent and the agent’s need to comply with an office manual which contains the broker’s policies, rules, procedures and other conduct the broker deems necessary to fulfill their responsibility for supervision. [See RPI Form 505 and Form 506]

It is never acceptable for an unlicensed individual (including those with revoked licenses) to conduct licensed acts.

Related, even when a broker employs the services of an office manager, the broker retains  overall supervisorial responsibility. Thus, the broker, as the ultimate authority with responsibility for all employees, needs to periodically review the actions of the office manager, and in turn, each employee — no exceptions, period.

Ultimately, it remains the designated broker’s responsibility to ensure the brokerage operates in compliance with real estate law. [Bus & P C §10159.2]

Want to learn more about broker oversight? Click the image below to download the RPI book cited in this article.