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Supervision vision

As of 2021, upwards of 20,000 individual and corporate broker licensees employ two or more real estate agents to represent them and render real estate services on their behalf. As employers of licensees, these brokers are required under the California Department of Real Estate’s (DRE’s) supervisory scheme to reasonably supervise the activities of their employees to protect members of the public.

Reasonable supervision includes establishing written policies, rules, procedures and reports for the broker to review and manage:

  • transactions and conduct requiring a real estate license;
  • documents materially affecting the rights or obligations of clients in transactions;
  • the filing, storage and maintenance of documents related to the real estate services rendered;
  • the handling and documentation of trust funds;
  • advertisement of real estate services requiring a license;
  • employee’s knowledge of anti-discrimination, fair housing and agency laws; and
  • reports on the activities of employees. [California Department of Real Estate Regulations §2725]

When the employing broker becomes too busy to provide continuous oversight over all the licensees, they may employ a licensee to act as an office manager

to carry out the employing broker’s supervisory responsibility to review documents and maintain files.

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The employing broker and their office manager review documents for unacceptable or incorrect activity, and take necessary steps to correct any errors in a timely fashion. A lack of corrective action will expose the broker and their manager to liability for money losses incurred by the staff working on behalf of the broker, whether through error or malfeasance.

Managers supervise, but without ultimate liability

In addition to reviewing documents, the responsibilities of the appointed office manager include:

  • oversight and supervision of day-to-day operations of all licensed activities in the real estate branch or division [Calif. Business and Professions Code §10164(a)];
  • supervising the on-the-job activities of employed licensees; and
  • managing unlicensed clerical staff employed in the branch office or division. [See RPI Form 507]

An office manager also assumes obligations for any sanctions and disciplinary actions by the DRE for their failure to properly supervise the activities of licensees and administrative employees on behalf of the employing broker. [Bus & P C §10164(b)]

When employing a licensee to carry out a broker’s responsibility for the oversight and management of their licensed and unlicensed staff, a written and signed agreement is necessary. [Bus & P C §10164(c); See RPI Form 510]

However, while an office manager carries out the duty to supervise employees, the employing broker retains overall supervisorial responsibility. An employing broker’s duty to supervise cannot be entirely delegated to others. Thus, the employing broker needs to periodically audit and review the actions of an office manager, and in turn, each employee. [DRE Regs. §2725]

Besides the administrative tasks assigned to an office manager, their primary responsibility is to review all correspondence and documents made or received by employed agents. The actions of a sales agent or broker-associate, as well as other administrative employees, are considered to be acts performed on behalf of their employing broker. Agents are always classified as agents of the agent — their employing broker.  [Calif. Civil Code §2079.13(b)]

Appointing a branch office manager

Licensees who may not be employed as an office manager include individuals who:

  • hold a restricted DRE license;
  • have been debarred by the DRE; or
  • are salespersons with less than two years of full-time real estate experience within the past five years prior to the appointment. [Bus & P C §10164(d)]

Employing brokers use the Office Manager Employment Agreement published by RPI (Realty Publications, Inc.) when employing a licensee as an office manager for their broker operations.

The agreement establishes the appointed licensee’s:

  • duties as the office manager; and
  • fee schedule for their compensation. [See RPI Form 510]

On employing an office manager, employing brokers are required to notify the DRE by preparing and filing the Branch or Division Manager Appointment form provided by the DRE. [See RE 242]

Likewise, on termination or change in the appointment of an office manager,  brokers are to promptly notify the DRE in writing by filing the Branch or Division Manager Appointment form. [See RE 242]

Failure to supervise

An office manager is a DRE-licensed employee who is authorized to represent the broker. Like a sales agent or broker-associate, the office manager represents the broker in dealings with members of the public as well as the broker’s employees. [DRE Regs. §2724]

The office manager owes their employing broker a duty to supervise all operations of the branch or division they manage. In turn, the employing broker is responsible for any breach in agency duty caused by the office manager’s failure to supervise agents and intercept and correct errors or omissions.

Thus, the office manager indemnifies the employing broker for losses caused by their failure to properly supervise employees and their work product. [Walters v. Marler (1978) 83 CA3d 1]

However, an office manager is also subject to disciplinary action by the DRE when they fail to properly supervise licensed activity of employees in the office they manage. In these cases, the DRE may suspend or revoke the manager’s license. [Bus & P C §§10164(b), 10165]

While most supervisory responsibilities may be assigned to an office manager, the agency duty the broker owes clients in transactions handled by employees may not be delegated to others. Agency obligations to members of the public may not be avoided. [Barry v. Raskov (1991) 232 CA3d 447]

This article was originally published March 2016, and has been updated.