Administrative and nondiscretionary duties by unlicensed assistants and finders

Brokers licensed by the Department of Real Estate (DRE) may hire unlicensed assistants to perform administrative activities on their behalf and on behalf of their agents. Brokers may also hire unlicensed finders to identify and refer potential real estate clients or participants to a broker, agent or principal in exchange for a fee. [See RPI Form 507 and RPI Form 115]

Unlicensed assistants act only under the broker’s constant supervision and control. [Calif. Business and Professions Code §10131.01(a)]

Further, a broker who manages transient housing or apartment complexes may hire unlicensed assistants to perform administrative and non-discretionary duties.

When assisting a broker who originates consumer mortgages, an unlicensed assistant may perform administrative duties, such as information gathering and loan processing — activities which do not require a real estate license or mortgage loan originator (MLO) license endorsement. [Bus & P C §10137]

Thus, brokers may assign tasks to their unlicensed employees, such as:

  • handling documents;
  • performing tenant-related negotiations;
  • opening a property to third-party service providers; and
  • communicating with parties to a transaction. [See RPI Form 507]

However, all unlicensed personnel performing on the broker’s behalf need to do so with the broker’s permission and their activities continuously supervised. [Department of Real Estate, Winter 1993]

Likewise, a finder providing referral services in California for a fee may:

  • find and introduce parties;
  • solicit parties for referral to others [Tyrone v. Kelley (1973) 9 C3d 1]; and
  • be employed by principals or brokers.

Any other activity, such as negotiating or providing property information disclosures, needs to be conducted by a real estate licensee, as they are both soliciting and negotiating. Unless licensed, an individual who enters into negotiations such as supplying property or sales information cannot collect a fee for services rendered – even if they call it a finder’s fee. [Calif. Bus & P C §§10137, 10139]

Licensed brokers and sales agents owe fiduciary duties to the principals they represent. Fiduciary duties require licensees to perform on behalf of their client with the utmost care, honesty and diligence.

But an unlicensed finder has no fiduciary duty to clients. Rather, their function as an “agent” is limited to identifying, and referring potential real estate participants to brokers, agents, or principals in exchange for the promise of a fee. They are locators and nothing more.

Therefore, a finder lacks legal authority to participate in any aspect of property information dissemination or other transactional negotiations for a fee. [Bus & P C §§10130 et seq.]

Related Video: Hire recruits as finders today, licensees tomorrow

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Thus, an unlicensed finder may not:

  • take part in any negotiations [Bus & P C §10131(a)];
  • discuss the price;
  • discuss the property; or
  • discuss the terms or conditions of the transaction. [Spielberg v. Granz (1960) 185 CA2d 283]

Handling documents

A common activity for an unlicensed employee is to act as a transaction coordinator (TC). Here, the assistant handles a sales file opened by an agent, reviews transaction documents from the client and confirms their completeness.

Documents and forms reviewed by a TC include:

  • purchase and lease agreements, or other contracts;
  • disclosure forms and reports;
  • inspection reports; and
  • escrow and title reports and forms.

Here, the TC is tasked with confirming the completeness of the documents. Any form or document not complete or fully executed by all required participants is brought to the attention of the agent to remedy. Only on the agent’s instruction may the document be forwarded to the client or participant for signing or acknowledgement of receipt.

TCs and assistants may prepare documents as instructed by the agent. Once complete, all documents prepared by the assistant are then reviewed by the agent prior to delivery to any participant in the transaction. Here, the work of the TC and assistant is purely mechanical and not discretionary.

On instructions from the agent, an assistant may deliver or obtain documents relating to the transaction directly to and from the client. They may also obtain signatures on documents from any participant in the transaction. However, an unlicensed assistant may not discuss the content or significance of the document with any participant to the transaction — an activity requiring a DRE license. [DRE Bulletin, Winter 1993]

Property management

An employee hired to assist the broker in the rental and leasing of residential complexes, other than single family units, can be either:

  • licensed; or
  • unlicensed.

Unlicensed employees may perform tenant-related negotiations, such as:

  • showing rental units and facilities to prospective tenants;
  • providing prospective tenants with information about rent rates and rental and lease agreement provisions;
  • providing prospective tenants with rental application forms and answering questions regarding their completion;
  • accepting tenant screening fees;
  • accepting signed lease and rental agreements from tenants; and
  • accepting rents and security deposits. [Bus & P C §10131.01(a)(1)]

Allowing access to property

With the property owner’s permission, an unlicensed assistant may open the property to third-party service providers to perform inspections or repairs related to the transaction.

However, an unlicensed assistant may not provide information to the inspector or repairman regarding the property unless they provide it as transmitted from a data sheet the agent has prepared. The assistant is also required to disclose the source of the data to the person receiving the information. [DRE Bulletin, Winter 1993]

Open house and marketing

With the property owner’s consent, an assistant may perform nondiscretionary activities while helping an agent at an open house for the sale of a property, such as:

  • providing pre-printed fact sheets which the agent has previously prepared and approved;
  • arranging appointments; and
  • greeting the public.

Under the agent’s supervision, assistants may also prepare and design advertising, brochures and flyers in connection with the sales transaction. All need to be carefully reviewed and approved by the agent prior to use.

However, when assisting an agent at an open house, assistants may not:

  • show the property;
  • discuss pricing, terms and conditions of the sale; or
  • discuss the property’s amenities (e.g., neighborhood, schools, etc.).

Further, any solicitation beyond providing information approved by the agent, such as a flyer, may only be conducted by the agent.

Communicating with transaction participants

Unlicensed assistants may arrange and schedule appointments for agents to meet with principals or members of the public relating to an existing or potential real estate transaction. They may also arrange appointments for services to be provided by third parties, such as pest control companies, home inspectors or appraisers. However, when making appointments, the unlicensed assistant may not discuss any details related to the transaction or property conditions – their role is purely secretarial.

Further, assistants may communicate directly with principals regarding:

  • the timing of the delivery of reports or other information needed; and
  • any information relating to the performance and completion of third-party services.

When communicating with the public, assistants may also provide facts to others from writings which the agent has prepared — again advising on the source of the data.

Hiring unlicensed assistants provides time-saving and organizational benefits and is essential to effectively managing the business activities of brokers and agents. Understanding the limitations imposed by the DRE and state law allows agents to delegate activities to their assistants without crossing the line into licensed activities.

Delegated administrative activities save the agents and brokers many hours, shifting their valuable time from administrative activities to income-producing, lead-generating activities – the domains where they excel. In turn, the assistant’s activities increase an agent’s bottom line, justifying their employment.

Similarly, a brokerage needs to call on all methods for generating business. If not, their business model will produce insufficient numbers of new clientele to provide enough earnings to keep them from being driven out of the real estate brokerage profession.

The employment of unlicensed finders of buyers, tenants and owners who want to sell or lease will extend operations for a brokerage business to bring earnings to a level sufficient to sustain their sought-after standard of living.

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This article was originally posted January, 2017 of Brokerage Reminder: Unlicensed assistants – supervision required, and has been updated.