The California Bureau of Real Estate (CalBRE) recently released a licensee alert firmly reminding sales agents they are prohibited from practicing or advertising as “independent” agents — a follow-up to a similar CalBRE advisory distributed in 2015.

At issue in the CalBRE’s alert is the ongoing practice of sales agents acting or advertising in a manner that implies the agent is:

  • an “independent” sales agent;
  • a real estate broker; or
  • managed by a real estate broker when they are not.

All practices are strictly prohibited under California law, which requires real estate sales agents who render real estate services on behalf of others be employed and supervised by a licensed broker at all times. Further, the employing broker needs to be properly identified in all marketing material used by an agent. [Calif. Business and Professions Code §10132]

Fundamental to real estate practice, only brokers are authorized to deal directly with members of the public to solicit, agree to and provide brokerage services for compensation. Sales agents are limited to acting solely on behalf of their employing broker. [Bus & P C §10131]

Since the CalBRE released its initial sternly worded advisory, it has continued to discover unlawful advertising and designation practices by sales agents.

Identifying and preventing unlawful advertisements

The most common violation reported by the CalBRE is the use of a fictitious business name — also called a DBA (“doing business as…”) — that suggests the agent is a real estate broker, or is acting entirely independently of one.

For example, an agent may improperly advertise their services by exclusively using the name “Smith Real Estate” without providing their license information or identifying an employing broker or brokerage company. Such a practice leads members of the public to believe the services are being offered by a licensed real estate broker or brokerage under the name provided.

Further, the CalBRE reports some sales agents blatantly brand themselves as “independent” without an employing broker.

These practices are strictly prohibited, as they wrongfully imply the sales agent may independently provide real estate services requiring either a broker license or supervision from a licensed broker.

To avoid these violations, any fictitious business name used by a sales agent in advertisements — subject to their broker’s approval — needs to display in equal prominence:

  • the name of the agent’s employing broker; or
  • the name and license number of the agent’s employing broker. [Bus P & C §10159.5(d)]

Editor’s note — The broker’s name is the name under which the broker conducts business and which is on file with the CalBRE. Thus, it may be the name of a company or business entity. 

Additionally, sales agents are required to provide their own name and license number on the advertisements. [Bus P & C §10159.5(e)]

Further, sales agents need to meet approval requirements prior to using a fictitious business name, which includes:

  • obtaining authorization from their employing broker;
  • filing a Fictitious Business Name Statement (FBNS) in the county in which the agent conducts business;
  • paying associated filing fees (and, later, any recurring costs to maintain the fictitious business name); and
  • obtaining the CalBRE’s approval to use the fictitious business name in practice. [CalBRE RE Form 247]

Alternatively, sales agents may use team names to brand themselves in advertisements without the more thorough filing requirements of fictitious business names. Team names:

  • are used by two or more sales agents employed by a licensed broker;
  • include the surname of at least one team member in conjunction with “team,” “associates” or “group”; and
  • are prohibited from including the terms “real estate broker,” “real estate brokerage,” “broker,” “brokerage” or any other term suggesting the sales agents offer real estate services independent of a broker. [Bus P & C §10159.7(a)(5)]

Advertisement rules for team names are similar to rules for fictitious business names, requiring sales agents who advertise using a team name to display in equal prominence:

  • the name of the agents’ employing broker; or
  • the name and license number of the agents’ employing broker. [Bus P & C §10159.6(b)]

Additionally, an advertisement using a team name is required to conspicuously include the name and license number of at least one team member. [Bus P & C §10159.6(a)]

Following all advertisement rules for fictitious business and team names ensures sales agents do not mislead the public by wrongfully implying the existence of an independent real estate entity operating without a licensed broker.

CalBRE penalties

The CalBRE warns it is “taking notice” of violations by sales agents. This language strongly suggests it has stepped up its efforts to scrutinize real estate advertisements for possible violations. It also indicates it is receptive to complaints submitted by the public and will take action where necessary.

Sales agents who unlawfully hold themselves out as “independent” or imply they are brokers are subject to CalBRE disciplinary action, which includes:

  • fines; and
  • revocation of their license.

The penalties are similarly severe for employing brokers. A broker who fails to properly supervise their employed sales agents to prevent violations in advertisements — their legal duty as a broker — faces the same penalties and disciplinary action from the CalBRE.