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 acting as a property manager who charged the tenant a greater amount than was paid to the landlord.
The California Department of Real Estate (DRE) decided by order hearing to revoke the license of Bruce Orona, a broker since 1985 operating out of San Diego, California. The decision became effective June 2022. Scott Orona, Bruce Orona’s brother and a broker since 2000, also surrendered his license in connection with the disciplinary action taken against him and his brother.
The Oronas provided property management services for an apartment owner in San Diego.
The Oronas entered into a new lease agreement with a tenant, though submitted an agreement containing drastically different terms to the owner.
The Residential Lease Agreement the owner received from the Oronas set the monthly rent amount at $2,150. The rent was to be made payable to the owner. The security deposit was set at $2,150. [See RPI Form 550]
However, the Residential Lease Agreement the tenant received and signed set the monthly rent at $2,300 with a $2,300 security deposit.
In an email to the tenant, the Oronas instructed the tenant to pay the security deposit to Bruce Orona instead of the owner. Further, the Oronas misrepresented to the tenant that they spoke to the owner, and the owner wanted all rental checks to be made out to Bruce Orona until further notice. Thus, the Oronas pocketed the difference from what was charged to the tenant, and what was later disbursed to the owner.
From June 2018 through October 2018, Bruce Orona received $2,300 for each month’s rent. The owner received monthly payments in the amount of $2,150 from July 2018 to September 2018. The Oronas failed to give the owner any of the tenant’s October 2018 rent.
In December 2019, the DRE completed an audit of Bruce Orona’s limited records. During a conference with the auditor, Bruce Orona:
- denied managing the owner’s properties;
- denied having a trust fund account for the owner;
- denied collecting funds for the owner; and
- failed to provide the requested documents for examination.
The DRE found Bruce and Scott Orona violated real estate law, since they:
- made substantial misrepresentations [Business & Professions Code §10176(a)];
- made false promises in attempt to influence, persuade or induce [Bus & P C §10176(b)];
- took secret, undisclosed compensation and failed to reveal the full amount they were compensated to the transaction participant contracting with them [Bus & P C §10176(g)];
- engaged in fraud or dishonest dealing [Bus & P C §§10176(i); 10177(j)];
- willfully disregarded real estate law [Bus & P C §10177(d)];
- demonstrated negligence as a licensee [Bus & P C §10177(g)]; and
- failed to retain records and documents in connection with transactions for which a broker’s license is required. [Bus & P C §10148]
Related article:
Trust funds are held in trust for the owner
Any fees or compensation a licensee earns in connection with licensed activities need to be disclosed.
Compensation is typically disclosed on:
- a listing agreement [See RPI Form 102 §3];
- escrow instructions [See RPI Form 401 §1];
- a property management agreement [See RPI Form 590 §4];
- a mortgage loan disclosure statement [See RPI Form 204]; or
- a loan servicing agreement. [See RPI Form 237 §13]
Compensation comes in many forms, including real estate fees, escrow fees, property management fees, mortgage origination and mortgage servicing fees.
DRE auditors often find situations where a licensee has charged clients an excessive amount for costs incurred or where a licensee has benefitted from trust funds, according to the DRE’s Summer 2019 Real Estate Bulletin.
Brokers, while acting on behalf of others in their capacity as agents in real estate transactions, receive funds which are not theirs and are held in trust for the owner of the funds. These trust funds include:
- deposits on offers to purchase and applications to rent or borrow;
- fees advanced for any brokerage services to be provided in the future, called advance fees;
- funds advanced for future costs;
- funds from sellers, borrowers and landlords as reserves to cover future costs;
- rental income and tenant security deposits;
- funding for a mortgage or the purchase of real estate; and
- proceeds from a sale or financing.
Funds received in the form of cash or checks made payable to the broker while acting as an agent need to be:
- deposited into the broker’s trust account;
- held undeposited as instructed; or
- endorsed and handed to others entitled to the funds.
Prior to the end of the third business day following the day the broker receives negotiable trust funds, the broker needs to deposit the funds:
- with the person or escrow depository entitled to the funds (as payee or by endorsement); or
- in a trust account maintained by the broker at a bank or other state-recognized depository.
Trust funds are held by brokers for safekeeping and may not be treated casually. Recordkeeping and accounting requirements are imposed on brokers when they receive, transfer or disburse trust funds. Trust funds received in the form of checks or cash may only be used for expenditures authorized and incurred for the benefit of the owner of the funds. [See RPI e-book Real Estate Principles, Chapter 6]
A broker’s use of trust funds for any reason other than those expressly authorized by the owner of the funds constitutes a conversion of the client’s funds to the broker’s own use.
Related Video: Managing Trust Funds
Click here for more information on trust fund handling.
All trust fund records are required to be retained by the broker for three years after the closing or cancellation of the transaction involving the trust funds. The DRE may audit trust fund accounts. [Bus & P C §10148(a)]
Further, all records of an agent’s activities on behalf of a client are retained by the agent’s broker for three years. [Bus & P C §10148]
The DRE requires brokers to retain real estate documents for three years when the documents were:
- used in a transaction requiring a real estate broker’s license; and
- executed or obtained by the broker or broker’s agent.
Upon notice by the DRE, these records need to be made available for examination, inspection and copying by a DRE representative. [See RPI e-book Real Estate Practice, Chapter 21]
Related article:
DRE Hot Seat: Making substantial misrepresentations constitutes dishonesty
Want to learn more about trust funds and recordkeeping? Click an image below to download the RPI books cited in this article.
This case highlights crucial ethics in real estate! I’m curious—what measures can landlords take to protect themselves from fraudulent brokers? Also, how do these situations impact tenant rights? Thank you for shedding light on such an important topic!
This is a really unfortunate situation that gives the real estate industry a bad name. The thing that bothers me most about cases like this is that it undermines trust in property managers who actually do their jobs properly. When someone acts as a fiduciary for both a landlord and a tenant, there’s an enormous amount of trust involved from both parties, and to abuse that position for personal gain is just inexcusable.
What makes this particularly egregious is that this wasn’t some momentary lapse in judgment – it appears to have been an ongoing scheme where he was systematically overcharging the tenant while underreporting to the landlord. That’s not just unethical, it’s outright fraud.
I also find it interesting (and suspicious) that his brother Scott surrendered his license “in connection with” the disciplinary action. Either he was somehow complicit in the scheme, or at minimum he was aware of what was happening and chose not to report it. Either way, it speaks to a broader culture within that operation that is deeply troubling.
The DRE’s decision to revoke the license sends a strong message, and I think it’s appropriate. License revocation isn’t just about punishment – it’s about protecting the public from someone who has demonstrated they can’t be trusted to handle other people’s money and property responsibly.
Hopefully this case serves as a reminder to both property owners and tenants to verify they’re working with honest professionals and to carefully review all financial statements and transactions.
This is a frustrating case to read about, but unfortunately not surprising in the property management world. What makes this particularly egregious is that the broker was actually managing the property for the landlord client – there should have been a relationship of trust there. The fact that he was overcharging the tenant while shortchanging his own client shows a complete betrayal of fiduciary duty on both ends.
What strikes me most is the timeline here – Bruce Orona was licensed since 1985, so we’re talking about nearly four decades of holding a license. It makes you wonder how long this had been going on and whether there were any red flags that should have been caught earlier. The fact that his brother Scott was also involved and surrendered his license suggests this might have been a systemic operation.
Property management can sometimes fly under the radar compared to the flashier side of real estate, but cases like this highlight how much trust is involved. Landlords are handing over their properties and often their tenants to these managers, expecting them to act in everyone’s best interest. When someone abuses that trust, it gives the whole industry a black eye.
I think the DRE’s decision to revoke these licenses was appropriate. Hopefully this serves as a reminder to property owners to stay engaged with their investments and regularly review the financial side of things, rather than just handing over the keys and forgetting about it.
Taking a cut of the rent like that is such a rookie move for a broker of thirty years. Imagine torching your career over a couple hundred bucks a month.
Thanks for sharing this post about the DRE case. It’s a good reminder of why ethical practices matter in real estate. I found the part about the broker overcharging the tenant especially concerning.
Thanks for sharing this DRE case. It’s a good reminder of why ethical property management matters. I found it interesting how the broker was caught overcharging the tenant, showing the importance of transparency in real estate.
This DRE Hot Seat piece highlights why ethical property management is non-negotiable. Great insight!
Acting as a property manager requires integrity. Revoking the license protects clients and the public.
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