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.
Cases like this show why fiduciary duty matters so much in property management. A broker handling trust funds for rent collection has to keep client money completely separate from personal accounts — commingling and conversion are exactly what the DRE looks hardest at. Hopefully the restitution order gives the victims some real recovery. Thanks for laying out the penalty details so clearly.
Presenting two versions of the same lease agreement to the owner and the tenant is about as clear a breach of a property manager’s fiduciary duty as it gets. This case is a good reminder for apartment owners to verify rent amounts and deposit terms directly with tenants or through trust account statements rather than relying solely on a manager’s reports. Write-ups like this are genuinely useful — they turn abstract licensing rules into concrete red flags worth watching for.
A textbook example of why owners need to review the actual lease documents their property manager executes, not just the monthly owner statements. The two-version scheme here — $2,150 shown to the owner vs. $2,300 charged to the tenant, with the deposit rerouted to the broker personally — went undetected precisely because the paperwork looked routine from the owner’s side. Worth noting for anyone in property management: trust fund handling and directive compliance violations like this attach to the license holder personally, and a revocation stays on the DRE record permanently. Good case study for brokerage risk management training.
This case is a good reminder of why owners need to keep an eye on the money side of property management. A manager who collects rent from tenants and remits less to the landlord is not just sloppy bookkeeping — those funds sit in a trust account on behalf of the owner, and a shortfall has to come out of the manager’s own pocket, never be covered by quietly holding back rent.
It is telling that the DRE moved to revoke the license outright rather than suspend it. Owners can protect themselves by reviewing monthly owner statements, asking for periodic trust account reconciliations, and checking the manager’s license and disciplinary history through the DRE’s license lookup before signing a management agreement. Small apartment owners in particular tend to run on trust alone, which is exactly what made this scheme possible for so long.
This case is a useful reminder that documentation and verification matter whenever someone is handling another person’s property or funds. The same principle applies to inherited furniture, silver, or other valuables: before relying on an identification or value estimate, check the maker’s marks, construction, condition, and supporting evidence. Antique Scanner can help organize that initial photo-based research, while final decisions should still be independently verified.
The Oronas’ scheme is a stark reminder of how trust accounts can be exploited when no one verifies the details. The $150 monthly difference went unnoticed for months, which suggests that routine audits might be the only real deterrent. It’s troubling that the tenant was told the owner wanted payments made to Bruce directly, a clear red flag that should have been caught earlier.