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 who made substantial misrepresentations to his clients, mishandled a trust account, and more.
In June 2021, the California Department of Real Estate (DRE) revoked the license of Philip J. Suhr, a broker since 2012 operating out of Cerritos, California.
The DRE conducted an audit of Suhr’s records between January 1, 2017 and April 30, 2018. During the entirety of this targeted period, the DRE discovered Suhr failed to maintain a trust account record detailing all trust funds received, deposited and disbursed in the course of his real estate sale and leasing activities.
Related Video: Maintaining Trust Account Integrity
Click here for more information on this topic.
Apart from his mishandling of trust funds, Suhr also made false representations to his clients. Suhr represented to his commercial tenant clients they were able to conduct their cannabis retail business in a city which prohibited the sale of cannabis. Induced by this misrepresentation, the tenants entered into a lease agreement for the property and paid rent and fees. Suhr agreed to compensate the tenants for their money losses after the DRE’s audit was complete.
Related article:
Cannabis industry impacts residential, commercial real estate
Suhr also failed to provide the tenant with a fully signed and executed copy of their Commercial Lease Agreement. [See RPI Form 552]
Finally, Suhr operated under a fictitious business name without holding a license that bears the same name used to conduct property management services.
Honesty and fair dealing
Under California real estate law, an agent or broker who makes a substantial misrepresentation or false promise in an attempt to influence, persuade or induce the behavior of another may have their real estate license revoked. [Calif. Business and Professions Code §10176(a); Calif. Bus & PC §10176(b)]
The duties owed to various participants in a transaction by a sales agent or broker include:
- the fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with a client; and
- the general duty use of skill, care, honesty, fair dealing and good faith in dealings with all parties to a transaction in the disclosure of information which adversely affects the value and desirability of the property involved. [Calif. Civil Code §2079.16]
Suhr induced his client to rent commercial property while ignoring the legality of the client’s business in their jurisdiction – a lapse in the broker’s due diligence obligations owed to his client. As the retail sale of cannabis was illegal, it was a crucial fact which adversely affected the value of the property as the tenant was unable to use the property for their desired purpose.
Of course, Suhr’s poor practice was not limited to that one incident, though it alone is grounds for suspension or revocation. Failing to maintain accurate trust account records is a common reason for disciplinary action from the DRE and is also a form of dishonesty and bad faith. 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. [Calif. Bus & PC §10148(a)]
Recordkeeping and accounting requirements are imposed on brokers when they receive, transfer or disburse trust funds. [See RPI e-book Real Estate Principles Chapter 6]
To be eligible for obtaining a broker or agent license, the DRE requires an applicant to be honest and truthful. Thus, honesty, fair dealing and good faith are fundamental aspects of a licensee’s requirements – always.
When these aspects are taken lightly – or flat out ignored – the consequences include losing the ability to practice the trade.
Related article:
Want to learn more about this topic? Click the image below to download the RPI book cited in this article.
