This article is part of an ongoing series covering violations of real estate law. Here, a broker acting as a property manager surrendered his license in connection with a disciplinary action taken by the Department of Real Estate (DRE) for concealing property management books and records from a client they represented.

In May 2023, the California Department of Real Estate (DRE) accepted the voluntary surrender of the license of Saeid Karandish, a broker since 2014 operating out of Los Angeles, California.

Karandish become the designated officer (DO) for LGI Association, Inc. (LGIA), licensed as a real estate corporation between November 2014 until June 2021. LGIA conducted property management services.

In January 2021, a residential rental property owner represented by Karandish submitted a complaint to the DRE. The owner owned 30 apartment complexes near the Los Angeles area. They were managed by Karandish under LGIA from early 2015 to late 2016.

During the time in which LGIA managed the owner’s properties, the owner learned there were substantial discrepancies between rents owed by tenants under the existing lease and rental agreements and the rents actually collected — over $200,000 per month. The owner maintained that LGIA never had a proper bookkeeping system and regularly bounced checks. The owner requested complete records for his 30 properties, which LGIA failed to produce.

Further, the owner discovered Karandish and LGIA moved into one of the owner’s properties and used it as their corporate broker office without the owner’s permission and without paying rent for their use of the space for their business activities. Also unknown to the owner, Karandish allowed various family members to move in and live on the property without paying rent. In DRE records, from 2014 until 2021, Karandish used this property address as his mailing and main address.

The owner claims that while managing his properties, Karandish and his salesperson, Sharona Youabian, embezzled funds from the owner’s property accounts by making unauthorized, personal charges for things such as vacations, lavish meals, cosmetic surgery procedures and online university tuition.

Between 2016 and 2020, LGIA and Karandish misrepresented and concealed the existence of a complete accounting for the owner’s 30 apartment complexes. Karandish’s acts and omissions were fraudulent breaches of his fiduciary duties owed to the owner and just cause for the revocation of his license. [Calif. Business and Professions Code §10177(d), 10177(g)]

A property manager’s duty of care

The duty of care a property manager owes a landlord is the same duty of care and protection a broker in real estate sales owes their sellers and buyers.

As a property manager, the broker is an agent acting in capacity of a trustee on behalf of the landlord. Agents acting on behalf of the broker perform property management services as authorized by the broker.

A property manager’s real estate broker license may be revoked or suspended when the property manager demonstrates negligence or incompetence in performing their management tasks. This includes negligent supervision of their employees, be they licensed or unlicensed employees. [Bus & P C §§10177(g), 10177(h)]

A property manager has a duty to employ a higher standard of conduct regarding the operating of a property than a typical landlord might apply. This standard is called the prudent investor standard.

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A prudent investor is a person who has the knowledge and expertise to determine the wisest conduct for reasonably managing a property. The prudent investor standard is the minimum level of competency expected of a property manager by a landlord, whether or not the landlord is familiar with it.

Property managers are employed to manage property as their primary occupation, one in which they have developed an expertise. A landlord’s primary reason for hiring a property manager is to have the property manager maintain the condition of the property at the least cost necessary and keep the rental income stable and as high as the market permits at a reasonable vacancy rate.

To conduct property operations in compliance with the prudent investor standard, a property manager considers the following factors:

  • the type of the property and its niche in the market;
  • the socioeconomic demographics of the area surrounding the property’s location;
  • the competition currently existing in the local market;
  • the current physical condition of the property; and
  • the existing liens on the property.

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