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 failed to adequately supervise and review transaction files, and unlawfully employed and compensated an unlicensed employee for performing acts requiring a real estate license.

In October 2021, the California Department of Real Estate (DRE) decided by default decision to revoke the license of Jason Aaron Whitmore, a broker since 2013 operating out of Upland, California.

From August 14, 2017 through May 22, 2018, Whitmore was the designated officer (DO) for Flat Fee Group, Inc. (FFGI), a corporate real estate brokerage. From May 23, 2018, up until the DRE issued their disciplinary action against FFGI, the DO for FFGI was Michelle Jenny Lin.

Whitmore represented a seller in a residential real estate transaction, a DRE licensed salesperson, Nicholas Kent Dillon II. Escrow opened around May 15, 2018. The buyer’s agent requested a Structural Pest Control (SPC) Report from Dillon, as the seller, and FFGI’s transaction coordinator (TC) — the only person at FFGI who had communications with the buyer’s agent.

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Dillon sent a SPC report to the buyer’s agent dated March 15, 2018. However, the report was fraudulent. It belonged to an entirely different property Dillon had professionally inspected and sold, evidenced by the general description of the properties, the findings and recommendations, and the name of the inspector being identical on both reports.

The fraudulent pest inspection report indicated there were no active infestations detected on the property. Escrow closed on June 19, 2018. A few months later, in November 2018, the buyer discovered evidence of termites on the property. The buyer had two independent inspections conducted, both of which confirmed an active infestation. The property required fumigation and repairs to the termite damage.

As part of their investigation into Dillon’s fraudulent termite report, the DRE contacted Whitmore for information on the sale, as the seller’s agent. Although Whitmore purportedly executed the listing agreement with Dillon for the sale of his property, Whitmore was unaware of the transaction and never had any contact with Dillon.

As the DO of FFGI, Whitmore never reviewed any transaction documents associated with the sale of Dillon’s property, and never visited the office.

Further, employees of FFGI electronically signed Whitmore’s name on transaction documents without his knowledge, a discovery which caused Whitmore to resign as designated officer of FFGI in 2018.

The forged transaction documents on Dillon’s sale caused the DRE to scrutinize other transactions FFGI conducted which were also electronically signed by employees without Whitmore’s authority.

One of these unlicensed employees, Megan Whitmore, signed a purchase agreement on April 28, 2018 on behalf of Jason Whitmore who was purportedly the agent for a seller of a residential property in Yucaipa. However, the buyer’s agent for the Yucaipa property had no direct contact with Jason Whitmore and instead conducted all activities pertaining to the transaction exclusively with Megan Whitmore — an unlicensed employee.

When Michelle Jenny Lin became DO of FFGI, a similar abuse occurred in a different transaction. Although Lin was purportedly the agent of the seller of a residential property in Los Angeles, the buyer’s agent’s only contact for all matters relating to the transaction was Megan Whitmore.

This pattern repeated itself again in March 2019 for a property in Bakersfield. Although Lin was classified as the seller’s agent, the buyer’s agent only conducted negotiations with Megan.

The DRE steps in

The DRE, after its investigation into FFGI, had cause to revoke the real estate license of the salesperson Nicholas Kent Dillon II, the corporate brokerage FFGI, and designated officers Jason Whitmore and Michelle Jenny Lin. [Calif. Business and Professions Code §10177(d); Bus & P C 10177(g)]

The acts and omissions of Dillon relating to the fraudulent SPC report constitutes fraud or dishonest dealing and a substantial misrepresentation and are cause for the suspension or revocation of his salesperson license. [Bus & P C §10177(j); Bus & P C §10176(a)]

FFGI’s conduct, including their lack of supervisory review, forging of electronic signatures, and unlawful employment and compensation of an employee for performing acts that require a real estate license, constitutes fraud and dishonest dealing and a substantial misrepresentation and is cause for the revocation of their corporate broker license. [Bus & P C §10176(i); Bus & P C §10176(a); Bus & P C §10137]

Jason Aaron Whitmore’s failure to supervise and establish policies, rules, procedures and systems to review, oversee, inspect and manage transactions requiring a real estate license constitutes cause for the revocation of his real estate broker license. [Bus & P C §10177(h); Bus & P C §10159.2; DRE Regulations §2725]

Likewise, Michelle Jenny Lin’s failure to supervise over the activities of FFGI’s employees and establish policies, rules, procedures and systems to review, oversee, inspect and manage transactions requiring a real estate license constitutes cause for the revocation of her real estate broker license. [Bus & P C §10177(h); Bus & P C §10159.2; DRE Regs. §2725]

Jason Whitmore never submitted a Notice of Defense against his accusations, so the DRE ordered a default to be entered on the record. The standard of proof contained in the accusation against Whitmore was clear and provided sufficient evidence to trigger the revocation of his license individually and as a former designated officer of FFGI in November 2021.

Whitmore’s violations of real estate law boil down to egregious noncompliance with mandated oversight requirements.

Related article:

DRE Compliance Goals – For Brokers

An employing broker ensures their agents diligently comply with the duties owed to clients and others by establishing office policies, procedures, rules and systems relating to:

  • transactions requiring a real estate license;
  • documents which might affect the rights and obligations of a party to the transaction, such as agreements, disclosures, reports and authorizations;
  • the filing, storage and maintenance of documents affecting the rights of the parties;
  • the handling of trust funds;
  • advertising of any service for which a license is required;
  • compliance with federal and state laws regarding unlawful discrimination; and
  • the regular and consistent reporting of the licensed activities of salespersons. [DRE Regs. §2725; See RPI e-book Real Estate Practice Chapter 1]

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Further, unlicensed assistants may perform limited administrative duties, such as handling documents and communicating with parties to a transaction, but they may not:

  • enter into listing agreements;
  • take part in any negotiations which lead to the creation of a real estate transaction;
  • discuss a property’s price or terms;
  • discuss the property’s conditions; or
  • discuss the conditions of a transaction. [Bus & P C §10137]

An unlicensed assistant who engages in brokerage activities without a license is subject to a:

  • penalty of up to $20,000; and
  • six-month jail term. [Bus & P C §10139]

Brokers may hire assistants to help them with limited functions relating to their day-to-day office activities, allowing brokers to oversee more agents and handle more transactions. However, brokers always need to exercise proper supervision to ensure their unlicensed assistants do not cross over into activities requiring a license, as illustrated in this case.

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Form-of-the-Week: Employment Agreements — For Transaction Coordinator and Office Manager — Forms 507 and 510

Want to learn more about broker responsibilities and licensed activities? Click the image below to download the RPI book cited in this article.