The Department of Real Estate released a list of six of the most common license violations. For the full article, please visit the California Department of Real Estate’s website at //www.dre.ca.gov.

1. Trust Fund Record Keeping

Trust fund handling problems usually stem from these two problems:

  • lack of knowledge of trust fund laws and basic accounting skills; and
  • lack of supervision over trust fund operations.

A broker should take care to make himself familiar with trust fund laws by reading the following code sections:

  • California Business and Professions Code §10145;
  • Regulations of the Real Estate Commissioner 2831;
  • Regulations of the Real Estate Commissioner 2831.1;
  • Regulations of the Real Estate Commissioner 2831.2; and
  • Regulations of the Real Estate Commissioner 2834.

It may be wise to hire a professional familiar with accounting and bookkeeping procedures to maintain the proper records required by law. As the responsible party, a broker must also keep a constant and vigilant eye on trust funds in his office if he is to comply with the law and fully perform his fiduciary duty.

2. Trust Fund Shortage

The importance of responsible trust fund handling cannot be stressed enough. While some violations are caused by the previously mentioned poor record-keeping, there is also the issue of deliberate conversion of trust funds for personal use. Not only does the DRE punish this kind of conversion with disciplinary action, the offending broker may be subject to criminal prosecution.

Code sections applicable to this issue can be found in:

  • California Business and Professions Code §10145;
  • Regulations of the Real Estate Commissioner 2832; and
  • Regulations of the Real Estate Commissioner 2832.1.

3. Failure to Supervise

Brokers must exercise reasonable supervision over the salespersons working under him. In addition, any broker-officers must exercise supervision over the corporation for which he is an officer.

Code sections applicable to this issue can be found in:

  • California Business and Professions Code §10177(h).

4. Unlicensed Activity

A broker must be vigilant in ensuring that any salesperson working under him holds a current license in good standing with the DRE. Failure to do so exposes the broker to possible civil litigation, as well as penalties and fines.

Code sections applicable to this issue can be found in:

  • California Business and Professions Code §10130; and
  • California Business and Professions Code §10137.

5. Misrepresentation

This violation concerns the following actions:

  • making an untruthful or incorrect statement of material fact; and
  • failing to disclose material facts.

A licensee should take care not to make statements to a principal that they know are not true, or suspect are not true. In addition, the DRE suggests: when in doubt, disclose it in writing.

Code sections applicable to this issue can be found in:

  • California Business and Professions Code §10176(a).

6. Criminal Convictions

A prospective licensee should disclose all past criminal convictions, if any. Failure to do so may subject a current licensee to disciplinary action or make it harder for a prospective licensee to obtain a license.

Code sections applicable to this issue can be found in:

  • California Business and Professions Code §10177(a);
  • California Business and Professions Code §480(c); and
  • California Business and Professions Code §10177(b).