This is the second episode in our new video series covering office management principles. The first episode introduces the concept of agency, and distinguishes the licensed activities which may be conducted by a broker or an agent.

This episode analyzes a broker’s reasonable supervision over the activities performed by their agent, and the establishment of administrative office policies, procedures rules and systems.

On-the-job training and continuous policing

When a broker employs a sales agent to act on behalf of the broker, the broker is to exercise reasonable supervision over the activities performed by the agent. Brokers who do not actively supervise their agents risk having their licenses suspended or revoked by the Department of Real Estate (DRE). [Calif. Business and Professions Code §10177(h)]

Here, the employing broker’s responsibility to the public includes:

  • on-the-job training for the agent in the procedures and practice of real estate brokerage; and
  • continuous policing by the broker of the agent’s compliance with the duties owed to buyers and sellers.

The sales agent’s duties owed to the broker’s clients and others in a transaction are equivalent to the duties owed them by the employing broker. [Calif. Civil Code §2079.13(b)]

The duties owed to the various parties in a transaction by a broker, which may be carried out by a sales agent under the employing broker’s supervision, oversight and management, include:

  • the utmost care, integrity, honesty and loyalty in dealings with a client; and
  • the 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. [CC §2079.16]

The employing broker’s management

To ensure a broker’s agents are diligently complying with the duties owed to clientele and others, employing brokers need to establish office policies, procedures, rules and systems relating to:

  • soliciting and obtaining buyer and seller listings and negotiating real estate transactions of all types;
  • the documentation arising out of licensed activities which may affect the rights and obligations of any party, such as agreements, disclosures, reports and authorizations prepared or received by the agent;
  • the filing, maintenance and storage of all documents affecting the rights of the parties;
  • the handling and safekeeping of trust funds received by the agent for deposit, retention or transmission to others;
  • advertisements, such as flyers, brochures, press releases, multiple listing service (MLS) postings, etc.;
  • agents’ compliance with all federal and state laws relating to unlawful discrimination; and
  • the receipt of regular periodic reports from agents on their performance of activities within the course and scope of their employment. [California Department of Real Estate Regulations §2725]