This article explains the broker’s continuing responsibilities when delegating his supervisory duties to an office manager or transaction coordinator.
Supervision delegated, not agency
A salesperson employed by a broker is the agent of the broker, not the client. In turn, the broker is the agent of the client. As an agent representing the broker, a real estate salesperson is authorized to prepare listings, sales documents, disclosure sheets, etc., on behalf of the broker. | The broker may employ others to carry out his supervisory responsibility to review documents and maintain files. |
The DRE’s supervisory scheme requires the broker to reasonably supervise a salesperson’s activities. Reasonable supervision includes establishing policies, rules, procedures and statements to review and manage:
transactions requiring a real estate license;
documents having a material effect upon the rights or obligations of a party to the transaction;
the filing, storage and maintenance of documents;
the handling of trust funds;
the advertisement of services that require a license;
the salesperson’s knowledge of anti-discrimination laws; and
the reports of the activities of the salespersons. [Department of Real Estate Regulation §2725]
The broker may employ others to carry out his supervisory responsibility to review documents and maintain files, including:
another licensed real estate broker; or
a real estate salesperson employed by the broker. [DRE Reg. §2725]
The review of documents and file maintenance should not just be a mechanical function but a meaningful exercise to locate errors, such as in mathematical computations and contract and escrow provisions, and to ensure the completeness and timeliness of disclosures.
The broker, office manager or transaction coordinator reviewing documents must see to it that the salesperson cures any unacceptable documentation at the earliest possible moment.
Should time pass without corrective activity, and the parties to the transaction change their positions – i.e., close escrow – the broker is exposed to greater liability for any money damages caused by the salesperson’s negligence.
A written agreement concerning the employment of other licensees to carry out the broker’s responsibility of managing the activities of the broker’s salesperson on a sale, lease or loan should be entered into between the broker and the manager or file coordinator.
While the office manager or transaction coordinator is also assigned administrative duties, his primary responsibility is to review all correspondence and documents made or received by the agents on behalf of the broker. [See Form 510 §1.6]
No liability avoidance
Even though the broker uses an office manager or transaction coordinator, the broker has the overall supervisory responsibility to review the acts of the office manager or transaction coordinator and each salesperson. [DRE Reg. 2725]
Salespersons employed as agents of a broker remain under the direct supervision of the broker even if another licensee actually performs the supervision. | Real estate salespersons and broker associates employed as agents of a broker are under the direct supervision of the broker and remain so even if an office manager or transaction coordinator actually performs the supervision. The actions of a sales agent and broker associate are considered the acts of the employing broker. [Calif. Civil Code §2079.13(b)] |
Sales agent employment agreement
A real estate broker must have a written employment agreement with each of his salespersons.
A salesperson is defined as someone employed by a real estate broker. The licensee may be a salesperson or a broker. [Calif. Business and Professions Code §10132]
The agreement must provide for the supervision of the agent’s activities, the salesperson’s fulfillment of the duties owed by the broker to clients and the public, and the salesperson’s compensation.
The broker is mandated by law, subject to suspension or loss of his license, to perform constant and substantial supervision over his salespersons. [B & P C §10177(h)]
Supervision of nonlicensed individuals
A broker working as a property manager may employ nonlicensed individuals to perform administrative property management duties.
Under the supervision of a licensed real estate broker who has been retained to manage an apartment building or complex, a nonlicensed employee of the broker may:
show rentals;
provide and accept preprinted rental applications;
accept deposits, fees and rents;
give information about the rental schedule and provisions contained in the rental/lease agreement, under written instruction from the broker; and
receive signed lease/rental agreements from prospective tenants. [B & P C §10131.01]
The broker may employ others to shoulder his responsibility to supervise the activities of his nonlicensed employees, including:
another licensed real estate broker; or
a real estate salesperson employed by the broker, if the salesperson has at least two years’ full-time experience as a salesperson licensee during the preceding five-year period. [DRE Reg. §2724]
The broker’s delegation to the office manager of the responsibility to supervise the broker’s nonlicensed employees must be included in their written agreement. [See Form 510 §1.7]
Office manager liability
The office manager may also be an agent representing the broker. Like a salesperson or nonlicensed employee, the office manager who meets with the client or other parties is representing the broker in a transaction. While acting as an office manager or transaction coordinator, the licensee owes a duty to supervise only to the employing broker. The broker, in turn, is responsible to the client for any breach in the broker’s agency duty caused by the office manager’s or transaction coordinator’s failure to supervise and correct an agent’s errors or omissions. However, the office manager or transaction coordinator may have to indemnify the broker for failure to supervise as agreed. [Walters v. Marler (1978) 83 CA3d 1] | The broker is responsible to the client for any breach in the broker’s agency duty caused by the office manager’s failure to supervise and correct an agent’s errors. |
While most supervisory responsibility can be assigned to an office manager or transaction coordinator, the agency duty the broker owes to a client in a transaction cannot be delegated to others, and the broker’s agency obligations cannot be avoided. [Barry v. Raskov (1991) 232 CA3d 447]
Thus, the broker cannot use an office manager or transaction coordinator as a means of evading responsibility for the acts of his agents by delegating the performance of his supervisory duties or by delegating to the office manager his agency obligation owed to clients and the public.
