Ch. 2 - The California State Department of Real Estate

What is the max liability of the Recovery Account in any ONE transaction?

$50,000.00 and the total series of judgements against any individual licensee is limited to $250k

What are some regulations that apply to branch offices?

-A branch office license is required for each additional business location if a broker maintains more than one place of business in the State. Must be available for inspection -Branch office license may be added or deleted by using RE 203 (Branch Office Application) -A new license is issued for each additional branch office.

What are some regulations that apply to main offices?

-A broker engaged in activities requiring a license must maintain an office or other definite place of business in California. -The broker's license and the licenses of any salespersons employed by the broker must be available for inspection by the Commissioner or a designated representative at the broker's principal place of business. -A broker who changes his/her main office address must forward a written notice to the DRE in Sacramento.

Regulations that apply to PRLS

-An individ. may obtain the 2yr license necessary to conduct PRLS activities. There is no examination required to obtain such. -PRLS activities do not include negotiation of lease or rental contracts, NOR do they allow the licensee to perform ANY other real estate activities. -A real estate broker can collect a prepaid fee without holding this type of license IF his PRLS activities are conducted at the broker's regular place of business.

Managers and Employees Exempt from Licensing Law

-Employees of banks or other lending institutions; -Lender who make federally-insured or federally-guaranteed loans; -Licensed personal property brokers; -Certain agricultural assoc.; -Certain collectors of payments for lenders or on notes for owners in connection with loans secured directly or collaterally by liens on real property; -Some clerical help (depending on the extent of the duties handled by the clerical personnel); -Resident managers of apt bldgs and complexes or their employees; -Short-term (vacation) rental agents; -Employees of certain lending institutions; -Employees of real estate brokers for specific, limited functions;

Original Salesperson License Requirements

-Must be 18+ -Must first qualify for and pass a written examination. -Provide a social security number or an individual tax payer ID number -Honesty

Educational Requirement for Salesperson Applicants

-Must complete the college-level Real Estate Principles course -Real Estate Practice Course -One additional required, college-level course, ex: Legal Aspects of Real Estate, Real Estate Financing, Real Estate Appraisal, Accounting, Business Law, Property Management. All licensing courses must be: -3 semester-Chapter (or four quarter-unit) courses in length -College-level courses; and -Offered by an institution of higher learning accredited by the Western Assoc. of Schools and Colleges or an equivalent course of study offered by a private vocational school approved by the DRE, like Real Estate Express

Elective Broker Courses

-Real Estate Principles -Business Law -Property Management -Real Estate Office Admin -Escrows -Advanced Legal Aspects of Real Estate -Advanced Real Estate Finance -Advanced Real Estate Appraisals -Computer Applications in Real Estate -Common Interest Development

Other unlicensed parties

-The property owners; -A person holding power of attorney FOR the owner; -An attorney at law acting in the capacity of an attorney ON BEHALF OF the owner; -A receiver or other court appointee. -A trustee who is selling the property under a deed of trust.

Original Real Estate Broker License

1. 18+ 2. Be honest and truthful 3. Have been full time as a real estate salesperson for at least 2 out of 5 years immediately preceding the application or have equivalent experiences 4. Have completed 8 courses in addition to the experience 5. Pass the qualifying exam

What happens once the plaintiff files?

1. DRE has 15 days to notify applicant of deficiencies 2. After app is substantially complete, DRE has 90 days to pay, compromise, or deny claim 3. If app is denied, the applicant has 6 months to refile 3. If payment is made, the license of the judgement debtor is automatically suspended until he/she has repaid the amount, plus interest.

Payment made from Recovery Fund

1. Judgement based on intentional fraud or conversion of trust funds. 2. Licensee must have been properly licensed at the time the cause of action arose and must have been performing actions requiring RE license. 3 The applicant must file within one year of the final judgement or criminal restitution order. 4. The applicant must show that he or she has made all reasonable efforts to satisfy the judgement from the assets of not only the judgement debtor but also all other persons who may have been liable in the transaction, such as the employing broker

Mandatory Broker Courses

1. Real Estate Practice 2. Legal Aspects of Real Estate 3. Real Estate Financing 4. Real Estate Appraisal 5. Accounting or Real Estate Economics

How long do California real estate licenses last?

4 years

What is the continuing education requirement for California?

45 hours every 4 years. It must be fulfilled by attending courses, seminars, or conferences approved by the Commissioner. They include: 3 hrs of Agency; 3hrs of Ethics and Professional Conduct; 3hrs of Trust Fund Accounting and Handling; 3hrs of Fair Housing; 3hrs of Risk Management; and at least 18hrs of courses under the umbrella of Consumer Protection such as Fair Practices in Real Estate, Capital Formation, Taxation, etc Additionally, the update survey class includes 8 hrs course.

What is a RE 212?

A Corporate Background Statement, which must be submitted by the designated officer of the original corporation license applicant for him/herself, as well as for each director, the chief executive officer, the president, first-level vice, secretary, chief financial officer, subordinate officers with responsibility for forming policy of the corporation, and for each natural person owning or controlling more than 10% of the corporation's shares.

Corporate Real Estate License

A corporation may be licensed as a real estate broker, provided at least one officer of the corporation is a duly qualified real estate broker willing to act as the corporation's responsible designated broker-officer. The must submit a Certificate of Status issued by the Secretary of State within the 30 days prior to the date the application is filed and a state of officers as filed with the SOS

When is a Real Estate License required?

A person must be licensed if he or she, for compensation (or the promise of compensation) and for another person, undertakes or negotiates to undertake any of the following: -Sells or offers to sell, buys or offers to buy, and solicits prospective sellers or purchasers of real estate. -Solicits or obtains listings of real estate. -Negotiates the purchase, sale, or exchange of real property or a business opportunity. -Assists or offers to assist in filing an application for the purchase or lease of property owned by the state or federal gov't. -Negotiates loans, collects payments, or performs services for borrowers or lenders or note owners. -Sells or offers to sell, buys or offers to buy, or exchanges or offers to exchange a real property sales contract, or a promissory note secured directly or collaterally by a lien on real property or on a business opportunity, and performs services for the holders thereof. -Leases or rents; offers to lease or rent; places for rent; solicits listings of places for rent; solicits for prospective tenants; negotiates the sale, purchase or exchanges of leases on real property; or collects rents from real property. *Some managers and employees are exempt

Non-working Status

A salesperson may be issued and hold a license, but NOT perform acts requiring a license, without being in the employ of a broker. License is given "non-working status" until the salesperson becomes employed by a broker and the broker notifies the DRE of such.

What happens after 2 years of an expired license?

All license rights lapse and the individual will be required to re-qualify through the examination process before being licensed in real estate.

Section 10177 of the Business and Profession Code

Applies to situations in which the licensee involved was not necessarily acting in the capacity of an agent.

The Commissioner's Regulations

Are rules that are part of the California Administrative Code. These regulations have been established and are enforced by the Commissioner.

Mineral, Oil, and Gas License

As of Jan. 1, 94, the DRE no longer issues original mineral, oil, and gas (MOG) broker licenses or permits.

How is the California Real Estate Commissioner appointed?

By the governor and serves as the chief executive of the DRE.

What and where was the nation's first real estate license law enacted?

California in 1917

California Real Estate Law: Misrepresentation

Concerns the conduct of licensees rather than the settling of disputes about damages or injuries between licensees and their clients.

Sections 10176 & 10177?

Constitutes the foundation for most license suspensions or revocations.

Department Publications

DRE publishes both a Reference Book and a Real Estate Law book. The law book contains the Real Estate Law, Subdivided Lands Law, Commissioner's Regulations, and pertinent excerpts from the California codes. Additionally, DRE publishes the quarterly Real Estate Bulletin, a publication intended for the education of licensees by keeping them informed of the latest admin provisions and the current practices in RE

What is an FBNS and when does it expire?

FBNS means Fictitious Business Name Statement and it expires at the end of 5yrs from Dec. 31 of the year in which it was filed in the office of the county clerk.

T/F: There are fees for the following: Addy change; salesperson employment transfer; personal or corporate name change; adding or deleting fictitious business name; branch office; and duplicate license cert

False, there are no fees

T/F: Both broker and salespersons are NOT required to maintain their mailing addy of record on file at all time while licensed?

False, they must maintain it on filed at all times and during the two-year late renewal grace period.

T/F: The broker has 10 business days to notify the DRE of ANY change of addy for the broker's prince place of business or any branch office?

False, they must notify the DRE no later than the next business day following the change.

T/F: If a person has been licensed as a real estate broker in another state, then the license law in Cali requires ONE responsible party to submit verification?

False. TWO responsible parties must submit it on the RE 228.

The Regulations of the Real Estate Commissioner

Have the force and effect of law and, once issued, becomes a part of the California Administrative Code. The Commissioner always has the authority to adopt regulations to aid in the administration and enforcement of the Real Estate Law and Subdivided Lands Law.

The Subdivided Lands Act

Is administered by the Commission.

What is an RE 226?

It is a form for an applicant who has been licensed as a real estate salesperson in another state and is used to verify previous salesperson experience.

What is an RE 227?

It is the Equivalent Experience Verification form that claims equivalent experience, in lieu of the two years of salesperson experience required for the broker exam. It is based on any combination of salesperson experience, equivalent real estate related experience, and education.

Loss of License Status

May occur: -When a person holding a license allows two years to elapse from the expiration date without applying for (late) renewal, submitting evidence of completion of the continuing education requirements, and paying the required fee. -If a license is revoked.

Misrepresentation

Means that the licensee must disclose to his principal ALL material facts that the principal should know. It is a false statement of fact. If the licensee does not make such disclosures OR if he/she outright lies, there is a cause for disciplinary actions to be taken against him/her.

Commissioner Requirements

Must have served for a min. of 5 years as a real estate broker actively engaged in the real estate business in Cali or must possess 5 years related experience associated with real estate activity in Cali during the last 10 years,

Effect of Revocation or Suspension

Once a real estate broker license is revoked or suspended, the licenses of every real estate salesperson in the broker's employ are automatically canceled. Such salespersons transfer their licenses to a new employing broker.

Specific Commissioner responsibilities

Qualification of applicants and issuance of real estate licenses; The investigation of complaints and where appropriate, pursuit of formal action against licensees; The investigation of non-licensees alleged to be performing acts for which a license is required; The regulation of the sale or lease of subdivision interests; and Through real estate broker and other license requirements, the regulation of dealing in mineral, oil and gas property and Prepaid Rental Listing Services.

False Promise

Section 10176(b). A false promise and a misrepresentation are not the same thing. A false promise is a false statement about what the promisor is going to do because that promise was impossible to perform and the person making the promise knew.

Continued Misrepresentation

Section 10176(c) Gives the Commissioner the right to discipline a licensee for "a continued and flagrant course of misrepresentation or making of false promises through real estate agents or salespersons"

What will happen to a broker who is found compensating an unlicensed person for real estate activities?

That broker will be guilty of a misdemeanor and may also be fined by the courts, under Sections 10138, 10139, 10139.5 of the Code.

The Commissioner's Authority

The Commissioner has the authority to investigate the actions of any person engaged in the business or acting in the capacity of a license in California, and has the power to suspend or revoke the real estate license. The Commissioner may require evidence of honesty and truthfulness from ALL of the following parties: the officers, directors, and persons who own or control more than 10% of the shares of the applicant for a corporate real estate brokerage license.

Restricted License

The Commissioner has the authority to restrict license by any of the following factors: -Term (one, three, etc months); -Employment by a particular broker (for a salesperson); -Limitation to a certain area or type of activity; -Requiring detailed reports of each transaction; -Requiring the filing of a surety bond; or -Other conditions or combinations of conditions.

What happens when the administrative law judge issues a proposed decision based upon findings?

The Commissioner may reject or accept the proposed decision, or reduce the proposed penalty and make an official decision. The respondent may petition for reconsideration, and has the right of appeal through the courts.

Partnerships

The DRE does not issues partnership licenses. A partnership may legally perform licensed acts, as long as EVERY partner through whom the partnership so acts is a licensed real estate broker.

What is the RE 400A or RE216B?

The application for real estate salesperson license

Formal Hearings

The formal hearing is conducted in accordance with procedures set forth in the Administrative Procedure Act. The accusation or statement of issues is served upon the licensee, who is informed of the rights of an accused.

What is an example of a license bearing a fictitious name being denied?

The name is misleading or would constitute false advertising.

What happens if the license is revoked?

The person affected may not apply for reinstatement of the license until one year has passed.

What is a "responsible party"?

They are the persons who have been in a position to verify the applicant's employment status. This might include other real estate brokers, title officers, or loan officers.

How can a licensee change her/his addy?

They must file a change of addy notification with the RE 204 (Broker) and RE 214 (Salesperson)

License Transfer and the steps

To make a transfer of the salesperson's employment, the salesperson and both his formed AND new employing brokers must take the following: -The former employing broker must immediately notify DRE Licensing in Sacramento in writing. -The former employer gives the transferring salesperson his/her license certificate and signs a Salesperson Change App. -Within 5 days, the salesperson and the new employing broker must complete RE 214 and send it to the Dept. of Real Estate.

T/F: Any non-resident salespersons that engage in business in California must be licensed with a California broker?

True

T/F: The judgement debtor who has filed a timely response may file a writ of mandamus to challenge the suspension of his or her license?

True

T/F: A Licensee may legally renew the license within two years after expiration?

True, by submitting a proper application, evidence of completion of the current continuing education requirements, and the appropriate late renewal fee.

T/F: Can a corporation operate under a "dba" or fictitious business name in California?

True, it is permitted. The corporation has to submit a copy of a Fictitious Business Name Statement as filed with the county clerk's office in the county where the corporation's principal place of business is located.

T/F: An applicant can apply for their license and exam at the same time?

True; it's the newest amendments to Business and Professions Code Section 10150 (Broker Exam and License App) and 10151 (Salesperson Exam and License App)

License Termination

When a salesperson is terminated by an employing broker for a violation of any of the provisions of the Real Estate Law, the employing broker must immediately file a certified written statement of the facts with the DRE.

The Recovery Fund

is an account established as a last resort for a consumer who has obtained a final civil judgement or criminal restitution order against a real estate licensee based on fraud or certain other grounds. The consumer, who has suffered financial loss due to the wrongful act of a licensee in a real estate transaction, can receive payment of damage and arbitration from its fund, if the judgement hasn't been satisfied.

Real Estate General Fund

is an account that holds ALL the money collected from license and exam fees, and is used for the operating expenses of the DRE. However, 20% of the Gen. Fund is specifically set aside to be divided into the following: 1. 8% for the Real Estate Education and Research Fund 2. 12% for the Recovery Fund

Prepaid Rental Listing Service License (PRLS)

is in the business of supplying prospective tenants with listings of residential real property for rent or lease while collecting a fee at the same time or in advance of the time the listings are provided.

Original Salesperson License

is required for an individual who is to be employed as a salesperson under the control and supervision of a license broker. The license permits activity only while in the employ of a broke. Salespersons' license must be available for inspection in the broker's main office. The salesperson can be compensated for work as an agent only by the salesperson's employing broker.

Section 10176 of the Business and Professions Code

is the legal guideline for the actions of a real estate licensee performing or attempting to perform any of the licensed acts.

Police Power

is the right of the state to enact and enforce laws fro the order, safety, health, morals, and general welfare of the public.

What is the Commissioner's Mission?

is to enforce the Real Estate Law and the Subdivided Lands Law in a manner that offers the maximum protection for persons dealing with real estate licensees and for purchasers of subdivided real property.

What is the Commissioner's responsibility?

is to enforce these laws in a manner in which maximum protection for real estate consumers is achieved.

What is the main purpose if DRE>

is to protect the public. The DRE achieves this purpose through the enactment and enforcement of laws relating to real estate and by establishing requirements for the real estate salespersons' and brokers' licenses.

The California Real Estate Law

regulates licensing and subdivision in California, can be found in the "Business and Professions Code"