Broker Management and Supervision of Salespersons, Segment 1: The Supervisory Duties and Responsibilities of a Broker

The model agreement covers such topics as:

* Identification of the broker and form of business organization. * Identification of license and license status (salesperson or broker) * Independent contractor relationship * Licensed Activity, which sets forth the types of activity permitted and requires compliance with real estate and other applicable laws. * Proprietary information and files * Superversion * Trust Funds * Compensation and issues relating to compensation * Termination of the relationship * Dispute resolution * Automobile usage * Personal assistants * Office policy manual * Indemnity and hold harmless and notice of claims. * Definitions * Outline of attorney fees.

Ensuring That All Salespersons are Property Licensed is the responsibility of the managing broker to ensure that all persons performing activities that require a real estate license for compensation hold a valid real estate license. In order to ensure that all licensees hold a valid license, a system should be in place that addresses the following:

* Prior to hiring a new salesperson, the broker should check the DRE website to verify the license status of the applicant. * Broker and salesperson licenses expire four years after issuance, so the broker should monitor license expiration dates and verify that each license has been timely renewed. * During the four-year license period, any number of events can occur that may make an otherwise active license, inactive. License may be suspended for unpaid child support, recovery fund payouts, or due to disciplinary action. The broker should periodically check the license status of each salespersons or affiliated broker to ensure that the license is still valid.

The Broker is responsible for:

* Salespersons * Any licensee tied to the broker's license * Unlicensed assistants

Transactions requiring a Real Estate License. Real Estate law requires any individual that engages in licensed activity within California must do so only if licensed by the California Department of Real Estate. Licensed activity can be generally defined as performing certain acts on behalf of another or others, for or in expectation of compensation. Those acts include, but are not limited to the following:

* Selling or offering to sell real property or a business opportunity * Buying or offering to buy real property or a business opportunity * Soliciting prospective sellers or purchasers * Soliciting or obtaining listings * Negotiating the purchase, sale or exchange of real property or a business opportunity. * Leasing or renting, or offering to lease or rent, real property or a business opportunity. * Placing real property of a business opportunity for rent * Soliciting rental listings * Soliciting for prospective tenants, or negotiates the sale, purchase or exchanges of leases on real property, or on a business opportunity. * Collecting rents from real property or from business opportunities * Soliciting borrowers or lenders for loans secured directly or collaterally by liens on real property or on a business opportunity *Negotiating loans or collecting payments or performing services for borrowers, lenders or note owners in connection with loans secured directly or collaterally by liens on real property or on a business opportunity If an individual is engage in any of the activities listed, that individual must be licensed.

A managing broker also needs to ensure that associated licensees are following all other laws regarding advertising, including:

* State license and disclosure requirements. * Special requirements for mobile home advertisements * Federal laws including the Truth in Lending Act and the Do-Not-Call Registry * Advertising in compliance with fair housing laws.

Activities Requiring Supervision, Commissioner's Regulation 2725 requires that a broker exercise reasonable supervision over the activities of his or her licensees. Reasonable supervision includes the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage the following:

* Transactions requiring a real estate license. * Documents that may have a material effect upon the rights or obligations of a party to the transaction * Filing, storage and maintenance of all such documents. * The handling of trust funds * Advertising of any service for which a license is required * Familiarizing salespersons with the requirements of federal and state laws relating to the prohibition of discrimination * Regular and consistent reports of licensed activities of salespersons.

The following would be considered licensed real estate activity:

*Negotiating the exchange of a business opportunity *Obtaining real estate property listing contracts.

What is "Reasonable Supervision?" The California Department of Real Estate (DRE) looks for the following to gauge the adequacy of a broker's supervisory activity:

1. Whether the broker looks into activities of salespeople and broker-associates. 2. Whether agents regularly report to the broker or participate in scheduled update meetings. 3. Whether the supervisor is "a visible, active presence" 4. Whether signed and dated broker-salesperson agreements include duties and supervision. 5. Whether there is a training program for salespersons 6. How files are secured, given the private information contained in files 7. Whether the trust account(s) are handled properly. 8. Whether there is a separation of duties in the area trust fund handling and accounting.

A broker must retain all documentation relating to real estate activity for ? from the date of the termination of the transaction.

3 years.

A notification must be sent to the RE within ? whenever a real estate salesperson enters the employment of a broker.

5 days.

Supervising a Branded Team

A fictitious business name is a professional identity or brand name under which activity requiring a real estate license is conducted and the use of which is subject to approval by the DRE. The use of a team name and work structure does not nullify the broker's responsibility over the salespeople; the responsible broker is still responsible for supervising the team. The responsible broker must ensure that the team operates within the guidelines under the Business and Professions Code, which include the requirement that the responsible broker's identity appear in all advertising and solicitation materials.

General Advertising Rules: The Commissioner's Regulations defines advertising as "any written or printed communication, or oral communication made in accordance with a text or outline that has been reduced to written form, which is published for the purpose of inducing persons to purchase or use a product or service"

Advertising includes but is not limited to: Flyers, Mailers, TV and Radio, Newspapers and Magazines, Yellow Pages and the internet.

Record Keeping for Managers and Supervisors

Failure to maintain the necessary records means that the broker will be charged for the costs of the DRE audit, on top of any disciplinary action taken, Knowingly destroying, mutilating, concealing, altering or falsifying necessary records is grounds for license suspension or outright revocation.

License Disclosure Requirements for Advertising: Many of the solicitation materials exceptions to license number disclosure expired on January 1, 2018 per Assembly Bill 1650.

License are now required to include their DRE numbers on business cards, stationery; advertising flyers; advertisements on television, imprint, or electronic media; "For Sale", rent, lease, "Open House", and directional signs, and other materials designed to solicit the creation of a professional relationship between the licensee and a consumer. "For Sale", rent, lease, and "Open House" signs will be excluded from solicitation materials as defined by Business and Professions Code 10140.6 only if they do not contain any licensee information or if they contain the identification of the licensee's responsible broker without any reference to the licensee.

Who in the office should have access to a client's confidential information?

Only the broker and the licensee who works with that client.

The Broker is NOT responsible for:

Property sellers.

Failure to Supervise. A licensee is required to adequately supervise employees and agents to ensue that the business is run in accordance with all applicable laws and regulations.

Sanctions can include action taken against the licensees of the individual or the corporation if an officer, director, or person owning or controlling 10% or more of the corporation's stock fails to exercise reasonable supervision over their salespersons or the activities of the corporation. failure to supervise cases are allowing non-licensees to be signatures to trust accounts and, when a firm or licensee maintains multiple trust accounts, improper accounting among the accounts.

The following would NOT be considered licensed real estate activity?

Scheduling appointments to show a broker's listing.

Corporate Broker Supervisory Assignments

The employing broker is still responsible for the activities of the licensees under his/her broker license, even when supervising responsibility has been appointed to a manager.

Advertising. Managing brokers are ultimately responsible for the content of any advertising by their affiliated brokers and salespeople.

The following two major issues relate to advertising activity: * General Advertising Rules * License Disclosure Requirements for Advertising

Broker-Salesperson Agreement. Commissioner's Regulations Section 2726 require that every real estate broker must have a written agreement with each of his or her salesperson, whether license as a salesperson or as a broker under a broker-salesperson arrangement. The agreement will be dated and signed by the parties and will cover material aspects of the relationship between the parties, including supervision of licensed activities, duties and compensation.

There is no specific contact form that is required by the DRE. A good place to start is the model Independent Contractor Agreement between Broker and Associate-License that is available from the California Association of Realtors.

A corporate real estate broker can delegate supervision responsibilities to another broker or salesperson only if the:

appointee has at least two years real estate experience within the last five years.

Outlining a broker's responsibilities as well as what is expected of salespersons can be accomplished by:

creating a well-drafted office policy and procedures manual.

When dealing with a salesperon's property listing agreement, a broker should:

review all listing agreements created by salespersons.

When creating a fictitious business name, the

salesperson may own the name if approved by the broker.