Expanded Self-Reporting Requirement for Real Estate Licensees

On January 1, 2012, a new section was added to the Business and Professions Code which expanded mandated reporting for real estate licensees of certain events to the Department of Real Estate (DRE). The requirement, contained in section 10186.2 of the Business and Professions Code, provides that a real estate licensee must submit a report of any of the following to the DRE:

  • The bringing of an indictment or information charging a felony against the licensee.
  • The conviction of the licensee, including any verdict of guilty, or plea of guilty or no contest, of any felony or misdemeanor.
  • Any disciplinary action taken by another licensing entity or authority of this state or of another state or an agency of the federal government.”

The law requires that any such report is to be made in writing within 30 days “of the date of the bringing of the indictment or the charging of a felony, the conviction, or the disciplinary action” (subsection (a)(1)(2)), and that failure to make such a written report shall constitute a cause for discipline. For this statute, “the failure to report” is what violates it and creates a cause for discipline.
Turning to subsections (a)(1)(A) and (C), there does not have to be a conviction for the reporting of (A), and there does not have to be final discipline imposed for the report to be made under (C). In fact, a plain reading of (C) suggests that if disciplinary action has been “taken”, which includes the bringing or commencement of disciplinary charges, such as where there has been the filing of a pleading such as an Accusation by a licensing authority, that action must be reported within 30 days even if the licensee believes or concludes the action has no merit and even if the action is ultimately unsuccessfully prosecuted by the licensing authority.
The California State legislature created this section (via California Senate Bill 706 – 2011 [Senator Price]) to create more transparency of other “bad acts” by licensees. By forcing the licensees to self-report on serious arrests or other forms of license discipline, it reduces the amount of effort DRE has to investigate individual licensees. Once reported, it makes it easier to track to determine whether severe discipline (e.g. revocation, suspension, etc.) should be speedily imposed. However, it is not clear if the legislature considered how this new requirement meshed with licensees’ due process rights and privileges against self-incrimination. Furthermore, it is not presently clear how licensees are to handle crimes that could be charged or convicted as felonies or misdemeanors, pursuant to Penal Code section 17(b). Finally, not all licensing authorities treat “license discipline” uniformly throughout the country. Thus, licensees who possess out-of-state or federal licenses will be required to determine what these out-of-state or federal agencies consider as “license discipline” for purposes of reporting to the DRE. This could raise even further claims of violation of Due Process and Privileges and Immunities defenses.
The DRE has developed form RE 238 – Indictment, Conviction, and Disciplinary Action Notification – for the purpose of this reporting. However, any form of written communication will meet the notification requirement.