The designated officer of a corporation is responsible for the supervision and control of the activities conducted on behalf of a corporate broker by all of its officers and employees. This responsibility is essential to securing full compliance with the Real Estate Law. If this responsibility is not taken seriously, the corporation could inadvertently permit unlicensed individuals engage in activities that require a license or licensed salespersons engage in activities for which a broker license is required.
To assist brokers and designated broker/officers to carry out their duty, it is important for the broker to know and identify those activities that do and do not require a real estate license. This knowledge assists the broker to use licensed persons when required. It also provides the broker with the flexibility to determine what level of supervision is required given the type of activity engaged in by what specific type of personnel.
Identifying licensed activities has become difficult for many brokers. Real estate transactions evolve and the law regarding the practice of real estate is constantly trying to catch up. In addition, political and consumer demands influence the enforcement of the law by the DRE and others. Finally, the law itself is vague. While it provides definitions, it does not provide the explicit trip-line for when an activity becomes unlicensed salesperson or broker activities. For example, sections 10131, 10131.1, 10131.2, 10131.3, 10131.4, 10131.45, and 10131.6 of the Business and Professions Code define the scope of a real estate broker’s activity. Specifically, it identifies all of the following as requiring a license:
- Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property or a business opportunity.
- Leases or rents or offers to lease or rent, or places for rent, or solicits listings of places for rent, or solicits for prospective tenants, or negotiates the sale, purchase or exchanges of leases on real property, or on a business opportunity, or collects rents from real property, or improvements thereon, or from business opportunities.
- Assists or offers to assist in filing an application for the purchase or lease of, or in locating or entering upon, lands owned by the state or federal government.
- Solicits borrowers or lenders, negotiates loans, collects payments, or performs services for borrowers or lenders or note owners in connection with loans secured directly or collaterally by liens on real property or on a business opportunity.
- 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.
- Engages as a principal in the business of making loans or buying from, selling to, or exchanging with the public, real property sales contracts or promissory notes secured directly or collaterally by liens on real property, or who makes agreements with the public for the collection of payments or for the performance of services in connection with real property sales contracts or promissory notes secured directly or collaterally by liens on real property.
As you can see, there are many questions left unanswered even in the law. Rather, it is, frankly, vague on where the trip-line is for when one has engaged in activity that requires license and supervision.
In response, the DRE has provided a Guideline for Unlicensed Assistants. Originally drafted in 1993, it was revised as recently as 2005 and is still accessible through the DRE website. They present specific scenarios that allow brokers to organize their business practices in a manner that will contribute to compliance with the Real Estate Law. It is a guideline of defined activities that generally do not come within the term “real estate broker”, so long as when the activity is being performed on behalf of the broker and with the broker’s knowledge and consent.
Below, please find a list of acceptable activities. In addition, please review the Guideline yourself for additional, more specific information concerning these activities.
- Cold Calling – Can call to inquire as to interest, but cannot induce public to use broker’s service
- Open Houses – Can assist in the planning and implementation (i.e. placing signs, greeting public, providing information, etc.) of an open house for the public. Cannot show the property, discuss features of property, or terms of sale.
- Comparative Market Analysis – Can make, conduct, prepare, or review on behalf of the broker.
- Communicating with the Public – Can provide factual information based on writings prepared by the broker.
- Communicating with Principals – Can discuss timeframes of delivery of services or documents.
- Arranging Appointments – Can call to make appointments on behalf of broker. This could be concerning the principal or party to a transaction. This can also be ordering reports, title inspection, pest control inspection, appraisal, credit check, and/or repair work at the property, as directed by the broker.
- Access to Property – Can be responsible for providing access to a property to a third party who is at the property for purposes of issuing a report, inspecting the property, or repairing the property. Any information about the property needed by this third party must come from information prepared by the broker.
- Advertising – Can design, prepare, and distribute advertising, so long as advertisement reviewed and approved by broker prior to publication.
- Preparation of Documents – Can prepare all documents to be approved and finalized by broker.
- Delivery and Signing Documents – Can mail, deliver, transport, and retrieve documents or signatures for documents. Cannot discuss the content, relevance, importance, or significance of document being delivered or signed.
- Trust Funds – Can accept and account for the receipt of trust funds.
- Document Review – Can review transaction documents for completeness, recommendations, or compliance, if the broker conducts a final review and renders final decisions.
As you can see, it does not take very much to go from unlicensed to licensed activity. Thus, it is imperative that brokers diligently and consistently supervise their staff to ensure that they remain in compliance with the real estate law.