We assist real estate brokers and agents in complying licensing requirements, responding to inquiries or audits from the California Bureau of Real Estate and in litigation.
Real Estate Broker And Agent Duties
The duties of a real estate broker or agent arise under four interrelated areas of law: regulatory law administered by the California Bureau of Real Estate (BRE) formerly known as the Department of Real Estate (DRE), agency law, contract law, and tort law.
Real Estate Regulations
The real estate profession in California is regulated by a comprehensive body of statutes known as the Real Estate Law, which is interpreted and implemented through regulations imposed by the Real Estate Commissioner. The Commissioner can invoke numerous grounds for disciplining a licensee. In some cases, the grounds for discipline arise out of activities of the licensee while acting as an agent. In other cases, the conduct of the licensee while acting as a principal can justify discipline. A real estate licensee has a vested right in the license and therefore the Commissioner cannot impose discipline on a licensee except after a hearing conducted pursuant to the Administrative Procedures Act.
Agency Relationship
An agency relationship is created when one person authorizes another person to conduct a transaction with third persons on behalf of the employer and to exercise a degree of discretion in effecting the purposes of the employer. The person who engages another to act on his or her behalf is called the “principal” while the actor is called the “agent.” An agency is a fiduciary relationship. The creation of an agency creates fiduciary obligations on the part of the agent to the principal. Real estate agents owe their principals the same obligation of undivided service and loyalty owed by trustees to their beneficiaries. As fiduciaries, real estate agents must act in the highest good faith toward their principals and may not obtain any advantage over the principal in any transaction arising out of the agency relationship. They must make full and complete disclosure of all material facts that might influence their principal’s decision to enter into a transaction.
Contract Law
Ordinarily, an agent is not personally liable on a contract executed in the name of the principal. There are a number of important exceptions to this general rule. However, provided the agent has authority to bind the principal, the principal is identified and the agent’s capacity is sufficiently indicated, only the principal and not the agent has liability under the contract.
Tort Law
An agent is only liable to third persons for his or her own wrongful acts or omissions. While a principal may be vicariously liable for the wrongful acts of an agent, even though the principal has not personally committed any wrongful acts or omissions, absent fault, an agent cannot be vicariously liable for the wrongful acts of the principal.
Property Management Activities
In general, a person who offers to lease or rent, offers for rent, solicits listings of places to rent, or solicits prospective tenants for real property, or collects rents from real property, for another or others, must hold a real estate license. The result is that a person who manages real property for another for compensation must hold a real estate broker’s license. However, there are important exceptions. For example, a resident manager is not required to hold a real estate license. Likewise, employees of a property management firm acting under the supervision and control of a broker with respect to residential rental property need not be licensed to perform certain activities. These activities include showing rental units to prospective tenants, providing or accepting preprinted rental applications, responding to inquiries regarding completion of the application, accepting deposits or fees for credit checks, accepting security deposits and rents, providing rental rate and other lease term information as set out in a schedule by the employer, or accepting signed leases and rental agreements. Brokers employing such unlicensed persons must exercise reasonable supervision and control over them and maintain a branch office license for each rental property where unlicensed persons are employed.