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Compliance With California Department of Real Estate Licensing Requirements

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. We assist property management companies, brokers, and agents in complying with licensing requirements and responding to inquiries or audits from the California Department of Real Estate (DRE).

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.

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.