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10-year bar to real estate accusations and license discipline in California

May 14th, 2015 | By | Category: Real Estate Broker Law

California Real Estate Broker License Lawyer – Disclosing past criminal convictions and the 10 year bar to file accusations.

Real estate license fraud

Introduction

You have a sales license but want to be a broker.  Yet you realize about 20 years ago when you were applying for your real estate salesperson license that you MIGHT NOT have checked the box disclosing your criminal conviction (ex. theft, burglary, DUI, etc.) and yet you were able to obtain your real estate license anyway.  Now, when you apply for your broker’s license you know they are asking you to disclose all criminal convictions (even expunged ones and ones from other states).  So, you are worried that by applying for your broker license, the PAST WILL COME BACK TO HAUNT you and that they will realize you procured your real estate license by fraud or misrepresentation.  Is it too risk to apply or is there possibly another outcome where you cannot be held liable for acts over ten years?  This blog discusses this interesting point and the law in California.

Procuring a real estate license through fraud or misrepresentation

California Business and Professions Code section 10177(A) states:

10177.  The commissioner may suspend or revoke the license of a real estate licensee, delay the renewal of a license of a real estate licensee, or deny the issuance of a license to an applicant, who has done any of the following, or may suspend or revoke the license of a corporation, delay the renewal of a license of a corporation, or deny the issuance of a license to a corporation, if an officer, director, or person owning or controlling 10 percent or more of the corporation’s stock has done any of the following:

(a) Procured, or attempted to procure, a real estate license or license renewal, for himself or herself or a salesperson, by fraud, misrepresentation, or deceit, or by making a material misstatement of fact in an application for a real estate license, license renewal, or reinstatement.

For a case on point, the California case of Madrid v. Dep’t of Real Estate, 152 Cal. App. 3d 454, 455-56, 199 Cal. Rptr. 520, 520-21 (Ct. App. 1984) highlights the seriousness of making false representations of fraudulent omissions in a real estate application.  In this case:

“Appellant, a real estate salesman, was accused by the Real Estate Commissioner of the State of California of having fraudulently procured a real estate license by making a material misstatement of fact in his license application, a violation of Business and Professions Code section 10177(a). Specifically, it was alleged that appellant had been convicted of bingo fraud in Arizona in 1975 and failed to list the conviction on his application. After an administrative hearing, appellant’s license was revoked. The superior court denied his petition for a writ of mandate, and this appeal followed. Appellant contends that there is not substantial evidence to support the finding that his license was fraudulently procured because respondent did not show that the application would have been denied had the Arizona conviction been disclosed.”
The applicant argued that he “plumb forgot” to list the conviction.  The Court however, did not buy it, and held:

“The crime of which Respondent was convicted bears a substantial relationship to the qualifications, functions, or duties of a real estate licensee.  Respondent’s failure to reveal the criminal conviction alleged above in said application for licensure constitutes the procurement of a real estate license by fraud, misrepresentation or deceit, or by making a material misstatement of fact in said application, which failure is cause for suspension or revocation of Respondent’s real estate license under Sections 490 and 10177(a) of the Business and Professions Code.  This is merely another way of stating that the license would not have been granted had the conviction been disclosed. Having so alleged in the accusation, the Department met its burden by proving (1) that the conviction occurred, and (2) appellant’s failure to list it on the application was willful.

As we have mentioned in other real estate blogs and videos on our real estate youtube channel failure to disclose prior convictions can be one of the worst things you can do.  Since a real estate agent, salesperson, or broker has to READ THINGS for a living, you can’t just argue ignorance.  Read the application carefully, and provide honest, candid, and detailed answers.  Use additional sheets of paper if you need to.

The three year statute of limitations for fraud accusations

One important BRE real estate licensing case that discusses the three year statute of limitations is Herrera v. Dep’t of Real Estate, 88 Cal. App. 4th 776, 779-80, 106 Cal. Rptr. 2d 232, 234-35 (2001)

Before suspending or revoking a real estate license, the Department must file an accusation notifying the licensee of the alleged grounds for possible disciplinary action and thereafter hold a hearing. (§10100.) The accusation must “be filed not later than three years from the occurrence of the alleged grounds for disciplinary action.” (§ 10101.) The three-year limitations period commences on the date of the occurrence of the grounds for revocation or suspension. (California Real Estate Loans, Inc. v. Wallace (1993) 18 Cal.App.4th 1575, 1585, 23 Cal.Rptr.2d 462.) Thus, for example, where the ground for license revocation or suspension is a final civil judgment for fraud, the limitations period commences on the date of the final judgment, “not the acts or omissions underlying that judgment.” (Ibid.) Similarly, where the ground for revocation or suspension is the conviction of a crime involving moral turpitude, the limitations period commences on the date of the final judgment of conviction, not the acts or omissions underlying the judgment of conviction. (Karrell v. Watson (1953) 116 Cal.App.2d 769, 777–778, 254 P.2d 651.)”

Cal. Bus. & Prof. Code § 10101

The California business and professions code discusses the statute of limitations in fraud cases:

The accusation provided for by Section 11503 of the California Government Code shall be filed not later than three years from the occurrence of the alleged grounds for disciplinary action unless the acts or omissions with which the licensee is charged involves fraud, misrepresentation or a false promise in which case the accusation shall be filed within one year after the date of discovery by the aggrieved party of the fraud, misrepresentation or false promise or within three years after the occurrence thereof, whichever is later, except that in no case shall an accusation be filed later than 10 years from the occurrence of the alleged grounds for disciplinary action.

This means (or at least there is a strong argument that it “should mean”) that if you made a false statement on a real estate application OVER TEN YEARS AGO, this should not be something that should be grounds to file an real estate accusation or strip a real estate license that is already vested.  Keep in mind licensed real estate brokers and salespersons have “due process” rights in their real estate license, meaning before anyone loses a license, (other than those who might have a “restricted real estate license“), they are entitled to a hearing and a right to present evidence and tell their side of the story.

What is the “discovery rule” relating to the three year bar for fraud cases:

So as set forth above, the code section cited above discusses the “discovery rule” in these types of cases, and also appears to set a 10 year outside bar when the Bureau of Real Estate (formerly the Department of Real Estate) can no longer go after you.  In these cases, the evidence is old, the prior misstatement is old, and per legislative mandate APPEARS to set the outer limits for filing a real estate action against a licensee or seeking to revoke, suspend or discipline a real estate license.

Section 11503 of the Government Code (as cited above – for reference purposes)

11503.  (a) A hearing to determine whether a right, authority, license, or privilege should be revoked, suspended, limited, or conditioned shall be initiated by filing an accusation or District Statement of Reduction in Force. The accusation or District Statement of Reduction in Force shall be a written statement of charges that shall set forth in ordinary and concise language the acts or omissions with which the respondent is charged, to the end that the respondent will be able to prepare his or her defense. It shall specify the statutes and rules that the respondent is alleged to have violated, but shall not consist merely of charges phrased in the language of those statutes and rules. The accusation or District Statement of Reduction in Force shall be verified unless made by a public officer acting in his or her official capacity or by an employee of the agency before which the proceeding is to be held. The verification may be on information and belief.    (b) In a hearing involving a reduction in force that is conducted pursuant to Section 44949 of the Education Code, the hearing shall be initiated by filing a “District Statement of Reduction in Force.” For purposes of this chapter, a “District Statement of Reduction in Force” shall have the same meaning as an “accusation.” Respondent’s responsive pleading shall be entitled “Notice of Participation in Reduction in Force Hearing.”

General tips to avoid denial of your real estate license

Here are some general tips to keep in mind:

1.  Fill out your broker application neatly and completely

2.  Disclose all criminal convictions and provide background documents in case they want to review them.  This is what we refer to as “disclose and explain.”  Do not try to hide anything or that will have a good chance to leading to a negative result.

3.  Draft a letter addressing the BRE “rehabilitation factors”

4.  Include reference letters (from professional, family, religious and volunteer activity references).

5.  Make sure to show how you are a different person (changes in attitudes and associations as we say).

We can package up these applications on your behalf and tell your story.  It is often easier to have a third party tell your story than you trying to tell it yourself.  People are naturally defensive and biased when it comes to their criminal past.  We are great at telling your story and we have saved and helped many  men and women get licensed over the years.

 Contact a California real estate licensing, compliance and defense lawyer

If you need help dealing with a real estate licensing dispute, issue, investigation, complaint, accusation or other matter, contact us to discuss. We believe we are the best real estate license defense law firm in the State of California.  We have helped a large numbers of real estate brokers and salespersons in a wide variety of real estate law, compliance, and other matters.  Don’t be fooled by other lawyers that insist they can get you a better deal “because I used to work for the DRE.”  Call us to discuss our flexible legal fees.  We can be reached at (877) 276-5084.  Or, leave your phone number and have one of our real estate lawyers contact you using our contact form below.  We normally respond within the hour of receiving a message.

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