California Real Estate Property Management Law Firm
Our regional law firm helps property managers with BRE compliance issues. This blog discusses the law in regard to when a company that manages residential or commercial real estate in California needs to be properly licensed or risk getting a desist and refrain order from the BRE (Bureau of Real Estate). Even worse, a district attorney from any county in California, such as San Francisco, Orange, LA or other county could PROSECUTE you for violations of California law, this is written into the statute as noted below. Property management is a SIZZLING business right now, but the compliance issues must be taken serious and whether or not your business needs to be licensed might be a threshold issue. This blog discusses some of the general issues in California.
Who needs a real estate license?
California companies must comply with both the Business & Professions Code, the CalBRE rules and regulations and the case law interpreting those statutes. In general, here is a list of some of the licensing laws that affect property managers. If you are not sure whether or not your firm has to comply, contact us by using the form below.
The California Business & Professions Code 10131(b) states when a real estate license is needed:
10131. A real estate broker within the meaning of this part is a person who, for a compensation or in expectation of a compensation, regardless of the form or time of payment, does or negotiates to do one or more of the following acts for another or others:
(a) 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.
(b) 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.
Cal B&P 10130 makes it illegal to management property without a real estate license and mandates that it is the “duty” of the district attorney to prosecute violations:
10130. It is unlawful for any person to engage in the business of, act in the capacity of, advertise as, or assume to act as a real estate broker or a real estate salesperson within this state without first obtaining a real estate license from the department, or to engage in the business of, act in the capacity of, advertise as, or assume to act as a mortgage loan originator within this state without having obtained a license endorsement. The commissioner may prefer a complaint for violation of this section before any court of competent jurisdiction, and the commissioner and his or her counsel, deputies, or assistants may assist in presenting the law or facts at the trial. It is the duty of the district attorney of each county in this state to prosecute all violations of this section in their respective counties in which the violations occur.
This obviously is some pretty serious stuff. Do not manage real property for a third party without a real estate license without first consulting real estate counsel, the penalties could be devastating!
Does a lawyer acting on behalf of a client have an exemption from the real estate licensing laws?
An attorney providing legal services for a client is generally exempt from having to have a real estate license. See B & P 10133(a)(3) which notes a few different exceptions to the licensing rule:
(a) The acts described in Section 10131 are not acts for which a real estate license is required if performed by:
(1) A regular officer of a corporation or a general partner of a partnership with respect to real property owned or leased by the corporation or partnership, respectively, or in connection with the proposed purchase or leasing of real property by the corporation or partnership, respectively, if the acts are not performed by the officer or partner in expectation of special compensation.
(2) A person holding a duly executed power of attorney from the owner of the real property with respect to which the acts are performed.
(3) An attorney at law in rendering legal services to a client.
(4) A receiver, trustee in bankruptcy or other person acting under order of a court of competent jurisdiction.
(5) A trustee for the beneficiary of a deed of trust when selling under authority of that deed of trust. (b) The exemptions in subdivision (a) are not applicable to a person who uses or attempts to use them for the purpose of evading the provisions of this part.
What are the duties of a licensed property management broker?
CalBRE regulation 2725 notes that the real estate broker must “supervise all licensed activity.” In some cases the broker can designate authority to another party. If the broker collects trust funds there are also significant trust fund accounting requirements which we have talked about on many other blogs.
Does a manager of a hotel, motel or auto and trailer park need a real estate license?
Probably not. According to Cal. B & P 10131.01(a)(1):
10131.01. (a) Subdivision (b) of Section 10131 does not apply to (1) the manager of a hotel, motel, auto and trailer park, to the resident manager of an apartment building, apartment complex, or court, or to the employees of that manager.
With the rise of “renter nation” property management is becoming a big business. For many real estate licensees who are not making much money in sales or mortgage lending or business opportunities, take a look at property management, but make sure you are doing it right because compliance is a hot issue right now!
What is the biggest legal issue in California property management?
Property management audits have been trending for the last year or two. The BRE auditors have been conducting “random audits” of property management companies, and they also respond to complaints initiated against licensees involving residential and commercial rental units. Where non-compliance is found, brokers have “cite and fine” actions or possible accusations. Being ready by having an annual broker self-audit makes good sense.
Contact one of our real estate lawyers
We can help you with residential or commercial real estate property management compliance in California and Arizona. We handle cases throughout both states. We can be reached at (877) 276-5084 or by filling out the contact form below. Please be sure to leave your phone number. We can help with general compliance, audit preparation, trust fund accounting, BRE investigations, cease and desist letters, statement of issues, accusations, licensing denials, OAH hearings, arbitration subpoena response, and other legal issues involving property managers. We offer low flat rate fees for many of our services.
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