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Falsely acting as a real estate broker = $20,000

Jan 27th, 2015 | By | Category: Real Estate Broker Law

California Business & Professions Code 10139 – falsely holding yourself out as a real estate broker or salesperson in California is against the law.

real estate attorney for broker accusations

Introduction

This blog talks about what a licensed real estate activity is, and what it isn’t.  For licensed real estate activities, a license is required, for unlicensed real estate activities, no real estate license is required.  The problem is differentiating one from the other, and then holding yourself out as license (either holding yourself out as a sales agent, or sometimes holding yourself out as a broker), when in fact no license exists.  This could be construed as the unauthorized practice of real estate and could lead to large fines, and potential imprisonment.

California Business & Professions Code 10130 (acts requiring a real estate license)

 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 (Ex. MLO 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.

TIP:  So as you can see, this a serious section and shows the violation of the real estate licensing laws could lead to serious penalties, including possible criminal sanctions.

California Business & Professions Code Section 10131 (what is a real estate broker):

Cal Business & Professions Code Sec. 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 puchasers 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.

 (c) 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.

(d) Solicits borrowers or lenders for or negotiates loans or 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.

(e) 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.

The definition of activities a broker does (thus requiring a real estate license) are thus pretty broad).

10131(d) Soliciting borrowers and negotiating loans, performing services for borrowers in connection with loans.

One of the classic violations we see in a BRE real estate commissioner Desist & Refrain is section 10130(d) which as referenced above references:

(d) Solicits borrowers or lenders for or negotiates loans or 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.

10131.2 (advance fee handling)

Under Section 10131.2 (B&P).  A real estate broker within the meaning of this part is also a person who engages in the business of claiming, demanding, charging, receiving, collecting or contracting for the collection of an advance fee in connection with any employment undertaken to promote the sale or lease of real property or of a business opportunity by advance fee listing, advertisement or other offering to sell, lease, exchange or rent property or a business opportunity, or to obtain a loan or loans thereon.

This section arises where unlicensed persons are soliciting or advertising for loan modification clients and collecting an advance fee (even more troublesome after the passage of SB94 in October 2009).  To discuss these types of charges, leave your phone number below.

What about “finder’s fees” is this a licensed activity requiring a real estate license in California?

Whether the Contracts are Illegal – California Case law.  See Indep. Cellular Tel., Inc. v. Daniels & Associates, 863 F. Supp. 1109, 1114-15 (N.D. Cal. 1994):

“California law provides that it is “unlawful for any person to engage in the business, act in the capacity of, advertise or assume to act as a real estate broker or a real estate salesman within this state without first obtaining a real estate license from the department [of real estate].” Cal.Bus. & Prof.Code § 10130. Further, section 10136 prohibits an unlicensed real estate broker from bringing an action for collection or compensation for covered acts, and section 10139 provides that unlicensed activity is punishable by imprisonment and fine. A real estate broker is, in the first place, defined as “a person who, for a compensation or in expectation for a compensation (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.” See Cal.Bus. & Prof.Code § 10131.

The Court concluded:
“D & A is not licensed as a real estate broker pursuant to California’s regulatory scheme. Expectedly, however, D & A contends it is not required to be so licensed, offering various explanations why the licensing scheme is inapplicable. First, D & A contends it is protected by a “finder’s exception” to the licensing statute, whereby one who simply finds or introduces a prospective purchaser to a seller need not be licensed in order to receive a commission for his services. Preach v. Monter Rainbow, 12 Cal.App.4th 1441, 16 Cal.Rptr.2d 320 (1993). The exception has been explained as follows:
A person is not a broker … where he merely brings a buyer and a seller together so that they may make their own contract without aid from him, but any participation, however slight, in the negotiations will bring him within the definition.  (this is important to note)
See Evans v. Riverside Int’l Raceway, 237 Cal.App.2d 666, 675–76, 47 Cal.Rptr. 187 (1965) (emphasis added). Phrased differently, any time there occurs something more than “the bare act of introduction,Crofoot v. Spivak, 113 Cal.App.2d 146, 147, 248 P.2d 45 (1952), the exception is inapplicable.  The facts at hand illustrate an involvement far surpassing that necessary to be protected by the exception. Rhodes himself acknowledged in a deposition that “negotiations” would be referred to D & A, and that D & A could “maximize the value” of the sales it sought to promote. ICT’s Mot. at 12. D & A also prepared an information package for prospective purchasers, was obligated to assist in negotiations if requested by ICT, forwarded information to potential buyers, and placed calls to several potential customers in California and elsewhere. ICT’s Mot. at 12; Reply at 2. Accordingly, the finder’s exception is inapplicable.

TIP:  There is no requirement to have a real estate license to earn a “finder’s fee” but any discussion of transaction terms will convert the finder into engaging in licensed real estate activity, requiring a real estate license.  So this is a very fine line to tow, and to get the answer wrong, is to be engaged in potentially criminal activity.

California Business & Professions Code 10139 (false impersonation).

Here is a code statement you might see pasted onto your Desist & Refrain letter:

“Section 10139.  Any person acting as a real estate broker, real estate salesperson, or mortgage loan originator (MLO) without a license or license endorsement, or who advertises using words indicating that he or she is a real estate broker, real estate salesperson, or mortgage loan originator without being so licensed or without having obtained a license endorsement, shall be guilty of a public offense punishable by a fine not exceeding twenty thousand dollars ($20,000), or by imprisonment in the county jail for a term not to exceed six months, or by both fine and imprisonment; or if a corporation, be punished by a fine not exceeding sixty thousand dollars ($60,000).

If a Real Estate Fraud Prosecution Trust Fund, as described in Section 27388 of the Government Code, exists in the county where a person or corporation is convicted, any fine collected from the person in excess of ten thousand dollars ($10,000) or any fine collected from the corporation in excess of fifty thousand dollars ($50,000) shall be deposited in that Real Estate Fraud Prosecution Trust Fund.

This highlights the serious of these code sections and in short, you need to have a real estate license if engaging in licensed real estate activities.  If not, you could find yourself in a lot of problems, both criminally and in civil litigation matters.  We can help you sort out the legal issues and raise appropriate defenses (and try to negotiate a settlement of your case).

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Call us now to discuss your case with one of our California Real Estate Lawyers.  We can be reached at (877) 276-5084.  You can also fill out the contact form below (please leave your name and phone number) and we can contact you.

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