Real Estate Litigation Law Firm – Overview of the California Consumer Recovery Account
BONUS MATERIALS: California BRE recovery account sample letter PDF (this is not a complete application do not rely on this)
What constitutes “intentional fraud” for purposes of the real estate recovery account and what other violations are covered?
The Stewart case discussed the types of violations that could give rise to a DRE recovery account claim:
When any aggrieved person obtains … a final judgment in a court of competent jurisdiction, … against a defendant based upon the defendant’s fraud, misrepresentation, or deceit, made with intent to defraud or conversion of trust funds arising directly out of any transaction not in violation of Section 10137 or 10138 in which the defendant, while licensed under this part, performed acts for which that license was required, the aggrieved person may, upon the judgment becoming final, file an application with the Department of Real Estate for payment from the Recovery Account, within the limitations specified in Section 10474, of the amount unpaid on the judgment that represents an actual and direct loss to the claimant in the transaction.
What is the maximum amount I can receive from the real estate recovery account?
Click on the picture above to watch our real estate law youtube video overview of the DRE consumer recovery account for real estate transactions. Click on the RED “V” in the top right corner to subscribe to free updates! Great for business and real estate professionals in CA and AZ.
Steps to recovering money damages from the BRE recovery account (CA) or DRE recovery account (AZ)
1. Obtain a final judgement in a civil case or real estate arbitration (or get a criminal restitution order) which finds a real estate licensee guilty of fraud, misrepresentation, financial elder abuse, deceit, breach of fiduciary duty, intent to defraud or trust fund mishandling (ex. conversion or embezzlement of trust funds). Note: not all legal theories will always work, you have to make your case for compensation artfully and with facts, exhibits and legal arguments.
2. Take reasonably diligent efforts to collect on the judgment. Ex. hire a collection lawyer, or try to garnish wages, levy bank accounts, etc. If the judgement debtor goes into bankruptcy to try to wipe out the debt, you should consider pursuing the real estate licensee into bankruptcy court (we can help you with that) in order to try to get a ruling that the debt is “non-dischargeable” and must survive the bankruptcy discharge. If you do not challenge the debt in BK court, there is a good chance the licensee will wipe out your judgement, which is basically an unsecured debt. The BRE will want to know if you took steps to protect your judgement and whether or not the debt was discharged.
3. File an application for recovery (the forms are on the first link below). Make sure you provide all of the required information, attachments, exhibits, proof, declarations, etc. This is your chance to make your case.
4. File your materials within one year of the date of the judgement, and sign it under penalty of perjury.
5. If your file is incomplete, you will get a “notice of deficiencies” within 15 days. You need to promptly update your materials.
6. The judgement debtor needs to be served with everything, because they get a chance to respond (and if need be, object to your application). It must be noted that if the applicant wins the recovery account case, and the DRE pays out damages, the real estate licensee will likely lose their real estate license until they pay back the judgment. This is why you may get objections from the licensee. We assist both applicants and brokers, agents and salespersons in recovery account actions and defense work.
7. The BRE will make a decision on the application within 90 days.
8. If the applicant loses, they have 6 months to appeal to a Superior Court, and must show a gross abuse of discretion. If the judgment debtor (licensee loses, they can file for a writ of mandamus within 3o days of the decision. Again, we can help with these appeals and actions for both Plaintiff’s and Defendants.
These steps may not be current and updated. Please do not rely on these as rules may have changed. Consult with real estate counsel to discuss.
Does the real estate broker have a right to object to request for recovery?
Yes. As mentioned above, the broker may object and argue that the claim is not for one related to licensed real estate activity, or that the judgement was wrong, or that other Defendant (real estate licensees) were actually at fault and not named in the other action, or that the amount of damages is inflated or not recoverable (for example attorneys fees and punitive damages are not generally recoverable in a consumer recovery account action). There are other things a broker might claim in defense to try to save their license depending upon the facts of each case.
What will happen to the real estate licensee if they lose and I am awarded funds from the DRE or BRE consumer recovery account?
Again, they will be required to pay back the funds to retain their real estate licensing rights in California or Arizona.
What is the maximum amount I can recover in a Consumer recovery account BRE case?
$50k per transaction and a max of $250,000 per licensee.
What code sections does an applicant need to be aware of?
An applicant should take note of the following California code section:
10471. (a) When an aggrieved person obtains:
(1) a final judgment in a court of competent jurisdiction, including, but not limited to, a criminal restitution order issued pursuant to subdivision (f) of Section 1202.4 of the Penal Code or Section 3663 of Title 18 of the United States Code, or
(2) an arbitration award that includes findings of fact and conclusions of law rendered in accordance with the rules established by the American Arbitration Association or another recognized arbitration body, and in accordance with Sections 1281 to 1294.2, inclusive, of the Code of Civil Procedure where applicable, and where the arbitration award has been confirmed and reduced to judgment pursuant to Section 1287.4 of the Code of Civil Procedure, against a defendant based upon the defendant’s:
fraud, misrepresentation, or deceit, made with intent to defraud, or conversion of trust funds,
arising directly out of any transaction in which the defendant, while licensed under this part, performed acts for which a real estate license or a prepaid rental listing service license was required,
the aggrieved person may, upon the judgment becoming final, file an application with the Bureau of Real Estate for payment from the Consumer Recovery Account, within the limitations specified in Section 10474, of the amount unpaid on the judgment that represents an actual and direct loss to the claimant in the transaction. As used in this chapter, “court of competent jurisdiction” includes the federal courts, but does not include the courts of another state.
(b) The application shall be delivered in person or by certified mail to an office of the bureau not later than one year after the judgment has become final. (c) The application shall be made on a form prescribed by the bureau, verified by the claimant, and shall include the following:
(1) The name and address of the claimant.
(2) If the claimant is represented by an attorney, the name, business address, and telephone number of the attorney.
(3) The identification of the judgment, the amount of the claim and an explanation of its computation.
(4) A detailed narrative statement of the facts in explanation of the allegations of the complaint upon which the underlying judgment is based.
(5) (A) Except as provided in subparagraph (B), a statement by the claimant, signed under penalty of perjury, that the complaint upon which the underlying judgment is based was prosecuted conscientiously and in good faith. As used in this section, “conscientiously and in good faith” means that no party potentially liable to the claimant in the underlying transaction was intentionally and without good cause omitted from the complaint, that no party named in the complaint who otherwise reasonably appeared capable of responding in damages was dismissed from the complaint intentionally and without good cause, and that the claimant employed no other procedural means contrary to the diligent prosecution of the complaint in order to seek to qualify for the Consumer Recovery Account.
Is there a statute of limitations for bringing a recovery account action?
YES. The application shall be delivered in person or by certified mail to an office of the bureau not later than one year after the judgment has become final.
Does your law firm take these recovery cases on Contingency fee basis?
Yes. In many cases (but not all) we can take these cases on a contingency fee or flat rate fee basis. Contact us below to have your case reviewed by one of our real estate lawyers.
Real Estate Recovery Account Resources
Can insurance companies subrogate to recover losses from the California recovery account?
One court has answered NO. In Stewart Title Guar. Co. v. Park, 250 F.3d 1249, 1255 (9th Cir. 2001) the Court held:
Contact a real estate law firm to discuss your recovery account case
If you need more information about the Consumer recovery account in California or Arizona call our real estate litigation law firm at (877) 276-5084 or fill out the contact form below.
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