By: Tamara B. Pow, Esq .
Back in September of 2015, the California Bureau of Real Estate ( CalBRE ) released a warning, officially known as a supplemental disciplinary advisory, to salespersons working in real estate who illegally mislead consumers into falsely believing that the salesperson is a real estate broker, as well as an additional warning to actual brokers who permit or support such practices by these salespersons.
Real estate brokers, salespersons, and consumers should review this warning and the hypotheticals below. According to CalBRE, these unlawful practices have continued to occur, to the potential detriment of consumers.
Under CA Business and Professions Code Section 10139, any person pretending to be a real estate broker without a license or license endorsement, or who advertises as such is guilty of a public offense punishable by a fine of up to $20,000 or by imprisonment for a term of up to six months, or both. If this violation is committed by a corporation, that fine can increase to $60,000. Additionally, under Section 10140, a violation for false advertising is punishable by a fine of up to $1,000, imprisonment for up to one year, or both. As mentioned in the issued warning, the Commissioner of CalBRE may also suspend or revoke the license of any broker who is guilty of one or more of these offenses. In regards to prosecution, under Section 10130, it is the duty of the District Attorney of each county in this state to prosecute all violations in their respective counties in which the violations occur.
CalBRE has specifically outlined two examples in which these violations typically occur. The first hypothetical is a salesperson who uses a fictitious business name that would lead consumers to think that this business is operated and managed by a real estate broker. For this scenario, let’s call this salesperson John Doe. John Doe conducts business using the name Doe Real Estate. John Doe then advertises his business with that name, and supplements these advertisements with a webpage or other tangible tools. This unlawful practice allows consumers to believe that John Doe is a real estate broker or brokerage firm and not a salesperson who must be supervised by an actual broker when conducting these activities.
The second illegal scenario is Jane Doe or a team of Jane Does branding or identifying themselves as independent real estate practitioners. It is illegal for salespersons to act and/or advertise as an independent entity in real estate. Teams must disclose the name of the responsible broker or brokers, at least one responsible broker’s license number, and use at least one of the responsible brokers’ surname in the title of the team’s name, along with the terms “team,” “group,” or “associates.”
The use of a fictitious name for a real estate firm is itself not illegal (See definition of “Fictitious business name” under Business and Professions Code 10159.7(a)(2)). However, under Section 10159.7(a)(5)(C), a fictitious business name may not include the terms “real estate broker,” “real estate brokerage,” “broker,” “brokerage” or any other obvious term that would lead a member of the public to conclude that the team is offering real estate brokerage services.
Furthermore, salespersons who are active in real estate license activities in the state of California must be affiliated with and reasonably supervised by a responsible broker. Reasonable supervision is defined in CalBRE’s Commissioner Regulation 2725. Incidentally, one of the activities that qualify for broker supervision is reviewing any and all advertising done by the broker’s salesperson or salespersons. Irresponsible brokers who otherwise allow for unlawful practice are also liable and will face similar discipline.
It is imperative that not only licensees review the disciplinary advisory, but consumers as well to make sure they understand who they are working with. For more information regarding this matter, visit the CalBRE website at calbre.ca.gov , look under Essential Information on the homepage, click the link 2017 Real Estate Law, and review the governing rules in the California Business and Professions Code sections 10000 – 11288.
- For the complete definition of a real estate broker, see California Business and Profession code section 10131.
- For the complete definition of a salesperson, see California Business and Profession code section 10132.
- For the minimum requirements for broker supervision and activities that qualify for broker supervision, see California Business and Profession code sections 10131.01(a)(A) through 10131.01(a)(E)(c).