Robert E. Muir

110 West A Street, Suite 625, San Diego, CA 92101-3707 (619)231-6500 rm@muirlaw.com

HOW WILL CHANGES AT THE DRE AFFECT YOU?

By: Robert Muir, Attorney

(Published in The San Diego Realtor, June 2013)

The Department of Real Estate will become the Bureau of Real Estate (BRE) under the Department of Consumer Affairs on July 1, 2013 as part of the state government restructuring to improve efficiencies. Wayne Bell was appointed Commissioner of Real Estate in February 2013. Commissioner Bell is an attorney and real estate broker who had been Chief Counsel and Assistant Commissioner for Legal Policy and Recovery at the BRE since 2006. Unlike other commissioners appointed in the past, Commissioner Bell comes from inside the BRE, rather than from the real estate industry. What changes and trends can we expect at the BRE?

EMPHASIS ON COST RECOVERY

We will likely see an increased emphasis on cost recovery by the BRE since the restructuring of the office was in part economically driven. The BRE can recover the costs of an investigation or audit from licensees, whether the matter goes to hearing or is settled by way of stipulation. The BRE can also bill licensees for follow-up compliance audits which usually occur between six and 18 months after the settlement or hearing. These costs, which include legal fees for enforcement, can be significant.

According to the BRE's 2011 Annual Report, cost recovery from licensees in the previous three or four years increased significantly along with the number of investigations.

AREAS WITH MOST INVESTIGATIONS AND ACCUSATIONS

Fraud: As Chief Counsel, Wayne Bell was outspoken on fraud in loan modifications, foreclosure relief, short sales and advance fees, conducting forensic audits. As new Commissioner, he will likely continue to focus on these areas.

A review of recently filed Accusations, which is a public complaint filed by the BRE that alleges the licensee has violated the law, shows that in February 2013, the BRE filed the most Accusations for fraud and dishonest dealing of licensees, and for substantial misrepresentation.

Supervision: A frequent Accusation filed by the BRE concerns failure of the designated officer to supervise the licensed actions of the corporation and salespersons.

Licensing: Acting without a license is also a frequently charged violation, often for negotiating or soliciting without a license, or a license that has lapsed. Fines can be significant and be against the company and individual licensee.

Trust Funds: A review of recent BRE violations also indicate that trust fund handling by licensees engaged in sales and property management continues to be a major area of focus.

NEW LAW AFFECTING SETTLEMENTS

On July 1, 2013, statutory law will expressly prohibit licensees from including or permitting the inclusion in a settlement agreement of a civil dispute, a provision barring the other party from contacting, filing a complaint with, or cooperating with the Department of Consumer Affairs ("DCA"), or a bureau, board, or program within the DCA. Licensees also may not include or permit a provision for the other party to withdraw a DCA complaint. A licensee violating these requirements is subject to disciplinary action. This new law also provides that any DCA board or bureau that takes disciplinary action against a license based on a complaint or report that is also the subject of a civil action that has been fully settled monetarily, cannot require the licensee to pay additional sums to someone who was a plaintiff in the civil action. This underscores the importance of having a legally valid settlement agreement when settling a dispute.

CONCLUSION

The BRE will likely conduct more investigations, file more Accusations, and demand higher amounts for cost recovery. While the BRE combats fraud in the market place, licensees need to pay special attention to the BRE's many technical requirements to avoid discipline.

This article provides general information and is not intended to provide advice on any specific case. Robert Muir, real estate transaction and litigation attorney, represents licensees before the BRE as well as buyers and sellers in real estate legal matters. He can be reached at rm@muirlaw.com