Robert E. Muir

110 West A Street, Suite 625, San Diego, CA 92101-3707 (619)231-6500


By: Robert E. Muir

(Published in The San Diego Realtor, July 2013)

At a time when the Bureau of Real Estate (formerly Department of Real Estate) is increasing its scrutiny of real estate licensees' activity, it is important to take steps to avoid an investigation or audit by the BRE but also to be proactive in the event the Bureau initiates action.


Given the broad rules that licensees have to comply with, it is not unusual for an investigation or audit to uncover Business and Professions Code violations. For example, violations can occur when an agent's license has lapsed, the exact name of business does not match the corporate license with the BRE, or client checks are not deposited on time.

The BRE tends to focus on fraud and misrepresentation, broker supervision, acts without a license, and trust fund violations. However, licensees should be prepared to comply with all areas of the law. The BRE's website has useful information on broker evaluation and compliance, including manuals, checklists, and a trust fund guide covering accounting requirements, audits and examinations. Staying current with continuing education and new laws is also essential.

Licensees should have safeguards in place such as a policy and procedures manual. Calendaring agents' licenses when they come up for renewal is essential since it doesn't matter that the agent or brokerage intended to renew the agent's license or even made efforts to renew. If the license hasn't been renewed, the agent can't perform any activity requiring a license. The same goes for changing the corporate license. This can take time before it is effective and it is a violation to do business before then. These are just some of the violations that can occur.


The BRE investigator often calls the agent or broker with some questions or requests a meeting. You may also receive a letter requesting an interview and to produce documents. It is important to show that you are cooperating with the BRE. However, you should not be so eager to cooperate that you fail to make an informed decision as to when to meet or to give yourself enough time to prepare. You should also consult with an attorney and consider having the attorney present with you at the meeting. It may also be helpful to retain a private auditor experienced in BRE audits to help you prepare for this meeting or to conduct a pre-audit, and attend the meeting or audit with you.

It is helpful to know why the BRE wants to meet or interview you. At this stage, before the BRE has filed an Accusation, the BRE does not need to tell you who lodged a complaint against you. However, you can often determine this if you recently dealt with a disgruntled client or party. Once an Accusation is filed, you can review and obtain a copy of the BRE's file, including seeing who filed the complaint against you. A request that the complaint be filed anonymously is not always honored since occasionally a review of the BRE file shows the complaint letter from a party who requested anonymity, apparently to no avail. The BRE also conducts random audits or investigations without a receiving a complaint.


It is important to deal with the BRE in a professional and cooperative manner but protecting your rights at the same time. Be careful what you say. A recent example occurred when the auditor prefaced his question to the licensee with, "just between you and me." You should assume that nothing is off the record when speaking to the auditor or investigator. Many agents discover this by later seeing the auditor's Audit Report containing statements they made that they didn't realize would find their way into the Report.

At the end of the audit, there is an exit interview to allow the auditor to review with the licensee a summary of what was found. You should have your attorney or private auditor present with you for this as well as any meetings during the audit. Be sure there isn't any misunderstanding of your records. You may also be able to learn what violations were found so you can correct them before the Audit Report comes out. There would still be a violation, but the Report would show that it was corrected.


An Accusation is filed against the licensee after an attorney with the BRE determines that there is sufficient information to indicate a violation has occurred. Upon receiving an Accusation or Statement of Issues, you should promptly consult with an attorney experienced in this area of law, if you have not already done so in the process. A response or Notice of Defense must be submitted to the BRE within 15 days to preserve your right to a hearing. Agents sometimes phone the BRE attorney to discuss their case only to later discover that their statements may constitute an admission which can hurt their case. The burden of proof is on the BRE to prove the elements of any violation. Along with submitting the Notice of Defense, it is usually best to also promptly make a request to obtain a copy of the BRE's file to learn all the facts and witnesses the BRE has.


After the agent and his or her attorney have reviewed the evidence in the BRE file, and the attorney has researched the available defenses to the allegations, the attorney can determine whether there is a valid defense to the Accusation. The Accusation may have incorrect facts that can be resolved by furnishing the BRE with evidence showing there is an error. Often there are phone discussions between the BRE's attorney and agent's attorney to try to resolve the case through a negotiated settlement know as a "Stipulation and Agreement in Settlement and Order."

If a settlement is negotiated between attorneys, the Commissioner must agree to the Stipulation and adopt the terms and order it. The Stipulation is made a part of the public record which is accessible on the BRE's website under the licensee's record. For this reason, it is important to negotiate the best terms and language in the Stipulation.

The advantages of settling are that you may be able to achieve a more favorable outcome on the license sanction, and payment to the BRE for a fine, its investigation, audit and attorney fees. You would also avoid having to pay your attorney to go through the hearing. Another concern with going to a hearing is the BRE Commissioner does not have to adopt the Administrative Law Judge's "proposed ruling."

The settlement issues to negotiate include license revocation or surrender, license suspension, stayed suspension or proceedings, restricted license, Professional Responsibility Exam, paying for current and follow-up audits, monetary fine, BRE's costs and legal fees, etc. In a typical settlement, you would admit to some wrongdoing and accept some disciplinary consequences in exchange for leniency and retention of your license.

Often, a settlement results following a detailed written offer from the agent's attorney setting forth the legal and factual basis for the settlement. This letter offer also helps the Commissioner understand the case from your standpoint since the Commissioner has to approve the settlement. It is also possible to file a request for a settlement conference in an appropriate case which the Presiding Administrative Law Judge must approve.


Protecting your license begins with learning what the BRE looks for, implementing systems to ensure compliance with the laws, and being prepared in the event the BRE pursues a matter with you. Agents who fail to do anything short of this are placing their license at risk.

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