What a difference a few years make. It wasn’t long ago (around 2005) when upwards of 8,000 of would-be real estate agents would take the California real estate exam in a single month. According to California Department of Real Estate’s statistics, about that same number of people now take it over the course of an entire year.
So you would think that since the numbers are lower for licensed agents now in the field, the prevalence of lawsuits threatening their licenses would plummet as well. Not so, according to statistic provided by the DRE, California’s watchdog that governs licensing and protects consumers’ interests when doing business with licensed brokers and agents. “Back when we were issuing real estate licenses at a record pace, it was more likely that we would find reasons to issue restricted licenses or deny licenses altogether after doing a thorough background check,” says Tom Poole, the California DRE’s public information officer. “What we are finding now is that although there are fewer people applying to become agents, the percentage of lawsuits against existing licensees has sharply risen.”
Why this phenomenon? The economic downturn no doubt plays a huge role in how litigious a society becomes. When holding onto every last dollar counts and property values have become unpredictable, it’s only logical that people who may have signed contracts in good faith find themselves getting cold feet the moment an undisclosed fact about a property comes to light. And since bargains abound in California compared to just a few years ago, the grass may begin to look greener elsewhere while a consumer is waiting out a short sale, his or her agent is bombarding a bank with phone calls regarding a bank-owned property or they simply want to get out of a deal for which they’ve already signed on the dotted line. Hefty deposits that become non-refundable by a certain date can also find them taking their complaints to higher courts, dragging agents’ licenses into the fray.
To illustrate the vulnerability of agents’ and broker’s licenses, RealtyTimes columnist Bob Hunt cites a case where “Bad facts make bad law” in his piece titled, Real Estate License Can Be Easily Lost. In the case of Robbins v. Davi, heard by California’s Second Appellate District Court of Appeal, Real estate broker and attorney, Lance Robbins, both owned and managed a number of lucrative “slumlord” apartments in the Los Angeles area. “Between 1985 and 1995, Robbins had been convicted of some 50 municipal building code violations,” says Hunt. “He was twice disciplined (1991 and 1994) by the State Bar for ‘facts and circumstances surrounding habitability violations in properties that he owned.”
By 2001, Hunt reports that Robbins pleaded no contest and was convicted of three misdemeanor violations of the fire protection and prevention provisions of the Los Angeles Municipal Code, was fined $100 and then placed on summary probation for 18 months. Consequently, Department of Real Estate filed an accusation alleging that Robbins’s convictions constituted cause for the suspension or revocation of his license as a broker.
“The original charges involved issues of moral turpitude, but subsequent rulings have effectively removed that as a cause of action,” says Hunt. “Nonetheless, charges remained based on the claim that Robbins’s crimes were “substantially related to the qualifications, functions or duties of a real estate licensee.”
California law states that if a crime is related to a licensee’s qualifications, functions, or duties, his or her license may be revoked. But the authorities are required to develop criteria to aid them in making that determination. The Department of Real Estate has developed a rather broad criteria for this: anything is considered substantially related “…if it involves… doing of any unlawful act with the intent of conferring a financial or economic benefit upon the perpetrator…”
Hunt goes on to surmise that, for example, attempts to fix a horse race, or a high school basketball game, might be considered “a crime substantially related to the qualifications, functions or duties of a real estate licensee.”
Robbins’s violations were all profit-related, so the court agreed that they fit the criteria for license revocation. A broad interpretation? Perhaps. What this illustrates, however, is that almost any illegal act aimed at making a profit will fit the definition. It need not have anything to do with the real estate profession. So will failing to pay a traffic fine possibly result in a license revocation? Perhaps not, but why would you risk it, if it took years and a lot of hard work to establish yourself as a real estate professional?
It only takes a few people doing a few egregious things to make it bad for everyone else. Besides, Hunt points out “Who would want to appear to be on the side of someone like Robbins?”
The lesson learned here is to cross every “T” and dot every “I” when doing real estate business – disclose everything material to the property and the transaction itself, even if you have to do some super-sleuthing on your own and even if the other agent doesn’t care enough to do so. It’s your license that is on the line.
Now a professional freelance, writer and journalist, San Francisco native Dena Kouremetis began her writing career during her 23 years in real estate industry. One of her passions is reporting on legal issues as they pertain to peoples’ livelihoods in the state of California.