Attorney Comments
By Dave Freeman, Association Counsel
Department of Real Estate Audits of Brokers The primary areas where audits come up are: Property Management: Complaints to the DRE usually cause the audit (which can be very expensive and time consuming on the part of the Broker), but red flags or routine activity can lead to the audit. a. Operating without a broker’s license is a violation. b. Meticulous records must be kept, including written contracts and communication with the owner/client, and with the tenants. c. Complaints from clients and tenants must be handled promptly and with proper training. Records should be kept of this as well. d. The broker must supervise any employees or licensees and review communication and records, as well as proper handling of the issues that arise. e. Bottom line, this is a hazardous and energy draining area of real estate. Broker-Owned Escrow (BOE): The biggest problem here is the lack of understanding of what is required and what is allowed. a. The most important, and often misunderstood issue is that the BOE’s are exempt from the arduous licensing and annual audits required of an independent escrow, but they are only allowed to perform escrow transactions in which the broker or his agent is an agent or participant in the transaction. b. The Broker must, annually file a report with the DRE, detailing the escrow activity participated in during the year, if the BOE handles more than five escrows or escrows involving more than a total of one million dollars during that year. The penalties for failure to report add up quickly and can be large. 6
ARCADIA REALTOR® · JANUARY-MARCH 2019
Foreign Language Contracts/Leases If a contract or lease is negotiated primarily in a foreign language, the document resulting from the discussion must be in that foreign language. Several documents are available from the DRE in five different common languages found in Southern California. But the obvious misunderstandings and disagreements that can arise are obvious, leading to an attorney’s fair employment act. Therefore, it is normally best to have the party who only deals in the foreign language to have their own interpreter present, and keep the communication between the agent and the other parties in English, and the contract/lease in English as well.
Rent Control Proposition 10 failed to pass. Proposition 10 would not have automatically imposed rent control, but would have repealed Costa Hawkins, a law that limited cities and counties from imposing certain tough rent control rules such as: A. Vacancy Decontrol: In a rent control city, this prevents a landlord from raising the rent to the current going rate, even when the tenant moves out voluntarily. B. Moving the date, for example to 1995, that a building must be constructed after, to be exempt from rent control. The date in Los Angeles is currently 1978. Cities and counties can still impose rent control rules under the current law. Glendale, Pasadena and Long Beach are currently considering it. The Board of Supervisors of Los Angeles County just voted to impose a 3% limit on rent increases for the County. As the city of Los Angeles is already under rent control, the new decision affects all of the County that is not an incorporated city (Including the township of Altadena). Be sure to educate your clients, who may be buying in current and POTENTIAL rent control locations of the limitations on future income, that is and will be imposed.