The D.R.E.’s Department Enforcement Section receives and processes a large number of complaints each year that are investigated and referred to the Department’s Legal Section for disciplinary action.
In many cases, the violations that resulted in disciplinary action could have been avoided if appropriate office procedures had been in place.
The following is a list of the six most common violations of the Real Estate Law that have resulted in disciplinary action by the D.R.E.
- Trust Fund Record Keeping Violations
- Trust Fund Shortage Violations
- Failure to Supervise Violations
- Unlicensed Activity Violations
- Misrepresentation Violations
- Criminal Conviction Violation
Trust Fund Record Keeping Violations
In this Article, we will review some suggested remedies for Trust Fund Record Keeping to avoid this violation.
Trust fund handling and record keeping is one of the most common problem areas. The D.R.E. sees case after case in which Brokers handle trust monies on behalf of others and eitherconvert the monies to their own use, or do not have the expertise to maintain proper accounting records and end up with shortages in their trust accounts. To avoid problems in this area, all real estate Brokers should be familiar with the following laws and regulations thatgovern the handling of trust funds by real estate Brokers.
Section 10145 - General statute governing the handing of trusts funds.
Regulation 2831 - Maintaining columnar records of trust funds received.
Regulation 2831.1 - Maintaining separate records for each beneficiary.
Regulation 2831.2 - Performing monthly reconciliation of trust fund accounts.
Regulation 2834 - Allowing unlicensed and unbonded signatories on a trust account.
Remedy
Deficiencies in the area of trust fund records usually stem from one of two common deficiencies by real estate Brokers.
The most common problem found among Brokers who maintain poor trust fund records is alack of knowledge of what the law requires in the area of trust fund record keeping and a lack of basic bookkeeping or accounting skills. Brokers often attempt to handle large amounts oftrust funds without any specific training in the area. This often results in a trust fund disaster.
Brokers should understand that simply because they are able to handle large amounts of trust funds by virtue of their license, it doesn't necessarily follow that they should. Before accepting any trust funds, Brokers should make sure that they have the proper knowledge and skills necessary to handle and account for the trust funds that are received in their business operations. The level of knowledge and skill that is necessary will vary with the type ofoperation and the
amount of trust funds that are handled. Brokers must be able to recognize the limitations oftheir knowledge and skills as their business operations expand and either get further training orhire professionals with appropriate training.
To read about other remedies for the most common violations, go to dre.ca.gov and view Top Common Enforcement Violations.
