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DRE Warns of the Risks of Supervising “Virtual Brokerages” 
In its Spring 2019 Real Estate Bulletin, the DRE states that the more a brokerage business becomes a “virtual brokerage,” the greater the scope and complexity of a supervisory system of oversight is needed to ensure compliance. 

Specifically, the DRE states that with a virtual file/document review system, a broker would need to have policies, procedures, and systems that:
1) Demonstrate how transactions and documents and files are to be reviewed remotely, and
2) Demonstrate by documentation that their policies are functioning, and that specific transaction/files have been reviewed.

Definite Place of Business Required
The DRE comments that “virtual brokerages” often describe themselves as online, discount brokerages that offer low cost or flat fee commissions, as well as innovative technologies. Despite the growth of the “virtual brokerage” business model, the DRE is at pains to stress that Business & Professions Code § 10162 requires that every real estate broker to have and maintain a definite place of business in California that serves as his or her office for the transaction of business. This is the place where the DRE can meet with a broker to review documents and records, including those maintained electronically, and serve a subpoena duces tecum. The bottom line is the place of business requirement means that a brokerage can never be fully virtual in California.

What is Considered an On-Time License Renewal Submission?
In the 2019 Spring Real Estate Bulletin, the DRE reminds agents and brokers whose licenses are about to expire that they may continue in business, but only upon the timely submission of a license renewal application as follows:
1. All items must be posted marked before midnight of the last day of expiration of the current license.
2. The application must use the correct renewal application form for the type of license being renewed.
3. The applicable renewal fee must be included (See RE 206).
4. Good faith evidence of compliance with continuing education requirements must be included. 
Only licensees who meet all four of the above conditions will be considered to have renewed on time. If so, they may continue to operate under their existing license. 

Elicensing system
But agents do not have to wait until the last minute. Brokers and agents may use the DRE’s elicensing system to renew. Licensees may also mail in the renewal application package as early as 90 days prior to the license expiration date. 

Purplebricks Agent Sues Over Independent Contractor Status
A lawsuit filed in January by a former Purplebricks agent, alleging that she was misclassified as an independent contractor, is claiming as damages all of the compensation and penalties due an employee.  The suit also seeks damages and penalties under the State’s Private Attorney General Act (PAGA) on behalf of “all aggrieved employees.” The PAGA claim is not a class action but a PAGA representative action. In March Purplebricks responded by filing an answer and denying all allegations and providing 47 affirmative defenses. 

The suit relies upon the Dynamex case which was handed down last year. Involving truck drivers, the Dynamex case likely made it more difficult for some employers to classify workers as independent contractors.  However, the possibility of real estate agents being misclassified under the various tests used by courts to determine employment status was anticipated by the California Legislature years ago. Under Business & Professions Code § 10032, the Legislature specifically declared that real estate licensed salespersons and brokers may choose an independent contractor relationship even though they are subject to real estate laws requiring broker supervision and salespersons activity to be conducted under only one broker’s license. See C.A.R.’s description of the Dynamex case and its impact.  

 

 


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