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Alert – Be Cautious in Undertaking Property Management Responsibilities

Rentals are becoming a larger part of the residential real estate market. As a result, many agents are moving into managing property. Although it seems like a natural fit for residential real estate agents, it may be much more complicated then it initially appears.

Agents interested in undertaking property management services are encouraged to educate themselves in this area, particularly, with regard to landlord-tenant laws and trust fund regulations. The California Association of Realtors offers courses in property management, which agents interested in this field are encouraged to attend. Agents are also encouraged to study and understand the regulations pertaining to trust fund maintenance.

The California Bureau of Real Estate (“CalBRE”) appears to have increased its audit activity, with a focus on property managers. CalBRE takes trust fund violations very seriously and will prosecute agents for violations, particularly, if there are discrepancies in trust fund accounts or comingling.

Property managers should also review their insurance policies to ensure that they are properly insured for their activities. Insurance should include errors and omissions insurance. (Many standard errors and omissions insurance policies do not include property management activities. However, such insurance is easily available, upon request of the insurance company.) Property managers should further ensure that they have appropriate liability insurance.

Notary Issues

There have been numerous situations recently involving stolen notary stamps and forged grant deeds.   To help minimize this problem, it is suggested that sellers be advised to have the grant deed signed and notarized at the escrow company handling the transaction.   Of course this is not always possible and the seller cannot be required to have the documents notarized at the escrow company.   In the event that the seller is going to have the grant deed notarized somewhere other than the escrow company, it is suggested that unless the listing agent is certain of the seller’s identity, that the listing agent make every effort to provide a reputable notary to notarize the grant deed.   The combination of an unknown seller and an unknown notary opens the door for the possibility of a forged deed that is then fraudulently notarized.   Keeping vigilant with regard to this issue may help avoid a major legal entanglement.

Court Held that Revocation of a Real Estate License Was Not Authorized Where the Salesperson’s Conviction Was Dismissed

In Ryan-Lanigan v. Bureau of Real Estate, a California appellate court held that a revocation of a real estate license was not statutorily authorized where the salesperson’s misdemeanor hit and run conviction was dismissed. In Ryan-Lanigan, a salesperson was charged with a misdemeanor hit and run with property damage. She pleaded no contest and was convicted. The California Bureau of Real Estate (“CalBRE”) sought to revoke her license based on the conviction. Ryan-Lanigan moved to withdraw her plea. The trial court granted the motion and accepted her no contest plea to a violation of basic speed law and dismissed the hit and run charge in the “interests of justice.” The signed order of the trial court also indicated that the conviction was sent aside as of the date of the entry of the plea. Notwithstanding, CalBRE revoked her licensed based on the hit and run conviction.

The agent petitioned the trial court. The trial court entered judgment in the salesperson’s favor and ordered CalBRE to set aside the revocation and remanded the matter for reconsideration. CalBRE appealed contending that the revocation of the license was authorized under Business and Professions Code §10177 despite the plea withdrawal and the set aside of the conviction. The court of appeal affirmed the trial court’s ruling, holding that B&P §10177 did not authorize the revocation of Ryan-Lanigan’s license because the provision does not allow discipline when there has been a dismissal unless the dismissal is pursuant to an expungment.

CAR Is Sponsoring A Bill To Address Squatters In Real Property

The California Association of Realtors (“CAR”) intends to sponsor legislation to address the unlawful occupation of residential property by squatters. Unfortunately, there has been a rise in the number of properties occupied by squatters who have knowledge of California eviction laws. There are currently no laws designed to assist homeowners and law enforcement officials with removing squatters from vacant properties in a timely manner. As a result, CAR has sponsored legislation specifically addressing the unlawful entering or possession of real property, as well as making it a felony to refuse to leave property when requested to do so by an owner or an owner’s representative.

CalBRE Can Discipline a Licensee for Altering a File It Requests

Effective January 2, 2014, the California Bureau of Real Estate (“CalBRE”) can suspend or revoke a license of any licensee, if the licensee knowingly, alters, destroys, conceals or mutilates any of the records that the CalBRE requires the licensee to maintain. If a licensee receives a request for documents from the CalBRE, it is recommended that the licensee speak with his or her attorney as soon as possible.

Homeowner Charged with Attempted Murder after Attempting to Shoot Property Manager

In an upscale neighborhood in Northern California, a property owner was sued by a landlord for failing to pay his rent. The court issued an order requiring him to vacate the premises. When the property manager served the order, the homeowner shot him through the front door and narrowly missed a deputy from the Contra Costa County Sheriff’s Department. That homeowner was arrested and was recently charged with attempted murder. An arraignment hearing has been scheduled for January 31, 2014.

Given volatilities with evictions and foreclosures, real estate agents and property managers are advised to be cautious in dealing with homeowners under these circumstances.

Three Real Estate Agents/Investors Plead Guilty to Charges of Bid Rigging at Public Foreclosure Sales

Three real estate agents/investors in Northern California recently accepted agreements to plead guilty to conspiring to commit mail fraud and bid rigging at public foreclosure sales. The U.S. Department of Justice filed charges in Federal Court against these investors alleging that they agreed between themselves that on certain properties, they would not bid against each other and thus, ensure lower sales prices for the properties. The three could receive up to 40 years in jail and multimillion-dollar fines.

The Department of Justice has further announced that 43 people have now pled guilty as a result of ongoing federal anti-trust investigations into fraudulent activities relating to Northern California public real estate foreclosure auctions.

Teenager Receives $5.7 Million in Premises Liability Case

Plaintiff, a teenager, was drinking with her friends and fell out a window. She suffered multiple skull fractures and traumatic brain injury. Plaintiff claimed that a contractor had replaced the windows, which had fixed bottoms to prevent falls, with large sliding glass windows that were low to the ground. Plaintiff claimed that the installation of such windows was negligent. She also claimed that the owner of the apartment complex had been warned of the potential dangers of the low window sills, but failed to address the issue. Defense counsel claims that the fall was caused by the plaintiff’s drinking and that the windows met requirements of the Building Code. The parties settled for $5.7 million with the contractor paying $950,000 and the owner of the apartment building pay $4.75 million.

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