What happens at a BRE property management audit in California

This blog will provide you some of the main things you need to know if you are facing a real estate property management audit in California (BRE) or Arizona (DRE).

1. What to do when you get the audit letter?

   1. The first thing to do is to not panic 2. Do not call to get upset at the BRE or its auditor. 3. Contact Attorney Steve Vondran to get a free 10 minute case evaluation. We can discuss the legal issues, risks and exposure and formulate a plan of attack. Once retained, we can draft a letter of representation to the BRE (or DRE if the case is in Arizona) and at times we can seek a short extension of time to respond and prepare for the audit.

2. Preparing your documents

   Once you have real estate counsel on your side, we can start reviewing your business practices, and get your documents to together that response to what the BRE auditor is requesting in their letter. We can look at your contracts, and property management folders, trust fund accounting records and other property management documents to help get prepared for the questions and issues we know are coming.. But at this stage we basically get your books and records ready to show.

3. The interview with the real estate auditor

   In order to be fully prepared to meet the auditor, you will want to go though a "mock interview." Having handled a large number of audit cases, I have a good handle on the types of legal questions that you are going to be asked. For example, the broker will be scrutinized about your business practices, corporation status, use of unlicensed DBA's an branch office, use of broker identification #'s of advertising and business cards, certain transaction files may have been the subject of complaint, and these transactions need to be closely reviewed and examined. There will also be questions about unlicensed activity, the types of properties your company is managing, whether or not you have trust accounts, were you keep general control ledgers, separate beneficiary records, and monthly reconciliation records. We can help you see if there is any comingling or shortage of money in the trust accounts. We can advise you on other legal issues that may be present in your case. Once you are done with out mock audit, you will be very prepared for the types of questions you will encounter and this should help put you at ease.

4. What happens next?

   After the auditor spends the first hour or so in an interview of the designated broker, next they will ferret through your real estate files and examine your trust fund account records and practices. This is where a lot of issues can arise. One of the popular legal problems is having a trust fund that is NOT identified as a "trust account" this of course will raise concerns. Having the wrong signors on the trust account is also another common problem as is comingling private and client funds or failing to take out earned funds within 25 days of earning it. These are the types of things that are going to be looked at. Eventually, the auditor will male the auditee sign a broker "non-compliance summary" which basically admits certain violations were found. If there are alot of these the case will often proceed to a formal written accusation. If you are lucky, you might be able to get a cite and fine offer, or a correction letter that closes the case.

5. Getting your case settled without a hearing

   Our firm can review the accusation that might be filed against the broker and the company. We can seek to get a better deal that will limit the impact of the discipline being sought, for example seek to reduce the fines, or reduce the discipline being debated (for example a revocation of the real estate license, suspension, restricted license or other issues. Of course there are times when a broker may want to surrender their real estate license, but we can help save the license by creating a settlement proposal and seek to resolve the case through negotiation with BRE counsel. If the case cannot get settled, we can represent you and your company at a accusation hearing in front of the OAH (Office of Administrative Hearings)