Under California Real Estate Law and the Civil Code, real estate brokers and their associate licenses are regarded as agents and fiduciaries. See Business and Professions Code Sections 10010.5 and following, 10131 and following, 10176 and following, as well as 10177; Civil Code Sections 2079.13 and following, and 2295 and following, along with other relevant laws.
Real estate licenses are recognized as agents and fiduciaries acting on behalf of principals in matters involving real property and transactions secured by real property, as outlined in Civil Code Sections 2079.13 and following (including 2079.24), and 2295 and following (including 2297).
The California Department of Real Estate (“DRE”) requires real estate licensees to comply with all applicable laws and regulations. When the DRE files accusations against licensees, it often includes charges of violating Business and Professions Code Section 10177(d), which means the licensee “willfully disregarded or violated the Real Estate Law.”
Prohibiting consultants and expert witnesses from referencing statutes and regulations for compliance purposes—because doing so constitutes the unauthorized practice of Law—undermines the intent of statutory and regulatory frameworks designed to license real estate brokers and salespersons. These frameworks exist to regulate and guide licensee conduct, protecting the public interest. See, Evidence Code, Section 669(a)(1).
Legal counsel for real estate licensees often tries to block expert testimony or declarations by claiming that referencing statutes or regulations is unauthorized legal practice or improperly presents ultimate legal conclusions. Attorneys should recognize this tactic, especially when admitting expert evidence in trials or Law and motion proceedings. Counsel frequently aims to exclude distinctions, such as between disclosures and fiduciary duties, from being considered as evidence. For example, did the responsible real estate broker and the associate licensees advise the buyer to seek Legal Counsel’s advice before proceeding with the transaction?
Has the buyer consulted with the local building official regarding permits, Certificates of Occupancy, and government approvals? The real estate industry has effectively opposed licensing requirements for generalist home inspectors, resulting in limited regulatory oversight. During the 1970s, real estate and mortgage brokers faced challenges in fully disclosing material facts and investment risks to all parties involved in property transactions, including those who were not direct clients.
For many years, the real estate industry referred to certain principals—usually buyers—who were not actually their principals as “customers.” This terminology was phased out in California during the mid-1980s and by the National Association of Realtors (NAR) in the early 1990s, when it updated its “sub-agency” MLS rules.
By the late 1970s, Harry Miller, Esq. of Miller, Starr, & Regalia was preparing to include the fiduciary duty obligations of real estate licensees in his firm’s well-respected published work, “California Real Estate Law.”
Harry suggested that real estate brokers and their associates’ licenses were required (when performing fiduciary duties) to ensure their transaction principals received adequate advice and recommendations (including the significance and consequences of the disclosures of applicable material facts and investment risks). See, Lyngsch v Savage (1963) 213 Cal. App—2d 729, among other applicable Laws.
The advice and recommendations of the brokers responsible and their associates, as reflected in their licenses, included referring principals to qualified professionals and government authorities as an essential part of their agency relationships and fiduciary duties.