DRE Bulletin Digest: Winter 2023

Welcome back to your quarterly real estate industry roundup! The Winter 2023 edition of the California Department of Real Estate (DRE) Bulletin starts the new year with a reminder on updated licensing requirements, new legislation and more.

Scroll ahead for firsttuesday’s digest of DRE notices for real estate professionals in Q1 2023.

Commissioner’s Update

DRE Commissioner Doug McCauley begins the first bulletin of the year with a behind-the-scenes look at licensing exams.

Seasoned licensees know the DRE’s exams do not fully prepare newcomers for the day-to-day tasks of selling homes. The Commissioner admits as much in the Bulletin, explaining exam questions are designed to evaluate for entry level competency with Real Estate Law.

But the function of the DRE’s licensing exams is better understood through the lens of consumer protection. Just as the DRE enforcement team protects consumers from agent malpractice, exams ensure only those with the knowledge and skill to adhere to relevant laws and regulations perform transactions.

The design process of these exams is as rigorous as the questions themselves. Thus, the Commissioner invites industry subject matter experts to volunteer their time and expertise to refine exam questions for the benefit of licensees and consumers alike.

Also in the spirit of consumer protection, the DRE reminds licensees of the changes to pre-license education per the newly-signed Senate Bill (SB) 1495. Starting January 1, 2024, all sales agents and brokers applying for the exam are required to complete the revised real estate practice course including education on:

firsttuesday shares the DRE’s commitment to a more equitable real estate industry and housing market. Click the related article ahead for our breakdown of the new requirements and order the Implicit Bias and Fair Housing Course for your license today.

Related article:

Implicit bias and fair housing soon required for licensing courses

New housing laws for 2023-2024

Along with SB 1495, the bulletin highlights nine new real estate laws taking effect in 2023 (or by the end of 2024).

Active agents and brokers need to keep track of:

• Assembly Bill (AB) 1410 (effective 2023) — which prevents the homeowner’s association (HOA) from prohibiting members and residents from discussing common interest development (CID) and any concerning issues on social media;
• AB 1837 & AB 2170 (effective 2023) — which builds upon 2020’s Senate Bill (SB) 1079 to ensure large-scale investors aren’t first in line to profit during the upcoming foreclosure wave;
• AB 2503 (effective 2024) — which requires the California Law Revision to examine the consistency of terminology used to describe parties in an agreement, lease, or contracts for real estate property;
• AB 2559 (effective 2023)— which gives landlords the option of accepting RTSRs from prospective tenants;
• AB 2745 (effective 2023) — which requires non-licensees applying for a broker’s license to show the required two years of general real estate experience accumulated within the five-year period prior to the exam application date;
• AB 2960 (effective 2023) — which ensures disclosure requirements in effect on the date parties enter into an agreement apply;
• SB 1005 (effective 2023) — which revises the provisions surrounding the sale of a conservatee’s present or former personal property, such as the action for partition; and
• SB 1017 (effective 2023) — which requires landlords to compensate tenants between $100 and $5,000 when they violate a tenant’s right to terminate their lease due to abusive living conditions.

Related article:

California real estate: 2022 in review and a forecast for 2023

Don’t be shady, be fiduciary!

Continuing the vein of consumer protection, the DRE reminds Mortgage Loan Originators (MLOs) of their professional commitments to borrowers.

Just as agents and brokers are beholden to the client, MLOs are to honor their fiduciary duties to the borrower.

Under the Loan Originator Compensation (LO Comp) Rule, an MLO is violating their fiduciary duty to their client when pursuing higher interest rates in order to receive a higher commission. An MLO who puts their own monetary interest above the interest of their client will face consequences enforced by the DRE. Learn more about the LO Comp Rule.

Steering borrowers into mortgage products with unfavorable terms is a violation of the licensee’s duties. Impartial counseling ensures consumers adequately understand the mortgage products they are buying.

Related video:

Additionally, brokers are to disclose all costs and expenses regarding the loan to their client and refrain from taking any undisclosed compensation.

Yearly report on unclaimed property

When personal property is unclaimed and has had no activity (usually three years), California law requires it be reported to the State Controller’s Office (SCO).

Real estate is not included in unclaimed property. However, unclaimed property does include:

• payroll and commissions (needs to be dormant for a year);
• savings and checking;
• trust accounts;
• accounts payable or receivable;
• rent deposits;
• vendor payments; and
• costumer refunds.

Further, the DRE outlines the five steps to reporting unclaimed property. To report unclaimed property, banks, insurance companies, and corporations need to:

• identify the unclaimed property — search through records and confer with SCO’s Dormancy Periods Table and Property Reporting Cycles to determine reportability;
• carry out due diligence by mailing notices to owners — confer with SCO’s Guide to Due Diligence;
• submit a notice report to SCO before November 1^st — confer SCO’s Notice Report checklist before submitting;
• respond to owners’ inquires and reunite property with owner even when an owner responds after the SCO notification; and
• submit Remit Report and Remittance between June 1^st and June 15^th — this will officially transfer the property to the Controller’s Office.

Additionally, when brokerages have brokerage trust accounts bearing unclaimed funds, they need to make a good faith effort to:

• reconcile trust accounts regularly;
• return funds to the owner; and
• report to the SCO after the dormancy time period has expired.

Learn more about reporting unclaimed property.

Related video:

Preventative care for sales agents and brokers

To bring the bulletin all the way home, the DRE reminds agents and brokers of their fiduciary duty to their client once more — this time focusing on the final leg of home transactions.

Brokers and agents are to assist their clients before and after escrow is opened. They need to explain the necessary disclosures and any documents their client is to sign. As you guide clients through one of the most important purchases of their lives, take the time to ensure they understand their rights and responsibilities as homeowners.

When clients are properly informed, the DRE enforcement team has no reason to knock on your door.

Related article:

Brokerage Reminder: When in doubt, disclose – always!

Visit the DRE website to download the full Winter 2023 DRE Bulletin and sign up for the Quilix newsletter to receive the next DRE Bulletin Digest in your inbox!