Criminal Convictions and Real Estate Broker Discipline in California

Updated November 19, 2021

The California Department of Real Estate (DRE) has the authority to discipline people with a real estate license if those licensees have certain criminal convictions. Convictions that trigger disciplinary proceedings include either misdemeanor or felony convictions that are “substantially related” to the functions and duties of a real estate broker (examples include convictions for crimes involving fraud, theft, or violence). Disciplinary action can include real estate license suspension or revocation.

The DRE can also deny a broker license if a license applicant has a criminal history. Under California real estate law, applicants convicted of a crime within seven years of a real estate license application may get denied a license if the conviction was substantially related to brokering work. Further, a criminal conviction, of any age, can disqualify an applicant if the conviction was for either:

• a serious offense (such as murder, rape, or grand theft),
• a sex offense that requires Tier II or Tier III sex offender registration, or
• a financial felony related to real estate brokerage.

If a convicted broker comes under investigation by the DRE, he/she has the right to an administrative hearing before the Department can take disciplinary action.

A hearing is like a mini criminal trial held before an administrative law judge. Both parties can present evidence in their favor. If the Department proves its case by clear and convincing evidence, the judge typically recommends that the DRE take some type of disciplinary action.

The Department can either adopt the judge’s recommendation, or it can modify or reject it.

Our California criminal defense attorneys will highlight the following in this article:

• 1. Who regulates real estate brokers in California?
• 2. What types of criminal convictions trigger discipline by the DRE?
• 3. What does “substantially related” mean?
• 4. Does it matter if a convicted broker is rehabilitated following an offense?
• 5. What can I do to fight for my California real estate license?
• 6. Can I become a real estate agent if I have a criminal history?

1. Who regulates real estate brokers in California?

The Department of Real Estate (DRE) regulates California’s 450,000-plus real estate brokers, realtors, agents, and real estate salespersons.

The DRE’s goal is to protect the public in real estate transactions. As part of its job, the Commissioner of the Department oversees professional licensee discipline in accordance with real estate laws and regulations.¹

Criminal convictions (both felony and misdemeanor convictions) are among the most common reasons for enforcement actions. Action can include license suspension and revocation.

2. What types of criminal convictions trigger discipline by the DRE?

Convictions that are “substantially related” to the qualifications, functions, or duties of a real estate licensee can trigger DRE discipline.²

The term “convictions” includes guilty pleas and guilty verdicts. The word also includes pleas of nolo contendere or “no contest” pleas. The Bureau of Real Estate can even count as a conviction one that has been expunged under California Penal Code Section 1203.4.³

Note that all real estate licensees have fingerprints on file with the Department of Justice (DOJ). If a licensee is arrested, charged, and/or convicted of a crime, the DOJ notifies the Department electronically.⁴

The DRE, then, immediately begins a screening process to determine if the crime is “substantially related” to the functions of a broker, and whether it merits further investigation.⁵

Note, too, that a licensed broker is required to report to the Department any criminal complaint, information, or indictment charging of a felony, a conviction, or disciplinary action. Failure to make a report constitutes a separate cause for license discipline.⁶

3. What does “substantially related” mean?

A “substantially related” conviction is one that brings into question the convicted party’s ability to adhere to and uphold the duties, qualifications, and functions of a real estate broker.⁷

The DRE typically evaluates every conviction on a case-by-case basis. This means it can label almost any conviction as “substantially related,” depending on the circumstances and facts of the case.

With that said, the DRE has said that convictions are “substantially related” in cases involving:

• dishonesty and misrepresentation (including acts of forgery, fraud, bribery, tax evasion, and embezzlement),⁸
• drugs and alcohol (including instances of DUI),⁹ and
• sex offenses.¹⁰

Note that the DRE used to initiate disciplinary proceedings against a broker if he/she was convicted of a “crime of moral turpitude.” However, this is no longer the case. The test is now if a conviction is substantially related to the duties of a licensee.¹¹

4. Does it matter if a convicted broker is rehabilitated following an offense?

Yes. In determining whether and how to discipline a broker, the Department of Real Estate must consider whether the licensee has been rehabilitated from his or her criminal activity.

“Evidence of rehabilitation” includes, but is not limited to, evidence of the following:

• the passage of time since the conviction,
• restitution to the injured party,
• expungement of convictions,
• expungement of sex offender registration,
• substance abuse therapy,
• stability of family life,
• educational courses,
• discharge of debts,
• correction of questionable business practices,
• change in attitude,
• change in social and business relationships, and
• community involvement.¹²

5. What can I do to fight for my California real estate license?

A broker can fight a disciplinary action via a settlement or an administrative hearing.

Note that prior to taking disciplinary action, the real estate licensing board must first file a formal accusation against the licensee. The accusation describes the acts or omissions which justify discipline.¹³

Once the convicted broker receives the accusation, the realtor (or his/her attorney) can try to negotiate a settlement with the DRE to limit the extent of discipline.

If the parties cannot settle the matter, the broker has the right to defend him-/herself against the charges in an administrative hearing before an administrative law judge (ALJ).¹⁴

Administrative hearings are conducted at the Office of Administrative Hearings (OAH).

At the time of the hearing, the Department must prove the charges in the accusation by clear and convincing evidence. This is a lower standard of proof than the “beyond a reasonable doubt” standard used in criminal trials.

The convicted realtor can offer evidence to rebut any of the DRE’s allegations, including testimony from witnesses.

If the Department succeeds in its case, the ALJ typically recommends that the DRE impose a certain disciplinary measure against the realtor. The Department can adopt this recommendation, modify it, or reject it.

Note that brokers have the right to appeal the DRE’s decision by filing a writ with the Superior Court.

If the licensing department decides to suspend or revoke a professional’s license, the broker can try to petition the Board for license reinstatement.

6. Can I become a real estate agent if I have a criminal history?

The answer depends on when the conviction occurred, and the crime convicted of.

The general rule is that the DRE cannot deny someone a real estate license if the party does not have a conviction within the seven years before the date of his/her license application. But if a conviction, and it is substantially related to the duties of a broker, then the Department can disapprove licensure.¹⁵

Note also that the Department can deny a license if the applicant was convicted of any of the following, no matter when the conviction occurred:

• a crime for which the applicant has to register as a Tier II or Tier III sex offender,
• a financial felony related to real estate brokerage, or
• a serious felony, as defined in Section 1192.7 of the Penal Code.¹⁶

Examples of a “serious felony” under PC 1192.7 include:

• murder,
• rape,
• kidnapping,
• mayhem,
• forced sodomy, and
• assault with a deadly weapon.¹⁷

For additional help…

If you are a broker in the State of California, and you are under investigation by the Department of Real Estate, we invite you to contact our criminal defense firm at the Shouse Law Group. Our attorneys provide both free consultations and legal advice you can trust.

Our lawyers also represent clients throughout California, including those in Los Angeles, Orange County, and Beverly Hills.

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