How do criminal records impact real estate licenses in California?

The California Department of Real Estate (DRE) has the authority to discipline real estate license holders who pick up certain misdemeanor or felony criminal convictions. Disciplinary action can include a real estate license suspension or revocation.

Here are five key things to know:

1. Convictions that trigger discipline are “substantially related” to a broker’s duties, such as crimes of fraud, theft, or violence.
2. The DRE can deny your license application for convictions in the last seven years substantially related to brokering work.
3. Some past convictions – no matter how old – can be disqualifying if they were serious felonies, Tier II or III sex offenses, or certain financial crimes.
4. If you come under investigation by the DRE, you may have an administrative hearing before any disciplinary action.
5. If the DRE proves its case with clear and convincing evidence, the judge may recommend discipline, which the DRE can then adopt, modify, or reject.

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 I am 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?
• 7. What mandatory disclosures do I have to make to the DRE?

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

DRE prizes honesty. If you are asked about your criminal past, it is best to disclose everything rather than risk them finding your record on their own. They may discipline you based solely on you trying to hide your record.

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 once the judgment has been entered. The word also includes pleas of nolo contendere or “no contest” pleas once the judgment has been entered.³

All real estate licensees have fingerprints on file with the Department of Justice (DOJ). If you are arrested, charged, and 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 you are 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 brings into question your 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 you if you were 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 I am rehabilitated following an offense?

Yes. In determining whether and how to discipline you, the Department of Real Estate must consider whether you have been rehabilitated from your 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?

You can fight disciplinary action through a settlement or an administrative hearing.

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

Once you receive the accusation, you (or your attorney) can try to negotiate a settlement with the DRE to limit the extent of discipline.

If you cannot settle the matter, you have the right to defend yourself against the charges in an administrative hearing before an administrative law judge (ALJ).¹⁴

The Hearing Process

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 with clear and convincing evidence. This is a lower standard of proof than the “beyond a reasonable doubt” standard used in criminal trials.

You can offer evidence to rebut any of the DRE’s allegations, including witness testimony.

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

Note that you 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 your license – or if you voluntarily surrender your license – you can try to petition the Board for license reinstatement one year after the disciplinary action. In order to grant reinstatement, the DRE would have to find that it is not against the public interest for you to have a real estate license.¹⁵

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

The answer depends on when the conviction occurred, and the nature of the conviction offense, including any aggravating factors.

The general rule is that the DRE cannot deny you a real estate license if you do not have a conviction within seven years before the date of your license application. However if there is a conviction, and it is substantially related to the duties of a broker, then the Department can disapprove licensure.

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

• a crime for which you have 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.

If the DRE denies your application due to your criminal record but does not file a “Statement of Issues,” you have 60 days to request a hearing and ask that your application be reconsidered.¹⁷

7. What mandatory disclosures do I have to make to the DRE?

When you apply for a real estate license with the California DRE, you are required to answer the following four questions:

1. Have you ever had a denied, suspended, restricted or revoked business or professional license (including real estate), in California or any other state?
2. Are there any license disciplinary actions pending against a business or professional license you hold at this time?
3. Have you ever been required to register as a sex offender pursuant to the provisions of section 290 of the California Penal Code or any comparable law of any state or governmental unit?
4. Have you ever been ordered to cease, desist and/or refrain from doing an act(s), or from violating a law, rule or regulation by, or cited for a breach of ethics or unprofessional conduct, by an administrative agency or professional association in California or any other state?

In addition, the DRE will run a criminal background check on you based on your fingerprints. Based on the results, you may need to provide more information. The only past records that may escape the DRE’s reach are juvenile convictions and cases sealed through Penal Code 1203.45.

Suppose you currently hold a real estate license from the California DRE. In that case, you must inform them in writing within 30 days of any conviction, criminal complaint, information or indictment charging a felony, or disciplinary action taken by another licensing entity or authority of California or a federal agency.¹⁸

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