BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Real estate agents and brokers are beginning to utilize virtual assistants (“VA”) to perform a number of tasks. Unfortunately, there can be liability affiliated with the use of VAs. The use of VAs needs to be limited in light of Department of Real Estate (“DRE”) regulations.
A real estate VA is a remote employee or independent contractor who provides administrative, marketing, and transactional support to real estate agents and brokerages. Many brokerages use VAs for administrative tasks such as email, scheduling, organizing files, marketing, transactional support, data entry and management, and property management such as scheduling showings, managing listings, and coordinating maintenance. VAs can be an important part of business and provide support to agents and brokerages at a reduced cost. However, agents and brokers need to be aware of the limitations placed on VAs by DRE regulations.
DRE regulations provide that a real estate license is required when anyone with the expectation of compensation participates in the negotiation of real property for purchase or lease in the State of California. Therefore, the following tasks require a real estate license when performed in exchange for compensation: communicating with clients regarding disclosures, contract terms or any terms addressing or relating to the condition or sale of property; communications with other agents regarding the same topics; drafting documents including contractual or disclosure documents; communicating with agents or clients regarding disclosures; and participating in the disclosure or contract process. A real estate license is not required for the following administrative tasks: scheduling; file maintenance; preparing marketing materials; ensuring documents are in a file by comparing them to a checklist. However, the agent for whom the VA is working is responsible for all activities of that VA and should review all materials before they are delivered to the recipient. The DRE is currently working on a clarification of exactly what activities require a real estate license and which activities do not.
The concern with VAs is that VAs are not local and are not licensed. Many agents and brokers rely upon VAs, and VAs can unintentionally cross the line from unlicensed activities into licensed activities. Agents and brokers need to be cognizant of the responsibilities which can be transferred to a VA and which responsibilities cannot.
Recently, BRM was asked by a client if a VA could do a file review to ensure compliance with DRE regulations and the law. Unless the VA is a DRE licensee with the brokerage, such review will likely not be approved by the DRE.
When hiring VAs, agents and brokers are advised to keep the above-referenced lists of licensed versus unlicensed activities in mind. BRM is aware of at least one real estate salesperson whose license was revoked by the DRE for using an unlicensed assistant to perform licensed activities.
Brokers and agents should also consult with an employment attorney as to whether the VA is an independent contractor or employee under California law. If a VA is paid as an independent contractor, but determined to be an employee, the taxes and penalties to the agent could be extraordinary.
RESOURCES:
CAR Legal Q&A “Unlicensed Assistants” at https://www.car.org/riskmanagement/qa/licensing-folder/unlicensed-assistants
DRE “Guidelines for Unlicensed Assistants Who Work in the Real Estate Industry” at
https://www.dre.ca.gov/files/pdf/faqs/guide_unlic_asst.pdf
PRACTICE TIPS:
- Agents may not use VAs to perform licensed activities unless the VA is a licensed broker or a salesperson licensed with the brokerage.
- Brokers should not retain VAs to undertake file reviews as required by the DRE.
- Agents should recognize that they are responsible for all the activities of the VA. If the VA errs, the agent will be held responsible both from a civil liability point of view and by the DRE.
- Brokers and agent should consult with their employment attorneys before retaining VAs to ensure compliance with California law.