The duty to disclose criminal convictions to DRE and consequences

By
Services for Real Estate Pros with The Law Offices of Steven C. Vondran, P.C. #232337 #025911


Criminal convictions sometimes occur, even to good people.  When a real estate licensee, or applicant for an original real estate license is convicted of a crime (for example rape, arson, robbery, burglary, DUI, shoplifting, embezzlement, etc.) whether a felony or misdemeanor, such persons need to be aware of the need to disclose the conviction at risk of losing the real estate license or facing license disclipline (via suspension or revocation following an accusation) or else having the original real estate license denied.


NEW APPLICANTS FOR A REAL ESTATE LICENSE - CRIMINAL CONVICTIONS.


When applying for an original California Real Estate license, an applicant will want to make sure to disclose any and all prior criminal convictions.  Why?  First, the DRE will probably find out as they conduct a background search, and Second, failing to disclosure may evidence a lack of candor that may result in the ultimate denial of the real estate license you have worked hard to obtain.


The DRE talks about the need to report and disclose criminal convictions to the DRE in many places which can be found on the internet.  In fact, in the above link, the DRE states:


Remedy

The one remedy that should be discussed in connection with criminal convictions is that persons applying for a real estate license should take great care to disclose all past criminal convictions. If the conviction is not disclosed, DRE will find out and the applicant's chances of receiving a license will be diminished as a result of their nondisclosure.


Section 10177(a) of the Califrnia Business and Professions Code addresses the need to disclose for the licensee and give the DRE commissioner authority to refuse to grant a real estate license for non-disclosure of criminal activity (essentially an act of deceit)


The commissioner may suspend or revoke the license of a real
estate licensee, delay the renewal of a license of a real estate
licensee,
or deny the issuance of a license to an applicant, who has
done any of the following, or may suspend or revoke the license of a
corporation, delay the renewal of a license of a corporation, or deny
the issuance of a license to a corporation, if an officer, director,
or person owning or controlling 10 percent or more of the
corporation's stock has done any of the following:
  

(a) Procured, or attempted to procure, a real estate license or
license renewal, for himself or herself or a salesperson,
by fraud,
misrepresentation, or deceit, or by making a material misstatement of
fact in an application
for a real estate license, license renewal,
or reinstatement.


California Business and Professions Code Section 480(c) also states:

(c) A board may deny a license regulated by this code on the
ground that the applicant knowingly
made a false statement of fact
required to be revealed in the application
for the license.

SO WHAT DOES THIS MEAN?  IF YOU ARE APPLYING FOR A CALIFORNIA REAL ESTATE LICENSE, ALTHOUGH YOU MAY BE EMBARRASSED BY A PREVIOUS CRIMINAL CONVICTION INVOLVING A MISDEMEANOR OR FELONY, YOU SHOULD MAKE SURE YOU DISCLOSE IT.  IF YOU ARE NOT SURE WHAT SOME OF THE CRIMES ARE THAT YOU NEED TO DISCLOSE, HERE IS A SHORT LIST OF SOME EXAMPLE CRIMES:


  • Driving under the influence (DUI)
  • Burglary
  • Embezzlement
  • Shoplifting
  • Arson
  • Rape
  • Murder
  • Manslaughter
  • Assault
  • Battery
  • Attempt
  • Solicitation
  • Conspiracy
  • Larceny
  • Writing Bad Checks
  • Carjacking
  • Domestic Violence
  • Grand theft auto
  • Drug crimes
  • Extortion
  • Identity Theft
  • Forgery
  • Fraud
So if you are convicted of one of these crimes, or other crimes, do yourself a favor and disclose this on your real estate licensing application.

What happens if you disclose your past criminal conviction?

The DRE will ask you to explain your conviction in detail.  You may be sent a RE 515 form - CONFIDENTIAL INTERVIEW FORM (AND RE 515 CONVICTION DETAIL REPORT) asking you to explain your felony or misdemeanor conviction.  At some point, you could be denied a real estate license at which point you will have the opportunity to request a hearing in front of the California office of administrative hearings.  At the hearing, you will be required to show your rehabilitation as set forth in the DRE Commissioner Regulations Section 2911.  These factors have been developed by the DRE pursuant to Business and Professions Code Section 482(a).


Scroll down to section 2911 (clicking on the link above) to see the various criteria the DRE will look to in determining whether a license should be issued, (these are the same rehabilitation criteria that must be met by the licensee who seeks to reinstatement of the license).


Here are just a few of the broad points (factors) they will consider (paraphrasing in my own words):


  • Passage of time since conviction
  • Change of attitude
  • Change of social contacts
  • Payment of fines and fees
  • Payment of restitution
  • Completion of probation
  • Stability in family life
  • Discharging debts owed to others (bankruptcy may be a factor looked at)
  • Abstinence from the use of drugs and alcohol
  • Correction of business practices

There is no one factor relied on, and this should be considered a “case-by-case approach,”  which is why we suggest you consider contacting a DRE defense lawyer and California real estate lawyer like our firm.  If you need representation contact Attorney Steve at (877) 276-5084.


It is important to note that under the Commissioner’s Regulation Section 2911 there are two circumstances that will prevent a broker from becoming a mortgage broker (MLO under the NMLS).  These are stated as follows under section 2911 (sections “o” and “p”):


(o) Each of the above criteria notwithstanding, no mortgage loan originator license endorsement shall be issued to an applicant for such license endorsement where the applicant has been convicted of any felony within seven (7) years from the date of his or her application for a license endorsement. This ban is not subject to mitigation or rehabilitation.


(p) Each of the above criteria notwithstanding, no mortgage loan originator license endorsement shall be issued to an applicant for such license endorsement where the applicant has ever been convicted of a felony where such felony involved an act of fraud, dishonesty, a breach of trust, or money laundering. This ban is not subject to mitigation or rehabilitation.


So, in these two instances, you will not be allowed to show mitigation factors to seek to get into the loan brokering business, which now requires the NMLS MLO license.  Note however, that we have been involved in litigation involving what the precise meaning of “fraud, dishonesty, a breach of trust” is.  This is not always an easy question to answer, but you can expect the DRE to take a very expansive view of what these words mean in an effort to protect the public.  Again, if you are denied a license on this grounds, you may want to consider having a California real estate attorney to review your case and perhaps represent you in a OAH hearing.


IF I DIDN’T MENTION IT ABOVE, THE SAME DISCLOSURE RULES HOLD TRUE OF THE APPLICATION FOR THE MORTGAGE LENDING LICENSE THROUGH THE NMLS.  MAKE SURE YOU DISCLOSE YOUR CONVICTIONS, WHETHER FELONY OR MISDEMEANOR AND CHECK THE BOXES THAT DISCLOSE AND ADMIT YOUR PRIOR CONVICTIONS.  FAILURE TO DO SO WILL LEAD YOU RIGHT TO MY OFFICE LOOKING FOR REPRESENTATION.


For those persons who have disclosed a criminal conviction, and filled out the RE 515 form, the DRE may still want to revoke or suspend your real estate license.  The rehabilitation criteria are again examined in this situation, except the DRE will look to Commissioners Regulation Section 2912 in this event.  Many of the factors are the same as 2911.


NOTE:  Following the passage of SB 706 as a real estate professional in California, (broker or salesperson for example) you are required to disclose your criminal convictions to the California Department of Real Estate (“DRE”).  Once this happens, you may get the RE 515 forms, and be back in a position to explain rehabilitative factors as discussed above.


Well as they say - that’s all folks.  Things to take from this (1) stay out of trouble, (2) if you are convicted of a crime, disclose it, (3) if you are applying for a real estate license, disclose all criminal convictions, (4) if you are applying for a NMLS MLO (mortgage loan originator license) then make sure you are honest and disclose all criminal convictions on the application.  In this “information age” it is likely the authorities will find out anyway, and failure to disclose these tings to an agency like the DRE will almost surely result in disaster.


THE FINAL THING I WANTED TO DISCUSS IN THIS ARTICLE IS TITLE 10 OF THE CALIFORNIA CODE OF REGULATIONS SECTION 2910 - CRITERIA OF SUBSTANTIAL REALTIONSHIP TEST:


When the DRE is considering whether a real estate license should be denied, suspended, revoked in regard to disclosing a conviction for a felony or misdemeanor crime (or on the basis of an act described in section 480(a)(2) or 480(a)(3)) the DRE will evaluate whether or the not crime is “substantially related to the qualifications, functions, or duties of a licensee.”  If it is, this may lead toward denial of the license or make it more probable the DRE will try to revoke or suspend your license (the context in which the act was committed is a factor to be “weighed”).  


Again, this is where you may want to consult with a real estate lawyer to analyze your specific case.  Once again, there is a pretty broad net as to what is “substantially related” to real estate activity and what is not.  Here are some of the factors that weigh toward a finding that a crime or act is substantially related to real estate qualifications and functions under Commissioners Regulation 2910:


- The fraudulent taking, obtaining, appropriating or re- taining of funds or property belonging to another person;


- The employment of bribery, fraud, deceit, falsehood or misrepresentation to achieve an end.


- Doing of any unlawful act with the intent of conferring a financial or economic benefit upon the perpetrator or with the intent or threat of doing substantial injury to the person or property of another.


Review the 2910 link above to review all the criterion that the DRE considers under the “substantial relationship” test.


As you can see, even attempt, conspiracy, and solicitation (called inchoate crimes) are covered under the test.


Attorney Steve Vondran is licensed to practice law in California and Arizona.  We are a general business and real estate litigation firm.  We handle DRE audits, hearings, investigations, and arbitration, litigation, intellectual property and general business consulting.  We have offices in San Diego, Newport Beach, Beverly Hills, Fresno, San Francisco, and Phoenix. We help real estate professionals and business owners in and around these areas.  This is an advertisement and communication.  This is not legal advice or a substitute for legal advice.  If you need help contact us at (877) 276-5084.

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Rainmaker
568,197
Hella Mitschke Rothwell
(808) 226-1095 or (831) 626-4000
Hawaii & California Real Estate Broker

Steve: Most people don't have any criminal intent, but they may not think about the dire consequences drinking and driving have. If you get a DUI, your life may be over as you know it.

August 03, 2012 12:16 AM #1
Rainmaker
72,435
Steve Vondran
The Law Offices of Steven C. Vondran, P.C. - Newport Beach, CA
Real Estate Lawyer

Hi Hella,

You are absolutely correct.  Getting a DUI can be devastating on many levels.  One of the biggest things most people don't think about when having a few cocktails, beer, wine, etc then hitting the road, is that if you "accidentally" kill someone, people (MADD etc.) will be likely fighting to see that you do serious jail time.  It is not worth it.  Don't drink and drive.  Pay $50 for the cab!  This also protects your real estate license from issues like those discussed above.  Thank you for your input

Steve Vondran

 

August 03, 2012 09:01 AM #2
Anonymous
Anonymous
rune

If I was convicted of a charge that was a wobbler, which means I was on felony probation , but completed that and the charge was then reduced to a misdemeanor and expunged, how will the DRE treat this?

January 09, 2013 02:21 PM #3
Anonymous
Anonymous
Sha Sa

 

I had a criminal background that was sponged.  I did not disclose it on my NMLS application because I thought I did not have to due to spongement.  I applied for NMLS license after almost a year it has been denied, and my RE broker is also facing a revocation based on the fact that the criminal action was not disclosed once on my Sales person renewal application, and just last year on my broker’s application.   What will happen if I appeal this case? Is it better to voluntarily surrender my license, and after a few months apply for a reinstatement? Or take my chances and appeal hoping that my broker license will not be revoked?  Please help me.

 

March 22, 2013 01:39 PM #5
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Rainmaker
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Steve Vondran

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