Unlicensed Activity Results in Real Estate Licenses Being Revoked
Unlicensed brokerage employee offered lease-to-own agreements and brokerage failed to maintain specialized mobile home license.
Takeaways
- Review state and local license requirements, especially if engaged in specialized practice.
- Consider implementing policies that ensure only licensed individuals engage in brokerage activities that require a license.
- Contact your jurisdiction’s real estate commission with any questions regarding licensure requirements in your practice area.
- Be aware of potential liability arising out of brokerage management of properties that are under alternative ownership.
- Consult legal counsel when licensure questions arise.
On October 17th, 2022, the California Second District Court of Appeal affirmed the decision of the California Department of Real Estate to revoke the real estate licenses of a realty company and its broker of record for allowing an unlicensed individual to offer real estate sales contracts, acting as a mobile home dealer without proper licensure, and allowing occupancy in mobile homes lacking proper permits.
Nijjar Reality, Inc. (“Nijjar”) and its broker of record, Everet Miller (“Miller”) operated and managed the Four J’s Trailer Park (“Four J’s”) in Oildale, California, which was owned by a separate entity. Following a fire, the California Department of Real Estate (“the Department”) investigated Four J’s and in 2018 filed allegations against Nijjar and Miller for violations of the California Real Estate Law, Housing and Community Development regulations, and provisions of the Health and Safety Code.
At an adjudicative hearing before an administrative law judge, the Department presented evidence of three lease-to-own mobile home contracts executed by an unlicensed person who represented Nijjar in the transactions. The contracts, each titled ‘Rental Lease Agreement with Option to Purchase,’ included the monthly rent price, the duration of the lease, and a clause granting tenants the exclusive right to purchase the mobile home during the duration of the lease. The judge found the unlicensed individual was employed and compensated to perform real estate activities in violation of California Real Estate Law.
Additionally, the administrative law judge found that Nijjar improperly operated a place of business without a legally required mobile home dealer license. Evidence also revealed Nijjar allowed residents to occupy several mobile homes at Four J’s that lacked the requisite utility inspections and permits in violation of the Health and Safety Code. The judge ruled there was sufficient cause to revoke Nijjar’s and Miller’s licenses, and the real estate commissioner adopted the judge’s findings and order.
After a trial court denied Nijjar and Miller’s petition for review of the decision to revoke the licenses, Nijjar and Miller appealed to the Second District Court of Appeal. Miller and Nijjar argued the revocation decision was in error because the contracts executed by the unlicensed person were leases, not sales agreements; and the provisions requiring an additional mobile home license were inapplicable because Nijjar did not maintain a place of business at the Four J’s Park. Nijjar and Miller also argued only the owner of a mobile home park can be liable for permitting occupancy in homes without the required permits and inspections.
The Court of Appeal found substantial evidence supported the administrative law judge’s findings and subsequent denial by the trial court in revoking Nijjar and Miller’s licenses.
While the parties disputed whether the lease-to-own agreements constituted a “sale” or “lease,” the Court of Appeal held the distinction was “beside the point” because the applicable statute encompassed “offer[ing] to sell” a mobile home, and an option to purchase is an irrevocable and continuing offer to sell. The court found the unlicensed person offered to sell the mobile homes, therefore Nijjar’s employee engaged in unauthorized real estate activity.
Next, the Court of Appeal analyzed whether Nijjar’s presence at Four J’s as manager was sufficient to constitute maintaining an “established place of business.” Nijjar argued it did not maintain a place of business at Four J’s, citing a legal definition of “established place of business” that involves the place where books and records are kept. The Court of Appeal found this argument unpersuasive, citing the legislative intent of the statute to limit circumstances in which a broker could offer multiple mobile homes for sale.
Finally, the Court of Appeal held Nijjar and Miller, even as non-owners, may be liable for allowing tenants to occupy un-permitted and unapproved mobile homes, citing a Health and Safety Code provision expanding the scope of liability making it unlawful for “any person” to allow occupancy of a non-compliant mobile home.
The Court of Appeal affirmed the decision to revoke the licenses of Nijjar and Miller, and the Department recovered its costs on appeal.
Miller v. Dep’t of Real Est(link is external)., 84 Cal. App. 5th 141 (2022)