The Meaning of a “Restricted” Real Estate License

To understand the effect a restricted real estate license will have on your real estate career, you must first understand the rights associated with an “un”restricted real estate license.

Unrestricted Licenses Are Your Property:

Your license to practice real estate, either as a real estate sales broker or agent, is considered to be a piece of property under the law.  As such, the license gets the same protection all property gets as guaranteed by the United States Constitution.  As you may remember from social studies class, the 5th amendment of the Constitution forbids the government from depriving you of “Life, Liberty or Property without Due Process of Law.”  What this means is that the state of California, through the Department of Real Estate (DRE), cannot take away or suspend your license to work in real estate without first notifying you of its intention to do so AND providing you with an opportunity to defend your right to the license.  Both the notice and the opportunity to be heard must occur before the DRE can take your real estate license away.

Cause:

However, this does not mean your right to your real estate license is absolute.   The DRE is still entitled to enforce certain regulations and standards relating to your status as a real estate licensee which may result in the issuance of a restricted real estate license.  Misrepresentations to the department, negligent acts or dishonest acts amid a real estate transaction are just a few examples.

Additional situations which might also result in the initiation of a disciplinary action leading to a restricted real estate license are:  conduct demonstrating  a lack of honesty and integrity, a felony or misdemeanor conviction that is deemed to be “substantially related” to the qualifications, functions, or duties of a real estate licensee.

Effect:

An agent with a restricted license can do all of the same tasks as a regularly licensed salesperson, but has lost the property right he or she formerly held to the license.  This means that the license could be suspended without a hearing leaving the licensee unable to work in real estate until after a formal trial occurs and there is a final decision in the matter.

For example, the DRE will suspend a restricted license prior to a hearing if:

  1. the restricted licensee is convicted of a crime substantially related to his or her fitness or capacity to act as a real estate licensee; or
  2. there is satisfactory evidence that the restricted licensee has violated provisions of the California Real Estate Law, the Subdivided Lands Law, Regulations of the Real Estate Commissioner, or conditions attaching to the restricted license.

Additionally, restricted licenses are sometimes subjected to certain conditions and limitations.  Typically a restricted licensee will need to:

  1. take and pass a continuing education course within nine (9) months; and
  2. in the event of an arrest, the licensee must notify the Department within 72 hours by sending a certified letter to the DRE.

Restriction Removal:

Lastly, the restriction is not automatically removed from your license; you must take affirmative steps to have the restriction lifted.  Furthermore, the petition process is not a speedy one.  It can take anywhere from 6 to 24 months for the DRE to review your petition to remove the restriction.  So realistically, the restriction, and thus your loss of property interest, can remain on your license for longer than you might think.

*Please note: This article refers to the current rules of California’s Department of Real Estate.  If you have been disciplined in another state, the real estate laws of that state will control.

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