Case Study: Protecting a California Brokerage from DRE Enforcement
Case Study: Department of Real Estate (DRE) Investigation Resolved Without Disciplinary Action
Client Background
Our client, a California real estate brokerage, was contacted by the Department of Real Estate (DRE) regarding alleged unauthorized property management activities, potential mishandling of client funds, unlicensed use of fictitious business name and branch office. The inquiry, while presented as a preliminary fact-finding request, raised issues that could have escalated into a formal disciplinary proceeding carrying the risk of license suspension or revocation.
The Challenge
The DRE’s letter of inquiry appeared routine, requesting records and an interview to “clarify business practices.” However, the underlying allegations—unauthorized property management, improper handling of trust funds, and unlicensed activity through a fictitious business name and branch office—fell squarely within the most common and serious bases for disciplinary action under the California Business and Professions Code.
At this stage in similar matters, many brokerages respond to DRE inquiries without counsel—a practice that can lead to inadvertent admissions or incomplete disclosures and escalate regulatory scrutiny. Our role was to intervene early, manage communications, and guide the matter toward a routine compliance closure.
Our Approach
Our legal team immediately took over as the point of contact with the assigned DRE investigator, preventing unsupervised interviews and unvetted document production. We conducted a rapid internal audit of the brokerage’s operations to identify and correct any areas of potential exposure.
We then developed a strategic written response supported by evidence demonstrating:
That no trust funds had been mismanaged;
That no unauthorized property management activity occurred; and
That any use of a fictitious business and branch office was due to inadvertent mistake, not misleading to the public and immediately corrected
In addition, we advised the brokerage on remedial compliance measures, including updates to policies, written supervisory procedures, and documentation standards. These proactive steps demonstrated to the DRE both cooperation and a good-faith commitment to compliance.
The Result
Through early intervention, structured communication, and a carefully crafted response narrative, we were able to de-escalate what could have become a formal enforcement action. The DRE closed its investigation without disciplinary action. The matter did not proceed to an accusation, citation, or formal hearing—saving the brokerage from reputational harm, financial penalties, and potential license jeopardy.
Key Takeaways
Early legal intervention is critical. Even seemingly routine DRE inquiries can develop into serious enforcement actions if handled without counsel.
Most DRE discipline arises from three categories: trust-fund mismanagement, failure to supervise and unlicensed real estate activities
A well-documented response and demonstration of remedial action can neutralize allegations before they evolve into a disciplinary proceeding.
Proactive compliance review during an investigation positions the brokerage as cooperative rather than defensive, often leading to case closure without sanctions and further disciplinary actions.
Practice Area
Real Estate Defense – Regulatory & DRE Compliance
Our Firm Can Help
Our firm routinely assists real estate brokers and agents facing DRE investigations, audits, or compliance inquiries. With strategic legal guidance and early engagement, we can help you protect your license and resolve issues before they escalate.
Contact us:
Phone: (858) 232-1290 or (949) 310-6722
Email us at: info@blakelawca.com or
Visit: www.blakelawca.com to learn more