Builder Beware: Your Next “Buyer” May Be the DRE

The Subdivisions Section of the California Department of Real Estate (“DRE”) has re-instituted a program of visiting residential subdivisions that are under its jurisdiction.  The site inspections are one of several tools the DRE is using to monitor subdivision compliance with the California Real Estate Law and the DRE’s regulations.  You may or may not have advance notice of the visit, so an ongoing compliance program is key.

Some of the things a DRE Special Investigator (formerly known as a “deputy commissioner”) might look for in a site inspection include sales office compliance and common area completion.  In a sales office, the Special Investigator might, among other things, check the following:

  • Whether the sales staff complies with all applicable licensing requirements;
  • Whether advertising materials are consistent with the public report application and comply with applicable law;
  • Whether public reports are displayed;
  • Whether improvements shown on a topographical depiction of the community have been transferred to the homeowners association or their construction has been secured or adequately disclaimed; and
  • Whether the form purchase agreement and other documents distributed to potential buyers are the same as the documents on file with the DRE.

A Special Investigator might also check the status of common area completion to determine whether it is consistent with representations made by the developer to the DRE.

If a Special Investigator finds a violation of the California Real Estate Law or the DRE’s regulations, a Special Investigator might, among other things, issue a deficiency letter for those project files with pending applications and/or cause a complaint to be issued.  These actions could, in turn, result in a real estate licensee being fined or having his or her license suspended or revoked, delays in issuance of new or amended public reports for the project, issuance of an order to cease sales activities, and other penalties.

Reviewing requirements with your sales staff is a good place to begin to ensure compliance with DRE requirements.

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