License Types and Broker Supervision

California has specific requirements for how licensees operate and how brokers supervise salespersons.

License Types

Individual Licenses

Corporate and Partnership Licenses

Brokers can operate through business entities:

• Corporation - Must have a designated officer who holds a broker license
• Partnership - At least one partner must be a licensed broker
• LLC - California allows LLCs for real estate brokerages

The designated officer (corporate) or designated broker (LLC) is responsible for supervising all licensed activities.

Broker Supervision Requirements

California law places significant responsibility on brokers to supervise their salespersons.

Written Agreement Requirement

Every broker must have a written agreement with each salesperson that covers:

• Supervision and oversight
• Compensation structure
• Duties and responsibilities
• Termination procedures

Supervision Policies

Brokers must establish, maintain, and enforce written policies for:

1. Review of transactions - How and when files are reviewed
2. Document retention - How long records are kept (3 years minimum)
3. Trust fund handling - Procedures for deposits and disbursements
4. Advertising review - How marketing is approved
5. Training and education - Ongoing professional development

Broker Liability

The broker is vicariously liable for the actions of salespersons acting within the scope of their employment. This means:

• Broker can be disciplined for salesperson violations
• Broker can be sued for salesperson misconduct
• Broker must maintain adequate supervision

Exam Tip: The supervising broker is responsible even if they didn't know about the salesperson's misconduct, if it resulted from inadequate supervision.

Branch Offices

A broker operating from more than one location must:

1. Obtain a branch office license for each additional location
2. Designate supervision - Either the broker or a licensed branch manager
3. Display licenses - The branch license must be displayed at the branch

Branch Manager Requirements

A branch manager must:

• Hold a broker license
• Be designated in writing by the responsible broker
• Provide adequate supervision of branch activities

Real Estate Teams

California requires teams to:

1. Register team names with the DRE
2. Include broker identification in all advertising
3. Identify the responsible broker clearly
4. Not use misleading team names (no "Realty," "Real Estate," etc. without broker)

Team Advertising Rules

All team advertising must:

• Include the responsible broker's name and license number
• Not be misleading about the team's relationship to the broker
• Comply with all DRE advertising regulations

Salesperson Activities

Salespersons may only perform activities under broker supervision:

Permitted Activities:

• List properties for sale or lease
• Negotiate sales and leases
• Solicit buyers and sellers
• Present offers and counteroffers
• Open escrow (if authorized by broker)

Prohibited Activities (for salespersons):

• Operate independently without broker supervision
• Collect commissions directly from clients
• Act as a principal broker in transactions