Rules of Professional Organizations Can Protect You

April 14, 2013

Most people are aware that there are laws and statutes in place to keep order in society. There are, however, many types of rules and regulations in place to protect the public. For example, there are regulations and cases which expand upon the law, adding information so it is clear when certain laws are applicable. There are also rules in place for specific professions, such as doctors and lawyers. These rules are also in place to protect the public.

Take for example the case of Nelson v. The Department of Real Estate. In this case, Allen Nelson (Nelson) was attempting to appeal a decision by the Department of Real Estate (DRE) which resulted in his real estate license becoming temporarily suspended. In the original case, the DRE filed an accusation against California Consolidated Financial Services, Inc. (CCFS) and Nelson, the president of the company. CCFS was a licensed real estate broker through Nelson Andrew of its business was finding borrowers and helping them find loans. CCFS charged an advanced fee for its services as well as a finding fee if it succeeded in securing a loan for the customer. Under the DRE’s Business and Professions Code, a real estate agent or licensee is required to place advanced payments in trust accounts, and may only be accessed as it is earned. Breaking this rule is subject to license suspicion. Nelson, tried to claim that the demanded fees were not advanced fees. The fees were listed in the contracts as preparation fees, made with the purpose of providing payment to CCFS for the act of searching for loans and negotiating terms. For this reason, Nelson claimed the fees were not advanced fees.

In deciding the case, the court looked to not only the DRE rules, but also the actions and intentions of the parties. The court found that although the fees were titled as preparation fees, in effect they were actually advanced fees. Part of the reason for this finding is because of evidence from at least two CCFS clients where one client asked for a small loan and had straightforward collateral and the other needed a larger loan and the collateral was made up of multiple properties, yet the preparation fee was the exact same price. Once the court decided that the fee in question was in fact an advance fee, the next issue was whether the money was handled correctly. One of the DRE’s rules regarding advanced fees requires an accounting for advanced fees be provided to a client. This account must explain when the money was used and for which services. The is to allow the client to understand what his or her money is being used for and to keep the real estate licensee honest. Due to the lack of information provide to clients, the court held that Nelson and CCFS improperly held advanced funds making the suspension of Nelson’s real estate license proper.

Sometimes people you decide to work with do not give you all the information you are entitled to, causing you to waste time and money. There are many rules and regulations out there with the intent to protect you but you may not know where to look. This is where an experienced lawyer can be a great asset. If you are looking for an attorney in the Sacramento area, please contact our Sacramento real estate attorney.

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