As a real estate broker, you’re likely aware that retaining important records is an essential part of keeping your license in good standing. But as we all know, during busy times it is easy to get behind on recordkeeping or to stay abreast of recordkeeping requirements. Unfortunately, it is not uncommon for real estate brokers to get into legal trouble for improperly maintaining records. Below we’ll show you why keeping good records is essential, give you best practices for recordkeeping, and tell you what to do if you think you need legal help.
Record-Keeping Under California Law
California Business and Professions Code 10148 maintains that real estate brokers must keep all real estate transaction-related documents for three years. It’s important to be familiar with the types of records you should keep so you don’t accidentally throw out a record you are legally required to have in your possession.
The types of records you should keep include:
- Deposit Receipts
- Trust Records
- Canceled Checks
Depending on the circumstances of the transaction, you may need to keep additional documents, so always exercise caution when deciding what to get rid of and when. As a rule, you should keep any documents you execute or obtain during any transaction that requires a broker license. If in doubt, hang onto the record for three years.
In addition, buyers have up to four years to bring action against a seller for a contract breach or other undisclosed defect. The four-year statute of limitations starts on the date of discovery.
Unfortunately, many brokers are unaware that claims can also be brought against them during these four years. If you find yourself in a situation where a claim is brought against you, and you’ve already disposed of important records, it could cause serious problems for your license.
Understanding Digital Document Requirements
If you’ve been practicing for a long time, you should also remember that California law requires you to keep not only official documents but also transaction-related emails, for three years. As of January 1, 2015, real estate brokers do not need to retain text messages, instant messages, or tweets. The only exception to this is if you used these digital mediums to intentionally create a permanent record, in which case you should, by all means, keep them.
Best Records Retention Practices
One of the top benefits of the digital age for real estate brokers is that it makes retaining and organizing records much easier. California law does not require you to keep original copies of records, so scanning documents and keeping digital copies is always an option.
Even if you choose to destroy hard copies of records, by scanning your files and storing your records digitally, you can have peace of mind knowing that your records are properly and safely stored. Make sure your scans are legible and accurate. You also want to be sure to scan records immediately after use, so you always have a copy available.
If you need a place to store your records, the California Association of Realtors has a useful service called zipVault, where you can store unlimited documentation.
When to Seek Legal Help
If you fail to keep any transaction-related records for the full-time period required and it is discovered, the California Department of Real Estate can revoke or suspend your license. If you find yourself in this situation, it is in your best interest to work with a real estate license defense attorney who is knowledgeable in cases like these.
Scott J. Harris has done significant work with real estate brokers and has helped many retain their licenses, even after a recordkeeping issue. We are committed to fighting for brokers’ rights and to getting you the best possible outcome for your case.
To schedule a free consultation, get in touch with us today at 323-794-0701.