California Real Estate Recovery Fund

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The California Department of Real Estate (DRE) is the state agency that issues real estate broker licenses and public reports to individuals (developers).  The DRE has the authority to revoke or suspend licenses and administers a victimís fund known as the Real Estate Recovery Account.

In general, the requirements for payment from the Real Estate Recovery Account include obtaining a final civil judgment or arbitration award, or a criminal restitution order against the licensee. The judgment, award or order must be based on intentional fraud or conversion of trust funds in connection with a transaction requiring a real estate license. The victim must make a reasonable search for the licensee's assets, and, if any, a reasonable effort to collect on the judgment, arbitration award or restitution order from those assets to satisfy the judgment. In addition, the victim must name as a defendant and make a reasonable effort to collect from all other parties involved in the transaction that may be liable to and able to pay the victim.

An application for payment must be submitted to the Department within one year after the judgment, award or order becomes final. A copy of the application and required notice must be served on the judgment debtor / licensee, who is given an opportunity to respond to the allegations in the application and object to payment of the claim.

Once filed, the application is reviewed to determine if all required information has been submitted so that a decision can be made whether or not to pay. That review normally involves a series of letters between the Department and the applicant, resolving questions and obtaining necessary supporting documentation. The applicant will be notified in writing of the initial deficiencies in the application within 15 days of its receipt by the Department.

Once the application becomes complete, the Department must issue a decision granting or denying payment within 90 days. If the application is granted, the applicant will be paid an amount for his or her actual and direct loss in a transaction, up to a statutory maximum of $50,000 per transaction, with a possible total aggregate maximum of $250,000 per licensee.

If an application is denied, the applicant has the right to refile the claim in court. When there is a decision to pay, the judgment debtor / licensee has the right to file a writ of mandamus to challenge the Department of Real Estate's decision to pay (payment results in the automatic suspension of his or her real estate license until the amount paid is repaid in full plus 10% interest).

In cases where the aggregate amount of multiple claims against a licensee exceeds the $250,000 licensee limit, the Department must file an action in court to prorate payment among all eligibleclaimants. Whenever a Recovery Account application matter ends up in court (a refiled application, a writ or a proration), the Department is represented by the California Attorney General's office to defend the decision to deny or pay the claim or to properly distribute the funds among multiple applicants.


The attorneys with Michael T. Chulak & Associates represent plaintiffs and defendants in mediations, arbitrations, and litigation throughout California.  Call us for a no cost initial consultation.




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