California Civil Code section 2079.16 states that buyers and sellers of real estate are advised that California licensed real estate agents and brokers are not qualified to give legal or tax or advice stating: “If legal or tax advice is desired, consult a competent professional.”
A real estate licensee in California has no legal duty to provide warnings, give advice or spot issues in legal or tax areas of a given transaction. A real estate licensee has the necessary training, experience, and license to sell real estate.
Providing legal or tax advice requires training, experience, and licensing for one who is a licensed attorney or certified public accountant in California. Real estate licensees should never get involved in legal or tax areas.
Further, a real estate agent’s duty to his or her client terminates as a matter of law when the transaction ends. In California, there are no post-escrow duties owed to one’s client.
In every real estate transaction, there is the potential danger of confusion by the client that the real estate licensee may be giving tax or legal advice to him or her and is engaging in the unauthorized practice of law.
In California, only attorneys licensed with the State Bar Association are permitted to practice law. The unauthorized practice of law is a crime under Business & Professions Code 6125, punishable by:
- up to one year in county jail and
- a fine of up to $1000
The crime of the unauthorized practice of law in California is not always well-known. Many people are not aware that practicing law—or just representing oneself as a lawyer— without an active bar membership or other authorization can lead to serious criminal penalties in California.
It is very important that as a real estate professional, you advise your client repeatedly in writing – and saved in his or her transaction file – that your retention as either the listing, selling, or dual agent is to sell real estate – and not to give legal or tax advice. That is why an attorney or accountant is retained in a real estate transaction.
Simple and common-sense ways to prevent confusion by your client that his or her real estate agent is giving legal or tax advice are as follows:
- Repeatedly state in emails sent to the client that “California licensed real estate agents and brokers are not qualified to give legal or tax advice. If legal or tax advice is desired, consult a competent professional.”
- Save all emails in your transaction file.
- Offer to provide the client with the names of three or four local attorneys and/or accountants and refer the client to the local county bar association.
- Do not research the law on a given subject for a client.
- Refer the client to numerous third-party professionals in writing on a given problem, such as licensed surveyors, licensed contractors, licensed pest control, termite inspectors and the like.
Be sure you have real estate errors and omissions insurance to protect yourself and your business.
Contributing Author:
Edward McCutchan
Sunderland | McCutchan, LLP
1083 Vine Street, No. 907
Healdsburg, CA 95448
(707) 433-0377
emccutchan@sunmclaw.com
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