Complaints to the Colorado Real Estate Commission or DORA, against a Real Estate Broker, must be handled with extreme care and significant detail.
A cardinal rule is to hire competent and experienced counsel practically the same day the DORA complaint is received by the Broker. The Broker is normally not able to assess the severity, process and procedure to properly handle such a complaint.
OVERVIEW – DORA:
The Department of Regulatory Agencies (DORA) is the umbrella administrative agency in Colorado that supports and hosts approximately 41 various Divisions, Boards and Commissions. The Division of Real Estate (DRE) is one of the primary agencies under DORA. The DRE over sees and administers programs and functions for (1) Colorado Real Estate Commission (2) Board of Real Estate Appraisers (3) Board of Mortgage Loan Originators (4) Conservation Easement Program (5) HOA or Home Owner Association Information Office.
This article focuses on the DORA complaints filed with the Division of Real Estate for the Colorado Real Estate Commission when lodging or filing a complaint against a Colorado Real Estate Broker. The DRE’s web site may be accessed by going to the following URL: http://www.dora.state.co.us/real-estate/index.htm
1. Complaint filed.
A complaint may be filed by anyone (member of the public, buyer, seller, landlord, tenant, another broker, appraiser, lender, mortgage loan originator, or the Division of Real Estate). The Division of Real Estate (DRE), on behalf of the CREC, may institute an investigation on its own, i.e., on its own motion a complaint may be lodged against a Broker by the Colorado Real Estate Commission. Complaints may be mailed in with copies of all pertinent documents, or more conveniently to the public, and more common today, by filing a “complaint” on-line via the DRE web site. http://www.dora.state.co.us/real-estate/Complaints/Complaints.htm
2. Complaint Reviewed by DRE – Real Estate Broker Lead – Investigations.
The complaint is reviewed by the Real Estate Broker Lead – Investigations handling the respective complaint for the DRE including real estate brokers. The supervisor determines that the CREC has jurisdiction in that a potential violation of the Real Estate Broker License law was violated. See, Section 12-61-113, C.R.S. There are some instances when the Commission or DRE will inform the complainant that the CREC has no authority to be involved. For example, a buyer of a new home has problems with the house. A complaint of this nature will not go far when the consumer wants to have the house fixed due to the defect. This is especially the case if there is no basis or allegation of fraud, misrepresentation and the like by the builder (even if the builder holds a real estate broker’s license).
3. Complaint sent to Broker Associate and Brokerage Firm.
A copy of the complaint will be sent to all the named real estate broker associates and their Supervising Broker. A Response is required to be filed by the Broker Associate and Brokerage Firm. Usually the Response is to be filed within 14 days from the date of the transmittal letter. It is possible at times to obtain an extension of time to respond. It has been my experience that an improved result will normally be obtained when the Broker Associate and the Brokerage Firm immediately hires an attorney to represent the Broker Associate and Brokerage Firm. Ideally, the call to the attorney will be made the same day the DORA complaint is received.
4. Response by Broker Associate and Brokerage Firm.
It is critical that a well thought out, thorough Response with all documentation be prepared and submitted. Some guidelines that must be followed by any Respondent include the following: Tell the truth; do not lie or stretch the truth. Do not ignore the DRE, CREC or investigator assigned to the case. Failure to respond is a separate violation and penalty. Do not wait until the last minute to respond. Allow sufficient time to arrange a meeting with the attorney and allow adequate time for the lawyer to meet with you to review and study the facts and documents as well as the complaint.
The DORA letter normally encloses a copy of the “complaint”, usually a letter from the Complainant, and instructs the Respondent to submit a response no later than 21 days from the date of the letter. You should anticipate that the attorney would like to have a minimum of 10 days to meet with the client, review all documents, facts and prepare the Response. The DORA letter will be sent to the address of the Brokerage Firm on file with the DRE for the Broker Associate. The Broker Associate needs to be sure they check in at the “office” or timely have the Brokerage Firm staff inform the Broker Associate that an “envelope” (“complaint”) was received from DORA or the DRE. This is especially important for many Broker Associates who conduct a majority of their work from their home office. The letter is not sent to the Broker Associate’s home or residence address, rather it is mailed to the office address at the Brokerage Firm on file with the DRE. This is another reminder to submit change of address to the DRE when the office address changes or the main office relocates. Once the Broker Associate receives the complaint letter, the Broker Associate should immediately contact the attorney the Broker desires to hire to defend the Broker Associate.
Many times I have seen the brokers prepare and file a Response “pro se”, that is on their own rather than hiring a lawyer. The lawyer should review all the facts and documents. The Response will be retained in the Investigative file of the DRE when they investigate the matter. It is not uncommon for the DIY (Do it Yourself) Response to be prepared so it is 1) not responsive to the complaint, 2) includes information not relevant or pertinent in the investigation and 3) does not address matters the investigator is keenly interested in seeing (whether stated in the complaint or not). It is the author’s recommendation in handling many complaints filed with DORA over the years that it is a mistake for the Broker Associate or Brokerage Firm to handle the matter on their own to save some money. The Broker’s livelihood and reputation are at risk. Normally what is stated (or failed to be set forth) in the Response will not be able to be undone. The Response sets the scene for the remainder of the disciplinary process. The Response is truly part of the investigative and disciplinary process. Unfortunately, many brokers have a view or understanding that the Response is merely a preliminary step before anything else happens. While it is true that it is early in the process, the Response is one of the most critical stages of the disciplinary case and presented correctly, may result in an early conclusion of the case. An incorrect Response ³may adversely affect or substantially harm the Broker’s case. There is no “delete” or “undo” button once a Response is sent to the DRE. A Response prepared by an attorney increases the likelihood of a resolution as favorable to the Broker as possible.
5. Investigator Reviews Response.
The Investigator will review the Response and determine if further investigation is necessary, obtain confirmation whether the statements in the Complaint and Response are correct and can be confirmed. In a number of the DORA complaints where I have represented Brokers, it has been very helpful in supplying a properly organized and complete email chain. Lately, a number of the Broker and Complainant email chains and exchanges have been very persuasive in confirming the Broker’s perspective of what was said or not said and in helping the Broker’s case to be made. The Investigator will review documents the lender has, title insurance company, other brokers involved in the transaction as well as Buyer and Seller.
6. Internal Review and Draft Investigative Report.
Once the Investigator has concluded he or she has all the pertinent facts, normally a draft Investigative Report will be prepared that is reviewed only internally within the DRE, not shown to or shared with the Broker. The Investigative Report is then finalized.
7. Investigative Report and CREC.
Once the Investigative Report is completed, and any further review by other DRE staff, for example, Chief of Enforcement, or in some cases by the Assistant Attorney General (AAG) assigned to the CREC is completed, the Investigative Report, (normally without exhibits such as Contract to Buy and Sell, Exclusive Right-to-Sell Listing Contract, etc.), is then submitted to the Colorado Real Estate Commissioners a couple of weeks prior to the next scheduled bi-monthly Commission Meeting. Accordingly, the CREC does not receive the entire file; rather, only the “summary” viewed through the eyes of the Investigator who wrote the report.
For budgetary reasons the Commission and the other Boards are now meeting every other month. So, depending on when the report is completed it will normally be 1 to 2 months before the Commission will have the particular matter on the CREC Agenda. There are some instances where the matter could be heard with less time delay, but that is the exception rather than the rule.
Once the matter comes on the Agenda in the CREC meeting, the Investigations and Compliance Officer (ICO) or Chief of Enforcement (COE) normally summarizes the case for the Commission, as all Commissioners should have already received and reviewed the Investigative Report. At times the ICO or COE makes a recommendation as staff to the Commissioners on suggested discipline and sanctions that could be offered to the Broker Associate as a proposed Stipulation. The Commission quite often adopts the recommendation of staff, but in other cases, especially if the Commissioners view it differently than staff, after asking questions of the Investigator, the Commission votes on whether they want the matter sent over to the AAG’s office to prosecute or if a proposed Stipulation, commonly known as an ESP (Expedited Settlement Procedure) will be issued. The Commission may also ask questions to the Investigations and Compliance Officer or Chief of Enforcement and at times the Assistant Attorney General (AAG).
8. Proposed Stipulation or Expedited Settlement Procedure.
Once the Commission votes to direct staff to send an ESP with the Investigative Report to the Broker Associate, it is normally sent later in the week or the following week to the Broker (at the Brokerage Firm address).
If the ESP is found to be acceptable to the Broker Associate, the Broker agrees to it by accepting the proposed Stipulation (that attaches a copy of the Investigative Report). The Broker may also reject it or make a counter proposal. The Broker is required to sign and return the ESP within 10 days, if the Stipulation is agreed upon.
9. Counter Offer to ESP.
In most of the cases I have handled, there are one or more changes I suggest to the client and present to DRE staff, normally the ESP Settlement and Enforcement Officer who then reviews the counter offer and some discussion (negotiation) ensues. Many of the changes are quite significant and important to the Broker to have accepted. The ESP Settlement and Enforcement Officer normally does not have the authority to decide whether to accept or reject the counter offer, provided there is a substantial modification from the proposed Stipulation. Rather, the Settlement Officer will present the counter offer to the Commission at the next CREC meeting. The practice has developed that counter proposals are reviewed in “Executive Session”, where the public is not allowed to be present, nor staff other than the Director and certain other staff as the ESP Settlement and Enforcement Officer, AAG and the Commissioners. If the CREC concludes to accept, reject or at times tell the Respondent what will then be acceptable, the revised ESP will then be supplied to the Broker and if counsel is representing the Broker, it will be sent to the attorney.
10. Acceptance of ESP.
If an acceptable ESP is accomplished, it must be signed by the Broker and returned to the DRE. The Director or one of her designee’s will sign it on behalf of the CREC. A fully executed copy will then be returned to the Broker and the Broker’s attorney.
11. Case Sent to Assistant Attorney General (AAG).
In cases that do not settle through an ESP or Stipulation for Diversion, the matter will be referred to the AAG to prepare a Notice of Duty to Answer, Notice to Set, Notice of Hearing and Notice of Charges against the Broker.
12. Administrative Law Court.
A proceeding in the Administrative Law Courts before an ALJ, in essence is a lawsuit. Rather than being tried to a jury or in the civil courts (District Court or County Court) it is an Administrative License Law Proceeding. The process and procedure is contained in another set of rules called the Administrative Procedures Act (APA). The APA controls and dictates how the Administrative Law Judge (ALJ) is to handle a case. The Administrative Law Court system incorporates the Colorado Rules of Civil Procedure similar to a civil proceeding. The ALJ cannot make a monetary award. Rather, the ALJ can only make an Initial Decision and suggest discipline be imposed that the agency (CREC) is authorized by law to impose. This will only occur after the entire litigation process has been completed including the Evidentiary Hearing (like a trial) to conclude what version of the “facts” to believe and legal basis to conclude the case. The ALJ will conclude the Hearing, take the case under advisement and subsequently in 1 to 2 months the ALJ will issue a written ruling or Initial Decision.
The Administrative Law Courts require the Broker and Commission participate in ³Mediation² prior to trial or the Hearing. This occurs after the case is at issue, that is, the Broker has had counsel prepare the Broker¹s ³Answer² to the Charges and admits or denies each any every paragraph of the Notice of Charges. All of this is expensive as in civil litigation. The Mediator can be another Administrative Law Judge, other than the ALJ that will be conducting the Hearing. The purpose of the Mediation is to ³settle² the case by encouraging each side to compromise and accept something less than what each side would like to see happen, based on the risks and expense of litigation. No one knows which side the ALJ will accept for the alleged “facts.” An authorized representative of the Commission (one of the Commissioners) will be present in person or by phone to participate in the Mediation and approve any settlement. They will then be disqualified from Hearing the case if it does not settle in Mediation and the Initial Decision goes to the Commission for its Final Agency Order.
As noted above, the ALJ is authorized to only make an “initial” decision. It is more in the nature of a “recommendation or suggestion”, as the CREC is not bound by the conclusions of the ALJ. The CREC receives the “Initial Decision”, transcript of the Evidentiary Hearing before the ALJ and “Exceptions” filed by the Broker or the Commission. “Exceptions” are objections filed by the parties when there is an “objection” to the conclusions of the ALJ. The CREC, following review of all these matters, will then vote at its Meeting on whether to 1) “dismiss” the case (very, very, very unlikely), 2) agree with the ALJ, 3) disagree with the ALJ’s Initial Decision, or more likely 4) agree with that part that concluded the Broker committed a license law violation, but then ignore any discipline the ALJ’s Initial Decision contained, and impose what they previously decided when they voted to send the Broker an ESP or voted to have the AAG draft Notice and Charges. Yes, you read this correctly. It does not matter what the ALJ concluded. The CREC gets the last word and enters its “Final Agency Order.” To get to this stage the Broker will have spent significant money on attorney fees defending the case as the Broker did not like the CREC initial decision when they first heard the case from the Investigation Report and not surprisingly, the same or similar conclusion is made by the CREC when it enters its “Final Agency Order.”
The CREC’s “Final Agency Order” may then be appealed to the Courts. Both the Broker and the Commission may seek an appeal. This is done on the record and goes to the Colorado Court of Appeals. It is handled as an appeal as would any administrative agency’s order.
The Commission has the power to impose various types of discipline against a Broker for violation of the license law and the Brokerage Relationship Act as well as the Rules and Regulations of the Commission. Discipline the Commission may impose against the Broker’s license and the Broker include:
(1) Administrative Fine – maximum of $2,500 (for each separate offense)
(2) Public Censure
(3) Probation (and its terms)
(5) Permanent Revocation of license
Any discipline imposed by the Commission through a Final Agency Order resulting from an Administrative Law Hearing or Stipulation requires the Commission “publish” the discipline (i.e., Public Censure) in the CREC News, its quarterly publication that is sent to all licensees (now electronically). It will also go into the Minutes of the CREC. Minutes are posted on the DRE web site. Search engines, like “Google” among others, will pick up this discipline and it will be indexed and accessible by anyone doing a search. The CREC, in its licensee database, will also “flag” a licensee who has discipline. The CREC is exploring with its data base vendor an economical way to allow the “flags” to be removed after a specified time period unless the discipline resulted in a Suspension or in Revocation. Some causes of discipline, fraud, misappropriation, etc., will continue to have the license “flagged” (where the public can ascertain the basis for the discipline and severity of the discipline to the licensee).
Diversion is not “technically” discipline. While it will not be displayed on the licensee database, no publication in the CREC News, it will remain as part of the license history of the Broker and if there is a future matter, the CREC can review it and take it into consideration when considering whether to impose its sanctions. The resolution of the matter using “Diversion” is for technical violations or violations that were less serious in nature. The policy of the CREC is to exclude fraud, conversion (theft) and other more serious acts from this alternative.
DORA complaints against a Real Estate Broker must be handled with extreme care and significant detail. In defending Real Estate Brokers for well over 38 years, it is exceptionally clear that the cardinal rule is to hire competent experienced counsel practically the same day the DORA complaint is received by the Broker. The Broker is normally not equipped to assess the severity, process and procedure to properly handle such a complaint.