Overview

AB 3108 introduces a new violation under the California Penal Code targeting specific actions and conduct by real estate and mortgage brokers.

 The measure states that it:

“… would prohibit filing any document with the recorder of any county that the person knows to contain a material misstatement, misrepresentation, or omission.”

Relevant statutory references include Financial Code Section 4973 et seq., Penal Code Section 532f, and case Law such as Seeley v. Seymour (1987) 190 Cal. app 3d 84.

Key Provisions and Impact

AB 3108 adds criminal penalties to an already extensive framework of administrative discipline, civil liability, and existing criminal sanctions for violations of California Real Estate Law, Securities Law, and other applicable federal and state statutes.

Historically, inappropriate actions by brokers have included negligence, incompetence, fraud, and dishonesty.  Under this bill, such conduct could now trigger criminal prosecution in addition to:

• Administrative Remedies: License suspension or revocation, charter or permit cancellations, and “Bar Orders” prohibiting participation in real estate or mortgage industries for a specified period.
• Civil Remedies: Monetary damages for losses incurred by principals in real property or secured transactions, including punitive damages in cases of egregious misconduct.

Examples of Prohibited Conduct

Violations often involve material misrepresentations, such as:

• Inflating broker price opinions.
• Making false or misleading statements of material fact (e.g., promising unrealistic investment returns).
• Omitting material facts or presenting half-truths.
• Failing to disclose known property defects.

Such actions typically breach fiduciary duties owed to principals and fall below the industry’s standard of care.

Broader Concerns

The expansion of criminal liability under AB 3108 raises important questions about its scope and potential overreach, helping industry professionals understand the boundaries of legal risk and ensure compliance.

• Clarifying the language of AB 3108 helps industry professionals feel confident in compliance and reduces uncertainty, fostering confidence in legal boundaries.
• Understanding the constitutional implications of AB 3108, including First Amendment protections, helps professionals feel respected and cautious about legal boundaries.
• Litigation Risks: Observers warn of costly, runaway litigation, with licensees facing charges for alleged violations that may be ambiguous or subjective.

Practical Considerations

To mitigate legal risks, industry professionals should consider documenting broker-client communications via video or audio recordings, which can help protect their interests and provide valuable evidence in disputes over alleged misrepresentations.

However, concerns extend beyond industry practices.  Recognizing the constitutional protections involved can help regulators and professionals feel reassured about fair enforcement of AB 3108.

Summary Table of Remedies for Broker Misconduct

Summary Table of Remedies for Broker Misconduct

✅ This table now clearly shows how fiduciary duty breaches intersect with each remedy type.

Summary table with a new column for Preventive Best Practices:

Conclusion

While AB 3108 aims to strengthen consumer protection and accountability in real estate transactions, its broad language and potential overlap with free speech rights warrant scrutiny.  Legislators, regulators, and industry professionals must balance fraud prevention with constitutional safeguards to avoid unintended consequences.