The Real Estate Recovery Account

California's Consumer Recovery Account

The Consumer Recovery Account is a separate account in the Real Estate Fund that provides limited relief for qualifying unpaid losses caused by licensed real estate activity. It is not general insurance against a disappointing purchase or an unsuccessful investment.

Qualifying loss and application

Under Business and Professions Code section 10471, the claimant needs a qualifying final judgment against a defendant who, while licensed, performed acts requiring a real estate or prepaid rental listing service license. The judgment must arise from fraud, misrepresentation, or deceit made with intent to defraud, or conversion of trust funds. A qualifying criminal restitution order can support an application. An arbitration award must satisfy the statutory requirements, including confirmation and reduction to judgment.

Payment concerns the unpaid judgment amount representing actual and direct loss in the transaction, subject to account limits. A judgment does not itself guarantee payment. The verified application identifies the judgment, explains the claim calculation and underlying facts, and documents asset searches and collection efforts. The claimant cannot be the judgment debtor's spouse or the spouse's personal representative. California law also requires conscientious, good-faith pursuit of potentially liable parties rather than manipulating a lawsuit to qualify for account payment.

Section 10471 requires delivery of the application to the Department of Real Estate no later than one year after the judgment becomes final. The judgment debtor must receive the notice and application and has an opportunity to object.

Limits are ceilings, not awards

Section 10474 states that applications filed on or after January 1, 2009 are subject to $50,000 for any one transaction and $250,000 for any one licensee. More claimants, parcels, or judgments do not multiply these ceilings. For example, an otherwise eligible $70,000 unpaid actual loss from one transaction cannot produce more than $50,000 from the account under that transaction ceiling.

Denial and license consequences

A claimant can seek a superior court order after denial. Section 10472 measures its six-month filing period from mailing of the denial notice; section 10471.5's prescribed notice instead describes receipt. Keep those distinct rather than assuming the starting events are identical. The commissioner may defend the account and relitigate relevant issues under section 10473.

Under section 10475, payment triggers automatic license suspension when the final judgment was established by clear and convincing evidence, or the commissioner determined that the claimant supplied clear and convincing evidence of the specified misconduct. Payment alone is not the entire statutory test. Reinstatement requires full repayment of the account payment plus interest at the prevailing legal rate. Bankruptcy discharge does not remove the chapter's penalties and disabilities. When account funds are insufficient, section 10476 provides for later payment in original filing order, plus accumulated interest at four percent annually.