In California, most real estate transactions between private parties proceed without direct oversight from the Department of Real Estate (DRE). This includes standard sales of residential or commercial property where both buyer and seller are acting independently and not offering interests to the public. However, there are specific scenarios where DRE approval—or at least compliance—is required. Understanding these exceptions is critical for brokers, developers, and nonprofit entities to avoid regulatory pitfalls.
The Line Between Private Sale and Public Offering
In California, the DRE steps in when real estate interests are offered to the public—especially when those interests involve subdivisions, fractional ownership, or pooled investments. The moment a seller (or their agent) begins marketing multiple lots, units, or undivided interests, they may trigger the requirement for a public report under the Subdivided Lands Law.
In our case, the church wasn’t subdividing or selling multiple lots—but by allowing the buyer to market future parcels before the sale closed, they risked being seen as part of a public offering. That’s a compliance headache no nonprofit wants.
Lessons from the Field
This scenario isn’t rare. Faith-based organizations, nonprofits, and even small investors often assume that “private sale” means “no oversight.” But the DRE’s jurisdiction isn’t just about who’s selling—it’s about how the property is being offered and to whom.
Here are a few situations where DRE approval is required:
- Subdivisions of five or more lots or units: Requires a public report before marketing or sale.
- Fractional interests or syndications: Tenancy-in-common, timeshares, or pooled investments often require DRE and DFPI oversight.
- Marketing prior to entitlement or approval: Advertising future lots or units before they legally exist can trigger DRE scrutiny.
- Broker-supervised activity: Even if the sale is private, licensed brokers must ensure all advertising, disclosures, and fund handling comply with DRE rules.
A Word to Trustees and Brokers
If you’re advising a church, nonprofit, or private seller, don’t assume DRE approval is irrelevant. Ask the right questions:
- Is the property being subdivided or marketed in pieces?
- Are multiple investors being solicited?
- Is there any advertising before entitlements are secured?
- Is a broker involved—and are they supervising licensed activity?
Conclusion
In our case, we revised the agreement to prohibit pre-sale marketing and clarified that the church was not participating in any subdivision or public offering. The sale closed smoothly, and the DRE stayed out of it.
Please see our other related articles
Subdivision Map Act
Parcels of Land
Don’t Sign a Letter of Intent
Why Use Bushore Real Estate
Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax, or other professional services. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.
