Broker of record liability for an AI transaction coordinator mistake lands in three places, not one: the regulator disciplines the individual broker’s license, the brokerage entity answers in civil court for its employees and tools, and the person who did the act answers for the act. No state statute names software. Every state names the broker of record, and what it makes that broker supervise is the activity and the record, whoever or whatever performed them. The orders below show how the bill gets split.
I want to start with a real set of orders rather than a hypothetical, because the hypotheticals in this space all end the same way (“the broker of record is liable for everything”) and the orders do not. In DRE No. H-41819 LA the California Department of Real Estate charged a salesperson, a corporate brokerage, its former designated officer, and its current designated officer over the same set of transactions. Three of the four outcomes are public, and they are not the same outcome.
One accusation, four respondents, three different bills
The underlying facts, as the accusation describes them and as the respondents who settled chose not to contest, were a fraudulent pest report on a sale where the buyer’s agent dealt only with the brokerage’s transaction coordinator, and a run of later transactions where an unlicensed employee was the only person the other side ever spoke to. The DRE’s accusation was filed November 12, 2020. I read the three decisions that came out of it.
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Nicholas Kent Dillon II, the salesperson who sent the report, stipulated in March 2022 to revocation with a restricted salesperson license available, a two year bar on petitioning to lift the restrictions, $4,500 in restitution to the buyer for fumigation costs, and $1,947.58 as his share of the Department’s $6,321.55 investigation and $1,468.80 enforcement costs. His future employing broker must certify in writing that it “will exercise close supervision” over him.
Michelle Jenny Lin, the designated officer at the time, stipulated in April 2022 to discipline under Business and Professions Code sections 10177(g) and 10177(h), the failure to supervise provisions. The order is a 90 day suspension. The first 45 days are stayed if she pays $2,250, calculated at $50 per day. The second 45 days are stayed for a year of clean conduct. She also owes $2,235.60 in costs, has to pass the Professional Responsibility Examination within six months, and has to complete the continuing education course on office management and supervision. Nothing in her order says she touched the file. The charge is that she, as broker of record, had no system that would have caught it.
Jason Whitmore, the broker of record before her, never filed a notice of defense. The Department entered a default in July 2021 and the Decision in the November 2021 hearing file revokes every license and license right he held, citing sections 10177(d), (g) and (h), section 10159.2, and Regulation 2725. The corporation’s own outcome is not in the three files I could retrieve, so I am not asserting it.
That is broker of record liability in practice. The person who did the thing paid the victim. The broker of record paid the regulator and lost time. The earlier broker of record who ignored the process lost the license. None of it ran through a civil judgment against the designated officer personally, and in California there is a published reason for that.
The three ledgers: a way to read any broker of record liability question
I sort any “who is liable” question about a TC error, human or AI, into three ledgers, because the statutes keep them separate even when the trade press collapses them.
The first is the license ledger. This is the regulator against the individual broker of record, and the currency is suspension days, penalties, costs, exams and courses. California’s hook is section 10159.2, which makes the designated officer “responsible for the supervision and control of the activities conducted on behalf of the corporation by its officers and employees,” enforced through 10177(h). Texas uses 22 TAC 535.2 and TRELA 1101.803. Florida uses section 475.25(1)(u), which disciplines a broker who “failed, if a broker, to direct, control, or manage a broker associate or sales associate employed by such broker,” with an administrative fine of up to $5,000 per count. Colorado uses Rule 6.3 and section 12-10-217(1)(r). Washington uses RCW 18.85.275.
The second is the entity ledger. This is the brokerage firm against the buyer, seller or lender who was harmed, under ordinary agency law: the employer answers for the employee’s torts within the scope of employment. The firm, not the individual broker of record, is normally the employer, and in Washington the statute even says the listings, transactions and contracts “are property of the real estate firm.”
The third is the personal ledger, and this is where states disagree. Texas writes the broker of record’s personal exposure into the statute. Occupations Code 1101.803 says a licensed broker “is liable to the commission, the public, and the broker’s clients for any conduct engaged in under this chapter by the broker or by a sales agent associated with or acting for the broker.” Texas also tightened the license ledger on January 1, 2026: under Senate Bill 1968, TREC now notifies brokers when complaints are filed against their associated brokers, and every broker must complete the Broker Responsibility Course whether or not they sponsor anyone. California went the other way in court. In Sandler v. Sanchez (2012) 206 Cal.App.4th 1431, lenders sued a designated officer who, the complaint admitted, played no role in the transaction and did not know of it, arguing that his 10159.2 duty to supervise made him liable for the salesperson’s misrepresentations. The Court of Appeal held that the duty “is owed to the corporation, not to third parties,” so breaching it “is grounds for administrative discipline against the designated officer by the licensing entity and perhaps an action by the corporation for indemnification, but not an action by third parties.” It also refused to treat the statutory right to control as an agency relationship, relying on the U.S. Supreme Court’s reading of the same statute in Meyer v. Holley.
So the sentence “the broker of record is personally liable for everything an assistant does” is true in Texas by statute and wrong in California by published opinion, and the answer in most other states sits somewhere in the agency law of that state. If a vendor or a trainer tells you otherwise without naming the state, they have not read the case.
No statute names software: what five states make the broker of record supervise
The stub that used to sit at this URL said that state commissions “treat AI software the same as a human TC.” I could not find a rule that says that, so I am retracting it. What the rules do is define the object of supervision, and that object is narrower than people assume in some states and wider in one. Here is what I read this run, with the regulatory text rather than a summary of it.
| State and rule | Who or what the broker of record must supervise | Written system required | Transaction records | Discipline hook |
|---|---|---|---|---|
| California, B&P 10159.2 and Reg. 2725 | 10159.2: activities conducted on behalf of the corporation “by its officers and employees.” Reg. 2725: “salespersons or broker associates acting in the capacity of a salesperson” | Yes. “Policies, rules, procedures and systems to review, oversee, inspect and manage” transactions, documents, filing, trust funds, advertising, and regular reports, plus “a system for monitoring compliance” | B&P 10148, three years (see the records retention guide linked below) | 10177(h) |
| Texas, 22 TAC 535.2 and TRELA 1101.803 | Sponsored sales agents; the broker “is responsible for the authorized acts” and for acts “beyond the scope explicitly authorized” | Yes. 535.2(i): current written policies and procedures covering eight items, including competence, compensation routing and advertising | 535.2(h): eight record types for four years, “readily available to the Commission” | 535.141(c)-(d): a complaint against the agent is a complaint against the broker |
| Florida, s. 475.25(1)(u) | “A broker associate or sales associate employed by such broker” | Not in the discipline statute | s. 475.5015 | Fine up to $5,000 per count, suspension, revocation, reprimand |
| Washington, RCW 18.85.275 and 18.85.285 | “The conduct of brokers and managing brokers”; delegation to a managing broker must be by written agreement | Record of managing brokers and delegations | Designated broker “shall keep adequate records of all real estate transactions handled by or through the firm,” and is responsible for funds and records “only after they are received” | Chapter 18.235 RCW |
| Colorado, 4 CCR 725-1 Rules 6.3 and 6.20 | Associate brokers, and under Rule 6.3.A.2 “all unlicensed employees, including, but not limited to, Unlicensed On-Site Managers, secretaries, bookkeepers, and personal assistants” | Yes. Office Policy Manual signed by each associate; “all executed contracts are reviewed”; “all transaction files are reviewed” | Rule 6.20: four years from consummation or listing expiry, per the Transaction File Checklist | 12-10-217(1)(r); a complaint against an associate may trigger an investigation of the employing broker |
Two things in that table matter for an AI TC. First, the only state of the five that extends the supervision rule to unlicensed staff by name is Colorado. California’s Regulation 2725 and Florida’s 475.25(1)(u) literally describe licensees, and California reaches the unlicensed employee through 10159.2’s “officers and employees” instead, which is exactly how the DRE charged Lin and Whitmore. Second, every state that makes the broker of record run a written system describes that system in terms of outputs: contracts reviewed, files reviewed, documents inspected, reports received. A tool that produces those outputs is inside the system the broker of record already has to run. A tool whose outputs no broker of record reviews is a supervision failure with extra steps.
The delegation side, meaning which tasks an unlicensed person may perform at all, is covered in our unlicensed assistant rules guide and the unlicensed transaction coordinator piece. This article is about what happens after the delegation goes wrong.
The AI law brokers were told to fear carves out workflow
For two years brokerages were warned that Colorado’s AI Act would make anyone using an AI tool in a housing transaction a “deployer” of a “high-risk” system. The law that warning described no longer exists in that form. Senate Bill 24-205’s June 30, 2026 effective date never arrived: a federal magistrate judge in Denver entered a stipulated order on April 27, 2026 under which the Attorney General would not enforce it while xAI’s constitutional challenge proceeds, and the General Assembly repealed and reenacted the framework as Senate Bill 26-189, signed May 14, 2026. The new act takes effect January 1, 2027 and applies to consequential decisions made on or after that date.
The text matters more than the headline. SB 26-189 still lists “the lease or purchase of residential real estate in Colorado” as a covered domain, so an automated system that decides which buyer’s offer gets presented, or screens who may rent, is squarely inside it. But the definition of “consequential decision” now excludes “low-stakes or routine decisions, actions, and business processes that do not materially influence eligibility for, selection for, denial of, compensation for, pricing of, or access to an opportunity or service,” and the bill names the examples: “routine scheduling,” “administrative routing,” “customer service triage,” “communication of decisions, or workflow management.” Deadline computation, document collection, reminder emails and file assembly are workflow management on the face of the statute. The notice, adverse outcome explanation and human review duties attach to the system that decides, not to the system that coordinates.
I am not telling a Colorado broker of record to relax. The bill text I read is the rerevised version as passed, the Attorney General still has rulemaking due by January 1, 2027, and xAI and the Department of Justice have signaled they may challenge the replacement as well. I am telling you that the supervision duty you already have under Rule 6.3 is the live obligation, and the AI act is not the thing that makes a broker of record answer for a TC tool’s mistake.
What a broker of record should make the AI TC do
Because the duty attaches to outputs and records, the question for any AI TC is whether it produces what the rule text says the broker of record must review and keep, in a form the broker of record can review. These are the behaviours I would insist on, each tied to the sentence in the rule that requires it.
It has to produce the review record Colorado describes, meaning every executed contract and every transaction file surfaced to a reviewer with the required documents marked present or missing, so that “all executed contracts are reviewed” and “all transaction files are reviewed” are facts the broker of record can prove rather than assert. California’s “system for monitoring compliance” is the same requirement said differently.
It has to keep Texas’s eight record types for four years in a format “readily available to the Commission,” including the one TCs most often lose, “substantive communications with parties to the transaction.” An email thread that lives only in an agent’s inbox does not meet 535.2(h)(3). If the tool sends the email, the tool keeps the email on the broker of record’s file. Our guide to brokerage records retention walks the ten state clocks.
It has to compute deadlines from the contract’s own counting rules and show its work, because a derived date with no visible trigger, counting method and roll rule is a date no broker of record can supervise. We laid out that arithmetic in how to automate real estate deadlines.
It has to stop at the licensed activity line. Texas 535.2(a) makes the broker responsible even for acts “beyond the scope explicitly authorized,” which is the clause that catches a tool configured to answer a buyer’s question about price or condition. The approval gate belongs on anything that negotiates, advises or modifies a contract term, and the broker of record, not the vendor, sets where that gate sits.
It has to attribute every action to an actor and a time, because the first question a DRE or TREC investigator puts to the broker of record is who did what and when, and because the supervision defense in every one of these states is a documented system that was operating. A log that shows the broker of record reviewed a file on a date is the difference between Lin’s order and a dismissal.
This is where ReBillion sits. It is the AI control plane that orchestrates your stack, reading every contract and tracking every deadline while it coordinates your TMS, CRM, signature, and comms, and the file it assembles is built to survive a broker audit. The pricing page shows how it is priced per file, and a demo will show you the review record itself. If you are evaluating the category more broadly, the pillar on what an AI transaction coordinator is gives the three level test we use, and the brokerage compliance software guide covers the adjacent tooling.
State specifics for the two markets most brokers ask about are in the California, Texas and Colorado transaction coordinator pages.
Sources, and what I refused to assert
Every quotation above is from a document I retrieved this run: the three DRE hearing files in H-41819 LA; the Sandler v. Sanchez opinion; B&P 10159.2 and Regulation 2725; 22 TAC 535.2 (LII copy, last amended effective June 11, 2023) and Occupations Code 1101.803; Florida s. 475.25 (2025 statutes); RCW 18.85.275 and 18.85.285; 4 CCR 725-1 Chapter 6; the rerevised text of SB 26-189; and TREC’s March 25, 2026 article on what Senate Bill 1968 changed for Texas brokers on January 1, 2026, which is where the fact that TREC now notifies brokers of complaints against their associated brokers comes from.
I did not assert the corporate brokerage’s outcome in H-41819 LA, because that decision was not among the files I could retrieve. I did not quote the accusation’s factual paragraphs directly, because they are an exhibit to the default decision and did not come through in the retrieved text; the description of the facts above follows a trade journal summary of the accusation and the respondents’ stipulations not to contest it. I did not assert any Texas administrative penalty amount, because I did not retrieve 1101.702 this run. I did not assert anything about errors and omissions coverage of AI driven work, because policy language varies by carrier and I had no primary form in hand; ask your carrier in writing. I did not treat the LII copy of 535.2 as current without flagging that LII mirrors of the Texas Administrative Code have lagged before. And I did not state what the Colorado Attorney General’s rules will require, because they do not exist yet.
This article is not legal advice. It is a reading of the primary text, with the file numbers so you can check it.
Frequently asked questions
Is the broker of record liable when AI transaction coordinator software makes a mistake
The broker of record faces license discipline for failing to supervise in every state reviewed, because the supervision duty attaches to the activity and the records regardless of who or what performed them. Civil liability to the harmed party normally sits with the brokerage entity as employer. Personal civil liability of the individual broker depends on the state: Texas Occupations Code 1101.803 imposes it by statute, while California’s Sandler v. Sanchez holds the supervision duty runs to the corporation, not to third parties.
Does any state real estate rule mention AI or software
None of the five reviewed here does. Each names the broker of record and the people or records that broker must supervise. California Regulation 2725, Texas Rule 535.2, Florida 475.25(1)(u), Washington RCW 18.85.275 and Colorado Rule 6.3 describe supervision of people and review of documents, files and communications. A tool that produces those documents and communications is inside the system the broker of record must already operate.
Does the Colorado AI Act make a brokerage using an AI TC a deployer of a high-risk system
Not for coordination work. SB 26-189, signed May 14, 2026 and effective January 1, 2027, keeps residential lease and purchase decisions as a covered domain but excludes routine scheduling, administrative routing, communication of decisions and workflow management from the definition of a consequential decision. A system that decides which applicant or offer is selected is covered; a system that tracks deadlines and collects documents is not, on the face of the text.
What did the broker of record pay in DRE case H-41819 LA
Michelle Jenny Lin, the designated officer and broker of record, stipulated to a 90 day suspension with 45 days stayed on payment of $2,250 and 45 days stayed on one year of clean conduct, plus $2,235.60 in Department costs, the Professional Responsibility Examination within six months, and a management and supervision continuing education course. The salesperson who sent the fraudulent report paid $4,500 in restitution and $1,947.58 in costs and took a restricted license. The former designated officer who defaulted was revoked outright.
Which state extends the supervision rule to unlicensed assistants by name
Colorado. Rule 6.3.A.2 requires employing brokers to supervise all unlicensed employees, including secretaries, bookkeepers and personal assistants of associate brokers. California reaches unlicensed employees through section 10159.2, which covers activities conducted on behalf of the corporation by its officers and employees, rather than through Regulation 2725, which names salespersons and broker associates.
What records does a Texas broker of record have to keep from a TC tool
Rule 535.2(h) requires the broker of record to keep eight record types for at least four years from closing or termination in a format readily available to the Commission: disclosures, commission agreements, substantive communications with parties, offers and contracts with addenda, compensation receipts and disbursements, property management contracts, appraisals and price opinions, and sponsorship agreements. Emails a tool sends to parties are substantive communications and belong on the file.
Written by Vikas Malpani
Vikas Malpani is the CEO and Co-Founder of ReBillion and a CAR-Certified Transaction Coordinator. A serial real estate technology entrepreneur with 15+ years across technology and real estate operations, he was named to MIT Technology Review's TR35 list of young innovators. At ReBillion he leads the AI systems that deliver compliant, accurate transaction coordination for brokerages and agents across the 10 states ReBillion serves. Connect with Vikas on LinkedIn: https://www.linkedin.com/in/vikasmalpani/
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