BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   AB 278|
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                                 THIRD READING


          Bill No:  AB 278
          Author:   Hill (D)
          Amended:  6/23/11 in Senate
          Vote:     21

           
           SENATE BUSINESS, PROF. & ECON. DEV. COMM.  :  9-0, 6/20/11
          AYES:  Price, Emmerson, Corbett, Correa, Hernandez, Negrete 
            McLeod, Vargas, Walters, Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8
           
          ASSEMBLY FLOOR  :  78-0, 5/23/11 - See last page for vote


           SUBJECT  :    Department of Real Estate:  administrative 
          fines

           SOURCE  :     Author


           DIGEST  :    This bill authorizes the Real Estate 
          Commissioner to adopt regulations to establish a system for 
          the issuance of citations and fines of up to $1,000 to 
          licensees, and to include an order of abatement, if a 
          licensee of the Department of Real Estate is in violation 
          of the Real Estate Law.  

           ANALYSIS  :    

          Existing law, the Real Estate Law:

          1. Establishes in the Business, Transportation and Housing 
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             Agency, the Department of Real Estate (DRE), the chief 
             officer of which is the Real Estate Commissioner 
             (Commissioner) and specifies that the Commissioner, 
             through the DRE, is responsible for the regulation of 
             real estate transactions and licensure of real estate 
             agents, brokers and salespersons.

          2. Provides that the Commissioner shall enforce the 
             provisions of the Real Estate Law and has full power to 
             regulate and control the issuance and revocations, both 
             temporary and permanent, of all licenses to be issued, 
             and to perform all other acts and duties provided under 
             the Real Estate Law.  (Business and Professions Code 
             (BPC) Section 10071)

          3. Provides that the Commissioner may suspend or revoke a 
             real estate license, or deny the issuance of a license 
             to an applicant, who has violated any of the provisions 
             of the Real Estate Law as specified, or other laws as 
             specified, or may suspend or revoke the license of a 
             corporation, or deny the issuance of a license to a 
             corporation, if an officer, director or person owning 10 
             percent or more of the corporation's stock has violated 
             any of those provisions as specified.  (BPC Section 
             10177)

          4. Makes any person, including officers, directors, agents 
             or employees of corporations, who willfully violates or 
             knowingly participates in the violation of the Real 
             Estate Law shall be guilty of a misdemeanor punishable 
             by a fine not exceeding $10,000, or by imprisonment in 
             the county jail not exceeding six months, or by a fine 
             and imprisonment.  (BPC Section 10185)

          5. Provides that the Attorney General (AG) shall render to 
             the Commissioner opinions upon all questions of law 
             relating to the construction or interpretation of the 
             Real Estate Law, or arising in the administration 
             thereof that may be submitted to him by the 
             Commissioner.  The AG shall also act as the attorney for 
             the Commission in all actions and proceedings brought by 
             or against him under or pursuant to any provision of the 
             Real Estate Law.  (BPC Section 10079)


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          6. Provides that any board, bureau, or commission within 
             the Department of Consumer Affairs (DCA) may establish, 
             by regulation, a system for the issuance to a licensee 
             of a citation which may contain an order of abatement or 
             an order to pay an administrative fine assessed by the 
             board, bureau, or commission where the licensee is in 
             violation of the applicable licensing act or any 
             regulation adopted pursuant thereto.  Specifies the 
             procedures to be followed in both the issuance of the 
             citation and fine, and appeal of the citation or fine 
             assessment and provides that the administrative fine 
             assessed may not exceed $5,000.  (This citation and fine 
             authority, however, does not prevent a board, bureau, or 
             commission from establishing by statute their own 
             citation and fine authority, as long as it is consistent 
             with the aforementioned procedures.)  (BPC Section 
             125.9)

          7. Provides that any board, bureau, or commission within 
             the DCA may, in addition to the administrative citation 
             system authorized by Section 125.9 (as against 
             licensees, Item #6, above), also establish, by 
             regulation, a similar system for issuance of an 
             administrative citation to an unlicensed person who is 
             acting in the capacity of a licensee under the 
             jurisdiction of that board, bureau, or commission.  The 
             administrative citation system shall meet the 
             requirements of Section 125.9 above.  However, the 
             establishment of an administrative citation system for 
             unlicensed activity does not preclude the use of other 
             enforcement statutes for unlicensed activities at the 
             discretion of the board, bureau, or commission.  (BPC 
             Section 148)

          This bill:

          1. Authorizes the Commissioner to adopt regulations that 
             establish a system for issuing citations to licensees in 
             violation of the Real Estate Law or any regulation 
             adopted under the law, and to issue such citations 
             except where violations have resulted in serious 
             financial loss to the member of the public.  A citation 
             may contain an order of abatement or an order to pay an 
             administrative fine.

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          2. Requires the system for issuing citations to satisfy the 
             following conditions:

             A.    Citations shall be in writing and describe the 
                nature of the violation, including reference to the 
                provision of law that was violated;

             B.    Citations shall, when appropriate, contain an 
                order of abatement fixing a reasonable time for 
                abatement;

             C.    Administrative fines must not exceed $2,500 for 
                each inspection or each investigation made with 
                respect to the violation.  The Commissioner must 
                consider several factors in assessing a fine, as 
                specified;
              
             D.    Citations or fine assessments must inform 
                licensees of the appeal process for contested 
                violations, which provides that a hearing may be 
                requested by written notice to the Commissioner 
                within 30 days of the date the fine or assessment is 
                issued.  Payment of a fine shall not constitute an 
                admission of the violation charged and shall not be 
                reported in the DRE real estate bulletin.

             E.    The Commissioner may take disciplinary action if a 
                licensee fails to pay a fine within 30 days of the 
                assessment date, unless the citation is being 
                appealed.  If a citation is not contested and a fine 
                is not paid, the fine shall be added to the license 
                renewal fee.  A license shall not be renewed without 
                payment of the renewal fee and fine.

          3. Allows the following:  citations to be issued without 
             the assessment of an administrative fine; a fine 
             assessment to be limited to particular violations of the 
             Real Estate Law; and notice to be given to a broker when 
             a citation is issued to a salesperson or broker 
             associate employed by the broker.

          4. Specifies that, if a fine is paid to satisfy an 
             assessment based on the finding of a violation, payment 

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             of the fine shall be represented as satisfactory 
             resolution of the matter for purposes of public 
             disclosure.

          5. Requires administrative fines to be credited to the 
             Recovery Account of the Real Estate Fund and, upon 
             legislative appropriation, to be available for 
             expenditure under the Real Estate Recovery Program.

          6. Specifies that the establishment of an administrative 
             citation system does not preclude the use of other 
             disciplinary authority of the Commissioner.

          7. Allows the Commissioner to adopt regulations to 
             establish a similar administrative citation system for 
             unlicensed persons acting in the capacity of a licensee, 
             as specified.

           Background

           In 1986, SB 2335 (Montoya), Chapter 1379, Statutes of 1986, 
          established a uniform citation and fine system for the DCA, 
          and for all the boards, bureaus, committees and the 
          commission under the DCA.  The amount of the fines at that 
          time was limited to $2,500.  (The limitation on fines was 
          raised to $5,000 in 2004.)  According to the DCA at the 
          time, numerous agencies are required to initiate formal 
          disciplinary action, which is extremely costly to the 
          agency as well as the licensee, or issue a letter of 
          warning.  Since the majority of complaints received by most 
          agencies are "minor" violations which normally would not 
          warrant formal disciplinary action, the agency is only able 
          to issue a letter of warning.  Although a letter of warning 
          may have some educational value, in many cases it is 
          ineffectual.  According the DRE, the agencies should have 
          stronger sanctions available to them to more effectively 
          correct and educate licensees who choose to violate the 
          law.  Typically, these types of sanctions will deter 
          further violations and avoid the necessity for formal 
          disciplinary expenses following repeated warnings.

           Prior Legislation

           SB 1737 (Machado), Chapter 286, Statutes of 2008, allowed 

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          the DRE to ban from real estate-related employment for up 
          to three years anyone found guilty of violating the Real 
          Estate Law or any crime related to the qualification or 
          duties of a licensee.  The bill allowed the DRE to suspend 
          or revoke a license if the licensee provides an inaccurate 
          opinion of value for a short sale for specified purposes, 
          and required notice to all parties in a real estate 
          transaction when the same person arranges financing and 
          acts as the buyer's agent, seller's agent, or both.

          AB 1830 (Lieu, Bass, Nava and Wolk), 2007-08 Session, 
          authorized the Commissioners of the DRE, the Department of 
          Financial Institutions, and the Department of Corporations 
          to suspend or revoke licenses for violations of specified 
          federal lending laws or regulations, and defined the term 
          "higher-priced mortgage loan," as specified.  The bill was 
          vetoed by the Governor.

          AB 2454 (Emmerson), Chapter 279, Statutes of 2008, 
          increased the limit on the amount for which the Recovery 
          Account may be liable and deleted obsolete provisions 
          relating to a cause of action brought prior to January 1, 
          1980.

          AB 840 (Emmerson), Chapter 140, Statutes of 2007, 
          authorized the Commissioner to suspend or revoke the 
          license of a real estate licensee or a mineral, oil and gas 
          licensee, or deny issuance of the license to an applicant, 
          if the applicant or licensee has been found guilty of a 
          felony or a crime substantially related to the 
          qualification, functions, or duties of the real estate 
          license or the mineral, oil and gas license.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

           SUPPORT  :   (Verified  7/12/11)

          California Association of Realtors

           ARGUMENTS IN SUPPORT  :    The author states, "While the Real 
          Estate Commissioner has authority to enforce real estate 
          law, he or she has a relatively narrow number of options 
          for imposing discipline and penalties.  AB 278 would allow 

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          for the issuance of a citation and a fine for relatively 
          minor violations that have not resulted in harm to the 
          public.  AB 278 would provide a type of "fix-it ticket" 
          that could be levied without the necessity of a long drawn 
          out hearing and review process.  While certainly 
          appropriate for more serious violations, such a time 
          consuming process does not serve either the general public 
          or the regulated community in the most efficient manner in 
          all cases.  AB 278 will allow the Commissioner to 
          discipline minor transgressions while focusing valuable 
          investigative resources on more serious violations."


           ASSEMBLY FLOOR  :  78-0, 5/23/11
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Charles Calderon, Campos, 
            Carter, Cedillo, Chesbro, Conway, Davis, Dickinson, 
            Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, 
            Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove, 
            Hagman, Halderman, Hall, Harkey, Hayashi, Roger 
            Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, 
            Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, 
            Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, 
            Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, 
            Portantino, Silva, Skinner, Smyth, Solorio, Swanson, 
            Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, 
            John A. Pérez
          NO VOTE RECORDED:  Cook, Gorell


          JJA:mw  7/12/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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