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:  9/1/11 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 Commissioner of the 
          Department of Real Estate to issue citations to unlicensed 
          persons the Commissioner believes to be engaging in 
          activities for which a real estate license is required or 
          to licensees who are in violation of any provision of the 
          Real Estate Law or any rule or order thereunder.  
          Authorizes citations to include an order to correct the 
          violation or to include an administrative penalty of up to 
          $2,500, and requires any fines collected to be credited to 
          the Recovery Account and made available for specified 
          purposes upon appropriation by the Legislature.

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           Assembly Amendments  revise and recast the bill with a 
          similar intent.

           ANALYSIS  :    

          Existing law, the Real Estate Law:

          1. Establishes in the Business, Transportation and Housing 
             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 

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             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)

          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:


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          1. Authorizes the Commissioner of DRE (Commissioner) to 
             issue citations, in writing, to unlicensed persons the 
             commissioner believes to be engaging in activities for 
             which a real estate license is required or to licensees 
             who are in violation of any provision of the Real Estate 
             Law or any rule or order thereunder.  

          2. Authorizes citations to include an order to correct the 
             violation or to include an administrative penalty of up 
             to $2,500, and requires any fines collected to be 
             credited to the Recovery Account and made available for 
             specified purposes upon appropriation by the 
             Legislature.

          3. Requires the Commissioner give due consideration to the 
             appropriateness of the amount of the fine with respect 
             to factors such as the gravity of the violation, the 
             good faith of the person cited, and the history of 
             previous violations. 

          4. Specifies a citation issued and a fine assessed against 
             and paid by a licensee shall be in lieu of other 
             administrative discipline by the Commissioner for the 
             offense or offenses cited.

          5. Specifies nothing in the bill prevents the Commissioner 
             from issuing an order to desist and refrain from 
             engaging in a specific business activity or activities 
             or an order to suspend all business operations to a 
             person who is engaged in or has engaged in continued or 
             repeated violations. In any of these circumstances, the 
             sanctions authorized shall be separate from, and in 
             addition to, all other administrative, civil, or 
             criminal penalties.

          6. Provides if person cited fails to request a hearing to 
             contest the citation within 30 days from the receipt of 
             the citation, the citation and fine shall be deemed 
             final, but not be reported as disciplinary action taken 
             by the department. 

          7. Provides that after the exhaustion of the review 
             procedures provided for this bill, the Commissioner may 
             apply to the appropriate superior court for a judgment 

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             in the amount of any administrative penalty imposed and 
             an order compelling the cited person to comply with the 
             order of the Commissioner. Provides the application, 
             which shall include a certified copy of the final order 
             of the Commissioner, constitutes a sufficient showing to 
             warrant the issuance of the judgment and order.

          8. Provides that failure of any person to comply with the 
             terms of a citation or pay a fine assessed, within a 
             reasonable period specified by the Commissioner, shall 
             subject that person to disciplinary action by the 
             commissioner. 

          9. Provides that in no event may a license be renewed if an 
             unpaid fine remains outstanding or the terms of a 
             citation have not been complied with.

           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 
          the DRE to ban from real estate-related employment for up 

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          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  9/2/11)

          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 
          for the issuance of a citation and a fine for relatively 

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          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  9/2/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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