BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1718| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1718 Author: Hill (D) Amended: As introduced Vote: 21 SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 8-0, 6/18/12 AYES: Price, Emmerson, Corbett, Hernandez, Negrete McLeod, Strickland, Vargas, Wyland NO VOTE RECORDED: Correa SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 71-1, 4/30/12 - See last page for vote SUBJECT : Real estate broker licenses SOURCE : California Association of Realtors DIGEST : This bill repeals and recasts existing requirements that must be met prior to the licensure of real estate brokers, to provide that the Real Estate Commissioner may grant an original real estate broker license to an applicant who (1) has passed the real estate broker license examination, (2) satisfied other specified requirements, (3) either held a real estate salesperson's license, or (4) holds an active membership in the State Bar of California or has graduated from a four-year university with a specialization in real estate. ANALYSIS : CONTINUED AB 1718 Page 2 Existing law: 1. Provides for the licensure and regulation of more than 483,000 real estate brokers, real estate salespersons, and more than 22,000 mortgage loan originator license endorsements by the Department Real Estate (DRE) in the Business, Transportation and Housing Agency (BT&H). The Real Estate Commissioner (Commissioner), who serves as the chief executive of the DRE, is appointed by the Governor, subject to Senate confirmation. The Commissioner, through DRE, is responsible for the regulation of real estate transactions and licensure of real estate agents, brokers and appraisers. (Business and Professions Code (BPC) Section 10000 et seq.) 2. Defines "real estate broker" as a person who, for compensation or in expectation of compensation, does or negotiates to do one or more of the following acts for another or others: (BPC Section 10131) A. Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property or a business opportunity. B. Leases or rents or offers to lease or rent, or places for rent, or solicits listings of places for rent, or solicits for prospective tenants, or negotiates the sale, purchase or exchanges of leases on real property, or on a business opportunity, or collects rents from real property, or improvements from business opportunities. C. Assists or offers to assist in filing an application for the purchase or lease of, or in locating or entering upon, lands owned by the state or federal government. D. Solicits borrowers or lenders, negotiates loans or collects payments or performs services for borrowers or lenders in connection with loans secured directly or collaterally by liens on real property or on a CONTINUED AB 1718 Page 3 business opportunity. E. Sells or offers to sell, buys or offers to buy, exchanges or offers to exchange a real property sales contract, or a promissory note secured directly or collaterally by a lien on real property or on a business opportunity, and performs services for the holders thereof. 3. Provides that the following conditions must be met for issuance of a real estate broker's license: (a) the applicant must hold a real estate salesman's license for at least two years and be eligible for renewal of that license within five years of the application for a broker's license; and (b) must be actively engaged in the business of real estate salesperson during that time. (BPC Section 10150.6) 3. Provides an exception to the above conditions, if the applicant files a written petition to the DRE setting forth his or her qualifications and experience to include at least the equivalent of two years' general real estate experience or graduation from a four-year college or university course which included specialization in real estate. (BPC Section 10150.6) 4. Allows for the immediate issuance of a broker's license if either of the conditions in #3 above has been met and the applicant passes the broker's license examination. (BPC Section 10150.6) 5. Provides that all real estate licenses issued by the Commissioner shall be for a period of four years. Applicants shall qualify in the appropriate examination and satisfy all other requirements prior to issuance of the license. (BPC Section 10153.6) This bill: 1. Requires an applicant for an original real estate broker's license to demonstrate to the Commissioner that he/she has held a real estate sales person's license for at least two years; qualified for the renewal of this license during the previous five years; and was actively CONTINUED AB 1718 Page 4 engaged in the business of real estate salesperson during that time. 2. Deletes the Commissioner's authority to grant an original real estate broker's license to an applicant that has graduated from a four-year college or university course, which included specialization in real estate, and instead authorizes the Commissioner to treat a degree from a four-year college or university, which course of study included a major or minor in real estate, as the equivalent of two years' general real estate experience. Background Existing law generally requires applicants for a real estate broker's license to have, among other things, two years of full-time experience in the real estate business. It also contains alternative ways to demonstrate the experience qualification by meeting any of the following: 1. A finding of equivalent experience and education by the Commissioner; 2. Active membership in the State Bar; 3. A degree or "course" of study from a four-year college which "included a specialization in real estate." This bill revises the alternative path to licensure as a real estate by requiring a "major or minor concentration in real estate" rather than a "specialization" in real estate. The University of California states that it does not offer either a major or minor concentration in real estate. However, the California State University system does offer a concentration in real estate as part of it bachelor's degree in Business Administration at the East Bay, Fresno, Los Angeles, Northridge, Pomona, Sacramento, San Bernardino, and San Diego campuses. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No CONTINUED AB 1718 Page 5 SUPPORT : (Verified 7/2/12) California Association of Realtors (source) ARGUMENTS IN SUPPORT : According to the bill's sponsor, the California Association of Realtors: Unqualified individuals lacking sufficient experience are able to get their real estate broker's license by exploiting a loophole in current law that permits an unrelated college degree to be substituted for actual experience in real estate. The ability of the Real Estate Commissioner to waive the experience criteria in exchange for a four-year degree has evolved into essentially a de facto policy wherein all such requests are approved as opposed to reviewing them on a case-by-case basis. As such, individuals can substitute any four-year degree, e.g., English, physical education, chemistry, etc., for practical real world experience. Real estate brokers not only engage directly in real estate transactions, but also supervise, hire, oversee and review the work of other sales people. Coupled with the increasing complexity and intricate details of the industry, real world experience is increasingly important. Barring that, an advanced degree with an emphasis on real estate will better serve the public and provide an important safeguard for consumers. ASSEMBLY FLOOR : 71-1, 4/30/12 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Bonilla, Bradford, Buchanan, Butler, Charles Calderon, Campos, Carter, Chesbro, Conway, Dickinson, Eng, Feuer, Fletcher, Fong, Fuentes, Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove, Hagman, Halderman, Hall, Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Solorio, Swanson, Torres, Valadao, CONTINUED AB 1718 Page 6 Wagner, Wieckowski, Williams, Yamada, John A. Pérez NOES: Donnelly NO VOTE RECORDED: Blumenfield, Brownley, Cedillo, Cook, Davis, Furutani, Logue, Smyth JJA:m 7/3/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED