BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 53|
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UNFINISHED BUSINESS
Bill No: SB 53
Author: Calderon (D) and Vargas (D)
Amended: 8/29/11
Vote: 21
SENATE BANKING & FINANCIAL INSTITUT. COMM : 6-1, 4/6/11
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla
NOES: Walters
SENATE BUSINESS, PROF & ECON DEVELOP COMM : 8-1, 5/2/11
AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete
McLeod, Vargas, Wyland
NOES: Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 38-0, 05/31/11
AYES: Alquist, Anderson, Blakeslee, Calderon, Cannella,
Corbett, Correa, De León, DeSaulnier, Dutton, Emmerson,
Evans, Fuller, Gaines, Hancock, Harman, Hernandez, Huff,
Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete
McLeod, Padilla, Pavley, Price, Rubio, Runner, Simitian,
Steinberg, Strickland, Vargas, Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Berryhill, Walters
ASSEMBLY FLOOR : 78-0, 09/07/11 - See last page for vote
SUBJECT : Real estate licensees
SOURCE : Author
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DIGEST : This bill makes several changes to Californias
Real Estate Law, to give the Department of Real Estate
(DRE) more enforcement tools with which to crack down
against mortgage fraud and other real estate violations,
add safeguards to protect consumers who seek out services
from real estate licensees, and make technical changes,
intended to clean up certain portions of the Real Estate
Law.
Assembly Amendments clarify that the Real Estate
Commissioner must make a noticed motion prior to applying
to the Superior Court for an order to compel a license to
produce documentary evidence in cases where the licensee
refused to obey a subpoena, and specify that, while
citations and fines constitute discipline for a violation
of the law, they shall be reported as disciplinary action
taken by the Commissioner of the Department of Real Estate.
ANALYSIS : Existing real estate law:
1.Establishes in the Business, Transportation and Housing
Agency (BT&H) the DRE, the chief officer of which is the
Real Estate Commissioner and specifies that the
Commissioner, through the Department, 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.
3.Provides that any board, bureau, or commission within the
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
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citation or fine assessment. 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.
4.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 or 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.
5.Makes it unlawful for any person to offer or sell any
security in an issuer transaction unless the sale has
been qualified or the security or transaction is exempted
or is not subject to qualification, as specified.
Exempts from qualification a transaction that involves
the sale of a series of notes secured directly by an
interest in real property or the sale of undivided
interest in a note secured directly by real property
equivalent to a series transaction. Requires a real
estate broker to indicate in the real estate broker's
transaction file the provisions of law pertaining to
qualification or exemption from qualifications under
which a transaction is being conducted and requires the
broker to file certain information with the Commissioner
relative to conducting these transactions that are exempt
from qualification.
This bill:
1. Provides that in cases where a licensee refuses to,
by a noticed motion, obey a subpoena, the Commissioner
may apply to the Superior Court, without the need to
involve the Attorney General, and the Court may issue
an order requiring the licensee to appear before the
Commissioner to produce documentary evidence, or to
give evidence regarding an investigation. Failure of
the licensee to obey the order of the Court may be
punished by the Court as contempt.
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2. Grants to the DRE the authority to issue citations
and/or citations and fines to licensees found to have
violated provisions of the Real Estate Law. Licensees
would be authorized to appeal the findings of any such
citation through an administrative hearing process.
Fines would be capped at $2,500 per violation. Fines
collected would be deposited into the Real Estate
Fund's Recovery Account, where they would be available
to reimburse consumers for losses resulting from
violations of the Real Estate Law. Specifies that
these fines and citations shall not be reported as
disciplinary action taken by the Commissioner.
3. Specifies that nothing prevents the Commission from
also 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 continued or repeated
violations of the Real Estate Law.
4. Provides that after the filing of a desist and
refrain order or a bar order, or the commencement of a
formal disciplinary action by the Commissioner, and
upon a finding by the Commissioner that action is
warranted for the protection of the public, and that
failure to act is likely to result in grievous harm to
the public, the Commissioner may make information
public confirming the fact of an investigation or
proceeding regarding a licensee or unlicensed person
believed to be engaging in activities for which a real
estate license is required. Provides that any release
of the information shall include language explaining
that the person is entitled to a hearing on the matter
and the procedural aspects and current status of the
investigation or proceeding.
5. Requires, beginning July 1, 2012, a real estate
broker who engages in escrow activities for five or
more transactions within a year, as specified under FC
17006 or whose escrow activities exceed $1,000,000
within a year, shall file with the DRE a report within
60 days providing certain information as specified.
Provides that the real estate broker may also file
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consolidated reports that include all of the
information as specified in Section 10232.2. Provides
for penalties for failure to submit the report, and for
suspension of revocation of the realtor's license for
failure to pay penalties imposed.
6. Makes findings pursuant to the information provided
to DRE, as specified in Item # 5 above, that in order
to allow the DRE to fully accomplish its goals, it is
imperative to protect the interests of those persons
submitting information to the DRE to ensure that any
personal or sensitive business information that this
act requires of those persons to submit is protected as
confidential information.
7. Provides, beginning July 1, 2012, that the
Commissioner may delay renewal of a license pursuant to
any acts as specified in Section 10177, and that any
decision to delay renewal of a license shall toll the
expiration of that license until the results of any
pending disciplinary actions against the licensee are
final, or until the licensee voluntarily surrenders
his, her or its license, whichever is earlier.
8. Specifies that the Commissioner may also delay
renewal of a license pursuant to any acts as specified
in Section 10177, even though the licensee has
fulfilled the requirements for licensure pursuant to
Section 10156.2; including fulfilling their CE
requirement.
9. Would require a real estate broker to submit a copy
of information in the real estate broker's transaction
file relative to securities qualification, or exemption
from securities qualification, pursuant to a
transaction involving secured notes on real property to
any investor from whom the real estate broker obtains
funds in connection with the transaction or other
provision of law pertaining to these types of
transactions. Recasts and updates certain provisions
and clarifies the repeal of specified provisions
relative to these transactions.
10. Provides that the DRE may obtain copies of full-face
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engraved pictures or photos of individuals directly
from the DMV and allows the Commissioner access to
records of the DMV for purposes of enforcing the Real
Estate Law and the Subdivided Lands Law.
11. Makes clarifying and technical changes to certain
enforcement provisions of the Real Estate Law.
12. Contains double-jointing language with SB 6 (Calderon
and Vargas).
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/25/11)
California Association of Realtors
California Mortgage Association
Escrow Institute of California
ARGUMENTS IN SUPPORT : The California Mortgage
Association (CMA) supports the efforts of this bill's
Authors to give the DRE the tools the department needs to
effectively and efficiently enforce the law.
"Fundamentally, SB 53 is a consumer protection measure.
The bill is well thought-out and crafted." CMA
specifically cites its support for the "cite and fine"
provision of this measure, which it views as a way for the
DRE to deal with minor violations of the law quickly and
conclusively, without having to resort to formal
accusations against licensees in each instance. This, in
turn, will free up department resources to focus on
egregious violations of the law.
The California Association of Realtors (CAR) supports the
bill as currently amended. The CAR had concerns about
disclosure of enforcement action without prior proof but
believes the language in the bill now strikes a balance
between concern for immediate protection of the public and
basic due process for licensees by requiring stringent
findings by the DRE and requiring the imposition of
preliminary sanctions before releasing information
regarding the investigation of a licensee to the public.
The CAR also had concerns about the authority granted to
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DRE to refuse renewal of a license while a licensee was
under investigation by the DRE. Recent language allows
more flexibility to DRE to toll the expiration of the
license under review and reinstate the license if the
licensee is absolved. The CAR is also in support of a
limited citation and fine authority and is actually
sponsoring a similar bill but the cap is $1,000. They
indicate that they will continue to work with the Authors
to reconcile the two provisions.
The Escrow Institute of California (EIC) is in support of
this measure, especially as to the provision which would
require DRE licensees who conduct escrows to annually
report their number of transactions to the DRE. According
to the EIC, under the California Escrow Law real estate and
mortgage brokers, title companies, banks and attorneys who
engage in escrow activities are exempt from the stringent
requirements contained in the Escrow Law. The EIC has
advocated for years the elimination of the exemption for
unlicensed escrow practitioners and the regulation of all
escrow agents under a uniform Escrow Law and Regulations.
The EIC believes that this bill is an important first step
for the DRE to identify who among their real estate
licensees are conduction escrows so as to evaluate and
determine if any appropriate regulatory measures and follow
up may be required.
ASSEMBLY FLOOR : 78-0, 09/07/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, 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: Furutani, Gorell
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JJA:nl 9/8/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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