BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 510| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 510 Author: Correa (D) Amended: 5/4/11 Vote: 21 SENATE BUSINESS, PROF & ECON DEVELOP COMM : 9-0, 04/11/11 AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete McLeod, Vargas, Walters, Wyland SENATE BANKING & FINANCIAL INST. COMM : 6-0, 04/27/11 AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Walters NO VOTE RECORDED: Padilla SUBJECT : Real estate brokers: corporate officers: designating branch SOURCE : California Association of Realtors DIGEST : This bill establishes various minimum requirements for an individual to become a branch manager and authorizes the Commissioner of the Department of Real Estate (DRE) to discipline a branch manager for failure to supervise branch operations. ANALYSIS : Existing law: 1.Defines real estate broker as a person who, for compensation or in expectation of compensation, does or negotiates to do the following: CONTINUED SB 510 Page 2 A. Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, 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 exchange of leases on real property, or on a business opportunity, or collects rents from real property, or improvements thereon, or 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 for or negotiates loans or collects payments or performs services for borrowers or lenders or note owners in connection with loans secured directly or collaterally by liens on real property or on a business opportunity. E. Sells or offers to sell, buys or offers to buy, or 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. 1.Authorizes the commissioner of the real estate board to suspend or revoke the license of a real estate licensee for a violation of the Real Estate Law. 2.Authorizes the Commissioner of the DRE to suspend or revoke a license or deny the issuance of a license where licensee (either a person or a corporation) commits a number of violations. Included in these violations is a broker licensee's failure to exercise reasonable supervision over his or her salespersons or an officer designated by the corporate broker licensee's failure to exercise reasonable supervision over the corporation. CONTINUED SB 510 Page 3 3.Requires a corporation that is issued a license to also procure additional licenses for each branch office. 4.Allows corporate broker licensee to assign to a branch manager supervisory responsibility over salespersons in branch offices. This bill: 1.Authorizes an employing real estate broker or corporate designated broker officer appointed by an employing real estate broker to appoint a licensee to manage a branch office or division of the employing broker's or employing corporate designated broker officer's real estate business, and to delegate to the appointed manager the responsibility to oversee day-to-day operations, supervise the licensed activities of licensees, and supervise clerical staff employed in the branch office or division. 2.Provides that nothing in this bill shall be construed to limit the responsibilities of an employing broker or a corporate designated broker who fails to exercise reasonable supervision and control over the activities of the corporation. 3.Subjects a licensee accepting appointment as a branch office or division manager to disciplinary action for failure to properly supervise licensed activity over which the appointee is given authority. 4.Requires any appointment made pursuant to the provisions of the bill to be made through means of a written contract in which the appointee accepts the delegated responsibility, and requires the employing broker or corporate designated officer retain a copy of the contract and send a notice to the DRE, in a form approved by the Commissioner of Real Estate, identifying the appointee and the branch office or division the manager is appointed to supervise. 5.Provide that a licensee may not be appointed as a manager, if he or she holds a restricted license, is or CONTINUED SB 510 Page 4 has been subject to an order of debarment, or is a salesperson with less than two years of full-time real estate experience within five years preceding the appointment. 6.Requires the employing broker or corporate designated broker notify the Commissioner in writing whenever an appointment of a branch manager is terminated or changed. 7.Sunsets the bill on July 1, 2012. Background California Code of Regulations governing the DRE requires reasonable supervision of salespersons including establishment of policies, rules, procedures and systems to review, oversee, inspect and manage. The form of such policies, procedures, and systems takes into consideration the numbers of employees and branches. A broker is required to monitor compliance and may not relinquish overall responsibility. However, this regulation does not include any kind of disciplinary action when a broker fails to carry out his or her supervisorial duties. In August 2010, the Commissioner of the DRE proposed to adopt regulations that would implement some portions of this bill. Specifically, the regulations prohibited a broker from delegating supervision to a licensee whose license was subject to restriction, who was not licensed to the employing broker, who had less than two years of experience during the five years immediately preceding the delegation and who had been subject to debarment in the past seven years. Additionally, it required that when a broker designated a branch manager, that designation must be in writing. However, no provisions concerning the discipline of branch office managers were considered in these regulations because that action requires a statutory change, which this bill hopes to accomplish. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 5/4/11) CONTINUED SB 510 Page 5 California Association of Realtors (source) ARGUMENTS IN SUPPORT : The California Association of Realtors states that "SB 510 will add two much needed changes to the law." Also, they add that "SB 510 does not remove any existing accountability for the employer broker that is at the head of the company; he or she is still just as accountable for wrongful acts as under current law." JJA:nl 5/4/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED