BILL ANALYSIS Ó
SB 510
Page 1
Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 510 (Correa) - As Amended: May 4, 2011
SENATE VOTE : 39-0
SUBJECT : Real estate brokers: corporate officers: designating
branch managers.
SUMMARY : Establishes requirements for an individual to become
a real estate branch manager and authorizes the Commissioner of
the Department of Real Estate (DRE) to discipline a branch
manager for failure to supervise branch operations.
Specifically, this bill :
1)Authorizes an employing real estate broker or corporate
designated broker officer to appoint a real estate broker
licensee or real estate sales licensee as a manager of a
branch office or division of the employing broker's or
employing corporate designated broker officer's real estate
business and 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 officer who fails to exercise reasonable
supervision and control over the activities of the
corporation.
3)Subjects a licensee accepting appointment as a manager to
disciplinary action, including suspension or revocation of the
appointee's license, for failure to properly supervise
licensed activity over which the appointee is given authority.
4)Requires any appointment made pursuant to this bill to be made
by means of a written contract in which the appointed manager
accepts the delegated responsibility. The appointing
employing broker or corporate designated broker officer must
retain a copy of the contract and send a notice to DRE, in a
form approved by the Commissioner, identifying the appointee
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and the branch office or division the manager is appointed to
supervise.
5)Provides that a licensee shall not be appointed as a manager
if any of the following apply:
a) The licensee holds a restricted license;
b) The licensee is or has been subject to an order of
debarment; or,
c) The licensee 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
officer to immediately notify the Commissioner in writing
whenever an appointment of a branch manager is terminated or
changed.
7)Becomes operative on July 1, 2012.
EXISTING LAW
1)Regulates real estate transactions and licenses real estate
agents, brokers and salespersons through DRE.
2)Defines a real estate salesperson as a natural person who, for
compensation or in expectation of compensation, is employed by
a licensed real estate broker to engage in one or more of the
activities for which a real estate license is required.
3)Provides that the Commissioner may suspend or revoke the
license of a real estate broker licensee who fails to exercise
reasonable supervision over the activities of his or her
salespersons or who, as the officer designated by a corporate
broker licensee, fails to exercise reasonable supervision and
control over the activities of the corporation.
4)States that no violation of any of the provisions of the Real
Estate Law by a real estate salesperson or other employee of a
licensed real estate broker shall cause the revocation or
suspension of the license of the employing broker, unless it
appears upon a hearing by the Commissioner that the employing
broker had guilty knowledge of such violation.
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Existing regulation requires real estate brokers to exercise
reasonable supervision over the activities of their
salespersons, as specified, and provides that a broker may use
the services of brokers and salespersons to assist in this task,
as long as the broker does not relinquish overall responsibility
for supervising the acts of salespersons licensed to the broker
(Regulation 2725).
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "SB 510
will add accountability to the managers of real estate branch
offices by ensuring that managers' licenses can be sanctioned
for failure to supervise."
Background . The Commissioner of DRE established a Broker
Supervision Task Force in 2009-2010 to evaluate challenges and
related issues pertaining to broker supervision. This bill
enacts one of the task force's recommendations.
In its September 2010 report, the task force explained,
"Currently, there are no license disciplinary consequences to
any subordinate licensee when supervisorial authority is
delegated under the provisions of Regulation 2725 for failure to
properly supervise. It was decided that legislation should be
considered to provide a multi-tiered operational structure that
would hold a subordinate supervisor delegate liable for proper
supervision potentially along with the designated officer or
broker....Real estate licensee(s) accepting delegated
supervisory authority shall be subject to disciplinary action,
potentially along with the responsible broker or designated
officer, for failing to properly supervise the licensed
activities performed within his/her delegated areas of
responsibility. Regardless of any such agreements, the
principal real estate broker or designated officer of a
corporation shall exercise reasonable supervision and control
over all activities that require a real estate license."
The task force concluded that requirements for appointment as an
office manager should include those provided for in this bill (a
minimum of two years for any real estate salesperson appointed
to a branch manager position, inability of anyone with a
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restricted license or subject to a bar order to act as a branch
manager, and a requirement that a written contract be in place
between the employing broker and the branch manager).
As noted above, the task force envisions that real estate
brokers who head up large real estate offices will be able to
delegate branch manager responsibilities to real estate
salespersons and real estate brokers in their employ. This is
nothing new. Employing brokers already delegate branch manager
and office manager responsibility to others. What is new in
this bill is the concept that the licensees to whom this
responsibility is delegated will be subject to disciplinary
action for failure to properly supervise.
Support . The California Association of Realtors (CAR) states,
"SB 510 will add two much needed changes to the law?(to) put in
place minimum standards for appointment?(and) impose a statutory
duty to supervise the sales persons that report to the office
manager, and expose the manager to license discipline if he or
she does not properly supervise." CAR also notes, "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."
Related Legislation . SB 706 (Price) makes numerous enforcement
enhancements to DRE and the Office of Real Estate Appraisers
(OREA); requires licensing boards to post information about
licensees on the Internet, as specified; and, makes updating and
conforming changes. This bill is pending in Assembly Business,
Professions and Consumer Protection Committee.
AB 278 (Hill) authorizes the DRE Commissioner to promulgate
regulations authorizing the issuance of citations and fines to
DRE licensees and unlicensed persons engaging in activities for
which a real estate license is required. This bill is pending
in Senate Business, Professions and Economic Development
Committee.
Previous legislation . SB 1737 (Machado) Chapter 286, Statutes
of 2008, allows 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 allows DRE to suspend or revoke a
license if the licensee provides an inaccurate opinion of value
for a short sale for specified purposes, and requires notice to
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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) of 2008 authorizes the
Commissioners of 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 defines the term "higher-priced mortgage loan," as
specified. This bill was vetoed.
AB 2454 (Emmerson) Chapter 279, Statutes of 2008, increases the
limit on the amount for which the Recovery Account may be liable
and deletes obsolete provisions relating to a cause of action
brought prior to January 1, 1980.
AB 840 (Emmerson) Chapter 140, Statutes of 2007, authorizes 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.
Double referred . This bill is double-referred to Assembly
Banking and Finance Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors (sponsor)
Opposition
None on file.
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301