BILL ANALYSIS Ó
SB 706
Page 1
Date of Hearing: July 5, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 706 (Price) - As Amended: June 27, 2011
SENATE VOTE : 22-12
SUBJECT : Business and professions.
SUMMARY : Makes numerous enforcement enhancements to the
Department of Real Estate (DRE) and the Office of Real Estate
Appraisers (OREA), requires specified licensing boards to post
information about licensees on the internet, and makes updating
and conforming changes. Specifically, this bill :
1)Adds the following entities to the list of entities that must
post on the internet specified information regarding their
licensees, and makes conforming changes: the California Board
of Accountancy; the California Architects Board; the State
Athletic Commission; the State Board of Barbering and
Cosmetology; the State Board of Guide Dogs for the Blind; the
State Board of Chiropractic Examiners (BCE); DRE; and, OREA.
Requires the Board of Behavioral Sciences to include
information about licensed professional clinical counselors.
2)Requires the information specified above to include
accusations filed pursuant to the Administrative Procedures
Act. Provides that, in providing information on the internet,
entities within the Department of Consumer Affairs (DCA) and
the BCE shall comply with DCA guidelines for access to public
records.
3)States that protection of the public shall be the highest
priority for DRE and OREA in exercising their licensing,
regulatory, and disciplinary functions and that whenever the
protection of the public is inconsistent with other interests
sought to be promoted, the protection of the public shall be
paramount.
4)Allows DRE and OREA to enter into a settlement with a licensee
or applicant instead of the issuance of an accusation or
statement of issues against that licensee or applicant.
Requires the settlement to identify the factual basis for the
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action being taken and the statutes or regulations violated.
Specifies that a person who enters a settlement is not
precluded from filing a petition, in the timeframe permitted
by law, to modify the terms of the settlement or a petition
for early termination of probation, if probation is part of
the settlement. States that any settlement executed against a
licensee shall be considered discipline.
5)Authorizes an administrative law judge (ALJ) to order a
licensee in a disciplinary proceeding to pay, upon request of
the DRE Commissioner (Commissioner) or OREA Director
(Director), the reasonable costs of investigation and
enforcement of the disciplinary case against the licensee, as
specified. Prohibits DRE and OREA from renewing or
reinstating the license of a licensee who fails to pay costs
ordered, unless the licensee demonstrates financial hardship
and enters into an agreement to pay, as specified.
6)Authorizes the Commissioner or Director, when a licensee is
placed on probation, to require the licensee to pay the
monetary costs associated with monitoring the licensee's
probation, in addition to any other terms and conditions
placed upon the licensee. Prohibits the renewal or
reinstatement of a license or license endorsement if the
licensee fails to pay costs ordered.
7)Requires costs recovered pursuant to these disciplinary
actions to be deposited in either the Real Estate Fund or the
Real Estate Appraisers Regulation Fund, as specified, and
makes the funds available upon appropriation by the
Legislature.
8)Requires the automatic suspension of any license or
endorsement of a licensee during any time the licensee is
incarcerated after conviction of a felony, regardless of
whether the conviction has been appealed, as specified.
Requires the DRE or OREA to notify the licensee in writing of
the suspension and of his or her right to elect to have the
issue of penalty heard, as specified.
9)Requires the Commissioner or Director to suspend a license or
endorsement if it is determined after a hearing before an ALJ
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from the Office of Administrative Hearings that the felony for
which the licensee was convicted was substantially related to
the qualifications, functions, or duties of the licensee, as
specified. Provides for additional disciplinary action, as
specified, including due process provisions.
10)Requires a licensee to submit a written report of any of the
following to the DRE or OREA: the bringing of an indictment or
information charging a felony against the licensee; arrest of
the licensee; conviction of the licensee, including any felony
or misdemeanor; and, any disciplinary action taken by another
licensing entity or authority of this state, another state, or
an agency of the federal government. Requires the report to
be made in writing within 30 days, and provides that failure
to make a report shall constitute a cause for discipline.
11)Requires the Secretary (Secretary) of the Business,
Transportation and Housing Agency (BTH), by January 31, 2012,
to appoint a DRE Enforcement Program Monitor (Monitor) to
monitor and evaluate DRE's disciplinary system and procedures,
as specified. The Secretary may retain a person for this
position by a personal services contract, the Legislature
finding, pursuant to Section 19130 of the Government Code,
that this is a new state function and, thus, not prohibited by
the Civil Service Act. The Monitor is directed to make as his
or her highest priority the reform and reengineering of the
department's enforcement program and operations, and is vested
with the same investigative authority as the Secretary. BTH
must reimburse the Secretary for all of the costs associated
with the employment of the Monitor.
12)Subjects DRE and OREA to review by the appropriate committees
of the Legislature, including reports submitted by the
Monitor.
13)Renames the "Recovery Account of the Real Estate Fund" the
"Consumer Recovery Account (CRA) of the Real Estate Fund".
14)Deletes a provision deeming claims for reimbursement from the
CRA denied if the Commissioner fails to render a written
decision in response to the claim within 90 days.
15)Requires the Secretary of BTH to review and evaluate OREA and
make recommendations to the Legislature by October 1, 2014,
regarding whether OREA should be consolidated within DRE or
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consolidated within any other state department or office, and
to provide appropriate justification for that recommendation.
16)Requires, effective January 1, 2013, applicants for renewal
of a license from OREA to fulfill continuing education (CE)
requirements including a minimum of four hours of federal and
California appraisal related statutory and regulatory law
every four years.
EXISTING LAW
1)Provides for the licensure, and regulation of real estate
brokers, real estate salespersons, and mortgage loan
originators by DRE in BTH.
2)Provides for the licensure and regulation of real estate
appraisers, and the certification of appraisal management
companies (AMCs) by OREA within BTH.
3)Requires specified entities to disclose on the internet
information on their respective licensees, including
information on the status of every license, suspensions and
revocations of licenses issued and other related enforcement
actions.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office,
"California and the Nation are struggling in the grip of a
financial crisis. While many factors have contributed this
crisis, a significant role has been played by mortgage and real
estate issues. Mortgage defaults and foreclosures grew to
all-time highs. In 2008, nearly a quarter million Californians
lost their homes to foreclosure. In recent months, foreclosure
sales have accounted for nearly half of all property sales in
California.
Throughout the crisis, significant criticism has been focused
upon real estate practices. Recent reports and articles have
criticized the Department of Real Estate as well as the Office
of Real Estate Appraisers for a lack of taking action against
licensees who have violated the law?(This) bill gives both DRE
and OREA a set of tools to enhance their enforcement
operations."
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Background . The DRE is responsible for regulating the practice
of real estate brokers and real estate salespersons in
California.
The OREA is responsible for regulating the practice of real
estate appraisers in California, by ensuring that only qualified
persons are licensed to conduct appraisals in federally related
real estate loan transactions and that all real estate
appraisers licensed by the state adhere to applicable laws,
regulations, and standards.
The Administrative Procedures Act (APA) requires an agency to
file an accusation or statement of issues against a licensee
before the regulatory agency can reach a stipulated settlement
with the licensee. While many licensees will not agree to a
stipulated settlement without the pressure of a formal
accusation having been filed, it is the experience of a number
of regulatory boards that there are instances in which a
licensee is willing to agree to a stipulated settlement earlier
on in the investigation stage of the enforcement process in
order to minimize the cost of an administrative hearing, or in
order to expedite the resolution of a disciplinary matter. This
bill authorizes DRE and OREA to enter into a stipulated
settlement agreement with a licensee or applicant prior to the
issuance of an accusation or statement of issues against the
licensee.
The ability to recover the costs for the investigation and
enforcement of a disciplinary case in which an administrative
law judge has found a licensee to have committed violations of
the licensing act is an important tool for licensing and
regulatory agencies. This bill authorizes an ALJ to order a
licensee in a disciplinary proceeding to pay, upon request of
the Commissioner or Director, the reasonable costs of
investigation and enforcement of the disciplinary case against
the licensee.
Explicit statutory authority to recover the costs associated
with probation monitoring for a disciplined licensee that has
been placed upon probation is also an important regulatory tool.
Several regulatory boards under the DCA have explicit statutory
authority to recover costs for probation monitoring. Such
statutory authority will give DRE and OREA greater explicit
authority, lead to quicker resolution of probation terms, and
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authorize DRE and OREA to refuse to renew the license of a
licensee who has not paid probation costs. This bill authorizes
the Commissioner or Director to require the licensee to pay the
monetary costs associated with monitoring the licensee's
probation.
A criticism leveled by the Sacramento Bee in November 2010 was
that a number of DRE licensees who had been convicted of crimes
and incarcerated still held untarnished licenses with DRE.
Giving DRE and OREA the ability to automatically suspend a
licensee who is suspended will close this gap in DRE and OREA's
enforcement arsenal, while maintaining a licensee's due process
rights. This bill requires the automatic suspension of any
licensee who is incarcerated after conviction of a felony, and
requires DRE or OREA to give written notification to the
licensee of the suspension and of his or her right to elect to a
hearing on the penalty.
Applicants for original and renewal licenses are typically
required to disclose criminal violations, prior disciplinary
action taken against a professional license, or pending criminal
charges. In such cases, a license will only be issued to the
applicant after the receipt and review of the confirming
information from the Department of Justice. This bill requires
a licensee to submit a written report of any of the following to
the DRE or OREA: the bringing of an indictment or information
charging a felony against the licensee; arrest of the licensee;
conviction of the licensee, including any felony or misdemeanor;
and, any disciplinary action taken by another licensing entity
or authority of this state, another state, or an agency of the
federal government. The report must be made in writing within
30 days, and failure to make a report constitutes a cause for
discipline.
Currently, a number of regulatory boards are required to post
the status of every license, including suspensions and
revocations, whether or not the licensee or former licensee is
in good standing, or has been subject to discipline by the board
or by the licensing program of another state. However,
accusations are not required to be noticed.
An accusation is a public record under the Public Records Act
(PRA). If a consumer made a PRA request about a particular
licensee, the responding agency would have to disclose any
pending accusation. An accusation means that the complaint has
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been fully investigated, the investigation is complete, and the
prosecutor believes that there is "clear and convincing
evidence" of a violation that merits disciplinary action. The
filing of an accusation is what turns a confidential
investigation into a matter of public record. The author's
office contends that there is no reason why DRE and OREA should
not disclose accusations that are already public records. Once
the investigation is completed, and accusations are filed, the
public must be made aware of the charges against licensees.
This bill expands the list of entities that must post on the
internet specified information regarding their licensees,
including accusations: the California Board of Accountancy; the
California Architects Board; the State Athletic Commission; the
State Board of Barbering and Cosmetology; the State Board of
Guide Dogs for the Blind; the State Board of Chiropractic
Examiners (BCE); DRE; and, OREA. The bill also requires the
Board of Behavioral Sciences to include information about
licensed professional clinical counselors, which is a new
licensing category.
DRE Enforcement Monitor . This bill requires the appointment of
an enforcement program monitor for the DRE. While an
enforcement monitor may be effective in helping an agency
improve operations and outcomes for discipline and enforcement,
this bill appears to overreach in its provisions for this
function.
This bill allows the Secretary to hire the Monitor under a
personal services contract, stating that the Legislature finds
it is a new state function under Section 19130 of the Government
Code. It is not clear that this position would qualify under
the requirements of this section, as the Monitor's functions
appear to be ongoing and additional requirements of Section
19130, such as cost savings to the state, inability for the work
to be performed by state employees, and other factors, have not
been shown with regard to this Monitor position.
This bill also directs the Monitor to make "as his or her
highest priority the reform and reengineering of the
department's enforcement program and operations." This appears
to be a contradictory and premature directive. The Monitor must
submit a report of his or her findings and conclusions to DRE
and the Legislature, yet is directed to reform and reengineer
DRE's programs and operations. There is also no allowance for
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the Legislature to review any of the Monitor's reports prior to
changes the Monitor would have the authority to make.
This bill also grants the Monitor the "same investigative
authority as the Secretary" of BTH. It is unclear why the
Monitor should be vested with this authority, particularly as a
contracted position. This bill also requires BTH to reimburse
the Secretary for all of the costs associated with the
employment of the Monitor. Both of these provisions appear to
lack appropriate oversight.
The Committee may wish to consider whether it is more
appropriate to request the Bureau of State Audits to conduct an
investigation of DRE's disciplinary and enforcement system,
before allowing a contracted enforcement monitor with no
Legislative oversight to reform a state department's enforcement
program and operations.
Related legislation . 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 Appropriations
Committee.
SB 53 (Calderon and Vargas) authorizes the Commissioner to issue
citations to unlicensed persons engaging in activities for which
a real estate license is required or to licensees in violation
of any provision of the Real Estate Law or any rule or order
thereunder. The bill allows citations to include an
administrative penalty of up to $2,500, and includes a number of
additional provisions pertaining to DRE investigations, escrow
disclosures, recording requirements, and exempted transactions.
This bill is pending in Assembly Appropriations Committee.
Previous legislation . AB 33 (Nava) of 2009 proposed to
consolidate the OREA with the DRE. The bill also proposed a
number of other changes, including a complete reorganization of
several departments in BTH. This bill was amended to address a
different subject.
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
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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 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.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301