BILL ANALYSIS Ó
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|Hearing Date:April 1, 2013 |Bill No:SB |
| |269 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 269Author:Hill
As Introduced: February 14, 2013 Fiscal: Yes
SUBJECT: Prepaid rental listing service.
SUMMARY: Eliminates the pre-paid rental listing services only,
(PRLS-only) license, and requires a provider of pre-paid rental
listing services to hold a valid real estate license. The rental
listing service provider would also have to provide his or her real
estate license number and notice of the consumer's rights on the
written contract for services before accepting payment.
Existing law:
1) A person who wants to offer pre-paid rental listing services must
either hold a real estate broker's license or a pre-paid rental
listing services license issued by the Department of Real Estate.
(BPC § 10167.2 (a))
2) To maintain a PRLS-only license, the licensee must maintain a
$10,000 corporate security bond or cash deposit in an account
assigned to the Real Estate Commissioner. (BPC § 10167.7)
3) PRLS licensees must pass a background check, pay an application fee
of $100, plus $25 for each branch location at which the PRLS
services will be offered. (BPC § 10167.3 (a))
4) Prior to accepting a fee, a PRLS provider must offer a written
contract specifying the name, address, and telephone number of the
provider, acknowledgement of receipt of the amount of the fee, a
description of the service to be provided, and the prospective
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tenant's specifications for the rental property. (BPC § 10167.9)
5) A licensee must fully refund a prospective tenant if within five
days of executing the contract the licensee has not provided at
least three currently available properties that meet the
prospective tenant's specifications, unless the tenant obtains a
rental through the licensee's services. (BPC § 10167.10(a)(1))
6) A licensee must refund any charge above $50 if the prospective
tenant obtains a rental that is not through the services of the
licensee during the period of the contract, or does not find a
rental during the period of the contract, so long as the
prospective tenant requests the refund within ten days after the
end of the contract period. (BPC § 10167.10(b)(2))
This bill:
1) Eliminates the PRLS--only license, and requires a real estate
salesperson or real estate broker license to offer prepaid rental
listing services.
2) Prohibits the issuance of any new PRLS-only licenses, effective
January 1, 2014.
3) Allows persons who were issued a PRLS-only license before the
bill's operative date to continue operating under that license,
until their license expires.
4) Requires all contracts for prepaid rental listing services to
include the license number held by the PRLS provider.
5) Requires PRLS providers to give each prospective customer a simple,
easy-to-understand explanation of their contractual refund rights,
an explanation of how they can file a complaint, and a description
of their options, if their PRLS provider refuses to issue them a
refund in accordance with their contract.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. This bill is sponsored by the Author. According to the
Author, fraud and abuse perpetrated by pre-paid rental listing
service companies has increased due to the increase in demand for
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rental housing, and may be curbed by restricting the ability to
offer these listing services to individuals holding a real estate
salesperson or broker's license. Additionally, this bill provides
increased consumer protection by requiring each PRLS provider to
include their real estate license number and a statement of
consumer rights on the written contract for services. This will
inform the consumer of their rights, the method of redress if the
rights are violated, and adequate information to identify the
licensee and verify the licensee's status prior to signing the
contract.
2. Background. A Pre-paid Rental Listing Service is a list of
available rentals meeting a prospective renter's selection
criteria, in exchange for a fee paid by the prospective renter.
The fee is due when the list is provided to the prospective renter,
but the prospective renter is entitled to a refund from their list
provider if they are unable to obtain a rental property using the
list they are provided. The Pre-paid rental list can be a valuable
time-saver for a consumer only if the list that is provided is
accurate, specifically tailored to the renter's needs, and is
up-to-date.
PRLS scams are increasingly common, and many consumers have found
themselves unable to obtain rentals, and unable to obtain refunds
of their PRLS fees from unscrupulous PRLS providers. In recent
months, there have been press reports in various regions of the
state documenting PRLS abuses. The DRE has issued a Consumer Fraud
Alert and Warning to encourage consumers to research their rental
list providers before paying for services.
A typical PRLS scam involves the promise of a list of available
rentals in a location and price range desired by the prospective
tenant. But, when the prospective renter contacts the owners of
the properties on the list, they learn that the properties are not
for rent, have already been rented, or do not exist.
Alternatively, the prospective renter finds that the rental price
represented on the list, or that other details about the rental
property, are incorrect. Compounding the problem, scammers fail to
provide refunds, as specified in their contracts.
Currently, conducting business as a PRLS provider in California
requires a real estate salesperson or real estate broker license,
or a special PRLS-only license, which entitles the license holder
to offer PRLS services, but none of the other services that
licensed real estate salespersons or brokers may perform.
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The low barrier to obtaining a PRLS-only license, (passing a
background check, posting a $10,000 bond, and paying a $100 license
fee) may be encouraging fraud and abuse. The DRE's web site lists
fifty-eight (58) PRLS-only licensee locations, forty percent of
which are no longer licensed to legally provide PRLS services, due
either to cancellation of their bond by their bonding company (14
license locations) or to disciplinary actions initiated against
them by DRE (eight license locations). Since the foreclosure
crisis began, DRE has issued thirty-four desist and refrain orders
to people offering PRLS services, without being licensed to do so.
Eliminating the PRLS--only license, and requiring a real estate
salesperson or real estate broker license to offer prepaid rental
listing services will allow a prospective renter who falls victim
to a PRLS scam perpetrated by a real estate licensee to file a
claim for restitution from the DRE's Consumer Recovery Account.
Currently, victims of PRLS-only licensees are not eligible for
restitution from this fund, because the Consumer Recovery Account
only covers those who were victimized by persons holding a real
estate license.
The DRE will be able to use its existing authority to issue
citations and levy fines against unlicensed persons, when it
uncovers evidence of unlicensed PRLS activity. DRE's citation and
fine authority is limited to licensed persons and those who are
unlicensed, but operating in a manner that requires a real estate
license.
3. Arguments in Support. The California Association of Realtors ,
(CAR) supports this bill. The CAR states that the economic
downturn and housing crisis has caused increased demand for rental
listings. As a result, the number of fraudulent providers of
rental listings has also increased. The CAR believes that
restricting authorization to provide rental listings to people who
hold a real estate license will raise the bar and help ensure
ethical business behavior.
SUPPORT AND OPPOSITION:
Support :
California Apartment Association
California Association of Realtors
Opposition :
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None on file as of March 26, 2013.
Consultant: Kristin Webb