BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 269|
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THIRD READING
Bill No: SB 269
Author: Hill (D)
Amended: As introduced
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM .: 10-0, 4/1/13
AYES: Price, Emmerson, Block, Corbett, Galgiani, Hernandez,
Hill, Padilla, Wyland, Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Prepaid rental listing service
SOURCE : Author
DIGEST : This bill eliminates the prepaid rental listing
services only (PRLS-only) license, and requires a provider of
prepaid rental listing services to hold a valid real estate
license. The rental listing service provider would also have to
provide his/her real estate license number and notice of the
consumer's rights on the written contract for services before
accepting payment.
ANALYSIS :
Existing law provides that:
1.A person who wants to offer prepaid rental listing services
must either hold a real estate broker's license or a prepaid
rental listing services license issued by the Department of
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Real Estate (DRE).
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 DRE Commissioner.
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.
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 tenant's specifications for the rental property.
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.
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 10 days
after the end of the contract period.
This bill:
1.Eliminates the PRLS-only license, and requires a real estate
salesperson or real estate broker license to offer PRLS.
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 PRLS to include the license number
held by the PRLS provider.
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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.
Background
PRLS 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
prepaid 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.
The DRE's Web site lists 58 PRLS-only licensee locations, 40% 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
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the foreclosure crisis began, DRE has issued 34 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 PRLS 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/12/13)
Apartment Association, California Southern Cities
California Apartment Association
California Association of Realtors
East Bay Rental Housing Association
Nor Cal Rental Property Association
ARGUMENTS IN SUPPORT : According to the author's office, fraud
and abuse perpetrated by PRLS companies has increased due to the
increase in demand for 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
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licensee's status prior to signing the contract.
The California Association of Realtors (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. 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.
MW:nl 4/16/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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