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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