BILL ANALYSIS Ó
SB 269
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Date of Hearing: June 11, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
SB 269 (Hill) - As Introduced: February 14, 2013
SENATE VOTE : 36-0
SUBJECT : Prepaid rental listing services.
SUMMARY : Phases out the prepaid rental listing services (PRLS)
only license under the Department of Real Estate (DRE), and
instead requires a provider of PRLS to hold a valid real estate
broker license and to provide prospective clients with a written
notice of the consumer's rights before accepting payment.
Specifically, this bill :
1) Eliminates the authorization for a PRLS-only licensed
individual to conduct a PRLS, effective January 1, 2015.
2) Requires a person engaged in the business of a PRLS to have a
real estate broker license, effective January 1, 2015.
3) Deletes provisions related to the fee for a PRLS-only
license, effective January 1, 2015.
4) Deletes provisions related to the background qualifications
of an applicant, the applicant's designated agents, and the
persons owning 25% or more of the shares of the corporate
applicant for a PRLS-only license and service of process upon
that applicant.
5) Eliminates requirements on designated agents of PRLS provided
by a licensed real estate broker or PRLS-only license,
effective January 1, 2015.
6) Requires providers of PRLS to provide, prior to accepting a
fee, the prospective tenant with a written notice in 12 point
font enumerating the prospective tenant's rights under
existing law, as specified.
7) Deletes bond requirements related to the provision of PRLS.
8) Requires contracts for PRLS to include the license number
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held by the PRLS provider.
9) Provides that on and after January 1, 2014, the DRE shall not
issue any PRLS-only licenses
10)Eliminates various implementing provisions related to the
PRLS-only license, effective January 1, 2015.
11)Deletes requirements that the DRE promulgate regulations to
apply to the PRLS-only license certain provisions which apply
to a real estate broker license.
12)Makes various other technical and clarifying changes.
13)Makes Legislative findings and declarations relative to PRLS
fraud.
EXISTING LAW:
1) The Real Estate Law provides for the regulation and licensing
of prepaid rental listing services by the Real Estate
Commissioner (Commissioner). Existing law prohibits a person
from engaging in the business of PRLS unless licensed in that
capacity or licensed as a real estate broker. A willful
violation of these provisions is a crime. (Business and
Professions Code (BPC) Section 10000, et seq.)
2) Requires a person offering PRLS to hold either a real estate
broker's license or a PRLS-only license issued by the DRE.
(BPC 10167.2 (a))
3) Requires a PRLS-only licensee to maintain a $10,000 corporate
security bond or cash deposit in an account assigned to the
Commissioner. (BPC 10167.7)
4) Requires PRLS licensees to 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))
5) Requires a PRLS provider, prior to accepting a fee, to 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. (BPC 10167.9)
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6) Requires a licensee to 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))
7) Requires a licensee to 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))
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill is intended to improve
consumer protection in the rental housing market by
eliminating a separate class of license to provide PRLS
without a real estate license, and by mandating the provision
of a written notice of consumer rights to prospective clients.
This bill was motivated by allegations of fraud and abuse by
some PRLS companies, which operate without real estate broker
licenses. This bill is author-sponsored.
2)Author's statement . According to the author, "A tight rental
housing market is one of the many consequences of California's
foreclosure crisis. Either because they lost their home to
foreclosure or short sale, or because the home they were
renting was foreclosed upon, many individuals and families are
being forced to, or are choosing to, look for rental housing.
Unfortunately, the high demand for rental properties has
created a market ripe for prepaid rental listing service
scams. In recent months, there have been press reports in
various regions of the state, documenting some of the abuses,
and DRE has issued a Consumer Fraud Alert and Warning, hoping
to encourage consumers to check out their rental list
providers, before paying for services? This bill eliminates
the PRLS--only license, and requires a real estate salesperson
or real estate broker license to offer prepaid rental listing
services."
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3)The PRLS-only license . PRLS offer a list of available rentals
meeting a prospective renter's selection criteria, in exchange
for a fee paid by the prospective renter. Anyone conducting
business as a PRLS provider in California requires a real
estate salesperson or broker's license, or a special PRLS-only
license which entitles the licensee to offer PRLS services but
none of the other services that licensed real estate
salespersons or brokers may perform. The PRLS-only license
expires after two years.
The fee paid by a prospective renter is due when the list is
provided to him or her, but a consumer is entitled to a refund
from their PRLS provider if they are unable to obtain a rental
property using the list they were provided. Paying a fee to
avoid the hassle of sorting through hundreds of classified or
online ads can appear to be a good deal on the surface, and
can be a valuable time-saver, if the list that is provided is
accurate, specifically tailored to the renter, and up-to-date.
However, the author contends that PRLS scams are increasingly
common, and that many consumers have found themselves unable
to obtain rentals and unable to obtain refunds of their PRLS
fees.
4) Evidence of improper activity in the PRLS market .
According to the author, the bar to obtain a PRLS-only
license is very low (passing a background check, posting a
$10,000 bond, and paying a $100 license fee), which makes
it easy for scammers to proliferate. There are also very
few valid licenses in operation. The DRE's Web site lists
a total of 31 unique PRLS-only license identification
numbers, of which only 16 are in good standing or
restricted status. Seven other ID numbers are listed as
cancelled, five are expired, two are revoked and one is
suspended. Furthermore, since the foreclosure crisis
began, DRE has issued thirty-four desist and refrain orders
to people offering PRLS services without a valid license.
In 2012, the DRE issued a Consumer Fraud Alert and Warning
regarding PRLS, writing that a "growing number of scams
[are] being perpetrated against consumers seeking to rent
homes and apartments by persons offering rental lists for a
fee and businesses operating Prepaid Rental Listing Service
(PRLS) companies. As a result of the current economic
climate, a significant number of consumers have the need to
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move into residential rental properties due to income
and/or credit issues, foreclosures, short sales, or some
other inability to own homes or maintain homeownership.
Moreover, some existing renters are forced to look for
alternative rental space due to foreclosure of their
existing rental properties. These realities have created an
environment perfect for PRLS scams."
According to the author, 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.
Prospective renters may also find that the advertised
rental price, or some other detail, is incorrect. The
failure of some PRLS providers to honor valid refund
requests also poses a problem for consumers.
5) This bill in practice . SB 269 effectively phases out the
PRLS-only license, effective January 1, 2015, and bars the
issuance of such licenses as of January 1, 2014. Going
forward, PRLS providers will be required to hold a valid
real estate broker license.
This bill would also require PRLS providers to include their
license number in their contracts, and to provide a notice
to prospective tenants before accepting a service fee. That
notice would offer a simple, easy-to-understand explanation
of their contractual refund rights, the process for
requesting a refund, how to file a complaint with the DRE,
and a reminder that a consumer may bring suit against a
licensee in small claims court for refusal to issue a
refund as required by the contract.
The author contends that requiring a real estate license to
offer PRLS services will "raise the bar" for those wishing
to offer PRLS and thereby discourage the less qualified and
ill-intentioned. Consumers harmed by a licensed real estate
broker can also file claims for restitution from the DRE's
Consumer Recovery Account, whereas victims of PRLS-only
licensees cannot. Bad actors can also be more effectively
disciplined by the DRE.
6)Arguments in support . The California Apartment Association
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(CAA) writes "[SB 269] offers a solution to what has become a
problem for the rental housing industry and more specifically
for prospective tenants?.Some unscrupulous vendors have not
delivered up-to-date rental listings and have not returned any
deposits to the prospective tenants when they are unable to
locate a rental unit as required by the vendor contracts. CAA
believes that added oversight and the requirement that PRLS
providers hold a real estate license will help to reduce the
problems associated with this service.
REGISTERED SUPPORT / OPPOSITION :
Support
California Apartment Association
California Association of Realtors
Opposition
None on file.
Analysis Prepared by : Hank Dempsey / B.,P. & C.P. / (916)
319-3301