BILL ANALYSIS Ó
SB 269
Page 1
SENATE THIRD READING
SB 269 (Hill)
As Amended June 27, 2013
Majority vote
SENATE VOTE :36-0
BUSINESS & PROFESSIONS 12-0 APPROPRIATIONS 16-1
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|Ayes:|Gordon, Jones, Bocanegra, |Ayes:|Gatto, Harkey, Bigelow, |
| |Campos, Dickinson, | |Bocanegra, Bradford, Ian |
| |Eggman, Hagman, | |Calderon, Campos, Eggman, |
| |Maienschein, Mullin, | |Gomez, Hall, Holden, |
| |Skinner, Ting, Wilk | |Linder, Pan, Quirk, |
| | | |Wagner, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Donnelly |
| | | | |
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SUMMARY : Phases out the prepaid rental listing service (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, or a real estate sales license in conjunction
with broker supervision, 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, or a real estate sales license in
conjunction with supervision by a real estate broker,
effective January 1, 2015.
3) Authorizes a real estate licensee to provide PRLS at any
location where business is conducted under the immediate
supervision of a broker or of a real estate salesperson
licensed to, and acting on behalf of, the broker.
4) Deletes provisions related to the fee for a PRLS-only
license, effective January 1, 2015.
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5) 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.
6) Eliminates requirements on designated agents of PRLS provided
by a licensed real estate broker or PRLS-only license,
effective January 1, 2015.
7) 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.
8) Deletes bond requirements related to the provision of PRLS.
9) Requires contracts for PRLS to include the license number
held by the PRLS provider.
10)Provides that on and after January 1, 2014, the DRE shall not
issue any PRLS-only licenses.
11)Eliminates various implementing provisions related to the
PRLS-only license, effective January 1, 2015.
12)Deletes requirements that the DRE promulgate regulations to
apply to the PRLS-only license certain provisions which apply
to a real estate broker license.
13)Makes various other technical and clarifying changes.
14)Makes legislative findings and declarations relative to the
threat of PRLS fraud.
15)Specifies that no reimbursement is required pursuant to
Section 6 of Article XIIIB of the California Constitution
because the only costs that may be incurred by a local agency
or school district will be incurred because this act creates
a new crime or infraction, eliminates a crime or infraction,
changes the penalty for a crime or infraction, or changes the
definition of a crime.
SB 269
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EXISTING LAW:
1) Provides, in accordance with the Real Estate Law, 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 Section 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 Section 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 Section
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 Section 10167.9)
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
Section 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 Section
10167.10(b)(2))
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FISCAL EFFECT : According to the Assembly Appropriations
Committee, costs associated with this legislation should be
minor and absorbable within existing DRE resources.
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 allowing individuals
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
operating 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."
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.
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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 34 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 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
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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, or a real estate sales license in
conjunction with a broker's supervision.
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
(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."
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Analysis Prepared by : Hank Dempsey / B.,P. & C.P. / (916)
319-3301 FN:
0001453