BILL ANALYSIS Ó
SB 269
Page 1
SENATE THIRD READING
SB 269 (Hill)
As Amended August 30, 2013
Majority vote
SENATE VOTE :36-0
BUSINESS & PROFESSIONS 14-0
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|Ayes:|Bonilla, Jones, | | |
| |Bocanegra, Campos, | | |
| |Dickinson, Eggman, | | |
| |Gordon, Hagman, Holden, | | |
| |Maienschein, Mullin, | | |
| |Skinner, Ting, Wilk | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Expands the enforcement powers of the Bureau of Real
Estate (BRE) over prepaid rental listing services (PRLS) licensees,
authorizes consumers harmed by PRLS providers to seek compensation
from the Consumer Recovery Account (Account), increases application
fees for the PRLS license to better fund the Account, and requires
licensees to provide prospective clients with a written notice of
the consumer's rights. Specifically, this bill :
1) Authorizes BRE to issue a citation containing an order of
correction to an unlicensed individual for advertising
professional services in a telephone directory, which may include
a requirement that the cited individual cease advertising in a
telephone directory and a request for the disconnection of the
violator's telephone service, as specified.
2) Grants cite and fine authority to the Commissioner of BRE as
specified to punish the unlicensed or improper provision of PRLS,
which includes the power to impose an administrative fine not to
exceed $2,500 to be deposited in the Account.
3) Increases the application fee for the PRLS license from $100 to
$125 for the first location, and from $25 to $50 for each
subsequent location and to add or eliminate additional locations.
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4) Requires $25 of each application fee to be credited to the
Account.
5) Requires a PRLS licensee to include his or her license number in
the written contract offered to a prospective tenant.
6) Requires PRLS licensees to provide to the prospective tenant,
prior to accepting a fee, with a written notice in 12 point font
enumerating the prospective tenant's rights under existing law,
as specified.
7) Requires every person holding a PRLS license, when obtaining or
renewing a license anytime within two years after the balance of
the Account drops below $200,000, to pay an additional fee of $1
to fund the Account. The fee shall be paid into the State
Treasury and credited to the Account.
8) Authorizes consumers harmed by a PRLS licensee to file an
application with BRE for payment of a final court judgment or
arbitration award from the Account.
9) Requires the automatic suspension of a PRLS license if any
payment is made from the Account in settlement of a claim or
toward satisfaction of a judgment against a licensee; further
requires full repayment with interest of that amount before a
license can be reinstated.
10)Makes other technical and clarifying changes.
11)Specifies that no reimbursement is required 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.
EXISTING LAW :
1) Provides, under the Real Estate Law for the regulation and
licensing of PRLS 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.)
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2) Requires a person offering PRLS to hold either a real estate
broker's license or a PRLS-only license issued by the BRE. (BPC
Section 10167.2 (a))
3) Requires a PRLS licensee to maintain a $10,000 corporate security
bond or cash deposit in an account assigned to the Commissioner
of BRE. (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 10 days
after the end of the contract period. (BPC Section
10167.10(b)(2))
FISCAL EFFECT : According to the Assembly Appropriations Committee,
costs associated with this legislation should be minor and
absorbable within existing BRE resources.
COMMENTS :
1)Purpose of this bill . This bill is intended to improve consumer
protection in the rental housing market by increasing BRE's power
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to regulate real estate licenses that pertain only to the
provision of PRLS. This bill would also give PRLS consumers
access to a licensee-funded recovery Account in case the consumer
is financially harmed by a licensee, while increasing application
fees to better fund the Account and also requiring licensees to
provide a written notice of consumer rights to prospective
clients. 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 BRE has issued a
Consumer Fraud Alert and Warning, hoping to encourage consumers to
check out their rental list providers, before paying for
services."
3)The PRLS-only license . PRLS providers 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
license which entitles the licensee to offer only PRLS services.
The PRLS license expires after two years.
The fee paid to a PRLS provider 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 may be worthwhile and 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 or
refunds of their PRLS fees.
4)Improper activity in the PRLS market . According to the author,
the bar to obtain a PRLS-only license is very low (passing a
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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 BRE'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, BRE has issued
34 desist and refrain orders to people offering PRLS services
without a valid license.
In 2012, the BRE 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 [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 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 aims to better regulate the PRLS
market by giving BRE authority to cite and fine individuals who
engage in unlicensed activity. Under this bill, BRE may issue
administrative fines of up to $2,500 per violation, curtail
advertising by unlicensed individuals, and have a violator's
telephone disconnected.
SB 269 also makes PRLS consumers eligible to access the Consumer
Recovery Account, which enables a person who has been defrauded to
recover at least some of his or her actual loss when the licensee
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has insufficient assets to pay for the loss.
In general, the requirements for payment from the Account include
obtaining a final civil judgment, arbitration award, or a criminal
restitution order against a licensee. The judgment, award or
order must be based on intentional fraud or conversion of trust
funds in connection with a transaction requiring a real estate
license. The victim must make a reasonable search for the
licensee's assets, and, if any, a reasonable effort to collect on
the judgment, arbitration award or restitution order from those
assets to satisfy the judgment. This bill would better fund the
Account through the cite and fine authority and by increasing
license application fees by $25.
SB 269 would also require PRLS providers to include their license
number in their contracts, and provide a notice of consumer rights
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 BRE, 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.
6)Prior hearing of this bill . This bill was previously heard by the
Assembly Business, Professions and Consumer Protection Committee
on June 11, 2013, where it was passed out 12-0. That version of
the bill (February 14, 2013) would have phased out the PRLS
license over two years and instead require a PRLS provider to hold
a valid real estate broker license, in addition to providing
prospective clients with a written notice of the consumer's rights
before accepting payment. However, according to the author, the
Department of Consumer Affairs raised technical concerns about the
constitutionality of that particular approach, and the bill was
subsequently rewritten to better regulate the PRLS license rather
than prohibit it altogether.
Analysis Prepared by : Hank Dempsey / B.,P. & C.P. / (916)
319-3301
FN: 0002773
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