BILL ANALYSIS �
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|Hearing Date:April 29, 2013 |Bill No:SB |
| |676 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 676Author:Block
As Amended: April 22, 2013 Fiscal: Yes
SUBJECT: Real estate records: unlawful destruction.
SUMMARY: This bill would authorize the Department of Real Estate to
suspend or revoke the license of any real estate broker, real estate
salesperson, or any director, officer, employee or agent of the
corporation licensed as a real estate broker, who knowingly destroys,
alters, conceals, mutilates, or falsifies any of the books, papers,
writings, documents, or tangible objects that are required to be
maintained or that have been sought in connection with an
investigation, audit, or examination of a real estate licensee by the
Commissioner. This bill would exempt knowingly destroying, altering,
concealing, mutilating, or falsifying real estate records that must be
retained from the misdemeanor penalty that would be available under
BPC � 10185.
NOTE : This Committee heard this measure on April 8, 2013. It was
voted out of this Committee by a vote of 10 to 0. It was then
re-referred to Rules Committee and subsequently referred to the Senate
Public Safety Committee. This measure was withdrawn from Public
Safety Committee based on Author's amendments which removed the
misdemeanor violation and was re-referred back to this Committee on
April 24, 2013.
Existing law:
1)Requires a real estate broker to retain for three years copies of
all listings, deposit receipts, canceled checks, trust records, and
other documents executed or obtained by the broker in connection
with any transactions for which a real estate broker license is
required. (BPC � 10148)
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2)Requires a broker, after receiving notice, to make available for
examination, inspection, and copying by the Real Estate Commissioner
or the Commissioner's designee, during regular business hours, all
requested records the broker is legally required to retain.
(BPC � 10148)
3)States that after an initial inspection of retained records, and
upon the appearance of sufficient cause, a broker is subject to
audit without further notice, so long as the audit is not harassing.
(BPC � 10148)
4)States that any person who willfully violates or knowingly
participates in the violation of a provision of the Real Estate
Division of the Business and Professions Code is guilty of a
misdemeanor. (BPC � 10185)
5)Gives the Real Estate Commissioner authority to investigate
licensees, bring administrative actions against licensees, and in
some circumstances suspend or revoke a real estate licensee. (BPC
�� 10175, 10176)
This bill:
1 States that the Department of Real Estate may suspend or revoke the
license of any real estate broker, real estate salesperson, or any
director, officer, employee, agent, or shareholder of a corporation
licensed as a real estate broker, who knowingly destroys, alters,
conceals, mutilates, or falsifies any of the books, papers,
writings, documents, or tangible objects that are required to be
maintained by this section or that have been sought in connection
with an investigation, audit, or examination of a real estate
licensee by the Commissioner.
2 States that knowingly destroying, altering, concealing, mutilating,
or falsifying real estate records that must be retained under BPC �
10148(a) shall not be subject to BPC �10185, which states that
willfully violating or knowingly participating in the violation of a
provision of the Real Estate Division of the Business and
Professions Code is a misdemeanor .
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
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1. Purpose. In order to thwart investigations and hide wrong doing,
some real estate licensees have falsified or destroyed records
required to be kept under law. According to the Author, this bill
resolves a weakness in current Real Estate Law, by clarifying that
the Department of Real Estate may suspend or revoke the license of
a real estate licensee, if the licensee, or in the case of a
corporate licensee, if the corporation's director, officer,
employee, agent, or shareholder, knowingly destroys, alters,
conceals, mutilates, or falsifies records required to be kept under
law or sought in an investigation. This bill makes the punishment
for committing a knowing violation of BPC � 10148 clear and
obvious.
2. Background. Currently, a licensee's failure to retain records
required under BPC � 10148 may be punished through an
administrative action or criminal prosecution. Although BPC �
10148 itself is silent on the penalty for violating the statute,
other sections (BPC �� 10175, 10176, 10185) authorize strong
penalties for violating the records retention requirement.
Potential discipline includes professional penalties, such as
suspension or revocation of the violator's real estate license. To
take action against a license, the Real Estate Commissioner must
prove in an administrative action that the accused individual's
acts constituted fraud or dishonest dealing. Criminal penalties
are available pursuant to BPC � 10185, which states that a willful
violation or knowing participation in a violation of real estate
law may be prosecuted as a misdemeanor.
According to the Author, this bill is necessary to create clear
rules for real estate professionals, and to authorize the
Department of Real Estate to seek administrative disciplinary
action against licensees who engage in actions prohibited by BPC �
10148.
3. Staff Comments:
a) Who is to be Disciplined? Real estate law already authorizes
the Real Estate Commissioner to take administrative action
against licensees who engage in fraud or dishonest dealings, and
states that it is a misdemeanor to willfully violate or knowingly
participate in the violation of real estate law.
This bill adds language to BPC � 10148 which states that the
Department of Real Estate may suspend or revoke a licensee's real
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estate license in this particular instance where the licensee, or
in the case of a corporate licensee, where the licensee's
director, officer, employee or agent, knowingly destroys, alters,
conceals, mutilates, or falsifies records required to be kept
under BPC � 10148. It is not clear who is the licensee in this
instance, since the director, officer, employee, agent, or
shareholder are considered that of the corporate licensee and not
as licensee's individually.
Suggested Author's Amendment: To clarify whom the Department may
discipline, and whose actions may trigger that discipline, the
Committee recommends the following technical amendment to the
bill:
(e) (1) The department may suspend or revoke the license of any
real estate broker, real estate salesperson, or any director,
officer, employee, agent, or shareholder of any corporation
licensed as a real estate broker, who if the real estate broker,
real estate salesperson, or any director, officer, employee or
agent of the corporation licensed as a real estate broker,
knowingly destroys, alters, conceals, mutilates, or falsifies any
of the books, papers, writings, documents, or tangible objects
that are required to be maintained by this section or that have
been sought in connection with an investigation, audit, or
examination of a real estate licensee by the commissioner.
(2) A violation of this subdivision shall not be subject to
Section 10185.
b) Inconsistency in Applying the Misdemeanor Provision. BPC �
10148(e)(2) only limits criminal liability for violating BPC �
10148(e)(1). This means that as it is currently drafted, this
measure would exempt knowingly destroying, altering, concealing,
mutilating, or falsifying records required to be kept under BPC �
10148(a) from being prosecuted as a misdemeanor under BPC �
10185. (BPC � 10148(e)(2))
Yet, this measure would still allow willfully or knowingly
violating BPC � 10148(a), (willfully or knowingly not retaining
the records) to be prosecuted as a misdemeanor under BPC � 10185.
Is this the Author's intent; to assign a misdemeanor penalty to
willful or knowing failure to maintain records, but to exempt
knowing destruction or falsification of records, which is
arguably a more reprehensible action?
While staff appreciates that the Author and Senate Public Safety
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Committee drafted the recent amendments to this bill to avoid
creating a new misdemeanor, staff remains concerned about the
inconsistent penalties associated with violating this statute.
4. Arguments in Support. The California Association of Realtors,
(CAR) supports this bill. CAR states that it hopes that clarifying
the linkage between the professional obligations related to record
keeping and the potential prosecution for violating those
requirements will raise the quality of practice, to the benefit of
consumers and other licensees.
SUPPORT AND OPPOSITION:
Support:
California Association of Realtors
Opposition:
None received as of April 24, 2013
Consultant: Kristin Webb