BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 676
                                                                  Page  1

          Date of Hearing:   August 5, 2013

                      ASSEMBLY COMMITTEE ON BANKING AND FINANCE
                               Roger Dickinson, Chair
                      SB 676 (Block) - As Amended:  May 14, 2013

           SENATE VOTE  :   39-0
           
          SUBJECT  :   Real estate records: unlawful destruction

           SUMMARY  :   Authorizes the Bureau of Real Estate (BRE) to suspend  
          or revoke the license of any real estate broker, real estate  
          salesperson, or corporation licensed as a real estate broker if  
          they knowingly destroy, alter, conceal mutilate, or falsify any  
          books, accounts, or records that are required to be maintained.   


           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.  (Business & Professions  
            Code § 10148)

          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.  
          (Business & Professions Code § 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.  (Business & Professions Code § 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.  (Business & Professions Code § 10185)

          5)Gives the Real Estate Commissioner authority to investigate  
            licensees, bring administrative actions against licensees, and  








                                                                  SB 676
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            in some circumstances suspend or revoke a real estate  
            licensee.  (Business & Professions Code §§ 10175, 10176)

           FISCAL EFFECT  :   None

           COMMENTS  :   

          According to the author, In order to thwart investigations and  
          hide wrong doing, some real estate licensees have falsified or  
          destroyed records required to be kept under Business and  
          Professions Code Section 10148 (a). Rare examples include a  
          broker who submitted bank statements with the dollar figures  
          altered for the purposes of hiding trust fund shortages and  
          false entries in accounting records in order to hide money that  
          has been mishandled.

          In these instances, Real Estate Law is silent on the  
          Commissioner's specific authority to take disciplinary action  
          against the licensee. SB 676 expressly codifies that knowingly  
          destroying, altering, concealing, mutilating, or falsifying  
          records is a violation of real estate law resulting in two  
          important outcomes.  First, the legislation creates clear rules  
          for real estate professionals and secondly, it authorizes the  
          BRE to seek administrative disciplinary action against licensees  
          who willingly engage in these dishonest actions.

          This bill provides direct authorization for BRE to suspend or  
          revoke a real estate license if the licensee knowingly destroys  
          or alters any records that are required to be maintained or are  
          sought by the Commissioner. Currently, BRE must first prove that  
          the destruction or alteration constitutes fraud or dishonest  
          dealing before revoking a license, which is difficult when the  
          records to prove that fact have been altered or destroyed.  This  
          bill is author sponsored.     
           
          Existing law requires a real estate broker to maintain copies of  
          all records connected with real estate transactions for three  
          years.  Failure to do so is a misdemeanor punishable by a fine  
          not exceeding $10,000, or by imprisonment in the county jail not  
          exceeding six months, or both.  Presently, to revoke the real  
          estate license of a licensee who destroys or alters these  
          records requires that BRE prove that the act constitutes fraud  
          or dishonest dealing.  Unfortunately, this is difficult when the  
          records have been destroyed or altered.  This bill will allow  
          BRE to take administrative action directly.       








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          Explicitly codifying the increased penalty for violating the  
          real estate record retention requirement strengthens the BRE's  
          ability to investigate records and punish wrongdoing.  The  
          clarification of the risk to the broker's license may also act  
          as an additional deterrent to the crime. 

          Existing law authorizes the Commissioner to charge a real estate  
          broker for the cost of any audit, and to suspend, revoke, or  
          deny renewal of a broker's license, if a broker fails to pay for  
          the cost of an audit within 60 days of mailing a notice of  
          billing.  The authorization for the Commissioner to maintain an  
          action for the recovery of the cost in a court of competent  
          jurisdiction, however, does not clarify to which specific "cost"  
          the authorization applies. Clarifying that the "cost" refers  
          specifically to the cost of an audit provides greater certainty  
          and prevents unnecessary disputes over cost recovery.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          California Association of Realtors
           
            Opposition 
           
          None on file.

           Analysis Prepared by  :    Mark Farouk / B. & F. / (916) 319-3081