BILL ANALYSIS Ó
AB 345
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Date of Hearing: April 14, 2015
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Susan Bonilla, Chair
AB 345
(Frazier) - As Amended March 16, 2015
SUBJECT: Real estate licensees: continuing education
requirements.
SUMMARY: Requires a real estate broker, as part of his or her
45 hours of continuing education (CE), to complete a 3-hour
course in the management of real estate offices and supervision
of licensed activities, and provides that elective CE courses
may also include relevant information to assist salespersons and
brokers in understanding how to be effectively supervised.
EXISTING LAW
1)Provides for the licensure and regulation of real estate
brokers and salespersons by the Real Estate Commissioner.
(Business and Professions Code (BPC) Section 10000 et seq.)
2)Requires a responsible broker, as defined, to exercise control
and supervision of salespersons. (BPC 10159.7)
3)Authorizes an employing broker or corporate designated broker
officer to appoint a licensee as a manager of a branch office
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or division of a real estate business if specified
requirements are met. (BPC 10164)
4)Requires brokers and salespersons licensees to successfully
complete 45 hours of continuing education, except as
specified, as a prerequisite to license renewal as follows:
(BPC Section 10170.5).
a) Requires 15 of those 45 hours to include a three hour
course in each of the following categories:
i) ethics, professional conduct, and legal aspects of
real estate;
ii) agency relationships and duties in a real estate
brokerage practice;
iii) trust fund accounting and handling;
iv) fair housing; and
v) risk management;
b) Requires at least 18 of those 45 hours to include
courses or programs related to consumer protection, and
designated by the Commissioner as satisfying this purpose
in his or her approval of the offering of these courses or
programs, as specified; and,
c) Requires other courses and programs that will enable a
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licensee to achieve a high level of competence in serving
the objectives of consumers who may engage the services of
licensees to secure the transfer, financing, or similar
objectives with respect to real property, including
organizational and management techniques.
5)Authorizes the Commissioner to suspend or revoke a real estate
license of a licensee or of a corporation if the licensee, or
an officer, director, or person owning or controlling 10
percent or more of the corporation's stock, has, as a broker
licensee, failed to exercise reasonable supervision over the
activities of his or her salespersons, or, as the officer
designated by a corporate broker licensee, failed to exercise
reasonable supervision and control of the activities of the
corporation for which a real estate license is required. (BPC
Section 10177(h))
THIS BILL
1)Requires a real estate broker, as part of his or her 45 hours
of CE, to successfully complete a 3-hour course in the
management of real estate offices and supervision of licensed
activities, as specified.
2)Provides that the elective CE requirement, which requires
courses and programs that will enable a licensee to achieve a
high level of competence in serving the objectives of
consumers, including organizational and management techniques,
also include relevant information to assist a salesperson or
broker in understanding how to be effectively supervised by a
responsible broker or branch manager.
3)Makes other technical and conforming changes.
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FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS
1)Purpose. This bill is sponsored by the California Association
of REALTORS (CAR). According to the author, "Current real
estate law requires a real estate broker to exercise
reasonable supervision over the activities of his or her
salespersons. Reasonable supervision includes the
establishment of policies, rules, procedures and systems to
review, oversee, inspect and manage real estate transactions.
Brokers are further required to establish a system for
monitoring compliance. Supervision is a critical part of a
real estate broker's responsibility. [This bill] simply
allocates three hours of a licensed broker's existing 45 hours
of [CE] to be reserved for a course to provide guidance of how
to manage real estate offices, salespersons, and broker
associates, while also permitting salespersons to elect to
take a course containing relevant information to assist them
in understanding how to be effectively supervised by a
responsible broker or branch manager."
2)Background. Licensing and CEs. In order to obtain a real
estate salesperson license, an individual must apply for and
pass a real estate examination and fulfill certain real estate
education requirements. In order to obtain a real estate
broker license, an individual, in most cases, must have held a
real estate salesperson's license for at least two years
during which time he or she must have been actively engaged in
real estate, meet certain real estate education requirements
in addition to passing an examination. Broker and salesperson
licenses are issued for a four-year period. In general, both
types of licenses may be renewed by submitting the appropriate
fee and application, and evidence of completion of 45 hours of
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California Bureau of Real Estate (CalBRE)-approved continuing
education courses. These courses include 15 hours of required
courses in ethics, agency relationships, trust fund handling,
fair housing, and risk management, and at least 18 hours in
courses dedicated to consumer protection. The remaining
courses, up to 12 hours of electives, may be related either to
consumer protection or consumer services that will enable the
licensee to achieve a high level of competence in serving the
objectives of consumers who may engage the services of
licensees to secure the transfer, financing, or similar
objectives with respect to real property, including
organizational and management techniques.
Failure to Supervise is a Common Violation. Under existing
law, an employing real estate broker or corporate designated
broker officer, appointed by an employing real estate
broker,may appoint a licensee to manage a branch office or
division of the employing broker's or employing corporate
designated broker officer's real estate business. The
employing real estate broker or corporate designated broker
officer may also delegate to the appointed manager the
responsibility to oversee day-to-day operations, supervise the
licensed activities of licensees, and supervise clerical staff
employed in the branch office or division. Any appointment is
required to be made through means of a written contract, in
which the appointee accepts the delegated responsibility, and
requires the employing broker or corporate designated officer
retain a copy of the contract and send a notice to the CalBRE
identifying the appointee and the branch office or division
the manager is appointed to supervise. According to the
author, while principal brokers remain accountable for overall
supervisorial responsibilities, CalBRE can also hold managers
accountable for failure to supervise.
According to the CalBRE's website, one of the six most common
types of violations of the Real Estate Law that have resulted
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in disciplinary action include failure to supervise, in
violation of BPC Section 10177(h), which requires a real
estate broker to exercise reasonable supervision over the
activities of salespersons, or as the designated officer of a
corporation, to exercise the activities conducted by the
corporation for which a real estate license is required.
CalBRE's website also indicates that lack of supervision on
the part of a broker is a recurring problem, and in many
cases, real estate brokers become designated officers of
corporations owned by salespersons or unlicensed individuals
and do not properly supervise the operations.
This bill seeks to address this problem by requiring, as a
part of existing CE requirements for brokers, a three hour
course on management and supervision, and by allowing
salespersons to take a course on how to be effectively
supervised by including that issue under elective CE
requirements.
CE Requirements in Other States. According to the author,
several states require brokers to complete a course on
supervision when renewing their license. For example, Montana
requires supervising brokers to complete a three-hour course
on supervision to assure competent practice in the real estate
industry, while Virginia requires brokers to complete an
eight-hour course on management and supervision. Minnesota
requires brokers and salespersons to complete a one-hour
course on broker supervisory obligations, Maryland requires
brokers, office managers, and team leaders to complete a
three-hour course on supervision within 90 days of assuming a
supervisory position if they did not complete the course
during their renewal, and Texas requires designated brokers
and licensees delegated supervision of one or more real estate
licensees, for a period of longer than six months, to complete
a six hour course on broker responsibility.
3)Prior Related Legislation. AB 2105 (DeSaulnier) of 2014, among
other things, would have required the consumer protection CE
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courses to include instruction in financial elder and
dependent adult abuse signs and reporting requirements. NOTE:
This bill was vetoed by Governor Schwarzenegger for reasons
primarily related to other portions of the bill.
SB 510 (Correa), Chapter 709, Statutes of 2012, established
various minimum requirements for an individual to become a
branch manager and authorized the Commissioner to discipline a
branch manager for failure to supervise branch operations.
AB 223 (Negrete McLeod), Chapter 183, Statutes of 2005,
required CE requirements to include completion of a 3-hour
course in risk management that includes principles, practices,
and procedures calculated to avoid errors and omissions in the
practice of real estate licensed activities.
AB 555 (Dutra), Chapter 116, Statutes of 2002, included in the
consumer protection CE the subject of California law relating
to common interest developments, as specified.
ARGUMENTS IN SUPPORT
According to the California Association of REALTORS , "Current
law requires a real estate broker to exercise reasonable
supervision over the activities of his or her salespersons.
Reasonable supervision includes the establishment of policies,
rules, procedures and systems to review, oversee, inspect and
manage real estate transactions. Existing law also requires
real estate licensees renewing a real estate license to complete
45 hours of [CalBRE] approved CE. Currently, 15 hours of that
CE requirement are earmarked for specified courses (ethics,
agency, trust fund handling, fair housing, and risk management),
while 18 hours are dedicated to consumer protection courses,
with the remaining 12 hours of CE being elective. C.A.R.
supports [this bill] as it will provide guidance to brokers on
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how to properly manage real estate offices, salespersons, and
broker associates, while permitting salespersons to elect to
take a course to assist them in understanding how to be
effectively supervised."
ARGUMENTS IN OPPOSITION
None on file.
REGISTERED SUPPORT / OPPOSITION:
Support
California Association of REALTORS (sponsor)
Opposition
None on file.
Analysis Prepared by:Eunie Linden / B. & P. / (916) 319-3301
AB 345
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