BILL ANALYSIS                                                                                                                                                                                                    



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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













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