BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 345 Hearing Date: June 8,
2015
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|Author: |Frazier |
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|Version: |March 16, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Janelle Miyashiro |
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Subject: Real estate licensees: continuing education
requirements.
SUMMARY: Requires a broker to complete a three-hour course in
management of real estate offices and supervision of licensed
activities as part of the 45 hours of required continuing
education for license renewal.
Existing law:
1)Provides for the licensure and regulation of real estate
brokers and salesperson by the Real Estate Commissioner.
(Business and Professions Code (BPC) § 10050)
2)States that all real estate broker licenses issued by the
commissioner are valid for a period of four years. (BPC
§10153.6)
3)Requires a responsible broker, as defined, to exercise control
and supervision of salespersons. (BPC § 10159.7)
4)Requires a corporate broker licensee to designate an officer
who is a broker who shall be responsible for the supervision
and control of the activities of the officers, employees and
salespersons, as necessary, to secure full compliance with the
licensed practice under the law. (BPC §§ 10211, 10159.2)
5)Defines the duties of a real estate broker as a person who,
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for a compensation or in expectation of a compensation,
performs any of the following for another individual:
a) Sells, buys, or solicits prospective sellers or
purchasers real property or a business opportunity.
b) Leases, rents, or solicits listings of places for rent
or negotiates leases on real property.
c) Assists or offers to assist in filing an application for
the purchase or lease of lands owned by the state or
federal government.
d) Solicits or negotiates loans, liens on property, or
other collateral for borrowers or lenders on real property
or business opportunities. (BPC § 10131)
6)Authorizes an employing broker or corporate designated broker
officer to appoint a licensee as a manager of a branch office
or division of a real estate business if specified
requirements are met. (BPC § 10164)
7)Requires a licensee to complete 45 hours of continued
education (CE) in order to renew his or her license. This CE
includes:
a) A three-hour course in ethics, professional conduct, and
legal aspects of real estate (relevant legislation,
regulations, articles, reports, studies, court decision).
b) A three-hour course in agency relationships and duties
in a real estate brokerage practice.
c) A three-hour course in trust fund accounting and
handling.
d) A three-hour course in fair housing.
e) A three-hour course in risk management including
principles, practices, and procedures calculated to avoid
errors and omissions while practicing real estate licensed
activities.
f) At least 18 hours of courses or programs related to
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consumer protection.
g) Other courses and programs that will enable a licensee
to achieve a high level of competence in serving the
objectives of consumers who may engage the services of
licensees to secure, transfer, financing, or similar
objects with respect to real property. (BPC § 10170.5)
8)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
§ 10177(h))
9)Exempts licensees from completing the 45 hours of CE if the
licensee can submit proof to the commissioner that he or she
has been a real estate licensee in good standing for 30
continuous years in this state and is 70 years of age or
older.
(BPC § 10170.8)
10)Makes willful violation of the Real Estate Law a misdemeanor.
(BPC § 10185)
This bill:
1) Requires a broker, as part of his or her 45-hour continued
education requirement, to complete a three-hour course in the
management of offices and the supervision of licensed
activities.
2) Permits salespersons, as part of their continuing education
requirements, to elect to take other courses and programs in
organizational management techniques, including information
to assist them 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: This bill is keyed "fiscal" by Legislative Counsel.
According to the Assembly Committee on Appropriations analysis
dated April 28, 2015, this bill will result in minor and
absorbable costs within existing resources to the California
Bureau of Real Estate (CalBRE).
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."
CAR states that this bill, "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. California adopted the Real Estate Act in 1919,
to protect the public in real estate and mortgage
transactions involved the services of an agent. The
requirement of real estate qualifications enables the
Commissioner to ascertain whether or not a licensee meets
certain standards of knowledge and honesty for the
salesperson and broker license. Short-term vacation rental
agents, employees of certain lending institutions, and
resident managers of apartment buildings and complexes or
their employees are exempt from these licensure requirements.
To obtain a real estate salesperson license, an applicant
must first qualify for and pass a written examination. The
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applicant must then submit a license application to be
approved by the CalBRE. Prospective real estate broker
licensees, in addition to passing a written examination and
gaining approval of a broker license application from CalBRE,
must also have a minimum of two years of full-time licensed
real estate salesperson experience. The broker licensee must
submit evidence of this minimum of two years of full-time
experience through verification by the licensee's employing
broker using an Employment Verification (RE 226). The course
requirements for licensure as a real estate broker include
eight college level courses on real estate practice, the
legal aspects of real estate, real estate finance, real
estate appraisal, real estate economics/accounting, and three
electives.
Both broker and salesperson licenses must be renewed every
four years. To renew either a broker or salesperson license,
the licensee must submit the appropriate fee and application,
as well as submit evidence that he or she has completed the
required 45 hours of CalBRE-approved continuing education
(CE) courses. These CE courses include 15 specifically
earmarked courses in ethics, agency relationships, trust fund
handling, fair housing, and risk management and 18 hours of
the CE coursework is dedicated to consumer protection. The
remaining 12 hours are reserved as CE electives, and
licensees may take courses related either to consumer
protection or consumer services. These elective courses are
meant to 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.
A licensee who has been in good standing (meaning not having
any disciplinary action on record) for 30 continuous years in
the state of California and who is 70 years of age or older
is exempt from the CE requirements.
A licensee may be appointed to manage a branch office or
division of the employing broker's or employing corporate
designated broker officer's real estate business by an
employing real estate broker or corporate designated broker
officer. This appointed licensee may also be responsible for
overseeing the day-to-day operations of the business,
supervising the licensed activities of licensees, and
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supervising clerical staff employed in the branch office or
division. Any appointment of a licensee must be made through
a written contract, in which the appointee accepts the
delegated responsibility, and requires the employing broker
or corporate designated officer to 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.
Although risk management is one of the earmarked CE courses,
it has been suggested by CalBRE that the subject of
supervision in risk management should be its own earmarked CE
course required for broker licensure renewal. According to
CalBRE's website, one of the six most common and recurring
types of violations of the Real Estate Law that have resulted
in disciplinary action include a lack of supervision on the
part of the broker, in violation of BPC Section 10177(h).
This section 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.
According to the Author, several states require brokers to
complete a course on supervision when renewing their license.
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.
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This bill would reserve three hours of a licensed broker's CE
requirements specifically on a course to provide guidance on
how to manage real estate offices, salespersons and broker
associates. The bill will also allow salespersons to take a
course on how to be effectively supervised by a responsible
broker or branch manager as part of the licensee's 12 hours
of reserved CE elective credits. This bill seeks to resolve
the issue of recurrent lack of supervision violations on the
part of brokers by requiring broker licensees to take
specific CE courses on the topic.
3. Prior/Related Legislation. AB 2105 (DeSaulnier, 2014), would
have required the consumer protection CE courses to include
instruction in financial elder and dependent adult abuse
signs and reporting requirements. ( Status : 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
three-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.
4. Arguments in Support. Writing in support of the bill, the
California Association of REALTORS (CAR) states that "AB 345
seeks to earmark three hours of a real estate broker's
mandated 45 hours of CE for a course on the management and
supervision of real estate licensed activity". CAR states
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that, "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 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."
SUPPORT AND OPPOSITION:
Support:
California Association of REALTORS (Sponsor)
Opposition:
None on file as of June 2, 2015.
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