BILL ANALYSIS                                                                                                                                                                                                    



          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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