BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                        AB 345|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |

                                   THIRD READING 

          Bill No:  AB 345
          Author:   Frazier (D)
          Amended:  3/16/15 in Assembly
          Vote:     21  

           SENATE BUS, PROF. & ECON. DEV. COMMITTEE:  9-0, 6/8/15
           AYES:  Hill, Bates, Berryhill, Block, Galgiani, Hernandez,  
            Jackson, Mendoza, Wieckowski


           ASSEMBLY FLOOR:  77-0, 5/7/15 (Consent) - See last page for  

           SUBJECT:   Real estate licensees: continuing education  

          SOURCE:    California Association of REALTORS

          DIGEST:   This bill 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 (CE) 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)Requires a responsible broker, as defined, to exercise control  
            and supervision of salespersons. (BPC § 10159.7) 


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          3)Requires a corporate broker licensee to designate an officer  
            who is a broker to be responsible for the supervision and  
            control of the activities of the officers, employees and  
            salespersons. (BPC §§ 10211, 10159.2) 

          4)Defines the duties of a real estate broker as a person who,  
            for compensation or in expectation of compensation, performs  
            any of the following for another individual:  sells, buys, or  
            solicits prospective sellers or purchasers of real property or  
            a business opportunity, leases, rents, or solicits listings of  
            places for rent or negotiates leases on real property, assists  
            or offers to assist in filing an application for the purchase  
            or lease of lands owned by the state or federal government, or  
            solicits or negotiates loans, liens on property, or other  
            collateral for borrowers or lenders on real property or  
            business opportunities. (BPC § 10131) 

          5)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) 

          6)Requires a licensee to complete 45 hours of 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)   Four three-hour courses in: agency relationships and  
               duties in a real estate brokerage practice, trust fund  
               accounting and handling, fair housing, and risk management.  

             c)   At least 18 hours of courses or programs related to  
               consumer protection.

             d)   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  


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                                                                    Page  3

               objects with respect to real property. (BPC § 10170.5) 

          7)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% 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))

          8)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)

          9)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 CE  
            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 CE 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. 

          California adopted the Real Estate Act in 1919 to protect the  
          public in real estate and mortgage transactions involving 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  


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          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 applicant  
          must then submit a license application to be approved by the  
          California Bureau of Real Estate (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  

          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 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.


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          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 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 Web site,  
          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 §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  


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          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.

          This bill reserves 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. This bill also allows 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  

          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. (The  
          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. 

          FISCAL EFFECT:    Appropriations:   No    Fiscal Com.:   Yes     
          Local:   No


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          SUPPORT:   (Verified6/22/15)

          California Association of REALTORS (source)

          OPPOSITION:   (Verified6/22/15)

          None Received 

          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 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." 

          ASSEMBLY FLOOR:  77-0, 5/7/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,  
            Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,  
            Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones,  


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            Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,  
            Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,  
            Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,  
            Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark  
            Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,  
            Wood, Atkins
          NO VOTE RECORDED:  Campos, Roger Hernández, Steinorth

           Prepared by:Janelle Miyashiro / B., P. & E.D. / (916) 651-4104
          6/23/15 16:41:39

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