BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON
          BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
                              Senator Jerry Hill, Chair
                                2015 - 2016  Regular 

          Bill No:            AB 1381         Hearing Date:    August 25,  
          2016
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          |Author:   |Weber                                                 |
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          |Version:  |August 19, 2016                                       |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Mark Mendoza                                          |
          |:         |                                                      |
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           Subject:  Professions and vocations:  real estate appraisers:   
                                 real estate brokers

          SUMMARY: Provides that an "outdoor advertising representative"  
          is not required to register as a broker with the Bureau of Real  
          Estate; defines an "outdoor advertising representative" as  
          specified; requires the owner or operator of the advertising  
          display to maintain liability insurance; requires the Bureau of  
          Real Estate Appraisers to provide information on its website  
          regarding the continuing education courses taken by a licensee. 

           NOTE :  The Senate floor amendments as of 8/19/16 constitute a  
          rewrite and this measure has been referred to this Committee  
          pursuant to Senate Rule 29.10 (b) for consideration.  The  
          Committee may, by a vote of the majority, either:  (1) hold  
          the bill, or (2) return the bill to the Senate floor for  
          consideration, or (3) re-refer the bill to fiscal committee  
          pursuant to Joint Rule 10.5. 

          The Senate floor amendments define an "outdoor advertising  
          representative", clarify that an "outdoor advertising  
          representative" is not required to obtain a real estate broker's  
          license, require that the owner or operator of the advertising  
          display maintain liability insurance coverage, as specified, and  
          clarify that the renewal of an appraiser's license is not  
          contingent on the Bureau of Real Estate Appraisers' posting a  
          licensee's continuing education courses on its Web site.

          Existing law:







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          1) Establishes the Outdoor Advertising Act that regulates  
             outdoor advertising structures and signs.  (Business and  
             Professions Code (BPC)  5200)

          2) Declares that it is the intent of the Legislature to regulate  
             advertising displays adjacent to highways included in the  
             national system of interstate and defense highways or the  
             federal-aid primary highway system.  (BPC  5228)

          3) Authorizes the governing body of any city or city and county  
             to enact ordinances requiring licenses or permits for the  
             placing of advertising displays in view of any highway.  (BPC  
              5231)

          4) States that a person engages in the business of outdoor  
             advertising whenever, personally or through employees, that  
             person places an advertising display, changes the advertising  
             message of an advertising display that does not pertain  
             exclusively to that person's business and is visible to a  
             state highway or freeway. (BPC  5300)

          5) Prohibits a person to engage in or carry on the business or  
             occupation of outdoor advertising without first having paid  
             the license fee. The fee is payable annually in advance on  
             the first day of July of each year to the Director of  
             Transportation or his authorized agent. Requires each license  
             remain in force for the term of one year from and after the  
             first day of July, and may be renewed annually. (BPC  5301)

          6) Provides that persons acting in the capacity of a film  
             location representative in connection with a transaction are  
             not required to be licensed as a real estate broker. (BPC   
             10133.4(a))

          7) Defines "film location representative" as an employee of a  
             principal arranging for the use of real property for  
             photographic purposes. (BPC  10133.4(b)(1))

          8) Defines "principal" as the person who will use the real  
             property for photographic purposes. (BPC  10133.4(b)(2))

          9) Requires, in every transaction by a film location  
             representative, the principal maintain liability insurance  








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             coverage for death, bodily injury, and property damage  
             arising out of, or in connection with the use, ownership, or  
             maintenance of real property which is the subject of the  
             transaction. (BPC  10133.4(c))

          10)Requires that the liability insurance not be less than five  
             hundred thousand dollars ($500,000) per person or one million  
             dollars ($1,000,000) per occurrence for personal injury and  
             five hundred thousand dollars ($500,000) for property damage.  
             (BPC  10133.4(c))

          11)Requires that the liability insurance be issued by an  
             insurance carrier authorized to sell such insurance in  
             California. (BPC  10133.4(c))

          12)Establishes the Real Estate Appraisers' Licensing and  
             Certification Law (Act), administered by the Bureau of Real  
             Estate Appraisers (BREA) within the Department of Consumer  
             Affairs (DCA), which regulates the licensing of real estate  
             appraisers.  (BPC  11300 et seq.)  

          13)Requires the BREA to provide information on the Internet in  
             regarding, among other things, the status of every license  
             and registration issued by the BREA. 
          (BPC  11317.2(a)) 

          14)Requires the Director of the DCA to adopt regulations for  
             licensure which shall meet, at a minimum, the requirements  
             and standards established by the Appraisal Foundation and the  
             federal financial institutions regulatory agencies acting  
             pursuant to Section 1112 of the Financial Institutions Reform  
             Recovery and Enforcement Act of 1989, Public Law 101-73  
             (FIRREA).  (BPC  11340(c))

          15)Requires the director to adopt regulations governing the  
             process and procedures for renewal of a license, which shall  
             include, but not be limited to, continuing education  
             requirements, which shall be reported on the basis of  
             four-year continuing education cycles. (BPC  11360) 

          This bill:

          1) Provides that an "outdoor advertising representative" is not  
             required to register as a broker with the Bureau of Real  








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             Estate (BRE).

          2) Defines an "outdoor advertising representative" as an  
             employee of a corporation or a limited liability company or a  
             general partner of a partnership arranging for the lease or  
             transfer of real property or an interest in real property  
             solely for the placement of, access to, or operation of, an  
             advertising display and appurtenances.

          3) Requires, in every transaction involving the transfer, lease,  
             or use of real property for the operation of an advertising  
             display negotiated by an outdoor advertising representative,  
             the owner or operator of the advertising display to maintain  
             liability insurance coverage for death, bodily injury, and  
             property damage arising out of, or in connection with, its  
             acts, omissions, or operations on the real property.

          4) Requires that the liability insurance not be less than five  
             hundred thousand dollars ($500,000) per person or one million  
             dollars ($1,000,000) per occurrence for personal injury and  
             five hundred thousand dollars ($500,000) for property damage.  


          5) Requires that the liability insurance be issued by an  
             insurance carrier authorized to sell such insurance in  
             California.

          6) Requires BREA to provide, on the Internet, the continuing  
             education course information provided by a licensee when an  
             individual applies for licensure renewal.

          7) Removes obsolete references to the Office of Real Estate  
             Appraisers and inserts the word "Bureau".  

          
          FISCAL EFFECT:  According to the Senate Committee on  
          Appropriations that analyzed the June 1, 2016 version, this  
          measure will result in minor and absorbable costs.  Given the  
          new outdoor advertising provisions, additional costs are  
          unknown.   

          COMMENTS:

          1. Purpose.  The  Author  is the sponsor of the bill.  According  








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             to the Author, "AB 1381 would provide the public with  
             additional information on the continuing education courses  
             taken when an appraiser seeks to renew his or her license.   
             By listing an appraiser's continuing education courses, the  
             public will have a better understanding of who appraises  
             their property.  In addition, businesses would be better able  
             to evaluate candidates and select appraisers with certain  
             specializations.

             Additionally, AB 1381 clarifies that employees of outdoor  
             advertising companies can continue to conduct business  
             negotiations related to the placement and operation of  
             outdoor advertising displays without seeking licensure as a  
             real estate broker for specific transactions related to the  
             placement, access, and operation of an outdoor advertising  
             display.  Since 1901, this has been industry practice, and  
             with decades of experience, we have little evidence that the  
             status quo needs to be changed.  

             This issue was raised recently as the result of a signal  
             inquiry raised at the BRE.  This bill takes a measured  
             approach explicitly detailing the types of transactions that  
             outdoor advertising representatives may negotiate and further  
             requires that the outdoor advertising company maintain  
             appropriate liability insurance - a model that has served the  
             film industry well.   As the Little Hoover Commission and  
             others continue their efforts to study appropriate levels of  
             licensure, and how appropriate licensure levels can  
             facilitate economic prosperity as well as maintain consumer  
             protection, it is appropriate to codify this century-long  
             practice."

              Broadway Heights Community Council  and the Author ultimately  
             underscore, 
             "AB 1381 would provide the public with additional information  
             on the continuing education courses taken when an appraiser  
             seeks to renew his or her license.  By listing an appraiser's  
             continuing education courses, the public will have a better  
             understanding of who appraises their property.  In addition,  
             businesses would be better able to evaluate candidates and  
             select appraisers with certain specializations."

          2. Outdoor Advertising Displays. Tracing back to 1867, outdoor  
             advertising displays have served as a messaging medium to the  








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             United States.  Outdoor advertising companies negotiate with  
             private property owners, business partners and municipalities  
             to reach contractual agreements between the parties for the  
             ownership, operation, or placement of outdoor advertising  
             displays. Outdoor advertising displays are required to comply  
             with applicable federal, state and municipal ordinances.  

             Recently, a member of the public made a complaint about a  
             negotiation that had taken place between two outdoor  
             advertising companies and a private property owner at a BRE  
             forum.  The complaint raised the question of whether  
             employees of outdoor advertising companies were required to  
             be licensed real estate brokers under existing state law.  

             Since 1960s, the California State Outdoor Advertising  
             Association (CSOAA) has represented member outdoor  
             advertising companies and affiliate members in California.   
             CSOAA states the following:

                 "Although individuals may negotiate to sell their own  
                 real property assets without holding a broker's license,  
                 and officers of corporations may negotiate on behalf of  
                 their corporation, existing law may be interpreted that  
                 an employee is not viewed to have the same ability.  Oil  
                 and mineral property owners, and film industry  
                 representatives have explicit exemptions from licensure  
                 as real estate brokers under existing law."

             The Administration also notes that outdoor advertising is a  
             heavily regulated business.  Under current law, any person or  
             company wishing to display advertising, other than a display  
             on a building, within 660 feet of a highway right of way must  
             comply with federal and State law relating to display size,  
             distance between displays, and certain content limitations.   
             The person or company must be licensed by the State Office of  
             Outdoor Advertising, within Department of Transportation,  
             obtain a permit from the State Office of Outdoor Advertising,  
             and comply with all local permitting requirements.  The State  
             license and permit must be renewed each year.  

             The Department of Transportation is responsible for enforcing  
             compliance with federal and state laws governing outdoor  
             advertising.  If the state fails to properly administer the  
             federal program, the state shall lose 10% of its federal  








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             highway funding.   

             Given the level of regulation already placed on the outdoor  
             advertising industry, the Department of Consumer Affairs does  
             not believe an additional real estate license for outdoor  
             advertising representatives is needed.

             The proposed language is modeled after an existing exemption  
             for film industry employees who negotiate lease agreements  
             for filming and are not required to obtain licensure as real  
             estate brokers.

          3. Background on the BREA.  In 1989, Title XI of the federal  
             Financial Institutions Reform, Recovery and Enforcement Act  
             was adopted by Congress mandating states to license and  
             certify real estate appraisers who appraise property for  
             federally related transactions.  The federal law was enacted  
             as a result of the savings and loan crisis. 
             
             In response to the federal mandate, the California  
             Legislature enacted the Real Estate Appraisers Licensing and  
             Certification Law in 1990 (AB 527, Chapter 491, Statutes of  
             1990).  The Office of Real Estate Appraisers was established  
             within the Business, Transportation and Housing Agency, and  
             charged with developing and implementing a real estate  
             appraiser licensing and certification program compliant with  
             the federal mandate.  In 2012, Governor Brown submitted a  
             reorganization plan to the Legislature.  As a result, on July  
             1, 2013, OREA became the BREA within DCA.

             BREA, which is entirely funded by licensing fees, is a single  
             program comprised of two core components, licensing and  
             enforcement.

             The Licensing Division implements the minimum requirements  
             for licensure, according to criteria established by the  
             federal government and California law, to ensure that only  
             qualified persons are licensed to conduct appraisals in  
             federally related real estate transactions.  Applicants must  
             meet minimum education and experience requirements and  
             successfully complete a nationally approved examination.  The  
             Licensing Division also registers Appraisal Management  
             Companies (AMC) in compliance with California law.









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             The Enforcement Division investigates the background of  
             applicants, licensees, and AMC registrants to ensure they  
             meet the standards for licensure. The Enforcement Division  
             also investigates complaints of violations of California law  
             and national appraisal standards filed against licensed  
             appraisers and registered AMCs.

             BREA is responsible for the accreditation of educational  
             courses and providers for real estate appraisers.  BREA has  
             reviewed and approved over 1,800 pre-licensing and continuing  
             education courses.  In addition to the real estate appraisal  
             related 
             3 courses offered by California's community colleges and  
             universities, over 70 proprietary schools provide appraisal  
             education.

          4. Continuing Education for Licensees.  The term of a California  
             real estate appraiser's license is two years. All licensed  
             appraisers must meet minimum continuing education  
             requirements before renewing their license.  A total of 56  
             hours of continuing education is required during the  
             four-year continuing education cycle including the following  
             mandatory courses for all license categories.

                       7-hour National Uniform Standards of Professional  
                  Appraisal Practice (USPAP) course-required every two  
                  years.

                       4-hour Bureau approved course entitled "Federal  
                  and State Laws and Regulations"- required every four  
                  years.  This 4-hour course is an addition since the last  
                  sunset review. (California Code of Regulations, Title  
                  10,  3543)

             In practical terms, this requires a renewal of the 7-hour  
             USPAP course every two years on its own, and a full  
             continuing education (56 hours) renewal every four years.   
             Generally the requirement is a full CE 56 hour renewal every  
             other two year cycle, with a reduced 7 hour CE renewal cycle  
             in between.

             Continuing education courses or seminars must cover appraisal  
             related topics including subjects such as land use planning,  
             appraisal computer applications, cost estimating, and green  








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             building appraisals.

          1. BREA Continuing Education Course Approval.  Continuing  
             education courses, both classroom and online, must meet the  
             requirements of the Appraisal Qualifications Board (AQB).   
             The AQB is within the Appraisal Foundation, a non-profit  
             organization that works to advance professionalism for  
             appraisers through the promulgation of standards, appraiser  
             qualifications, and guidance regarding appraisal methods and  
             techniques.  The AQB establishes the minimum education and  
             experience requirements as well as the examination  
             requirements for appraisers.  
             
             The requirements for BREA approval of continuing education  
             courses are:

                     Courses must be a minimum of two classroom hours  
                 long (classroom hour means 50 minutes within a one-hour  
                 period actually spent in presenting the course content).

                     Participants must have been present for at least 90%  
                 of the course hours to obtain credit for the course. 

             Continuing education courses that BREA has already approved  
             allow for faster processing of renewal applications.  Courses  
             offered by providers that are private vocational schools or  
             professional organizations are assigned a BREA course  
             approval number.  In addition, some college and university  
             courses may be acceptable if the courses cover one of the  
             topics listed below.

             The AQB allows, and BREA may grant, continuing education  
             credit for courses that cover topics including, but not  
             limited to:

               a)     Ad Valorem Taxation
               b)     Arbitration-Dispute Resolution
               c)     Practice of Real Estate Appraisal
               d)     Development Cost Estimating
               e)     Ethics and Standards of Practice
               f)     Land Use Planning-Zoning
               g)     Property Management-Leasing-Timesharing
               h)     Property Development-Partial Interests
               i)     Real Estate Law-Easements-Legal Interests








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               j)     Real Estate Litigation-Damages-Condemnation
               aa)    Real Estate Financing and Investment
               bb)    Real Estate Appraisal Computer Applications
               cc)    Real Estate Securities and Syndication
               dd)    Real Property Appraisals-Personal Property-Business  
                 Valuation
               ee)    Seller Concession Impact on Value
               ff)    Energy Efficient-Green Building Appraisal

          1. Arguments in Support.  The  California State Outdoor Adverting  
             Association  writes that this bill "takes a measured approach  
             explicitly detailing the types of transactions that outdoor  
             advertising representatives may negotiate and further  
             requires that the outdoor advertising company maintain  
             appropriate liability insurance - a model that has served the  
             film industry well."

          2. Arguments in Opposition.  The  California Association of  
             Realtors  writes, "We respectfully suggest that it is  
             inappropriate to carve out a new exemption to the real estate  
             license at the very last hour, and to do so in a way that  
             interferes with a pending enforcement action that has not yet  
             been resolved.

             Under the new proposed language, any individual can create a  
             partnership or company and "end run" the license requirement  
             for agents that negotiate extremely valuable leases, and  
             sales, on behalf of third parties.  The change allows  
             unlicensed agents to evade the recently enacted commercial  
             agency disclosures that were enacted only last session; it  
             also allows unlicensed agents to evade the fiduciary duty  
             responsibilities that would apply to any other legitimate  
             agent.

             As we understand it, the bill is intended to protect salaried  
             in-house employees that negotiate only outdoor advertising  
             siting on behalf of their own employer.  We respectfully  
             suggest that such a goal is already addressed in the  
             so-called 'principal's exemption' in existing Business and  
             Professions Code 10133 (a).  That law already allows  
             individuals and corporate entities to negotiate their own  
             transactions without a license.  If that provision is  
             unclear, we would welcome an opportunity to work with you and  
             your staff, or the sponsors, to clarify it." 







           
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             The California Association of Realtors believes the following  
             language would better capture the Author's intent:

             "SECTION 1.  Section 10133 of the Business and Professions  
             Code is amended to read: 

             (a) The acts described in Section 10131 are not acts for  
             which a real estate license is required if performed by:
             (1  )(A)  A regular officer of a corporation or a general  
             partner of a partnership with respect to real property owned  
             or leased by the corporation or partnership, respectively, or  
             in connection with the proposed purchase or leasing of real  
             property by the corporation or partnership, respectively, if  
             the acts are not performed by the officer or partner in  
             expectation of special compensation.
              (B) For the purposes of this Section a regular officer may  
             include an officer of a corporation, a limited liability  
             company; or a general partner of a partnership, that is a  
             salaried employee whose duties entail the arranging or  
             negotiation on behalf of his or her employer of a lease or  
             purchase by the employer of an interest in real property for  
             the placement of, access to or operation of an advertising  
             display defined in Section 5202.  "
          

          SUPPORT AND OPPOSITION:
          
           Support:  

          Broadway Heights Community Council 
          The California State Outdoor Adverting Association
          Outfront Media 

           Opposition:  

          California Association of Realtors