BILL ANALYSIS Ó SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Jerry Hill, Chair 2015 - 2016 Regular Bill No: AB 1381 Hearing Date: August 25, 2016 ----------------------------------------------------------------- |Author: |Weber | |----------+------------------------------------------------------| |Version: |August 19, 2016 | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Mark Mendoza | |: | | ----------------------------------------------------------------- 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: AB 1381 (Weber) Page 2 of ? 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 AB 1381 (Weber) Page 3 of ? 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 AB 1381 (Weber) Page 4 of ? 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 AB 1381 (Weber) Page 5 of ? 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 AB 1381 (Weber) Page 6 of ? 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 AB 1381 (Weber) Page 7 of ? 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. AB 1381 (Weber) Page 8 of ? 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 AB 1381 (Weber) Page 9 of ? 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 AB 1381 (Weber) Page 10 of ? 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." AB 1381 (Weber) Page 11 of ? 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