BILL ANALYSIS Ó SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Jerry Hill, Chair 2015 - 2016 Regular Bill No: AB 1650 Hearing Date: June 13, 2016 ----------------------------------------------------------------- |Author: |Frazier | |----------+------------------------------------------------------| |Version: |June 8, 2016 | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Mark Mendoza | |: | | ----------------------------------------------------------------- Subject: Real estate licensees: advertisements SUMMARY: Requires disclosure of a real estate licensee's name, license number, and responsible broker's identity on solicitation materials; broadens the scope of solicitation materials. Existing law: 1) Establishes within the Department of Consumer Affairs (DCA) the Bureau of Real Estate (CalBRE), which regulates the licensing of real estate agents, brokers, and mortgage loan originators. (Business and Professions Code (BPC) § 10000 et seq.) 2) Provides that a real estate licensee shall not publish or circulate any matter pertaining to any activity for which a real estate license is required that does not contain a designation disclosing that he or she is performing acts for which a real estate license is required. (BPC § 10140.6(a)) 3) Requires a real estate licensee to disclose his or her license identification number, and if applicable, his or her mortgage loan originator number on all solicitation materials intended to be the first point of contact with consumers and on real property purchase agreements when acting as an agent in those transactions. (BPC § 10140.6(b)(1)) 4) Authorizes the Real Estate Commissioner to adopt regulations identifying the materials in which a licensee must disclose a AB 1650 (Frazier) Page 2 of ? license identification number and, if that licensee is a mortgage loan originator, the unique identifier assigned to that licensee by the Nationwide Mortgage Licensing System and Registry. (BPC § 10140.6(b)(1)) 5) Defines "solicitation materials intended to be the first point of contact with consumers" to include business cards, stationary, advertising fliers, and other materials. The definition specifically excludes advertisements in print or electronic media and "for sale" signs. (BPC § 10140.6(b)(2)) 6) Provides that the provisions of this section shall not apply to classified rental advertisements reciting the telephone number at the premises of the property offered for rent or the address of the property offered for rent. (BPC § 10140.6(c)) This bill: 1) Requires a real estate licensee to additionally disclose his or her name, license identification number, and responsible broker's identity on all solicitation materials intended to be the first point of contact with consumers and on real property purchase agreements when acting as an agent in those transactions. 2) Expands the definition of "solicitation materials intended to be the first point of contact with consumers" to include business cards, stationery, advertising fliers, advertisements on television, in print, or electronic media, "for sale", rent, lease, "open house," directional signs, and other materials designed to solicit the creation of a professional relationship between the licensee and a consumer. 3) Provides that this section does not apply to "for sale," rent, lease, "open house" or directional signs that display a broker's identity or no licensee identification information at all. 4) Sunsets the existing section January 1, 2018 and provides that the new section shall become operative on January 1, 2018. AB 1650 (Frazier) Page 3 of ? 5) Makes other technical and clarifying changes. FISCAL EFFECT: This bill is keyed "fiscal" by Legislative Counsel. According to the April 28, 2016 Assembly Committee on Appropriations analysis, this bill would have minor and absorbable costs to the CalBRE to modify existing regulations. COMMENTS: 1. Purpose. California Association of Realtors (CAR) is the sponsor of this bill. According to the Author, "Current law has created confusion about what identity information is required to be included on real estate advertising materials. Existing law varies greatly depending on the type of advertisement (i.e. 'for sale' signs, print and electronic media, business cards, brochures, etc.) and the name being used by the licensee (i.e. given name, nickname, team name, etc.). This bill will require a licensee conducting advertising of any kind to also include their CalBRE license number and responsible broker's identity. 'Open house' and directional signs without a reference to agent name or branding would be exempt from this requirement. Creating a uniform advertising standard for real estate licensees would alleviate the existing competing standards and would serve to create more transparency for consumers in the market place." 2. Background on CalBRE. Real estate licensing in California commenced in 1917. CalBRE is the state entity currently charged with responsibility to enforce the Real Estate Law, the Subdivided Lands Act, and the Vacation Ownership and Time-share Act of 2004. CalBRE's programs are in place to satisfy the Bureau's statutorily mandated obligations of licensing and regulating salespersons, brokers, mortgage loan originators, real estate and prepaid listing service licensees, reviewing and approving subdivision and time share offerings, and approving continuing education (CE) and pre-license courses. Within the framework of requirements of Division 4 of the BPC and the Regulations of the Real Estate Commissioner as contained in the California Code of Regulations, each of CalBRE's programs contribute toward satisfying its mission of protecting and serving the interests of the public in real estate transactions and AB 1650 (Frazier) Page 4 of ? providing related services to the real estate industry. Specifically, BPC § 10050 requires the Real Estate Commissioner to enforce all laws commencing with BPC § 10000 and BPC § 11000 of Part 2 in a manner which achieves the maximum protection for the purchasers of real property and those persons dealing with real estate licensees. Prior to 2008, there were no disclosure requirements for real estate advertisements, other than to state that the services being advertised require a real estate license. After the onset of the housing market crisis, SB 1461 (Negrete-McLeod, Chapter 284, Statutes of 2008) was enacted to require a licensee to disclose his or her license number on specified solicitation materials for consumer protection purposes. The presence of a license identification number on solicitation materials makes it easier for consumers to check the status of a licensee on the CalBRE's online database. SB 1461 expressly excluded electronic and print advertisements from this requirement, as well as "for sale" signs. 3. Piecemeal Advertising Standards. Recently, AB 2018 (Bocanegra, Chapter 892, Statutes of 2014) was enacted to clarify and expand disclosure requirements for real estate advertisements under "fictitious business names" and "team names" to include the responsible broker's identity. It also expanded the scope of advertising and solicitation materials to include online and print advertisements, as well as "for sale", rent, and lease signs. Yet, the requirements set by AB 2018 do not apply to real estate licensees advertising under their given names. These piecemeal standards have created some confusion among licensees. There is also confusion among licensees regarding which types of advertising materials require disclosure. Current law requires disclosure generally on solicitation and advertising materials by real estate salespersons, but there are express exemptions for online and print advertisements, as well as "for sale" signs. The legislative history cites cost as the main factor behind the exemption for these items in the original 2008 legislation (SB 1461). 4. Consumers Identification of a Salesperson's Responsible Broker. Under California real estate law, every licensed real estate salesperson must be affiliated with and must operate under the supervision of a licensed real estate AB 1650 (Frazier) Page 5 of ? broker. However, existing law does not require real estate licensees' marketing materials to identify a responsible broker. If a salesperson does not disclose the identity of his or her responsible broker, it can be misleading to consumers. The broker is the actual representative for the client, and is a resource for consumers to access regarding problems with a salesperson. On September 1, 2015, the California Bureau of Real Estate (CalBRE) released a "Licensee Alert" threatening licensee sanctions against salespersons holding themselves out to the public as "independent" real estate professionals. The CalBRE also cautioned brokers against allowing this behavior among their retained salespersons. This bill would eliminate exemptions for disclosure on personalized solicitation and advertising materials by real estate salespersons. It also makes the disclosure requirements the same for salespersons operating under given names, "team names," and "fictitious business names." This bill would maintain the exemptions for general "for sale", rent, lease, "open house" and directional signs that only reference a responsible broker's identity. To address any potential concerns about cost of implementation to individual licensees, the author indicated that the new section will become operative on January 1, 2018 after a one year delay. 5. Arguments in Support. According to the California Association of Realtors (Sponsor), "Creating a uniform advertising standard for real estate licensees would alleviate confusion for real estate licensees and would create more transparency for consumers in the market place." SUPPORT AND OPPOSITION: Support: California Association of Realtors (Sponsor) Opposition: None on file as of June 7, 2016. -- END -- AB 1650 (Frazier) Page 6 of ?