BILL ANALYSIS                                                                                                                                                                                                    



          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 ?