BILL ANALYSIS Ó SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Jerry Hill, Chair 2015 - 2016 Regular Bill No: AB 1807 Hearing Date: June 27, 2016 ----------------------------------------------------------------- |Author: |Bonta | |----------+------------------------------------------------------| |Version: |June 22, 2016 | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Mark Mendoza | |: | | ----------------------------------------------------------------- Subject: Real estate licensees SUMMARY: Allows a licensee of the Bureau of Real Estate to petition the Real Estate Commissioner to remove his or her notice of disciplinary action from the Bureau's Internet Web site because the information is no longer necessary to prevent a credible risk to the public, as specified. Existing law: 1) Establishes within the Department of Consumer Affairs (DCA) a Bureau of Real Estate (BRE or Bureau), the chief officer of which is named the Real Estate Commissioner (Commissioner); the BRE is mandated to protect the public by exercising its licensing, regulatory, and disciplinary functions; whenever the protection of the public is inconsistent with other interests sought to be promoted, the protection of the public shall be paramount. (Business and Professions Code (BPC) § 10000, et seq.) 2) Provides that the Commissioner enforce the provisions of the Real Estate Law; has full power to regulate and control the issuance and temporary or permanent revocation of all licenses to be issued; and, perform all other acts and duties necessary for their enforcement. (BPC § 10071) AB 1807 (Bonta) Page 2 of ? 3) Provides that the Commissioner may adopt, amend, or repeal rules and regulations that are reasonably necessary for the enforcement. (BPC § 10080) 4) Requires the Commissioner to provide on the Internet information regarding the status of every license issued, including information on suspensions and revocations of licenses, accusations filed pursuant to the Administrative Procedure Act relative to persons or businesses subject to licensure or regulation; provides that the information not include personal information, except for the licensee's address of record. (BPC § 10083.2) 5) Specifies actions by a licensee for which the Commissioner or a designee may issue a citation and fine, including when a person who does not possess a real estate license, prepaid rental listing service license, or a real estate broker license is engaged or has engaged in activities for which the respective license is required; or when a licensee is violating or has violated provisions, as specified. (BPC § 10080.9) 6) Authorizes the Commissioner to promulgate regulations for citations and fines associated with a violation or violations of the Real Estate Law; requires the citation to be provided in writing with particularities and nature of the violation; provides that the citation may be made by certified mail at the address of record of a licensee cited, or to the last known mailing, business, or residence address of an unlicensed person or entity cited; requires time be allowed to comply with an order of correction that is specified in the citation; provides that the person receiving the citation may request an extension of the time to comply with the order if the cited person or entity is unable to complete the correction or pay the fine within the time specified. (Title 10 California Code of Regulations §§ 2907.1-2907.4) This bill: 1) Declares that it is appropriate for the BRE to continue AB 1807 (Bonta) Page 3 of ? reporting on its license verification Internet Web page, which is hosted on the BRE Web site when discipline has been imposed upon a licensee for conduct that indicates a credible risk of harm to the public; and that the BRE may consider and grant on a case-by-case basis a licensee's petition to discontinue the reporting of past disciplinary actions when the petitioning licensee has demonstrated to the satisfaction of the Real Estate Commissioner that the continued reporting is no longer required in order to avoid or reduce such a risk to the public. 2) Declares that the BRE may require a petitioner to pay in advance of consideration a fee to defray costs associated with consideration of the petition. 3) Declares that the BRE is not authorized or required to destroy public records maintained pursuant to the California Public Records Act. 4) Declares that the Legislature intends to establish a process by which a licensee may petition the BRE to remove a notice of past discipline from the license verification Internet Web site of the BRE. 5) Provides that a licensee may petition the Commissioner to remove from the posting of discipline, as specified, an item that through passage of time and evidence of rehabilitation is no longer required in order to prevent a credible risk to members of the public utilizing licensed activity of the licensee. 6) Authorizes the Commissioner, upon petition by a licensee accompanied by a fee, to remove from the posting of a discipline that has been posted on the BRE's Internet Web site for no less than 10 years and for which the licensee provides evidence of rehabilitation indicating that the notice is no longer required in order to prevent a credible risk to members of the public utilizing licensed activity of the licensee. AB 1807 (Bonta) Page 4 of ? 7) Requires the Commissioner, when evaluating a petition, to take into consideration other violations that present a credible risk to the members of the public since the posting of discipline requested for removal. 8) Defines "posted" as the date of disciplinary action taken on the BRE website. 9) Authorizes BRE to develop, through regulations, the minimum information to be included in a licensee's petition, including, but not limited to, a written justification and evidence of rehabilitation. 10)Requires the fee for a real estate salesperson or broker to petition the BRE for removal of a notice of disciplinary action from its Internet Web site after the passage of no less than 10 years of the action first being noticed online be the same as that for an unrestricted real estate salesperson or broker license. FISCAL EFFECT: This bill has been keyed "fiscal" by Legislative Counsel. According to the May 4, 2016 Assembly Appropriations Committee analysis, this bill will impose: "Significant costs beginning in FY 2020-21 of approximately $340,000 (special funds) and $292,000 (special funds) ongoing for three positions for the associated workload to process, review and make recommendations on each request received. These costs, which are fee supported, assume the same type of staffing currently used by Bureau for similar workload for existing Bureau functions. The Bureau notes that certain licenses generated significant disciplinary actions between 2004 and 2009, during the real estate 'bubble', and from 2008 to the present due to the bursting of the real estate bubble and subsequent market decline. For these reasons the Bureau anticipates the workload impact of this bill may not decline until approximately 2030." AB 1807 (Bonta) Page 5 of ? COMMENTS: 1. Purpose. The California Association of Realtors is the sponsor of this bill. According to the Author, "The current disciplinary system under the BRE serves an important role in ensuring consumers have access to a real estate licensee's disciplinary history. That information serves as a valuable tool in protecting consumers and promoting transparency. However, this tool has also negatively impacted a small class of real estate licensees who have had minor disciplinary actions on their record for many years. Even after the licensee has been rehabilitated and the license penalty has been removed, there isn't an opportunity to have that action removed from the online database. This bill simply provides the BRE Commissioner the ability to determine how long certain disciplinary actions should be posted online, ensuring that rehabilitated licensees are operating on a level playing field." According to the California Association of Realtors, some licensees have used this information to gain a competitive advantage over licensees with a record of discipline from the BRE, even if the violation for which the licensee was disciplined is several years old, the licensee has complied with corrective actions specified in the citation, and the violation is no longer relevant to the licensee's ability to operate. The Commissioner already has the authority to review disciplinary actions against a licensee and evaluate whether the disciplinary action should be modified. This bill would provide an avenue for licensees to request a disciplinary action on the BRE's website be removed if the Commissioner agrees that there is evidence of rehabilitation and the licensee is not a potential risk to consumers. 2. Background on the BRE. Real estate licensing in California commenced in 1917. BRE 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. BRE's programs are in place to satisfy the Bureau's statutorily mandated obligations of licensing and regulating salespersons, brokers, mortgage loan AB 1807 (Bonta) Page 6 of ? 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 BRE's programs contribute toward satisfying its mission of protecting and serving the interests of the public in real estate transactions and 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. A real estate license must first be obtained from the BRE if a person wishes to engage in the real estate business and to act in the capacity of, advertise, or assume to act as a real estate broker or real estate salesperson within the State of California. Currently, there are approximately 535,000 real estate licensees in California. 3. Disciplinary Action Postings. The facts and circumstances of a violation, rather than the specific code section of the violation determines the level of discipline sought by BRE. Under current law, low-level violations of the real estate law by licensees are addressed by BRE through citations and fines. Typically, these are violations where the facts and circumstances showed little harm to the public, but where possible repetition of the violation calls for some corrective action by BRE. The citation and fine authorization statute (BPC § 10080.9) mandates that these low-level discipline actions against licensees "shall not be reported as disciplinary action taken by the commissioner." Thus, citations to licensees do not appear on BRE's website. More serious violations of the real estate law may involve exactly the same code sections - usually BPC § 10176-10177 - but where the facts and circumstances resulted in genuine harm to the public or unacceptable risk taking on the part of the licensee. Higher levels of risk, or of actual harm to the public, cause BRE to seek revocation or restriction of a license. Such discipline remains on BRE's website AB 1807 (Bonta) Page 7 of ? indefinitely. For example, BPC § 10177(g) provides for license discipline where a licensee demonstrates negligence or incompetence in performing an act that requires licensure. In one instance, a small act of negligence may present little risk and result in no harm to a client, but require correction, and a citation is issued. Where an act of negligence is one that presents great risk, or costs a client his or her life savings, outright revocation of the license may be sought by BRE. Presently, such discipline is visible on CalBRE's website, including documentation of the administrative filings. The sponsor reports that, even if the Commissioner were to remove a citation from its website, other states and enforcement agencies would be able to contact BRE and gain access to disciplinary documents against a licensee. 4. Arguments in Support. The California Association of Realtors (Sponsor) writes in support, "This bill creates a process by which a licensee can have an old record of discipline removed from [the BRE] website profile if the [Commissioner] determines that protection of the public interest and public welfare will be adequately maintained. Additionally, the process would be paid for by the petitioner thereby avoiding any new costs to the [BRE]." SUPPORT AND OPPOSITION: Support: California Association of Realtors (Sponsor) Opposition: None on file as of June 21, 2016. -- END -- AB 1807 (Bonta) Page 8 of ?