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
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          |Author:   |Bonta                                                 |
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          |Version:  |June 22, 2016                                         |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Mark Mendoza                                          |
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                           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)









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          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  








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             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.








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          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."
          








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          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  








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             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  








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             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 --
          










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