BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: SB 1196 Hearing Date: April 18,
2016
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|Author: |Hill |
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|Version: |April 12, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Mark Mendoza |
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Subject: Bureau of Real Estate: Bureau of Real Estate
Appraisers: review
SUMMARY: Adds a four year sunset date to the Bureau of Real
Estate and Bureau of Real Estate Appraisers; provides the Real
Estate Commissioner the authority to suspend the license of a
real estate licensee who has entered into a guilty plea for a
felony or a crime substantially related to the qualifications,
functions, or duties of a real estate license; requires an
applicant for a Real Estate Appraiser's license to complete a
course and examination that tests the applicant's knowledge of
state and federal laws relating to the practice of appraising.
Existing law:
1) Establishes the Real Estate Law, administered by the Bureau
of Real Estate (CalBRE or Bureau), within the Department of
Consumer Affairs (DCA), which licenses and regulates real
estate salespersons, brokers, and mortgage loan originators.
(BPC § 1000 et seq.)
2) Provides that the Real Estate Commissioner (Commissioner) may
revoke or suspend a real estate license who entered a plea of
guilty or nolo contendere to, or was found guilty of, or
convicted of, a felony, or a crime substantially related to
the qualifications, functions, or duties of a real estate
licensee, after the time for appeal has elapsed or the
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judgment of conviction has been affirmed on appeal.
(BPC § 10177(b))
3) Establishes the Real Estate Appraiser's Law, administered by
the Bureau of Real Estate Appraisers (BREA), within the DCA,
which licenses and regulates real estate appraisers. (BPC §
11300 et seq.)
4) Requires the Bureau Chief to adopt regulations governing the
process and procedures for renewal of a license to include,
but not be limited to, continuing education requirements,
which will be reported on the basis of four-year continuing
education cycles. (BPC § 11360)
This bill:
1) Adds a four year sunset date to the Bureau of Real Estate and
Bureau of Real Estate Appraisers.
2) Provides the Real Estate Commissioner the authority to
suspend the license of a real estate licensee who has entered
into a guilty plea for a felony or a crime substantially
related to the qualifications, functions, or duties of a real
estate license.
3) Requires the Bureau to notify person whose license is subject
to suspension of his or her right to elect to have the issue
of the suspension heard.
4) Requires that the suspension be rescinded and the license
reinstated to its status prior to the suspension if the plea
of guilty is withdrawn by the licensee.
5) Requires an applicant for a Real Estate Appraiser's license
to complete a Bureau approved course and examination that
tests the applicant's knowledge of state and federal laws
relating to the practice of appraising.
6) Makes other technical changes.
FISCAL
EFFECT: Unknown. This bill is keyed "fiscal" by Legislative
Counsel.
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COMMENTS:
1. Purpose. This bill is sponsored by the Author . This bill is
one of five "sunset review bills" the Author is sponsoring
this session. According to the Author, this bill is
necessary to add sunset dates for CalBRE and BREA in order to
ensure oversight over the real estate and appraiser
profession. The health, safety, and welfare of consumers are
protected by a well-regulated real estate and appraiser
profession. CalBRE and BREA have shown over the years a
strong commitment to improve the Bureaus' overall efficiency
and effectiveness and has worked cooperatively with the
Legislature and this Committee to bring about necessary
changes. While the Bureaus need to review some of its
enforcement and licensing practices, CalBRE and BREA should
both be given a four-year sunset date so that the Committee
may review once again if the issues and recommendations in
the background paper and others of the Committee have been
addressed.
2. Oversight Hearings and Sunset Review of Licensing Boards and
Programs. Beginning in 2016, the Senate Business and
Professions Committee and the Assembly Business and
Professions Committee (Committees) conducted joint oversight
hearings to review 12 regulatory entities: DCA, Acupuncture
Board, Board of Behavioral Sciences, California Massage
Therapy Association, Court Reporters Board, Board of
Pharmacy, Physician Assistant Board, Board of Podiatric
Medicine, Bureau of Private Postsecondary Education, Board of
Psychology, Bureau of Real Estate, Bureau of Real Estate
Appraisers, and Veterinary Medical Board.
The Committees conducted two hearings in March and joined
with the Senate Committee on Education and Assembly Committee
on Higher Education to review Bureau of Private Postsecondary
Education. This bill and the accompanying sunset bills are
intended to implement legislative changes as recommended by
staff of the Committees and which are reflected in the
background papers prepared by Committee staff for each agency
and program reviewed this year.
3. Background on CalBRE. Real estate licensing in California
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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
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.
4. Governor's Reorganization Plan No. 2. In 2012, Governor
Brown submitted a reorganization plan to the Legislature. As
a result, on July 1, 2013, CalBRE became a Bureau within the
DCA moving from the independent Department of Real Estate
(DRE).
AB 1317 (Frazier, Chapter 352, Statutes of 2013) enacted the
statutory changes necessary to reflect the changes in law
made by the Governor's Reorganization Plan No. 2, including
moving the former DRE from under the jurisdiction of the
former Business, Transportation, and Housing Agency to become
a new CalBRE under DCA within the Business, Consumer
Services, and Housing Agency.
With respect to its core functions, CalBRE currently licenses
405,985 persons in California. Licensed salespersons
(265,645) outnumber licensed brokers (136,232) nearly two to
one. Of the 402,000 real estate licensees, over 23,600 have
a Mortgage Loan Originator (MLO) endorsement that allows the
licensee to originate residential mortgage loans. Last
fiscal year, CalBRE issued over 25,000 new licenses and
renewed over 79,000. CalBRE's enforcement efforts resulted
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in
185 license denials, 705 licensing disciplinary actions
(revocations, surrenders, suspensions and public reprovals)
and 62 Desist and Refrain Orders. Moreover, CalBRE issued
over 2,350 final public reports, which translated to 30,641
new housing units being offered for sale in California in FY
2014/2015.
The Bureau's mission is "to safeguard and promote the public
interests in REAL ESTATE MATTERS through licensure,
regulation, education and enforcement."
5. Review of CalBRE - Issues Identified and Recommended Changes.
The following are some of the major issues pertaining to
CalBRE along with background information concerning the
particular issue. Recommendations were made by Committee
staff regarding the particular issue areas which needed to be
addressed.
a) Issue: Licensee Suspension
Background: Currently, BPC § 10177 (b) is written in such
a way that it requires "the time for appeal" to elapse on a
guilty plea before CalBRE can use it for disciplinary
action. The full language for BPC § 10177(b) reads:
BPC § 10177. "The commissioner may suspend or revoke the
license of a real estate licensee, delay the renewal of a
license of a real estate licensee, or deny the issuance of
a license to an applicant, who has done any of the
following, or may suspend or revoke the license of a
corporation, delay the renewal of a license of a
corporation, or deny the issuance of a license to a
corporation, if an officer, director, or person owning or
controlling 10 percent or more of the corporation's stock
has done any of the following:
(b) Entered a plea of guilty or nolo contendere to, or been
found guilty of, or been convicted of, a felony, or a crime
substantially related to the qualifications, functions, or
duties of a real estate licensee, and the time for appeal
has elapsed or the judgment of conviction has been affirmed
on appeal, irrespective of an order granting probation
following that conviction, suspending the imposition of
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sentence, or of a subsequent order under Section 1203.4 of
the Penal Code allowing that licensee to withdraw his or
her plea of guilty and to enter a plea of not guilty, or
dismissing the accusation or information."
CalBRE has seen instances where major criminal cases
involving real estate fraud have taken years to work their
way through federal and state criminal courts. In these
cases, CalBRE has seen licensees who were defendants plead
guilty relatively early in the process as part of a plea
bargain that furthers the prosecution of other defendants.
Those guilty pleas may not result in a conviction for
months, if not years, as the case against the other
defendants proceeds. As presently written in statute, that
guilty licensee (who has entered his or her own voluntary
and knowing plea) may continue to practice real estate.
The ability for the Bureau to take swift action against a
licensee and promote public health and safety appears to be
limited by this section of statute. Without the authority
to suspend a license from a real estate licensee who
voluntarily enters a guilty plea to a felony or
substantially related crime, real estate licensees are able
to continue to practice real estate.
Recommendation and Proposed Statutory Change : The Committee
may wish to grant the Commissioner authority to suspend the
license of a real estate licensee who has entered into a
guilty plea for a felony or a crime substantially related
to the qualifications, functions, or duties of a real
estate license.
This bill makes the following changes to the Real Estate
Law related to licensee suspension:
Provides the Commissioner authority to suspend the license
of a real estate licensee who has entered into a guilty
plea for a felony or a crime substantially related to the
qualifications, functions, or duties of a real estate
license. The language would be added onto BPC § 10177(b).
The language reads:
"Notwithstanding the above, and with the recognition that
sentencing may not occur for months or years following the
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entry of a guilty plea, the commissioner may suspend the
license of a real estate licensee upon the entry by the
licensee of a guilty plea to the crimes mentioned above. If
the plea of guilty is withdrawn, the suspension shall be
rescinded and the license reinstated to its status prior to
the suspension. The Bureau shall the notify person whose
license is subject to suspension of his or her right to
elect to have the issue of the suspension heard in
accordance with Section 10100 of the Business and
Professions Code."
6. 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 (OREA) 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.
The Enforcement Division investigates the background of
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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.
7. Federal Oversight of BREA. The following entities are not
part of BREA, but they have influence over BREA and its
operations at the federal level.
a) Appraisal Subcommittee: The Appraisal Subcommittee
(ASC) was created in 1989 pursuant to Title XI of the
Financial Institutions Reform, Recovery, and Enforcement
Act of 1989. The ASC's role as an independent federal
institution is to generally oversee the real estate
appraisal process as it relates to federally regulated
transactions. More specifically, the ASC reviews each
state's compliance with federal requirements for licensed
appraisers and appraisal management companies and can take
action in the case of non-compliance; maintains a national
registry of approved appraisers; and oversees the Appraisal
Foundation.
b) Appraisal Foundation: The Appraisal Foundation
(Foundation) is 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
Appraisal Standards Board within the Foundation determines
and maintains the Uniform Standards of Professional
Appraisal Practice (USPAP) which all states must enforce to
be compliant with federal requirements and allow state
licensed appraisers to participate in federally regulated
transactions. The Appraisal Qualifications Board within
the Foundation establishes the minimum education and
experience requirements as well as the examination
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requirements. The Appraisal Practices Board within the
Foundation is charged with providing guidance and issuing
opinions on recognized valuation methods and techniques.
8. Review of the BREA - Issues Identified and Recommended
Changes. The following are some of the major issues
pertaining to BREA along with background information
concerning the particular issue. Recommendations were made
by Committee staff regarding the particular issue areas which
needed to be addressed.
a) Issue : Licensee Education
Background: Prior to licensure, applicants are not required
take a course or pass an exam to show fluency in federal
and state laws and regulations. Only upon renewal of the
licensure must real estate appraisers demonstrate their
knowledge of federal and state laws and regulations.
Real estate appraiser licenses must be renewed every two
years. However, there are two separate continuing
education (CE) requirements in order to renew a license.
All licensed appraisers must meet minimum CE requirements
before renewing their license. A total of 56 hours of CE
is required during the four-year continuing education
cycle, including the following mandatory courses for all
license categories:
7-hour National USPAP course-required every two
years.
4-hour Bureau approved course entitled "Federal
and State Laws and Regulations"- required every four
years. (BPC § 11360(a)).
In practical terms, this requires a renewal of the 7-hour
USPAP course every two years on its own, and a full CE (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.
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Continuing education courses or seminars must cover
appraisal related topics including subjects such as land
use planning, appraisal computer applications, cost
estimating, and green building appraisals.
Recommendation and Proposed Statutory Change : To ensure
adequate public protection and curtail unnecessary
complaint investigations, the Committee may wish to require
applicants for a real estate appraiser license to initially
demonstrate their knowledge of the federal and state laws
regulating the appraisal profession. The most effective
way to accomplish this would be to require applicants,
prior to licensure, to complete a course and pass an
examination that would include questions regarding federal
and state laws and regulations.
This bill makes the following changes to the Appraisers Law
related to licensee education:
Requires an applicant for a real estate appraiser's license
to complete a Bureau-approved course and examination
testing the applicant on federal and state laws regulating
the appraisal profession.
1. Prior Legislation. SB 706 (Price, Chapter 712, Statutes of
2011) made numerous enforcement enhancements to the former
Department of Real Estate and the former Office of Real
Estate Appraisers; required licensing boards to post
information about licensees on the Internet, as specified;
and made updating and conforming changes.
SUPPORT AND OPPOSITION:
Support: None on file as of April 12, 2016.
Opposition: None on file as of April 12, 2016.
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