BILL ANALYSIS Ó
SB 1196
Page 1
Date of Hearing: June 28, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
SB 1196(Hill) - As Amended June 20, 2016
SENATE VOTE: 38-0
SUBJECT: Bureau of Real Estate: Bureau of Real Estate
Appraisers
SUMMARY: Adds a sunset review date for the Bureau of Real
Estate (CalBRE) and Bureau of Real Estate Appraisers (BREA);
authorizes the Real Estate Commissioner (Commissioner) to
suspend the license of a real estate licensee for specified
reasons; requires the CalBRE to notify a person whose license is
subject to suspension of his or her right to elect to have the
issue of the suspension heard; 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rescinded and the license reinstated to its status prior to the
suspension if the plea of guilty is withdrawn by the licensee;
requires an applicant for a Real Estate Appraiser's license to
complete a BREA-approved course and examination that tests the
applicant's knowledge of state and federal laws relating to the
practice of appraising; and makes other technical changes.
EXISTING LAW:
1)Establishes the Real Estate Law, administered by the CalBRE,
within the Department of Consumer Affairs (DCA), to license
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and regulate real estate salespersons, brokers, and mortgage
loan originators. (BPC Section 10000, 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
judgment of conviction has been affirmed on appeal. (BPC
Section 10177(b))
3)Establishes the Real Estate Appraiser's Law, administered by
the BREA within the DCA, to licenses and regulates real estate
appraisers. (BPC Section 11300, et seq.)
4)Requires the BREA Bureau Chief to adopt regulations governing
the process and procedures for renewal of a license to
include, but not be limited to, continuing education (CE)
requirements, which will be reported on the basis of four-year
CE cycles. (BPC Section 11360)
THIS BILL:
5)Adds a four year sunset review date to the CalBRE and BREA.
6)Provides the 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
licensee.
7)Requires the CalBRE to notify person whose license is subject
to suspension of his or her right to elect to have the issue
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of the suspension heard.
8)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.
9)Requires an applicant for a Real Estate Appraiser's license to
complete a BREA-approved course and examination that tests the
applicant's knowledge of state and federal laws relating to
the practice of appraising.
10)Makes other technical changes.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS:
Purpose. This bill is sponsored by the author. 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."
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Background. Joint Oversight Hearings and Sunset Review of the
DCA Licensing Boards. In March of 2016, the Assembly Business
and Professions Committee and the Senate Business, Professions
and Economic Development Committee (Committees) conducted
multiple joint oversight hearings to review 11 regulatory boards
within the DCA and one regulatory entity outside of the DCA.
The sunset bills are intended to implement legislative changes
recommended in the respective background reports drafted by the
Committee staff for the agencies reviewed this year.
The Sunset Review Process. The sunset review process provides a
formal mechanism for the DCA; the Legislature; the regulatory
boards, bureaus and committees; interested parties; and
stakeholders to make recommendations for improvements to the
authority of consumer protection boards and bureaus. This is
performed on a standard four-year cycle and was mandated by SB
2036 (McCorquodale), Chapter 908, Statutes of 1994. Each
eligible agency is required to submit to the Committees a report
covering the entire period since last reviewed that includes,
among other things, the purpose and necessity of the agency and
any recommendations of the agency for changes or reorganization
in order to better fulfill its purpose. During the sunset
review hearings, the Committees take public testimony and
evaluate the eligible agency prior to the date the agency is
scheduled to be repealed. An eligible agency is allowed to
sunset unless the Legislature enacts a law to extend,
consolidate, or reorganize the eligible agency. With respect to
the CalBRE and the BREA, the provisions governing these bureaus
would not be repealed if the sunset date is not extended;
rather, the sunset date serves to subject the bureaus to review
by the appropriate policy committees on a regular basis.
Background on the 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
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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 CE
and pre-license courses. Within the framework of requirements
of Division 4 of the BPC and the regulations of the 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 Section 10050 requires the
Commissioner to enforce all laws commencing with BPC Section
10000 and BPC Section 11000 in a manner which achieves the
maximum protection for the purchasers of real property and those
persons dealing with real estate licensees.
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 the
current CalBRE under the 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.
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CalBRE's enforcement efforts resulted 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 CalBRE's mission is: "to safeguard and promote the public
interests in real estate matters through licensure, regulation,
education and enforcement."
CalBRE Licensee Suspension. Currently, BPC Section 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. 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 CalBRE 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. This bill 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
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licensee.
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.
The 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 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.
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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 CE courses. In addition
to the real estate appraisal related courses offered by
California's community colleges and universities, over 70
proprietary schools provide appraisal education.
Federal Oversight of the BREA. The following entities are not
part of BREA, but they have influence over BREA and its
operations at the federal level:
1)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.
2)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 requirements. The Appraisal
Practices Board within the Foundation is charged with
providing guidance and issuing opinions on recognized
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valuation methods and techniques.
The following are some of the major issues pertaining to the
BREA along with background information concerning the particular
issue.
Licensee Education. 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 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 CE cycle. 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. CE courses or seminars must cover
appraisal related topics including subjects such as land use
planning, appraisal computer applications, cost estimating, and
green building appraisals.
This bill requires an applicant for a real estate appraiser's
license to complete a BREA-approved course and examination
testing the applicant on federal and state laws regulating the
appraisal profession.
Current Related Legislation. SB 710 (Galgiani) of the current
Legislative Session, corrects a drafting error that requires the
listing of a company name and a responsible broker's license
number on all "team" advertising and instead requires only one
or the other to be listed. STATUS: This bill is pending in the
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Assembly Committee on Business and Professions.
Prior Related Legislation. SB 706 (Price), Chapter 712,
Statutes of 2011, made numerous enforcement enhancements to the
former DRE 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.
REGISTERED SUPPORT:
None on file.
REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Gabby Nepomuceno / B. & P. / (916) 319-3301