BILL ANALYSIS Ó
SB 1196
Page 1
SENATE THIRD READING
SB
1196 (Hill)
As Amended June 20, 2016
Majority vote
SENATE VOTE: 38-0
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Business & |16-0 |Salas, Brough, Baker, | |
|Professions | |Bloom, Campos, | |
| | |Chávez, Dahle, Dodd, | |
| | |Eggman, Gatto, Gomez, | |
| | |Holden, Jones, | |
| | |Mullin, Ting, Wood | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |20-0 |Gonzalez, Bigelow, | |
| | |Bloom, Bonilla, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, Eduardo | |
| | |Garcia, Holden, | |
| | |Jones, Obernolte, | |
| | |Quirk, Santiago, | |
| | |Wagner, Weber, Wood, | |
SB 1196
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| | |Chau | |
| | | | |
| | | | |
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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rescinded and the license reinstated to its status prior to the
suspension if the plea of guilty is withdrawn by the licensee;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.
Specifically, this bill:
1)Adds a four year sunset review date to the CalBRE and BREA.
2)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.
3)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.
4)Requires that the suspension be rescinded and the license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of guilty is withdrawn by the licensee.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
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complete a BREA-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: According to the Assembly Appropriations
Committee, this bill will result in:
1)Minor and absorbable costs to CalBRE to handle the additional
requirements for suspended licenses.
2)Minor and absorbable costs to BREA to update the application
for a real estate appraiser and the applicant's packet.
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
Department of Consumer Affairs (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. 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.
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 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. Last fiscal year, CalBRE issued
over 25,000 new licenses and renewed over 79,000. 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 fiscal year 2014/2015.
CalBRE Licensee Suspension. Currently, CalBRE is required to
wait for "the time for appeal" to elapse on a guilty plea before
the plea can be used 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
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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. 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 licensee.
Background on the BREA. In 1989, Title XI of the federal
Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) 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 (Polanco), 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. The Licensing
Division also registers Appraisal Management Companies (AMC) in
compliance with California law. The Enforcement Division
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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.
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 (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)The Appraisal Subcommittee (ASC) was created in 1989 pursuant
to Title XI of the FIRREA. 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 AMCs and can take action in the case of non-compliance;
maintains a national registry of approved appraisers; and
oversees the Appraisal Foundation.
2)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
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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 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 and
all licensed appraisers must meet minimum CE requirements before
renewing their license. In practical terms, this requires a
renewal of the seven-hour USPAP course every two years on its
own, and a full CE (56 hours) renewal every four years. 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.
Analysis Prepared by:
Gabby Nepomuceno / B. & P. / (916) 319-3301 FN:
0003883
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