BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1762|
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THIRD READING
Bill No: AB 1762
Author: Hayashi (D)
Amended: 6/2/10 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 9-0, 6/16/10
AYES: Calderon, Cogdill, Florez, Kehoe, Liu, Lowenthal,
Padilla, Price, Runner
NO VOTE RECORDED: Correa, Cox
ASSEMBLY FLOOR : 73-0, 4/8/10 - See last page for vote
SUBJECT : Real estate
SOURCE : California Association of Realtors
DIGEST : This bill clarifies and updates the definition
of an advance fee, as that term is defined under the Real
Estate Law.
ANALYSIS : Existing law:
1. Defines an advance fee as a fee, regardless of the form,
which is claimed, demanded, charged, received, or
collected by a licensee from a principal before fully
completing each and every service the licensee
contracted to perform.
2. Prohibits an advance fee, or the services to be
performed by a licensee pursuant to a fee agreement,
CONTINUED
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from being separated or divided into components for the
purpose of avoiding the application of Section 10026.
3. States that the term "advance fee" includes a fee for a
listing, advertisement, or offer to sell or lease
property or a business opportunity, other than in a
newspaper of general circulation, as specified.
4. States that the term "advance fee" does not include the
term security, as that term is used in Section 1950.5 of
the Civil Code, or the term screening fee, as that term
is used in Section 1950.6 of the Civil Code.
5. Requires real estate licensees to submit all materials
used in obtaining advance fee agreements, including but
not limited to the contract forms, radio and television
advertising, and letters or cards used to solicit
prospective sellers, to the Commissioner of Real Estate
(commissioner) at least 10 days prior to their use, and
grants the commissioner the authority to order any of
the submitted material not be used, disseminated, or
published, based on his/her belief that it would tend to
mislead.
6. Provides that any person or entity using, disseminating,
or publishing any matter which the commissioner has
ordered not to be used, published, or disseminated
pursuant to Section 10085 is guilty of a misdemeanor
punishable by a fine not exceeding $2,500, or by
imprisonment in the county jail for up to six months, or
both, for each use, dissemination, or publication.
This bill:
1. Defines an "advance fee" as a fee, regardless of its
form, which is claimed, demanded, charged, received, or
collected by a licensee for services requiring a
license, or for a listing, as defined, before fully
completing the service the licensee contracted to
perform or represented would be performed.
2. Clarifies that neither an advance fee, nor the services
to be performed, may be separated or divided into
components for the purpose of avoiding the application
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of any provision of the Real Estate Law.
3. Adds the following exclusions from being defined as an
advance fee:
A. A fee claimed, demanded, charged, received, or
collected for the purpose of advertising the sale,
lease, or exchange of real estate, or of a business
opportunity, in a newspaper of general circulation,
any other written publication, or through electronic
media comparable to any type of written publication,
provided that the electronic media or the publication
is not under the control or ownership of the broker.
B. A fee earned for a specific service under a
"limited service" contract. For purposes of the bill,
a limited services contract is a written agreement for
real estate services, which are promoted, advertised,
or presented as stand-alone services, to be performed
on a task-by-task basis, and for which compensation is
received as each separate, contracted-for task is
completed. To qualify for this exclusion, all
services performed pursuant to the contract must be
described in subdivisions (a), (b), or (c) of Section
10131.
4. States that a contract between a real estate broker and
a principal that requires payment of a commission to the
broker after the contract is fully performed does not
represent an agreement for an advance fee;
5. States that the changes made by the bill are intended to
supercede the changes made to Section 10026 by SB 94
(Calderon), Chapter 630, Statutes of 2009, but are not
otherwise intended to alter the obligations or liability
of any person pursuant to SB 94 (Calderon), Chapter 630,
Statutes of 2009.
Background
Section 10026 of the Business and Professions Code was
enacted in 1955, and has been infrequently changed since
that time. The last change to this section was requested
by the California Association of Realtors (CAR) in 2009.
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That change, which was contained in SB 94 (Calderon),
Chapter 630, Statutes of 2009, added language stating that
the form of the fee was immaterial, and added the concept
that that neither an advance fee, nor the services to be
performed pursuant to an advance fee contract, may be
separated or divided into components for purposes of
avoiding the application of Section 10026.
The changes proposed by CAR in this bill go beyond those
enacted in 2009, and are intended to ensure that two types
of fee arrangements, into which DRE licensees may currently
enter without an advance fee agreement, are not interpreted
as requiring advance fee agreements by DRE at some time in
the future. These two fee arrangements include: 1)
entering into a limited services contract (described in
more detail below) and 2) entering into a contract in which
a commission will be earned by the licensee, after the
completion of the contract. Although neither of these fee
arrangements has ever been interpreted by DRE as requiring
an advance fee agreement, CAR is concerned that the
existing language of Section 10026 does not expressly
exclude them from the definition of activities for which an
advance fee agreement is necessary. The changes contained
in this bill are intended to ensure that the statute
clearly excludes these activities as ones requiring an
advance fee agreement.
The limited services contracts covered by this bill are a
la carte arrangements, and are entered into when an
individual might want a little bit of help from a DRE
licensee in purchasing or selling a home or performing
another real estate-related service, but does not wish to
enter into a contract with the licensee for the full range
of services typically provided by licensees. A limited
services contract allows the licensee to price the desired
services on a piece-by-piece or task-by-task basis, and to
receive payment as each piece or task is completed. The
language of this bill would make it clear that these types
of arrangements do not require advance fee agreements.
SB 94 (Calderon), Chapter 630, Statutes of 2009, prohibited
anyone, including a real estate licensee, who negotiates,
attempts to negotiate, arranges, attempts to arrange, or
otherwise offers to perform residential mortgage loan
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modifications or other forms of mortgage loan forbearance
or forgiveness for a fee or other compensation paid by a
borrower, from demanding or receiving any preperformance
compensation, requiring any security as collateral for
final compensation, or taking a power of attorney from a
borrower, as specified. Although SB 94 has colloquially
been described as a bill that bans advance fees in
connection with loan modification agreements, that bill did
not base its requirements upon the definition of an advance
fee in the Real Estate Law. The changes made by SB 94 to
the definition of an advance fee in the Real Estate Law
were unrelated to that bill's requirements relating to
mortgage loan modification/forbearance/forgiveness
contracts.
However, in an attempt to avoid any misunderstanding or
misinterpretations about the intent of this bill, this
bill's author and sponsor have included language, expressly
clarifying that the changes made by this bill are only
intended to supercede the changes made by SB 94 to the
definition of an advance fee in the Real Estate Law. This
bill contains express language that its changes are not
otherwise intended to alter the obligations or liability of
any person pursuant to SB 94.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/17/10)
California Association of Realtors (source)
Orange County Association of Realtors
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Tom Berryhill, Blakeslee, Block,
Blumenfield, Bradford, Brownley, Buchanan, Caballero,
Carter, Chesbro, Conway, Cook, Coto, De La Torre, De
Leon, DeVore, Emmerson, Eng, Evans, Feuer, Fletcher,
Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,
Garrick, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,
Huffman, Jeffries, Jones, Knight, Lieu, Bonnie Lowenthal,
Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello,
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Nielsen, Norby, Portantino, Ruskin, Salas, Saldana,
Silva, Skinner, Smyth, Solorio, Audra Strickland,
Swanson, Torlakson, Torres, Torrico, Tran, Villines,
Yamada, John A. Perez
NO VOTE RECORDED: Charles Calderon, Davis, Gilmore, Huber,
Logue, V. Manuel Perez
JA:nl 6/22/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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