BILL ANALYSIS �
AB 278
Page 1
Date of Hearing: May 3, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 278 (Hill) - As Introduced: February 8, 2011
SUBJECT : Department of Real Estate: administrative fines.
SUMMARY : Authorizes the Real Estate Commissioner
(Commissioner) to adopt regulations for issuing citations to
those who violate the Real Estate Law or any regulation under
that law. Specifically, this bill :
1)Authorizes the Commissioner to adopt regulations that
establish a system for issuing citations to licensees in
violation of the Real Estate Law or any regulation adopted
under that law, and to issue such citations except where
violations have resulted in serious financial loss to a member
of the public. A citation may contain an order of abatement
or an order to pay an administrative fine.
2)Requires the system for issuing citations to satisfy the
following conditions:
a) Citations shall be in writing and describe the nature of
the violation, including reference to the provision of law
that was violated;
b) Citations shall, when appropriate, contain an order of
abatement fixing a reasonable time for abatement;
c) Administrative fines must not exceed one thousand
dollars ($1,000) for each inspection or each investigation
made with respect to the violation. The Commissioner must
consider several factors in assessing a fine, as specified;
d) Citations or fine assessments must inform licensees of
the appeals process for contested violations, which
provides for a hearing within 30 days of the date the fine
or assessment is issued. Payment of a fine shall not
constitute an admission of the violation charged and shall
not be reported in the Department of Real Estate's (DRE)
real estate bulletin; and,
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e) The Commissioner may take disciplinary action if a
licensee fails to pay a fine within 30 days of the
assessment date, unless the citation is being appealed. If
a citation is not contested and a fine is not paid, the
fine shall be added to the license renewal fee. A license
shall not be renewed without payment of the renewal fee and
fine.
3)Allows the following: citations to be issued without the
assessment of an administrative fine; a fine assessment to be
limited to particular violations of the Real Estate Law; and,
notice to be given to a broker when a citation is issued to a
salesperson or broker associate employed by the broker.
4)Specifies that, if a fine is paid to satisfy an assessment
based on the finding of a violation, payment of the fine shall
be represented as satisfactory resolution of the matter for
purposes of public disclosure.
5)Requires administrative fines to be credited to the Recovery
Account of the Real Estate Fund and, upon legislative
appropriation, to be available for expenditure under the Real
Estate Recovery Program.
6)Specifies that the establishment of an administrative citation
system does not preclude the use of other disciplinary
authority of the Commissioner.
7)Allows the Commissioner to adopt regulations to establish a
similar administrative citation system for unlicensed persons
acting in the capacity of a licensee, as specified.
EXISTING LAW
1)Establishes the Real Estate Law, which provides for the
regulation and licensure of real estate brokers and
salespersons by the DRE under the Commissioner.
2)Authorizes the Commissioner, upon his or her own motion, and
requires the Commissioner upon the verified complaint in
writing of any person, to investigate the actions of a real
estate licensee who has engaged in specified acts. If the
Commissioner finds that a licensee has committed those acts,
the Commissioner may suspend or revoke the license of the
licensee or impose specified monetary penalties, which must be
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credited to the Recovery Account in the Real Estate Fund.
3)Creates the Recovery Account within the Real Estate Fund for
purposes of payment to aggrieved persons who obtain a final
judgment against a licensee based upon the licensee's fraud,
misrepresentation, or deceit in a real estate transaction.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "While
the Real Estate Commissioner has authority to enforce real
estate law, he or she has a relatively narrow number of options
for imposing discipline and penalties. AB 278 would allow for
the issuance of a citation and a fine for relatively minor
violations that have not resulted in harm to the public. AB 278
would provide a type of "fix-it ticket" that could be levied
without the necessity of a long drawn out hearing and review
process. While certainly appropriate for more serious
violations, such a time consuming process does not serve either
the general public or the regulated community in the most
efficient manner in all cases."
Background . DRE licenses and regulates approximately 463,000
real estate professionals in California.
Under existing law, DRE has the authority to take regulatory
action against a real estate licensee for committing an unlawful
act. DRE may also censure an individual who lacks a real estate
license but is nevertheless performing duties for which a
license is necessary.
In administering and enforcing the Real Estate Law, the
Commissioner may issue regulations and hold hearings to
determine whether a licensee or license applicant has violated
real estate laws or regulations. The Commissioner may suspend,
revoke or deny a real estate license or impose monetary
penalties if violations are substantiated through the hearings
process. The Commissioner may also issue desist and refrain
orders in certain circumstances.
In practice, for more serious violations, DRE files an
accusation, which initiates the disciplinary process that can
eventually result in suspension or revocation of a license, or
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issues a desist and refrain order. For less serious violations,
DRE issues a letter of corrective action. The citations
authorized by this bill would act as an intermediate option for
the DRE.
The Recovery Account is funded by DRE license fees and is used
to pay aggrieved individuals who obtain a final judgment against
a licensee who commits fraud, misrepresentation, deceit or other
specified violations in his or her capacity as a licensee when
effecting a real estate transaction. The aggrieved person can
file an application with DRE for payment from the Recovery
Account of amounts unpaid in the judgment. The DRE's Real
Estate Bulletin is published quarterly as an educational service
to real estate licensees in the state.
This bill grants the Commissioner the authority to adopt
regulations to issue citations for violations of Real Estate Law
that might not warrant a full investigation or the imposition of
remedies under current law, such as suspending or revoking a
license. Citations can include an order of abatement or a fine
of up to $1,000, which would be deposited into the Recovery
Account and subject to legislative appropriation. Citations
must notify the licensee of DRE's appeals process and, if a
licensee pays a fine, the underlying citation will not be
reported in DRE's Real Estate Bulletin. A similar citation
system can be adopted for unlicensed persons acting in the
capacity of a licensee.
Candidates for a citation under this bill could include: a
broker's trust account where records were not properly kept but
no monies were missing; or, where employment contracts were not
maintained correctly or hiring was not reported to DRE.
Support . The California Association of Realtors, sponsor of
this bill, writes, "Existing law allows the Department to order
an individual to 'desist and refrain' from misconduct, and
allows the Department to commence an administrative hearing
process to revoke a license. Unfortunately, the Department does
not have an intermediate option to issue a citation and fine for
relatively less serious violations. By giving the Department
the option to cite violations that have not resulted in serious
harm to the public, AB 278 will allow it (to) focus
prosecutorial resources on the most serious violators. In
addition, the Department will not be pressured to ignore minor,
but none the less real, violations while it prioritizes the most
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serious (violations)."
Related legislation . SB 53 (Calderon and Vargas) of 2011
authorizes the Commissioner to issue citations to unlicensed
persons engaging in activities for which a real estate license
is required or to licensees in violation of any provision of the
Real Estate Law or any rule or order thereunder. The bill
allows citations to include an administrative penalty of up to
$2,500, and includes a number of additional provisions
pertaining to DRE investigations, escrow disclosures, recording
requirements, and exempted transactions. This bill is pending
in Senate Business, Professions and Economic Development.
SB 706 (Price) of 2011 authorizes the DRE and the Office of Real
Estate Appraisers to enter into a settlement with a licensee or
applicant, instead of the issuance of an accusation or statement
of issues against the licensee or applicant, as specified. The
bill would authorize an administrative law judge to order a
licensee in a disciplinary proceeding to pay the reasonable
costs of investigating and prosecuting the disciplinary case
against the licensee, as specified. Costs recovered would be
deposited in either the Real Estate Fund or the Real Estate
Appraisers Regulation Fund, as specified. This bill is pending
in Senate Business, Professions and Economic Development.
Previous legislation . SB 1737 (Machado) Chapter 286, Statutes
of 2008, allows DRE to ban from real estate-related employment
for up to three years anyone found guilty of violating the Real
Estate Law or any crime related to the qualification or duties
of a licensee. The bill allows DRE to suspend or revoke a
license if the licensee provides an inaccurate opinion of value
for a short sale for specified purposes, and requires notice to
all parties in a real estate transaction when the same person
arranges financing and acts as the buyer's agent, seller's
agent, or both.
AB 1830 (Lieu, Bass, Nava and Wolk) of 2008 authorizes the
Commissioners of DRE, the Department of Financial Institutions,
and the Department of Corporations to suspend or revoke licenses
for violations of specified federal lending laws or regulations,
and defines the term "higher-priced mortgage loan," as
specified. This bill was vetoed.
AB 2454 (Emmerson) Chapter 279, Statutes of 2008, increases the
limit on the amount for which the Recovery Account may be liable
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and deletes obsolete provisions relating to a cause of action
brought prior to January 1, 1980.
AB 840 (Emmerson) Chapter 140, Statutes of 2007, authorizes the
Commissioner to suspend or revoke the license of a real estate
licensee or a mineral, oil and gas licensee, or deny issuance of
the license to an applicant, if the applicant or licensee has
been found guilty of a felony or a crime substantially related
to the qualification, functions, or duties of the real estate
license or the mineral, oil and gas license.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors (sponsor)
Opposition
None on file.
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301