BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 278|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 278
Author: Hill (D)
Amended: 6/23/11 in Senate
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 9-0, 6/20/11
AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete
McLeod, Vargas, Walters, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 78-0, 5/23/11 - See last page for vote
SUBJECT : Department of Real Estate: administrative
fines
SOURCE : Author
DIGEST : This bill authorizes the Real Estate
Commissioner to adopt regulations to establish a system for
the issuance of citations and fines of up to $1,000 to
licensees, and to include an order of abatement, if a
licensee of the Department of Real Estate is in violation
of the Real Estate Law.
ANALYSIS :
Existing law, the Real Estate Law:
1. Establishes in the Business, Transportation and Housing
CONTINUED
AB 278
Page
2
Agency, the Department of Real Estate (DRE), the chief
officer of which is the Real Estate Commissioner
(Commissioner) and specifies that the Commissioner,
through the DRE, is responsible for the regulation of
real estate transactions and licensure of real estate
agents, brokers and salespersons.
2. Provides that the Commissioner shall enforce the
provisions of the Real Estate Law and has full power to
regulate and control the issuance and revocations, both
temporary and permanent, of all licenses to be issued,
and to perform all other acts and duties provided under
the Real Estate Law. (Business and Professions Code
(BPC) Section 10071)
3. Provides that the Commissioner may suspend or revoke a
real estate license, or deny the issuance of a license
to an applicant, who has violated any of the provisions
of the Real Estate Law as specified, or other laws as
specified, or may suspend or revoke the license of a
corporation, or deny the issuance of a license to a
corporation, if an officer, director or person owning 10
percent or more of the corporation's stock has violated
any of those provisions as specified. (BPC Section
10177)
4. Makes any person, including officers, directors, agents
or employees of corporations, who willfully violates or
knowingly participates in the violation of the Real
Estate Law shall be guilty of a misdemeanor punishable
by a fine not exceeding $10,000, or by imprisonment in
the county jail not exceeding six months, or by a fine
and imprisonment. (BPC Section 10185)
5. Provides that the Attorney General (AG) shall render to
the Commissioner opinions upon all questions of law
relating to the construction or interpretation of the
Real Estate Law, or arising in the administration
thereof that may be submitted to him by the
Commissioner. The AG shall also act as the attorney for
the Commission in all actions and proceedings brought by
or against him under or pursuant to any provision of the
Real Estate Law. (BPC Section 10079)
CONTINUED
AB 278
Page
3
6. Provides that any board, bureau, or commission within
the Department of Consumer Affairs (DCA) may establish,
by regulation, a system for the issuance to a licensee
of a citation which may contain an order of abatement or
an order to pay an administrative fine assessed by the
board, bureau, or commission where the licensee is in
violation of the applicable licensing act or any
regulation adopted pursuant thereto. Specifies the
procedures to be followed in both the issuance of the
citation and fine, and appeal of the citation or fine
assessment and provides that the administrative fine
assessed may not exceed $5,000. (This citation and fine
authority, however, does not prevent a board, bureau, or
commission from establishing by statute their own
citation and fine authority, as long as it is consistent
with the aforementioned procedures.) (BPC Section
125.9)
7. Provides that any board, bureau, or commission within
the DCA may, in addition to the administrative citation
system authorized by Section 125.9 (as against
licensees, Item #6, above), also establish, by
regulation, a similar system for issuance of an
administrative citation to an unlicensed person who is
acting in the capacity of a licensee under the
jurisdiction of that board, bureau, or commission. The
administrative citation system shall meet the
requirements of Section 125.9 above. However, the
establishment of an administrative citation system for
unlicensed activity does not preclude the use of other
enforcement statutes for unlicensed activities at the
discretion of the board, bureau, or commission. (BPC
Section 148)
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 the law, and to issue such citations
except where violations have resulted in serious
financial loss to the member of the public. A citation
may contain an order of abatement or an order to pay an
administrative fine.
CONTINUED
AB 278
Page
4
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 $2,500 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 appeal process for contested
violations, which provides that a hearing may be
requested by written notice to the Commissioner
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 DRE real estate bulletin.
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
CONTINUED
AB 278
Page
5
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.
Background
In 1986, SB 2335 (Montoya), Chapter 1379, Statutes of 1986,
established a uniform citation and fine system for the DCA,
and for all the boards, bureaus, committees and the
commission under the DCA. The amount of the fines at that
time was limited to $2,500. (The limitation on fines was
raised to $5,000 in 2004.) According to the DCA at the
time, numerous agencies are required to initiate formal
disciplinary action, which is extremely costly to the
agency as well as the licensee, or issue a letter of
warning. Since the majority of complaints received by most
agencies are "minor" violations which normally would not
warrant formal disciplinary action, the agency is only able
to issue a letter of warning. Although a letter of warning
may have some educational value, in many cases it is
ineffectual. According the DRE, the agencies should have
stronger sanctions available to them to more effectively
correct and educate licensees who choose to violate the
law. Typically, these types of sanctions will deter
further violations and avoid the necessity for formal
disciplinary expenses following repeated warnings.
Prior Legislation
SB 1737 (Machado), Chapter 286, Statutes of 2008, allowed
CONTINUED
AB 278
Page
6
the 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 allowed the DRE to suspend
or revoke a license if the licensee provides an inaccurate
opinion of value for a short sale for specified purposes,
and required 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), 2007-08 Session,
authorized the Commissioners of the 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 defined the term
"higher-priced mortgage loan," as specified. The bill was
vetoed by the Governor.
AB 2454 (Emmerson), Chapter 279, Statutes of 2008,
increased the limit on the amount for which the Recovery
Account may be liable and deleted obsolete provisions
relating to a cause of action brought prior to January 1,
1980.
AB 840 (Emmerson), Chapter 140, Statutes of 2007,
authorized 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/12/11)
California Association of Realtors
ARGUMENTS IN SUPPORT : The author states, "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
CONTINUED
AB 278
Page
7
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. AB 278 will allow the Commissioner to
discipline minor transgressions while focusing valuable
investigative resources on more serious violations."
ASSEMBLY FLOOR : 78-0, 5/23/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, Perea, V. Manuel P�rez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. P�rez
NO VOTE RECORDED: Cook, Gorell
JJA:mw 7/12/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED