BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 278|
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THIRD READING
Bill No: AB 278
Author: Hill (D)
Amended: 9/1/11 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 Commissioner of the
Department of Real Estate to issue citations to unlicensed
persons the Commissioner believes to be engaging in
activities for which a real estate license is required or
to licensees who are in violation of any provision of the
Real Estate Law or any rule or order thereunder.
Authorizes citations to include an order to correct the
violation or to include an administrative penalty of up to
$2,500, and requires any fines collected to be credited to
the Recovery Account and made available for specified
purposes upon appropriation by the Legislature.
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Assembly Amendments revise and recast the bill with a
similar intent.
ANALYSIS :
Existing law, the Real Estate Law:
1. Establishes in the Business, Transportation and Housing
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
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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)
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:
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1. Authorizes the Commissioner of DRE (Commissioner) to
issue citations, in writing, to unlicensed persons the
commissioner believes to be engaging in activities for
which a real estate license is required or to licensees
who are in violation of any provision of the Real Estate
Law or any rule or order thereunder.
2. Authorizes citations to include an order to correct the
violation or to include an administrative penalty of up
to $2,500, and requires any fines collected to be
credited to the Recovery Account and made available for
specified purposes upon appropriation by the
Legislature.
3. Requires the Commissioner give due consideration to the
appropriateness of the amount of the fine with respect
to factors such as the gravity of the violation, the
good faith of the person cited, and the history of
previous violations.
4. Specifies a citation issued and a fine assessed against
and paid by a licensee shall be in lieu of other
administrative discipline by the Commissioner for the
offense or offenses cited.
5. Specifies nothing in the bill prevents the Commissioner
from issuing an order to desist and refrain from
engaging in a specific business activity or activities
or an order to suspend all business operations to a
person who is engaged in or has engaged in continued or
repeated violations. In any of these circumstances, the
sanctions authorized shall be separate from, and in
addition to, all other administrative, civil, or
criminal penalties.
6. Provides if person cited fails to request a hearing to
contest the citation within 30 days from the receipt of
the citation, the citation and fine shall be deemed
final, but not be reported as disciplinary action taken
by the department.
7. Provides that after the exhaustion of the review
procedures provided for this bill, the Commissioner may
apply to the appropriate superior court for a judgment
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in the amount of any administrative penalty imposed and
an order compelling the cited person to comply with the
order of the Commissioner. Provides the application,
which shall include a certified copy of the final order
of the Commissioner, constitutes a sufficient showing to
warrant the issuance of the judgment and order.
8. Provides that failure of any person to comply with the
terms of a citation or pay a fine assessed, within a
reasonable period specified by the Commissioner, shall
subject that person to disciplinary action by the
commissioner.
9. Provides that in no event may a license be renewed if an
unpaid fine remains outstanding or the terms of a
citation have not been complied with.
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
the DRE to ban from real estate-related employment for up
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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 9/2/11)
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
for the issuance of a citation and a fine for relatively
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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 9/2/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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