BILL ANALYSIS �
-----------------------------------------------------------------------
|Hearing Date:June 18, 2012 |Bill No:AB |
| |1718 |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 1718Author:Hill
As Introduced: February 16, 2012Fiscal: Yes
SUBJECT: Real estate broker licenses.
SUMMARY: Repeals and recasts existing requirements that must be met
prior to the licensure of real estate brokers, to provide that the
Real Estate Commissioner may grant an original real estate broker
license to an applicant who (1) has passed the real estate broker
license examination, (2) satisfied other specified requirements, (3)
either held a real estate salesperson's license, or (4) holds an
active membership in the State Bar of California or has graduated
from a 4-year university with a specialization in real estate.
Existing law:
1) Provides for the licensure and regulation of more than 483,000
real estate brokers, real estate salespersons, and more than
22,000 mortgage loan originator license endorsements by the
Department Real Estate (DRE) in the Business, Transportation and
Housing Agency (BT&H). The Real Estate Commissioner
(Commissioner), who serves as the chief executive of the DRE, is
appointed by the Governor, subject to Senate confirmation. The
Commissioner, through the Department, is responsible for the
regulation of real estate transactions and licensure of real
estate agents, brokers and appraisers.
(Business and Professions Code (BPC) commencing with Section
10000)
2) Defines "real estate broker" as a person who, for compensation or
in expectation of compensation, does or negotiates to do one or
more of the following acts for another or others: (BPC � 10131)
AB 1718
Page 2
a) Sells or offers to sell, buys or offers to buy, solicits
prospective sellers or purchasers, solicits or obtains listings
of, or negotiates the purchase, sale or exchange of real
property or a business opportunity.
b) Leases or rents or offers to lease or rent, or places for
rent, or solicits listings of places for rent, or solicits for
prospective tenants, or negotiates the sale, purchase or
exchanges of leases on real property, or on a business
opportunity, or collects rents from real property, or
improvements from business opportunities.
c) Assists or offers to assist in filing an application for the
purchase or lease of, or in locating or entering upon, lands
owned by the state or federal government.
d) Solicits borrowers or lenders, negotiates loans or collects
payments or performs services for borrowers or lenders in
connection with loans secured directly or collaterally by liens
on real property or on a business opportunity.
e) Sells or offers to sell, buys or offers to buy, exchanges or
offers to exchange a real property sales contract, or a
promissory note secured directly or collaterally by a lien on
real property or on a business opportunity, and performs
services for the holders thereof.
1) Provides that the following conditions must be met for
issuance of a real estate broker's license: (a) the
applicant must hold a real estate salesman's license for at
least 2 years and be eligible for renewal of that license
within 5 years of the application for a broker's license; and
(b) must be actively engaged in the business of real estate
salesperson during that time. (BPC � 10150.6)
2) Provides an exception to the above conditions, if the applicant
files a written petition to the DRE setting forth his or her
qualifications and experience to include at least the equivalent
of two years' general real estate experience or graduation from a
4-year college or university course which included specialization
in real estate. (BPC � 10150.6)
3) Allows for the immediate issuance of a broker's license if either
of the conditions above in item # (3) has been met and the
applicant passes the broker's license examination.
(BPC � 10150.6)
AB 1718
Page 3
4) Provides that all real estate licenses issued by the Commissioner
shall be for a period of four years. Applicants shall qualify in
the appropriate examination and satisfy all other requirements
prior to issuance of the license. (BPC � 10153.6)
This bill:
1) Revises and recasts Items 3, 4 and 5 from above.
2) Authorizes the commissioner to treat a degree from a 4-year
college or university, with a major or minor in real estate, as
the equivalent of 2 years' general real estate experience.
FISCAL EFFECT: According to the Assembly Appropriations Committee,
there is no significant cost associated with this legislation.
COMMENTS:
1. Purpose. This bill is sponsored by the California Association of
Realtors (Sponsor). The Sponsor states:
"Unqualified individuals lacking sufficient experience are able
to get their real estate broker's license by exploiting a
loophole in current law that permits an unrelated college degree
to be substituted for actual experience in real estate.
"The ability of the Real Estate Commissioner to waive the
experience criteria in exchange for a four-year degree has
evolved into essentially a defacto policy wherein all such
requests are approved as opposed to reviewing them on a
case-by-case basis. As such, individuals can substitute any
four-year degree, e.g., English, physical education, chemistry,
etc., for practical real world experience.
"Real estate brokers not only engage directly in real estate
transactions, but also supervise, hire, oversee and review the
work of other sales people. Coupled with the increasing
complexity and intricate details of the industry, real world
experience is increasingly important. Barring that, an advanced
degree with an emphasis on real estate will better serve the
public and provide an important safeguard for consumers."
2. Background. Current law generally requires applicants for a real
estate broker's license to have, among other things, two years
AB 1718
Page 4
full-time experience in the real estate business. It also
contains alternative ways to demonstrate the experience
qualification by meeting any of the following:
a) A finding of equivalent experience and education by the
Commissioner;
b) Active membership in the State Bar;
c) A degree or "course" of study from a four-year college
which "included a specialization in real estate."
This bill revises the alternative path to licensure as a real
estate by requiring a "major or minor concentration in real
estate" rather than a "specialization" in real estate.
The University of California states that it does not offer
either a major or minor concentration in real estate.
However, the California State University system does offer a
concentration in real estate as part of it bachelor's degree
in Business Administration at the East Bay, Fresno, Los
Angeles, Northridge, Pomona, Sacramento, San Bernardino, and
San Diego campuses.
1. Related legislation.
SB 226 (Negrete McCloud, vetoed by the Governor in 2007) was
substantially the same as this measure. This bill would have
repealed and recast existing law that provides for conditions that
must be met prior to the licensure of real estate brokers, allowed
the Real Estate Commissioner to require a licensee to display his
or license number on consumer first contact materials, and
provided that the Real Estate Commissioner may grant an original
real estate broker's license to an applicant who (1) has passed
the real estate broker license examination, (2) satisfied other
specified requirements, (3) either held a real estate
salesperson's license and satisfied other requirements as
specified, or (4) holds an active membership in the State Bar of
California.
AB 1963 (Leslie, vetoed by the Governor in 2006) would have
repealed in its entirety the provision of law that allows a person
to qualify for a real estate broker's license by using a 4-year
college degree and 2 years of general real estate experience as a
substitute for
2 years of experience as a real estate salesperson.
AB 1718
Page 5
SB 875 (Price, 2012), currently in the Assembly Business and
Profession Committee, requires the DRE to issue a statement of
denial when denying a license; deletes an obsolete provision
dealing with conditional licenses; requires the Commissioner to
require a person submitting a petition for a license reinstatement
or a reduction of a penalty to submit his or her fingerprints with
the petition. This bill gives the Commissioner additional tools
to discipline licensees and specifies that a person who is
suspended or barred from a position of employment, management, or
control is also barred from participation in an examination for
licensure.
SB 706 (Price, Chapter 712, Statutes of 2012) made numerous
enforcement enhancements to the DRE and the Office of Real Estate
Appraisers; required licensing boards to post information about
licensees on the Internet; and made updating and conforming
changes.
SB 53 (Calderon, Chapter 717, Statutes of 2012) made several
changes to the Real Estate Law to give DRE more enforcement tools
to combat mortgage fraud and other real estate violations;
granted authority to DRE to issue citations and/or citations and
fines, capped at $2,500 per violation, to licensees found to have
violated provisions of the Real Estate Law; added safeguards to
protect consumers who seek services from real estate licensees,
and made technical changes to clean up certain portions of the
Real Estate Law.
AB 278 (Hill, 2011) authorized the Commissioner to issue citations
to unlicensed persons 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. Authorized citations to include an order to correct
the violation or to include an administrative penalty of up to
$2,500, and required any fines collected to be credited to the
Recovery Account and made available for specified purposes upon
appropriation by the Legislature. The bill has been referred to a
Conference Committee for resolution.
AB 840 (Emmerson, Chapter 140, Statutes of 2007) authorizes the
Commissioner to suspend or revoke the license of a real estate
licensee, 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
AB 1718
Page 6
the mineral, oil and gas license.
SB 223 (Negrete McLeod, Chapter 278, Statutes of 2006) amended the
section of law that pertains to real estate salespersons by
eliminating the provision for a conditional license after October
1, 2007 and requiring all applicants for the real estate
salesperson's license to complete three specified courses and pass
the examination before obtaining the license.
2. Arguments in Support. In sponsoring the bill, The California
Association of Realtors states, "AB 1718 will close an important
loophole in the experience that is required of an applicant for a
real estate broker's license. Existing law allows an exception to
the experience requirement for a college degree "which included a
specialization in real estate." Over the years, the so-called
"degree broker" exception has been interpreted to apply to any
degree, and the exception has swallowed the rule. AB 1718 will
clarify that the degree claimed as an exception must actually
include a major or minor in real estate."
3. Policy Concerns. The education exemption for brokers has been in
place for over thirty years. In that time, no evidence has been
presented which shows that brokers who substitute the experience
requirement for a baccalaureate degree pose any greater risk to
the public than individuals who have a special concentration in
real estate. Education access for those wishing to specialize in
real estate is extremely restricted in California's public
colleges. The University of California does not offer a major or
minor in real estate while the California State University system
offers specialized courses at only 8 of their
23 campuses. If individuals desire to be brokers after completing
their 4-year degree, but were unable to afford a private
institution in which the degree was offered or was not able to
attend one of the eight CSU institutions, it is in the best
interest of the state to delay or prevent aspiring real estate
brokers from practicing in their field by requiring them to
instead have the 2-years of real estate experience? The DRE
recognizes this problem and therefore does not currently require
coursework that would amount to a major or minor degree in real
estate.
Narrowing the exemption can also increase barriers for brokers
wishing to open small businesses, impeding job creation and
economic growth. This can occur by severely limiting the
exemption for 4-year general degrees and narrowing the base of
potential applicants. In California's current economic crisis, is
AB 1718
Page 7
it in the best interest of the state to inhibit job creation?
Governor Schwarzenegger's veto message of a similar bill (AB 1963,
Leslie, 2006) stated similar concerns, "Although the Department of
Real Estate has seen a significant increase in the real estate
licensee population, it does not appear that newly licensed
'degree' brokers pose any more of a risk to the public compared to
those brokers who qualified for licensure based on experience.
Given this fact, it appears placing further impediments on those
seeking to start a business and work independently is not
warranted."
SUPPORT AND OPPOSITION:
Support:
The California Association of Realtors
Opposition:
None received as of June 13, 2012
Consultant: Michael Lynch