BILL ANALYSIS �
-----------------------------------------------------------------------
|Hearing Date:January 9, 2012 | Bill No:SB 875|
|-----------------------------------+-----------------------------------|
| | |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 875Author:Price
As Amended:January 4, 2012 Fiscal: Yes
SUBJECT: Real estate.
SUMMARY: Authorizes the Department of Real Estate (DRE) to use
additional procedures when denying a license and would also delete an
obsolete provision dealing with the issuing of conditional licenses.
Existing law, the Business and Professions Code (BPC):
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 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 is mandated to enforce the
Real Estate Law. (Business and Professions Code (BPC) commencing
with Section 10000).
2) Requires that before denying, suspending or revoking any license or
license endorsement, the DRE shall proceed as described in the
Administrative Procedures Act (APA).
(BPC 10100)
3) Requires, through general provisions of the Business and
Professions Code that regulatory boards within the Department of
Consumer Affairs (DCA), may deny a license to an applicant by
either: (BPC � 485 ff.)
a) Filing and serving a statement of issues to the applicant as
provided under the APA.
SB 875
Page 2
b) Notifying the applicant, as specified, that the application is
denied stating the reasons for denial and that the applicant has
a right to a hearing as provided in the APA if the applicant
makes a written request within 60 days for a hearing on the
denial of the application.
1) Refers to the renewal and issuance of a conditional license in real
estate. The DRE is no longer authorized to issue a conditional
license. (BPC � 10154)
Existing law, the Government Code:
1) Establishes the Administrative Procedures Act (APA) which provides
the framework by which state agencies may take administrative
action to deny, suspend, or revoke a regulatory license.
(Government Code (GC) � 11500 ff.)
2) The APA provides for a statement of issues, which is a written
statement of the reasons for denial of an application for a license
or privilege, specifying the statutes and rules allegedly violated
and the acts or omissions comprising the alleged violations. (GC
11504)
This bill:
1) Revises and recasts the provisions authorizing the DRE to deny, a
license or license endorsement to instead authorize DRE to deny a
license to an applicant by either:
a) Filing and serving a statement of issues to the applicant as
provided under the APA.
b) Notifying the applicant, as specified, that that the
application is denied stating the reasons for denial and that the
applicant has a right to a hearing as provided in the APA if the
applicant makes a written request within 60 days for a hearing on
the denial of the application.
1) Repeals the obsolete reference to a conditional real estate
license.
SB 875
Page 3
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. The Author is the sponsor of this measure. According to
the Author, this bill is a follow-up measure to last year's SB 706
(Price, Chapter 712, Statutes of 2011) to provide additional
enforcement tools for the DRE to more effectively carry out their
regulatory duties.
According to the Author, as currently provided under the real estate
law, in order to deny an application, the DRE must draft a formal
statement of issues describing in detail the reasons for denying
the license application and requesting a hearing of the statement
of issues before by an administrative law judge (ALJ) under the
Office of Administrative Hearings (OAH). The Author states that
each of the boards and bureaus under the DCA has the ability to
either issue a statement of issues as provided in the APA, or to
issue the applicant a written notice of denial. This bill would
give the DRE the ability to use the same streamlined process to
deny a license that is used by all of the boards within DCA.
According to the Author, the requirement to issue a statement of
issues each and every time the DRE denies a license increases the
department's enforcement costs and delays the overall licensing
processes. This bill would authorize the DRE to issue a written
notice of denial to an applicant who does not meet the criteria for
a real estate license.
Issuing a notice of denial does not reject an applicant's right to a
hearing, since the applicant may request a hearing within 60 days
of being served with the notice of denial. The DRE would then
prepare a statement of issues and proceed under the provisions of
the APA in order for the denial to be heard before an ALJ.
This bill would also repeal an obsolete provision of law referring to
the conditional real estate license. The conditional real estate
license was repealed in 2007 by the passage of AB 2429 (Negrete
McLeod, Chapter 278, Statues of 2007).
2. Background. The DRE is responsible for regulating the practice of
real estate brokers and real estate salespersons in California.
The DRE currently licenses more than 483,000 persons in California,
SB 875
Page 4
with over 20,800 new licenses issued each year, and more than
95,000 licenses renewed annually. Licensed salespersons (333,330)
outnumber licensed brokers (149,920) at a ratio of more than two to
one. The DRE licenses and regulates real estate salespeople,
brokers, and corporations. To implement mandates established by
federal legislation (The Secure and Fair Enforcement Mortgage
Licensing Act, called the SAFE Act), the California Legislature
enacted SB 36 (Calderon, Chapter 160, Statutes of 2009), which
requires that beginning, January 1, 2011, real estate licensees who
wish to act as mortgage loan originators must apply to DRE and
obtain a mortgage loan originator (MLO) license endorsement. The
DRE issued over 22,000 MLO license endorsements prior to the
January 1, 2011 deadline.
The Commissioner serves as the chief executive of the DRE and is
appointed by the Governor and subject to confirmation by the Senate
Committee on Rules. The Commissioner is mandated to enforce the
Real Estate Law in a manner which achieves the maximum protection
for the purchasers of real property and those persons dealing with
real estate licensees.
DRE's Enforcement and Audit sections investigate complaints regarding
alleged violations of the Real Estate Law, the Department's
regulations, and other applicable laws. If a complaint is
supported by evidence, the Commissioner may, after providing an
opportunity for an administrative hearing, revoke, suspend, or deny
a real estate license. The Commissioner may also issue desist and
refrain orders to stop activities that are in violation of these
laws.
3. Related legislation.
SB 706 (Price, Chapter 712, Statutes of 2012): Makes numerous
enforcement enhancements to the Department of Real Estate and the
Office of Real Estate Appraisers; requires licensing boards to post
information about licensees on the Internet, as specified; and
makes updating and conforming changes.
SB 53 (Calderon, Chapter 717, Statutes of 2012): Makes several
changes to California's Real Estate Law to give the Department of
Real Estate (DRE) more enforcement tools with which to crack down
against mortgage fraud and other real estate violations, add
safeguards to protect consumers who seek out services from real
estate licensees, and make technical changes, intended to clean up
certain portions of the Real Estate Law.
SB 875
Page 5
AB 278 (Hill): Authorizes the Commissioner of the DRE 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. This
bill is currently on the Senate Floor in this legislative session.
SUPPORT AND OPPOSITION:
Support:
None received as of January 4, 2012
Opposition:
None received as of January 4, 2012
Consultant:Michael Lynch