BILL ANALYSIS �
SB 875
Page 1
Date of Hearing: June 12, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 875 (Price) - As Amended: June 6, 2012
SENATE VOTE : 37-0
SUBJECT : Real estate licensees.
SUMMARY : Allows the Department of Real Estate Commissioner
(Commissioner ) to bar individuals from licensure and licensure
examinations for specified violations, and makes other changes
to Real Estate Law. Specifically, this bill :
1)Allows the Commissioner to bar from participation in an
examination for licensure a real estate salesperson or real
estate broker, or specified unlicensed persons, if the
Commissioner finds either of the following:
a) That the suspension or bar is in the public interest and
that the person has committed or caused a violation of
California Real Estate Law or rule or order of the
Commissioner, which violation was either known or should
have been known by the person committing or causing it or
has caused material damage to the public; or,
b) That the person has been convicted of or pleaded nolo
contendere to any crime, or has been held liable in any
civil action by final judgment, or any administrative
judgment by any public agency, if that crime or civil or
administrative judgment involved any offense involving
dishonesty, fraud, or deceit, or any other offense
reasonably related to the qualifications, functions, or
duties of a person engaged in the real estate business in
accordance with the provisions of this division.
2)Provides that persons suspended or barred from a position of
employment, management, or control under existing law are also
barred from participating in examinations for licensure.
3)Requires the Department of Real Estate (DRE), upon denial of
an application for a license or a license endorsement, to
proceed under statutes governing the denial, suspension and
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revocation of licenses issued by the boards and bureaus within
the Department of Consumer Affairs (DCA), which require a
statement of issues or a notification of denial, as specified.
4)Requires the Commissioner to require a person who submits a
petition for reinstatement of a license or reduction of a
penalty to submit his or her fingerprints with the petition.
5)Provides that no person shall cheat on, subvert, or attempt to
subvert a licensing examination given by the DRE. Cheating
on, subverting, or attempting to subvert a licensing
examination includes, but is not limited to, engaging in,
soliciting, or procuring any of the following:
a) Any communication between one or more examinees and any
person, other than a proctor or examination official, while
the examination is in progress;
b) Copying answers from another examinee or permitting
one's answers to be copied by another examinee;
c) The taking of all or a part of the examination by a
person other than the applicant;
d) Removing from the examination room any examination
materials without authorization;
e) The unauthorized reproduction by any means of any
portion of the actual licensing examination;
f) Aiding by any means the unauthorized reproduction of any
portion of the actual licensing examination;
g) Possession or use at any time during the examination or
while the examinee is on the examination premises of any
device, material, or document that is not expressly
authorized for use by examinees during the examination,
including, but not limited to, notes, crib sheets,
textbooks, and electronic devices;
h) Failure to follow any examination instruction or rule
related to examination security; or,
i) Providing false, fraudulent, or materially misleading
information concerning education, experience, or other
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qualifications as part of, or in support of, any
application for admission to an examination.
6)Allows the Commissioner to bar any candidate who willfully
cheats on, subverts, or attempts to subvert an examination
from taking any license examination and from holding an active
real estate license under any provision of the Business and
Professions code for a period of up to three years.
7)Repeals provisions relating to conditional licenses (which the
DRE no longer issues).
8)Clarifies grounds for disciplinary action against a licensee
for acting as a dual agent without the knowledge and written
consent of all parties.
9)Clarifies that an applicant for a Mortgage Loan Originator
(MLO) endorsement may fail the examination only three
consecutive times before having to wait six months before
re-taking the exam.
10)Allows licensees with an MLO endorsement who are called to
active military duty to extend the timeframe in which they
must complete continuing education (CE) requirements.
11)Makes conforming and technical changes.
EXISTING LAW
1)Provides for the licensure and regulation of real estate
brokers and real estate salespersons by the DRE, and requires
licensees to pass a written examination prior to licensure.
2)Authorizes the Commissioner, after appropriate notice and
opportunity for a hearing, by order, to suspend, or bar from
any position of employment, management, or control, for a
period not exceeding 36 months, a real estate salesperson or
real estate broker, or specified unlicensed persons, if the
Commissioner finds either of the following:
a) That the suspension or bar is in the public interest and
that the person has committed or caused a violation of this
division or rule or order of the commissioner, which
violation was either known or should have been known by the
person committing or causing it or has caused material
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damage to the public; or,
b) That the person has been convicted of or pleaded nolo
contendere to any crime, or has been held liable in any
civil action by final judgment, or any administrative
judgment by any public agency, if that crime or civil or
administrative judgment involved any offense involving
dishonesty, fraud, or deceit, or any other offense
reasonably related to the qualifications, functions, or
duties of a person engaged in the real estate business in
accordance with the provisions of this division.
3)Requires the DRE to follow administrative adjudication
provisions under the Administrative Procedure Act, including
the filing of a statement of issues, before denying any
license or license endorsement.
4)Authorizes the Commissioner to require any proof he or she may
deem advisable concerning the honesty and truthfulness of an
applicant for a real estate license or license examination
before authorizing the issuance of a real estate license.
5)Authorizes a person whose license has been revoked or
suspended to petition the DRE for reinstatement of the license
or reduction of a penalty, as specified.
6)Requires the Commissioner to require every original applicant
to be fingerprinted prior to issuing a license.
7)Includes provisions relating to conditional licenses.
8)Provides grounds for disciplinary action against a licensee
for acting as a dual agent without the knowledge and consent
of all parties.
9)Provides that an applicant for a MLO endorsement may retake a
required test up to three consecutive times before having to
wait six months before taking the test again.
10)Allows licensees who are called to active military duty to
extend the timeframe in which they must complete CE
requirements.
FISCAL EFFECT : Unknown
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COMMENTS :
Purpose of this bill . According to the author, "The requirement
to issue a formal 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. A general provision of the Business and Professions
Code authorizes all of the regulatory boards and bureaus within
DCA to deny a license to an applicant by issuing a notice of
denial. The notice of denial must meet certain criteria,
including providing for the applicant to request a hearing on
the denial before the Office of Administrative Hearings. This
bill would grant the DRE that same authority.
"Existing law requires real estate license applicants to be
fingerprinted, which allows the DRE to check state and federal
criminal databases for arrests and convictions associated with
the applicant. Once licensed, subsequent arrests notices of a
licensee are sent to the DRE by the California Department of
Justice. These subsequent arrest notices only include
information from California law enforcement/courts as the
federal fingerprint system lacks the capability to notice
agencies of subsequent arrests of a person in the federal
fingerprint database.
"Requiring the re-fingerprinting of a petitioner will give the
DRE a complete history/picture of a petitioner's arrest history
it does not now have. The federal arrest/conviction information
is important in determining whether to grant an applicant's
request for license reinstatement or to have restrictions
removed.
"Various provisions of existing law allow various licensing
agencies/law enforcement agencies to take action against a
person caught subverting a licensing exam. There is no such
comparable provision contained (in) the Real Estate Law that
expressly allows the DRE to keep a person who has subverted a
real estate exam from taking the exam again and getting
licensed. This measure would allow the DRE to keep a cheater
from taking the real estate exam for up to three years.
"The DRE no longer issues conditional licenses; therefore,
(current law referring to conditional licenses) is obsolete.
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"Separate provisions in Business and Professions Code and Civil
Code require real estate licensees to provide written
disclosures to the principals when the licensee is acting as a
dual agent in a transaction. However, the grounds for
disciplinary action against a licensee for acting as (a) dual
agent is acting 'without the knowledge or consent' of all the
parties. This (bill) would clarify that a licensee can be
disciplined for acting as a dual agent 'without the knowledge
and written consent' of all parties, which will make the grounds
for disciplinary action coincide with the disclosure
requirements.
"Federal law allows an applicant for an MLO endorsement to fail
the exam three times before having to wait six months to take
the MLO exam again. California's Real Estate Law implies that
an applicant can fail the MLO exam four consecutive times before
having to wait six months to take the exam again. This (bill)
would clarify existing law (and ensure conformity with federal
law) by clarifying that an MLO applicant who fails the exam
three consecutive times must wait six months before taking the
exam again.
"Existing law allows real estate licensees called to active
military duty to extend the statutory timeframe to complete the
required CE requirements to renew his or her license. This
(bill) would extend this accommodation to licensees who also
have MLO endorsements."
Background . DRE licenses and regulates approximately 426,000
real estate professionals in California, including salespersons
and brokers, including those with MLO endorsements. The
Commissioner serves as the chief executive of the DRE and is
mandated to enforce the Real Estate Law in a manner that
achieves the maximum protection for the purchasers of real
property and those persons dealing with real estate licensees.
Related legislation .
AB 278 (Hill) of 2011 authorizes the Commissioner to issue
citations, including an order to correct the violation or an
administrative penalty of up to $2,500, to unlicensed persons
believed 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
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thereunder. This bill is pending in Conference Committee.
AB 1718 (Hill) of 2012 deletes the Commissioner's authority to
grant an original real estate broker's license to an applicant
that has graduated from a four-year college or university course
that included specialization in real estate in lieu of two years
of general real estate experience, and instead authorizes the
Commissioner to treat a degree from a four-year college or
university, which course of study included a major or minor in
real estate, as the equivalent of two years' general real estate
experience. This bill is pending in Senate Business,
Professions and Economic Development Committee.
Previous legislation .
SB 53 (Ron Calderon and Vargas), Chapter 717, Statutes of 2011,
makes several changes to Real Estate Law to give DRE more
enforcement tools to take action against mortgage fraud and
other real estate violations, add safeguards to protect
consumers who seek services from real estate licensees, and make
technical changes to portions of the Real Estate Law.
SB 706 (Price), Chapter 712, Statutes of 2011, makes numerous
enforcement enhancements to the DRE and the Office of Real
Estate Appraisers, requires specified licensing boards to post
information about licensees on the Internet, and makes updating
and conforming changes.
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.
SB 1054 (Machado) of 2008 contains provisions identical to SB
1737 (Machado). This bill was held in Assembly Banking and
Finance Committee.
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
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for violations of specified federal lending laws or regulations,
and defines the term "higher-priced mortgage loan," as
specified. This bill was vetoed.
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.
AB 2429 (Negrete McLeod) Chapter 278, Statutes of 2006, repeals
the authority for the DRE to issue conditional licenses.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301