BILL ANALYSIS �
-----------------------------------------------------------------------
|Hearing Date:June 16, 2014 |Bill No:AB |
| |2018 |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: AB 2018Author:Bocanegra
As Amended: June 9, 2014Fiscal: Yes
SUBJECT: Real estate licensees: fictitious business names.
SUMMARY: Revises the requirements for the use of "fictitious business
names" by real estate licensees to additionally authorize the use of
"team names" subject to specified requirements; specifies that the
bill's provisions shall not be construed to limit or change a real
estate broker's duties to supervise a salesperson.
Existing law:
1)Licenses and regulates real estate brokers, real estate salespersons,
and mortgage loan originator license endorsements by the Bureau of
Real Estate (BRE) in the Department of Consumer Affairs (DCA).
(Business and Professions Code (BPC) � 10000 et seq.)
2)Pursuant to the Governor's Reorganization Plan No. 2 of 2012 (GRP 2),
reorganized, revised, consolidated and eliminated numerous entities
of California state government, including transferring the
regulation of real estate licensees, effective July 1, 2013, from
the Department of Real Estate within the Business, Transportation,
and Housing Agency to the BRE in the DCA.
3)Requires a corporate broker licensee to designate an officer who is a
broker who shall be responsible for the supervision and control of
the activities of the officers, employees and salespersons, as
necessary, to secure full compliance with the licensed practice
under the law. (BPC �� 10211, 10159.2)
4)Authorizes the BRE to take disciplinary action against a broker who
fails to exercise reasonable supervision over the activities of
AB 2018
Page 2
salespersons, or the real estate corporation. (BPC � 10177 (h))
5)Requires every applicant for a real estate license who desires the
license to be issued under a fictitious business name to file with
the application a certified copy of the fictitious business name
statement filed with the county clerk. (BPC � 10159.5)
6)Provides that "solicitation materials intended to be the first point
of contact with consumers," includes business cards, stationery,
advertising fliers, and other materials designed to solicit the
creation of a professional relationship between the licensee and a
consumer, and excludes an advertisement in print or electronic media
and "for sale" signs. (BPC � 10140.6.)
7)Authorizes the BRE to take disciplinary action to suspend or revoke a
real estate licensee, as specified (BPC � 10165)
8)Makes willful violation of the Real Estate Law a misdemeanor (crime).
(BPC � 10185)
This bill:
1)Provides, for fictitious business name purposes, that a supervising
broker may, by contract, permit a salesperson to:
a) File an application with a county clerk to obtain a fictitious
business name.
b) Submit an application to BRE, signed by the supervising
broker, requesting the approval of the use of a county-approved
fictitious business name which shall be identified with the
broker's license number.
c) Pay the fees associated with filing an application with the
county or with the BRE to obtain or use a fictitious business
name.
d) Maintain ownership of a fictitious business name, as defined,
which may be used subject to the control of a supervising broker.
2)Specifies that a salesperson using a fictitious business name under
the terms provided above, shall use that name only as permitted by
the supervising broker.
3)Authorizes a person applying to a county for a fictitious business
name under the terms above to file the application in the county or
AB 2018
Page 3
counties where the fictitious business name will be used.
4)Requires all marketing and advertising materials in print or
electronic media, "for sale" signage, using a fictitious business
name to include the supervising broker's identity in a manner
equally as prominent as the fictitious business name.
5)Requires advertising, including print or electronic media and "for
sale" signage, containing a fictitious business name to include the
salesperson's name and license number.
6)Establishes certain advertising requirements for the use of a "team
name" including:
a) Advertising that contains a team name, including print or
electronic media and "for sale" signage, must include the
licensee's name and license number.
b) The supervising broker's identity must be displayed as
prominently as the team name in all advertising.
c) Prohibits advertising material from containing terms that
imply the existence of a real estate entity independent of the
supervising broker.
7)Establishes certain definitions for purposes of the use of fictitious
business names by real estate licensees, including:
a) "Fictitious business name" means a professional identity or
brand name under which licensed real estate activity is conducted
and is subject to approval by the BRE as specified.
b) "Ownership of a fictitious business name" means the right to
use, renew, and control the use of a fictitious business name
obtained, as specified.
c) "Supervising broker" means a designated corporate officer
responsible for exercising control of corporate real estate
activities, or a licensee subject to discipline for failure to
supervise activity requiring a real estate license. The required
supervision of a salesperson is limited to regulatory compliance
and consumer protection.
d) "Team name" means a professional identity or brand name used
by a salesperson or broker associate. A team name does not
constitute a fictitious business name if all of the following
AB 2018
Page 4
conditions are satisfied:
i. The name is used by two or more real estate licensees.
ii. The name includes a licensee's surname
in conjunction with the term "associates," "group," or "team."
iii. The name does not include terms that
imply the existence of a real estate entity independent of a
supervising broker.
8)Specifies that the above provisions shall not be construed to limit
or change a real estate broker's duties to supervise a salesperson.
9)Specifies that a violation of the provisions of the bill is not
punishable as a misdemeanor, but is subject to disciplinary action
to suspend or revoke a real estate license, as specified.
FISCAL EFFECT: Unknown. The latest amendments to this bill have
caused Legislative Counsel to key the bill "fiscal."
COMMENTS:
1.Purpose. This bill is sponsored by the Author to clarify that a real
estate "team name" is not a "fictitious business name" if the name
is used by two or more real estate licensees, so long as any
marketing or advertising materials utilizing the team name include
the licensees' real estate license numbers and the name of the
employing broker.
The Author states that the California Association of Realtors (CAR)
has provided technical assistance in writing this legislation. In
discussing the latest amendments to this bill, CAR indicates that it
has worked closely with the BRE in drafting the amendments.
2.Background.
a) BRE Guidance on the "Use of Team Names." Existing real estate
law defines a fictitious business name as any name that is not
the licensee's own name. The BRE in its Spring 2013 Real Estate
Bulletin provided for a stricter standard for what constitutes a
fictitious business name for those working under a real estate
AB 2018
Page 5
license.
The article addressed numerous questions received by BRE regarding
the use of use of "team names" in licensed real estate practice.
Using team names in advertisements and marketing materials has
become a popular and general practice among real estate
businesses. BRE noted examples of team names such as "The Smith
Team," "The Brown and Smith Team", or "The Robert Brown and Sarah
Smith Team," "The John Doe Group, John Doe & Associates", and
indicated that such names are often included on "for sale" signs,
billboards, business cards, promotional flyers, emails, and
brochures. BRE noted that although "team names" are commonly
being used by licensees for real estate advertising and marketing
purposes, it should be noted that team names are almost always a
fictitious business name and therefore subject to the applicable
state laws, rules and regulations, regarding the use of
fictitious names.
The BRE article further pointed out that BRE regulations generally
prohibit the approval of a fictitious business name that includes
the name of a salesperson employed by a broker unless the
employing broker's name is also included in the fictitious
business name. With the common practice of using "team names"
this has complicated the approval of "fictitious business names."
This bill has been introduced to codify the use of "team names,"
and provide that under specified circumstances "team names" are
not considered to be "fictitious business names." CAR indicates
that working with BRE, the current provisions in the bill allow
the use of team names, but allow consumers to identify and look
up the licensees who actually make up the team.
b) Fictitious Business Names. A fictitious business name is any
name under which an individual transacts business in this state,
other than his or her legal name. The use of a fictitious
business name requires filing a fictitious business statement,
"doing business as," with the county clerk's office where the
business is located. The fee for filing a fictitious business
name statement is $10 for the first fictitious business name and
owner, and $2 for each additional fictitious business name or
owner filed on the same statement.
The fictitious business statement is intended to provide the public
with a means to learn the identities of individuals doing
business under the fictitious name in case a consumer needs to
contact the owners of a business to seek help with a problem, or
AB 2018
Page 6
to report owners or licensees to the authorities. This bill is
intended to change the requirements for when an advertised
business name is "fictitious" and thereby reduce the filing
requirements, on the theory that the criteria provided by this
bill (first and last names, license numbers, names of employing
broker, etc.) should give consumers enough information to
identify responsible individuals if there is a problem or
complaint.
3.Related Legislation. AB 2540 (Dababneh, 2014) requires real estate
brokers and real estate salespersons to supply the BRE with valid
contact information, including a current mailing address, email
address, and telephone number, as part of their examination and
license applications and to inform the BRE of any change in the
broker or salesperson's contact information within 30 days.
( Status : SB 2018 is set for hearing in Senate Business, Professions
and Economic Development Committee on June 16, 2014.)
SB 706 (Price, Chapter 712, Statutes of 2011) 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 676 (Block, Chapter 349, Statutes of 2013) authorizes BRE to suspend
or revoke a real estate license if the licensee knowingly destroys,
alters, conceals, mutilates, or falsifies any of the books,
accounts, or records that are required to be maintained or are
sought by the BRE, as specified.
SB 269 (Hill, Chapter 436, Statutes of 2013) expands the enforcement
powers of the BRE over prepaid rental listing services licensees,
authorizes consumers harmed by providers to seek compensation from
the Consumer Recovery Account, increases application fees for the
prepaid rental listing service license to better fund the Account.
4.Arguments in Support. Writing in support of the bill the California
Association of Realtors (CAR) states that current law defines a
fictitious business name as any name that is not your own. In its
Spring 2013 Real Estate Bulletin the BRE announced a stricter
standard for what constitutes a fictitious business name for those
working under a real estate license. The BRE article suggests that
salespersons are only permitted to work under "team" names if the
names were bona fide fictitious names that are registered by the
employing broker with the county clerk and approved by BRE. CAR
further states: "The lack of clear regulation creates confusion
AB 2018
Page 7
throughout the real estate industry on what is and what is not a
fictitious business name. AB 2018 will resolve this ambiguity by
statutorily defining how a salesperson, with their brokers
permission, can use a fictitious business name, while also
establishing clear standards for the use 'team' names that are not
fictitious business names."
SUPPORT AND OPPOSITION:
Support:
California Association of Relators
Opposition:
None received as of June 11, 2014.
Consultant:G. V. Ayers