The Real Estate Law provides for the licensure and regulation of real estate brokers and salespersons by the Real Estate Commissioner. The law requires a salesperson to be supervised by a responsible broker, as defined, and allows an employing broker or corporate designated broker officer to appoint a licensee as a manager of a branch office or division of a real estate business if specified requirements are met. The law requires a licensee to successfully complete 45 hours of continuing education as a prerequisite to license renewal, as specified.

This bill would require a broker, as part of the brokers 45 hours of continuing education, to successfully complete a 3-hour course in the management of offices and supervision of licensed activities, as specified.

The Real Estate Law provides for the licensure and regulation of real estate brokers and salespersons by the Real Estate Commissioner. The law requires a salesperson to be supervised by a responsible broker, as defined, and allows an employing broker or corporate designated broker officer to appoint a licensee as a manager of a branch office or division of a real estate business if specified requirements are met. The law requires a licensee to successfully complete 45 hours of continuing education as a prerequisite to license renewal, as specified.

This bill would require a broker, as part of the brokers 45 hours of continuing education, to successfully complete a 3-hour course in the management of offices and supervision of licensed activities, as specified.

The Real Estate Law provides for the licensure and regulation of real estate brokers and salespersons by the Real Estate Commissioner. The law requires a salesperson to be supervised by a responsible broker, as defined, and allows an employing broker or corporate designated broker officer to appoint a licensee as a manager of a branch office or division of a real estate business if specified requirements are met. The law requires a licensee to successfully complete 45 hours of continuing education as a prerequisite to license renewal, as specified.

This bill would require a licensee, broker, as part of the licensees brokers 45 hours of continuing education, to successfully complete a 3-hour course in the management of offices and supervision of licensed activities, as specified, and would also make related and conforming changes. specified.

The Real Estate Law provides for the licensure and regulation of real estate brokers and salespersons by the Real Estate Commissioner. The law requires a salesperson to be supervised by a responsible broker, as defined, and allows an employing broker or corporate designated broker officer to appoint a licensee as a manager of a branch office or division of a real estate business if specified requirements are met. The law requires a licensee to successfully complete 45 hours of continuing education as a prerequisite to license renewal, as specified.

This bill would require a licensee, as part of the licensees 45 hours of continuing education, to successfully complete a 3-hour course in the management of offices and supervision of licensed activities, as specified, and would also make related and conforming changes.

 THIRD READING  

Bill No: AB 345

Author: Frazier (D)

Amended: 3/16/15 in Assembly

Vote: 21

SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 9-0, 6/8/15

AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez, Jackson, Mendoza, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 77-0, 5/7/15 (Consent) - See last page for vote

SUBJECT: Real estate licensees: continuing education requirements

SOURCE: California Association of REALTORS

DIGEST: This bill requires a broker to complete a three-hour course in management of real estate offices and supervision of licensed activities as part of the 45 hours of required continuing education (CE) for license renewal.

ANALYSIS:

Existing law:

1. Provides for the licensure and regulation of real estate brokers and salesperson by the Real Estate Commissioner. (Business and Professions Code (BPC) § 10050)

2. Requires a responsible broker, as defined, to exercise control and supervision of salespersons. (BPC § 10159.7)

3. Requires a corporate broker licensee to designate an officer who is a broker to be responsible for the supervision and control of the activities of the officers, employees and salespersons. (BPC §§ 10211, 10159.2)

4. Defines the duties of a real estate broker as a person who, for compensation or in expectation of compensation, performs any of the following for another individual: sells, buys, or solicits prospective sellers or purchasers of real property or a business opportunity, leases, rents, or solicits listings of places for rent or negotiates leases on real property, assists or offers to assist in filing an application for the purchase or lease of lands owned by the state or federal government, or solicits or negotiates loans, liens on property, or other collateral for borrowers or lenders on real property or business opportunities. (BPC § 10131)

5. Authorizes an employing broker or corporate designated broker officer to appoint a licensee as a manager of a branch office or division of a real estate business if specified requirements are met. (BPC § 10164)

6. Requires a licensee to complete 45 hours of CE in order to renew his or her license. This CE includes:

1. A three-hour course in ethics, professional conduct, and legal aspects of real estate (relevant legislation, regulations, articles, reports, studies, court decision).

2. Four three-hour courses in: agency relationships and duties in a real estate brokerage practice, trust fund accounting and handling, fair housing, and risk management.

3. At least 18 hours of courses or programs related to consumer protection.

4. Other courses and programs that will enable a licensee to achieve a high level of competence in serving the objectives of consumers who may engage the services of licensees to secure, transfer, financing, or similar objects with respect to real property. (BPC § 10170.5)

7. Authorizes the Commissioner to suspend or revoke a real estate license of a licensee or of a corporation if the licensee, or an officer, director, or person owning or controlling 10% or more of the corporation’s stock, has, as a broker licensee, failed to exercise reasonable supervision over the activities of his or her salespersons, or, as the officer designated by a corporate broker licensee, failed to exercise reasonable supervision and control of the activities of the corporation for which a real estate license is required. (BPC § 10177(h))

8. Exempts licensees from completing the 45 hours of CE if the licensee can submit proof to the Commissioner that he or she has been a real estate licensee in good standing for 30 continuous years in this state and is 70 years of age or older. (BPC § 10170.8)

9. Makes willful violation of the Real Estate Law a misdemeanor. (BPC § 10185)

This bill:

1. Requires a broker, as part of his or her 45-hour CE requirement, to complete a three-hour course in the management of offices and the supervision of licensed activities.

2. Permits salespersons, as part of their CE requirements, to elect to take other courses and programs in organizational management techniques, including information to assist them in understanding how to be effectively supervised by a responsible broker or branch manager.

3. Makes other technical and conforming changes.

Background

California adopted the Real Estate Act in 1919 to protect the public in real estate and mortgage transactions involving the services of an agent. The requirement of real estate qualifications enables the Commissioner to ascertain whether or not a licensee meets certain standards of knowledge and honesty for the salesperson and broker license. Short-term vacation rental agents, employees of certain lending institutions, and resident managers of apartment buildings and complexes or their employees are exempt from these licensure requirements.

To obtain a real estate salesperson license, an applicant must first qualify for and pass a written examination. The applicant must then submit a license application to be approved by the California Bureau of Real Estate (CalBRE). Prospective real estate broker licensees, in addition to passing a written examination and gaining approval of a broker license application from CalBRE, must also have a minimum of two years of full-time licensed real estate salesperson experience. The broker licensee must submit evidence of this minimum of two years of full-time experience through verification by the licensee’s employing broker using an Employment Verification (RE 226). The course requirements for licensure as a real estate broker include eight college level courses on real estate practice, the legal aspects of real estate, real estate finance, real estate appraisal, real estate economics/accounting, and three electives.

Both broker and salesperson licenses must be renewed every four years. To renew either a broker or salesperson license, the licensee must submit the appropriate fee and application, as well as submit evidence that he or she has completed the required 45 hours of CalBRE-approved CE courses. These CE courses include 15 specifically earmarked courses in ethics, agency relationships, trust fund handling, fair housing, and risk management and 18 hours of the CE coursework is dedicated to consumer protection. The remaining 12 hours are reserved as CE electives, and licensees may take courses related either to consumer protection or consumer services. These elective courses are meant to enable the licensee to achieve a high level of competence in serving the objectives of consumers who may engage the services of licensees to secure the transfer, financing, or similar objectives with respect to real property, including organizational and management techniques. A licensee who has been in good standing (meaning not having any disciplinary action on record) for 30 continuous years in the state of California and who is 70 years of age or older is exempt from the CE requirements.

A licensee may be appointed to manage a branch office or division of the employing broker’s or employing corporate designated broker officer’s real estate business by an employing real estate broker or corporate designated broker officer. This appointed licensee may also be responsible for overseeing the day-to-day operations of the business, supervising the licensed activities of licensees, and supervising clerical staff employed in the branch office or division. Any appointment of a licensee must be made through a written contract, in which the appointee accepts the delegated responsibility, and requires the employing broker or corporate designated officer to retain a copy of the contract and send a notice to the CalBRE identifying the appointee and the branch office or division the manager is appointed to supervise. According to the author, while principal brokers remain accountable for overall supervisorial responsibilities, CalBRE can also hold managers accountable for failure to supervise.

Although risk management is one of the earmarked CE courses, it has been suggested by CalBRE that the subject of supervision in risk management should be its own earmarked CE course required for broker licensure renewal. According to CalBRE’s Web site, one of the six most common and recurring types of violations of the Real Estate Law that have resulted in disciplinary action include a lack of supervision on the part of the broker, in violation of BPC §10177(h). This section requires a real estate broker to exercise reasonable supervision over the activities of salespersons, or as the designated officer of a corporation, to exercise the activities conducted by the corporation for which a real estate license is required.

According to the author, several states require brokers to complete a course on supervision when renewing their license. Montana requires supervising brokers to complete a three-hour course on supervision to assure competent practice in the real estate industry, while Virginia requires brokers to complete an eight-hour course on management and supervision. Minnesota requires brokers and salespersons to complete a one-hour course on broker supervisory obligations; Maryland requires brokers, office managers, and team leaders to complete a three- hour course on supervision within 90 days of assuming a supervisory position if they did not complete the course during their renewal; and Texas requires designated brokers and licensees delegated supervision of one or more real estate licensees, for a period of longer than six months, to complete a six hour course on broker responsibility.

This bill reserves three hours of a licensed broker’s CE requirements specifically on a course to provide guidance on how to manage real estate offices, salespersons and broker associates. This bill also allows salespersons to take a course on how to be effectively supervised by a responsible broker or branch manager as part of the licensee’s 12 hours of reserved CE elective credits. This bill seeks to resolve the issue of recurrent lack of supervision violations on the part of brokers by requiring broker licensees to take specific CE courses on the topic.

Prior/Related Legislation

AB 2105 (DeSaulnier, 2014) would have required the consumer protection CE courses to include instruction in financial elder and dependent adult abuse signs and reporting requirements. (The bill was vetoed by Governor Schwarzenegger for reasons primarily related to other portions of the bill.)

SB 510 (Correa, Chapter 709, Statutes of 2012) established various minimum requirements for an individual to become a branch manager and authorized the Commissioner to discipline a branch manager for failure to supervise branch operations.

AB 223 (Negrete McLeod, Chapter 183, Statutes of 2005) required CE requirements to include completion of a three-hour course in risk management that includes principles, practices, and procedures calculated to avoid errors and omissions in the practice of real estate licensed activities.

AB 555 (Dutra, Chapter 116, Statutes of 2002) included in the consumer protection CE the subject of California law relating to common interest developments.

FISCAL EFFECT: Appropriations: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 6/22/15)

California Association of REALTORS (source)

OPPOSITION: (Verified 6/22/15)

None Received

ARGUMENTS IN SUPPORT: Writing in support of the bill, the California Association of REALTORS (CAR) states that “AB 345 seeks to earmark three hours of a real estate broker’s mandated 45 hours of CE for a course on the management and supervision of real estate licensed activity”. CAR states that, “Current law requires a real estate broker to exercise reasonable supervision over the activities of his or her salespersons. Reasonable supervision includes the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage real estate transactions. Existing law also requires real estate licensees renewing a real estate license to complete 45 hours of [CalBRE] approved CE. Currently, 15 hours of that CE requirement are earmarked for specified courses (ethics, agency, trust fund handling, fair housing, and risk management), while 18 hours are dedicated to consumer protection courses, with the remaining 12 hours of CE being elective. C.A.R. supports [this bill] as it will provide guidance to brokers on how to properly manage real estate offices, salespersons, and broker associates, while permitting salespersons to elect to take a course to assist them in understanding how to be effectively supervised.”

ASSEMBLY FLOOR: 77-0, 5/7/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O’Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Campos, Roger Hernández, Steinorth

Prepared by: Janelle Miyashiro / B., P. & E.D. / (916) 651-4104

6/23/15 16:41:39

**** END ****

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Jerry Hill, Chair

2015 - 2016 Regular

Bill No: AB 345 Hearing Date: June 8, 2015

-

Subject: Real estate licensees: continuing education requirements.

SUMMARY:

Requires a broker to complete a three-hour course in management of real estate offices and supervision of licensed activities as part of the 45 hours of required continuing education for license renewal.

Existing law:

1. Provides for the licensure and regulation of real estate brokers and salesperson by the Real Estate Commissioner. (Business and Professions Code (BPC) § 10050)

2. States that all real estate broker licenses issued by the commissioner are valid for a period of four years. (BPC §10153.6)

3. Requires a responsible broker, as defined, to exercise control and supervision of salespersons. (BPC § 10159.7)

4. 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)

5. Defines the duties of a real estate broker as a person who, for a compensation or in expectation of a compensation, performs any of the following for another individual:

1. Sells, buys, or solicits prospective sellers or purchasers real property or a business opportunity.

2. Leases, rents, or solicits listings of places for rent or negotiates leases on real property.

3. Assists or offers to assist in filing an application for the purchase or lease of lands owned by the state or federal government.

4. Solicits or negotiates loans, liens on property, or other collateral for borrowers or lenders on real property or business opportunities. (BPC § 10131)

6. Authorizes an employing broker or corporate designated broker officer to appoint a licensee as a manager of a branch office or division of a real estate business if specified requirements are met. (BPC § 10164)

7. Requires a licensee to complete 45 hours of continued education (CE) in order to renew his or her license. This CE includes:

1. A three-hour course in ethics, professional conduct, and legal aspects of real estate (relevant legislation, regulations, articles, reports, studies, court decision).

2. A three-hour course in agency relationships and duties in a real estate brokerage practice.

3. A three-hour course in trust fund accounting and handling.

4. A three-hour course in fair housing.

5. A three-hour course in risk management including principles, practices, and procedures calculated to avoid errors and omissions while practicing real estate licensed activities.

6. At least 18 hours of courses or programs related to consumer protection.

7. Other courses and programs that will enable a licensee to achieve a high level of competence in serving the objectives of consumers who may engage the services of licensees to secure, transfer, financing, or similar objects with respect to real property. (BPC § 10170.5)

8. Authorizes the Commissioner to suspend or revoke a real estate license of a licensee or of a corporation if the licensee, or an officer, director, or person owning or controlling 10 percent or more of the corporation’s stock, has, as a broker licensee, failed to exercise reasonable supervision over the activities of his or her salespersons, or, as the officer designated by a corporate broker licensee, failed to exercise reasonable supervision and control of the activities of the corporation for which a real estate license is required. (BPC § 10177(h))

9. Exempts licensees from completing the 45 hours of CE if the licensee can submit proof to the commissioner that he or she has been a real estate licensee in good standing for 30 continuous years in this state and is 70 years of age or older.
   (BPC § 10170.8)

10. Makes willful violation of the Real Estate Law a misdemeanor. (BPC § 10185)

This bill:

1. Requires a broker, as part of his or her 45-hour continued education requirement, to complete a three-hour course in the management of offices and the supervision of licensed activities.

2. Permits salespersons, as part of their continuing education requirements, to elect to take other courses and programs in organizational management techniques, including information to assist them in understanding how to be effectively supervised by a responsible broker or branch manager.

3. Makes other technical and conforming changes.

FISCAL EFFECT:

This bill is keyed “fiscal” by Legislative Counsel. According to the Assembly Committee on Appropriations analysis dated April 28, 2015, this bill will result in minor and absorbable costs within existing resources to the California Bureau of Real Estate (CalBRE).

COMMENTS:

1. Purpose. This bill is sponsored by the California Association of REALTORS (CAR). According to the Author, "Current real estate law requires a real estate broker to exercise reasonable supervision over the activities of his or her salespersons. Reasonable supervision includes the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage real estate transactions. Brokers are further required to establish a system for monitoring compliance. Supervision is a critical part of a real estate broker's responsibility.”

CAR states that this bill, “allocates three hours of a licensed broker's existing
45 hours of CE to be reserved for a course to provide guidance of how to manage real estate offices, salespersons, and broker associates, while also permitting salespersons to elect to take a course containing relevant information to assist them in understanding how to be effectively supervised by a responsible broker or branch manager."

2. Background. California adopted the Real Estate Act in 1919, to protect the public in real estate and mortgage transactions involved the services of an agent. The requirement of real estate qualifications enables the Commissioner to ascertain whether or not a licensee meets certain standards of knowledge and honesty for the salesperson and broker license. Short-term vacation rental agents, employees of certain lending institutions, and resident managers of apartment buildings and complexes or their employees are exempt from these licensure requirements.

To obtain a real estate salesperson license, an applicant must first qualify for and pass a written examination. The applicant must then submit a license application to be approved by the CalBRE. Prospective real estate broker licensees, in addition to passing a written examination and gaining approval of a broker license application from CalBRE, must also have a minimum of two years of full-time licensed real estate salesperson experience. The broker licensee must submit evidence of this minimum of two years of full-time experience through verification by the licensee’s employing broker using an Employment Verification (RE 226). The course requirements for licensure as a real estate broker include eight college level courses on real estate practice, the legal aspects of real estate, real estate finance, real estate appraisal, real estate economics/accounting, and three electives.

Both broker and salesperson licenses must be renewed every four years. To renew either a broker or salesperson license, the licensee must submit the appropriate fee and application, as well as submit evidence that he or she has completed the required 45 hours of CalBRE-approved continuing education (CE) courses. These CE courses include 15 specifically earmarked courses in ethics, agency relationships, trust fund handling, fair housing, and risk management and 18 hours of the CE coursework is dedicated to consumer protection. The remaining 12 hours are reserved as CE electives, and licensees may take courses related either to consumer protection or consumer services. These elective courses are meant to enable the licensee to achieve a high level of competence in serving the objectives of consumers who may engage the services of licensees to secure the transfer, financing, or similar objectives with respect to real property, including organizational and management techniques. A licensee who has been in good standing (meaning not having any disciplinary action on record) for 30 continuous years in the state of California and who is 70 years of age or older is exempt from the CE requirements.

A licensee may be appointed to manage a branch office or division of the employing broker’s or employing corporate designated broker officer’s real estate business by an employing real estate broker or corporate designated broker officer. This appointed licensee may also be responsible for overseeing the day-to-day operations of the business, supervising the licensed activities of licensees, and supervising clerical staff employed in the branch office or division. Any appointment of a licensee must be made through a written contract, in which the appointee accepts the delegated responsibility, and requires the employing broker or corporate designated officer to retain a copy of the contract and send a notice to the CalBRE identifying the appointee and the branch office or division the manager is appointed to supervise. According to the Author, while principal brokers remain accountable for overall supervisorial responsibilities, CalBRE can also hold managers accountable for failure to supervise.

Although risk management is one of the earmarked CE courses, it has been suggested by CalBRE that the subject of supervision in risk management should be its own earmarked CE course required for broker licensure renewal. According to CalBRE's website, one of the six most common and recurring types of violations of the Real Estate Law that have resulted in disciplinary action include a lack of supervision on the part of the broker, in violation of BPC Section 10177(h). This section requires a real estate broker to exercise reasonable supervision over the activities of salespersons, or as the designated officer of a corporation, to exercise the activities conducted by the corporation for which a real estate license is required.

According to the Author, several states require brokers to complete a course on supervision when renewing their license. Montana requires supervising brokers to complete a three-hour course on supervision to assure competent practice in the real estate industry, while Virginia requires brokers to complete an eight-hour course on management and supervision. Minnesota requires brokers and salespersons to complete a one-hour course on broker supervisory obligations; Maryland requires brokers, office managers, and team leaders to complete a three-hour course on supervision within 90 days of assuming a supervisory position if they did not complete the course during their renewal; and Texas requires designated brokers and licensees delegated supervision of one or more real estate licensees, for a period of longer than six months, to complete a six hour course on broker responsibility.

This bill would reserve three hours of a licensed broker’s CE requirements specifically on a course to provide guidance on how to manage real estate offices, salespersons and broker associates. The bill will also allow salespersons to take a course on how to be effectively supervised by a responsible broker or branch manager as part of the licensee’s 12 hours of reserved CE elective credits. This bill seeks to resolve the issue of recurrent lack of supervision violations on the part of brokers by requiring broker licensees to take specific CE courses on the topic.

3. Prior/Related Legislation. AB 2105 (DeSaulnier, 2014), would have required the consumer protection CE courses to include instruction in financial elder and dependent adult abuse signs and reporting requirements. (Status: This bill was vetoed by Governor Schwarzenegger for reasons primarily related to other portions of the bill.)
   
   SB 510 (Correa, Chapter 709, Statutes of 2012), established various minimum requirements for an individual to become a branch manager and authorized the Commissioner to discipline a branch manager for failure to supervise branch operations.

AB 223 (Negrete McLeod, Chapter 183, Statutes of 2005), required CE requirements to include completion of a three-hour course in risk management that includes principles, practices, and procedures calculated to avoid errors and omissions in the practice of real estate licensed activities.

AB 555 (Dutra, Chapter 116, Statutes of 2002), included in the consumer protection CE the subject of California law relating to common interest developments.

4. Arguments in Support. Writing in support of the bill, the California Association of REALTORS (CAR) states that “AB 345 seeks to earmark three hours of a real estate broker’s mandated 45 hours of CE for a course on the management and supervision of real estate licensed activity”. CAR states that, "Current law requires a real estate broker to exercise reasonable supervision over the activities of his or her salespersons. Reasonable supervision includes the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage real estate transactions. Existing law also requires real estate licensees renewing a real estate license to complete 45 hours of [CalBRE] approved CE. Currently, 15 hours of that CE requirement are earmarked for specified courses (ethics, agency, trust fund handling, fair housing, and risk management), while 18 hours are dedicated to consumer protection courses, with the remaining 12 hours of CE being elective. C.A.R. supports [this bill] as it will provide guidance to brokers on how to properly manage real estate offices, salespersons, and broker associates, while permitting salespersons to elect to take a course to assist them in understanding how to be effectively supervised."

SUPPORT AND OPPOSITION:

Support:

California Association of REALTORS (Sponsor)

Opposition:

None on file as of June 2, 2015.

-- END --

Date of Hearing: April 29, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 345

Author:(Frazier) – As Amended Ver:March 16, 2015

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires a real estate broker, as part of his or her 45 hours of continuing education (CE), to complete a 3-hour course in the management of real estate offices and supervision of licensed activities, and provides that elective CE courses may also include relevant information to assist salespersons and brokers in understanding how to be effectively supervised.

FISCAL EFFECT:

Costs to the California Bureau of Real Estate (CalBRE) will be minor and absorbable within existing resources.

COMMENTS:

1. Purpose. According to the author, "Current real estate law requires a real estate broker to exercise reasonable supervision over the activities of his or her salespersons. Reasonable supervision includes the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage real estate transactions. Brokers are further required to establish a system for monitoring compliance. Supervision is a critical part of a real estate broker's responsibility. [This bill] allocates three hours of a licensed broker's existing 45 hours of [CE] to be reserved for a course to provide guidance of how to manage real estate offices, salespersons, and broker associates, while also permitting salespersons to elect to take a course containing relevant information to assist them in understanding how to be effectively supervised by a responsible broker or branch manager."

2. Licensing and CEs. To obtain a real estate salesperson license, an individual must pass a real estate examination and fulfill certain real estate education requirements. To obtain a real estate broker license, an individual, in most cases, must have held a real estate salesperson's license for at least two years during which time he or she must have been actively engaged in real estate, meet certain real estate education requirements in addition to passing an examination.

Broker and salesperson licenses are issued for a four-year period. In general, both types of licenses may be renewed by submitting the appropriate fee and application, and evidence of completion of 45 hours of CalBRE-approved CE courses. These courses include 15 hours of required courses in ethics, agency relationships, trust fund handling, fair housing, and risk management, and at least 18 hours in courses dedicated to consumer protection. The remaining courses, up to 12 hours of electives, may be related either to consumer protection or consumer services.

3. Failure to Supervise. According to the CalBRE's website, one of the six most common types of violations of the Real Estate Law resulting in disciplinary action include failure to supervise, in violation of BPC Section 10177(h), which requires a real estate broker to exercise reasonable supervision over the activities of salespersons, or as the designated officer of a corporation, to exercise the activities conducted by the corporation for which a real estate license is required. CalBRE's website also indicates that lack of supervision on the part of a broker is a recurring problem.

This bill seeks to address this problem by requiring, as a part of existing CE requirements for brokers, a three hour course on management and supervision, and by allowing salespersons to take a course on how to be effectively supervised by including that issue under elective CE requirements.

4. Prior Legislation.

1. SB 510 (Correa), Chapter 709, Statutes of 2012, established various minimum requirements for an individual to become a branch manager and authorized the Commissioner to discipline a branch manager for failure to supervise branch operations.

2. AB 2105 (DeSaulnier) of 2008, among other things, would have required the consumer protection CE courses to include instruction in financial elder and dependent adult abuse signs and reporting requirements. This bill was vetoed by Governor Schwarzenegger for reasons primarily related to other portions of the bill.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 14, 2015

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Susan Bonilla, Chair

ABPCA Bill Id:ABPCA Bill Id:AB 345

Author:(Frazier) – As Amended Ver:March 16, 2015

SUBJECT: MERGEFIELD bill \* MERGEFORMAT Real estate licensees: continuing education requirements.

SUMMARY: Requires a real estate broker, as part of his or her 45 hours of continuing education (CE), to complete a 3-hour course in the management of real estate offices and supervision of licensed activities, and provides that elective CE courses may also include relevant information to assist salespersons and brokers in understanding how to be effectively supervised.

EXISTING LAW

1. Provides for the licensure and regulation of real estate brokers and salespersons by the Real Estate Commissioner. (Business and Professions Code (BPC) Section 10000 et seq.)

2. Requires a responsible broker, as defined, to exercise control and supervision of salespersons. (BPC 10159.7)

3. Authorizes an employing broker or corporate designated broker officer to appoint a licensee as a manager of a branch office or division of a real estate business if specified requirements are met. (BPC 10164)

4. Requires brokers and salespersons licensees to successfully complete 45 hours of continuing education, except as specified, as a prerequisite to license renewal as follows: (BPC Section 10170.5).

   1. Requires 15 of those 45 hours to include a three hour course in each of the following categories:

      1. ethics, professional conduct, and legal aspects of real estate;

      2. agency relationships and duties in a real estate brokerage practice;

      3. trust fund accounting and handling;

      4. fair housing; and

      5. risk management;

   2. Requires at least 18 of those 45 hours to include courses or programs related to consumer protection, and designated by the Commissioner as satisfying this purpose in his or her approval of the offering of these courses or programs, as specified; and,

   3. Requires other courses and programs that will enable a licensee to achieve a high level of competence in serving the objectives of consumers who may engage the services of licensees to secure the transfer, financing, or similar objectives with respect to real property, including organizational and management techniques.

5. Authorizes the Commissioner to suspend or revoke a real estate license of a licensee or of a corporation if the licensee, or an officer, director, or person owning or controlling 10 percent or more of the corporation’s stock, has, as a broker licensee, failed to exercise reasonable supervision over the activities of his or her salespersons, or, as the officer designated by a corporate broker licensee, failed to exercise reasonable supervision and control of the activities of the corporation for which a real estate license is required. (BPC Section 10177(h))

THIS BILL

1. Requires a real estate broker, as part of his or her 45 hours of CE, to successfully complete a 3-hour course in the management of real estate offices and supervision of licensed activities, as specified.

2. Provides that the elective CE requirement, which requires courses and programs that will enable a licensee to achieve a high level of competence in serving the objectives of consumers, including organizational and management techniques, also include relevant information to assist a salesperson or broker in understanding how to be effectively supervised by a responsible broker or branch manager.

3. Makes other technical and conforming changes.

FISCAL EFFECT: Unknown. This bill is keyed fiscal by the Legislative Counsel.

COMMENTS

1. Purpose. This bill is sponsored by the California Association of REALTORS (CAR). According to the author, "Current real estate law requires a real estate broker to exercise reasonable supervision over the activities of his or her salespersons. Reasonable supervision includes the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage real estate transactions. Brokers are further required to establish a system for monitoring compliance. Supervision is a critical part of a real estate broker's responsibility. [This bill] simply allocates three hours of a licensed broker's existing 45 hours of [CE] to be reserved for a course to provide guidance of how to manage real estate offices, salespersons, and broker associates, while also permitting salespersons to elect to take a course containing relevant information to assist them in understanding how to be effectively supervised by a responsible broker or branch manager."

2. Background. Licensing and CEs. In order to obtain a real estate salesperson license, an individual must apply for and pass a real estate examination and fulfill certain real estate education requirements. In order to obtain a real estate broker license, an individual, in most cases, must have held a real estate salesperson's license for at least two years during which time he or she must have been actively engaged in real estate, meet certain real estate education requirements in addition to passing an examination. Broker and salesperson licenses are issued for a four-year period. In general, both types of licenses may be renewed by submitting the appropriate fee and application, and evidence of completion of 45 hours of California Bureau of Real Estate (CalBRE)-approved continuing education courses. These courses include 15 hours of required courses in ethics, agency relationships, trust fund handling, fair housing, and risk management, and at least 18 hours in courses dedicated to consumer protection. The remaining courses, up to 12 hours of electives, may be related either to consumer protection or consumer services that will enable the licensee to achieve a high level of competence in serving the objectives of consumers who may engage the services of licensees to secure the transfer, financing, or similar objectives with respect to real property, including organizational and management techniques.

Failure to Supervise is a Common Violation. Under existing law, an employing real estate broker or corporate designated broker officer, appointed by an employing real estate broker,may appoint a licensee to manage a branch office or division of the employing broker’s or employing corporate designated broker officer’s real estate business. The employing real estate broker or corporate designated broker officer may also delegate to the appointed manager the responsibility to oversee day-to-day operations, supervise the licensed activities of licensees, and supervise clerical staff employed in the branch office or division. Any appointment is required to be made through means of a written contract, in which the appointee accepts the delegated responsibility, and requires the employing broker or corporate designated officer retain a copy of the contract and send a notice to the CalBRE identifying the appointee and the branch office or division the manager is appointed to supervise. According to the author, while principal brokers remain accountable for overall supervisorial responsibilities, CalBRE can also hold managers accountable for failure to supervise.

According to the CalBRE's website, one of the six most common types of violations of the Real Estate Law that have resulted in disciplinary action include failure to supervise, in violation of BPC Section 10177(h), which requires a real estate broker to exercise reasonable supervision over the activities of salespersons, or as the designated officer of a corporation, to exercise the activities conducted by the corporation for which a real estate license is required. CalBRE's website also indicates that lack of supervision on the part of a broker is a recurring problem, and in many cases, real estate brokers become designated officers of corporations owned by salespersons or unlicensed individuals and do not properly supervise the operations.

This bill seeks to address this problem by requiring, as a part of existing CE requirements for brokers, a three hour course on management and supervision, and by allowing salespersons to take a course on how to be effectively supervised by including that issue under elective CE requirements.

CE Requirements in Other States. According to the author, several states require brokers to complete a course on supervision when renewing their license. For example, Montana requires supervising brokers to complete a three-hour course on supervision to assure competent practice in the real estate industry, while Virginia requires brokers to complete an eight-hour course on management and supervision. Minnesota requires brokers and salespersons to complete a one-hour course on broker supervisory obligations, Maryland requires brokers, office managers, and team leaders to complete a three-hour course on supervision within 90 days of assuming a supervisory position if they did not complete the course during their renewal, and Texas requires designated brokers and licensees delegated supervision of one or more real estate licensees, for a period of longer than six months, to complete a six hour course on broker responsibility.

3. Prior Related Legislation. AB 2105 (DeSaulnier) of 2014, among other things, would have required the consumer protection CE courses to include instruction in financial elder and dependent adult abuse signs and reporting requirements. NOTE: This bill was vetoed by Governor Schwarzenegger for reasons primarily related to other portions of the bill.
   
   SB 510 (Correa), Chapter 709, Statutes of 2012, established various minimum requirements for an individual to become a branch manager and authorized the Commissioner to discipline a branch manager for failure to supervise branch operations.

AB 223 (Negrete McLeod), Chapter 183, Statutes of 2005, required CE requirements to include completion of a 3-hour course in risk management that includes principles, practices, and procedures calculated to avoid errors and omissions in the practice of real estate licensed activities.

AB 555 (Dutra), Chapter 116, Statutes of 2002, included in the consumer protection CE the subject of California law relating to common interest developments, as specified.

ARGUMENTS IN SUPPORT

According to the California Association of REALTORS, "Current law requires a real estate broker to exercise reasonable supervision over the activities of his or her salespersons. Reasonable supervision includes the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage real estate transactions. Existing law also requires real estate licensees renewing a real estate license to complete 45 hours of [CalBRE] approved CE. Currently, 15 hours of that CE requirement are earmarked for specified courses (ethics, agency, trust fund handling, fair housing, and risk management), while 18 hours are dedicated to consumer protection courses, with the remaining 12 hours of CE being elective. C.A.R. supports [this bill] as it will provide guidance to brokers on how to properly manage real estate offices, salespersons, and broker associates, while permitting salespersons to elect to take a course to assist them in understanding how to be effectively supervised."

ARGUMENTS IN OPPOSITION

None on file.

REGISTERED SUPPORT / OPPOSITION:

Support

California Association of REALTORS (sponsor)

Opposition

None on file.

Analysis Prepared by: Eunie Linden / B. & P. / (916) 319-3301