Courtside Newsletter February 2012: A CLOSER LOOK AT DRE AND LICENSE REGULATIONS AFFECTED BY SENATE BILL 53

Published: March 1, 2012

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January 18-21, 2012 the California Association of REALTORS® held its annual Winter Business Meetings in Indian Wells. During the Legal Affairs Forum, numerous new laws discussed, including some that have been discussed in past articles of the Courtside Newsletter. One Senate Bill that seemed particularly important is Senate Bill 53, which discusses, in detail, California Department of Real Estate and License Regulations.

It is important to recognize the implications behind the Real Estate Law that SB 53 addresses. The Real Estate Law provides for the regulation and licensure of real estate brokers and salespersons by the Real Estate Commissioner. Any person who willfully violates or knowingly participates in a violation of the Law’s provisions may be guilty of a crime.

As it currently stands, the law allows the Commissioner—either by his or her own motion or upon the submission of a verified Complaint—to investigate the actions of a licensee who has engaged in specified acts. Those acts are listed in Business and Professions Code Section 10176 (a-n) and include such things as making substantial concealment or misrepresentations of material facts; making false promises of a character that is likely to induce, influence or persuade; unlawful discrimination; acting for more than one party in a transaction without the knowledge or consent of all parties; and conduct that constitutes fraud or dishonest dealing. If the licensee is found to have committed the actions outlined in Business and Professions Code Section 10176, the Commissioner can revoke or suspend the licensee’s license or impose a monetary penalty.

The current language of Business and Professions Code Section 10177 will become inoperative as of July 1, 2012 and repealed as of January 1, 2013. Instead, new language will be added under Business and Professions Code Section 10177, effective July 1, 2012, to allow the Commissioner to suspend or revoke the license of a real estate licensee, delay the renewal of a license, or deny the issuance of a license to an applicant pursuant to the terms outlined in Business and Professions Code Section 10177 (a-q). Some of the conditions listed in Section 10177 include but are not limited to whether a licensee or applicant has entered a plea of guilty or nolo contendere (no contest) to, been found guilty of, or been convicted of a felony or a crime substantially related to the duties of a real estate licensee; whether the licensee willfully used the term “realtor” or a trade name or insignia of a membership in a real estate organization of which the licensee is not a member; whether a licensee has demonstrated negligence or incompetence in performing an act for which he or she is required to have a license; and whether the licensee engaged in any conduct that constitutes fraud or dishonest dealing. If a corporation’s officer, director, or person owning or controlling 10 percent of the corporation’s stock has violated any of the aforementioned conditions, the Real Estate Commissioner may suspend or revoke the license of the corporation, delay the renewal of a license of the corporation, or deny the issuance of a license to the corporation. These conditions will become effective on July 1, 2012.

SB 53 will also amend Business and Professions Code Section 10080.9. The amended Code will allow the Commissioner to issue citations to unlicensed persons that he or she believes to be performing acts for which a license would be required, as well as against licensees who are in violation of the Real Estate Law or any of its rules. The citations would include an order to correct the violation and could impose an administrative fine of up to $2,500. Any money collected from the citations would be placed into the Recovery Account of the Real Estate Fund. If the licensee or unlicensed person wants to contest the citation, they must inform the Commissioner within thirty days of the date of the citation. After that time has passed, the citation or citation and fine becomes final.

Additionally, should a licensee fail to obey a subpoena issued for the production of documents, SB 53, through changes to Business and Professions Code Section 10079, will allow the Real Estate Commissioner to apply to the Superior Court, (through a noticed motion), for an Order requiring the licensee or a designated representative of the licensee to appear at Court with the requested documents. Failure to obey this Order would be considered contempt of Court.

Effective July 1, 2012, the current Business and Professions Code Section 10156.2 will become inoperative. A “new” Section 10156.2 will be added in its stead, which will be effective beginning July 1, 2012. Currently, the Code Section addresses a licensee’s application for renewal of his or her license. If the application is filed before midnight of the last day of the period for which the license was issued, along with the fee and good faith evidence of compliance with Article 2.5, then the applicant can continue to operate under his or her existing license (so long as it wasn’t previously suspended or revoked). The language of this portion of Section 10156.2 does not change, nor does the language with regards to the Commissioner’s ability to advise or reprimand those licensees who are not in compliance with the education requirements. The only language that does change, in fact, is that the Section now states “nothing in this section shall prevent the Commissioner from delaying the renewal of the license of a licensee pursuant to Section 10177.”

Currently, real estate brokers are required to indicate in their transaction files the provisions of law pertaining to securities qualifications or exemption from securities qualifications under which their transactions are being conducted. Real estate brokers are also required to file certain information with the Real Estate Commissioner relative to conducting those transactions that are exempt from qualification. Through changes to Business and Professions Code Sections 10236.7, 10237, and 10238, real estate brokers will now be required to submit a copy of the information in their transaction files to any investors from whom the brokers obtain funds in connection with the transaction within 10 days of receipt of those funds. Further, a form notice will need to be filed with the Real Estate Commissioner within 30 days after the first transaction and within 30 days of any material change in any information that is required in the notice. That form can be found in Section 10238. Any willful violation of the provisions in these Code Sections will be considered a crime.

Lastly, Senate Bill 53 provides the Real Estate Commissioner with access to a person’s records and the Department of Motor Vehicles for the purpose of enforcing specific provisions of the Real Estate Law or Subdivided Lands Law (Vehicle Code Section 1808.51).

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Last modified: October 16, 2020 at 2:21 pm | Originally published: March 1, 2012 at 9:23 am
Printed: November 24, 2020