The California Association of Realtors trade group succeeded in its legislative push to heighten pre-licensing requirements for prospective real estate salespersons, but failed in a bid to raise the bar for broker licensing.
Assembly Bill 2429, which was signed by the governor Sept. 14 and becomes active Oct. 1, 2007, requires that all real estate professionals must complete three pre-license courses prior to taking a license examination. The bill passed the state Senate 37-1 and the Assembly 77-1.
Existing law provides that applicants may either take three real estate classes and then pass an exam to receive a four-year license or may take one class and then take the exam to obtain a conditional license. And the applicants who opt for the conditional license can take the other classes during the first 18 months of real estate licensure.
According to the association’s latest legislative report, updated Oct. 11, the state Department of Real Estate reported that about 85 percent of new licensees in the state opt for the conditional license. The association sought to “increase the foundational knowledge of sales licensees entering the profession,” according to the report.
Meanwhile, Gov. Arnold Schwarzenegger vetoed Assembly Bill 1963, which would in most cases require two years of real estate experience in order to become a licensed real estate broker in California. While the bill passed the state Assembly 75-0 and the Senate 34-1, Schwarzenegger said in a statement that the bill’s requirements are “not warranted.”
Under existing law, the state’s real estate commissioner can issue a real estate broker’s license to an applicant who has at least the equivalent of two years of general real estate experience or has graduated from a four-year college or university course, who files a written petition with the Department of Real Estate setting forth qualifications and experience and is approved by the commissioner, and passes an examination and satisfies other requirements.
AB 1963, sponsored by the Realtor association, provided that the commissioner “shall not grant an original real estate broker’s license to any person unless that person has held a real estate salesperson’s license for at least two years and qualified for renewal real estate salesperson status, within the five-year period immediately prior to the date of … application for the broker’s license and during that time … was actively engaged in the business of a real estate salesperson.”
The proposed bill also would have allowed the commissioner to approve an application for a real estate broker’s license if the applicant filed a petition “setting forth his or her real estate related qualifications and experience.” Also, the legislation provides that the commissioner can “waive the requirements … for an applicant who is a member of the State Bar of California.”
Alex Creel, senior vice president of Government Affairs for the California Association of Realtors, said that existing law is often interpreted to allow real estate professionals with any four-year degree to qualify for a broker’s license. “The way it’s being interpreted they don’t really look to a four-year degree with a specialization in real estate — they just pretty much accept any degree,” he said. The association may work to address that specific provision with other legislation in the future, he said.
In his veto, Schwarzenegger stated, “AB 1963 would repeal the ability of a person to qualify for a real estate broker license with a college degree, removing a provision of law that has been in existence for over thirty years. Although the Department of Real Estate has seen a significant increase in the real estate licensee population, it does not appear that newly licensed ‘degree’ brokers pose any more of a risk to the public compared to those brokers who qualified for licensure based on experience.”
He added, “Given this fact, it appears placing further impediments on those seeking to start a business and work independently is not warranted.”
The number of real estate brokers in the state increased 16.1 percent from August 2004 to August 2006, and was up 8.1 percent from August 2005 to August 2006, to a total of 139,260. Meanwhile, the number of nonbroker real estate salespersons in the state grew 31.9 percent from August 2004 to August 2006, and grew 12.8 percent from August 2005 to August 2006, to a total of 372,199 in August 2006.
The association dropped its sponsorship of an insurance-related bill, Assembly Bill 2365, stating in its legislative report that “the bill has achieved its purpose in eliciting a cooperative response from the (state Department of Insurance) and the commitment by private-sector groups to create a purchase-assistance program for (errors and omissions insurance) coverage.”
Errors and omissions (E&O) insurance helps to cover insurance agents and brokers against risks associated with real estate transactions. Existing law does not require real estate agents and brokers to carry E&O insurance, and the association-sponsored legislation sought to create a program to be administered by the state Insurance Department to assist real estate licensees in locating sufficient E&O coverage.
Another association-sponsored bill, Assembly Bill 2100, signed by the governor Aug. 28, provides that homeowner associations are required to provide their members with “clear and concise information on how much they will have to pay for the association’s special and regular assessment needs, such as the replacement of roofs or repair of building exteriors,” according to the group’s legislative report.
Other association-sponsored legislation introduced this year includes Assembly Bill 2511, which relates to state laws requiring local governments to report on housing production plans. The law, signed by the governor Sept. 30, “provides judicial relief for those who challenge local governments that refuse to disclose their plan for meeting the regional housing need to the Department of Housing and Community Development and would require the plaintiff to inform the attorney general should a plaintiff sue the city or county alleging that government is not in compliance with state law,” according to the report. Also, the law increases enforcement options under state housing law.
Assembly Bill 2526, co-sponsored by the association, sought to “enable developers to build lower-cost units at a rate that will allow them to be placed on the market with lower construction costs,” the association reported, though the measure failed to pass the Assembly’s Housing and Community Development Committee.
Senate Bill 1177, another association-sponsored measure that sought to “prohibit local governments from examining the financial records of housing developers seeking a density bonus when they apply for a waiver of, or reduction in development standards,” and association co-sponsored Senate Bill 1330, which sought to extend a sunset date for a measure that allows developers to recoup attorney fees related to cases in which local governments deny residential developments, also failed to pass the Assembly’s Housing and Community Development Committee.