Transaction and Regulatory Committee
This material is for discussion purposes only and has not been approved
by the Transactions and Regulatory Committee, the Legislative Committee,
Executive Committee or the Board of Directors.
Should C.A.R. sponsor legislation to change the term of the real estate
license from 4 years to 2 years?
Action: Optional; difficult to implement in 2010.
1. Do Nothing.
2. Defer action now, direct staff to more fully study the proposal during
2010 and review for inclusion in C.A.R.'s 2011 sponsored legislation
3. Support DRE-sponsored legislation to change the term of the license, but
not introduce as C.A.R. legislation.
4. Sponsor C.A.R. legislation to change the license.
5. Do Nothing
The suggestion has been made that the term of the real estate license be
shortened from 4 years to 2, with the goal of improving the currency of
continuing education and evening out the numbers of licensees up for
renewal in any given year. The license renewal (but not application) fee
would also be cut in half.
In 2009 the Legislative Analyst's Office (LAO) released a report on DRE
entitled "Opportunities to Improve Consumer Protection" which included,
among other things, a recommendation that continuing education for
maintaining the real estate license be required on an annual basis. It did
not recommend a change in the license term itself. DRE has not been
authorized by the Administration to sponsor legislation in 2010.
Discussion: LAO report.
As mentioned, the LAO recommended a number of changes to DRE, including
better pre-license education and annual continuing education. The report
pointed out that California has an exceptionally long cycle of requirement
for real estate continuing education. The concern is that taking
course work only every four years may not ensure that licensees are current
on the latest developments in the real estate business.
A similar concern was shared by C.A.R.'s Business Practices Task Force
which recommended that DRE prohibit so-called "all in one" seminars that
purport to award all 45 hours of required education in a single
seminar. At the urging of C.A.R. the DRE limited continuing education
to 15 hours in one day, and required (among other reforms) an examination
for each class. The Task Force did not recommend an annual requirement.
The LAO report also noted that the new S.A.F.E. Act mortgage loan
originator license endorsement will require some real estate licensees to
take annual course work to maintain their license. The report suggested
that other states require annual education and that it seems to work.
Other recommendations included changes to the DRE disciplinary process and
pre-license education and experience requirements. Some of the
suggestions included proposals that C.A.R. has either sponsored or
requested over the years.
Again, DRE (like other regulatory agencies) has not been authorized to
sponsor legislation in 2010 and it is not clear where the department would
stand on the proposal.
The full report may be seen at
Time is short. The deadline for introduction of legislation in
the 2010 legislative session is February 19 (approximately two weeks after
the Board of Directors meeting). Whether an appropriate, capable,
author can be found to carry the legislation on short notice, or that a
bill draft can make it through the required administrative processes in
time to be successfully sponsored in 2010 is problematic. Sponsorship has
been made particularly difficult by reduced bill limits for legislators. In
all likelihood, a sponsored bill would fare better as a 2011 effort.
What's wrong with 4 years?
Only a few other states have a 4-year term for a real estate license, and
even in California the real estate license is unusual in its length. Most
professional licenses are subject to annual renewal, even when they have a
longer period in which to take required continuing education. For
example, attorneys renew annually, but demonstrate continuing education
only every 3 years.
DRE tries to ensure that all licensees pay the same fee for their license
and renewals, both because of fairness to various annual "classes." Also
when DRE holds the line on fees over a longer period, there is less
confusion in the ranks of licensees over amount, and thus a reduction in
the inadvertent errors in fees received. Unfortunately, in order to hold
the line against fee fluctuations the DRE retains larger operating reserves
to buffer the effect of ups and downs in the economy and the licensee base
-- and in the current fiscal environment, larger reserves make an agency a
larger target for "borrowing" of its reserves.
An additional concern with a 4-year term is that it means there is more
"dead wood" in the ranks of licensees (inactive licensees still on the
Why 2 years?
A shorter license term builds in the objective of more current continuing
education sought by both the LAO and others. DRE would appear to
favor a 2-year term so that it doesn't need to review the continuation
education annually. The two year term would still double the
frequency of the continuation, but not be as burdensome as annual review.
If more frequent education is the goal, it can be accomplished without
changing the overall license. Some licenses, like those of the State
Bar, are renewed annually but the verification of continuing education is
only required every third year. Other licenses, like the new
mortgage loan originator license endorsement are attached to a 4-year
license, but require annual education.
The real estate continuing education requirement could be set at every year
or every other year without changing the 4-year term of the existing
license. However, the DRE would incur a larger administrative burden to do
so. In light of the growing popularity of E-licensing renewals, it is
unclear how burdensome such a rule would be.
Also on the plus side, DRE could see a more rapid response to fee increases
(or decreases) made in response to market conditions, since every
licensee would be effected rather than only one fourth of them, as under
the current license. Of course this more rapid response comes with more
administrative activity and more opportunity for expensive and time
consuming confusion on the part of licensees.
Would a shorter term be better? Would a two-year term be better than an
It is unclear how REALTORS® would view the prospect of a shorter license
Would it be appropriate to research the reaction of rank and file
members before making a decision on such a significant aspect of the