Mandatory Broker Education in ManagementDecember 18, 2006Legislative CommitteeThis material is for discussion purposes only and has not beenapproved by the Legislative or Executive Committees or the Board of DirectorsIssue: Should C.A.R. sponsor legislation to impose a requirement for management or supervision training on all brokers?Action: Optional, but consistent with recommendation of 2006 Working Group.Options: 1. Do Nothing in 2007; wait to see the result of new Risk Management course and results of so-called “degree broker” proposal.2. Change the existing Real Estate Office Management course from an elective to a sixth required course in the broker pre-license courses.3. Earmark, or substitute, a new 3-hour course from the existing 45 hours of required continuing education required for license renewal.4. OtherStatus Summary: In 2006 C.A.R. sponsored AB 1963, Leslie, to repeal the degree exception to experience requirements for licensure. AB 1963passed the legislature, but was vetoed. While the bill was being moved, the Legislative chair appointed a working group to consider whether additional educational requirements ought to be imposed. The working group recommended that broker education standards be changed to include a requirement for a course in office management or supervision. The issue before the Legislative Committee is whether to sponsor legislation to impose such a requirement in continuing education or pre-licenseeducation or both.Background:Prior Legislation. In light of the veto of C.A.R.-sponsored AB 1963, Leslie, the Schwarzenegger administration is firmly on record in opposition to changes that might be characterized as barriers to entry into the profession. In response to the veto, the Board of Directors voted in October of 2006 to continue to pursue the issue of inexperienced “degree brokers” with a two-part strategy. Staff was directed to first seek a clarification from the Department of Real Estate (by regulation) that the meaning of a course of study with “a specialization in real estate” means a major or minor in real estate as part ofthe underlying degree, or inclusion of the eight broker pre-requisite courses in course work. Second, if the requested regulatory change is rejected, C.A.R. will pursue the clarification in the underlying statute itself (Business and Professions Code Section 10150.6). Please see AB 1963, Leslie: Post-Veto Options, which was part of committee materials for the October 19, 2006 meeting.Additional Education and Training. The working group, and the committee as awhole, discussed a number possible changes ranging from a complete re-write of the license law to become an “all broker” law like that of Colorado to a relatively minor change in existing law such as making management training mandatory for new and/or renewing brokers. The question for the committee is whether ANY change in the law is appropriate at this time; and if new requirements are imposed, what classes of licensee should be effected.New Broker Applicants. New applicants must demonstrate (among other things) passage of eight different 3-unit college courses. Five of those courses (real estate practice, legal aspects of real estate, appraisal, real estate financing, and realestate economics or accounting) are required, and three additional electives may be selected from a statutory list. One of the courses in the elective list is “real estate office administration.”It would seem to be a relatively small change to change the office administration course from an elective to a required course. Does the office administration course supply enough additional management training to meet the goal expressed in previous discussions?The contents of the required courses, including office administration if it is added, are not specifically set out in statute. If C.A.R. were to sponsor the change, is it appropriate to try anddefine the contents of the course as well? Such intent could be set out as “findings and declarations” in the legislation required to make the statutory change.Renewing Brokers. Changing the rules for new brokers alone can have only an incremental effect on the broker population – most new licensees are salespersons, and the renewal rate for brokers tends to be high. Interestingly, DRE reports that the most common length oflicensure for brokers subject to discipline is not the new licensee, but rather the broker that has been in practice for about a decade. Obviously, many factors in addition to education could be responsible, but a case could be made that supervision or management training is appropriate for more senior licensees as well.Existing law requires 45 hours of continuing education in order to renew a brokers' license. Existing law also “earmarks” 5 of the courses (15 hours) for required classes in agency, ethics, fair housing, trust fund management and (most recently) risk management. The new risk management course earmarked an additional3 hours for a required class and is effective in 2006 as the result of C.A.R. sponsored legislation. After the first renewal in which the classes are taken individually, the requirement may be satisfied by a “survey” or combined course that takes up only 8 of the required 45 hours. However, a total of 45 hours must still be completed.Should an additional class in Real Estate Office Management be required? If a new mandatory course is imposed, should it be in addition to the existing 5 classes, or should it replace one of the existing courses? For example, is the proposed course more important than the fair housing course; or should it replace the trust fund management course, or the agency course? If it simply earmarks an additional 3 hours, it will push the total mandatory course time to 18 hours.In the alternative, perhaps it should be coupled with the survey course. If, in fact, the target group is the generation of brokers on their second or subsequent renewal, the management course might be most effectively targeted by such a linkage. If the pre-license course requirements are also changed to require an office management component, then all the licensees taking classes for their first renewal will have had the pre- license course within the last 4 years.Strategic Considerations.C.A.R. is pressing the administration to clarify the “degree broker” exception to experiencerequirements (and effectively do away with ability of most broker applicants to use it). Will it dilute or undercut the effectiveness of the degree broker bill to also seek a new management class at the same time?In light of the fact that the new risk management course has only just become mandatory, is it premature to impose yet another mandatory course? Is it appropriate to wait and see the effect of the most recent change before imposing another?C.A.R. sponsored legislation to repeal the conditional salesperson license will become effective in September of 2007, thus requiring all salesperson applicants to complete real estate principles, real estate practices and an elective course priorto taking the license exam. Should this incline C.A.R. to hold off on new educational requirements at this time?Should C.A.R. sponsor a new management education requirement in 2007? If so, to whom shouldthe requirement apply?