Real estate brokers: limited liability companies.

Existing law, the California Revised Uniform Limited Liability Company Act, authorizes a limited liability company to have any lawful purpose, except as specified. A limited liability company is an entity distinct from its members. Existing law authorizes a limited liability company to render services that may be lawfully rendered only pursuant to a license, certificate, or registration authorized by the Business and Professions Code, the Chiropractic Act, the Osteopathic Act, or the Yacht and Ship Brokers Act, if those provisions authorize a limited liability company to hold that license, certificate, or registration. Existing law prohibits the act from being construed to permit a limited liability company to render professional services, as defined. Under existing law, a limited liability company is a member-managed limited liability company unless the articles of organization contain a statement that the limited liability company is to be manager managed. Under existing law, the operating agreement governs, among other things, relations among the members as members and between the members and the limited liability company and the activities of the limited liability company. Existing law authorizes a written operating agreement to provide for the appointment of officers. Existing law, the Real Estate Law, provides for the licensure and regulation of real estate brokers by the Real Estate Commissioner, the chief officer of the Department of Real Estate within the Business, Consumer Services, and Housing Agency. Existing law authorizes a real estate broker license to be issued to an individual or a corporation. Existing law authorizes one officer, designated in the license application of a corporation, to engage in the business of real estate broker on behalf of the corporation. Existing law requires a licensed corporation to obtain an additional license to retain each additional officer to act under the corporation's license as a real estate broker. Existing law authorizes a corporation, in the event of death or incapacity of a sole designated broker-officer, to operate as a licensee without interruption under its existing license if notice and an application is provided to the department within a specified period of time of the death or incapacity. Under existing law, an officer through whom the corporation is licensed and who is not a licensed real estate broker, is authorized only to act as real estate broker for and on behalf of the corporation as an officer. Existing law does not preclude a designated corporate officer who has a separate individual license from conducting licensed activity for another entity if the entity for which they act is clearly disclosed and apparent to any member of the public using their services outside the corporation. Existing law requires a corporation to be licensed by the department through qualified broker-officers, as provided, to act as a real estate broker. Under existing law, an officer through whom the corporation is licensed need not maintain an individual broker's license, but is otherwise subject to all duties and responsibilities of a licensed real estate broker. Existing law requires applicants for licensure as a real estate broker and real estate broker licensees to pay application, licensure, and renewal fees, which are deposited in the Real Estate Fund, a continuously appropriated fund. Existing law also authorizes the commissioner to take disciplinary action against a real estate licensee, including the imposition of a monetary penalty, which is also deposited in the Real Estate Fund. A willful violation of the law is a crime. This bill would authorize a limited liability company to be licensed as a real estate broker. The bill would require the limited liability company to obtain an additional license to retain each additional member, manager, or officer to act under the company's license as a real estate broker. The bill would, in the event of death or incapacity of a sole designated broker-member, broker-manager, or broker-officer, authorize a limited liability company to operate as a licensee without interruption under its existing license if notice and an application is filed with the department within a specified time of the event. Under the bill, a member, manager, or officer through whom the limited liability company is licensed and who is not a licensed real estate broker, is authorized only to act as a real estate broker for and on behalf of the company as a member, manager, or officer. The bill would not preclude a designated member, manager, or officer who has a separate individual license from conducting licensed activity for another entity if the entity for which they act is clearly disclosed and apparent to any member of the public using their services outside the limited liability company. The bill would require the limited liability company to be licensed by the department through qualified broker-officers, as provided, to act as a real estate broker. The bill would provide that a member, manager, or officer of a limited liability company through whom the limited liability company is licenced to act need not maintain an individual broker's license, but is otherwise subject to all duties and responsibilities of a licensed broker. The bill would make various other conforming changes in this regard. Because new application, licensure, and renewal fees for limited liability companies would be deposited in the Real Estate Fund, a continuously appropriated fund, the bill would make an appropriation. However, the bill would exclude money in the Real Estate Fund attributable to administrative fines, civil penalties, and criminal penalties imposed by the department against a limited liability company broker, or attributable to cost recovery in actions or settlements, from being continuously appropriated, and would instead make that money subject to appropriation by the Legislature. Existing law, the Real Estate Recovery Program, authorizes an aggrieved person, who obtains a final judgment, including a criminal restitution order, or an arbitration award based on a defendant's acts for which a real estate license was required, to apply to the bureau for payment from the Consumer Recovery Account, as specified. Existing law requires the license of a broker or salesperson to be automatically suspended when the commissioner pays from the Consumer Recovery Account any amount in the settlement of a claim or toward the satisfaction of a judgment against that broker or salesperson. Existing law requires a licensed broker, a licensed salesperson, or a person holding a prepaid rental listing service license to pay fees in addition to certain fees for obtaining or renewing their respective license, as specified, when, on June 30 of any year, the balance remaining in the Consumer Recovery Account, a continuously appropriated account in the Real Estate Fund, is less than $200,000. This bill would require, as a condition of the issuance, reinstatement, reactivation, or continued valid use of a real estate broker license, a limited liability company to maintain a policy or policies of insurance against liability imposed on or against it by law for damages arising out of claims based upon acts, errors, or omissions arising out of conduct subject to licensure under the Real Estate Law, as specified. The bill would provide that this insurance requirement does not in any way supersede or mitigate the requirements of the Real Estate Recovery Program described above. The bill would require, upon the dissolution and winding up of a limited liability company licensed as a real estate broker, the company to maintain or obtain an extended reporting period endorsement or equivalent provision, as specified, for a minimum of 3 years. The bill would require the limited liability company real estate broker applicant or licensee, and the limited liability company's insurer or surplus line broker, as specified, to submit to the commissioner certain information and documentation related to these insurance requirements. The bill would authorize the commissioner to post to the limited liability company licensee's license record on the internet specified information about the licensee's insurance. The bill would authorize the commissioner to temporarily suspend or permanently revoke the license of a licensee for failing to maintain the insurance required by the above-described provisions. Because a willful violation of the law and other related real estate provisions by a limited liability company would be a crime, the bill would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.