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F I S C A L I M P A C T R E P O R T

SPONSOR Wallace

DATE TYPED 2/22/05

HB 312/aHGUAC

SHORT TITLE Real Estate Broker Licensing Requirements

SB

ANALYST McSherry

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

($150.0)

NFI Indeterminate Recurring Real Estate Re-

covery Fund

$150.0

NFI Indeterminate Recurring

Proposed Edu-

cation and

Training Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

House Bill 312 relates to HB 306 which extends the sunset date for the Real Estate Commission,

and HB 310 which proposes language regarding the appropriating role of the legislature.

HB312 partially duplicates and conflicts with SB 267.

SOURCES OF INFORMATION

LFC Files

Regulations and Licensing Department (RLD)

FOR THE LEGISLATIVE FINANCE COMMITTEE

Synopsis of Amendment

The proposed amendments to House Bill 312 would provide for:

1. revision, rather than elimination, of provisions for refunding of license fees.

2. revision of the annual premium for liability insurance and the requirements for con-

tinuing education.

3. the ability of the commission to adopt rules which would require professional liability

insurance with minimum coverage standards

4. authorization of the commission to facilitate a competitive bid process for insurance

carriers.

House Bill 312 -- Page 2

5. maximum annual premiums for insurance to not exceed two hundred dollars for an in-

dividual ($200) and not less than one hundred thousand dollars ($100,000) for individual

coverage and five hundred thousand for aggregate coverage limitation.

6. commission rules including option for licensees to purchase individual insurance poli-

cies, and not requiring insurance should the commission not be carrying the group policy.

7. those currently licensed as real estate salespersons to automatically be qualified for an

associate brokers license rather than have the possibility of being qualified for the associ-

ate brokers license.

8. the ability of the commission to limit or condition a license in addition to the already

provided power to revoke the license based on fraudulent activity or any other licensee

fall from established protocol.

9. removal of language specifying the legislature’s role in the appropriation of commis-

sion funds

10. the requirement that the commission promulgate rules regarding fund administration

Synopsis of Bill

House Bill 312 “Education and Training Fund,” proposes to phase out the salesperson category

of licensure and make “associate broker” the entry level real estate license in New Mexico effec-

tive January 1, 2006. The bill proposes to double, from 60 to 120, the classroom hours required

to be eligible to take the examination for an entry-level real estate license, which would be an

associate broker’s license under HB 312.

The bill provides for “grandfathering” of licensees who are salespersons on the effective date of

the Act to associate broker status with no additional education or examination requirements.

Proposed language would eliminate the existing “65 years of age and 20 years of continuous li-

censure” exemption from continuing education required for license renewal and give the Real

Estate Commission statutory authority to require criminal background checks as a condition of

licensure.

The term “transaction broker” is proposed to be incorporated into the real estate license law and

would allow licensees to provide real estate services to customers and clients without forming an

agency relationship.

The bill proposes the creation of an “Education and Training Fund,” by appropriating balances in

the Real Estate Recovery Fund in excess of $250 thousand (approximately $150,000 currently).

The bill provides that the appropriation would take place on July 1, 2005.

A “consent to service” provision for non-resident licensees is proposed.

Significant Issues

According to RLD, minor wording changes to sections of the law dealing with “basic licensee

duties” are proposed for the purpose of conforming to language in the Commission’s rules.

House Bill 312 -- Page 3

The Department asserts that proposed statute amendments are intended to “increase public pro-

tection” by:

(1) increasing educational standards for individuals entering the real estate business and

removing the existing exemption from continuing education for licensees who are 65 years of

age and have 20 years of continuous licensure

(2) allowing the Commission to require that all license applicants submit to a criminal

background check

(3) providing a “transaction broker” classification as a real estate brokerage alternative to

a formal agency relationship with a real estate brokerage

(4) using funds contributed by licensees to the Real Estate Recovery Fund to create a

program to improve real estate courses and instruction

(5) restoring Commission authority to serve process on non-resident licensees without

having to serve the licensee in his or her state of residence

(6) providing measures so that real estate license law and the Commission rules regarding

“basic licensee duties” are consistent.

PERFORMANCE IMPLICATIONS

According to the Regulations and Licensing Department, the amendments to the real estate li-

cense law proposed in HB 312 will enhance the Real Estate Commission’s ability to carry out its

public protection responsibilities.

FISCAL IMPLICATIONS

House Bill 312 provides for an appropriation of approximately $150,000 from the Real Estate

Recovery Fund to proposed new Education and Training Fund.

According to RLD, future revenues to the Education and Training Fund would be provided

through Real Estate Commission fees already authorized but not yet implemented on real estate:

course, sponsor, and instructor certifications, and gifts, grants, donations and bequests to the

Fund. The Department also suggests that interest income would be earned from investment of

the Fund. The proposed transfer will leave intact the $250,000 minimum balance in the Real Es-

tate Recovery Fund required by law.

Continuing Appropriations

This bill creates a new fund and provides for continuing appropriations. The LFC objects to in-

cluding continuing appropriation language in the statutory provisions for newly created funds.

Earmarking reduces the ability of the legislature to establish spending priorities.

ADMINISTRATIVE IMPLICATIONS

According to RLD, most of the changes proposed in HB 312 could be accomplished with exist-

ing staff and within existing budget; however, the Department states that it is possible that one

additional FTE could be required in future fiscal years to administer the Education and Training

Fund.

House Bill 312 -- Page 4

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

HB 312 duplicates, and conflicts, in part, with SB 267.

House Bill 312 relates to HB 306 which extends the sunset date for the Real Estate Commission,

and HB 310 which proposes language regarding the appropriating role of the legislature.

OTHER SUBSTANTIVE ISSUES

HB 310 amends all board and commission funds to specify the appropriating power of the legis-

lature; the last proposed amendment by the Real Estate Commission would remove language

specifying this power.

ALTERNATIVES

According to the Real Estate Commission, SB 267 would be an alternative to HB 312.

SB 267 was recently amended to include a provision that would cause the Senate Minority

Leader to serve as the governor of NM for every day that there is more than one real estate com-

missioner from any one county.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

By not enacting HB 312, there is still the option of enacting SB 267, or the option of leaving the

commission statute and the Commission would continue to operate as it is currently.

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