REPORT TITLE:
Real Estate


DESCRIPTION:
Simplifies registration of real estate brokers and salespersons.
Provides prelicensing examination options.  Authorizes licensing
of limited liability companies.  (HB353 HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        353
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO REAL ESTATE BROKERS AND SALESPERSONS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The purpose of this Act is to:
 
 2      (1)  Simplify and deregulate the certification of real
 
 3           estate continuing education instructors;
 
 4      (2)  Provide an option prior to expending time and funds for
 
 5           prelicensing education and examination requirements for
 
 6           a candidate who may have a questionable background
 
 7           experience that may cause a denial of licensure;
 
 8      (3)  Simplify and clarify prelicensing broker requirements
 
 9           including updating to present standards among the other
 
10           states and providing more fairness to specialty areas;
 
11      (4)  Provide for other options in the use of the real estate
 
12           prelicensing examination which will provide more
 
13           options to candidates and licensees including
 
14           recognizing the auditor's recommendation to provide
 
15           equivalency to out-of-state licensees for passage of
 
16           the other state's uniform section of the examination;
 
17      (5)  Ensure that real estate licensees, who renew licenses
 
18           on time, will receive notice of relicensure and new
 
19           license by the start of the new licensing period;
 
20      (6)  Simplify, decrease, and clarify the procedures for
 

 
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 1           restoration of forfeited licenses including adding
 
 2           options and opening up the restoration periods;
 
 3      (7)  Deregulate the displaying of the licenses of associated
 
 4           real estate salespersons;
 
 5      (8)  Deregulate real estate brokers' branch offices;
 
 6      (9)  Repeal the requirement that real estate site offices be
 
 7           registered;
 
 8     (10)  Ensure that the real estate recovery fund requirements
 
 9           do not conflict with bankruptcy laws; and
 
10     (11)  Simplify and clarify the registration requirements
 
11           applicable to condominium hotel operators.
 
12      SECTION 2.  Section 467-1, Hawaii Revised Statutes, is
 
13 amended by amending the definition of "continuing education" to
 
14 read as follows:
 
15      ""Continuing education" means a course:
 
16      (1)  With a curriculum level above the current minimal
 
17           competency entry level in any of the following areas:
 
18           (A)  Protection of the general public in its real
 
19                estate transactions;
 
20           (B)  Consumer protection; or
 
21           (C)  Improvement of the licensee's competency and
 
22                professional standards and practice; and
 
23      (2)  That is:
 

 
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 1           (A)  Approved by the commission and delivered by an
 
 2                [approved continuing education] instructor[;]
 
 3                certified by an approved continuing education
 
 4                provider;
 
 5           (B)  A national course taught by a nationally certified
 
 6                instructor certified by the National Association
 
 7                of Realtors or its affiliates; or
 
 8           (C)  A national course taught by a nationally certified
 
 9                instructor certified by, including but not limited
 
10                to, the Building Owners and Managers Association,
 
11                the Community Associations Institute, or other
 
12                national organization approved by the commission;
 
13 provided that the continuing education course is offered by an
 
14 approved continuing education provider.  Continuing education
 
15 courses shall not require an examination."
 
16      SECTION 3.  Section 467-8, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "467-8  Prerequisites for license, registration, or
 
19 certificate.  (a)  No license, registration, or certificate under
 
20 this chapter shall be issued to:
 
21      (1)  Any individual applying for a real estate broker or
 
22           salesperson license who does not satisfy the
 
23           requirements set forth in section 467-9.5;
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (2)  Any individual applying for a real estate broker or
 
 2           salesperson license unless the individual has
 
 3           demonstrated by passing with a grade satisfactory to
 
 4           the commission an examination appropriate to the
 
 5           license sought that the individual has a reasonable
 
 6           knowledge of:
 
 7           (A)  Estates, interests, and rights in real property;
 
 8           (B)  The documents or acts or occurrences by which
 
 9                property is transferred or otherwise affected;
 
10           (C)  The rights and duties of an agent;
 
11           (D)  The laws of the State relating to real estate
 
12                brokers and salespersons; and
 
13           (E)  Other subjects that the commission determines to
 
14                be essential for the protection of the general
 
15                public in its real estate transactions;
 
16      (3)  Any person who does not possess a reputation for or
 
17           record of competency, honesty, truthfulness, financial
 
18           integrity, and fair dealing;
 
19      (4)  Any partnership unless the real estate brokerage
 
20           business thereof is under the direct management of a
 
21           principal broker who is a general partner or employee
 
22           thereof and holds a current active real estate broker's
 
23           license;
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (5)  Any corporation unless the real estate brokerage
 
 2           business thereof is under the direct management of a
 
 3           principal broker who is an officer or employee thereof
 
 4           and holds a current active real estate broker's
 
 5           license;
 
 6      (6)  Any individual applying for a real estate broker's
 
 7           license who does not have a current [active or
 
 8           inactive] Hawaii real estate salesperson's license;
 
 9           [or] 
 
10      (7)  Any person with a trade name, partnership, limited
 
11           liability company, or corporation that is not currently
 
12           registered with the business registration division of
 
13           the department of commerce and consumer affairs;
 
14           provided that no real estate salesperson's license
 
15           shall be approved or issued with a trade name[.]; or
 
16      (8)  Any limited liability company unless the real estate
 
17           brokerage business is under the direct management of a
 
18           principal broker who is a member of a member-managed
 
19           limited liability company or a manager of a manager-
 
20           managed limited liability company or employee and holds
 
21           a current active real estate broker's license.
 
22      (b)  Prior to submitting to prelicensing education or
 
23 examination requirements, an individual candidate may request
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 that the commission consider a preliminary decision as to whether
 
 2 the individual candidate for a real estate license will be denied
 
 3 a real estate license pursuant to section 467-8(a)(3).  The
 
 4 individual candidate shall submit a completed application, all
 
 5 information requested by the commission, and the nonrefundable
 
 6 application fee as provided in rules adopted by the director
 
 7 pursuant to chapter 91.  The preliminary decision shall provide
 
 8 advisory guidance, shall not be construed as binding, and shall
 
 9 not be subject to appeal.  The individual candidate seeking a
 
10 preliminary decision shall not be considered an applicant for
 
11 licensure.  A preliminary decision that is unfavorable to the
 
12 individual shall not prevent the individual from submitting a
 
13 complete license application and fees after successful completion
 
14 of the prelicensing requirements."
 
15      SECTION 4.  Section 467-9.5, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "467-9.5  Prerequisites for examination.  (a)  No
 
18 individual shall be eligible for the licensing examination
 
19 unless[:] the individual is:
 
20      (1)  [The individual is a] A citizen of the United States,
 
21           or an alien who is authorized to work in the United
 
22           States, and of the age of majority;
 
23      (2)  [The individual applying] Applying for the real estate
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           salesperson examination and has satisfactorily
 
 2           completed a commission-approved prelicensing course for
 
 3           real estate salesperson candidates, which includes real
 
 4           estate principles[,] or its equivalent[, approved or
 
 5           accredited] as determined by the commission;
 
 6      (3)  [The individual applying] Applying for the real estate
 
 7           broker examination [has satisfactorily completed a
 
 8           prelicensing course for real estate broker candidates,
 
 9           or its equivalent, approved or accredited by the
 
10           commission;
 
11      (4)  The individual applying for the real estate broker
 
12           examination] and:
 
13           (A)  Is currently licensed as [an active or inactive] a
 
14                Hawaii real estate salesperson; [and
 
15           (B)  Has been engaged in the real estate business as a
 
16                licensed Hawaii real estate salesperson as
 
17                determined by the commission for not less than a
 
18                period of two years on a full-time basis and has
 
19                practical experience in the real estate field as
 
20                determined by the commission.
 
21           The commission may waive a portion of the required
 
22           experience, if the individual has had other experience
 
23           or education in real estate, which, in the opinion of
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           the commission, is equivalent to the required
 
 2           experience, to be established by detailed explanatory
 
 3           affidavit or in any other manner as may be determined
 
 4           by the commission; or
 
 5      (5)] (B)  Has satisfactorily completed a commission-approved
 
 6                prelicensing course for real estate broker
 
 7                candidates, or its equivalent as determined by the
 
 8                commission; and
 
 9           (C)  Has experience as a full-time state-licensed real
 
10                estate salesperson associated with a Hawaii-based
 
11                real estate broker for the three-year period
 
12                immediately prior to the licensing examination and
 
13                has practical real estate salesperson experience,
 
14                as certified by the principal broker or principal
 
15                brokers during the subject period.  The candidate
 
16                shall secure commission approval of the
 
17                candidate's experience certification application
 
18                prior to the date of the examination.  Subject to
 
19                commission approval, a candidate may request
 
20                equivalency for a portion of the experience
 
21                requirement based on real estate license
 
22                experience in another state, as determined by the
 
23                commission; or
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           (4)  [Unless specifically] Specifically authorized by
 
 2                the commission.
 
 3      (b)  Each individual shall certify on the application for
 
 4 examination that the prerequisites set forth in this section have
 
 5 been or will be satisfied prior to the date of examination.  The
 
 6 examination score of any individual who has taken the examination
 
 7 without having satisfied the prerequisites set forth in this
 
 8 section prior to the date of examination shall be voided."
 
 9      SECTION 5.  Section 467-9.6, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "467-9.6  Examination.  (a)  Every applicant for a real
 
12 estate examination shall file an application with either the
 
13 commission or the testing service agency designated by the
 
14 commission pursuant to rules of the commission to provide the
 
15 testing service.  The application shall be in a form prescribed
 
16 by the commission and shall include a certification statement
 
17 that the applicant has fulfilled or will fulfill by the date of
 
18 the examination, the prerequisites for examination.  Every
 
19 application shall be accompanied by an examination fee as
 
20 determined by the commission by rules adopted pursuant to
 
21 chapters 26 and 91.  Applicants shall apply for real estate
 
22 licenses in the manner prescribed by the commission. 
 
23      (b)  The commission may prescribe the passage of a specific
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 section or sections of the examination for different purposes,
 
 2 including the following:
 
 3      (1)  A current out-of-state licensee requesting an
 
 4           equivalency to the uniform part of the state
 
 5           prelicensing examination based on previously passing
 
 6           the uniform portion of another state's licensing
 
 7           examination or equivalent as determined by the
 
 8           commission.  The approved equivalency will be for the
 
 9           respective examination passed in the other state;
 
10      (2)  Equivalency to continuing education requirements as
 
11           determined by the commission;
 
12      (3)  Restoration of forfeited license; and
 
13      (4)  Reinstatement of license due to disciplinary action, as
 
14           determined by the commission;
 
15 subject to the contract with the testing service and submission
 
16 of application and approval prior to application for the
 
17 examination."
 
18      SECTION 6.  Section 467-11, Hawaii Revised Statutes, is
 
19 amended by amending subsections (b) and (c) to read as follows:
 
20      "(b)  The biennial renewal fee [shall be paid to] and
 
21 completed renewal application shall be submitted to the
 
22 department of commerce and consumer affairs on or before
 
23 [December 31 of each even-numbered year.] the commission
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 prescribed deadline prior to the expiration date of the license.
 
 2 All real estate licenses expire on December 31 of an even-
 
 3 numbered year.  Failure, neglect, or refusal of any duly licensed
 
 4 real estate broker or real estate salesperson to pay the biennial
 
 5 renewal fee and to submit a completed renewal application shall
 
 6 constitute a forfeiture of the license [of the broker or
 
 7 salesperson.] as of January 1 of the subsequent odd-numbered
 
 8 year.  The forfeited license [of the broker or salesperson] may
 
 9 be restored upon [written] approval of a completed application
 
10 [therefor,]; payment of the delinquent fees and the penalty fees
 
11 as provided in the rules adopted by the director of commerce and
 
12 consumer affairs pursuant to chapter 91[, and]; satisfaction of
 
13 the applicable requirements in sections 467-8, 467-9, 467-9.5,
 
14 and 467-11.5; and prior to submission of the completed
 
15 application, satisfaction of [such other requirements as the
 
16 commission may impose as a condition to restoration.] the
 
17 following as applicable:
 
18      (1)  For a license forfeited for more than one year but less
 
19           than four years, the successful completion of the
 
20           commission-approved course or courses or passage of the
 
21           commission-approved examination; or
 
22      (2)  For a license forfeited for more than four years, the
 
23           successful passage of the commission-approved
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           examination.
 
 2      (c)  A real estate broker or real estate salesperson may
 
 3 place [that broker's or salesperson's] that person's license on
 
 4 an inactive status by filing an application and setting forth
 
 5 such information as may be prescribed or required by the
 
 6 commission, and such license [may] shall be renewed [biennially]
 
 7 on or before [December 31 of each even-numbered year] the
 
 8 commission prescribed deadline prior to the expiration date of
 
 9 the license by payment of the [proper] biennial renewal fee[.]
 
10 and submission of a completed renewal application.  A real estate
 
11 broker or real estate salesperson may reactivate that person's
 
12 inactive license by satisfying section 467-11.5, filing an
 
13 application and setting forth such information as may be
 
14 prescribed or required by the commission, and payment of the
 
15 proper fee."
 
16      SECTION 7.  Section 467-12, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "467-12  Place of business and posting of license.(a)  A
 
19 licensed real estate broker shall have and maintain a definite
 
20 place of business in the State, in compliance with this chapter
 
21 and the rules of the commission, and shall display therein the
 
22 real estate broker's license and upon request make available any
 
23 associating real estate salesperson's license.
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (b)  No real estate broker's branch office shall operate
 
 2 without a [license] registration previously obtained under and in
 
 3 compliance with this chapter and the rules of the commission.
 
 4      [(c)  A real estate broker's site office shall be registered
 
 5 with the commission and in compliance with this chapter and the
 
 6 rules of the commission.]"
 
 7      SECTION 8.  Section 467-18, Hawaii Revised Statutes, is
 
 8 amended as follows:
 
 9      1.   By amending subsection (c) to read:
 
10      "(c)  The court shall proceed upon the application in a
 
11 summary manner[,] and, upon the hearing thereof, the aggrieved
 
12 person shall be required to show:
 
13      (1)  The person is not a spouse of debtor, or the personal
 
14           representative of such spouse[.];
 
15      (2)  The person has complied with all the requirements of
 
16           this section[.];
 
17      (3)  The person has obtained a judgment as set out in
 
18           subsection (b) of this section, stating the amount
 
19           thereof and the amount owing thereon at the date of the
 
20           application[.];
 
21      (4)  The person has made all reasonable searches and
 
22           inquiries to ascertain whether the judgment debtor is
 
23           possessed of real or personal property or other assets,
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           liable to be sold or applied in satisfaction of the
 
 2           judgment[.];
 
 3      (5)  That by such search the person has discovered no
 
 4           personal or real property or other assets liable to be
 
 5           sold or applied, or that the person has discovered
 
 6           certain of them, describing them, owned by the judgment
 
 7           debtor and liable to be so applied, and that the person
 
 8           has taken all necessary action and proceedings for the
 
 9           realization thereof, and that the amount thereby
 
10           realized was insufficient to satisfy the judgment,
 
11           stating the amount so realized and the balance
 
12           remaining due on the judgment after application of the
 
13           amount realized[.]; and
 
14      (6)  That where the real estate broker or real estate
 
15           salesperson is a debtor in a bankruptcy proceeding, the
 
16           aggrieved person has obtained an order from the
 
17           bankruptcy court declaring the judgment against the
 
18           real estate broker or real estate salesperson to be
 
19           non-dischargeable."
 
20      2.   By amending subsection (e) to read:
 
21      "(e)  Should the commission pay from the real estate
 
22 recovery fund any amount in settlement of a claim or toward
 
23 satisfaction of a judgment against a licensed real estate broker
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 or real estate salesperson, the license of the real estate broker
 
 2 or real estate salesperson shall be automatically terminated upon
 
 3 the issuance of a court order authorizing payment from the real
 
 4 estate recovery fund.  No real estate broker or real estate
 
 5 salesperson shall be eligible to receive a new license until the
 
 6 expiration of at least five years from the effective date of the
 
 7 termination of the license and until the terminated real estate
 
 8 broker or real estate salesperson has repaid in full, plus
 
 9 interest at the rate provided for in section 478-3, the amount
 
10 paid from the real estate recovery fund on the terminated real
 
11 estate broker's or real estate salesperson's account.  [A
 
12 discharge in bankruptcy shall not relieve a person from the
 
13 penalties and disabilities provided in this subsection.]"
 
14      SECTION 9.  Section 467-30, Hawaii Revised Statutes, is
 
15 amended by amending subsection (b) to read as follows:
 
16      "(b)  All condominium hotel operators shall register with
 
17 the commission as a sole proprietor, partnership, limited
 
18 liability company, or corporation and shall:
 
19      (1)  Obtain a license as a real estate broker in compliance
 
20           with this chapter and the rules of the commission;
 
21      (2)  Register [on an annual basis on or before December 31
 
22           of each year as a condominium hotel operator with the
 
23           commission; provided that after December 31, 1996,
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           registration shall be on a biennial basis] by
 
 2           submitting a completed commission application form with
 
 3           the commission requested information prior to
 
 4           conducting condominium hotel activity, and reregister
 
 5           on or before [December 31 of each even-numbered year.]
 
 6           the commission prescribed deadline prior to the
 
 7           registration expiration date.  The registration and re-
 
 8           registration shall expire on December 31 of an even-
 
 9           numbered year.  Registration information shall include
 
10           but not be limited to the number of apartments managed
 
11           for others as well as the number of apartments owned by
 
12           the condominium hotel operator.  Any operator failing
 
13           to register with the commission shall be subject to a
 
14           fine not exceeding an amount equal to $25 multiplied by
 
15           the aggregate number of apartments being utilized as a
 
16           condominium hotel.  Each month or fraction of a month
 
17           of noncompliance shall be deemed a new and separate
 
18           violation;
 
19      (3)  [Provide evidence of a current] Obtain and keep current
 
20           a fidelity bond [or a certification statement from an
 
21           insurance representative of an] from an insurance
 
22           company registered with the insurance division of the
 
23           department of commerce and consumer affairs [to the
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           commission certifying that the bond is in effect and
 
 2           meets the requirement of this section and the rules
 
 3           adopted by the commission, and that the].  The fidelity
 
 4           bond [is] shall be in an amount equal to $500
 
 5           multiplied by the aggregate number of apartments in the
 
 6           condominium hotel operation; provided that the minimum
 
 7           amount of the fidelity bond required by this paragraph
 
 8           shall not be less than $20,000 nor greater than
 
 9           $100,000.  The aggregate number of apartments excludes
 
10           the number of apartments owned by the condominium hotel
 
11           operator either as a sole proprietor, partnership,
 
12           limited liability company, or corporation or those
 
13           apartments included in a registered time share plan
 
14           managed by a registered time share plan manager.  The
 
15           bond shall cover all of the condominium hotel
 
16           operator's employees handling or having custody and
 
17           control of either the condominium hotel operator's or
 
18           the apartment owner's funds, or both.  Upon request by
 
19           the commission, the condominium hotel operator shall
 
20           provide evidence of a current fidelity bond or a
 
21           certification statement from an insurance
 
22           representative of an insurance company registered with
 
23           the insurance division of the department of commerce
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           and consumer affairs certifying that the fidelity bond
 
 2           is in effect and meets the requirements of this section
 
 3           and the rules adopted by the commission.  The
 
 4           commission may adopt rules establishing conditions and
 
 5           terms by which it may grant an exemption or bond
 
 6           alternative, or permit deductibles.  No fidelity bond
 
 7           exemption shall be granted to a condominium hotel
 
 8           operator who is exempt from paragraph (1); and
 
 9      (4)  Pay an application fee and an initial registration or a
 
10           re-registration fee as provided in rules adopted by the
 
11           director of commerce and consumer affairs pursuant to
 
12           chapter 91, which fees shall be deposited with the
 
13           director of commerce and consumer affairs to the credit
 
14           of the compliance resolution fund established pursuant
 
15           to section 26-9(o);
 
16 provided that this subsection shall not apply to persons who are
 
17 subject to section 467-2."
 
18      SECTION 10.  Until such time as fees are adopted by the
 
19 director of commerce and consumer affairs pursuant to chapter 91,
 
20 the fee assessed for any new application as the result of this
 
21 Act shall be the lowest non-renewable application fee for
 
22 licensure presently assessed.
 
23      SECTION 11.  Statutory material to be repealed is bracketed.
 

 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 New statutory material is underscored.
 
 2      SECTION 12.  This Act shall take effect upon its approval.