How Will California’s Senate Bill 53 Affect a Broker’s In-House Escrow Services On July 1, 2012?
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Learn how California’s Senate Bill 53 will change escrow law and how broker’s in-house escrow services must adapt. A number of real estate brokers in California figured out a long time ago that they could make more money by utilizing their own in-house escrow services (i.e. “broker-controlled” or “non-independent” escrows) instead of turning business over to more traditional “independent” escrow companies.
Unlike traditional independent escrow companies, real estate brokers in California have always been exempt from California’s “Escrow Law” (California Financial Code Section 17000 et seq.) if the escrow services offered related to one of their transactions (and if the broker was performing an act for which a license was required).
Being exempt from the Escrow Law meant that a broker with an in-house escrow division was free from the various regulatory requirements required by the Department of Corporations (“DOC”), including having to post a bond, endure unannounced audits by the DOC, having to meet financial liquidity requirements, or having to conduct background checks on its escrow service employees.
Many experts are now wondering what, if anything, will really change come July 1, 2012. On October 9, 2011, Governor Brown signed a new law set to take effect on July 1, 2012 (SB 53) which places some new requirements on brokers who run their own in-house escrow services. Starting on July 1st, brokers who conduct or control their own escrow services on five or more occasions per year, or whose escrow activities equal at least $1,000,000.00 per year, must file a report with the Department of Real Estate (“DRE”) providing specifics on the escrow services they provide.
The exemptions mentioned above, and many others, remain unaffected. While it is true that SB 53 also provides the DRE with authority to promulgate requirements regarding the new law’s implementation, as it stands now many experts have concluded that not much will really change from either the broker’s or customer’s perspectives.
Whether this is just the first step by the State of California to bring such brokers’ escrow services more into line with those subject to the Escrow Law, or whether it is simply a way for the DRE to collect data regarding the services offered by its licensed professionals remains to be seen.
What is certain is that despite the exemptions, brokers who maintain in-house escrow services would be wise to comply in most respects with the requirements set forth in the Escrow Law.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
ABOUT THE AUTHOR: Michael B. Kushner
Michael B. Kushner is the senior partner at The Kushner Law Firm, PC located in Orange County, California. Mr. Kushner focuses on business and real estate litigation, as well as on the firm’s extensive transactional practice. In addition to authoring frequent articles and blogs on a variety of business and real estate issues, Mr. Kushner is well known for his live lectures, which are lauded by top business executives as thought provoking, dynamic, and relevant.
Copyright Kushner Carlson, PC
More information about Kushner Carlson, PC
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
Being exempt from the Escrow Law meant that a broker with an in-house escrow division was free from the various regulatory requirements required by the Department of Corporations (“DOC”), including having to post a bond, endure unannounced audits by the DOC, having to meet financial liquidity requirements, or having to conduct background checks on its escrow service employees.
Many experts are now wondering what, if anything, will really change come July 1, 2012. On October 9, 2011, Governor Brown signed a new law set to take effect on July 1, 2012 (SB 53) which places some new requirements on brokers who run their own in-house escrow services. Starting on July 1st, brokers who conduct or control their own escrow services on five or more occasions per year, or whose escrow activities equal at least $1,000,000.00 per year, must file a report with the Department of Real Estate (“DRE”) providing specifics on the escrow services they provide.
The exemptions mentioned above, and many others, remain unaffected. While it is true that SB 53 also provides the DRE with authority to promulgate requirements regarding the new law’s implementation, as it stands now many experts have concluded that not much will really change from either the broker’s or customer’s perspectives.
Whether this is just the first step by the State of California to bring such brokers’ escrow services more into line with those subject to the Escrow Law, or whether it is simply a way for the DRE to collect data regarding the services offered by its licensed professionals remains to be seen.
What is certain is that despite the exemptions, brokers who maintain in-house escrow services would be wise to comply in most respects with the requirements set forth in the Escrow Law.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
ABOUT THE AUTHOR: Michael B. Kushner
Michael B. Kushner is the senior partner at The Kushner Law Firm, PC located in Orange County, California. Mr. Kushner focuses on business and real estate litigation, as well as on the firm’s extensive transactional practice. In addition to authoring frequent articles and blogs on a variety of business and real estate issues, Mr. Kushner is well known for his live lectures, which are lauded by top business executives as thought provoking, dynamic, and relevant.
Copyright Kushner Carlson, PC
More information about Kushner Carlson, PC
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
