Assuming it will be approved by the Governor, a new bill in the California legislature will change the educational requirements for all real estate licensees within the state. Assembly Bill 223 (McLeod), sponsored by the California Association of Realtors (CAR), provides that risk management shall be a subject covered as part of the existing continuing education requirements for real estate license renewal.

Current law provides that a real estate license is good for four years, and that a licensee must complete 45 hours of continuing education in order to renew that license. The first time a licensee renews, the 45 hours must include the following three-hour courses: (1) ethics and professional conduct, (2) agency relationships and duties, (3) trust fund accounting and handling, and (4) fair housing. For subsequent license renewals, applicants must complete a six-hour survey course, covering those four subjects, as part of the overall 45 hour requirement.

AB 223 provides that the first time a licensee applies for renewal, the applicant shall also have completed a three-hour course on risk management "that shall include, but need not be limited to, principles, practices, and procedures calculated to avoid errors and omissions in the practice of real estate licensed activities." This course is to be included within the required 45 hours of continuing education.

Second and subsequent renewals of the license will require the inclusion of an eight-hour survey course -- adding risk management to the survey course already required -- within the 45 hours.

AB 223 does not expand the 45-hour requirement to 48. It simply adds another required component within those 45 hours.

The bill requires that in 2006 the Department of Real Estate begin preparations for its implementation. The new requirement does not become operative, however, until July 1, 2007.

AB 223 came about as a result of proposals made by CAR's Errors and Omissions Task Force, a working group that completed its mission approximately a year ago. The E&O Task Force was formed in response to the dramatically increasing costs and decreasing availability of Errors and Omissions insurance for California real estate brokerages. Its recommendations ranged from legislative proposals, such as the one under discussion, to the use of new and revised forms, formation of a defense strategy committee, and the introduction of new courses and training procedures.

In the words of a CAR release, the proposal for AB 223 "grows out of the fact that the current market has undergone dramatic changes, and has created an explosive growth in numbers of new licensees, who may not be steeped in 'best practices.' It also gives existing licensees an opportunity to keep current with the increasingly complex demands of documentation, newly required disclosures and the newest options available to shield themselves from avoidable liability."

There was no registered opposition to AB 223. Who, after all, could be against such a bill? To be sure, it could be noted that improving risk management procedures -- and thereby reducing liability -- is something that benefits real estate agents and brokers; but this benefit is not at the expense of consumers. Consumers benefit, too, if the likelihood of an agent doing something wrong, or forgetting to do something right, is reduced. It is, as they say, a win-win.

AB 223 passed in the Assembly in May and in the Senate on August 18. It should be one of the less controversial issues to face the Governor this year.