Yacht and Ship Brokers in California

Division 3, Chapter 5, Article 2 of the California Harbors and Navigation Code deals with yacht and ship brokers. Section 700 names this the Yacht and Ship Brokers Act. Section 701 defines the terms “broker,” “salesman,” “yacht,” and “ship.”

Section 702 provides that all records of the department relating to yacht brokers and yacht salesmen are open to inspection by the public during regular office hours. Section 702.5 specifies that any declaration, license, or other record electronically generated or transmitted pursuant to this article must meet the requirements of a “record” under the Civil Code.

Section 703 allows the director, in accordance with the State Civil Service Act to select, employ, and fix the compensation of employees as may be necessary properly to administer this article, provided that no employee of the department is allowed to have an interest for financial or other personal gain in the business of a licensed broker as director, stockholder, officer, member, agent, salesman, or employee. The director is also authorized to engage in six specified activities.

Section 704 requires the commission to advise the department with respect to all matters relating to the administration of this act. The department is required to submit any proposed regulations or changes in regulations pertaining to this act for review and comment by the commission prior to enactment.

Section 705 allows the director to adopt a seal and any other device for use by the department as it may desire, which may be used to authenticate all papers and documents required by this article which are under the control of the department. Copies of all records and papers required by this article which are in the department’s office must be received in evidence in all cases, when certified under the hand and seal of the department, equally and with like effect as the originals.

Section 706 requires the Attorney General to act as the attorney for the department in all actions and proceedings pursuant to this article and render to the department opinions upon all questions of law arising under this article or in its administration.

Section 707 requires the division to publish on or before July 1 of each year a directory of licensed brokers and salespersons and post the directory on its Internet Web site. The division may publish additional information as it deems expedient and may also issue a periodical bulletin concerning affairs arising under the administration of this article.

Section 708 prohibits any person from engaging in the business of, act in the capacity of, advertise as, or assume to act as a broker or salesperson within this state without first obtaining a license under this article to do so. Only the person to whom a license is issued may perform or offer to perform any act subject to this article.

No fictitious name may be used by a broker in the conduct of any business for which a license is required under this article, unless a license bearing that fictitious name has been issued to the broker. Also, the department is prohibited from issuing a license under a fictitious business name which is the same as or similar to the fictitious business name on a license previously issued and in effect.

Section 709 prohibits a licensed broker or licensed salesman from practicing any fraud or deceit or make any fraudulent or grossly negligent representation with respect to any act for which a license is required under this article.

Section 710 specifies that the definitions of “broker” and “salesperson” do not include seven specified individuals or activities.

Section 711 states that no person engaged in the business or acting in the capacity of a licensed broker or salesman within this state is to bring or maintain any action in the courts of this state for the collection of compensation for the performance of any of the acts mentioned in this article without alleging and proving that he was a duly licensed broker or licensed salesman at the time the alleged cause of action arose.

Section 712 prohibits a licensed broker from employing or compensating, directly or indirectly, any person for performing any of the acts within the scope of this article who is not a licensed broker or salesman licensed under the broker employing or compensating him or her, except that a licensed broker may pay a commission to a broker of another state or country.

Section 713 explains that nothing contained in this article precludes a partnership from performing acts for which a broker’s license is required, provided every partner through whom the partnership so acts is a licensed broker.

Section 714 provides that a licensed broker who accepts funds from others in connection with any transaction subject to this article who does not place those funds into a neutral escrow depository in order to place the funds into a trust fund account maintained by the broker in some bank or recognized depository and retain all the funds in the account until the broker makes a disbursement of the funds in accordance with written instructions from the person entrusting the money. The written instructions also have to set forth the specific purposes for which the broker may use money deposited with him or her. The term “neutral escrow” is defined.

Section 715 specifies that, within one month after the closing of a transaction in which title to a yacht is conveyed from a seller to a purchaser through a licensed broker, the licensee is required to provide a closing statement in writing of the selling price including specified items.

Section 716 prohibits a broker from engaging in any transaction for which a license is required under this article without first obtaining a signed written authorization to do so from the broker’s principal. An authorization to sell must contain specified items. An offer to purchase must contain the description of the yacht including specified information.

Section 717 requires an application for a license as a broker to be made on forms prescribed by the department and be signed by the applicant. The application must be accompanied by the broker license examination fee.

Section 718 requires an application for a license as a salesman to be made on forms prescribed by the department and be signed by the applicant and by the employing broker. The application must be accompanied by the salesman license examination fee.

Section 719 requires a person to be deemed qualified to submit an application for a broker’s license if, as shown on the department’s records, the person meets all four of the specified requirements.

Proof of employment as a broker in another state or as an employee of a marine business selling new or used yachts in California must be in the form of all four specified items. If the applicant is a corporation, then the officer or officers of the corporation to be designated for a license as provided in this article must have the specified qualifications.

Section 720 authorizes the department to require proof as it deems advisable concerning the honesty, truthfulness, and good reputation of the applicant for a broker’s or salesperson’s license or of the officers of any corporation making application before the issuance of a broker’s license.

Section 721 requires the department to ascertain by written examination that the applicant, and in case of a partnership or corporation applicant for a broker’s license that an officer or partner through whom it proposes to act as a yacht broker, has eight specified requirements.

Section 722 requires the broker license first issued to a broker to be for a period of one year, and the license may be renewed for periods of two years upon filing of the required application and payment of the required fee.

Section 723 requires the salesman license first issued to a broker to be for a period of one year, and the license may be renewed for periods of two years upon filing of the required application and payment of the required fee. Applicants must also submit a recommendation of the broker who is to be his employer certifying that the applicant is honest, truthful, and of good reputation.

Section 724 provides that an application on the form prescribed by the department for the renewal of a broker or salesman license must be filed with the department prior to the last day of the period for which a previous license was issued, accompanied by the applicable renewal fee.

Section 725 allows a temporary license to be issued to salespersons under five specified conditions.

Section 726 provides that a person who fails to renew his license within two years after its expiration may not renew it. The person may apply and obtain a new license, in which case all of the provisions must apply as if such person were applying for a license for the first time.

Section 727 allows the department to issue a certificate of convenience to the executor or administrator of the estate of a deceased broker, or if no executor or administrator has been appointed, and until a certified copy of an order making an appointment is filed with the department, to the widow or other heir otherwise entitled to conduct the business of the deceased.

Section 728 states that every license issued to a corporation entitles one officer thereof on behalf of the corporation to engage in the business of broker without the payment of any further fee and such officer shall be designated in the application of the corporation for a license. There are specified rules for corporate licenses.

Section 729 says that every license issued to a partnership entitles one partner thereof on behalf of the partnership to engage in the business of yacht broker without the payment of any further fee and the partner is designated in the application of the partnership for a license. There are specified rules for partnership licenses.

Section 730 requires, before any broker’s license is issued or renewed by the department for any applicant, the applicant is required to procure, file, and maintain with the department a good and sufficient bond in the amount of $15,000 with a corporate surety duly licensed to do business within the State of California, and conditioned that the applicant shall not practice any fraud or deceit or make any fraudulent or grossly negligent representations that will cause a monetary loss to any person for whom the broker acts under this article.

Section 731 states that a cash deposit given instead of the bond required is to be held by the department during the life of the license and for a period of four years after the expiration of the license.

Section 732 allows the department to deny an application or temporarily suspend or permanently revoke the license of a broker or a salesperson at any time if the licensee, while a broker or salesperson, in performing or attempting to perform any of the acts within the scope of this article, has committed any of the fourteen specified acts.

Section 733 authorizes the department to deny an application or suspend or revoke the license of a yacht broker or yacht salesperson who, within four years immediately preceding, has committed any of the five specified acts.

Section 734 prohibits the department from denying, suspending, or revoking a license granted under this article without a hearing, except the department may suspend a license without a hearing for failure of a broker to maintain a bond as specified or for failure of a broker to make available to the department, for inspection, any records.

A broker whose license has been suspended for failure to make records available to the department for inspection, may request that an expedited hearing be held within 30 days of the suspension before an administrative law judge to appeal the suspension. Upon a showing of good cause to reinstate the license, the broker’s license is to be reinstated. If no good cause is found, the broker’s license may be revoked. The term “reasonable costs” is defined, including four specified items.

Section 735 requires every broker to maintain a definite place of business in this state as his principal office and may establish other branch offices throughout the state. Every broker maintaining more than one place of business within this state must procure an additional license for every branch office maintained by him. Every broker is required to keep the department informed at all times of the address of his principal and branch offices and any changes of address. Every broker’s license is to be prominently displayed in the broker’s principal office.

Section 735.1 requires a licensed broker to retain, for four years, copies of at least specified items. These records must be made available to the department for inspection upon request.

Section 735.2 requires to department to accept any electronic record or electronic or digital signature created, generated, sent, communicated, received, or stored by electronic means. The term “digital signature” is defined.

Section 736 requires the division to adopt regulations setting forth the fees to be charged and collected under this article. The fees must be sufficient to reimburse the division for the reasonable costs of implementing this article. A criminal records investigation fee is to be collected for both a salesperson’s and broker’s license in an amount determined by the Department of Justice. The specified fees must apply until the time that the division adopts regulations.

Section 737 requires the proceedings and hearings under this article to be conducted in accordance with existing law, including the right of judicial review. In addition to any other disciplinary action and in lieu of a separate action in civil court, the department, as part of a disciplinary hearing conducted by an administrative law judge, may impose a civil penalty.

Section 738 specifies that each violation of a section or subdivision of a section of this article is a misdemeanor punishable by a fine not exceeding $1,000, or by imprisonment in the county jail not exceeding one year.

Section 739 states that any person who violates any provision of this article, or any regulation adopted pursuant to this article, is liable for a penalty in an amount not less than $100 and not to exceed $1,500 for each separate violation. The penalties provided in this section are in addition to the remedies or penalties available under all other laws of this state.

Section 740 requires any action taken in the enforcement of this article to be commenced within three years of the department’s discovery of the facts constituting the grounds for that action.