8:00 a.m. - 11:30 a.m. Thursday, May 5th, 2011 Sacramento Convention Center Room 308/309/310
Mission Statement The Housing Committee is a Policy Committee. Its mission is to develop C.A.R.'s housing policy. It has original jurisdiction to evaluate housing legislation and regulation in the following issue areas: Common Interest Developments; Fair Housing/Equal Opportunity; Housing Policy; Manufactured Housing; Multifamily Housing; and Property Management.
Presiding: Allen Okamoto, Chair Allen Chiang, Vice Chair
Issue Chairs (ICs): Janet Halliburton, Common Interest Development Lidia Yun, Fair Housing/ Equal Opportunity Sandy Darling, Housing Policy; NAR Liaison (Equal Opportunity & Cultural Diversity) Bruce Bourdon, Manufactured Housing Larry Black, Multi-Family Housing Jay Avirom, Property Management
Executive Committee Liaison: Mike Riley
NAR Liaison: Jim Hamilton (Housing Opportunity)
Staff Coordinator: Dave Milton
Federal Issues Coordinator: Matt Roberts
I. Welcome and Opening Remarks - Allen Okamoto, Chair
II. Reporting Items A. CID - Janet Halliburton, Issues Chair (IC) 1. Sponsored Bills AB 771 (Butler) HOA Fees Imposed by Third Party Agents- Under the Davis-Stirling Act (Civil Code Section 1368), sellers of residential real property in common interest developments (CIDs) are required to provide basic information about the structure, operation and management of the homeowners association (HOA) that operates the CID. This information can only come from the HOA. The law requires the HOA to provide the specified documents and materials within a designated timeframe and limits the requesting party’s cost for such services to "reasonable fees" based upon the HOA’s actual costs. It has been documented that 3rd party companies and agents are charging fees as high as $1000 for this service where the costs previously assessed were only $75 to $250 when provided directly by the HOA. This has created difficulties when closing these real estate transactions. Civil Code Section 1368 does not address the use by HOAs of third party companies or agents. As amended AB 771 will revise Civil Code Section 1368 to clearly state that
only reasonable fees for only the documents required to be disclosed by this section can be charged at the time they are provided. A statutory form will also be created to more clearly delineate exactly when disclosures must be made pursuant to the requirements of this section and prohibit the bundling of any other fees with these charges.
SB 150 (Correa) CID Right-to-Rent- SB 150 (Correa) is intended to ensure that if an owner of a unit in a common interest development (CID) has the right to rent that unit at the time he or she purchases it, that expectation is preserved as long as he or she owns the unit, irrespective of any subsequent revision of governance provisions effecting the right to rent. The central theme of the bill is to protect the legitimate expectation of a homeowner, which existed at the time he or she purchased a dwelling in a CID, that he or she could rent the unit/home in the future. SB 150, as did AB 2259 (Mullin) in 2008 and AB 1927(Knight) in 2010 (both vetoed by Governor Schwarzenegger), is designed to protect this fundamental right of homeownership.
2. Bills of Others AB 805 (Torres) Recodification & Simplification of the Davis-Stirling Act- Revises, recasts, re-numbers and reorganizes the Davis Stirling Common Interest Development (CID) Act (Act) which governs CIDs. The goal of the sponsor, the California Law Revision Commission, is to simplify the provisons of this act for the residents of CIDs, often charged with its implementation as a member of a home owners association (HOA) board charged with administering the operations of a CID. A sampling of its proposed revisions: 1) Related provisions grouped together in a logical order. 2) Sections that are unclear or confusing are clarified. 3) Sections that are excessively long are divided into more readable, shorter sections. 4) Procedures for amending a declaration are better coordinated. 5) Process for amending a condominium plan is clarified. 6) Outdated references to the Corporations Code are eliminated. 7) All provisions that limit an HOA's ability to restrict certain specified uses of a separate interest are combined into one section. 8) All HOAs will be required to provide an advance notice of a board meeting, including an agenda, regardless of whether the governing documents provide for a fixed meeting place and time. 9) Any meeting in which there are enough board members present or participating to establish a quorum are subjected to governing board meeting procedural requirements. 10) Adds governing documents to the list of HOA records that a member can request to inspect, and organizes all annual reporting requirements of a CID in one section. 11) If enacted, becomes effective on January 1, 2014. Position: Favor Status: Assembly Judiciary Committee
AB 806 (Torres) CID Law (Davis-Stirling Act)- Makes conforming changes to all non-Civil Code sections of the law that are cross-referenced to the Civil Code provisions of the Davis-Stirling Act. It become effective only upon enactment of AB 805, and has the same effective date of January 1, 2014. Position: Favor Status: Assembly Judiciary Committee
SB 561 (Corbett) Collection Process for Delinquent Assessments- Existing law authorizes an HOA to collect assessments from owners of a unit in a CID and requires any payments towards assessment debt to be applied first to the assessments owed. SB 561 would clarify that a debt collector shall be subject to specified provisions of the Davis-Stirling Act (Act), including the requirement regarding application of payments, and state that any waiver by a homeowner of his or her rights is void as contrary to public policy. It also provides that an association shall not assign, sell, or pledge its right to collect payment or assessments unless the third party agrees to collect those assessments in the manner set forth in the Act. Position: Watch Status: Senate Floor
SB 563 (Transportation & Housing Committee) Electronic Participation in HOA Board Meetings- Proposes to prohibit a common interest development (CID) board from conducting meetings via e-mail, reduce the notice period for CID board meetings held solely in executive session from four days to two, and provides standards for teleconferencing CID board meetings. It redefines "meeting" to include any item of business that is within the authority of the board, as opposed to items scheduled to be heard by the board. The bill also provides that the board of directors shall not take action on any item of business outside of a meeting and that a majority of the board shall not hear, discuss, or deliberate on any item of business outside of a meeting. Position: Favor Status: Senate Floor
3. Federal Issue- Update of FHA and GSE’s Condo Financing Requirements The FHA has extended their 2010 temporary condo requirements until the end of June 2011. Unless FHA extends the 2010 requirements, which C.A.R. and NAR are requesting, beginning July 1, 2011, the FHA’s new condo requirements will be in place. This includes decreasing the FHA concentration from 50 percent to 30 percent; increasing pre-sale requirements from 30 percent to 50 percent; and including vacant and REO properties in owner occupancy requirements. C.A.R., along with NAR continue to work with the FHA to ease and modify their condo requirements so they are more applicable to today's difficult housing market conditions. For more information on FHA, Fannie Mae and Freddie Mac's condo requirements you can visit NAR's
GSE and FHA Condo Rules.
B. Fair Housing/Equal Opportunity - Lidia Yun, IC AB 534 (Swanson) Protection of Rights of Homeless Persons- Specifies that homeless persons are entitled to the rights set forth under civil rights laws, and provides that a homeless person has the right to be free from violence or intimidation perpetrated on the basis of that person's status as a homeless person. The bill also provides that these provisions shall not be construed to enlarge or diminish an existing duty, if any, for an owner of residential rental or commercial property to protect a homeless person who is present on the property. Position: Watch Status: Assembly Judiciary
AB 542 (Allen) Modification of Regional Housing Needs Assessment Criteria- Allows local government agencies to utilize densities less than existing law requires to accommodate lower-income households, if the site is owned by the planning agency and set aside for affordable housing development, or the planning agency has offered to provide subsidies on a per unit basis for affordable housing construction. Position: Watch Status: Assembly Housing & Community Development Committee
AB 559 (Swanson) Exemption of FEHA Claims from Recent Supreme Court Case- Proposes to revise attorney's fees awards in smaller housing discrimination cases by exempting cases brought under the Fair Employment and Housing Act (FEHA) from the rule giving discretion to judges to deny fees in a case, if the prevailing party recovers a judgment that could have been rendered in a limited civil case. The author intends this bill to help ensure that low-income victims of unlawful discrimination have fair and equitable access to the civil justice system for claims brought under the Fair Employment and Housing Act (FEHA) by removing a significant barrier to such citizens securing private counsel. Position: Watch Status: Assembly Floor
AB 679 (Allen) Modification of Housing Element Requirements- California's Planning and Zoning Law requires a city or county to prepare and adopt a long-term general plan that includes a housing element, which is a periodic assessment of housing needs and whether those needs are being met. That law requires an evaluation of the regional housing plan's ability to address the housing need of persons at all income levels within the city or county, including the condition that the county's share of low-income and very low income housing only be reduced in proportion to the amount by which the county's share of moderate and above moderate income housing is reduced. This bill provides that, if a local agency provides funding for affordable housing construction within its jurisdiction, that funding does not have to be proportional across income categories, but may reflect the specific affordability of units that are being funded. Position: Favor Status: Assembly Housing & Community Development Committee
AB 1216 (Alejo) Facilitation of Affordable Housing Development- California's Planning and Zoning Law requires an owner of an assisted housing development to provide specific notice to the local housing agency of an opportunity for an offer to purchase the development prior to the termination of any applicable subsidies or restrictions on occupancy. This bill would authorize any affected public entity, or any affected tenant, to enforce these requirements either in law or in equity. It would also prohibit certain application of that law from affecting the rights of a purchaser who acts in good faith and without notice of a failure to comply with the details of that law. Position: Watch Status: Assembly Housing & Community Development Committee
C. Housing Policy - Sandy Darling, IC 1. State Issues AB 370 (Smyth) Tank-less Water Heater Installation Requirements- Requires that a plastic pipe shall only be used for venting hot gases from a tank-less water heater if the plastic pipe or plastic pipe fitting has been designed and certified for that use by the manufacturer, AND the certification specifies the maximum operating temperature for the pipe. Position: Watch Status: Assembly Housing & Community Development Committee
AB 1017 (Ammiano) Reduced Penalties for Marijuana Cultivation- Existing law requires that every person who is convicted of planting or cultivating marijuana, except as to certain medical exemptions, must be punished by imprisonment in state prison. This bill would make that crime punishable by imprisonment in county jail for a period of not more than one year OR by imprisonment in the state prison. Position: Watch Status: Assembly Public Safety Committee
AB 1220 (Alejo) Land Use and Challenges to Local Planning Decisions- AB 1220 will help clarify the long-standing provision—recently misinterpreted by the courts—to ensure that local governments follow the law on housing elements, density bonuses and other requirements that ensure a healthy housing market for all economic segments. This bill, a reintroduction of last year's AB 602 (Feuer), will ensure that all cities and counties have the ability to participate in such an effort. For nearly 25 years there has been a very short window for challenging land use decisions by local governments. At the same time, housing for low and moderate-income households was treated as a special case and enjoyed an exception that was created to encourage cities and counties to recognize the on-going obligation to ensure that such housing can and will be built. AB 1220 returns this planning standard to its status for the 25 years before the 2008 case, Urban Habitat Program v. City of Pleasanton, 164 Cal App 4th 1561, that substantially shortened the time period filing challenges from 5 years to 90 days. Position: Support Status: Assembly Floor
SB 663 (Correa) Veterans Transitional Housing- This bill authorizes the Department of Veterans Affairs to provide transitional housing for veterans, address the housing needs of homeless veterans and provide other assistance to homeless veterans. Position: Favor Status: Senate Rules Committee (Not yet assigned to policy committee)
SB 726 (Berryhill, T.) Flexibility on Fire Sprinkler Installations for Single Family Homes- Existing law requires the State Fire Marshal to adopt and administer a program for servicing, testing, and maintaining all fire sprinkler systems. This program requires installation of a smoke detector in each dwelling intended for human occupancy by specific dates, and authorizes a city, county, or city and county to, by ordinance, make changes or modifications that are more stringent than the requirements published in the California Building Standards Code relating to fire sprinkler systems. SB 726 would authorize, until January 1, 2014, a county, by ordinance or resolution, to opt not to be subject to the California Building Standards Code requiring installation of a fire sprinkler system in an existing single-family residential dwelling. Position: Favor Status: Senate Transportation & Housing Committee
2. Federal Issue- HAFA Update In light of a slow start to the Home Affordable Foreclosure Alternatives (HAFA) program and in response to industry and government criticism, the Treasury department has announced multiple changes to their HAFA program with the hope it will begin to gain market share. These changes include: a. Servicers no longer must verify a borrower's financial information or determine if the borrower's total monthly mortgage payment exceeds 31 percent of their monthly gross income; they must still verify their hardship. b. A borrower may have moved out of their property up to 12 months prior to HAFA approval so long as they can document that it was their principal residence prior to their relocation and that they have not purchased a new home during that period. c. Treasury has removed the six-percent cap on payments to subordinate liens. The only cap now is the $6,000 cap. C.A.R. is advocating for the removal of this cap as well. If there must be a cap C.A.R. believes a ten-percent cap is more appropriate and meets current non-HAFA short sale practices. d. A servicer must accept the commission stated within the listing agreement so long as it does not exceed six-percent. e. Extends the response time a servicer has to 45 days to respond to a borrower's request for a short sale, deed-in-lieu agreement or an Alternative Request for Short Sale Approval.
D. Manufactured Housing - Bruce Bourdon, IC AB 579 (Monning) Attorneys Fee Awards for Local Governments that Win Challenges to Rent Control Ordinances- Existing law permits a court to award attorney's fees to a successful party in an action that has resulted in the enforcement of an important right affecting public interest, but does not allow an award of attorney's fees in favor of public entities. This bill would permit the award of attorney's fees and, in some cases, other litigation expenses, to a local governmental entity in an action brought by the owner of a mobile home park to challenge the validity or application of a local rent control ordinance, if the local governmental entity is determined to be the prevailing party. AB 579 essentially penalizes the owner of a mobile home park or an association representing a mobile home park for bringing a challenge to the validity or application of rent control or subdivision conversion ordinances that are adopted by local governments. C.A.R. opposes AB 579 because all citizens deserve the right to redress their legal grievances. Furthermore, California law already provides sanctions for bad faith actions or tactics that are frivolous (C.C.P. 128.5) and also the remedy of malicious prosecution. Position: Oppose Status: Assembly Judiciary Committee
AB 724 (Bradford) Transfer of Master Meter Responsibilities from Park Owner to Local Utility- Current law authorizes the owner of a master-metered mobile home park or manufactured housing community that provides gas or electric service to residents to transfer ownership and operational responsibility for its gas or electric system to the gas or electrical corporation providing service in the area in which the park or community is located. This bill would require the Public Utilities Commission (PUC), by February 1, 2012, to open an investigation or other appropriate proceeding to evaluate and report to the Legislature, by July 1, 2013,
as to when an owner of a mobile home park or manufactured housing community should be required to transfer responsibility for gas or electric service to the local gas or electrical corporation providing service in the area. Position: Watch Status: Assembly Utilities & Commerce Committee
SB 245 (Rubio) Smoke Detectors in Mobile and Manufactured Homes- Since 1986, state law has required that all used mobile and manufactured homes that are sold have a smoke detector that is operable on the date of the transfer of title. AB 2050 (Garcia), Chapter 737, Statutes of 2008, expanded this requirement so that at the time of sale, all used mobile and manufactured homes, and multifamily manufactured homes have a operating smoke alarm in each room designed for sleeping on the date of the transfer of title. In response to recent mobile home fires that resulted in the demise of occupants, SB 245 requires, beginning on July 1, 2012, that all used manufactured and mobile homes have a smoke alarm installed in each room designed for sleeping. Position: Watch Status: Senate Appropriations Committee
SB 376 ( Fuller) Real Estate Brokers and Sales of Mobile and Manufactured Homes[Report Only; Transactions Committee will be evaluating this bill for position on this real estate financing issue.]- Provides that a person licensed as a real estate broker and a mortgage loan originator by the Department of Real Estate and who makes, arranges, or services mobile home loans or seller carry-back loans on mobile homes, would only be required to be licensed pursuant to the Real Estate Law and would not be required to be licensed by the Department of Corporations as a finance lender or broker under the California Finance Lenders Law. The manufactured housing industry believes this change in law is necessary to prevent disruption in the manufactured and mobile home financing arena, due to the changes in federal law by the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), which, among a plethora of provisions, redefined "residential mortgage loans" (loan secured by real property) to include chattel loans on mobile homes, whether or not they are attached to real property. Position: Not Yet Rated Status: Senate Appropriations Committee
SB 444 (Evans) Pre-conditions to Conversion of Mobile Home Parks and Manufactured Housing Communities to Resident Ownership- Existing law creates an exemption to the Subdivision Map Act for conversions of mobile home parks to resident ownership. To maintain this exemption the sub-divider is required to avoid the economic displacement of non-purchasing residents by doing ALL of the following: surveying residents about their support for the conversion; offering each existing tenant an option to buy his or her lot; filing a report on the impact of the conversion on residents and making that report available to the residents; submitting to a local agency hearing the sub-divider's compliance with the law requiring avoidance of economic displacement of non-purchasing residents; and limiting rent increases of non-purchasing, low-income residents by an amount equal to the average monthly increase in rent in the four years immediately preceding the conversion. The legislative body or an authorized advisory agency (i.e., the planning commission) of the local government must hold a hearing to approve, conditionally approve, or disapprove the map. The scope of the hearing is limited to whether or not the sub-divider complied with the above-noted requirements. SB 444
deletes, in effect, the exemption in the Subdivision Map Act for conversions of mobile home parks to resident ownership and provides that such conversions shall be subject to the full conditions of the Subdivision Map Act and any other applicable state or local laws. CAR is not in favor of this proposed change as it will cause significant delays in the process of conversion to resident ownership and disadvantage many residents wishing to own their own space. Position: Not Favor Status: Senate Transportation & Housing Committee
E. Multi-Family Housing - Larry Black, IC AB 19 (Fong) Water Meter Standards in Newly Constructed Multi-Family Housing- Current law requires every water purveyor to require, as a condition of new water service on and after January 1, 1992, the installation of water meters. This bill would require a water purveyor that provides water service to a newly constructed multiunit residential structure or newly constructed mixed-use residential and commercial structure, including a structure that is part of a common interest development, that submits an application for a water connection after January 1, 2014, to require the installation of a water meter or sub-meter to measure use by each individual dwelling unit as a condition of new water service. Position: Watch Status: Assembly Housing & Community Development Committee
AB 161 (Eng) Criminal Trespass by Juveniles on Private Property- Requires a juvenile subject to court-ordered prohibitions to adhere to certain sanctions regarding the property on which criminal violations occurred. The bill makes it a misdemeanor for any person who is the subject of a court order, based on conduct at a particular property, to enter upon or refuse to leave the property after having been informed that he or she may not enter the property by a peace officer acting at the request of the owner. If the underlying offense is a violent felony, the juvenile is permanently barred from returning to the property. If the offense is a misdemeanor, return to the property is barred for two years; if a non-violent felony, the duration of non-return is five years from the date of adjudication. Position: Watch Status: Assembly Public Safety Committee
AB 264 (Hagman) Restrictions on Location of Transitional Housing- This measure proposes to require operators of transitional housing to notify the city or county, and residents within 300 feet of the property, when a transitional housing facility will be established, in order to provide them specific knowledge about the transitional housing facility. Domestic violence shelters would be exempted from this requirement. Position: Watch Status: Assembly Housing and Community Development Committee
AB 483 (Torres) Modification of HCD's Multi-Family Housing Program- Broadens the definition of "target population", for purposes of the Supportive Housing component of the Multi-Family Housing Program (MHP-SH). The new definition includes families, who meet the definition of "chronic homelessness" in the US Department of Housing and Urban Development "Continuum of Care" Program; young adults and emancipated youth 25 years of age and younger experiencing homelessness; or, individuals exiting from institutional settings including, but not limited to, jails, hospitals, prisons, and institutes of mental disease, who were homeless when entering the institutional setting, who have a disability, and who resided in that setting for a period of not less than 15 days. Position: Watch Status: Assembly Floor
SB 425 (Calderon, R) Animal Fighting on Multi-Family Premises- The purpose of this bill is to establish minimum fines for specified dog fighting and cockfighting violations and to allow for forfeiture of property acquired through cockfighting. The bill provides that any minor under 16 years of age who visits or attends any cockfight or place where any cockfight is advertised to take place, and any owner lessee, or proprietor, or the agent of any owner, lessee or proprietor of any place where any cockfight is advertised or represented to take place who admits any minor is guilty of a misdemeanor punishable by a fine not exceeding $500 or by imprisonment in the county jail for not more than 25 days. Position: Watch Status: Senate Appropriations Committee
F. Property Management - Jay Avirom, IC 1. State Issues AB 265 (Ammiano) New Tenant Protections from Eviction- This bill has been amended from its initial version of revising the 3-Day Notice to a 14- Day Notice to Pay or Quit. It now provides that in addition to any discretionary relief from forfeiture available under current law, in cases of eviction for nonpayment of rent of a residential tenant who is being evicted from his or her principal place of residence, the court shall relieve the tenant from a forfeiture of a lease or rental agreement, whether written or oral, and whether or not the tenancy has terminated, and restore the tenant to his or her former estate or tenancy, if the tenant pays all of the following obligations under the lease or rental agreement: a. The amount of rent in arrears, as specified in the three day notice requiring payment of rent. b. Any subsequent rent that has become due. c. The reasonable costs of the proceedings, which shall include reasonable attorney's fees, not to exceed three hundred fifty dollars ($350) if the tenant has paid the amounts specified in this subdivision prior to the commencement of trial. Such application for relief under this subdivision may be made at any time prior to the restoration of the premises to the landlord. CAR is opposed to this bill because it could unfairly deny other tenants the "quiet enjoyment" of their residences as the tenant facing forfeiture "plays the system" for an indefinite period. Position: Oppose Status: Assembly Judiciary Committee
AB 475 (Butler) Offstreet Vehicle Parking on Rental Properties- This bill modifies existing authority for a parking facility to designate parking spaces for use only by a vehicle displaying a zero emission vehicle (ZEV) sticker so the authority applies to vehicles displaying an electric vehicle (EV) sticker. It authorizes an off-street parking facility to designate parking spaces for the exclusive use of vehicles displaying a DMV-issued EV sticker and plugged in for fueling, with a fine of up to $100 for violating the parking limitation. Position: Watch Status: Assembly Appropriations Committee
AB 934 (Feuer) Removal of Residential Property Owners/Managers from "Litigation Privilege" Protections- This bill amends the State's "litigation privilege" statute to exempt from it certain actions arising in the context of landlord-tenant law, including any communications made pursuant to the California law that authorize and regulate notices to tenants regarding change or termination of a lease, notices to quit and the filing of an unlawful detainer for recovery of rental property. CAR has joined with a coalition of organizations representing property managers to strongly oppose AB 934, which discriminates against rental property owners by denying them the litigation privilege that is available to virtually every other litigant. It is premised on the false assertion that residents lack adequate remedies to challenge what they believe is an unfair eviction when, in fact, those remedies are many and easily accessible. The bill also ignores the fact that many cities require property owners to demonstrate a specific cause for evicting a renter and overlooks the substantial evidence that has to be presented in these cases to support the claim. This bill will also promote greater conflict between landlords and tenants and likely promote unnecessary litigation with the prospect of court-clogging counter-suits by residents in response to lawful evictions. Boiled down to a single sentence: AB 934 will have a significant chilling effect on the sometimes necessary action of a rental property owner to pursue a lawful eviction - designed to preserve the quiet enjoyment of other tenants - through the filing of an unlawful detainer. Position: Oppose Status: Assembly Floor
SB 184 (Leno) Diminution of Landlord Rights Under Costa-Hawkins Act- This bill would authorize the legislative body of any city or county to adopt ordinances to impose, as a condition to the development of new rental housing, inclusionary housing requirements. Such a legislative enactment would essentially erase the new housing exemption from rent control ordinances created by the Costa-Hawkins Act in 1995. Position: Oppose Status: Senate Transportation & Housing Committee
SB 332 (Padilla) Authorization of Landlords to Prohibit Smoking on Premises- This bill would authorize a residential rental property landlord to prohibit the smoking of tobacco products on the property, in a dwelling unit, in another interior or exterior area, or on the premises on which the dwelling unit is located. It would require certain notices in rental agreements and leases executed on and after January 1, 2012, regarding this prohibition, and would require that a landlord who prohibits smoking pursuant to this authority be subject to state and local notice requirements governing changes to the terms of a rental agreement for tenants Position: Favor Status: Senate Judiciary Committee
SB 337 (Kehoe) Prohibition on Landlord Restrictions to Tenant Sign or Poster Displays- This bill proposes to prohibit a landlord from refusing to permit a tenant to post or display noncommercial signs, posters, flags, or banners on or within any portion of the tenant's dwelling unit, unless any of the following apply: a. The posting or display would violate a local, state, or federal law. b. The posting or display would violate a provision in the governing document of a common interest development that satisfies the requirements in Section 1353.6 of the Civil Code. c. The posting or display would violate a provision in the covenants, conditions, and restrictions recorded against the property. Position: Oppose Status: Senate Floor
2. Federal Issue- Lease Accounting (Update of NAR Policy) The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) proposed lease accounting changes that may be detrimental to our nation's economy by reducing the overall borrowing capacity of many commercial real estate lessees and lessors. The proposal would bring nearly $1.3 trillion in leased assets onto companies' balance sheets, with roughly 70 percent being real estate leases. Under the proposal, companies would be required to use a "right-of-use" accounting model where both lessees (renters ) and Lessors (property owners) recognize assets and liabilities arising from lease contracts. Currently, accounting rules allow many businesses to classify leases as an operating expense, which do not appear on their balance sheets. Both FASB and IASB believe these changes would improve transparency as well as provide investors with more consistent and concise financial reporting. However, if enacted, this proposal could negatively impact the financial stability of many businesses and could prolong our nation's economic recovery.
At NAR's New Orleans' business meetings NAR took the policy position "that the National Association of REALTORS® opposes lease accounting standard changes proposed by the Financial Accounting Standards Boards (FASB) and the International Accounting Standards Board (IASB) that would treat the income producing real estate business as a financing business on company balance sheets. "Their rational was a concern that the proposed lease accounting standard changes will be detrimental to the nation's economy by reducing the overall borrowing capacity of many commercial real estate lessees and lessors. Due to larger balance sheets, more frugal lessees will want less space and shorter-term leases without renewal options or contingent rents, which will decrease cash flow for property owners. Shorter-term rents will likely reduce the borrowing capacity of many commercial real estate lessors, who rely on leases and the value of the property as collateral in order to obtain financing.
The FASB and IASB announced that they will delay their final lease accounting rules by at least a few months after their original June 2011 finalization target date. The effective date of this proposal will likely be in 2012 or 2013, where virtually all new and outstanding leases would be subject to the new accounting standard.
III. Other Business A. Committee Webinar Meeting between Board Meetings Beginning with the period between CAR's May and September Board of Director meetings, the Chair, Vice Chair and Issues Chairs will conduct a webinar meeting available to all Members of the Housing Committee. This will become a regularly scheduled meeting opportunity between the scheduled meetings.