Agenda Summary - Legislative CommitteeSheraton Hotel
June 8, 2006
1:00 pm. - 5:00 pm.
Magnolia Room, Sheraton Hotel
Sacramento, CaliforniaPresiding:
Steve Hanleigh, Chair
Liz Fitzgerald, Vice Chair
Steve Goddard, Vice Chair
Irma Vargas, Committee Liaison
Jeannette Way, Committee Liaison
Gary Thomas, NAR RepresentativeStaff:
Alex Creel
Stan WiegI. Welcome and Introductory Remarks - Steve Hanleigh, ChairII.Legislative Day Recap and Political Update - StaffIII. C.A.R. Sponsored Legislation

A. SB 1177, Hollingsworth; Density Bonus -- In recent years, C.A.R. has sponsored legislation to improve the use of the state’s density bonus law by passing legislation to make the law is more easily understood and functional. This year, C.A.R. is sponsoring SB 1177 to prohibit local governments from examining the financial records of housing developers seeking a density bonus when they apply for a waiverof, or reduction in, development standards. Requiring developers to open their records to local government to prove that a waiver or modification of development standards is necessary gives local governments the opportunity to “second guess”  the developer’s profit, the type of appliances, marketing strategies and design styles that should be included in the development. Additionally, since local governments are NOT financially contributing to the subdivision, they should not have the right to inspect these financial records. The bill was recently amended, by the author, to clarify the intent of how a waiver or concession will be considered.

Status: Passed to Assembly

B. SB 1330, Dunn- Housing elementreform -- C.A.R. is co-sponsoring SB 1330 to permit homebuilders and other interested parties (homeowners) to recover attorney’s fees should they prevail in their challenge of a local government’s compliance with the housing element law. C.A.R. was successful in amending the state’s “anti-Nimby” law two years ago. That measure allows the successful plaintiff (developer), until December 31, 2006, to recover attorney fees when he or she prevails in court demonstrating to the court that a local government arbitrarily denied the plaintiff’s residential development that was in compliance with the local government’s development standards. SB 1330 will extend this sunset date to December 31, 2008.

Status: Passed to AssemblyC. AB 1963, Leslie; Degree brokers -- Existing law requires most applicants for a brokers license (in addition to exam passage) to demonstrate a valid salespersons license and two years experience in general real estate. Current law also provides that the Real Estate Commissioner may grant a license to an applicant without real estate experience who demonstrates graduation from a 4-year college or university. C.A.R. is sponsoring AB 1963 to require the same two years of “general real estate” experience for degree holders that currently applies to all other applicants. This bill will not change the other mechanisms for demonstrating equivalency such as an individualized petition by a licensee from another state for recognition ofhis or her experience.

Status: Passed to Senate

D. AB 2100, Laird; CID written reserve plan -- Existing law requires an association to provide members a pro forma budget but does not require homeowner associations (HOAs) to identifyhow and when they will repair or replace the major assets of the association. This year C.A.R. is sponsoring AB 2100 to require HOAs to adopt an assessment schedule of the dates and assessment amounts that will be necessary to fund the associations reserve account. AB 2100 is vital to homeowners because it will complete the budgeting process for homeowners by requiring HOAs to provide members with clear and concise information on how much they will have to pay for the association’s special and regular assessment needs, such as the replacement of roofs or repair of building exteriors.

Status: Passed to Senate

E. AB 2365, Jones; E&O Insurance – Special Status Report

In response to REALTOR® difficulties in obtaining Errors and Insurance (E&O) coverage, C.A.R. created the Errors and Omissions Insurance Task Force, chaired by former president Diana Bull.  The task force met late in 2003 and in 2004 and in addition to staff and member resources, retained Murray and Company insurance consultants.  The scope of the task force investigations and recommendations was broad, but all calculated to improve the environment for REALTORS®.  Three bills were introduced in 2005 to implement the report: AB 223, Negrete McLeod, which earmarked part of required continuing education hours for a Risk Management course, and other bills (including AB 323, Gordon) designed to improve the litigation and insurance environment for licensees.AB 323 would haveimplemented one of the proposals of the task force, and imposed a 60-day cooling off period on complaints against licensees. The theory was that if an employing broker knew about the proposed lawsuit in advance of its being filed then he or she could effectively negotiate a settlement.  It would then reduce the number of lawsuits and improve the insurance market.  The proposal was summarily stopped in Assembly Judiciary Committee.  A C.A.R.-sponsored companion measure (SB 530, Kehoe) was designed to keep settlements made during the 60-day period from being counted in the licensee’s claims history, thus keeping individual premiums down as well. It too was stopped, but in the senate. The chair of the Judiciary committee (Assemblyman Jones) was not unsympathetic to REALTORS’® insurance plight, and committed to C.A.R. to facilitate legislation in 2006 to help with insurance. Assemblyman Jones then actually introduced AB 2365 himself, with C.A.R. as the sponsor, with the original plan of facilitating self insurance by licensees, especially for the large deductible amounts becoming common in liability policies.  As the bill progressed it became apparent that some amount of self insurance was already occurring in the licensee community, and that creating a new self insurance provision in statute might conceivably lead to a new regulator (Department of Insurance) attempting to assert authority over real estate business models.  However, it also became apparent thatby raising the visibility of the market for real estate E&O, AB 2365 was addressing another of the core goals of the task force, namely increasing the availability of more sources of coverage. Because it was consistent with existing policy, committee leadership approved a change in direction of the bill to set up a “matchmaking” or market assistance function within Department of Insurance (DOI) to help real estate licensees find providers of coverage when they are searching for insurance.  In anticipation of the bill, DOI then used its contacts to bring together insurance industry “players” to facilitate the program. The final result is the trade group representing independent agents and brokers of such coverage has agreed to set up the “matchmaking” website as part of its trade association, and not go through the DOI. Private sector creation of the website is consistent with DOI policy not to become involved in individual brokerage activity (or compete with individual agents) and has the virtue of not requiring legislative permission. Assemblyman Jones is continuing to move AB 2365 forward for the time being so as to ensure that the proposed resolution actually bears fruit. However, it appears that the ultimate goal of incrementally increasing E&O insurance availability will be accomplished without the bill having to be signed into law.Status: Assembly Floor    F. AB 2429, Negrete McLeod; Conditional License -- Existing law provides two ways to qualify for a sales license. The first option requires an applicant to take three real estate classes, and then pass the salesperson exam as well as a criminal background check to receive a four-year license. In the second option,an applicant takes only one class, and then takes the exam. Should the applicant pass, they may obtain a “conditional” license and finish the rest of the required course work during the next 18 months of licensure, while they sell real property. AB 2429 will require all salesperson applicants, after September 31, 2007, to complete all three of their pre-license courses prior to receiving a license. The Department of Real Estate has licensed more than 100,000 new licensees in the last three years, and 85 percent of them came in under the conditional license option. AB 2429 will increase the foundational knowledge of new sales licensees entering the market.

Status: Passed to Senate

G. AB 2511, Jones; Written development standards -- C.A.R. is co-sponsoring AB 2511 which would: amend the permit streamlining act to apply to subdivisions that have a much smaller percentage of affordable housing, and require local governments to report to the state on their housing production in an effort to make sure that they can accommodate their share of the regional housing need for the ensuing 5 years. AB 2511 provides judicial relief for those who challenge local governments that refuse to disclose their plan for meeting the regional housing need to the Department of Housing; and would require the plaintiff to inform the Attorney General should a plaintiff sue the city or county alleging that government is not in compliance with state law. Additionally, the measure will clean-up the no-net-loss housing law by increasing enforcement options and it will rename the “anti-NIMBY” law to the “Housing Accountability Act,” while repealing the Granny Flat law (which is not used due to state law on “second” units). Further, this measure will require cities and counties to adopt and publish clear and objective development standards (e.g., zoning code requirements) and prohibit any change in those standards after the building application is completed. Developers should be able to rely on the standards throughout the local government review process and not have the rules arbitrarily changed during the process.

Status: Assembly Appropriations Committee

H. AB 2526, Arambula; Deferred developmentfees -- C.A.R. is co-sponsoring AB 2526 to defer local government development fees until occupancy permits are issued for housing developments with at least 49% lower-income units in cities that offer meaningful incentives. This legislation was introduced to enable developers to build lower cost units at a rate that will allow them to be placed on the market with lower construction costs.

Status: Held in Assembly Housing CommitteeIV. Reports of Standing Committees and Task Forces

A.Commercial Investment Committee - Gil Bordenave
B. Property Management Committee - Curt Cournale
C. Taxation Committee - Raymond Karpe
D. Common Interest Development Committee - Donna Crowder
E. Housing Opportunity Committee - Nancy Troxell
F. Land Use and Environmental Committee - James Irving
G. Local Governmental Relations Committee - Mel Wilson
H. Manufactured Housing Committee - Scott Swendiman
I. Real Estate Finance Committee - J. Michael Roberts
J. Equal Opportunity - Cultural Diversity - Kelvin Wong
K. Eminent Domain Task Force (information only – the final report of the Task Force was  
     received and approved by the leadership team so as to allow positions to be taken on
     legislation pending in March and April) - William Jansen
L. Consumer Services Task Force - Robert Bailey*V. Legislative Committee Working Group on Broker Experience* -- Please see included report. Theworking group grew out of discussions regarding the recommendations of the Business Practices Task Force.  The Legislative Chair sought volunteers for an informal working group of the Legislative Committee, with the following MISSION STATEMENT:

To consider whether the experience required in order to obtain a Broker's license should be changed to include a supervisory component.

After extensive discussions, the Working Group reached a consensus that attempting to specify the actual details of the many types of experience brokers might have, particularly as they will be applied to areas of a broker applicant's future practice, is not feasible. Instead, the Working Group made other suggestions explored in the report.VI. Ballot Propositions*  Please see included report. Note that Legislative committee will only be asked for a recommended position on selected measures, and will then report a single consolidated motion to the Board of Directors containing the positionsof all the relevant policy committees.
 
VII. Department of Real Estate – Oral report from staff.  Note that the DRE Commissioner’s open forum will occur on Friday June 9, at 1:30p.m.VIII. FPPC Conflicts Law - In the 1999-2000 legislative session C.A.R. successfully sponsored AB 1838, Leonard, which directed the Fair Political Practices Commission to implement regulations that clarified three points of law:

First, to minimize disqualifications of public officialsbased upon their business trade or profession;

Second, that possession of a professional license (e.g.  a real estate license) does not of itself create a conflict of interest; and,

Third, that industry groups (like real estate) can legitimately constitute a significant portion of the populace and thus be counted as the “public generally” when analyzing conflicts.

Reports of inappropriate attempts to disqualify real estate licensees from local governmentoffice have come in from the field, apparently inspired in part by a recent League of Cities “guideline” brochure.  Staff will seek clarification from the FPPC through letter rulings and prepare background materials as appropriate on whether additional legislation might be required.        IX. Bills of Others
(Note: Descriptions of these bills, and many other significant bills that C.A.R. is following, are listed and described in the Program Bill Report that can be found on the C.A.R. website at: http://www.car.org/index.php?id=NTcy    Please note also that the statusreport was prepared prior to legislative deadlines at the end of May.)A. SB 521, Torlakson - This bill authorizes Contra Costa County to impose a document recording fee of $1 per page after the first page on the recordation of real estate related documents.  The revenue collected would be used for the development of affordable housing for very low, lower and moderate income households.  C.A.R. has historically viewed document recording fees as a “transfer tax” if they apply tothe recording of documents facilitating the transfer of property.  C.A.R. has dropped its opposition to bills imposing a document recording fee when the bills have been amended to exclude documents against which the “documentary transfer tax” (typically $1.10 per thousand dollars of the purchase price) has already been imposed.  Unless there is a change in C.A.R. policy, C.A.R. will oppose SB 521 and any other measure that imposes a document recording fee without exempting documentsalready subject to the documentary transfer tax. Please see agenda materials for the Taxation Committee additional information.Status: In Assembly, pending policy committee hearing.B. SB 1274, Dunn; Anti-trust law changes – The Cartwright Act prohibits combinations of business that restrain trade. This bill would import federal definitions, including making it unlawful for any person to monopsonize (control the market as a buyer) or monopolize, attempt to monopolize, or to conspire with any person to monopolize any part of a trade or business. The bill also specifies the standards of proof required in a motion for summary judgment or summary adjudication filed by a defendant in an action under the Cartwright Act. C.A.R. opposes this measure primarily because it makes it tougher to defeat an anti-trust complaint by imposing restrictions on obtaining a summary judgment.Status: Pending Senate floor action.C. SB 1432, Lowenthal; Mello-Roos district for affordable housing -- Existing law, the Mello-RoosCommunity Facilities Act of 1982, authorizes a local agency to establish a district to finance public facilities and various services by the imposition of special taxes and the issuance of bonds on real property, so long as the funds generated directly benefit the community from which they were collected. This bill would authorize the creation of local Mello-Roos districts by local governments and developers to solely fund affordable housing development. C.A.R. opposes this bill because it places much ofthe burden for providing affordable housing on property owners, and not the entire community.Status: Passed to Assembly.D. SB 1809, Machado; Disclosure of redevelopment with eminent domain power –
SB 1809 would create a new recorded disclosurenotice to tell buyers of a residential real property that the property may be subject to eminent domain proceedings through a redevelopment agency’s actions. C.A.R. opposed this measure until it is was amended to require a recorded notice that wouldbe revealed in the title report.Status: Passed to Assembly.E. SB 1817, Torlakson; New Environmental Hazard Disclosure -- SB 1817 would require the disclosure of environmental hazard sites located within a one-quarter mile radius of a property upon transfer of the property, and mandates the creation of new disclosure form like the NHD. Additionally, a transferor may use a third party report or opinion to determine the environmental hazards sites required to be disclosed but, should the transferor choose to not use this option, they must disclose all sites located in the same city or zip code as the property listed in a public database located on the Department of Toxic Substance Control’s website. C.A.R. opposes this measure because this bill unnecessarily dilutes the value of existing disclosures, unnecessarily increases transaction costs, and coerces sellers to purchase a consultant’s report.Status: Died in Senate Judiciary Committee.F. AB 802/1899, Wolk; Levee disclosure, flood insurance --This measure would have required local governments, prior to development, to certify that the property met a 200-year flood protection standard. C.A.R. opposed AB 1899 because it did not allow for alternative “non-structural” solutions to flood protection that have already been successfully implemented by several California communities. Furthermore, this bill could have shut down home construction in parts of the Central Valley for up to, if not more than, 20 years, and exacerbated California’s already critical housing shortage. This measure was recently amended to remove the conditions and restriction on infill development and new development located in areas with less than three feet of potential flooding, and for developments of lessthan 25 units. Additionally, the amendments will continue to allow development to occur if the development can achieve 200-year flood protection within 5 years using “structural” (levees) and “non-structural” (elevated-foundationhome construction) solutions. C.A.R. has removed its opposition but continues to cautiously watch the measure as it is amended.Status: Passed to SenateG. AB 1169, Torrico,; 60-day notice -- This bill would, until January 1, 2010, re-enact the provisions of Sen. Keuhl’s 60-day notice law which expired on January 1, 2006. This bill would also revise these provisions to provide that an owner may give 30 days' notice if any tenant or resident has resided in the dwelling for less than one year. Proponents argue that a 60-day notice to terminate is needed to give more time for the tenant to locate a replacement rental unit. C.A.R. opposed the original measure because landlords need the ability to terminate tenancies on tenants causing problems as soon aspracticably possible in order to preserve the “quiet enjoyment” of the premises to the benefit of all tenants. C.A.R. has continued to oppose.Status: Bill was amended in the Senate and is pending hearing in policy committee.H. AB 2228, Evans;Environmental reports -- C.A.R. received amendments to AB 2228 (Evans). This measure would have required homeowners and agents to inform buyers that they can purchase an environmental report that complies with “transaction screen standards describedin ASTM International Standard E1528, or relevant successor standards, to the extent that those standards require searches and disclosures of publicly available databases.” C.A.R. opposed this measure because it attempted to add yet another disclosure to the already intimidating amount of paperwork in real estate transactions. C.A.R. contended that local standards of practice already result in the inclusion of supplemental environmental disclosures should the information be relevant to the real estate transaction. C.A.R. was recently successful in achieving amendments that take the burden of this disclosure off buyers and sellers. The bill now requires consultants to include the information about the availability of supplemental reports in their reports, and will allow the providers of these reports to develop an acceptable “California” standard.Status: Assembly FloorI.  AB 3022, Umberg; CBIA flood insurance bill – This measure would have created an additional required disclosure to notify buyers that their property is located near a levee and, therefore, faces the potential risk of flooding. C.A.R. was successful in negotiating with the author and sponsors to achieve amendments that removed the requirement for additional disclosures, and now requires that the developers provide the first 4 years of flood insurance after the first transfer of the property, and that developers provide buyers a copy of the safety plan developed by cities or counties that provides information onwhat should be done in case of levee failure. C.A.R. will be neutral with amendments.Status: Passed to the SenateJ. AB 2541, Coto;  Native American Grave sites – This bill requires a landowner discovering potential Native American remains to preserve a site and consult with descendants.  C.A.R. opposes because it would unreasonably restrict the ability of a property owner to mitigate the unexpected discovery in a way that would allow other portions of the project to continue, and becausethe mandated preservation may result in an uncompensated taking. Status: Assembly floor. X. OtherXI. Adjournment