Agenda Summary – Legislative CommitteeThursday, October 11, 2007 2:00 p.m. – 5:00 p.m. Marquis Ballroom Center Marriott Hotel Anaheim,CaliforniaPresiding: Stephen Goddard, Chair Leigh Rutledge, Vice Chair Heide Wolf-Reid, Vice Chair Frank Nelson, Executive Committee Liaison Susan Tilling, Executive Committee LiaisonC.A.R. Staff: Alex Creel Stan WiegI. Welcome and Opening Remarks – Stephen Goddard, ChairII. Overview of the Legislative Climate - Member mobilization report– DeAnn Kerr, an update on the program and personnel of the C.A.R. member mobilization system. - Extraordinary legislative sessions – An update on the two special sessions called by the Governor on Health Care and Water Supply issues. - Considerations in sponsoring legislation* Please see included paper on issues that ought to be taken into account when making a decision whether to sponsor legislation, or whether to support legislative proposals in other ways.III. C.A.R. Sponsored Legislation20071. AB 980, Calderon, Disclosure of Private Transfer Taxes-This bill will require that a stand alone document on the private transfer tax (PTT) be recorded to become part of the title record, as well as a separate seller provided disclosure to potential home buyers as to whether the home they are considering purchasing requires thepayment of a private transfer tax, the percentage of the home price constituting the PTT, the duration of the payment obligation, and the purpose for which the funds from the fee will be used. If the stand alone PTT document is not recorded, the new homebuyer will not have to pay the PTT.2. AB 1356, Houston, Agents of Equity Purchasers- Existing law effectively (and inappropriately) precludes legitimate agents from representing investor purchasers of properties that are in foreclosure. The prohibition is the inadvertent result of requiring buyers’ agents to purchase a bond for the sale at twice the value of the property. These bonds are not available. This bill will allow alternate means of demonstrating financial responsibility by maintaining E&O insurance in a similar amount and by certifying that the licensee is in good standing with the DRE and that consumers have access to the Real Estate Recovery Fund for fraud that he or she might commit.3. SB 226,Negrete McLeod, “Degree Broker” Education Requirements - Current law provides that the Real Estate Commissioner may grant a brokers license to an applicantwithoutreal estate experience if the applicant has a degree from a 4-year college or university with a “specialization in real estate.” SB 226 will require the DRE to clarify what a “specialization” in real estate really means. This bill willnotchange the other mechanisms for demonstrating equivalency such as a petition by a licensee from another state for recognition of his or her experience.Additionally, SB 226 will empower the Commissionerto require a licensee to display his or her license number on “consumer first contact materials” which include: business cards, stationary, advertising fliers, and other materials designed to solicit a professional relationship. However, thisadditional authority is limited and may not be applied to "for sale" signs or advertisements that appear either in print or electronic media. 4. SB 343, Negrete McLeod, Housing Project Application; Pre-Hearing Availability of Staff Reports - Many local governments direct their staff to prepare reports concerning issues pending before a city council, local board or commission. Current law does not require that these reports be made available to an “applicant,” or the public, in advance of a hearing or meeting where the application or request for action is scheduled to be reviewed by the local legislative body, except by specific request. SB 343 amends the Brown Act to require any writing that qualifies as a public document, which is provided to at least a majority of the members of a local legislative body within 72 hours of a noticed open public meeting, to also be made available to the public at a designated location of the local agency at the same time, as well as byway of the internet, if such capacity exists.5. SB 670, Correa, Private Transfer Tax Prohibition- “Private” transfer taxes (PTT’s) are increasingly being used to settle disputes between builders and “no growth” advocates or, in the alternative, by builders to proactively avoid a lawsuit or to smooth development negotiations with the local government. Typically, in return for an agreement by an opponent of the development to not pursue a lawsuit, the builder agrees to impose one or more PTTs through a covenant included in the covenants, conditions and restrictions. These PTTs have totaled as much as 1.75 percent of the purchase price of a home and must be paid for 20 to 25 years or, even, in perpetuity. These taxes must be paid by the first buyer and every subsequent buyer each time the home is sold. SB 670, initially a prohibition, would now impose restrictions, requirements and oversight on the imposition of PTTs.
6. SB 1366,Portantino, Housing Impact Statement Requirement for Local Land Use Decisions - This bill would strengthen the annual housing element reporting process that governs local housing actions and will provide a reporting structure that will better assist localgovernments’ focus on the regional impact of their housing decisions. The measure also encourages local agencies to include more specific planning descriptions in an order to meet the localities share of its regional housing need. The additional information will assist in identifying those jurisdictions that meet or exceed their regional housing goals. The additional information provided by the housing element report will enhance the Department of Housing and Community Development’s (HCD) ability to evaluate regional housing production. C.A.R. has proposed language similar to that contained in AB 1366 be included in the form HCD is currently considering to facilitate local agencies submission of the aforementioned annual housing element report.
7. Pending Amendment, Sponsored Amendment to Tow Truck Regulation Law of 2006 (AB 2210, Goldberg) – C.A.R. is “shopping” amendments that will correct excess liability potential in the bill of last session that attempts to regulate so-called “rogue” tow truck operators. As a suitable bill presents itself, C.A.R. will sponsor the insertion of the corrective amendments.2008(approved June 2007)1. Sex offender status as “just cause” for eviction– In some communities, typically radical rent control jurisdictions, “just cause” is required in order to evict a tenant. Unfortunately, although state law allows such an eviction in order to protect persons at risk, local ordinances may not. This legislation will pre-empt local rules to the extent that they do not allow sex offender status to be treated as just cause.IV. Update on Electronic Recording Delivery Systems1. ERDS implementing regulations– After a multi-year effort, C.A.R. secured passage of AB 528, Leno, which authorized county recorders to accept real estate transactional documents electronically. The price of passage was to limit the use of the program to “authorized submitters” (lenders and title companies) and deliver the documents through systems that comply with security regulations established by the Departmentof Justice. The DOJ has finalized its program and is accepting applications for approval of vendors and software systems.
2. AB 1168, Jones, elimination of social security numbers in public records -AB 1168 requires the Franchise Tax Board to remove the first five digits of a Social Security number on lien abstracts and any other records created by the board that are disclosable under the California Public Records Act prior to disclosing the record to the public. C.A.R. opposed the bill until it was amended to ensure that real property records remain accessible to the public and that unnecessary additional costs are not imposed on the recording of documents. The creation of an electronic record accessible to thepublic is consistent with C.A.R.’s long term policy to encourage electronic commerce.V. Department of Real Estate
1. Degree brokers (see SB 226)– As of posting date, the bill is awaiting action by the Governor.2. License number on contact materials (see SB 226)– As of posting date, the bill is awaiting action by the Governor. Note that the license number provisions are those previously approved by C.A.R. in discussions with DRE.
3. Mortgage loan regulations (see SB 385) -The Real Estate Law allows the Department of Real Estate (DRE) to regulate mortgage loan brokers. This bill allows DRE to regulate licensees makingloans, even when they act as principals. It also requires all financing regulators, including DRE, to apply federal guidelines regarding nontraditional mortgages. C.A.R. opposed SB 385 until it was amended to limit Department of Real Estate inquiries about “specialized” licensee activities unless those inquiries are related to mortgage brokerage. 4. License revocation, crimes of moral turpitude (see AB 840) Existing law authorizes the Real Estate Commissioner to suspend, revoke or deny the issuance of a real estate license to a person who is convicted of a felony or a crime involving moral turpitude. AB 840 instead authorizes the commissioner to suspend, revoke or deny a license if the Department of Real Estate finds that the felony conviction is “substantially related” to the qualifications, functions or duties of a real estate licensee. C.A.R. supported AB 840 because it provides an important clarification of the regulatory authority of the department.5. Authority to punish unlicensed practice.* Please see included Issues Briefing Paper.
VI. Ballot Propositions for 2008*VII. Reports of Standing Committees and Task Forces 1. Commercial Investment – David Weinstein 2. Common Interest Development – Steve Delmartini 3. Equal Opportunity-Cultural Diversity - Eva Garcia 4. Housing Opportunity – Heidi Rickerd-Rizzo 5. Land Use and Environmental – Carol Banner 6. Local Governmental Relations – David Gillingham 7. Manufactured Housing – Norma Scantlin 8. Property Management – Cynthia Wood 9. Real Estate Finance – Mike Donohoe 10. Taxation – Robert Kevane 11. Tax Basis Portability Task Force – Deborah Ritchey 12. Troubled Loan Task Force – Greg Galli 13. Mortgage Broker Licensing Task Force – Heidi Wolf-ReidVIII. Billsof Others
Bill/ Author
Subject
C.A.R. Goal
Goal status?
SB 5, Machado
Floodprotection
200 year protection w/obuilding moratorium
Achieved
SB 127, Kuehl
Timing of disclosure
Avoid unneeded paperwork
Achieved for 2007
SB 223, Machado
Coercion of appraisers
Avoid burdening agents
Achieved
SB 385, Machado
Loan brokerage, DRE reporting
Avoid license restriction
Achieved
SB 464, Kuehl
Ellis Act 5-year pre-requisite for Ellis Act
Stop bill
Achieved
SB 702, Torlakson
“Anti-speculation” 5 % clause in condo sales
Avoid impairing liquidated damages law
Achieved
AB 709, Keene
State use of unlicensed appraisers
Avoid restrictions on REALTORS®’ sales
Achieved
AB 239, Desaulnier
$25 recording fee surcharge for real affordable housing
Stop bill and avoid new transaction costs
Achieved by bill defeat
AB 434, Silva
notary journal copy requests by police
Avoid unworkable time frames, increased costs
Achieved
AB 512, Leiber
Translation of contract documents
Avoid new burden on sales agreements and mortgages
Achieved by amendment
AB 864, Davis
Mandates on slumlord properties
Avoid point of sale burdenson buyers
Achieved by amendment
AB 941, Torrico
DRE study of all disclosures
Seek amends to limit to loans, limit DREcosts
Achieved by amendment
AB 952, Mullin
Subsidized units veto of CID assessments
Oppose special treatment
Achieved by bill defeat
AB 976, Calderon
Prohibits inquiries by mangers on immigration status
Avoid extra burdens on managers
Achieved by amendment
AB 1234, Wolk
Point of sale heater upgrades
Avoid Point of Sale mandate amended to delete
Achieved by amendment
AB 1538, Lieu
Mortgage lending restrictions
Avoid impairing loan availability
Achievedby amendment
AB 1452, Evans
Mobilehome park CID conversions
Avoid restrictions on property rights
Not achieved, to Governor
AB 1574, Houston
CBIA Private Transfer Tax bill
Stop bill in competition with C.A.R. bill
SB 5, Machado -SB 5 requires each parcel of land that is located in a flood hazard area be identified and that the local government annually notify owners of their level of flood protection as well as providing them with information regarding flood insurance. In addition, SB 5 requires local governments to amend their general plans and zoning ordinances to reflect flood hazard zones andto condition the approval of subdivisions on one of three provisions: (1) the subdivision will have a 200-year level of flood protection from levees or other structures; (2) the construction standards used in the development will achieve the increased level of flood protection (such as raised foundation construction), or (3) the local agency has made progress in identifying the scope, schedule and cost of the project in conjunction with having spent 10 percent of the appropriated funds to begin construction of critical features necessary to reach 200-year flood protection. C.A.R supports SB 5 because it requires increased protection from the current minimum standard of 100-year flood protection to 200-year flood protection in communities in the Sacramentoand San Joaquin River drainage areas without creating a building moratorium.SB 127 (Kuehl) Property Transfer Disclosures- As introduced, this bill would have required all transactional disclosure documents to be delivered within three days of the “execution” of an offer to purchase. As amended, this measure would require all transactional disclosure documents to be delivered within ten days of the “execution” (by which the author means acceptance) of an offer to purchase. C.A.R. opposed SB 127 because it would have imposed a “one size fits all” time frame which would make compliance difficult for many transactions, and would not haveallowed time frames to be negotiated. C.A.R. was successful in obtaining amendments that allow both parties to the transaction to agree to change, in writing, the time period for delivering transaction disclosures. With this amendment, C.A.R. had removedits opposition. Recent amendments to the bill, however, have renewed C.A.R.’s opposition. As amended, SB 127 requires a separate document when both parties to the real estate contract negotiate for a disclosure delivery time longer than ten days andwould not allow the agreement to be contained within a single contract or deposit receipt. C.A.R. opposes the bill because it would create unnecessary compliance burdens even in the great majority of transactions that do not involve a negotiated timeline.SB 223, Machado- SB 223 was originally opposed because it said that any attempt to influence an appraiser’s opinion was illegal coercion. The bill was moderated by amendment so that it onlypenalizes behavior that is already illegal as extortion or commercial bribery and C.A.R. withdrew opposition.SB 385, Machado-The Real Estate Law allows the Department of Real Estate (DRE) to regulate mortgage loanbrokers. This bill allows DRE to regulate licensees making loans, even when they act as principals. It also requires all financing regulators, including DRE, to apply federal guidelines regarding nontraditional mortgages. C.A.R. opposed SB 385 until it was amended to limit Department of Real Estate inquiries about “specialized” licensee activities unless those inquiries are related to mortgage brokerage. Please note: C.A.R. is awaiting the report in 2008 of a Task Force on mortgage broker licensing.SB 464, Kuehl-The Ellis Act prohibits any public entity from forcing owners of residential rental property to continue to offer their property for rent or lease. As introduced, SB 464 granted local governments the authority to require landlords of all rental property, including single family dwellings, to keep the property on the rental market for a minimum of 5 years after the purchase of that rental property. Furthermore, SB 464 requires landlords to giveall tenants a one-year notice of termination of tenancy if even one disabled or senior citizen, defined as 62 years of age or older, resides within their rental units. SB 464 was amended to reduce the required operating time to a minimum of 3 years. The author offered to reduce the operating time to a minimum of 2 years, but was unsuccessful in garnering enough support to pass the bill on the Senate Floor. C.A.R. strongly opposed SB 464 because it discouraged investment in rental housing by placing a substantial limitation on a property owner’s right to legitimately take a property off the rental market, thus negatively affecting property values. Furthermore, no other business is required to operate for 3 years when they open for business.AB 239, Desaulnier-Originally a re-introduction of SB 521 from 2006, AB 239 would have authorized Contra Costa County to impose a document recording fee surcharge of $1 per page after the first page on the recordation of real estate related documents. As recently amended, AB 239 would authorize Contra Costa County, as well as San Mateo County, to impose a flat $25 document recording fee on all real estate related documents that are longer than one page. The revenue collected would be used for the development of affordable housing for extremely low, very low, lower and moderate income households. C.A.R. has historically viewed document recording fees as “transfer taxes” if they apply to the recording ofdocuments facilitating the transfer of property. C.A.R. opposes AB 239 because it imposes a document recording fee without exempting documents already subject to the documentary transfer tax, and because the funds generated by the document recordingfee would be used for purposes which bear no relation to document recording.AB 434, Silva– C.A.R. expressed concern, as did others, that the very short time frames for law enforcement access to notary records called for inthe bill was not workable. Notary groups secured amendments that allow at least 15 days notice for production of records and withdrew opposition, as did C.A.R.AB 512, Leiber-Existing law requires landlords and property managers to provide translated copies of rental agreements and leases to tenants if negotiations were conducted in Spanish, Chinese, Tagalog, Vietnamese, or Korean.This bill would have required anyone that negotiates designated types of consumer contracts or agreements, in any language other than English, to provide a translation of that contract to the buyer or seller in their primary language. The measure would have applied to all rental agreements and leases. C.A.R. opposed the bill because expanding this requirement to all languages would have placed an undue burden on landlords and property managers in California, where there are hundreds of languages and dialects spoken. The author amended AB 512 to satisfied C.A.R.’s primary concerns by exempting rental agreements and leases from the scope of the bill. As currently written, the bill compels residential mortgage lenders to translate certain contracts negotiated in one of the five languages mentioned above.SB 702, Torlakson– This legislation was introduced as a follow up to earlier legislation (AB 748, Leno) sponsored by builders to allow them to increase the percentage of purchase price that could be characterizedas presumptively appropriate liquidated damages. Even if the deposit is ultimately refundable, builders want to characterize the funds as “liquidated” damages so that lenders will count the funds as part of the project’s capitalization. The bill was dramatically narrowed by amendment so that it applies only to “anti-speculation” provisions that apply to sales contracts for new attached common interest development units.AB 709, Keene– The bill was introduced to allow state agencies to call for the use of a private sector certified appraiser (e.g. a Member of the Appraisal Institute or MAI) even if not licensed in California. C.A.R. watched the bill to ensure that it did not impair REALTORS’® ability to issue an opinion of value.AB 864, Davis-Existing law requires the transferor, in any sale or other transfer of property to a third party that occurs duringthe period between the issuance of a notice of violation relating to substandard buildings and the abatement of the violation, to record a Notice of Conveyance of Substandard Property with the county recorder within 5 days after the sale or transfer occurs. AB 864 would have created a point-of-sale mandate on purchasers of substandard properties to provide the local enforcement agency a plan of correction of the substandard conditions, including costs, financing, and a timeline for repairing the premises.C.A.R. opposed AB 864 because it discouraged investment and rehabilitation of substandard properties by placing vague and unreasonable burdens on purchasers that would have delayed sales transactions. C.A.R. achieved amendment in July to require that theplan of correction be provided 30 days after the close of escrow, instead of at the point-of-sale, and removed the criminal penalties from the bill. With these amendments, C.A.R. removed it opposition.AB 941, Torrico-This bill would have required the Department of Real Estate (DRE) to review the real property transaction disclosure process and to make recommendations on state-required real property transfer documents in order to ensure a consumer's ability to understand the terms of the transaction. AB 941 required DRE to complete a draft report, accept written comments on the draft report and provide the final report to the Legislature by January 1, 2009. C.A.R. opposed AB 941 because it was too broad and shouldhave been more precisely targeted; also, the study did not include private sector “stakeholders,” like C.A.R., that provide some of the most important disclosures in a transaction. The bill was amended in early September to address an unrelated topic and, thus, C.A.R. removed its opposition.AB 952, Mullin-As introduced, AB 952 would have prohibited a common interest development (CID) from imposing or increasing any assessment by morethan 3% on low- or moderate-income units, unless those unit owners had voted to approve the increase in fees. C.A.R. opposed the bill because it would have required the market-rate unit owners to bear the increased assessment burden. As amended, AB 952 prevents a CID from imposing a regular assessment that exceeds 20 percent of the association's preceding year’s regular assessment, or 5 percent of the association’s gross expenses for special assessments, without first obtaining the approval of50 percent plus one of the market rate unit owners, as well as the approval of a majority of the low- or moderate-income unit owners, thereby giving a small minority of owners veto power over the majority of unit owners. Finally, AB 952 requires CIDs tooffer interest free payment plans to all below market rate units provided that the assessments are paid within 12 months. C.A.R. opposes AB 952 because it could block significant maintenance and property improvement actions by a CID, as well as shift thefinancial burden of completing needed repairs to the market rate unit owners, thus negatively impacting property values in the CID. The Department of Real Estate has also adopted an oppose position to AB 952 due to its prescribed assessment approval procedure.AB 1234, Wolk-As introduced, AB 1234 would have required homeowners to replace their “old” gas floor furnace when they sold their property. C.A.R. opposition to this bill was due to this point-of-sale mechanism for upgrading older floor heaters because the requirement should be placed on all homeowners, not just those involved in a sale. C.A.R achieved amendments removing the point-of-sale requirement for the heater upgrades. As amended, AB 1234 requires all floor heaters to be upgraded by January 1, 2014.AB 1452, Evans-Current law requires the filing of detailed impact reports when converting existing mobilehome parks to private ownership. However, if the park is being converted to resident ownership, the park is granted an exemption from this requirement. AB 1542 would have deleted that exemption. C.A.R. opposed the bill because it attempted to eliminate mobilehome park owners’ ability to convert their park into one that is resident-owned, thus penalizing residents and owners. As amended, AB 1542 deletes the existing requirement that subject subdividers to a hearing by the appropriate legislative body for the purpose of approving the subdivision map. The bill also requires local rent control measures to remain applicable to the rental of any mobilehome space when a resident chooses not to purchase their lot. C.A.R. continued to oppose AB 1542 because it attempts to maintain existing price controls that create undue financial burdens on park owners that contribute to the decline in mobilehome parks in California.AB 1538, Lieu– The bill is designed to create a program administered by CalHFA, using donated funds, to help homeowners forced into default. Program details have not yet been put into the bill; see also report of the C.A.R. Troubled Loan Task Force due to be provided to the Board in January 2008.AB 1574, Houston-An interim hearing may be held during the fall to investigate the imposition of private transfer taxes (PTTs) by developers. AB 1574 was the builder-sponsored response to C.A.R. sponsored SB 670. A loopholein California law lets developers and other non-government entities impose PTTs on homes every time the property is sold – with no oversight, no accountability and no limit on the number of separate private transfer taxes that can be piled onto a home. As introduced, AB 1574 legitimized the practice of imposing these “taxes” by making that loophole permanent. As amended, AB 1574 requires that the Department of Real Estate provide oversight of the imposition of PTTs and allows PTT revenue to only be directed to a public entity or a nonprofit organization providing a public benefit within the property’s region. AB 1574 allows the PTT to be imposed for a period up to 99 years, allocates a maximum of 10 percent of the proceeds for administrative costs, caps the amount of the PTT at two percent of the home sale price and prohibits the use of PTT funds for lobbying. C.A.R. continues to oppose AB 1574 because it legitimizes PTTs without providing adequate safeguardsIX. Introduction of 2008 Committee LeadershipX. OtherXI. AdjournmentNote: “*” denotes an item with accompanying written materials
