Legislative Committee
Land Use and Environmental Committee

(This material is for discussion purposes and has not been approved by the Legislative Committee, Land Use and Environmental Committee, Executive Committee or Board of Directors)

Issue:
Should C.A.R. pursue, as an alternative to point of sale, a comprehensive retrofit program creating a unified time for imposing governmentally required inspections and upgrades that would be triggered every 5-10 years, whether or not the house sells?

Action:
Required

Summary:
Staff is informed that C.A.R. will face a number of time of sale bills in 2009; in the current political environment they will be difficult if not impossible to defeat with straight-out opposition, even with all-out member mobilization.

In December 2008, the Leadership Team authorized staff to take preparatory steps to introduce legislation creating an alternative to time of sale mandates, and then bring the proposal to the Board in January 2009. The bill would create a unified time for imposing governmentally required upgrades, so that required inspections and upgrades would be triggered every 5-10 years, whether or not the house sells. The approach could use this “anniversary” inspection/upgrade as an alternative in combating time of sale proposals.

The proposal is an extension of the policy implemented in amending AB 2678 (Nunez) last session. Local Associations of REALTORS® faced with time of sale proposals have also requested that something like this be discussed by the Legislative or Land Use and Environmental Committees in January.

Options:
1. Sponsor Legislation for non-Point of Sale inspections and property upgrades, as outlined below. (New policy)

2. Oppose Point of Sale proposals with C.A.R.-sponsored counter legislation creating a universal requirement that becomes effective at a date certain, with compliance disclosed at sale. (An extension of C.A.R. policy position used with AB 2678 (Nunez) in 2008).

3. Do Nothing (C.A.R. existing policy would continue to oppose Point of Sale, both by outright opposition and "date certain" disclosure alternatives)

4. Other

Discussion

The bills on the 2009 horizon
Staff has been told of bills in the following areas:

- ACWA (Association of California Water Agencies) and MWD is circulating a time of sale water conservation (toilet) retrofit;
- The CEC (California Energy Commission) reportedly will re-introduce AB 2678 and possibly an additional rating / energy audit bill; the PCL (Planning and Conservation League) reportedly has its own similar bill;
- ARB (Air Resources Board) will approve in December an AB 32 implementation plan that includes time of sale as an appropriate trigger event for retrofits; agencies will take that as a mandate to do so;
- Water agencies and county governments will advance at least two different sewer / septic inspection and retrofit requirements;
- Local governments are continuing to push time of sale as the trigger event for fireplace, water use efficiency and energy retrofits;
- We will probably see additional “safety” mandates like the vetoed carbon monoxide alarm bill of last session or the next iteration of pool barriers.

A C.A.R. alternative requires approval
C.A.R. was successful last year in turning AB 2678 into a comprehensive, society-wide, program rather than point of sale bill, particularly when C.A.R. offered to support the alternative approach. Unfortunately, after C.A.R.’s amendments, the bill was abandoned by its sponsor (the California Energy Commission) which still favors point of sale, and the bill died in the Senate. A proactive approach could effectively counter the time of sale proposals and gives C.A.R. the high ground from which to oppose the ones we cannot defeat.

However, putting a C.A.R.-sponsored bill in motion that will impose hundreds (if not thousands) of dollars in inspection and upgrade costs on existing housing is a new extension of existing policy positions that merits review of this broader step by the Board of Directors. The Leadership Team authorized preliminary steps in order to avoid waiting to the end of January, when C.A.R. would have to “play catch-up” with the other legislation introduced much earlier. Indeed, some of the legislation may be introduced even in December. Pending the decision of the Board, no commitment to introduce or sponsor legislation will be made.

The Glendale and Pasadena Associations of REALTORS® is fighting point of sale mandates at the local level and have requested that C.A.R. consider sponsoring a state alternative.

The outline of the C.A.R. counter proposal
Staff will draft, and quietly approach an appropriate author for a bill as outlined below. An appropriate author would be one with which C.A.R. has sufficient rapport so as to make sure the sponsored “cure” doesn’t end up worse than the “disease.” That approach would only be with the caveat that the proposal is not yet approved and is subject to board of director action in January.

The bill would contain a new approach to updating existing housing stock that is based upon the age of the home/building and “phased” through the existing stock by triggering mandates upon a rolling 5 or 10-year anniversary of its first recorded sale or first certificate of occupancy.

The bill would create a statutory scheme for existing, and all new, mandates that gets them done all at the same time, hits all properties every 5 years (10 years?), and is triggered by time rather than sale. Part of the bill would be a requirement that mandates on older housing would all have to go to the “Anniversary Inspection and Upgrade” inspection and disclosure, almost like a new NHD or TDS or subdivision Public Report.

Depending upon the type of mandate, the legislation would also attempt to use the related entity (e.g. water agency, public utility) to “bankroll” the funding of the mandates. A repayment mechanism could build the financing into on-bill financing or tax bill collection. There is an intriguing existing model in the so-called “pay as you save” program for utility upgrades.

Political realities will require C.A.R. to work carefully with the utility, environmentalist and agency groups and add amendments to keep them comfortable that their regulatory “turf” is protected.

The "Date Certain" model
In the past, C.A.R. has sometimes avoided the imposition of a time of sale mandate by changing a proposed bill into a universal or comprehensive requirement, with a delayed effective date or "date certain" that is coupled with a requirement for sellers to disclose their compliance with the universal requirement. The approach was first used with smoke detectors, and the sellers' compliance is certified on a C.A.R. standard form (WHSD). The same approach was later followed with water heater strapping, and then a later variation was used to deal with pool barriers and spa covers (in the TDS) as well.

This approach complies with the "letter" of historic policy against time of sale mandates, but it has the potential to become a de facto time of sale requirement if there is insufficient publicity of the new rule and time for compliance. In theory, the approach only burdens the disclosing owner/seller, but if the agent has to verify compliance as part of his or her services in the transaction, it still burdens the transaction. By way of example, when the disclosure date for water heater strapping compliance arrived, many REALTORS® reportedly found so many sellers out of compliance that they began to give away strapping kits as part of their listing activity.

Should C.A.R. sponsor introduction of an anniversary mandates bill in January 2009 as an alternative to Point of Sale legislation?