I. Welcome and Opening Remarks - Bill Jansen, Chair
II. Overview of the Legislative Climate
- Member mobilization report - DeAnn Kerr - Extraordinary legislative sessions - Budget, Health
Care, Water - Oral update from staff on the status of special sessions of
the legislature that ran concurrently with the regular session. - Evaluating Proposals for Sponsored Legislation* - This
Issues Briefing Paper reviews that ought to be taken into account when making
the decision to sponsor a proposal as C.A.R. legislation.
III. C.A.R. Sponsored Legislation
A. SB 1737/1054 Machado, Mortgage Loan Broker Disclosure - As the
lending function has become increasingly complicated and the subject of
disputes, calls for more supervision or separation of the lending function from
the rest of the real estate license have increased. Legislative pressure for
reform continues to increase, aggravated by fears of increased defaults among
non-traditional mortgages. Upon recommendation of the Mortgage Broker Task
Force, C.A.R. sponsored a provision of SB 1054 that would have required a
prominent disclosure to all parties whenever a licensee represents a buyer and
originates a loan in a "1-4" transaction. This legislation would have helped to
alleviate the perceived conflict created by the loan originator's obligation to
ensure that the loan application is accurate and adequately underwritten, and
his or her natural inclination to press for closure of the transaction. In
June, C.A.R.'s Board of Director's adopted an oppose unless amended position to
SB 1054 in order to eliminate a provision that would have precluded an
individual licensee from taking a listing if they had provided a broker price
opinion on the parcel for a short sale within the last 12 months. C.A.R.
obtained amendments that removed this language. As amended, the bill contained
a provision to authorize the DRE commissioner to suspend or revoke a real
estate license if the licensee generated an inaccurate broker price opinion for
a short sale with the intent of manipulating the lienholder into rejecting the
proposed sale so that the licensee could acquire a business advantage.
B. AB 1356, Houston, Agents of Equity Purchasers - AB 1356
(Houston) Agents of Equity Purchasers - Existing law, prior to the
decision in Schweitzer vs. Westminster Inv., effectively (and
inappropriately) precluded legitimate agents from representing investor
purchasers of properties in foreclosure because buyers' agents were required to
purchase a bond, that is not available, for twice the value of the property. As
introduced, this bill would have allowed an alternate means of demonstrating
financial responsibility that included maintenance E&O insurance, with
coverage up to $1 million, and a certification that the licensee was in good
standing with the DRE. In early 2007, Schweitzer vs. Westminster
Inv. which has overturned the bond requirement became final, thus
making this bill unnecessary. C.A.R. requested that the author not move the
C. AB 1366, Portantino, Housing Impact Statement Requirement for Local
Land Use Decisions - AB 1366 (Portantino) Housing Element Requirements for
Local Land Use Decisions - This bill will strengthen the annual
housing element reporting process that governs local housing actions and
provide a reporting structure that will help local governments' to focus on the
regional impact of their housing decisions. HCD is promulgating a form that is
currently available on a voluntary basis until it is fully approved. The form
is intended to facilitate submission of the housing element portion of the
annual general plan status report. As amended, AB 1366 will create an incentive
program to encourage timely filing of the annual housing element portion of the
general plan report by conditioning the receipt of funding from the CalHome,
BEGIN, and the Infill Incentive Grant programs on both the adoption of an HCD -
approved housing element and submittal of the annual progress report to HCD
within the previous 12 months. The measure encourages local agencies to include
more specific planning descriptions designed to meet the localities’ share of
its regional housing need and help identify those jurisdictions that meet or
exceed regional housing goals. AB 1366 has a delayed effective date tied to the
first April 1 reporting date following final approval of the HCD Form for the
D. AB 2259, Mullin, CID Preservation of Right to Rent -
Over the last few years, C.A.R. members noticed a trend among some homeowner
associations to adopt restrictions that limit the ability of unit owners to
rent their dwellings in CIDs. The imposition of rental restrictions diminishes
an owner's property rights. C.A.R. argues that property owners should enjoy the
right to rent or lease their unit as it existed at the time the CID unit was
purchased. C.A.R. sponsored AB 2259 to protect this right, if it existed at the
time the owner purchased the unit.
E. AB 2363 (Ma) Megan’s Law - "Just Cause Evictions" under Megan's
Law - Municipalities with eviction controls only permit landlords to
terminate a tenancy for a "just cause." Under these ordinances, the landlord
must state, and potentially prove in court, a valid reason for terminating a
tenancy which generally includes: non-payment of rent, illegal activity or
holdovers, property damage, owner move-in, or the removal of units from the
rental market. In February, C.A.R. sponsored legislation to require local
jurisdictions with a "just cause eviction" ordinance to permit landlords to
terminate a tenancy of a registered sex offender if necessary to protect a
person at risk. With aggressive opposition in Assembly Judiciary Committee,
C.A.R. chose to amend AB 2363 to require the Sex Offender Management Board to
conduct a study on the availability of rental housing for sex offenders and to
analyze what impact making registration as a sex offender a basis upon which to
terminate a tenancy would have on public safety.
IV. Reports of Standing Committees and Task Forces
A. REALTORS® Commercial Alliance Commercial Investment - George Monte
B. Common Interest Development - Susan Tilling
C. Equal Opportunity-Cultural Diversity - Raymond Rodriguez
D. Housing Opportunity - Le Francis Arnold
E. Land Use and Environmental - Liz Fitzgerald
F. Local Governmental Relations - Leslie McBride
G. Manufactured Housing - David Hale
H. Property Management - Kevin Brown
I. Real Estate Finance - Patricia Bouie-Hinds
J. Taxation - Skip Zeleny
K. Tax Basis Portability Task Force - Deborah Ritchey
L. Public Policy Committee Reorganization Task Force - Annette Graw
M. Private Transfer Tax Task Force - Heath Hilgenberg
V. HR 3221 - California Implementation of Loan Originator License
* Preemptive federal legislation has passed as part of the new federal
housing bill that will require the states to individually license or register
mortgage loan originators. This paper explores the policy options potentially
raised by California efforts to comply.
VI. Ballot Propositions for November 2008 -UPDATED* The
November 2008 general election ballot will contain 12 propositions for a vote
of the people. C.A.R. has taken a position on only a few of the propositions,
but all of the propositions will be presented in order with updated
VII. Unconstitutional Covenants in Title Records * The
included Issues Briefing Paper raises the question of whether C.A.R. should
sponsor legislation attempting to mask or remove unconstitutional restrictions
in title records. This issue was the subject of AB 2204, De La Torre, and has
inspired multiple point of sale proposals.
VIII. State Pre-emption of Foreclosure Property Maintenance*
The included Issues Briefing Paper explores the background of state and local
regulation of REO properties. New state law speaks to the upkeep of foreclosed
properties, but some local jurisdictions are imposing or considering different
or even stricter regulations. At issue is whether C.A.R. should involve itself
in legislative efforts to pre-empt the local rules.
IX. Consolidation of Statutory Disclosures in the TDS* The
included Issues Briefing Paper explores whether C.A.R. should consider
sponsored legislation to amend the TDS so as to allow it to serve as the
disclosure or certification that property safety rules (like water heater
strapping) have been complied with prior to sale.
X. Point of Sale Legislation
A. SB 1386, Lowenthal; Carbon monoxide detectors - SB 1386 would
require ALL existing homes to install a carbon monoxide (CO) detector by July
1, 2010, and new homes built after June 1, 2009 to have a CO detector. The
measure would have originally required the recording of a separate disclosure
of compliance, a point-of-sale mandate and would have effectively forced home
sellers and their agents to certify CO alarm installation. C.A.R. has recently
obtained amendments that removed the specified point-of-sale mandate. As
amended, the bill provides for a statewide, date-certain mandate for CO
detectors in all housing (not just those that transfer), and will allow the CO
detector to be noted in a (TDS). The amendments also added CO detectors to the
TDS, thus eliminating the need for separate certifications. The amendments also
broadened the statutory protections for these disclosures providing better
seller protection and increased liability protections for agents.
B. AB 2678, Nunez; Energy audits and retrofit "investments" As
introduced, AB 2678 required the California Energy Commission to develop a
program that would have required ALL homes and commercial properties in
California to have an energy audit and mandatory energy efficiency upgrades
when properties were sold. While C.A.R. appreciated the goal of AB 2678, C.A.R.
strongly opposed the point-of-sale requirements in the bill because not only
would a point-of-sale mandate have failed to achieve the state's greenhouse gas
reduction objectives, it would have further weakened the housing market by
adding thousands of dollars to the cost of purchasing a home. C.A.R. obtained
amendments that removed the point-of-sale requirement for energy audits and
added language to ensure that the audits or improvements were not required as a
condition of sale. With these amendments, C.A.R. removed its opposition and
supported AB 2678 because it would have created a comprehensive statewide
campaign of flexible cost-effective energy efficiency improvements for existing
C. AB 2881 (Wolk) Right to Farm - As introduced, AB 2881
would have required real estate licensees to include a disclosure on the right
to farm in a real property sales contract for all properties located within a
1 - mile radius of an agricultural area. C.A.R. opposed the bill until it
was amended to remove the mandatory disclosure provision. The bill now places
the Right to Farm disclosure in both the subdivision reports for new homes and
Natural Hazard Disclosure reports for resale homes, and contains a more
workable definition of "agricultural area."
D. AB 2050 (Garcia) Point-of-Sale Mandate on Manufactured
Homes - This bill proposes to modify current law that requires
one smoke detector per mobilehome. AB 2050 would require all existing
manufactured homes have an operable smoke detector in each sleeping room and to
have water heaters strapped. As introduced, AB 2050 required that the
verification of compliance with this statute be confirmed by the occupant of
the mobilehome within 45 days prior to the sale of the mobilehome. C.A.R.
opposed AB 2050 because it imposed a pre-point-of-sale mandate that did not
include liability protection for real estate agents representing the seller of
a mobilehome. A similar retrofit requirement is in current law for
"stick-built" housing, and contains a safe-harbor provision for real estate
licensees. Real estate agents should not be required to be "de facto"
compliance inspectors. C.A.R achieved amendments that provide real estate
agents the same liability immunities and limitations on duties to the client as
currently exist in the sale of "stick-built" housing.
E. AB 2733, Brownley; Environmental Hazard Report - This
measure would have required sellers or their agents to purchase a new
disclosure report that identified all environmental hazard sites located within
a one-quarter mile radius of a home's zip code or city upon transfer of the
property. C.A.R. opposed AB 2733 because it would have required the purchase of
an additional, and unnecessary, disclosure report and resulted in a dilution in
the value of existing disclosures. The bill would have also added unknown costs
to the transaction. C.A.R. achieved amendments that removed its opposition. As
amended, AB 2733 no longer requires a new separate report but requires a
developer or professional natural hazard report provider to, in its existing
report, disclose environmental hazard sites located within a one-quarter mile
radius of the property to prospective buyers.
XI. Department of Real Estate
A. SB 1240/1053, Machado; Mortgage broker enforcement program
- SB 1053 failed to pass the Assembly Banking and Finance Committee due to a
political dispute between the Assembly and Senate Banking Committees. SB 1240
was selected as an alternate vehicle and was "gutted and amended" in August
2008 to move the concepts in SB 1053 forward. As amended, SB 1240 requires real
estate licensees acting as mortgage brokers to notify The Department of Real
Estate (DRE), in writing, upon commencing or discontinuing that activity.
Brokers will be required to file reports annually with the DRE that include a
review of compliance and a review of trust fund financial statements by a
licensed independent public accountant. Finally, SB 1240 will require brokers
to keep all documents and records related to a loan transaction for 3 years.
C.A.R. supports SB 1240 because it seeks to improve the supervision of mortgage
brokers, without creating a special license.
B. SB 1448, Scott; Unlicensed Real Estate Practice - As
introduced, SB 1448 would have authorized the Department of Real Estate (DRE)
to issue citations containing a maximum fine of $5,000 or an order of abatement
to unlicensed individuals acting as a real estate licensee. As amended, C.A.R.
supports SB 1448 with the adopted amendments that increase the existing
penalties and fines to be sought by district attorneys when unlicensed practice
C. SB 1461, Negrete McLeod; License number on contact
materials - SB 1461 requires a real estate licensee to display his or
her license number on real property purchase agreements and "consumer first
contact materials" which include: business cards, stationary, advertising
fliers, and other materials designed to solicit a professional relationship;
however, the bill does not apply to classified rental advertisements. This bill
would become effective on July 1, 2009. C.A.R. amendments that exempt "for
sale" signs and advertisements that appear either in print or electronic media
from the definition of "consumer first contact materials."
D. AB 2454, Emmerson; Real Estate Recovery Fund - The Real
Estate Recovery Account is funded through fees imposed on real estate licensees
and made available to individuals seeking to recover the unpaid portion of a
fraud judgment against a real estate licensee. Currently, payments from the
Recovery Account may not exceed $20,000 for any one transaction and $100,000
for any one licensee. AB 2454 would increase the amount that individuals may
recover to $50,000 for any one transaction and $250,000 for any one licensee.
C.A.R. supports AB 2454 because it will adjust homeowner protections to keep
pace with inflation.
E. Status of budget "raids" from DRE reserves - Staff
update on the status of attempts to "borrow" DRE reserve funds as part of
efforts to balance the state budget. As of press time, the effort seems to have
F. Proposed license fee increases - Update on DRE task
force examining whether, or how much, license and other fees may have to be
increased to keep pace with the declining numbers of licensees.
G. DRE Task Force to review exam questions - Update on
the DRE task force that is reviewing the license exam to ensure that its
questions are valid and related to real estate practice.
XII. Mortgage Brokerage Legislation
A. SB 1137, Perata; Changing the foreclosure process -
This legislation, passed on an urgency basis and already effective, was
originally opposed by C.A.R. as part of a business and lending coalition. The
bill was amended to moderate its restrictions on foreclosure and opposition was
withdrawn. Its net effect is to add a month to the required foreclosure
timeline to allow better “work out” opportunities for borrowers contacted by
lenders, and to protect tenants in foreclosed properties against eviction for
B. AB 1830, Lieu; Restrictions on mortgage loan brokers - AB
1830 would impose new interest rate tests and definitions for "higher priced"
loans in an effort to be consistent with the new federal "Reg. Z" law on
subprime loans. The bill also allows California regulators to punish violations
of federal lending law. C.A.R. opposed a previous version of the bill which
would have attempted to create a codified set of fiduciary duties for real
estate licensees that would have caused needless compliance burdens,
inappropriately restricted mortgage refinances, and worsened the current
liquidity crisis that is making home loans so difficult to obtain. As amended
in the Senate, C.A.R. renewed its opposition to AB 1830 because it restored
previously opposed language and would create a new one-sided attorney fee rule
that would only allow successful plaintiffs to collect attorney fees. AB 1830
will also create a double standard that does not hold ALL loan officers to the
same rules and restrictions by only imposing new restrictions on mortgage
brokers originating loans and not on residential mortgage lenders like
Countrywide when they originate loans. The bill would restrict loans which will
further restrict credit liquidity in California making home loans more
difficult to obtain for legitimate, qualified, borrowers.
C. AB 2880, Wolk; Bond requirement for mortgage
activity - This bill would have required a bond for a real estate
licensee to engage in mortgage brokerage. C.A.R. opposed as tantamount to a
license endorsement requirement and the bond was eventually eliminated.
D. HR 3221, Federal mandate to license mortgage loan originators (see
also item V, above) - The new federal housing bill (among other
things) requires states to regulate mortgage loan originators by creating a new
registration or licensing program. The included Issues Briefing Paper explores
the ramifications of the bill for DRE licensees.
XIII. Bills of Others
Note: For a complete listing of bills on which C.A.R. has taken active
positions please see the Legislative Program Report at the new CAR.org, under
"Government Affairs, 2008 Legislative Program."
SB 127, Kuehl; Timing of 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 have required all transactional disclosure documents to be
delivered within ten days of the "execution" (acceptance) of an offer to
purchase. C.A.R. originally opposed SB 127 because it would have imposed a 'one
size fits all" time frame which would have made compliance difficult for many
transactions, and would not have allowed time frames to be negotiated. C.A.R.
successfully obtained amendments that would have allowed both parties to the
transaction to agree, in writing, to change the time period for delivering
transaction disclosures. With this amendment, C.A.R. had removed its
opposition. Later amendments, however, forced C.A.R. to renew its opposition.
As amended, SB 127 required a separate document when both parties to the real
estate contract negotiate for a disclosure delivery time longer than ten days
and would not have allowed the agreement to be contained within a single
contract or deposit receipt. C.A.R. opposed the bill because it would have
created unnecessary compliance burdens. In the final weeks of session, C.A.R.
obtained amendments that removed the separate document requirement, thus
removing C.A.R.’s opposition to SB 127.
SB 1007, Machado; IRC 1031 Exchange Accommodator
regulation - This bill was supported by C.A.R. as it put minimum
practice standards for exchange accommodators. C.A.R. will consider at these
meetings whether to seek further regulation in the form of a legal opinion
characterizing accommodators as escrows, or to impose other regulation.
SB 1065, Machado; Partial conformity to federal safe harbor for debt
forgiveness - Federal law has created a special exception to the
rule that makes the amount of debt forgiven in a short sale taxable as ordinary
income. The federal rule protects tax years 2008-2010. This bill protects years
2008-2009; C.A.R. sought amendments to match the federal period.
SB 1608, Corbett; ADA lawsuits - This bill creates a
process by which a business owner can get a certificate of compliance with ADA
rules, and requires plaintiffs to actually have been personally inconvenienced
by a violation.
SB 1775, Calderon; Dog fighting forfeitures - C.A.R.
sought and received amendments to protect innocent landowners and landlords
from forfeiture of property used in illegal dog fighting. The bill was
eventually defeated in Senate Judiciary Committee for other reasons.
AB 2020, Fuentes; Liquidated damages in high-rise
condos - The bill changes the percentage amount for agreed upon
liquidated damages in transactions involving high value ($1,000,000+) high-rise
multiunit developments. The bill is designed to help construction financing by
allowing the liquidated damages to be counted as builder capital, but the buyer
is protected by provisions requiring a refund of amounts that exceed actual
damages for failure to complete a purchase.
AB 2052 (Lieu), Residential Tenancies, Domestic
violence - The bill allows a victim of domestic violence to
escape a lease in order to get away from an abuser. C.A.R. sought and received
amendments that sunset the new rule after a pilot period and which preserve the
ability of property managers to terminate the abuser.
AB 2105, DeSaulnier; Elder abuse mandatory reporting -
The Elder Abuse and Dependent Adult Civil Protection Act established procedures
for the reporting, investigation, and prosecution of elder and dependent adult
abuse. These procedures require persons, defined as "mandated reporters," to
report known or suspected instances of elder or dependent adult abuse. Under
current law, only care custodians of dependent adults, local law enforcement
agencies and some financial institutions are classified as mandated reporters.
As introduced, AB 2105 would have expanded the category of mandated reporters
for financial abuse to include both real estate brokers and residential
mortgage lenders. C.A.R. opposed AB 2105 because real estate licensees engage
in a broad array of customer services within the scope of their licensed
activities and it would have been impossible for them to reasonably comply with
the mandates of the bill without massive over reporting. C.A.R. obtained
amendments that exclude real estate brokers from the requirements of this bill.
As amended, the bill only pertains to Real Estate Mortgage Lenders (RMLs) and
California Finance Lenders (CFLs).
AB 2204, De La Torre; Unconstitutional covenants in title record (see
VII, above) - This bill would have imposed a time of sale
requirement to search out and review for removal unconstitutional restrictions
in the title record of residential property. Bill died in Senate Appropriations
committee, where one recorded estimated a 3-year cost in excess of $191
Note: “*” denotes an item with accompanying written materials