BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  AB 2016|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                 THIRD READING


          Bill No:  AB 2016
          Author:   Torres (D)
          Amended:  6/22/10
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  5-0, 6/15/10
          AYES: Corbett, Harman, Hancock, Leno, Walters

           ASSEMBLY FLOOR  :  75-0, 5/03/10 - See last page for vote  
            (Consent) 


           SUBJECT  :    Common interest developments:  requests for  
          notices of
                        default

           SOURCE  :     Community Association Institute 


           DIGEST  :    This bill seeks to allow a homeowners  
          association in a common interest development to record a  
          single a copy of a trustee's deed upon the sale of any  
          separate interest within the association at foreclosure.

           ANALYSIS  :    Existing law, the Davis-Stirling Common  
          Interest Development Act, defines and regulates common  
          interest developments (CIDs), including the ability of the  
          association to levy regular and special assessments  
          sufficient to perform its obligations.  (Civ. Code Sec.  
          1350 et seq.)

          Existing law regulates the non-judicial foreclosure of  
                                                           CONTINUED





                                                               AB 2016
                                                                Page  
          2

          properties pursuant to the power of sale contained within a  
          mortgage contract.  To commence the process, existing law  
          requires the trustee, mortgagee, or beneficiary to record a  
          Notice of Default and requires three months to lapse before  
          setting a date for sale of the property. (Civ. Code Secs.  
          2924, 2924f.)  Existing law allows a person to record a  
          request to be notified upon the filing of a notice of  
          default or notice of sale and requires the trustee to mail  
          notice to those persons. (Civ. Code Secs. 2924b(a),  
          2924b(b)(1).)

          Existing law permits an association to record a request  
          that the mortgagee, trustee, or other person authorized to  
          record a notice of default mail the association a copy of  
          the trustee's deed upon sale of a separate interest within  
          the association at foreclosure.  The request must include a  
          legal description or the assessor's parcel number of the  
          separate interests, the name and address of the  
          association, and a statement that it is a homeowners'  
          association. (Civ. Code Sec. 2924b(f).)

          Existing law requires the above request to be recorded  
          before the filing of a notice of default, and requires the  
          mortgagee, trustee, or other authorized person to mail the  
          requested information to the association within 15 business  
          days following the date the trustee's deed is recorded.  
          (Civ. Code Sec. 2924b(f).)

          Existing law requires specified information to be included  
          in any document that effects or evidences a transfer or  
          encumbrance of an interest in real property or that  
          releases or terminates any interest, right, or encumbrance.  
          (Gov. Code Sec. 27288.1.)

          This bill states that a request filed by an association  
          pursuant to the above provisions does not, for purposes of  
          Government Code Section 27288.1, constitute a document that  
          either effects or evidences a transfer or encumbrance of an  
          interest in real property or that releases or terminates  
          any interest, right, or encumbrance of an interest in real  
          property. 

           Background








                                                              AB 2016
                                                                Page  
          3

           California, as well as the nation, is facing an  
          unprecedented threat to the economy and housing market due  
          to increasing numbers of foreclosures caused by mortgage  
          payment defaults.  When a foreclosure occurs in a common  
          interest development (CID), and a struggling homeowner  
          stops paying their association dues, the association must  
          continue to function despite that loss of funds.  If that  
          property is sold in a foreclosure sale, it is in the best  
          interest of the association to begin collecting dues from  
          the new owner of that home as soon as possible. 

          Under the Davis-Stirling Common Interest Development Act,  
          CIDs are to be managed by a homeowners association that is  
          authorized to levy regular and special assessments to cover  
          operating expenses and to fulfill their obligations to  
          members of the association.  After sale or transfer of  
          ownership, the subsequent owner is responsible for paying  
          assessments from the time they become the legal owner of  
          the property.   

          In order to assist associations in collecting assessments  
          from subsequent purchasers of foreclosed properties, SB  
          1511 (Ducheny, Chapter 527, Statutes of 2008) allowed an  
          association to request that the person authorized to record  
          the notice of default (usually a trustee) mail the  
          association the trustee's deed upon sale.  The deed both  
          informs the association that the property was sold, and  
          includes information about the new owner of the property so  
          that the association may begin collection of dues.  

          To address issues encountered by associations using the  
          provisions of SB 1511, this bill seeks to clarify that a  
          homeowners association may record a single request for a  
          copy of notices of a trustee's deed with regards to all  
          separate interests within the association.

           Prior Legislation
           
          SB 1511 (Ducheny), Chapter 527, Statutes of 2008, which  
          passed the Senate on consent on 8/19/01 (35-0).

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No








                                                               AB 2016
                                                                Page  
          4

           SUPPORT  :   (Verified  6/22/10)

          Community Association Institute (source) 
          Executive Council of Homeowners


           ARGUMENTS IN SUPPORT  :    According to the author's office:

               AB 2016 clarifies the process established by SB 1511,  
               by allowing HOAs to record one notice against all the  
               properties in their HOA as a group.  The county  
               assessors have interpreted SB 1511 to require that an  
               association record a document on each individual home,  
               versus on the entire association in one action.  This  
               is expensive and time consuming for an HOA.  AB 2016  
               corrects this misunderstanding.


           ASSEMBLY FLOOR  :  
          AYES:  Adams, Ammiano, Anderson, Arambula, Bass, Beall,  
            Bill Berryhill, Tom Berryhill, Blakeslee, Block,  
            Blumenfield, Bradford, Brownley, Buchanan, Caballero,  
            Charles Calderon, Carter, Chesbro, Conway, Cook, Coto,  
            Davis, De La Torre, De Leon, DeVore, Emmerson, Eng,  
            Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Gaines,  
            Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi,  
            Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight,  
            Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller,  
            Monning, Nava, Nestande, Niello, Nielsen, Norby, V.  
            Manuel Perez, Portantino, Ruskin, Salas, Saldana,  
            Skinner, Smyth, Solorio, Audra Strickland, Swanson,  
            Torlakson, Torres, Torrico, Tran, Villines, Yamada
          NO VOTE RECORDED:  Furutani, Hall, Silva, John A. Perez


          RJG:nl  6/23/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****