BILL ANALYSIS
SB 120
Page 1
SENATE THIRD READING
SB 120 (Alan Lowenthal)
As Amended August 24, 2009
Majority vote
SENATE VOTE :23-14
JUDICIARY 7-3 UTILITIES & COMMERCE
10-4
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|Ayes:|Feuer, Brownley, Evans, |Ayes:|Fuentes, Buchanan, |
| |Jones, Krekorian, Lieu, | |Carter, Fong, Furutani, |
| |Monning | |Huffman, Krekorian, |
| | | |Skinner, Swanson, Torrico |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Tran, Knight, Silva |Nays:|Duvall, Fuller, Smyth, |
| | | |Villines |
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APPROPRIATIONS 12-5
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|Ayes:|De Leon, Ammiano, | | |
| |Charles Calderon, Coto, | | |
| |Davis, Fuentes, Hall, | | |
| |John A. Perez, Skinner, | | |
| |Solorio, Torlakson, Hill | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Conway, Duvall, Harkey, | | |
| |Miller, Audra Strickland | | |
| | | | |
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SUMMARY : Revises existing public utility termination notice
provisions, which currently apply only to the multi-unit
residential tenancies, to any residential structure, including a
single-family dwelling. Specifically, this bill :
1)Provides that whenever a corporation that furnishes
electrical, gas, heat, or water services to any residential
occupants, if the owner, manager, or operator of the
residential unit is listed by the corporation as the customer
of record, the corporation must make every good faith effort
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to inform the residential occupants, by means of a specified
written notice, when the account is in arrears, that service
will be terminated at least 10 days prior to the termination,
except as specified. The notice shall provide residents with
specified information regarding steps that they may take,
including a statement of the residents' right to obtain the
utility service in their own name and assume responsibility
for payment of any subsequent charges. Specifies that notice
must be in English, Spanish, Chinese, Tagalog, Vietnamese, and
Korean.
2)Applies the same provisions described above whenever a public
utility or district provides light, heat, water, or power to
residential occupants, including a single family dwelling, if
the owner, manager, or operator of the residential unit is
listed by the public utility or district as the customer of
record.
3)Permits a tenant of any residential dwelling to assume
responsibility for payment for utility services provided by a
corporation, public utility, or district and to deduct utility
charges from any periodic rent owed, if the rent amount
includes charges for utility services.
EXISTING LAW :
1)Requires any corporation, public utility, or district that
provides electrical, gas, heat, or water services to residents
in a multi-unit residential structure, mobilehome park, or
labor camp to make good faith effort to inform residential
occupants of any intent to terminate services, as specified
depending upon whether the units single- or mastered-units.
2)Permits a residential occupant of a multi-unit dwelling to
assume responsibility for paying service charges from a public
utility, corporation, or district, as specified, and to deduct
those charges from any rent owed if the services are supposed
to be included in the rental price.
3)Provides that any person engaged in a trade or business, who
negotiates primarily in Spanish, Chinese, Tagalog, Vietnamese,
or Korean, in the course of entering into a rental or lease
agreement, shall deliver to the other party a translation of
the agreement in the language in which the agreement was
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negotiated.
4)Provides, under the federal "Protecting Tenants at Foreclosure
Act of 2009," signed by President Obama on May 20, 2009, that,
in the case of foreclosure on a federally-related mortgage
loan, or on any dwelling or residential property after the
date of enactment, the successor in interest shall: a) give
any bona fide tenant on the affected property at least 90 days
notice to vacate; and, b) take the property subject to the
rights of any bona fide tenant.
This provision will sunset on December 31, 2012.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, minor absorbable costs to the PUC for enforcement of
the bill's requirements with regard to the investor-owned
utilities.
COMMENTS : One of the lesser known consequences of the recent
foreclosure crisis in California and elsewhere has been its
impact on renters. According to the California Apartment
Association, about one quarter of foreclosed single-family
properties are occupied by tenants. (See "Shadow Victims of the
Mortgage Crisis: Renters," Los Angeles Times, February 13,
2008.) Renters who bear no responsibility for the foreclosure,
in other words, often find themselves facing eviction when the
property owner fails to meet the mortgage. In addition, because
owners of distress properties sometimes fail to make utility
payments, tenants can sometimes lose utility services through no
fault of their own. Existing landlord-tenant law provides
certain protections for renters, but lenders and other
successors in interest who acquire title after a foreclosure -
and who never signed an agreement with the tenant - do not
necessarily acquire the legal obligations of a landlord. In
part, the uncertain status of the successor of interest in a
foreclosure situation is rooted in a legal assumption that a
foreclosure terminates a tenancy. As introduced this bill was
modeled on last year's AB 2586 (Torrico), which sought to
clarify the circumstances in which a person or entity that
acquires property pursuant to a foreclosure becomes a "successor
in interest" and assumes certain obligations of a landlord. AB
2586 was vetoed by the Governor.
The Governor's veto message on AB 2586 focused primarily on the
provisions that required the acquiring property owner in a
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foreclosure (i.e., the bank, typically) to return the security
deposit. The veto message claimed that such a provision would
"fundamentally change" existing law by requiring the successor
in interest to repay the security deposit even though the
successor in interest had never entered into a contractual
agreement with the tenant. In fact, existing law already makes
a landlord's successor in interest jointly and severally liable
for return of a security deposit if the landlord fails to return
it. So the relevant provision of AB 2586 was not a "fundamental
change" to contract principles, but simply a clarification that
a person or entity that acquired property as a result of a
foreclosure was a "successor in interest" for purposes of those
already existing provisions. More to the point, the Governor's
veto message did not mention any of the provisions that remain
in the measure under consideration, and it is difficult to see
how any of the remaining provisions would pose any of the same
concerns.
Recently enacted federal legislation appears to address many of
the concerns that originally motivated both this measure and
last year's AB 2586. Specifically, the "Protecting Tenants at
Foreclosure Act of 2009," signed by President Obama on May 20,
2009, provides that in the case of a foreclosure on a
federally-related mortgage loan, or on any other dwelling or
residential property after the effective date of the statute,
the successor in interest takes the property "subject to . . .
the rights of any bona fide tenant." In addition, the new
federal law requires the successor in interest of a foreclosed
property to give any bona fide tenant at least 90-days notice to
vacate.
This bill is sponsored by the Western Center on Law & Poverty
(WCLP). According to the WCLP, "tenants are truly innocent
victims of the foreclosure crisis . . . [who] find themselves
trapped in a vortex of trouble not of their own making." For
example, tenants in foreclosed properties commonly face possible
termination of public utilities, especially if they are renting
a single-family dwelling. WCLP contends further that landlords
of distressed properties are sometimes unable to pay utility
bills that they agreed to pay, and shut-offs occur. Current law
allows tenants in multi-family dwellings to begin service in
their own names and deduct payment from the amount of rent owed
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to the landlord. This bill would extend the current provisions
to tenants living in single-family homes and condos, since these
are often affected by foreclosure.
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334
FN: 0002353