BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  SB 1427|
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                                 THIRD READING


          Bill No:  SB 1427
          Author:   Price (D)
          Amended:  5/12/10
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  4-0, 5/4/10
          AYES:  Corbett, Harman, Hancock, Leno
          NO VOTE RECORDED:  Walters


           SUBJECT  :    Foreclosures: property maintenance

           SOURCE  :     California Association of Realtors


           DIGEST  :    This bill provides that prior to imposing a fine  
          or penalty for failure to maintain a vacant foreclosed  
          property that is subject to a notice of default, or that  
          has been purchased at a foreclosure sale or acquired  
          through foreclosure under a mortgage or deed of trust, a  
          governmental entity shall provide the owner of that  
          property with a notice of violation and an opportunity to  
          correct the violation.  This bill provides that an  
          assessment or lien to recover the costs of nuisance  
          abatement measures taken by a governmental entity with  
          regard to a property that is subject to a notice of  
          default, or that has been purchased at a foreclosure sale  
          or acquired through foreclosure under a mortgage or deed of  
          trust, shall not exceed the actual and reasonable costs of  
          nuisance abatement.

           ANALYSIS  :    Existing law provides that anything that is  
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          injurious to health, indecent or offensive to the senses,  
          obstructs the free use of property, or unlawfully obstructs  
          free passage is a nuisance.  (Section 3479 of the Civil  
          Code)

          Existing law requires a legal owner to maintain vacant  
          residential property purchased by that owner at a  
          foreclosure sale, or acquired by that owner through  
          foreclosure under a mortgage or deed of trust.  A  
          governmental entity may impose a civil fine of up to $1,000  
          per day for a violation.  If a government entity chooses to  
          impose a fine pursuant to this section, it shall give  
          notice of the alleged violation, as specified, and notice  
          of intent to assess a civil fine if action to correct the  
          violation is not commenced within 14 days and completed  
          within 30 days.  (Section 2929.3 of the Civil Code)

          Existing law requires the governmental entity to provide  
          the legal owner with not less than 30 days to remedy the  
          violation prior to imposing a civil fine and requires that  
          the entity provide a hearing and opportunity to contest any  
          fine imposed.  The governmental entity may provide less  
          than 30 days' notice to remedy a condition before imposing  
          a civil fine if the entity determines that a specific  
          condition of the property threatens public health or  
          safety, provided that notice of that determination and time  
          for compliance is given.  (Section 2929.3 (a)(2) and (c) of  
          the Civil Code)

          Existing law states that the above provisions shall not  
          preempt any local ordinance, and prohibits a governmental  
          entity from imposing both the fines specified above and a  
          local ordinance.  (Section 2929.3(e) and (h) of the Civil  
          Code)

          This bill provides that prior to imposing a fine or penalty  
          for failure to maintain a vacant property that is subject  
          to a notice of default, that is purchased at a foreclosure  
          sale, or that is acquired through foreclosure under a  
          mortgage or deed of trust, a governmental entity shall  
          provide the owner of that property with a notice of the  
          violation and an opportunity to correct that violation.

          The above provisions shall not apply if the governmental  

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          entity determines that a specific condition of the property  
          threatens public health or safety.

          This bill provides that an assessment or lien to recover  
          the costs of nuisance abatement measures taken by a  
          governmental entity with regard to property that is subject  
          to a notice of default, that is purchased at a foreclosure  
          sale, or that is acquired through foreclosure under a  
          mortgage or deed of trust, shall not exceed the actual and  
          reasonable costs of nuisance abatement.

          This bill requires a governmental entity to adopt a  
          schedule of costs for nuisance abatement measures prior to  
          collection of those costs.

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

           SUPPORT  :   (Verified  5/17/10)

          California Association of Realtors (source)
          California Alliance for Retired People

           OPPOSITION  :    (Verified  5/17/10)

          League of California Cities
          Mayor Gayle McLaughlin, City of Richmond

           ARGUMENTS IN SUPPORT  :    According to the bill's sponsor,  
          the California Association of Realtors:

            "SB 1427 will require cities to provide an REO owner with  
            notice of violation of an abandoned property maintenance  
            ordinance and as well as an opportunity to correct the  
            violation before fines can [be] assessed for failing to  
            maintain the post-foreclosure property.  In addition, the  
            bill specifies that the costs of nuisance abatement  
            measures taken by cities must be actual and reasonable,  
            and requires cities to adopt a schedule of such costs.

            "These changes to existing law are needed to provide  
            lenders with clear notice of an abandoned property  
            maintenance ordinance violation, the opportunity to  
            correct the violation before fines can be assessed, and a  

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            clear understanding of exactly how much each nuisance  
            abatement measure taken by the local city will cost  
            should the lender fail to correct the violation  
            themselves.  

            "Realtors are caught between local cities and lenders.   
            With a post-foreclosure property, the asset manager hired  
            by the lender is often a Realtor trying to preserve the  
            property and/or arrange a sale of the REO [Real Estate  
            (lender) Owned].  Due process and clarity in the  
            assessment and collection of nuisance abatement costs  
            provides fairness to everyone, including Realtors.   
            Moreover, fairness in the assessment and notice process  
            increases the likelihood that the property will be  
            maintained.  Selling the home to an individual that will  
            maintain the property is the best solution to the blight  
            problem which can devalue homes in a neighborhood."

           ARGUMENTS IN OPPOSITION  :    The Mayor of the City of  
          Richmond writes:  "I am concerned that the current language  
          in SB 1427 (Price) undermines local municipalities' ability  
          and efforts to implement local solutions to address the  
          serious issues caused by scores of unattended, bank-owned  
          properties.  Our ability to combine state law with  
          innovative local solutions has enabled our city to hold 34  
          banks/lending institutions accountable so far, inducing  
          them to clean up vacant/abandoned foreclosed properties.   
          Efforts like these have shown our residents that the City  
          is responding to their right to safe, stable and healthy  
          neighborhoods that are not brought down in value by the  
          irresponsibility of absentee property owners."  
           

          RJG:mw  5/18/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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