AB 1024, as introduced, Torres. Real property: divided lands.
(1) Existing law generally governs real estate transactions, including transactions involving subdivided lands. Existing law requires any person who intends to offer subdivided lands within California for sale or lease to file with the Department of Real Estate an application for a public report, consisting of a completed questionnaire and a notice of intention that includes, among other things, a statement of the proposed uses for which the proposed subdivision will be offered. Existing law provides a person who has made an offer to purchase an interest in an undivided-interest subdivision, as specified, the right to rescind any contract resulting from the acceptance of that offer until midnight of the 3rd calendar day following the day on which the prospective purchaser executed the offer to purchase. Existing law makes a violation of these provisions a crime.
Existing law exempts from the definition of “subdivided lands” and “subdivision” the creation or proposed creation of undivided interests in land if the offering and sale of the undivided interests have been expressly qualified by a permit from the Commissioner of Corporations.
This bill would revise the above-described exemption to apply to the offering and sale of undivided interests in a stock cooperative or community apartment project that is exempt from specified securities requirements, as well as to the offering and sale of undivided interests in a common interest development that has been so expressly qualified.
(2) Existing law exempts a limited-equity housing cooperative or a workforce housing cooperative trust from provisions of existing law governing subdivided land transactions that are applicable to stock cooperatives if the limited-equity housing cooperative or workforce housing cooperative trust complies with specified conditions.
This bill would revise the conditions for the exemption to, among other things, require that every party that executes a regulatory agreement with the cooperative satisfy itself that the rights of the cooperative members are provided adequate protection, as specified. By expanding the applicability of a crime, this bill would impose a state-mandated local program.
(3) Existing law prohibits the sale or lease of lots or parcels within a subdivision that is subject to a blanket encumbrance unless the encumbrance includes a specified release clause or certain conditions are met.
This bill would authorize the sale or lease of an individual interest in a defined stock cooperative or limited housing cooperative that is subject to a blanket encumbrance if a specified condition is met.
(4) The Davis-Stirling Common Interest Development Act establishes procedures for elections.
This bill would exempt a stock cooperative with bylaws that provide that all members and shareholders automatically become directors of the homeowners’ association from the procedures applicable to the election of directors of the homeowners’ association.
(5) The existing Subdivision Map Act requires a tentative and final map for all subdivisions creating 5 or more parcels, 5 or more condominiums, as defined, a community apartment project containing 5 or more parcels, or for the conversion of a dwelling to a stock cooperative containing 5 or more dwelling units, except as specified.
This bill would delete from the above-described requirement a community apartment project containing 5 or more parcels and the conversion of a dwelling to a stock cooperative containing 5 or more dwelling units.
(6) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.
The people of the State of California do enact as follows:
Section 11000.1 of the Business and Professions
2Code is amended to read:
(a) “Subdivided lands” and “subdivision,” as defined
4by Sections 11000 and 11004.5, also include improved or
5unimproved land or lands, a lot or lots, or a parcel or parcels, of
6any size, in which, for the purpose of sale or lease or financing,
7whether immediate or future, five or more undivided interests are
8created or are proposed to be created.
9(b) This section does not apply to the creation or proposed
10creation of undivided interests in land if any one of the following
12(1) The undivided interests are held or to be held by persons
13related one to the other by blood or marriage.
14(2) The undivided interests are to be purchased and owned solely
15by persons who present evidence satisfactory to the Real Estate
16Commissioner that they are knowledgeable and experienced
17investors who comprehend the nature and extent of the risks
18involved in the ownership of these interests. The Real Estate
19Commissioner shall grant an exemption from this part if the
20undivided interests are to be purchased by no more than 10 persons,
21each of whom furnishes a signed statement to the commissioner
22that he or she (A) is fully informed concerning the real property
23to be acquired and his or her interest in that property including the
24risks involved in ownership of undivided interests, (B) is
25purchasing the interest or interests for his or her own account and
26with no present intention to resell or otherwise dispose of the
27interest for value, and (C) expressly waives protections afforded
28to a purchaser by this part.
29(3) The undivided
interests are created as the result of a
P4 1(4) The undivided interests are created by a valid order or decree
2of a court.
3(5) The offering and sale of the undivided interests
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7 been expressly qualified by the issuance
9of a permit from the Commissioner of Corporations pursuant to
10the Corporate Securities Law of 1968 (Division 1 (commencing
11with Section 25000) of Title 4 of the Corporations Code).
Section 11003.4 of the Business and Professions Code
13 is amended to read:
(a) A “limited-equity housing cooperative” or a
15“workforce housing cooperative trust” is a corporation that meets
16the criteria of Section 11003.2 and that also meets the criteria of
17Sections 817 and 817.1 of the Civil Code, as applicable. Except
18as provided in subdivision (b), a limited-equity housing or
19workforce housing cooperative trust shall be subject to all the
20requirements of this chapter pertaining to stock cooperatives.
21(b) A limited-equity housing cooperative or a workforce housing
22cooperative trust shall be exempt from the requirements of this
23chapter if the limited-equity housing cooperative or workforce
24housing cooperative trust complies with all the following
26(1) The United
States Department of Housing and Urban
27Development, the United States Department of Agriculture, the
28National Consumers Cooperative Bank, the California Housing
29Finance Agency, the Public Employees’ Retirement System
30(PERS), the State Teachers’ Retirement System (STRS), the
31Department of Housing and Community Development,
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32Federal Home Loan Bank System or any of its member institutions,
begin delete alone or in any combination with each other, or withend delete the city, county,
36school district, or redevelopment agency in which the cooperative
37is located, directly
38finances or subsidizes at least 50 percent of the total construction
39or development cost or one hundred thousand dollars ($100,000),
40whichever is less; or the real property to be occupied by the
P5 1cooperative was sold or leased by the Department of
2Transportation, other state agency, a city, a county, or a school
3district for the development of the cooperative and has a regulatory
4agreement approved by the Department of Housing and Community
5Development for the term of the permanent financing,
6notwithstanding the source of the permanent subsidy or financing.
7(2) No more than 20 percent of the total development cost of a
8limited-equity mobilehome park, and no more than 10 percent of
9the total development cost of other limited-equity housing
10cooperatives, is provided by purchasers of membership shares.
11(3) A regulatory agreement that covers the cooperative for a
12term of at least as long as the duration of the permanent financing
13or subsidy, notwithstanding the source of the permanent subsidy
14or financing has been duly executed between the recipient of the
15financing and either (A) one of the federal or state agencies
16specified in paragraph (1) or (B) a local public agency that is
17providing financing for the project under a regulatory agreement
18meeting standards of the Department of Housing and Community
19Development. The regulatory agreement shall make provision for
20at least all of the following:
21(A) Assurances for completion of the common areas and
22facilities to be owned or leased by the limited-equity housing
23cooperative, unless a construction agreement between the same
24parties contains written assurances for completion.
25(B) Governing instruments for the organization and operation
26of the housing cooperative by the members.
27(C) The ongoing fiscal management of the project by the
28cooperative, including an adequate budget, reserves, and provisions
29for maintenance and management.
30(D) Distribution of a membership information report to any
31prospective purchaser of a membership share, prior to purchase
32of that share. The membership information report shall contain
33full disclosure of the financial obligations and responsibilities of
34cooperative membership, the resale of shares, the financing of the
35cooperative including any arrangements made with any partners,
36membership share accounts, occupancy restrictions, management
37arrangements, and any other information pertinent to the benefits,
38risks, and obligations of cooperative ownership.
begin deleteThe federal, state, or local public agency end deletethat
40executes the regulatory agreement shall satisfy itself that the
P6 1bylaws, articles of incorporation, occupancy agreement,
2subscription agreement, any lease of the regulated premises, any
3arrangement with partners, and arrangement for membership share
4accounts provide adequate protection of the rights of cooperative
begin deleteThe federal or state agency end deleteshall
receive from the attorney for the recipient of the
8financing or subsidy a legal opinion that the cooperative meets the
9requirements of Section 817 of the Civil Code and the exemption
10provided by this section.
11(c) Any limited-equity cooperative, or workforce housing
12cooperative trust that meets the requirements for exemption
13pursuant to subdivision (b) may elect to be subject to all provisions
14of this chapter.
15(d) The developer of the cooperative shall notify the
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16 of Real Estate, on a form provided by the department, that
17an exemption is claimed under this section. The
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18 of Real Estate shall retain this form for at least four years for
Section 11013.1 of the Business and Professions Code
21 is amended to read:
It shall be unlawful, except as provided in Section
2311013.2, for the owner, subdivider, or agent to sell or
24lease lots or parcels within a subdivision that is subject to a blanket
25encumbrance unless there exists in
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26or other supplementary agreement a provision, hereinafter referred
27to as a release clause, which by its terms shall unconditionally
28provide that the purchaser or lessee of a lot or parcel can obtain
29legal title or other interest contracted for, free and clear of
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30 blanket encumbrance, upon compliance with the terms and
31conditions of the purchase or lease.
Section 11013.2 of the Business and Professions Code
33 is amended to read:
begin deleteShould there not exist in end deletethe blanket encumbrance
35or supplementary agreement a release clause as
36set forth in Section 11013.1, then it shall be unlawful for the owner,
37subdivider, or agent to sell or lease lots or parcels within
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38 subdivision unless one of the following conditions is complied
P7 1(a) The entire sum of money paid or advanced by the purchaser
2or lessee of
begin delete any suchend delete lot or parcel, or begin delete suchend delete portion thereof as
3the commissioner shall determine is sufficient to protect the interest
4of the purchaser or lessee, shall be deposited into an escrow
5depository acceptable to the commissioner until
begin delete either (1) aend delete
7proper release is obtained from
begin delete suchend delete blanket
begin delete encumbrance; or (2) eitherend delete
9the owner, subdivider, or agent or the purchaser or
10lessee may default under their contract of sale or lease and there
11is a determination as to the disposition of
begin delete such moneys; or (3) theend delete
13owner, subdivider, or agent orders the return of
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14 moneys to
begin delete suchend delete purchaser or lessee.
15(b) The title to the subdivision is to be held in trust under an
16agreement of trust acceptable to the commissioner until a proper
begin delete suchend delete blanket encumbrance is obtained.
18(c) A bond to the State of California is furnished to the
19commissioner for the benefit and protection of purchasers or lessees
begin delete suchend delete lots or parcels, in begin delete suchend delete amount and subject to begin delete suchend delete
21 terms as may be approved by the commissioner, which shall
22provide for the return of the moneys paid or advanced by any
23purchaser or lessee, for or on account of the purchase or lease of
begin delete any suchend delete lot or parcel if a proper release from begin delete suchend delete blanket
25encumbrance is not obtained; provided, however, that if it should
26be determined that
begin delete suchend delete purchaser or lessee, by reason of
27default or otherwise, is not entitled to the return of
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28 moneys, or any portion thereof, then
begin delete suchend delete bond shall be
29exonerated to the extent of the amount of
begin delete suchend delete moneys to which
begin delete suchend delete purchaser or lessee is not entitled.
31(d) There is conformance to
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32requirement or method
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the commissioner may deem
33acceptable to carry into effect the intent and provisions of this part.
Section 11013.6 is added to the Business and
37Professions Code, to read:
Notwithstanding Sections 11013.1 and 11013.2, an
39individual interest in a stock cooperative, as defined in Section
4011003.2, or a limited equity housing cooperative, as defined in
P8 1Section 817 of the Civil Code, may be sold or leased subject to a
2blanket encumbrance if any of the following conditions are met:
3(a) The property subject to the sale has obtained a public report
4from the Bureau of Real Estate.
5(b) The notice required pursuant to Section 1133 of the Civil
6Code is provided to every prospective purchaser of the interest
7and is included in every purchase contract.
8(c) The governing documents of a homeowners association for
9a stock cooperative require the association to create within one
10year of the sale of at least 50 percent of the individual interest in
11the stock cooperative and maintain during the term of the blanket
12encumbrance a financing reserve amount equal to at least three
13months of the amount of the debt service payments due on the
15(d) Every purchaser of an individual interest in the stock
16cooperative is an excluded purchaser, as defined in Section
17260.102.13 of Title 10 of the California Code of Regulations.
Section 5146 is added to the Civil Code, to read:
Except for Section 5145, the provisions of this article
20applicable to the election of directors of a homeowners’ association
21shall not apply to a stock cooperative with bylaws that provide
22that all members and shareholders automatically become directors
23of the homeowners’ association.
Section 66426 of the Government Code is amended
A tentative and final map shall be required for all
27subdivisions creating five or more parcels
begin delete,end delete five or more
28condominiums as defined in Section 783 of the Civil Code,
begin delete a except where any one of the following
29community apartment project containing five or more parcels, or
30for the conversion of a dwelling to a stock cooperative containing
31five or more dwelling units,end delete
33(a) The land before division contains less than five acres, each
34parcel created by the division abuts upon a maintained public street
35or highway, and no dedications or improvements are required by
36the legislative body.
37(b) Each parcel created by the division has a gross area of 20
38acres or more and has an approved access to a maintained public
39street or highway.
P9 1(c) The land consists of a parcel or parcels of land having
2approved access to a public street or highway, which comprises
3part of a tract of land zoned for industrial or commercial
4development, and which has the approval of the governing body
5as to street alignments and widths.
6(d) Each parcel created by the division has a gross area of not
7less than 40 acres or is not less than a quarter of a quarter section.
8(e) The land being subdivided is solely for the creation of an
9environmental subdivision pursuant to Section 66418.2.
10(f) A parcel map shall be required for those subdivisions
11described in subdivisions (a), (b), (c), (d), and (e).
No reimbursement is required by this act pursuant to
13Section 6 of Article XIII B of the California Constitution because
14the only costs that may be incurred by a local agency or school
15district will be incurred because this act creates a new crime or
16infraction, eliminates a crime or infraction, or changes the penalty
17for a crime or infraction, within the meaning of Section 17556 of
18the Government Code, or changes the definition of a crime within
19the meaning of Section 6 of Article XIII B of the California