Amended in Assembly April 10, 2013

California Legislature—2013–14 Regular Session

Assembly BillNo. 1024


Introduced by Assembly Member Torres

February 22, 2013


An act to amend Sections 11000.1, 11003.4, 11013.1, and 11013.2 of, and to add Section 11013.6 to, the Business and Professions Code,begin insert andend insert to add Section 5146 to the Civil Code,begin delete and to amend Section 66426 of the Government Code,end delete relating to land use.

LEGISLATIVE COUNSEL’S DIGEST

AB 1024, as amended, 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 ifbegin delete aend delete specifiedbegin delete condition isend deletebegin insert conditions areend insert 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.

begin delete

(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.

end delete
begin delete

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.

end delete
begin delete

(6)

end delete

begin insert(5)end insert 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:

P3    1

SECTION 1.  

Section 11000.1 of the Business and Professions
2Code
is amended to read:

3

11000.1.  

(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
11conditions exists:

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
30foreclosure sale.

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 in a stock
4cooperative or community apartment project is exempt from the
5requirements of Section 25110 of the Corporations Code pursuant
6to subdivision (f) of Section 25102 of that code.

7(6) The offering and sale of undivided interests in a common
8interest development have 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).

12

SEC. 2.  

Section 11003.4 of the Business and Professions Code
13 is amended to read:

14

11003.4.  

(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
25conditions:

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, the Federal
32Home Loan Bank System or any of its member institutions, a state
33or federally chartered credit union, a state or federally certified
34community development financial institution, or the city, county,
35school district, or redevelopment agency in which the cooperative
36is located, alone or in any combination with each other, directly
37finances or subsidizes at least 50 percent of the total construction
38or development cost or one hundred thousand dollars ($100,000),
39whichever is less; or the real property to be occupied by the
40cooperative was sold or leased by the Department of
P5    1Transportation, other state agency, a city, a county, or a school
2district for the development of the cooperative and has a regulatory
3agreement approved by the Department of Housing and Community
4Development for the term of the permanent financing,
5notwithstanding the source of the permanent subsidy or financing.

6(2) No more than 20 percent of the total development cost of a
7limited-equity mobilehome park, and no more than 10 percent of
8the total development cost of other limited-equity housing
9cooperatives, is provided by purchasers of membership shares.

10(3) A regulatory agreement that covers the cooperative for a
11term of at least as long as the duration of the permanent financing
12or subsidy, notwithstanding the source of the permanent subsidy
13or financing has been duly executed between the recipient of the
14financing and either (A) one of the federal or state agencies
15specified in paragraph (1) or (B) a local public agency that is
16 providing financing for the project under a regulatory agreement
17meeting standards of the Department of Housing and Community
18Development. The regulatory agreement shall make provision for
19at least all of the following:

20(A) Assurances for completion of the common areas and
21facilities to be owned or leased by the limited-equity housing
22cooperative, unless a construction agreement between the same
23parties contains written assurances for completion.

24(B) Governing instruments for the organization and operation
25of the housing cooperative by the members.

26(C) The ongoing fiscal management of the project by the
27cooperative, including an adequate budget, reserves, and provisions
28for maintenance and management.

29(D) Distribution of a membership information report to any
30prospective purchaser of a membership share, prior to purchase
31of that share. The membership information report shall contain
32full disclosure of the financial obligations and responsibilities of
33cooperative membership, the resale of shares, the financing of the
34cooperative including any arrangements made with any partners,
35membership share accounts, occupancy restrictions, management
36arrangements, and any other information pertinent to the benefits,
37risks, and obligations of cooperative ownership.

38(4) Every party that executes the regulatory agreement shall
39satisfy itself that the bylaws, articles of incorporation, occupancy
40agreement, subscription agreement, any lease of the regulated
P6    1premises, any arrangement with partners, and arrangement for
2membership share accounts provide adequate protection of the
3rights of cooperative members.

4(5) Every provider of financing or subsidies shall receive from
5the attorney for the recipient of the financing or subsidy a legal
6opinion that the cooperative meets the requirements of Section
7817 of the Civil Code and the exemption provided by this section.

8(c) Any limited-equity cooperative, or workforce housing
9cooperative trust that meets the requirements for exemption
10pursuant to subdivision (b) may elect to be subject to all provisions
11of this chapter.

12(d) The developer of the cooperative shall notify the Bureau of
13Real Estate, on a form provided by the department, that an
14exemption is claimed under this section. The Bureau of Real Estate
15shall retain this form for at least four years for statistical purposes.

16

SEC. 3.  

Section 11013.1 of the Business and Professions Code
17 is amended to read:

18

11013.1.  

It shall be unlawful, except as provided in Section
1911013.2 or 11013.3, for the owner, subdivider, or agent to sell or
20lease lots or parcels within a subdivision that is subject to a blanket
21encumbrance unless there exists in the blanket encumbrance or
22other supplementary agreement a provision, hereinafter referred
23to as a release clause, which by its terms shall unconditionally
24provide that the purchaser or lessee of a lot or parcel can obtain
25legal title or other interest contracted for, free and clear of the
26blanket encumbrance, upon compliance with the terms and
27conditions of the purchase or lease.

28

SEC. 4.  

Section 11013.2 of the Business and Professions Code
29 is amended to read:

30

11013.2.  

If the blanket encumbrance or supplementary
31agreement does not include a release clause as set forth in Section
3211013.1, then it shall be unlawful for the owner, subdivider, or
33agent to sell or lease lots or parcels within the subdivision unless
34one of the following conditions is complied with:

35(a) The entire sum of money paid or advanced by the purchaser
36or lessee of the lot or parcel, or a portion thereof as the
37commissioner shall determine is sufficient to protect the interest
38of the purchaser or lessee, shall be deposited into an escrow
39depository acceptable to the commissioner until any of the
40following occur:

P7    1 (1) A proper release is obtained from the blanket encumbrance.

2 (2) Either the owner, subdivider, or agent or the purchaser or
3lessee may default under their contract of sale or lease and there
4is a determination as to the disposition of the moneys.

5 (3) The owner, subdivider, or agent orders the return of the
6moneys to this purchaser or lessee.

7(b) The title to the subdivision is to be held in trust under an
8agreement of trust acceptable to the commissioner until a proper
9release from the blanket encumbrance is obtained.

10(c) A bond to the State of California is furnished to the
11commissioner for the benefit and protection of purchasers or lessees
12of the lots or parcels, in an amount and subject to the terms as may
13be approved by the commissioner, which shall provide for the
14return of the moneys paid or advanced by any purchaser or lessee,
15for or on account of the purchase or lease of the lot or parcel if a
16proper release from the blanket encumbrance is not obtained;
17provided, however, that if it should be determined that the
18purchaser or lessee, by reason of default or otherwise, is not entitled
19to the return of the moneys, or any portion thereof, then the bond
20shall be exonerated to the extent of the amount of the moneys to
21which the purchaser or lessee is not entitled.

22(d) There is conformance to another alternative requirement or
23method that the commissioner may deem acceptable to carry into
24effect the intent and provisions of this part.

25(e) The sale or lease subject to the blanket encumbrance is
26described in Sectionbegin delete 11013.3end deletebegin insert 11013.6end insert.

27

SEC. 5.  

Section 11013.6 is added to the Business and
28Professions Code
, to read:

29

11013.6.  

Notwithstanding Sections 11013.1 and 11013.2, an
30individual interest in a stock cooperative, as defined in Section
3111003.2, or a limited equity housing cooperative, as defined in
32Section 817 of the Civil Code, may be sold or leased subject to a
33blanket encumbrance ifbegin insert the notice required pursuant to Section
341133 of the Civil Code is provided to every prospective purchaser
35of the interest and is included in every purchase contract andend insert
any
36of the following conditions are met:

37(a) The property subject to the sale has obtained a public report
38from the Bureau of Real Estate.

begin delete

P8    1(b) The notice required pursuant to Section 1133 of the Civil
2Code is provided to every prospective purchaser of the interest
3and is included in every purchase contract.

end delete
begin delete

4(c)

end delete

5begin insert(b)end insert The governing documents of a homeowners association for
6a stock cooperative require the association to create within one
7year of the sale of at least 50 percent of the individual interest in
8the stock cooperative and maintain during the term of the blanket
9encumbrance a financing reserve amount equal to at least three
10months of the amount of the debt service payments due on the
11blanket encumbrance.

begin delete

12(d)

end delete

13begin insert(c)end insert Every purchaser of an individual interest in the stock
14cooperative is an excluded purchaser, as defined in Section
15260.102.13 of Title 10 of the California Code of Regulations.

16

SEC. 6.  

Section 5146 is added to the Civil Code, to read:

17

5146.  

Except for Section 5145, the provisions of this article
18applicable to the election of directors of a homeowners’ association
19shall not apply to a stock cooperative with bylaws that provide
20that all members and shareholders automatically become directors
21of the homeowners’ association.

begin delete22

SEC. 7.  

Section 66426 of the Government Code is amended
23to read:

24

66426.  

A tentative and final map shall be required for all
25subdivisions creating five or more parcels or five or more
26condominiums, as defined in Section 783 of the Civil Code, except
27where any one of the following occurs:

28(a) The land before division contains less than five acres, each
29parcel created by the division abuts upon a maintained public street
30or highway, and no dedications or improvements are required by
31the legislative body.

32(b) Each parcel created by the division has a gross area of 20
33acres or more and has an approved access to a maintained public
34street or highway.

35(c) The land consists of a parcel or parcels of land having
36approved access to a public street or highway, which comprises
37part of a tract of land zoned for industrial or commercial
38development, and which has the approval of the governing body
39as to street alignments and widths.

P9    1(d) Each parcel created by the division has a gross area of not
2less than 40 acres or is not less than a quarter of a quarter section.

3(e) The land being subdivided is solely for the creation of an
4environmental subdivision pursuant to Section 66418.2.

5(f) A parcel map shall be required for those subdivisions
6described in subdivisions (a), (b), (c), (d), and (e).

end delete
7

begin deleteSEC. 8.end delete
8begin insertSEC. 7.end insert  

No reimbursement is required by this act pursuant to
9Section 6 of Article XIII B of the California Constitution because
10the only costs that may be incurred by a local agency or school
11district will be incurred because this act creates a new crime or
12infraction, eliminates a crime or infraction, or changes the penalty
13for a crime or infraction, within the meaning of Section 17556 of
14the Government Code, or changes the definition of a crime within
15the meaning of Section 6 of Article XIII B of the California
16Constitution.



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