BILL NUMBER: AB 1024 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 24, 2013
AMENDED IN ASSEMBLY APRIL 10, 2013
INTRODUCED BY Assembly Member Torres
FEBRUARY 22, 2013
An act to amend Sections 11000.1, 11003.4,
11003.4 and 11013.1 , and 11013.2 of, and
to add Section 11013.6 to, the Business and Professions Code, and to
add Section 5146 to amend Section 5100 of
the Civil Code, 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)
(1) 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)
(2) 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 specified
conditions are met.
(4)
(3) 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)
(4) 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 1. Section 11000.1 of the Business and
Professions Code is amended to read:
11000.1. (a) "Subdivided lands" and "subdivision," as defined by
Sections 11000 and 11004.5, also include improved or unimproved land
or lands, a lot or lots, or a parcel or parcels, of any size, in
which, for the purpose of sale or lease or financing, whether
immediate or future, five or more undivided interests are created or
are proposed to be created.
(b) This section does not apply to the creation or proposed
creation of undivided interests in land if any one of the following
conditions exists:
(1) The undivided interests are held or to be held by persons
related one to the other by blood or marriage.
(2) The undivided interests are to be purchased and owned solely
by persons who present evidence satisfactory to the Real Estate
Commissioner that they are knowledgeable and experienced investors
who comprehend the nature and extent of the risks involved in the
ownership of these interests. The Real Estate Commissioner shall
grant an exemption from this part if the undivided interests are to
be purchased by no more than 10 persons, each of whom furnishes a
signed statement to the commissioner that he or she (A) is fully
informed concerning the real property to be acquired and his or her
interest in that property including the risks involved in ownership
of undivided interests, (B) is purchasing the interest or interests
for his or her own account and with no present intention to resell or
otherwise dispose of the interest for value, and (C) expressly
waives protections afforded to a purchaser by this part.
(3) The undivided interests are created as the result of a
foreclosure sale.
(4) The undivided interests are created by a valid order or decree
of a court.
(5) The offering and sale of the undivided interests in a stock
cooperative or community apartment project is exempt from the
requirements of Section 25110 of the Corporations Code pursuant to
subdivision (f) of Section 25102 of that code.
(6) The offering and sale of undivided interests in a common
interest development have been expressly qualified by the issuance of
a permit from the Commissioner of Corporations pursuant to the
Corporate Securities Law of 1968 (Division 1 (commencing with Section
25000) of Title 4 of the Corporations Code).
SEC. 2. SECTION 1. Section 11003.4
of the Business and Professions Code is amended to read:
11003.4. (a) A "limited-equity housing cooperative" or a
"workforce housing cooperative trust" is a corporation that meets the
criteria of Section 11003.2 and that also meets the criteria of
Sections 817 and 817.1 of the Civil Code, as applicable. Except as
provided in subdivision (b), a limited-equity housing or workforce
housing cooperative trust shall be subject to all the requirements of
this chapter pertaining to stock cooperatives.
(b) A limited-equity housing cooperative or a workforce housing
cooperative trust shall be exempt from the requirements of this
chapter if the limited-equity housing cooperative or workforce
housing cooperative trust complies with all the following conditions:
(1) The United States Department of Housing and Urban Development,
the United States Department of Agriculture, the National Consumers
Cooperative Bank, the California Housing Finance Agency, the Public
Employees' Retirement System (PERS), the State Teachers' Retirement
System (STRS), the Department of Housing and Community Development,
the Federal Home Loan Bank System or any of its member institutions,
a state or federally chartered credit union, a state or federally
certified community development financial institution, or the city,
county, school district, or redevelopment agency in which the
cooperative is located, alone or in any combination with each other,
directly finances or subsidizes at least 50 percent of the total
construction or development cost or one hundred thousand dollars
($100,000), whichever is less; or the real property to be occupied by
the cooperative was sold or leased by the Department of
Transportation, other state agency, a city, a county, or a school
district for the development of the cooperative and has a regulatory
agreement approved by the Department of Housing and Community
Development for the term of the permanent financing, notwithstanding
the source of the permanent subsidy or financing.
(2) No more than 20 percent of the total development cost of a
limited-equity mobilehome park, and no more than 10 percent of the
total development cost of other limited-equity housing cooperatives,
is provided by purchasers of membership shares.
(3) A regulatory agreement that covers the cooperative for a term
of at least as long as the duration of the permanent financing or
subsidy, notwithstanding the source of the permanent subsidy or
financing , has been duly executed between the recipient
of the financing and either (A) one of the federal or state agencies
specified in paragraph (1) or (B) a local public agency that is
providing financing for the project under a regulatory agreement
meeting standards of the Department of Housing and Community
Development. The regulatory agreement shall make provision for at
least all of the following:
(A) Assurances for completion of the common areas and facilities
to be owned or leased by the limited-equity housing cooperative,
unless a construction agreement between the same parties contains
written assurances for completion.
(B) Governing instruments for the organization and operation of
the housing cooperative by the members.
(C) The ongoing fiscal management of the project by the
cooperative, including an adequate budget, reserves, and provisions
for maintenance and management.
(D) Distribution of a membership information report to any
prospective purchaser of a membership share, prior to purchase of
that share. The membership information report shall contain full
disclosure of the financial obligations and responsibilities of
cooperative membership, the resale of shares, the financing of the
cooperative including any arrangements made with any partners,
membership share accounts, occupancy restrictions, management
arrangements, and any other information pertinent to the benefits,
risks, and obligations of cooperative ownership.
(4) Every party that executes the regulatory agreement shall
satisfy itself that the bylaws, articles of incorporation, occupancy
agreement, subscription agreement, any lease of the regulated
premises, any arrangement with partners, and arrangement for
membership share accounts provide adequate protection of the rights
of cooperative members.
(5) Every provider of financing or subsidies shall receive from
the attorney for the recipient of the financing or subsidy a legal
opinion that the cooperative meets the requirements of Section 817 of
the Civil Code and the exemption provided by this section.
(c) Any limited-equity cooperative, or workforce housing
cooperative trust that meets the requirements for exemption pursuant
to subdivision (b) may elect to be subject to all provisions of this
chapter.
(d) The developer of the cooperative shall notify the Bureau of
Real Estate, on a form provided by the department
bureau , that an exemption is claimed under this section.
The Bureau of Real Estate shall retain this form for at least four
years for statistical purposes.
SEC. 3. SEC. 2. Section 11013.1 of
the Business and Professions Code is amended to read:
11013.1. It shall be unlawful, except as provided in Section
11013.2 or 11013.3 11013.6 , for the
owner, subdivider, or agent to sell or lease lots or parcels within a
subdivision that is subject to a blanket encumbrance unless there
exists in the blanket encumbrance or other supplementary agreement a
provision, hereinafter referred to as a release clause, which by its
terms shall unconditionally provide that the purchaser or lessee of a
lot or parcel can obtain legal title or other interest contracted
for, free and clear of the blanket encumbrance, upon compliance with
the terms and conditions of the purchase or lease.
SEC. 4. Section 11013.2 of the Business and
Professions Code is amended to read:
11013.2. If the blanket encumbrance or supplementary agreement
does not include a release clause as set forth in Section 11013.1,
then it shall be unlawful for the owner, subdivider, or agent to sell
or lease lots or parcels within the subdivision unless one of the
following conditions is complied with:
(a) The entire sum of money paid or advanced by the purchaser or
lessee of the lot or parcel, or a portion thereof as the commissioner
shall determine is sufficient to protect the interest of the
purchaser or lessee, shall be deposited into an escrow depository
acceptable to the commissioner until any of the following occur:
(1) A proper release is obtained from the blanket encumbrance.
(2) Either the owner, subdivider, or agent or the purchaser or
lessee may default under their contract of sale or lease and there is
a determination as to the disposition of the moneys.
(3) The owner, subdivider, or agent orders the return of the
moneys to this purchaser or lessee.
(b) The title to the subdivision is to be held in trust under an
agreement of trust acceptable to the commissioner until a proper
release from the blanket encumbrance is obtained.
(c) A bond to the State of California is furnished to the
commissioner for the benefit and protection of purchasers or lessees
of the lots or parcels, in an amount and subject to the terms as may
be approved by the commissioner, which shall provide for the return
of the moneys paid or advanced by any purchaser or lessee, for or on
account of the purchase or lease of the lot or parcel if a proper
release from the blanket encumbrance is not obtained; provided,
however, that if it should be determined that the purchaser or
lessee, by reason of default or otherwise, is not entitled to the
return of the moneys, or any portion thereof, then the bond shall be
exonerated to the extent of the amount of the moneys to which the
purchaser or lessee is not entitled.
(d) There is conformance to another alternative requirement or
method that the commissioner may deem acceptable to carry into effect
the intent and provisions of this part.
(e) The sale or lease subject to the blanket encumbrance is
described in Section 11013.6.
SEC. 5. SEC. 3. Section 11013.6 is
added to the Business and Professions Code, to read:
11013.6. Notwithstanding Sections 11013.1 and 11013.2, an
individual interest in a stock cooperative, as defined in Section
11003.2 4190 of the Civil Code , or a
limited equity housing cooperative, as defined in Section 817 of the
Civil Code, may be sold or leased subject to a blanket encumbrance if
the all of the following conditions are met:
(a) The notice required pursuant
to Section 1133 of the Civil Code is provided to every prospective
purchaser of the interest and is included in every purchase
contract and any of the following conditions are met:
contract.
(a)
(b) The property subject to the sale has obtained a
public report from the Bureau of Real Estate that accounts for
the blanket encumberance .
(b) The governing documents of a homeowners association for a
stock cooperative require the association to create within one year
of the sale of at least 50 percent of the individual interest in the
stock cooperative and maintain during the term of the blanket
encumbrance a financing reserve amount equal to at least three months
of the amount of the debt service payments due on the blanket
encumbrance.
(c) Every purchaser of an individual interest in the stock
cooperative is an excluded purchaser, as defined in Section
260.102.13 of Title 10 of the California Code of Regulations.
(c) The governing documents for the association require the
association to create within one year of the sale of at least 50
percent of the individual interests in the stock cooperative or
limited-equity housing cooperative and maintain during the term of
the blanket encumbrance a financing reserve amount equal to at least
three months of the amount of the debt service payments due on the
blanket encumbrance or a lesser amount acceptable to the
commissioner.
SEC. 6. Section 5146 is added to the Civil
Code, to read:
5146. Except for Section 5145, the provisions of this article
applicable to the election of directors of a homeowners' association
shall not apply to a stock cooperative with bylaws that provide that
all members and shareholders automatically become directors of the
homeowners' association.
SEC. 4. Section 5100 of the Civil Code
is amended to read:
5100. (a) Notwithstanding any other law or provision of the
governing documents, elections regarding assessments legally
requiring a vote, election and removal of directors, amendments to
the governing documents, or the grant of exclusive use of common area
pursuant to Section 4600 shall be held by secret ballot in
accordance with the procedures set forth in this article.
(b) This article also governs an election on any topic that is
expressly identified in the operating rules as being governed by this
article.
(c) The provisions of this article apply to both incorporated and
unincorporated associations, notwithstanding any contrary provision
of the governing documents.
(d) The procedures set forth in this article shall apply to votes
cast directly by the membership, but do not apply to votes cast by
delegates or other elected representatives.
(e) In the event of a conflict between this article and the
provisions of the Nonprofit Mutual Benefit Corporation Law (Part 3
(commencing with Section 7110) of Division 2 of Title 1 of the
Corporations Code) relating to elections, the provisions of this
article shall prevail.
(f) A director shall not be required to be elected pursuant to
this article if the governing documents provide that all members are
directors.
SEC. 7. SEC. 5. No reimbursement is
required by this act pursuant to Section 6 of Article XIII B of the
California Constitution because the only costs that may be incurred
by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction, within
the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIII
B of the California Constitution.