BILL ANALYSIS Ó AB 587 Page 1 ASSEMBLY THIRD READING AB 587 (Chau) As Amended April 30, 2015 2/3 vote ------------------------------------------------------------------ |Committee |Votes |Ayes |Noes | | | | | | | | | | | |----------------+------+--------------------+---------------------| |Housing |7-0 |Chau, Steinorth, | | | | |Burke, Chiu, Beth | | | | |Gaines, Lopez, | | | | |Mullin | | | | | | | |----------------+------+--------------------+---------------------| |Judiciary |10-0 |Mark Stone, Wagner, | | | | |Alejo, Chau, Chiu, | | | | |Gallagher, Cristina | | | | |Garcia, Holden, | | | | |Maienschein, | | | | |O'Donnell | | | | | | | |----------------+------+--------------------+---------------------| |Appropriations |17-0 |Gomez, Bigelow, | | | | |Bonta, Calderon, | | | | |Chang, Daly, | | | | |Eggman, Gallagher, | | | | | | | | | | | | | | |Eduardo Garcia, | | AB 587 Page 2 | | |Gordon, Holden, | | | | |Jones, Quirk, | | | | |Rendon, Wagner, | | | | |Weber, Wood | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Creates a tax abatement program for mobilehome owners who cannot transfer title into their names due to delinquent taxes and fees that may have been incurred by prior owners. Specifically, this bill: 1)Creates a tax abatement program for mobilehome owners meeting the following requirements: a) The applicant applies for the abatement program with the Department of Housing and Community Development (HCD) prior to December 31, 2018; b) The applicant is not currently the registered owner; c) The applicant provides satisfactory documentation demonstrating the date of acquisition of ownership interest in the mobilehome; d) The applicant pays any charges assessed by HCD during the period between the time the applicant took ownership interest or December 31, 2014, whichever is later, and the time the applicant applies for the abatement program; e) If the applicant's mobilehome is on the local property tax AB 587 Page 3 (LPT) system, the applicant must pay the taxes reasonably owed from the date of sale of the mobilehome, without penalties or interest, but not to exceed the amounts attributable one year prior to January 1, 2016; and f) The applicant is in compliance with other registration and titling requirements not related to nonpayment or late payment of the HCD charges related to registration and titling. 2)Provides that, if the applicant meets the requirements of the abatement program, HCD must release any lien related to those charges, issue a duplicate or new certificate of title or registration card, and amend the title record of the mobilehome. 3)Provides that HCD may establish a long-term payment program of up to five years, and may take out a lien in favor of the state in the amount owing which must be paid in full if the mobilehome is later transferred. 4)Provides that, if an abatement program participant is on a long term payment plan with HCD, failure to make the payments required by the plan is a violation of the program and HCD may suspend, revoke, or cancel the certificate of title. 5)Provides that, if the applicant is eligible for the abatement program and the mobilehome is subject to LPT, HCD must issue a conditional transfer of title. 6)Requires a county tax collector to issue a tax liability certificate to a person with a conditional transfer of title who applies for the certificate prior to January 1, 2019 and pays the reduced taxes under the abatement program. AB 587 Page 4 7)Provides that upon issuance of a tax liability certificate, the applicant must be listed as the owner of record for all local property tax purposes and the home is not subject to lien or seizure based on any taxes abated pursuant to the program. 8)Provides that the abatement program does not relieve any owner other than the applicant from tax liability, including penalties and interest, arising from nonpayment prior to the date of sale to the applicant, or prohibit a county tax collector from collecting delinquent taxes, penalties, or interest due prior to the date of sale, from any owner other than the applicant. 9)Prohibits eviction from a mobilehome park for nonconformance with the registration and titling requirements of state law when an application for the abatement program is filed prior to January 1, 2019, and title is transferred within one year of the filing date. 10)Provides that a park owner may allow a resident not in compliance with the State registration requirements to occupy a mobilehome if the resident applies for the abatement program prior to January 1, 2019, and title is transferred within one year of the filing date. 11)Provides that if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made. 12)Provides that no appropriation is made and the state shall not AB 587 Page 5 reimburse local agencies for property tax revenues lost by them pursuant to the bill. FISCAL EFFECT: According to the Assembly Committee on Appropriations: 1)Significant costs to HCD of $360,000 (Mobilehome Manufactured Home Revolving Fund) in 2015-16, 2016-17, and 2017-18 to fund five positions to process the anticipated increase in applications. HCD estimates approximately 100,000 mobilehome owners could be eligible to participate in the tax abatement program. If 10% of those eligible participate each year, 30,000 additional applications for registration and titling will be generated over the three-year period. 2)Lost property tax revenues to local taxing entities, potentially in the low millions of dollars, resulting from the abatement program provisions that cap the amount of delinquent property taxes owed and waive interest and penalties. These losses are not reimbursable under the bill. Staff notes that not all past taxes are forgiven, but rather a portion of the taxes accrued by the current owner (applicant). Past owners are still liable for their taxes and penalties owed. 3)Potentially reimbursable costs to county tax collectors to implement the program. COMMENTS: Background: HCD is responsible for the titling and registration of mobilehomes. Homes that were purchased new prior to July 1, 1980 were treated as vehicles and not subject to LPT, but rather to an "in lieu" vehicle license registration fee (VLF) paid AB 587 Page 6 annually to HCD. Mobilehomes that were purchased after July 1, 1980 are generally subject to LPT. Homeowners have the option to voluntarily transfer their homes from the VLF system to the LPT system, but not vice-versa. Prior to transferring title of a mobilehome, a buyer of a home on the LPT system must obtain a tax clearance certificate (TCC) from the county tax collector indicating that all property taxes have been paid. Similarly, if the mobilehome is on the VLF system, all past due fees and penalties must be paid to HCD prior to transfer of title, as well as a use tax. Regardless of whether a mobilehome is on the VLF or LPT system, delinquent fees or taxes prevent HCD from amending the title of that home. If a buyer cannot pay, and the seller will not pay or cannot be located, the buyer is left without legal proof of ownership of the home, and HCD, the county tax collector, and the county tax assessor may not have up-to-date ownership information for the home. Nonconformance with HCD's titling requirements can cause a number of issues. It could be the basis of an eviction from a mobilehome park, as parks are prohibited from allowing homes that do not conform to HCD's registration requirements in a park. It also prevents owners from legally making repairs to the home, insuring the home, and from transferring ownership of the home to another party. Purpose of this bill: According to the author, the problem that this bill seeks to address has been festering for over 30 years. There are thousands, perhaps tens of thousands, of homeowners who believe they own their homes, but never had title properly transferred to them. The author contends that "[m]obilehomes are an important source of affordable housing statewide, and these homes are regularly sold on a somewhat informal basis. For example, a buyer pays cash for the home, obtains a bill of sale, and takes possession of the property. The problem arises when the buyer subsequently tries to transfer title into his or her name and discovers that the previous owner fell behind on their tax bill. If the buyer is unable to pay, then the title cannot AB 587 Page 7 transfer. As a result, some buyers are in a situation where they paid for their home, but have no meaningful proof of ownership, which can cause a host of other issues such as the inability to legally make repairs to the home." This bill creates an abatement program to address the situation where a buyer has already purchased a mobilehome, but is unable to transfer title into his or her name due to delinquent fees or taxes. Nonpayment of VLF constitutes a lien on the mobilehome in favor of the state. Nonpayment of LPT means the county tax collector may pursue collection of the delinquent LPT in the same manner as other delinquent taxes on the unsecured roll. Both of these scenarios prevent HCD from amending the title into the new owner's name. If the buyer cannot pay the delinquent charges associated with the home, and the seller does not agree to pay or cannot be located, then the buyer cannot obtain legal ownership. Due to the sometimes informal nature of mobilehome sales, buyers and sellers may not be aware that delinquent taxes and fees prevent title from transferring. Sellers may not even be aware that a delinquency exists because of, for example, limited notification requirements for VLF delinquencies, or outdated ownership information at the county or state level. In these situations, a buyer may only become aware of the delinquency when he or she tries to transfer title at HCD. If a seller does not pay the delinquent fees or taxes and associated penalties, and the buyer cannot pay them but has already purchased the mobilehome, they are left with few options other than to keep the home with an outdated title. The three-year abatement program proposed by this bill would reduce specified past due taxes and fees by capping the amount owed and waiving penalties and interest. According to the author, this would encourage homeowners with outdated title to come forward and apply to transfer title into their names, thereby updating state and county records to ensure accurate VLF and LPT AB 587 Page 8 billing in the future. Applicants for the abatement program would first be required to prove ownership to the satisfaction of HCD and, upon payment of any reduced charges assessed by HCD, or entry into a payment plan, title would transfer for homes on the VLF system. For homes on the LPT system, HCD would issue an applicant a "conditional title" which the applicant would then bring to their local county tax collector. Once the applicant pays the reduced LPT due under the abatement program, the tax collector would update their property tax records and issue a tax liability certificate, which would perfect the transfer of title once filed with HCD. The abatement program does not relieve any owner other than the applicant from tax liability arising from nonpayment prior to the date of sale to the applicant, so a county tax collector would still have the ability to collect these amounts, including fees and penalties, from any owner other than the applicant. To further encourage owners to come forward, the bill also creates a moratorium on evictions, coinciding with the abatement program, based on lack of accurate title if the resident has applied for the abatement program and completes the title transfer within a specified time. Analysis Prepared by: Rebecca Rabovsky / H. & C.D. / (916) 319-2085 FN: 0000615 AB 587 Page 9