BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Hannah-Beth Jackson, Chair 2015-2016 Regular Session AB 587 (Chau) Version: June 20, 2016 Hearing Date: June 28, 2016 Fiscal: Yes Urgency: No TH SUBJECT Mobilehomes: Payments: Nonpayment or Late Payments DESCRIPTION This bill establishes, until December 31, 2019, a tax amnesty program for owners of mobilehomes who have not registered their ownership interest with the Department of Housing and Community Development (HCD). This tax amnesty program authorizes HCD to release specified liens imposed and waive all outstanding charges assessed by the department prior to December 31, 2015, as specified, in order to allow an owner to register or transfer registration of a manufactured home or mobilehome, as specified. This bill also alters the content of information to be provided annually to residents of mobilehome parks. BACKGROUND Under existing law, mobilehomes are taxed either as vehicles under the Vehicle License Fee program, or as property subject to local property taxes. When sold as new, the Manufactured Housing Act of 1980 (Health & Saf. Code 18000 et seq.) requires mobilehome dealers to register and establish legal title of a mobilehome with HCD in the name of the new owner. HCD issues title to the new registered owner or to the lien holder in cases where the home is financed. Until 2001, HCD used to issue owners of mobilehomes registration decals - much like an automobile's - which the owner was required to place in a specific location outside the mobilehome. However, in 2000, the Legislature passed AB 984 (Correa, Ch. 23, Stats. 2000), which eliminated this requirement, and instead left to HCD and its AB 587 (Chau) Page 2 of ? inspectors the duty to enforce compliance with titling and registration requirements. Unlike the formal sale process for real property, transferring ownership of a mobilehome is often done informally, and as a consequence, parties to a sale transaction may not realize that a mobilehome must be re-registered and titled in the name of the new owner or purchaser. Consequently, California now has an unknown number of mobilehomes that are improperly registered or titled, leading to difficulties in collecting property taxes or vehicle license fees from the appropriate party, and obstructing the ability to sell or transfer these homes to new owners unless all past due taxes and fees - which may be the responsibility of another party - are paid in full. This bill creates an amnesty program that would allow owners of unregistered or untitled mobilehomes to register their property without having to pay the full amount of unpaid taxes and fees. It would authorize HCD to issue new title and registration documents, and for a local tax assessor to issue a tax clearance certificate, when an applicant provides documentation demonstrating ownership of a mobilehome and their date of acquisition, and the applicant pays both the charges assessed by the department between the time the applicant took ownership or December 31, 2015, whichever is later, and the taxes owed from the date of sale, without penalties or interest, not to exceed the amounts attributable one year prior to January 1, 2017. This bill would also modify an annual notice provided to mobilehome park residents by park management educating them on the need to register and title a mobilehome in the name of the new owner upon sale. CHANGES TO EXISTING LAW 1.Existing law , the Mobilehome Residency Law (MRL), governs the relationship between park owners or managers and the residents and homeowners in mobilehome parks and manufactured housing communities. (Civ. Code Sec. 798 et seq.) Existing law specifies terms and conditions that must appear in a rental agreement governing a mobilehome. Existing law requires a specified notice to be provided by mobilehome park management annually providing notice of certain rights and responsibilities of parties under the MRL. (Civ. Code Sec. 798.15.) AB 587 (Chau) Page 3 of ? This bill modifies the content of the above notice to, among other things, state: homeowners must pay rent, utility charges, and reasonable incidental service charges in a timely manner. Failure to comply could be grounds for eviction from the park. (Civil Code Section 798.56); if you sell your home, you are required to provide a manufactured home and mobilehome transfer disclosure statement to the buyer prior to sale. (Civil Code Section 1102.6d) When a home is sold, the owner is required to transfer the title to the buyer. The sale of the home is not complete until you receive the title from the seller. The buyer must also file paperwork with the Department of Housing and Community Development to register the home in his or her name. (Civil Code Sections 798.70-798.74); in California, mobilehome owners must pay annual property tax to the county tax collector or an annual fee in lieu of taxes to the Department of Housing and Community Development (HCD). If you are unsure which to pay, contact HCD. Failure to pay taxes or in lieu fees can have serious consequences, including losing your home at a tax sale; and for more information on registration, titling, and taxes, contact: the Department of Housing and Community Development www.hcd.ca.gov (800) 952-8356; County Tax Collector, www.cacttc.org (for listing); or call your local county government. 1.Existing law provides that HCD shall withhold the registration or transfer of registration of any manufactured home, mobilehome, or floating home which is subject to local property taxation, other than a new manufactured home, mobilehome, or floating home for which application is being made for an original registration, until the applicant presents a tax clearance certificate or a conditional tax clearance certificate issued by the tax collector of the county where the manufactured home, mobilehome, or floating home is located. (Health & Saf. Code Sec. 18092.7.) Existing law provides that nonpayment of specified fees and penalties that are due on a mobilehome, manufactured home, commercial coach, truck camper, or floating home shall constitute a lien in favor of the State of California in the amount owing. Until the amount of the lien is paid to HCD, the department shall not do either of the following: AB 587 (Chau) Page 4 of ? amend the permanent title record of the manufactured home, mobilehome, commercial coach, truck camper, or floating home which is the subject of the lien for the purpose of transferring any ownership interest or transferring or creating any security interest in the manufactured home, mobilehome, commercial coach, truck camper, or floating home; or issue any duplicate, substitute, or new certificate of title, registration card, or copy of a registration card with respect to the manufactured home, mobilehome, commercial coach, truck camper, or floating home which is the subject of the lien. (Health & Saf. Code Sec. 18116.1.) This bill states that when application is made to HCD for registration or transfer of registration of a manufactured home or mobilehome, and the applicant is not currently the registered owner, with respect to all charges assessed by the department prior to the date the title or interest in the manufactured home or mobilehome was transferred to the applicant, the department shall release specified liens imposed and waive all outstanding charges assessed by the department, if all of the following requirements are met: the applicant provides documentation demonstrating to the satisfaction of the department ownership and the date of acquisition of ownership interest; the application is made prior to December 31, 2019; the applicant pays any charges assessed by the department during the period between the time the applicant took ownership interest or December 31, 2015, whichever is later, and the time the applicant applies for relief; and the applicant has not previously filed for relief, as specified. This bill specifies that if the applicant meets the above requirements and the other specified requirements, the department shall waive the outstanding charges, fees, or penalties, amend the title record, and issue a duplicate, substitute, or new certificate of title, registration card, or copy of a registration card with respect to the manufactured home or mobilehome. This bill states that for specified amounts owing, HCD may establish a long term payment program of up to five years. The department may provide that any amounts owing under the AB 587 (Chau) Page 5 of ? payment program shall constitute a lien in favor of the State of California in the amount owing and shall be paid in full if the manufactured home or mobilehome is subsequently transferred. This bill specifies that if the manufactured home or mobilehome for which an application has been submitted and approved is subject to local property taxation, the department shall issue a conditional transfer of title. Upon presentation of a completed tax liability certificate, if the applicant meets specified requirements, the department shall amend the title record and issue a duplicate, substitute, or new certificate of title. 1.Existing law directs the county tax collector to issue a tax clearance certificate or a conditional tax clearance certificate when the tax collector finds that no local property tax is due or is likely to become due, or that any applicable local property taxes have been paid or are to be paid in a manner not requiring the withholding of registration or the transfer of registration. Existing law specifies that a tax clearance certificate shall be used to permit registration of used manufactured homes. (Rev. & Tax. Code Sec. 5832.) This bill states, prior to January 1, 2020, a person with a specified conditional transfer of title may apply to the tax collector to issue either a tax liability or tax clearance certificate. The county tax collector shall issue a tax liability certificate if the person pays the taxes reasonably owed from the date of sale as shown on the conditional transfer of title, without penalties or interest, and not to exceed the amounts attributable one year prior to January 1, 2017. This bill states that upon issuance of a tax clearance or liability certificate, the applicant shall be listed as the owner of record for all local property tax purposes and the home shall not be subject to lien or seizure based on specified unpaid taxes, penalties, or interest. This bill 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, or prohibit a county tax collector from collecting delinquent taxes, AB 587 (Chau) Page 6 of ? penalties, or interest due prior to the date of sale, from any owner other than the applicant. This bill makes other conforming changes to existing law. COMMENT 1.Stated need for the bill According to the author: Mobilehomes are an important source of affordable housing statewide. The Department of Housing and Community Development (HCD) is responsible for titling mobilehomes. Mobilehomes that were purchased new after July 1980 are generally subject to local property taxes (LPT). Homes that were purchased new prior to July 1980 are not subject to LPT, but rather an "in lieu" vehicle license fee paid annually to HCD. To transfer title of a mobilehome, an owner on the LPT system must obtain a Tax Clearance Certificate from the County Tax Collector. Similarly, if the mobilehome is on the "in-lieu" system, past due fees must be paid to HCD prior to transfer of title. Mobilehomes 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 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. AB 587 establishes a tax abatement program for mobilehome owners who are unable to transfer title of their homes into their names due to tax delinquencies that may have been incurred by prior owners. The abatement program would run for three years, starting in January 2017. Eligible homeowners would apply for the abatement program with HCD. If a mobilehome is on the local property tax system, then the County Tax Collector would also be involved in processing and approving the tax abatement. AB 587 also refines the exiting AB 587 (Chau) Page 7 of ? title transfer process by requiring sellers to obtain a transfer clearance certificate from HCD (indicating that HCD may legally amend the title). 2.Increasing compliance with title and registration requirements The three-year tax and fee amnesty program created by this bill would incentivize mobilehome owners lacking legal title to their home to obtain title and begin paying taxes and fees as required by law. The Western Center on Law and Poverty, a co-sponsor of this bill, states: There is a growing crisis in California: thousands, perhaps tens of thousands, of homeowners who believe they own their manufactured home, but have never had title properly transferred to them. As a result, these homeowners do not have clear title to the homes. In many cases, without his or her name on state and local records, the homeowner is accumulating growing back taxes and fees that could stretch into the thousands of dollars. Without title in their name, these homeowners also face the risk that the prior owner could re-appear and claim ownership. Moreover, they may be prevented from selling, insuring, and obtaining permits to safely maintain their homes. . . . A growing number of manufactured homes in California are being transferred without the proper paperwork being filed with HCD to transfer title into the new owner's name. Whether because of lack of knowledge of the law, fraud by the seller, or other reason, the result is that unpaid taxes and/or fees continue to accumulate. Not only does this expose the new owner to potentially thousands of dollars in taxes and penalties, but it also puts a cloud on the homeowner's title. . . . AB 587 would establish an abatement program to give homeowners an opportunity to bring title into their name without having to pay certain outstanding amounts owing. It also provides the framework for ensuring that in the future, the state and local government has procedures in place to ensure that title is properly transferred when a home is sold. 3.Opposition concerns The tax amnesty program proposed in this bill would eliminate a potential party from whom HCD or a local tax assessor could AB 587 (Chau) Page 8 of ? collect back property taxes and registration fees, and would relieve current owners of their obligation to pay up to three years' worth of back taxes and fees. Depending on the level of applicants, this amnesty program could result in the loss of significant revenue to affected counties and the department. The California State Association of Counties, writing in opposition, states: We recognize that AB 587 would serve as an opportunity for a large number of existing mobilehome owners to come into compliance for registration and tax obligations, despite lacking the necessary documentation to do so under the current system. Any amnesty program requires a balance of losses in light of potential benefits. As such, we respectfully request consideration of the following: further narrowing of the amnesty window from three to two years, similar to other tax amnesty programs; maintaining a level of obligation for taxes owed and their associated penalties and interest; and promoting future compliance for mobilehome owners to remain in good standing for registration and tax obligations. Staff notes that this bill would not relieve a prior mobilehome owner from their tax liabilities, including penalties and interest, accruing prior to the date of sale, and would not prohibit a county tax collector from collecting delinquent taxes, penalties, or interest from that prior owner. Support : Cabrillo Wetland Village HOA; Educational Community for Homeowners; Fountain Valley Estates Homeowners Association; GSMOL Chapter 708; GSMOL Chapter 1128; GSMOL Homeowners Association at San Joaquin Village Mobile Park; Las Casas Homeowners Association; Northern Santa Barbara County Manufactured Homeowners Team; Oceanside Manufactured Homeowners Alliance; Orcutt Ranch Home Owners Association; Prothero Homeowners Association; Ranch Club Mobile Estates Homeowner Association; San Luis Obispo Mobilehome Residents Assistance Panel; San Marcos Mobilehome Residents Association; Sandpiper Homeowner's Association; Santa Cruz County Manufactured/Mobile Homeowners Association; Santee Mobilehome Owner's Action Committee; Sea Oaks Mobilehome Park; Sonoma Valley GSMOL; Trico Mobile Estates HOA; 295 Individuals AB 587 (Chau) Page 9 of ? Opposition : California Association of County Treasurers and Tax Collectors; California State Association of Counties; Rural County Representatives of California HISTORY Source : California Rural Legal Assistance Foundation; Golden State Manufactured Home Owner's League (GSMOL); Western Center on Law and Poverty Related Pending Legislation : SB 434 (Allen, 2015) would require the assessor to notify the Department of Housing and Community Development (HCD), the legal owner, and each assessee whose manufactured home is to be placed on the local assessment role. This bill would also require HCD to transfer a manufactured home that is subject to the vehicle license fee to local property taxation when it is found that the home has been rebuilt and is no longer mobile. This bill is pending in the Assembly Committee on Housing and Community Development. Prior Legislation : AB 999 (Daly, Ch. 376, Stats. 2015) amended the Mobilehome Residency Law to, among other things, authorize the management of a mobilehome park to enforce a warehouse lien and to designate a mobilehome for disposal without requiring the management or other person enforcing the lien to pay past or current vehicle license fees or to obtain a tax clearance certificate. This bill also authorized the management of a mobilehome park to dispose of an abandoned mobilehome and its contents without requiring the management to pay past or current vehicle license fees or to obtain a tax clearance certificate. AB 1457 (Keeley, Ch. 772, Stats. 2001) relieved certain mobilehome park residents of additional property tax liability for escape assessments when the assessor failed to act, and forgave certain outstanding tax bills, but prohibited refunds. AB 984 (Correa, Ch. 23, Stats. 2000) See Background. SB 415 (Craven, Ch. 506, Stats. 1991) required that unless specified liens in favor of the State of California are paid to HCD, the department is prohibited from amending the permanent title record of a commercial coach, truck camper, or floating home which is the subject of the lien for the purpose of AB 587 (Chau) Page 10 of ? transferring any ownership interest or transferring or creating any security interest thereon and is prohibited from issuing any duplicate, substitute, or new certificate of title or registration card. AB 2227 (Mays, Ch. 796, Stats. 1991) provides for a system of taxing manufactured and mobilehomes first sold as new on or after July 1, 1980. Prior Vote : Senate Transportation and Housing Committee (Ayes 10, Noes 0) Assembly Floor (Ayes 78, Noes 0) Assembly Appropriations Committee (Ayes 17, Noes 0) Assembly Judiciary Committee (Ayes 10, Noes 0) Assembly Housing and Community Development Committee (Ayes 7, Noes 0) **************