BILL ANALYSIS Ó AB 587 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 587 (Chau) As Amended August 15, 2016 2/3 vote -------------------------------------------------------------------- |ASSEMBLY: |78-0 |(June 1, 2016) |SENATE: |35-3 |(August 22, | | | | | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: H. & C.D. 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 an abatement process for mobilehome owners if the following requirements are met: a) The applicant is not currently the registered owner. b) The applicant provides documentation demonstrating ownership and the date of acquisition of ownership interest, to the Department of Housing and Community AB 587 Page 2 Development's (HCD) satisfaction. c) The application is made prior to December 31, 2019. d) The applicant pays any charges assessed by HCD during the period between the times the applicant took ownership interest or December 31, 2015, whichever is later, and the time the applicant applies for relief. e) Any lien under the Property Tax Postponement program has been satisfied. f) The applicant has not previously filed for relief under the abatement program. 2)Requires HCD to 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, if the applicant meets the requirements of the abatement program and is subject to the vehicle license registration fee (VLF). 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 after the applicant takes ownership, which must be paid in full if the mobilehome is later transferred. Failure to make payments required by the plan is a violation of the program and HCD may suspend, revoke, or cancel the certificate of title. 4)Provides that, if the applicant is eligible for the abatement program and the mobilehome is subject to the local property tax (LPT), HCD must issue a conditional transfer of title. Requires HCD to amend the title record and issue a duplicate, substitute, or new certificate of title if the applicant AB 587 Page 3 presents a completed tax liability certificate and meets the requirement of the abatement program. 5)Requires a county tax collector to issue a tax liability or tax clearance certificate to a person with a conditional transfer of title who applies for the certificate prior to January 1, 2020, and pays the reduced taxes under the abatement program. The reduced taxes include those 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. Upon the issuance of a tax liability certificate, the applicant shall be listed as the owner of record for all LPT tax purposes and the home shall not be subject to lien or seizure based on any taxes abated pursuant to this program. 6)Provides that the abatement program does not relieve any owner other than the applicant from tax liability, including penalties and interest, arising from the non-payment prior to the date of sale and does not 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. 7)Provides that on or after January 1, 2020, it is unlawful for any person to use, cause, or permit to be used for occupancy, any mobilehome, wherever the mobilehome is located, that does not conform to HCDs registration requirements, provided that HCD has given notice to the occupant of the registration requirements and any registration fees due. 8)Amends the Management Notice to All Homeowners in the following ways: adds that when a mobilehome is sold, the owner is required to transfer the title to the buyer; adds that in California, mobilehome owners must pay annual property tax to the county tax collector or an annual fee in lieu of taxes to HCD; and adds that information on registration, titling, and taxes can be found at HCD, with the county tax AB 587 Page 4 collector, or by calling the local county government. 9)Provides that the Legislature finds and declares that the abatement of taxes, penalties, and interest incurred prior to the date of sale of a mobilehome or manufactured home to an applicant serves a public purpose and does not constitute a gift of public funds. 10)States that if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made. 11)Provides that no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill. The Senate amendments: 1)Amend the Management Notice to All Homeowners in the following ways: adds that when a mobilehome is sold, the owner is required to transfer the title to the buyer; adds that in California, mobilehome owners must pay annual property tax to the county tax collector or an annual fee in lieu of taxes to HCD; and adds that information on registration, titling, and taxes can be found at HCD, with the county tax collector, or by calling the local county government. 2)Provide that on or after January 1, 2020, it is unlawful for any person to use, cause, or permit to be used for occupancy, any mobilehome, wherever the mobilehome is located, that does not conform to HCD's registration requirements, provided that HCD has given notice to the occupant of the registration requirements and any registration fees due. 3)Delete the provision that prohibited eviction from a AB 587 Page 5 mobilehome park for nonconformance with the registration and titling requirements of state law when an application for the abatement program is filed before January 1, 2019, and the nonconformance occurred prior to January 1, 2017. 4)Make several technical, clarifying changes. FISCAL EFFECT: According to the Senate Appropriations Committee: 1)HCD administrative costs of approximately $360,000 annually for three years to process an estimated 10,000 titling and registration applications each year for the duration of the program. These costs would likely be offset by application fee revenues. (Mobilehome-Manufactured Home Revolving Fund) 2)Unknown, potentially significant, foregone state revenues a result of the requirement that HCD waive specified past due charges, fees, and penalties if an applicant meets specified requirements. This impact would be partially mitigated to the extent a portion of these revenues would have otherwise remained uncollected in the absence of the abatement program. (General Fund, various mobilehome-related special funds) 3)Unknown significant foregone property tax revenues as a result of the specified limit on the amount of delinquent taxes that an applicant would pay to the county tax collector in exchange for a tax clearance or liability certificate. This impact would be partially mitigated to the extent a portion of these revenues would have otherwise remained uncollected in the absence of the abatement program. Senate Appropriations staff notes that any impacts to the K-14 school share of the property tax revenues are generally backfilled by the State General Fund. (General Fund, local funds) 4)Unknown foregone local revenues as a result of the requirement AB 587 Page 6 that county tax collectors waive all property tax penalties and interest that would otherwise be owed by eligible participants in the abatement program. (local funds) 5)Unknown reimbursable state-mandated local costs for county tax collectors to establish administrative procedures and issue tax clearance or liability certificates to eligible participants in the abatement program. (General Fund) 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" VLF paid 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. AB 587 Page 7 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 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 AB 587 Page 8 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 billing in the future. 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. 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. Senate amendments delete the provision that expressly prohibited eviction from a mobilehome park for nonconformance with the registration and titling requirements when an application for the abatement program has been filed. However, the amendments clarify that only after January 1, 2020 will it be unlawful for anyone to use a mobilehome that does not conform to HCD's registration requirements, provided that HCD has provided notice to the occupant of the registration requirements and any registration fees due. Senate amendments also make several technical changes, and specify additional information, including information on registration, titling, and taxes, that must be AB 587 Page 9 included in a manufactured home park management's notice to homeowners. Arguments in opposition: The California Association of County Treasurers and Tax Collectors (CATTC) oppose this bill unless amended to remove any abatement of taxes, which is the central purpose of the bill. CATTC disputes that people purchasing mobilehomes in California do not understand the necessary steps to property transfer title and ownership of mobilehomes. CATTC contends that by removing a county's ability to enforce tax collection on taxes in arrears and assess penalties in interest, this bill would remove the fiscal incentive to pay taxes in a timely manner. The California State Association of Counties proposes reducing the length of the program to two years, 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. Analysis Prepared by: Rebecca Rabovsky / H. & C.D. / (961) 319-2085 FN: 0004352