BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        AB 807|
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                                    THIRD READING


          Bill No:  AB 807
          Author:   Mark Stone (D), et al.
          Amended:  6/16/15 in Senate
          Vote:     21  

           SENATE JUDICIARY COMMITTEE:  7-0, 6/9/15
           AYES:  Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,  
            Wieckowski

           ASSEMBLY FLOOR:  79-0, 5/11/15 (Consent) - See last page for  
            vote

           SUBJECT:   Real estate transfer fees:  recorded documents


          SOURCE:    California Association of Realtors


          DIGEST:  This bill makes declaratory and clarifying changes to  
          existing law pertaining to the disclosure of real estate  
          transfer fees, including, among other things, providing that  
          transfer fees due at times other than upon the transfer or sale  
          of a property are subject to disclosure under existing law.


          ANALYSIS:   


          Existing law:


          1)Requires the transferor to deliver a transfer disclosure  
            statement (TDS), and other disclosures, as soon as practicable  








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            before transfer of title, or close of escrow, when  
            transferring real property and manufactured homes or  
            mobilehomes.  (Civ. Code Sec. 1102.3a(a).)


          2)States that for transfer fees imposed prior to January 1,  
            2008, the receiver of the fee, as a condition of payment of  
            the fee on or after January 1, 2009, shall record, on or  
            before December 31, 2008, against the real property in the  
            office of the county recorder for the county in which the real  
            property is located a separate document entitled "Payment of  
            Transfer Fee Required," with the title appearing in at least  
            14-point boldface type.  The document shall include all of the  
            following information:

                 The names of all current owners of the real property  
               subject to the transfer fee, and the legal description and  
               assessor's parcel number for the affected real property;

                 The amount, if the fee is a flat amount, or the  
               percentage of the sales price constituting the cost of the  
               fee;

                 If the real property is residential property, actual  
               dollar-cost examples of the fee for a home priced at  
               $250,000, $500,000, and 750,000;

                 The date or circumstances under which the transfer fee  
               payment requirement expires, if any;

                 The purpose for which the funds from the fee will be  
               used;

                 The entity to which funds from the fee will be paid and  
               specific contact information regarding where the funds are  
               to be sent; and

                 The signature of the authorized representative of the  
               entity to which funds from the fee will be paid.  (Civ.  
               Code Sec. 1098.5.)


          1)Provides that when a transfer fee is imposed upon real  
            property on or after January 1, 2008, the person or entity  







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            imposing the transfer fee, as a condition of payment of the  
            fee, shall record in the office of the county recorder for the  
            county in which the real property is located, concurrently  
            with the instrument creating the transfer fee requirement, a  
            separate document that meets all of the above requirements.   
            (Civ. Code Sec. 1098.5.)


          2)Provides that if a property being transferred on or after  
            January 1, 2008, is subject to a transfer fee, the transferor  
            shall provide, at the same time as the TDS is provided, an  
            additional disclosure statement containing all of the  
            following:

                 Notice that payment of a transfer fee is required upon  
               transfer of the property;

                 The amount of the fee required for the asking price of  
               the real property and a description of how the fee is  
               calculated;

                 Notice that the final amount of the fee may be different  
               if the fee is based upon a percentage of the final sale  
               price;

                 The entity to which funds from the fee will be paid;

                 The purposes for which funds from the fee will be used;  
               and

                 The date or circumstances under which the obligation to  
               pay the transfer fee expires, if any.  (Civ. Code Sec.  
               1102.6e.)

          1)Defines a "transfer fee" as any fee payment requirement  
            imposed within a covenant, restriction, or condition contained  
            in any deed, contract, security instrument, or other document  
            affecting the transfer or sale of, or any interest in, real  
            property that requires a fee be paid upon transfer of the real  
            property, except as provided.  (Civ. Code Sec. 1098.)


          2)Exempts from the definition of "transfer fee" any fee  
            reflected in a document recorded against the property on or  







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            before December 31, 2007, that is separate from any covenants,  
            conditions, and restrictions, and substantially complies with  
            the above requirements by providing a prospective transferee  
            with notice of the following:

                 That payment of a transfer fee is required;

                 The amount or method of calculation of the fee;

                 The date or circumstances under which the transfer fee  
               payment requirement expires, if any;

                 The entity to which the fee will be paid; and

                 The general purposes for which the fee will be used.   
               (Civ. Code Sec. 1098.)

          This bill:

          1)Clarifies that a "transfer fee" is any fee payment requirement  
            imposed within a covenant, restriction, or condition contained  
            in any deed, contract, security instrument, or other document  
            affecting the transfer or sale of, or any interest in, real  
            property that requires a fee be paid as a result of transfer  
            of the real property, except as provided.

          2)Provides that, for a document that was recorded against a  
            property on or before December 31, 2007, to be excluded from  
            the definition of a "transfer fee," it must set forth  
            information about the fee, as currently required, in a single  
            document and may not incorporate by reference such information  
            from another document.

          3)Specifies that disclosures providing notice of transfer fees  
            must describe the method for calculating the fee amount, and  
            whether or not the fee is a flat amount or is based on the  
            sale price of the real property.

          4)Provides that any fee reflected in a document recorded against  
            the property on or before December 31, 2007, that is not  
            separate from any covenants, conditions, and restrictions, or  
            that incorporates by reference from another document shall  
            constitute a "transfer fee" unless it is recorded against the  
            property on or before December 31, 2016, in a single document,  







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            as specified.

          5)Makes other technical and clarifying changes to existing law  
            pertaining to the recording of real property transfer fees.

          6)Finds and declares that amendments made by this bill are  
            clarifying and declaratory of existing law.

          Background

          Under existing law, various fees may be included in the price of  
          a residential real estate transfer.  Those fees, such as  
          transfer taxes and homeowner association processing fees, are  
          generally expected when purchasing homes within California.  In  
          recent years, a new type of transfer fee has appeared within  
          California.  Deemed a "private real estate transfer fee," the  
          fee amounts to a percentage of the sale price of a home, and is  
          generally paid to a third party not involved in the transaction.  
           According to a recent news story:

            A private transfer fee, sometimes called a "property transfer  
            fee," occurs when the builder adds a covenant to the deed of  
            each new home.  Sometimes the recipient of the fee is a  
            charity or government agency, which provides housing for  
            low-income families.  But sometimes builders themselves pocket  
            the money as pure profit.

            In Placer County . . . one builder agreed to impose the fee,  
            effective for 20 years, as part of a deal to placate two  
            environmental groups, the Sierra Club and the Audubon Society.

            In some cases, though, the covenant runs with the deed for 99  
            years, meaning that each time the house changes hands,  
            subsequent buyers must also pay the fee.  And because the  
            charge is a covenanted mandate, it is difficult to reverse  
            once in place . . . Moreover, most buyers often don't realize  
            they are paying the fee.  The builder or seller (if a  
            subsequent seller even knows of it) doesn't tell them about  
            it, and because they pay so little attention to the closing  
            statement, it escapes their view altogether.  But even if they  
            do question the charge, there isn't anything they can do about  
            it short of backing out of the deal.  (Herald-Tribune, Some  
            States Ban Private Transfer Fees (July 4, 2010)  
             
                                                                    Page  6


            /7041002> [as of May 29, 2015].)

          In 2007, the Legislature passed AB 980 (Calderon, Chapter 689,  
          Statutes of 2007), which requires any person or entity that  
          imposes, or has imposed, a transfer fee on real property to  
          document and record the fee in the property's records held by  
          the county recorder prior to collecting the fee.  AB 980 also  
          imposed a duty on sellers of residential property to provide a  
          disclosure statement notifying buyers about the transfer fee, as  
          well as the amount, recipients, purpose, and expiration (if any)  
          of the fee.

          This bill makes several clarifying changes to the requirements  
          enacted by AB 980, including clarifying that transfer fee  
          disclosures must be made whenever the obligation to pay such a  
          fee arises "as a result of" the transfer of real property.

          Comments

          The author writes:

            This bill seeks to ensure that all private transfer fees  
            [PTFs] on real property are recorded with the county and  
            disclosed to prospective purchasers in a transparent manner,  
            consistent with the intent of existing law, AB 980 (Stats.  
            2007).  To further the intent of this current law, this bill  
            clarifies the following: (1) the definition of PTF to capture  
            any fee that must be paid "as the result of" the transfer of  
            the property; (2) the method of calculating the PTF if the fee  
            is neither a flat fee, nor a percentage of the sales price;  
            and (3) required disclosures about the PTF must appear in a  
            single document and cannot be incorporated by reference into  
            other documents.

            AB 807 is needed to ensure continued notification and  
            disclosure of PTFs to homebuyers because some PTFs are now  
            being structured very differently than previously seen since  
            AB 980 became law in 2007.   For example, these new types of  
            PTFs may be structured so that they are not necessarily based  
            on the sale price of the home or paid immediately upon  
            transfer of the home, as was contemplated by AB 980.  

            As a result, prospective homebuyers may not be made aware of  
            such fees, contrary to the intent of existing law, if these  







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            new types of PTFs are ever determined by the courts to fall  
            outside the current statute requiring recordation and  
            disclosure.  Recent court cases have documented various  
            efforts to structure PTFs to avoid the recordation  
            requirements of AB 980; therefore, elements of the current  
            statute should be clarified to further the Legislature's  
            intent to protect homebuyers.

          Prior Legislation

          SB 670 (Correa, 2007) would have restricted the use of private  
          transfer fees recorded against real property by, among other  
          things, directing that transfer fee funds go to a non-profit  
          entity to fund facilities or services that provide a public  
          benefit to the real property subject to the fee.  The bill died  
          in the Senate Transportation and Housing Committee.

          AB 980 (Calderon, Chapter 689, Statutes of 2007) requires any  
          person or entity that imposes, or has imposed, a transfer fee on  
          real property to record a specified document with the county  
          recorder as a prerequisite to any payment of that fee, as  
          specified.  The bill also requires the seller of residential  
          property to provide a disclosure statement notifying the buyer  
          about the transfer fee, as well as the amount, recipients,  
          purpose, and expiration of the fee.

          AB 1574 (Houston, 2007) would have limited the imposition of  
          residential real property transfer fees to properties for which  
          the Department of Real Estate has issued a public report under  
          the Subdivision Map Act.  The bill would have also restricted  
          the prospective use of transfer fees by requiring that the fee:  
          (1) only go to public entities or nonprofit organizations  
          identified in the public report; (2) constitute no more than 2%  
          of the sale price; (3) be imposed for no greater than 99 years;  
          (4) provide a public benefit within the region; and (5) not be  
          used for expenses relating to lobbying.  The bill was gutted and  
          amended to address a different issue.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified6/9/15)








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          California Association of Realtors (source)
          Community Associations Institute 


          OPPOSITION:   (Verified6/9/15)


          None received


          ASSEMBLY FLOOR:  79-0, 5/11/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,  
            Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,  
            Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,  
            Wagner, Waldron, Weber, Wilk, Williams, Wood
          NO VOTE RECORDED:  Atkins

          Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
          6/17/15 16:53:25


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