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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Page 8
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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