California Legislature—2015–16 Regular Session

Assembly BillNo. 905


Introduced by Assembly Member Beth Gaines

February 26, 2015


An act to amend Sections 11216 and 11234 of the Business and Professions Code, and to amend Section 2079.6 of the Civil Code, relating to time-shares.

LEGISLATIVE COUNSEL’S DIGEST

AB 905, as introduced, Beth Gaines. Time-shares: public report: real property inspection.

Existing law, the Vacation Ownership and Time-share Act of 2004, requires a developer, defined as a person who creates a time-share plan or is in the business of selling time-share interests, to prepare, for issuance by the Real Estate Commissioner, a public report that discloses certain facts concerning the developer and time-share plan and to provide a copy of the public report in writing to each purchaser of a time-share interest in a time-share plan at the time of purchase. Existing law requires a developer who offers a purchaser the opportunity to subscribe or become a member of an exchange program to provide the purchaser with specified disclosures in writing. Existing law makes a violation of the public report disclosure requirement a public offense.

This bill would require the developer to provide the purchaser with the public report or other disclosures in writing or in a digital format at the discretion of the purchaser. By changing the definition of a crime, this bill would impose a state-mandated local program.

Existing law provides that it is the duty of a real estate broker or salesperson to a prospective purchaser of residential real property comprising one to 4 inclusive, residential dwelling units or a manufactured home, to make a reasonably competent and diligent visual inspection of, and disclosure regarding, the property, as specified, except for transfers that are required to be preceded by the furnishing of a copy of a specified public report and to transfers that can be made without a specified public report, unless the property has been previously occupied.

This bill would also create an exception for a transfer that is required to be preceded by the furnishing of a copy of the public report required pursuant to the above-described act, unless the property has been previously occupied.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 11216 of the Business and Professions
2Code
is amended to read:

3

11216.  

(a) An exchange program is not a part of a time-share
4plan offering and, except as provided in this section and Section
511238, shall not be subject to either this chapter or the regulations
6of the commissioner adopted pursuant to this chapter.

7(b) If a developer offers a purchaser the opportunity to subscribe
8to or to become a member of an exchange program, the developer
9shall provide to the purchaser in writingbegin insert or in a digital format at
10the discretion of the purchaserend insert
all of the information set forth in
11paragraphs (1) to (17), inclusive. If the exchange company is
12offering directly to the purchaser the opportunity to subscribe to
13or become a member of an exchange company, the exchange
14company shall provide to the purchaser in writing all of the
15information set forth in paragraphs (1) to (17), inclusive. In either
16case, the written information shall be provided prior to or
17concurrently with the execution of any contract or subscription for
18membership in the exchange program.

19(1) The name and address of the exchange company.

P3    1(2) The names of all officers, directors, and shareholders of the
2exchange company.

3(3) Whether the exchange company or any of its officers or
4directors have any legal or beneficial interest in any developer or
5managing entity for any time-share plan participating in the
6exchange program and, if so, the identity of the time-share plan
7and the nature of the interest.

8(4) A copy of the form of the contract between the purchaser
9and the exchange company, along with a statement that the
10purchaser’s contract with the exchange company is a contract
11separate and distinct from the purchaser’s contract with the seller
12of time-share interests.

13(5) Whether the purchaser’s participation in the exchange
14program is dependent upon the continued affiliation of the
15applicable time-share plan with the exchange program.

16(6) Whether the purchaser’s participation in the exchange
17program is voluntary.

18(7) A fair and accurate description of the terms and conditions
19of the purchaser’s contractual relationship with the exchange
20program and the procedure by which changes thereto may be made.

21(8) A fair and accurate description of the procedures necessary
22to qualify for and effectuate exchanges.

23(9) A fair and accurate description of all limitations, restrictions,
24and priorities employed in the operation of the exchange program,
25including, but not limited to, limitations on exchanges based on
26seasonality, accommodation size, or levels of occupancy, expressed
27in conspicuous type. If those limitations, restrictions, or priorities
28are not uniformly applied by the exchange company, the
29information shall include a clear description of the manner in which
30they are applied.

31(10) Whether exchanges are arranged on a space available basis
32and whether any guarantees of fulfillment of specific requests for
33exchanges are made by the exchange company.

34(11) Whether and under what circumstances an owner, in dealing
35with the exchange program, may lose the right to use and occupy
36an accommodation of the time-share plan during a reserved use
37period with respect to any properly applied for exchange without
38being provided with substitute accommodations by the exchange
39program.

P4    1(12) The fees or range of fees for participation by owners in the
2exchange program, a statement of whether any such fees may be
3altered by the exchange company and the circumstances under
4which alterations may be made.

5(13) The name and address of the site of each accommodation
6included within a time-share plan participating in the exchange
7program.

8(14) The number of accommodations in each time-share plan
9that are available for occupancy and that qualify for participation
10in the exchange program, expressed within the following numerical
11groups: 1-5; 6-10; 11-20; 21-50; and 51 and over.

12(15) The number of currently enrolled owners for each
13time-share plan participating in the exchange program, expressed
14within the following numerical groups: 1-100; 101-249; 250-499;
15500-999; and 1,000 and over; and a statement of the criteria used
16to determine those owners who are currently enrolled with the
17exchange program.

18(16) The disposition made by the exchange company of use
19periods deposited with the exchange program by owners enrolled
20in the exchange program and not used by the exchange company
21in effecting exchanges.

22(17) The following information for the preceding calendar year,
23which shall be independently audited by a certified public
24accountant in accordance with the standards of the Accounting
25Standards Board of the American Institute of Certified Public
26 Accountants and reported annually no later than August 1 of each
27year:

28(A) The number of owners currently enrolled in the exchange
29program.

30(B) The number of time-share plans that have current affiliation
31agreements with the exchange program.

32(C) The percentage of confirmed exchanges, which is the
33number of exchanges confirmed by the exchange program divided
34by the number of exchanges properly applied for, together with a
35complete and accurate statement of the criteria used to determine
36whether an exchange request was properly applied for.

37(D) The number of use periods for which the exchange program
38has an outstanding obligation to provide an exchange to an owner
39who relinquished a use period during a particular year in exchange
40for a use period in any future year.

P5    1(E) The number of exchanges confirmed by the exchange
2program during the year.

3(F) A statement in conspicuous type to the effect that the
4percentage described in subparagraph (C) is a summary of the
5exchange requests entered with the exchange program in the period
6reported and that the percentage does not indicate the probabilities
7of an owner’s being confirmed to any specific choice or range of
8choices.

9(c) All written, visual, and electronic communications relating
10to an exchange company or an exchange program shall be filed
11with the commissioner upon its request.

12(d) The failure of an exchange company to observe the
13requirements of this section, and the use of any unfair or deceptive
14act or practice in connection with the operation of an exchange
15program, is a violation of this chapter.

16(e) An exchange company may elect to deny exchange privileges
17to any owner whose use of the accommodations of the owner’s
18time-share plan is denied, and no exchange program or exchange
19company shall be liable to any of its members or any third parties
20on account of any such denial of exchange privileges.

21

SEC. 2.  

Section 11234 of the Business and Professions Code
22 is amended to read:

23

11234.  

A developer shall prepare, for issuance by the
24commissioner, a public report that shall fully and accurately
25disclose those facts concerning the time-share developer and
26time-share plan that are required by this chapter or by regulation.
27The developer shall provide the public report to each purchaser of
28a time-share interest in a time-share plan at the time of purchase.
29The public report shall be in writingbegin insert or in a digital formaend insertbegin insertt at the
30discretion of the purchaserend insert
and dated and shall require the
31purchaser to certify in writing the receipt thereof. The public report
32for a single site time-share plan is subject to the requirements of
33subdivision (a). The public report for a specific time-share interest
34multisite time-share plan is subject to the requirements of both
35subdivisions (a) and (b). The public report for a nonspecific
36time-share interest multisite time-share plan is subject to the
37requirements of subdivision (c). For time-share plans located
38outside of the state, a public report that has been authorized for
39use by the situs state regulatory agency and that contains
40disclosures as determined by the commissioner upon review to be
P6    1substantially equivalent to or greater than the information required
2to be disclosed pursuant to this section may be used by the
3developer to meet the requirements of this section. A developer
4may, upon approval by the commissioner, submit a public report
5that combines, in a manner prescribed by the commissioner, the
6information required to be disclosed by the applicable subdivisions
7of this section and the information required to be disclosed in a
8public report issued by a regulatory agency in one or more other
9states.

10(a) Public reports for a single site and those component sites of
11a specific time-share interest multisite time-share plan that are
12offered in this state shall include the following:

13(1) The name and address of the developer and the type of
14time-share plan being offered and the name and address of the
15time-share project.

16(2) A description of the existing or proposed accommodations,
17including the type and number of time-share interests in the
18accommodations, and if the accommodations are proposed or not
19yet complete or fully functional, an estimated date of completion.

20(3) The number of accommodations and time-share interests,
21expressed in periods of seven-day use availability or other time
22increments applicable to the time-share plan, committed to the
23multisite time-share plan, and available for use by purchasers and
24a representation about the percentage of useable time authorized
25for sale, and if that percentage is 100 percent, then a statement
26describing how adequate periods of time for maintenance and
27repair will be provided.

28(4) A description of any existing or proposed amenities of the
29time-share plan and, if the amenities are proposed or not yet
30complete or fully functional, the estimated date of completion.

31(5) The extent to which financial arrangements have been made
32for the completion of any incomplete, promised improvements.

33(6) A description of the duration, phases, and operation of the
34time-share plan.

35(7) The name and principal address of the managing entity and
36a description of the procedures, if any, for altering the powers and
37responsibilities of the managing entity and for removing or
38replacing it.

39(8) The current annual budget as required by Section 11240,
40along with the projected assessments and a description of the
P7    1method for calculating and apportioning the assessments among
2purchasers, all of which shall be attached as an exhibit to the public
3report.

4(9) Any initial or special fee due from the purchaser at closing
5together with a description of the purpose and the method of
6calculating the fee.

7(10) A description of any financing offered by or available
8through the developer.

9(11) A description of any liens, defects, or encumbrances on or
10affecting the title to the time-share interests.

11(12) A description of any bankruptcies, pending civil or criminal
12suits, adjudications, or disciplinary actions of which the developer
13has knowledge, that would have a material effect on the developer’s
14ability to perform its obligations.

15(13) Any current or expected fees or charges to be paid by
16time-share purchasers for the use of any amenities related to the
17time-share plan.

18(14) A description and amount of insurance coverage provided
19for the protection of the purchaser.

20(15) The extent to which a time-share interest may become
21subject to a tax lien or other lien arising out of claims against
22purchasers of different time-share interests.

23(16) A statement disclosing any right of first refusal or other
24restraint on the transfer of all or any portion of a time-share interest.

25(17) A statement disclosing that a deposit made in connection
26with the purchase of a time-share interest shall be held by an
27escrow agent until expiration of any right to cancel the contract
28and that a deposit shall be returned to the purchaser if he or she
29elects to exercise his or her right of cancellation. Alternatively, if
30the commissioner has accepted from the developer a surety bond,
31irrevocable letter of credit, or other financial assurance, each of
32which shall be enforceable by the association, in lieu of placing
33deposits in an escrow account: (A) a statement disclosing that the
34developer has provided a surety bond, irrevocable letter of credit,
35or other financial assurance in an amount equal to or in excess of
36the funds that would otherwise be placed in an escrow account,
37(B) a description of the type of financial assurance that has been
38obtained, (C) a statement that if the purchaser elects to exercise
39his or her right of cancellation as provided in the contract, the
P8    1developer shall return the deposit, and (D) a description of the
2person or entity to whom the purchaser should apply for payment.

3(18) A statement that the assessments collected from the
4purchasers will be kept in a segregated account separate from the
5assessments collected from the purchasers of other time-share
6plans managed by the same managing entity, along with a statement
7identifying the location of the account and a disclosure of the rights
8of owners to inspect the records pertaining to their accounts.

9(19) If the time-share plan provides purchasers with the
10opportunity to participate in an exchange program, a description
11of the name and address of the exchange company and the method
12by which a purchaser accesses the exchange program.

13(20) Any other information that the developer, with the approval
14of the commissioner, desires to include in the public report.

15(21) Any other information reasonably requested by the
16commissioner.

17(b) Public reports for specific time-share interest multisite
18time-share plans shall include the following additional disclosures:

19(1) A description of each component site, including the name
20and address of each component site.

21(2) The number of accommodations and time-share interests,
22expressed in periods of seven-day use availability or other time
23increments applicable to each component site of the time-share
24plan, committed to the multisite time-share plan and available for
25use by purchasers and a representation about the percentage of
26useable time authorized for sale, and if that percentage is 100
27percent, then a statement describing how adequate periods of time
28for maintenance and repair will be provided.

29(3) Each type of accommodation in terms of the number of
30bedrooms, bathrooms, and sleeping capacity, and a statement of
31whether or not the accommodation contains a full kitchen. For
32purposes of this description, a “full kitchen” means a kitchen
33having a minimum of a dishwasher, range, sink, oven, and
34refrigerator.

35(4) A description of amenities available for use by the purchaser
36at each component site.

37(5) A description of the reservation system, which shall include
38the following:

P9    1(A) The entity responsible for operating the reservation system,
2its relationship to the developer, and the duration of any agreement
3for operation of the reservation system.

4(B) A summary of the rules and regulations governing access
5to and use of the reservation system.

6(C) The existence of and an explanation regarding any priority
7reservation features that affect a purchaser’s ability to make
8reservations for the use of a given accommodation on a
9first-come-first-served basis.

10(6) The name and principal address of the managing entity for
11the multisite time-share plan and a description of the procedures,
12if any, for altering the powers and responsibilities of the managing
13entity and for removing or replacing it.

14(7) A description of any right to make any additions,
15substitutions, or deletions of accommodations, amenities, or
16component sites, and a description of the basis upon which
17accommodations, amenities, or component sites may be added to,
18substituted in, or deleted from the multisite time-share plan.

19(8) A description of the purchaser’s liability for any fees
20associated with the multisite time-share plan.

21(9) The location of each component site of the multisite
22time-share plan, the historical occupancy of each component site
23for the prior 12-month period, if the component site was part of
24the multisite time-share plan during the 12-month time period, as
25well as any periodic adjustment or amendment to the reservation
26system that may be needed in order to respond to actual purchaser
27use patterns and changes in purchaser use demand for the
28accommodations existing at that time within the multisite
29time-share plan.

30(10) Any other information that the developer, with the approval
31of the commissioner, desires to include in the time-share disclosure
32statement.

33(c) Public reports for nonspecific time-share interest multisite
34time-share plans shall include the following:

35(1) The name and address of the developer.

36(2) A description of the type of interest and usage rights the
37purchaser will receive.

38(3) A description of the duration and operation of the time-share
39plan.

P10   1(4) A description of the type of insurance coverage provided
2for each component site.

3(5) An explanation of who holds title to the accommodations
4of each component site.

5(6) A description of each component site, including the name
6and address of each component site.

7(7) The number of accommodations and time-share interests,
8expressed in periods of seven-day use availability or other time
9increments applicable to the multisite time-share plan for each
10component site committed to the multisite time-share plan and
11available for use by purchasers and a representation about the
12percentage of useable time authorized for sale, and if that
13percentage is 100 percent, then a statement describing how
14adequate periods of time for maintenance and repair will be
15provided.

16(8) Each type of accommodation in terms of the number of
17bedrooms, bathrooms, and sleeping capacity, and a statement of
18whether or not the accommodation contains a full kitchen. For
19purposes of this description, a “full kitchen” means a kitchen
20having a minimum of a dishwasher, range, sink, oven, and
21refrigerator.

22(9) A description of amenities available for use by the purchaser
23at each component site.

24(10) A description of any incomplete amenities at any of the
25component sites along with a statement as to any assurance for
26completion and the estimated date the amenities will be available.

27(11) The location of each component site of the multisite
28time-share plan, the historical occupancy of each component site
29for the prior 12-month period, if the component site was part of
30the multisite time-share plan during such 12-month time period,
31as well as any periodic adjustment or amendment to the reservation
32system that may be needed in order to respond to actual purchaser
33use patterns and changes in purchaser use demand for the
34 accommodations existing at that time within the multisite
35time-share plan.

36(12) A description of any right to make any additions,
37substitutions, or deletions of accommodations, amenities, or
38component sites, and a description of the basis upon which
39accommodations, amenities, or component sites may be added to,
40substituted in, or deleted from the multisite time-share plan.

P11   1(13) A description of the reservation system that shall include
2all of the following:

3(A) The entity responsible for operating the reservation system,
4its relationship to the developer, and the duration of any agreement
5for operation of the reservation system.

6(B) A summary of the rules and regulations governing access
7to and use of the reservation system.

8(C) The existence of and an explanation regarding any priority
9reservation features that affect a purchaser’s ability to make
10reservations for the use of a given accommodation on a
11first-come-first-served basis.

12(14) A description of any liens, defects, or encumbrances that
13materially affect the purchaser’s use rights.

14(15) The name and principal address of the managing entity for
15the multisite time-share plan and a description of the procedures,
16if any, for altering the powers and responsibilities of the managing
17entity and for removing or replacing it, and a description of the
18relationship between a multisite time-share plan managing entity
19and the managing entity of the component sites of a multisite
20time-share plan, if different from the multisite time-share plan
21managing entity.

22(16) The current annual budget as provided in Section 11240,
23along with the projected assessments and a description of the
24method for calculating and apportioning the assessments among
25purchasers, all of which shall be attached as an exhibit to the public
26report.

27(17) Any current fees or charges to be paid by time-share
28purchasers for the use of any amenities related to the time-share
29plan and a statement that the fees or charges are subject to change.

30(18) Any initial or special fee due from the purchaser at closing,
31together with a description of the purpose and method of
32calculating the fee.

33(19) A description of any financing offered by or available
34through the developer.

35(20) A description of any bankruptcies, pending civil or criminal
36suits, adjudications, or disciplinary actions of which the developer
37has knowledge, which would have a material effect on the
38developer’s ability to perform its obligations.

39(21) A statement disclosing any right of first refusal or other
40restraint on the transfer of all or any portion of a time-share interest.

P12   1(22) A statement disclosing that a deposit made in connection
2with the purchase of a time-share interest shall be held by an
3escrow agent until expiration of any right to cancel the contract
4and that a deposit shall be returned to the purchaser if he or she
5elects to exercise his or her right of cancellation. Alternatively, if
6the commissioner has accepted from the developer a surety bond,
7irrevocable letter of credit, or other financial assurance in lieu of
8placing deposits in an escrow account: (A) a statement disclosing
9that the developer has provided a surety bond, irrevocable letter
10of credit, or other financial assurance in an amount equal to or in
11excess of the funds that would otherwise be placed in an escrow
12account, (B) a description of the type of financial assurance that
13has been arranged, (C) a statement that if the purchaser elects to
14exercise his or her right of cancellation as provided in the contract,
15the developer shall return the deposit, and (D) a description of the
16person or entity to whom the purchaser should apply for payment.

17(23) If the time-share plan provides purchasers with the
18opportunity to participate in an exchange program, a description
19of the name and address of the exchange company and the method
20by which a purchaser accesses the exchange program.

21(24) Any other information that the developer, with the approval
22of the commissioner, desires to include in the time-share disclosure
23statement.

24(d) The commissioner may establish by regulation provisions
25regarding the delivery of the public report and other required
26information through alternative media forms.

27(e) The commissioner may, upon finding that the subject matter
28is otherwise adequately covered or the information is unnecessary
29or inapplicable, waive any requirement set forth in this section.

30

SEC. 3.  

Section 2079.6 of the Civil Code is amended to read:

31

2079.6.  

This article does not apply to transfers which are
32required to be preceded by the furnishing, to a prospective
33transferee, of a copy of a public report pursuant to Section 11018.1
34begin insert or Section 11234end insert of the Business and Professions Code and
35transfersbegin delete whichend deletebegin insert thatend insert can be made without a public report pursuant
36to Section 11010.4 of the Business and Professions Code, unless
37the property has been previously occupied.

38

SEC. 4.  

No reimbursement is required by this act pursuant to
39Section 6 of Article XIII B of the California Constitution because
40the only costs that may be incurred by a local agency or school
P13   1district will be incurred because this act creates a new crime or
2infraction, eliminates a crime or infraction, or changes the penalty
3for a crime or infraction, within the meaning of Section 17556 of
4the Government Code, or changes the definition of a crime within
5the meaning of Section 6 of Article XIII B of the California
6Constitution.



O

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