BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 905


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          Date of Hearing:  April 14, 2015


                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS


                                Susan Bonilla, Chair


          AB 905  
          (Beth Gaines) - As Introduced February 26, 2015


          SUBJECT:  Time-shares:  public report:  real property  
          inspection.


          SUMMARY:  Authorizes a time-share developer, who creates a  
          time-share plan or is in the business of selling time-share  
          interests, to provide to a purchaser a mandated public report or  
          other disclosures in a digital format, and provides that certain  
          inspection and disclosure requirements do not apply to property  
          transfers that are already required to meet mandated reporting  
          requirements.  


          EXISTING LAW


          1)Existing law, the Vacation Ownership and Time-share Act of  
            2004 (Act), requires a time-share 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 (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.  (Business and  
            Professions Code (BPC) Section 11234) 








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          2)Defines a "public report" as a preliminary public report,  
            conditional public report, final public report, or other such  
            disclosure document authorized for use in connection with the  
            offering of time-share interests pursuant to the Act.  (BPC  
            Section 11212(r))



          3)Requires the public report to disclose certain things,  
            depending on whether the time-share is single site or  
            component site of a specific time-share interest multisite  
            time-share plan; a specific time-share interest multisite  
            time-share plan; or a nonspecific time-share interest  
            multisite time-share plan.  (BPC Section 11234) 



          4)Requires a single site or component site of a specific  
            time-share interest to disclose, among other things: 



             a)   A description of any existing or proposed amenities of  
               the time-share plan and, if the amenities are proposed or  
               not yet complete or fully functional, the estimated date of  
               completion;

             b)   The extent to which financial arrangements have been  
               made for the completion of any incomplete, promised  
               improvements;



             c)   A description of the duration, phases, and operation of  
               the time-share plan;











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             d)   The name and principal address of the managing entity  
               and a description of the procedures, if any, for altering  
               the powers and responsibilities of the managing entity and  
               for removing or replacing it;



             e)   The current annual budget as required by Section 11240,  
               along with the projected assessments and a description of  
               the method for calculating and apportioning the assessments  
               among purchasers, all of which shall be attached as an  
               exhibit to the public report;



             f)   Any initial or special fee due from the purchaser at  
               closing together with a description of the purpose and the  
               method of calculating the fee;



             g)   A description of any financing offered by or available  
               through the developer;



             h)   A description of any liens, defects, or encumbrances on  
               or affecting the title to the time-share interests; and, 



             i)   A description of any bankruptcies, pending civil or  
               criminal suits, adjudications, or disciplinary actions of  
               which the developer has knowledge, that would have a  
               material effect on the developer's ability to perform its  
               obligations.  (BPC Section 11234(a))











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          5)Requires a developer who offers a purchaser the opportunity to  
            subscribe or become a member of an exchange program, defined  
            as any method, arrangement, or procedure for the voluntary  
            exchange of time-share interests or other property interests,  
            to provide the purchaser with specified disclosures in  
            writing, and makes a violation of the public report disclosure  
            requirement a public offense.  (BPC Section 11216)

          6)Requires a developer, in registering a time-share plan, to  
            provide the Commissioner a public report that complies with  
            the requirements of Section 11234, or for a time-share plan  
            located outside of the state, a public report that has been  
            authorized for use by the state regulatory agency and that  
            contains disclosures as determined by the commissioner upon  
            review to be substantially equivalent to or greater than the  
            information required to be disclosed pursuant to Section  
            11234.  (BPC Section 11226(c))



          7)Specifies that real estate licensees from certain inspection  
            and disclosure requirements, as specified, do not apply to  
            property transfers that are already required to meet mandated  
            reporting requirements relating to BPC Section 11018.1.   
            (Civil Code Section 2079.6)   





          THIS BILL


          1)Authorizes a time-share developer, who creates time-share plan  
            or is in the business of selling time-share interests, to  
            provide to a purchaser, at his or her discretion, a mandated  
            public report or other disclosures in a digital format. 








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          2)Provides that certain inspection and disclosure requirements  
            do not apply to property transfers that are already required  
            to meet mandated reporting requirements, including public  
            reports for specified time-share plans under the Act.  


          FISCAL EFFECT:  Unknown.  This bill is keyed fiscal by the  
          Legislative Counsel.  


          





          COMMENTS


          1)Purpose. This bill is sponsored by the  American Resort  
            Development Association  (ARDA) and the  ARDA Resort Owners  
            Coalition  (ARDA-ROC).  According to the author, "California  
            law requires a number of disclosures to protect Californians  
            who purchase timeshares.  However, in this modern and  
            increasingly paperless world, many consumers would prefer not  
            to get these sometimes bulky disclosures in paper form.  [This  
            bill] allows the disclosures to be made electronically - at  
            the discretion of the purchaser." 


          2)Background.  The Vacation Ownership and Time-share Act of 2004  
            (time-share Act of 2004) charges the Commissioner with the  
            responsibility of assuring that purchasers of time-shares  
            interests receive everything for which they bargained.  A  
            Time-share Plan Conditional or Final Public Report must be  
            issued and a copy given to each purchaser prior to the  
            execution of a sales contract for a sale of a time-share.  A  








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            copy of this report must also be given to any member of the  
            public who requests one.  The Time-share Final Plan Public  
            Report is issued only after the developers comply with the  
            provisions of all the applicable laws and regulations.  BPC  
            Section 11234 mandates that the developer prepare the public  
            report, and that the public report include the specific  
            disclosures as required by that statute.  The California  
            Bureau of Real Estate (CalBRE) does not prepare time-share  
            public reports.



          According to CalBRE, in addition to administering and enforcing  
            laws governing the sale of subdivided lots and common interest  
            developments, including condominiums and planned developments,  
            it also administers and enforces laws governing the sale of  
            time-share interests.  Time-share interests in a time-share  
            project, also known as a time-share plan, sold in California,  
            whether the plan is located in California or outside the  
            state, is subject to regulation under the time-share Act of  
            2004.  Before a time-share developer can market or sell  
            time-share interests in a time-share plan, the developer must  
            obtain a public report issued by the CalBRE which discloses  
            many important aspects of the time-share offering.  This  
            report must be presented to prospective purchasers before  
            buying, so that they have an opportunity to read it before  
            making a purchase decision.

          Under existing law, purchasers of timeshares must be provided  
            with this report in writing.  According to the author, a  
            number of states allow electronic disclosure of timeshare  
            documents including: Arizona, Arkansas, Florida, Illinois,  
            Louisiana, Nevada, New Work, and Virginia.  This bill proposes  
            to allow the report to be offered in writing (as in existing  
            law) or in a digital format at the discretion of the  
            purchaser.  
          
            This bill also replaces disclosure exemption language that was  
            inadvertently eliminated in a previous timeshare bill.  Under  








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            Civil Code Section 2079.6, real estate licensees are exempt  
            from specified disclosure requirements if the purchaser has  
            been given a copy of a public report mandated by BPC Section  
            11018.1.  In 2004, AB 2252 (Montanez), Chapter 697, Statutes  
            of 2004, deleted the mandated timeshare report from BPC  
            Section 11018.1 and placed an expanded report requirement in a  
            new section - BPC Section 11234.  However, Civil Code Section  
            2079.6 was never amended to reflect that change.  This bill  
            proposes to simply insert reference to the section of the code  
            that refers to the required timeshare report.  


            According to the author, both of these changes are in response  
            to requests by consumers who prefer not to get lengthy paper  
            documents.  


          3)Related Prior Legislation.  AB 2252 (Montanez), Chapter 697,  
            Statutes of 2004, enacted the "Vacation Ownership and  
            Time-share Act of 2004," consolidated and revised the entire  
            body of time-share vacation property regulation, and  
            streamlines the regulatory approval process and adding new  
            consumer protections.


          ARGUMENTS IN SUPPORT 


          According to the  ARDA  and  the ARDA-ROC  , "[This bill] will allow  
          mandated reports to be given in electronic form and replace  
          disclosure exemption language that was inadvertently eliminated  
          in a previous timeshare bill?.Under existing law, purchases of  
          timeshares and timeshare exchanges must be provided an extensive  
          public report on the development.  Member timeshare owners have  
          told ARDA-ROC that they would prefer to get these documents  
          electronically?.[This bill] proposes to allow the report to be  
          offered in writing (as in existing law) 'or in a digital format  
          at the discretion of the purchaser'.?Under Civil Code Section  
          2079.6, the disclosure requirements of that section are exempted  








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          if the purchaser has been given a copy of a public report [This  
          bill also] proposes to simply insert reference to the section of  
          the code that refers to the required timeshare report." 



          ARGUMENTS IN OPPOSITION
          None on file. 


          REGISTERED SUPPORT / OPPOSITION:




          Support


          American Resort Development Association (ARDA) (co-sponsor) 


          ARDA Resort Owners Coalition (co-sponsor)




          Opposition


          None on file. 




          Analysis Prepared by:Eunie Linden / B. & P. / (916) 319-3301












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