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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