BILL ANALYSIS Ó AB 905 Page 1 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) AB 905 Page 2 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; AB 905 Page 3 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)) AB 905 Page 4 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. AB 905 Page 5 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 AB 905 Page 6 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 AB 905 Page 7 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 AB 905 Page 8 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 AB 905 Page 9