BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 905|
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CONSENT
Bill No: AB 905
Author: Beth Gaines (R)
Introduced:2/26/15
Vote: 21
SENATE JUDICIARY COMMITTEE: 7-0, 6/9/15
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 77-0, 4/30/15 (Consent) - See last page for
vote
SUBJECT: Time-shares: public report: real property
inspection
SOURCE: American Resort Development Association
Resort Owner's Coalition
DIGEST: This bill modifies the Vacation Ownership and
Time-share Act of 2004 to authorize required copies of public
reports pertaining to time-share interests and required copies
of disclosures pertaining to exchange programs to be provided in
a digital format at the discretion of the purchaser. This bill
also exempts licensed real estate brokers or salespersons from
the duty to conduct a reasonably competent and diligent visual
inspection of a time-share property and to disclose all facts
materially affecting the value or desirability of the property
to a prospective purchaser when the property has not been
previously occupied, and, as a condition of transfer, the
prospective purchaser would receive a copy of the public report.
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Page 2
ANALYSIS:
Existing law:
1) Regulates, in the Vacation Ownership and Time-share Act of
2004, the creation and sale of time-share interests in a
time-share plan, and the creation and operation of exchange
programs that facilitate the voluntary exchange of time-share
interests. (Bus. & Prof. Code Sec. 11210 et seq.)
2) Provides that any person who, to any individual located in
the state, sells, offers to sell, or attempts to solicit
prospective purchasers to purchase a time-share interest, or
any person who creates a time-share plan with an
accommodation in the state, shall register the time-share
plan with the Commissioner of Real Estate, unless the
time-share plan is otherwise exempt. (Bus. & Prof. Code Sec.
11226 (a).)
3) Provides that, when registering a time-share plan, the
developer of a time-share plan shall provide the Commissioner
with, among other things, a public report that complies with
the requirements of the Vacation Ownership and Time-share Act
of 2004. (Bus. & Prof. Code Sec. 11226 (c).)
4) Provides that a developer shall prepare, for issuance by the
Commissioner, a public report that shall fully and accurately
disclose those facts concerning the time-share developer and
time-share plan that are required by the Vacation Ownership
and Time-share Act of 2004 or by regulation. (Bus. & Prof.
Code Sec. 11234.)
5) Provides that the developer shall provide the public report
to each purchaser of a time-share interest in a time-share
plan at the time of purchase. Existing law specifies the
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public report shall be in writing and dated and shall require
the purchaser to certify in writing the receipt thereof.
Existing law also specifies the information required to be
contained within a public report. (Bus. & Prof. Code Sec.
11234.)
6) Provides that public reports for a single site and those
component sites of a specific time-share interest multisite
time-share plan that are offered in this state shall include
specified information. (Bus. & Prof. Code Sec. 11234.)
7) Establishes additional disclosures for public reports for
specific time-share interest multisite time-share plans and
for nonspecific time-share interest multisite time-share
plans. (Bus. & Prof. Code Sec. 11234.)
8) Provides that if a developer offers a purchaser the
opportunity to subscribe to or to become a member of an
exchange program, or if an exchange company offers directly
to the purchaser the opportunity to subscribe to or become a
member of an exchange company, the developer or exchange
company shall provide to the purchaser in writing specified
information prior to or concurrently with the execution of a
contract or subscription for membership in the exchange
program. (Bus. & Prof. Code Sec. 11216.)
9) Provides that it is the duty of a real estate broker or
salesperson to a prospective purchaser of residential real
property, as defined, to conduct a reasonably competent and
diligent visual inspection of the property offered for sale
and to disclose to that prospective purchaser all facts
materially affecting the value or desirability of the
property that an investigation would reveal, and to make
other specified disclosures about the property and
transaction, if that broker has a written contract with the
seller to find or obtain a buyer or is a broker who acts in
cooperation with that broker to find and obtain a buyer.
(Civ. Code Sec. 2079 et seq.)
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10)Specifies that the duty of a real estate broker or
salesperson to conduct a reasonably competent and diligent
visual inspection of a property does not apply to transfers
which are required to be preceded by the furnishing, to a
prospective transferee, of a copy of a public report pursuant
to Section 11018.1 of the Business and Professions Code and
transfers which can be made without a public report pursuant
to Section 11010.4 of the Business and Professions Code,
unless the property has been previously occupied. (Civ. Code
Sec. 2079.6.)
This bill:
1)Authorizes a developer to provide a public report required by
the Vacation Ownership and Time-share Act of 2004, as well as
any disclosures pertaining to an exchange program, to a
purchaser in writing or in a digital format at the discretion
of the purchaser.
2)Provides that the duty of a real estate broker or salesperson
to conduct a reasonably competent and diligent visual
inspection of a property and to provide specified disclosures
about the property and transaction does not apply to transfers
which are required to be preceded by the furnishing, to a
prospective transferee, of a copy of a public report pursuant
to Section 11234 of the Business and Professions Code
pertaining to time-share plans, unless the property has been
previously occupied.
Background
Time-shares, or vacation ownerships, are terms that generally
describe a system where owners occupy a property for short
periods of time each year while on vacation. This contrasts
with more traditional common interest developments, like
condominiums and residential subdivisions, which are usually
occupied year-round. The regulation of timeshares began in
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earnest in 1981 when the industry was widely perceived as being
prone to high-pressure sales tactics and rampant consumer fraud
(an era now half-jokingly referred to as the "crime-share"
days). Stringent state regulations for time-shares were built
into the Subdivided Lands Law that regulated common interest
developments. Although time-share regulations and references
are now found throughout state law, they are now principally
found in the Vacation Ownership and Time-share Act of 2004.
(Bus. & Prof. Code Sec. 11210 et seq.)
Under current law, time-shares are regulated by the Bureau of
Real Estate (BRE), which has a broad responsibility to ensure
that purchasers of regulated time-shares, both in-state and
out-of-state, receive everything that they bargained for when
purchasing their interest in a time-share plan. Time-share
interests regulated by BRE fall into two basic categories, based
on whether participation in the time-share results in the
conveyance of an interest in real property. The first category
of regulated time-share interests includes those where a right
of occupancy in a time-share property is coupled with a
conveyance of an estate in real property, which is typically
transferred to the purchaser by grant deed. The second involves
time-share interests based on purchase agreements between
sellers and buyers that do not involve the conveyance of an
interest in real property. These purchase agreements take many
different forms, such as granting membership in a corporation
along with a time-limited license for exclusive use of a
particular property.
BRE's oversight of time-share interests is provided primarily
through the creation of a "public report," which must be issued
to each purchaser before the sale of an interest in a time-share
plan. The purpose of a public report is "to prevent fraud and
misrepresentation in the marketing of parcels of land by
requiring disclosure of the financial risks and benefits of a
transaction to proposed purchasers and lessees." (California
Coastal Com. v. Quanta Investment Corp. (1980) 113 Cal.App.3d
579, 589.) The Vacation Ownership and Time-share Act of 2004
requires the creation of this public report, which encompasses
most of the major elements of a time-share purchase (property
description, amenities, real estate disclosures, costs and
escrow, maintenance fees and assessments, management and local
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governance, rescission, liability, and a host of other matters).
BRE oversees developer compliance with regulations governing
the creation of time-shares, as well those related to
advertising and sales of time-share interests, but the
California Attorney General bears the ultimate responsibility to
ensure the law is enforced.
The Vacation Ownership and Time-share Act of 2004 also governs
the creation and sale of interests in "exchange programs," which
are contractual arrangements that facilitate voluntary exchange
of time-share interests, such as allowing the owner of a
time-share interest to trade use of time owned in one time-share
plan for use of time at another property. The Act requires
those who offer purchasers the opportunity to subscribe to or
become a member of an exchange program to provide specified
disclosures about the exchange program, including disclosures
about the program's membership and governance.
This bill, sponsored by the American Resort Development
Association, authorizes developers and sellers of time-share
interests to provide time-share public reports and disclosures
pertaining to exchange programs in a digital format at the
discretion of the purchaser. This bill also relieves licensed
real estate brokers and salespersons of the duty to conduct a
reasonably competent and diligent visual inspection of a
previously unoccupied time-share interest offered for sale, and
to disclose to a prospective purchaser all facts materially
affecting the value or desirability of the property that an
investigation would reveal, when the transfer of the time-share
interest would require the seller to provide a public report.
Comments
The author states:
Under existing law, purchasers of timeshares must be provided
an extensive public report on the development. Existing law
also mandates that purchasers of timeshare exchange program[s]
be given detailed information regarding the program . . . In
this modern and increasingly paperless world, many consumers
would prefer not to get these sometimes bulky disclosures in
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paper form. AB 905 allows the disclosures to be made
electronically - at the discretion of the purchaser. It also
replaces language that was inadvertently left out of previous
timeshare legislation. In 2004, a rewrite of the timeshare
law (AB 2252 - Montanez) deleted the mandated timeshare report
from [Business and Professions Code] Section 11018.1 and
placed an expanded report requirement in [a] new section --
[Business and Professions Code] Section 11234. However, Civil
Code Section 2079.6 was never amended to reflect that change.
Related/Prior Legislation
AB 634 (Calderon, 2015) amends the Vacation Ownership and
Time-share Act of 2004 to prohibit a time-share owner's
association from publishing its list of owners or providing a
copy of the list to any time-share interest owner or to any
third party, or from using or selling the list for commercial
purposes, except to accomplish legitimate association business,
as defined. The bill is pending in the Senate Judiciary
Committee.
AB 2252 (Montanez, Chapter 697, Statutes of 2004) consolidated
and revised the body of time-share vacation property law,
streamlined the regulatory approval process of time-share plans,
and added new consumer protections and disclosures to create the
Vacation Ownership and Time-share Act of 2004.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified6/9/15)
American Resort Development Association (co-source)
Resort Owner's Coalition (co-source)
OPPOSITION: (Verified6/9/15)
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Page 8
None received
ASSEMBLY FLOOR: 77-0, 4/30/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,
Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, 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, Atkins
NO VOTE RECORDED: Campos, Chávez, Gomez
Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
6/24/15 17:20:54
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