BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1750|
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CONSENT
Bill No: AB 1750
Author: Dodd (D)
Amended: 4/18/16 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE: 7-0, 6/14/16
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
ASSEMBLY FLOOR: 76-0, 3/14/16 (Consent) - See last page for
vote
SUBJECT: Real property transactions: definitions
SOURCE: California Association of Realtors
DIGEST: This bill clarifies that a seller or broker is not
required to provide additional information concerning common
environmental hazards that can affect real property to a
transferee in connection with the transfer of real property,
including transactions for the creation of a leasehold exceeding
one year's duration, provided the seller or broker transmits to
the transferee a specified consumer information booklet
concerning such hazards.
ANALYSIS:
Existing law:
1)Requires a real property seller, or the seller's agent, to
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Page 2
disclose to buyers any material facts that would have a
significant and measurable effect on the value or desirability
of the property if the buyer does not know, and would not
reasonably discover, those facts. (Karoutas v. Homefed Bank
(1991) 232 Cal.App.3d 767; Reed v. King (1983) 145 Cal.App.3d
261.)
2)Requires a seller's real estate broker to conduct a reasonably
competent and diligent visual inspection of a property offered
for sale, and to disclose to potential buyers any facts
revealed that would materially affect the value or
desirability of the property. (Civ. Code Sec. 2079.)
3)Does not relieve a buyer or prospective buyer of the duty to
exercise reasonable care to protect himself or herself,
including those facts which are known to or within the
diligent attention and observation of the buyer or prospective
buyer. (Civ. Code Sec. 2079.5.)
4)States that if a specified consumer information booklet is
delivered to a transferee in connection with the transfer of
real property, a seller or broker is not required to provide
additional information concerning, and the information shall
be deemed to be adequate to inform the transferee regarding,
common environmental hazards, as described in the booklet,
that can affect real property. Existing law states that
nothing in this provision either increases or decreases the
duties, if any, of sellers or brokers, or alters the duty of a
seller or broker to disclose the existence of known
environmental hazards on or affecting the real property.
(Civ. Code Sec. 2079.7.)
5)Requires additional specified disclosures by listing and
selling agents to be provided to a buyer and seller of
residential real property, and defines the duties owed by
those agents to the buyer and seller. (Civ. Code Sec. 2079.12
et seq.)
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6)Defines real estate listing and selling agent, buyer, seller,
and specifies that "real property" means any estate in
property which constitutes or is improved with one to four
dwelling units, any commercial real property, any leasehold in
these types of property exceeding one year's duration, and
mobilehomes, when offered for sale or sold through an agent.
(Civ. Code Sec. 2079.13.)
This bill provides that the above definitions shall apply for
purposes of the safe harbor provision concerning delivery of a
specified consumer information booklet describing common
environmental hazards.
Background
Prior to 1984, existing law required a real estate broker to
disclose to a buyer those material defects of a property that
were known to the broker but unknown to and unobservable by the
buyer. (See e.g. Lingsch v. Savage (1963), 213 Cal.App.2d 729.)
In 1984, Easton v. Strassburger (1984), 152 Cal.App.3d 90,
clarified that the duties owed by a broker also included the
duty to disclose defects which the broker should have discovered
through reasonable diligence. The Easton court held that real
estate licensees owed certain additional duties of care to
property buyers, and after the Easton decision, there was
extensive discussion in the real estate industry as to how these
duties were to be interpreted. The Legislature responded to the
Easton decision with SB 453 (Robbins, Chapter 223, Statutes of
1985), which clarified certain duties of real estate brokers and
buyers in real property transactions. However, the law after SB
453 was still unclear as to real estate brokers' disclosure
duties to buyers. In Smith v. Rickard (1988) 205 Cal.App.3d
1354, 1360, the court, after examining statutory construction
and the Easton case, held that real property brokers had a duty
to inspect a property and to disclose to a buyer any material
defects affecting the value or desirability of the property.
In 1995, the Easton decision, and the disclosure duties owed by
real estate brokers, were further clarified and codified in SB
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467 (Leonard, Chapter 428, Statutes of 1995), which required
real estate listing and selling agents of residential property
to provide specified disclosures to buyers and sellers. Those
disclosures require the real estate listing and selling agents
to disclose, among other things, whether the agent represents
the buyer, the seller, or both the buyer and seller (known as
dual agency). Importantly, SB 467 specified that its provisions
applied not only to sales of real property, but also to the
creation of a leasehold exceeding one year's duration.
Prior to SB 467, the Legislature passed AB 983 (Bane, et. al.,
Chapter 969, Statutes of 1989), which created a safe harbor
provision concerning the disclosure of common environmental
hazards that can affect real property. SB 467 directed the
Department of Real Estate to develop a booklet to educate and
inform consumers on the following:
Common environmental hazards that are located on, and affect,
real property, including asbestos, radon gas, lead-based
paint, formaldehyde, fuel and chemical storage tanks, and
water and soil contamination;
The significance of common environmental hazards and what can
be done to mitigate these hazards; and
Sources that can provide more information on common
environmental hazards for the consumer.
SB 467 further provided that if this booklet were delivered to a
transferee in connection with the transfer of real property, a
seller or broker would not be required, nor have a duty, to
provide additional information concerning those common
environmental hazards described in the booklet. Unlike AB 983,
SB 467 did not explicitly state that its provisions applied to
property transfers in the form of leaseholds exceeding one
year's duration.
This bill extends the disclosure safe harbor created by AB 983
to real estate brokers who conduct transactions that create
leaseholds in excess of one year by applying to that safe harbor
the definitions enacted by SB 467.
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Comments
The author writes:
Existing law provides for the development of the Environmental
Hazards Booklet, which may voluntarily be provided to buyers
of single family one-to-four unit properties. While the law
does not relieve the seller or broker of the duty to disclose
the existence of known environmental hazards on or affecting
the real property, the law does provide that if a seller or
broker delivers the booklet to a buyer, the seller or broker
enjoys protections from liability for the disclosure of common
environmental hazards that are included in the booklet. The
presumption provides a powerful incentive to use the booklet.
Therefore, it has become a standard of practice for sellers
and agents to use the booklet to inform purchasers of
potential environmental hazards.
The distribution of the booklet by landlords has been
encouraged, partly, by the title assigned to the booklet by
the state: "California Environmental Protection Agency
Residential Environmental Hazards: A Guide for Homeowners,
Homebuyers, Landlords and Tenants." However, the existing law
does not specifically mention landlords and tenants . . . ,
even though many landlords already distribute the booklet.
This bill would specify that the definitions in [Civil Code
Section 2079.13] also apply to Section 2079.7. By clarifying
that the definitions provided for in Section 2079.13 apply to
Section 2079.7, this bill ensures that parties to a real
estate transaction are clear on their rights and
responsibilities with respect to the Environmental Hazards
Booklet. This bill does not alter existing definitions, but
it does make clear that the definitions provided in statute
are applied to Section 2079.7 as well. This clarity will
benefit consumers by providing more direction on roles and
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responsibilities and encouraging landlords to provide the
Environmental Hazards Booklet to renters.
Related/Prior Legislation
AB 685 (Irwin, 2016), among other things, clarifies that a
seller or broker is not required to provide additional
information concerning common environmental hazards that can
affect real property to a transferee in connection with the
transfer of real property, including transactions for the
creation of a leasehold exceeding one year's duration, provided
the seller or broker transmits to the transferee a specified
consumer information booklet concerning such hazards.
SB 467 (Leonard, Chapter 428, Statutes of 1995) See Background.
AB 983 (Bane, et. al., Chapter 969, Statutes of 1989) See
Background.
SB 453 (Robbins, Chapter 223, Statutes of 1985) See Background.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified6/14/16)
California Association of Realtors (source)
North Bay Association of Realtors
OPPOSITION: (Verified6/14/16)
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None received
ASSEMBLY FLOOR: 76-0, 3/14/16
AYES: Achadjian, Alejo, Travis Allen, Atkins, Baker, Bigelow,
Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos,
Chang, Chau, Chávez, Chu, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Hadley, Harper, Roger Hernández, Holden, Irwin,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Rendon
NO VOTE RECORDED: Chiu, Cooley, Jones
Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
6/17/16 15:03:40
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