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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            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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