BILL ANALYSIS                                                                                                                                                                                                    



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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1750 (Dodd)


          As Amended  April 18, 2016


          Majority vote


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          |ASSEMBLY:  | 76-0 | (March 14,    |SENATE: | 37-0 |(June 30, 2016)  |
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          Original Committee Reference:  JUD.


          SUMMARY:  Specifies that certain definitions apply to related  
          sections of an article setting forth the duties that a seller,  
          agent, or real estate broker owes to the prospective buyer of a  
          real property interest.   


          The Senate amendments make a technical and clarifying change. 


          EXISTING LAW:  


          1)Imposes on real estate brokers and sellers of real property a  
            duty to make certain disclosures to the purchasers of real  
            property about any conditions that may affect the value or  
            desirability of the property.  










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          2)Defines various terms for the purposes of some, but not all,  
            provisions relating to the duties of disclosure in a real  
            estate transaction.  Specifies, for these purposes, that a  
            seller includes both a vendor and a lessor.  


          FISCAL EFFECT:  None 


          COMMENTS:  Under existing law a seller of real property, or a  
          listing agent or broker acting on the seller's behalf, owes  
          certain duties to a prospective purchaser of that property.  For  
          example, a real estate agent has a duty to conduct a reasonably  
          diligent inspection of property offered for sale and to disclose  
          to the prospective buyer any conditions that might materially  
          affect the value or desirability of the property.  In addition  
          to this general statutory duty, under the common law of torts a  
          seller or broker has a duty to disclose to a buyer any material  
          defects that are known to the seller or broker but unknown to,  
          and unobservable by, the buyer.  (Cooper v. Jevne (1976) 56 Cal.  
          App. 860, 866.)  A seller or broker who fails to disclose a  
          material defect may be liable for negligence if the defect  
          should have been known through a reasonably diligent inspection,  
          and a seller or broker may be liable for fraud or  
          misrepresentation if he or she intentionally conceals or  
          misrepresents a defect.  (Warner Construction Co. v. City of Los  
          Angeles (1970) 2 Cal 3d 285, 293-294.)  In addition to these  
          general duties, the Legislature has added other specific notice  
          and disclosure requirements, from providing general information  
          about seismic hazards to requiring residential leases and sales  
          contracts to contain information about the Sex Offender  
          Identification Line.   


          Article 2 (commencing with Section 2079) of Civil Code Part IV  
          Title 6 Chapter 3 sets forth both general and specific duties of  
          disclosure in commercial and residential real estate  
          transactions.  In 1995, the Legislature added new sections to  
          Article 2 in order to clarify the respective duties of sellers,  
          brokers, and real estate agents (in response to a court case  
          that had allegedly created confusion about those duties) and  
          added several sections relating to the appropriate forms that  








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          the seller or agent should use in making disclosures.  As part  
          of this revision, the bill added a definitional section but only  
          applied the definitions to the new sections added by the bill  
          rather than to the Article as a whole.  The new sections defined  
          several terms used both in the then-existing law and in the  
          newly added sections, including such basics terms such "agent,"  
          "buyer," "listing agent," and "seller," among others.  Prior to  
          the 1995 changes, Article 2 did not contain any definitions,  
          apparently assuming that such terms were so well understood in  
          this context that there was no need to define them.  According  
          to the sponsor, however, because the new definitional section  
          was placed in the middle of Article 2 and only applied to the  
          sections added by the 1995 legislation, it left some doubt as to  
          whether those new definitions also applied to the other,  
          then-existing sections of Article 2.  Was it the intent of the  
          Legislature that the meanings of such basic terms as "seller"  
          and "buyer" and "agent" would have different meanings in the  
          first half of Article 2 than they had in the second half?  Given  
          that all of the sections in Article 2 deal with required  
          disclosures of information about defects in the real property,  
          there is no apparent reason why standard legal terms should have  
          different meanings in the sections added after 1995 than those  
          in existence before 1995.


          According to the sponsor, one area of confusion that has arisen  
          involves the definition of "seller," which was defined in the  
          1995 legislation to include a "lessor," or landlord.  Though in  
          popular parlance we typically distinguish between "selling" and  
          "leasing" real estate, from a strictly legal perspective both  
          selling and leasing involve a transfer of a real property  
          interest.  Indeed, several sections of Article 2 already  
          expressly or implicitly apply to both sales and leases of real  
          property.  For example, Civil Code Section 2079.1 states that  
          "provisions of this article relating to sales transactions of  
          residential real property comprising one to four dwelling units  
          apply with equal force to leases of that property that include  
          an option to purchase, ground leases of land on which one to  
          four units have been constructed, or real property sales  
          contracts."  Section 2079.10a relating to notices about the Sex  
          Offender Identification Line applies to both lease agreements  
          and sales contracts for residential real property.  Finally,  








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          several sections relating to information booklets that meet some  
          of the "sellers" disclosure requirements clearly apply to both  
          sellers and lessors of residential properties.  For example,  
          Section 2079.7 provides that a booklet created by the Department  
          of Real Estate (DRE) shall be deemed adequate to meet the  
          "seller's" duty to inform the "transferee" (it does not use the  
          word "buyer," significantly) regarding common environmental  
          hazards.  That DRE booklet is entitled, "Residential  
          Environmental Hazards:  A Guide for Homeowners, Homebuyers,  
          Landlords and Tenants."  [Emphasis added.]  According to the  
          sponsor, the "seller" referenced in this section was always  
          presumed to include any transferor of a real property interest,  
          whether the real property interest transferred is a fee simple  
          estate or a tenancy.  In order to avoid any ambiguity about the  
          Legislature's intent, it is important to clarify that the  
          meaning of "seller," defined in the 1995 legislation to include  
          a "lessor," or landlord, applies to the entirety of Article 2.    



          Applying the definitional section to the entire article does not  
          create, lessen, or expand any existing duties.  The sections  
          affected by the new definitions deal, as noted above, with  
          prescribed forms or booklets that are deemed to provide adequate  
          notice, but only where a duty to provide notice already exists.   
          Indeed, the sections in which terms "seller" or "broker" or  
          other defined terms are used expressly state that nothing in the  
          section shall be construed to increase, decrease, or otherwise  
          alter "duties, if any, of sellers or brokers."  So if a "lessor"  
          did not already have a duty, applying the expanded definition of  
          "seller" to the prior sections would not create a duty, nor  
          would it lessen or alter any existing duties of lessors. 


          Analysis Prepared by:                                             
                          Thomas Clark / JUD. / (916) 319-2334  FN:  
          0003471













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