BILL ANALYSIS Ó
AB 1750
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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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