BILL ANALYSIS Ó
AB 2820
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Date of Hearing: April 19, 2016
Counsel: David Billingsley
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Reginald Byron Jones-Sawyer, Sr., Chair
AB
2820 (Chiu) - As Amended March 15, 2016
SUMMARY: Revises the definition of state of emergency and local
emergency for purposes of criminal price gouging. Specifies
that criminal price gouging includes rental of any housing with
an initial lease of up to one year for purposes of criminal
price gouging. Includes the transportation of persons and
towing services in the criminal price gouging during a declared
emergency. Specifically, this bill:
1)Revises the definition of a state of emergency to mean a
natural or manmade disaster or emergency caused by conditions
such as, but not limited to, air pollution, earthquake, fire,
flood, storm, epidemic, riot, drought, sudden and severe
energy shortage, plant or animal infestation or disease, for
which a state of emergency has been declared by the President
of the United States or the Governor of California.
2)Revises the definition a local emergency to mean a natural or
manmade disaster or emergency caused by conditions such as,
but not limited to, air pollution, earthquake, fire, flood,
storm, epidemic, riot, drought, sudden and severe energy
shortage, plant or animal infestation or disease, for which a
local emergency has been declared by an official, board, or
governing body vested with authority to make such a
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declaration in any city, county, or city and county in
California.
3)Applies the definitions above, throughout the criminal price
gouging statute.
4)Includes the transportation of persons and towing services in
the crime of price gouging during a declared emergency.
5)Specifies that criminal price gouging during a declared
emergency includes any rental housing with an initial lease
term of up to one year.
EXISTING LAW:
1)Finds that during emergencies and major disasters, including,
but not limited to, earthquakes, fires, floods, or civil
disturbances, some merchants have taken unfair advantage of
consumers by greatly increasing prices for essential consumer
goods and services. (Pen. Code, § 396, subd. (a).)
2)States that it is the intent of the Legislature in to protect
citizens from excessive and unjustified increases in the
prices charged during or shortly after a declared state of
emergency for goods and services that are vital and necessary
for the health, safety, and welfare of consumers. (Pen. Code,
§ 396, subd. (a).)
3)Provides that upon the declaration of a state of emergency
resulting from an earthquake, flood, fire, riot, storm, or
natural or manmade disaster declared by the President of the
United States or the Governor, or upon the declaration of a
local emergency resulting from an earthquake, flood, fire,
riot, storm, or natural or manmade disaster by the executive
officer of any county, city, or city and county, and for a
period of 30 days following that declaration, it is unlawful
for a person, contractor, business, or other entity to sell or
offer to sell any consumer food items or goods, goods or
services used for emergency cleanup, emergency supplies,
medical supplies, home heating oil, building materials,
housing, transportation, freight, and storage services, or
gasoline or other motor fuels for a price of more than 10
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percent above the price charged by that person for those goods
or services immediately prior to the proclamation of
emergency. (Pen. Code, § 396, subd. (b).)
4)States that upon the declaration of a state of emergency
resulting from an earthquake, flood, fire, riot, or storm
declared by the President of the United States or the
Governor, or upon the declaration of a local emergency
resulting from an earthquake, flood, fire, riot, or storm by
the executive officer of any county, city, or city and county,
and for a period of 180 days following that declaration, it is
unlawful for a contractor to sell or offer to sell any repair
or reconstruction services or any services used in emergency
cleanup for a price of more than 10 percent above the price
charged by that person for those services immediately prior to
the proclamation of emergency. (Pen. Code, § 396, subd. (c).)
5)Specifies that upon the proclamation of a state of emergency
resulting from an earthquake, flood, fire, riot, storm, or
other natural disaster declared by the President of the United
States or the Governor, or upon the declaration of a local
emergency resulting from an earthquake, flood, fire, riot,
storm, or other natural disaster by the executive officer of
any county, city, or city and county, and for a period of 30
days following that proclamation or declaration, it is
unlawful for an owner or operator of a hotel or motel to
increase the hotel or motel's regular rates, as advertised
immediately prior to the proclamation or declaration of
emergency, by more than 10 percent. (Pen. Code, § 396, subd.
(d).)
6)Specifies that, a greater price increase for the goods and
services, mentioned above, is not unlawful if that person can
prove that the increase in price was directly attributable to
additional costs imposed by specified circumstances. (Pen.
Code, § 396, subd. (a)-(c).)
7)Provides that time frame prohibiting specified price increases
may be extended for additional 30-day periods by a local
legislative body or the California Legislature, if deemed
necessary to protect the lives, property, or welfare of the
citizens. (Pen. Code, § 396, subd. (e).)
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8)States that the conduct described above is a misdemeanor
punishable by imprisonment in a county jail for a period not
exceeding one year, or by a fine of not more than ten thousand
dollars ($10,000), or by both that fine and imprisonment.
(Pen. Code, § 396 subd. (f).)
9)Specifies that the conduct described above shall constitute an
unlawful business practice and an act of unfair competition.
(Pen. Code, § 396 subd. (g).)
10)Defines "State of emergency" as "a natural or manmade
disaster or emergency resulting from an earthquake, flood,
fire, riot, or storm for which a state of emergency has been
declared by the President of the United States or the Governor
of California." (Pen. Code, § 396, subd. (g)(1).)
11)Defines "Local emergency" as "a natural or manmade disaster
or emergency resulting from an earthquake, flood, fire, riot,
or storm for which a local emergency has been declared by the
executive officer or governing body of any city or county in
California." (Pen. Code, § 396, subd. (g)(2).)
12)Defines "Housing" as "any rental housing leased on a
month-to-month term" for purposes of criminal price gouging.
(Pen. Code, § 396, subd. (g)(2).)
13)States that except as specified, in all leases of lands from
week to week, month to month, or other period less than a
month, the landlord may, upon giving notice in writing to the
tenant, in the appropriate manner, change the terms of the
lease to take effect, as to tenancies for less than one month,
upon the expiration of a period at least as long as the term
of the hiring itself, and, as to tenancies from month to
month, to take effect at the expiration of not less than 30
days, but if that change takes effect within a rental term,
the rent accruing from the first day of the term to the date
of that change shall be computed at the rental rate obtained
immediately prior to that change. (Civil Code, § 827, subd.
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(a).)
14)Specifies that the notice, when served upon the tenant, shall
in and of itself operate and be effectual to create and
establish, as a part of the lease, the terms, rents, and
conditions specified in the notice, if the tenant shall
continue to hold the premises after the notice takes effect.
15)States that all leases of a residential dwelling, or of any
interest therein, from week to week, month to month, or other
period less than a month, the landlord may increase the rent
provided in the lease or rental agreement, upon giving written
notice to the tenant, as follows, by either of the following
procedures:
a) By delivering a copy to the tenant personally; or (Civil
Code, § 827, subd. (b)(1)(A).)
b) By serving a copy by mail under the procedures as
specified. (Civil Code, § 827, subd. (b)(1)(B).)
16)States that for an increase in rent greater than 10%, the
minimum notice period required pursuant to that paragraph
shall be increased by an additional 30 days, but does not
apply to an increase in rent caused by a change in a tenant's
income or family composition as determined by a
recertification required by statute or regulation. (Civil
Code, § 827, subd. (b)(3).)
FISCAL EFFECT: Unknown
COMMENTS:
1)Author's Statement: According to the author, "Following the
devastating Aliso Canyon gas leak, unscrupulous individuals
took advantage of a tragic loophole in current law and raised
the prices of housing and services. AB 2820 updates current
law to ensure that whether the disaster prompting the
declaration of a state of emergency is natural or manmade,
familiar or totally unprecedented, consumers across the state
will be protected from excessive price increases. Disaster
victims should not be victimized twice."
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2)Aliso Canyon Disaster: In October of 2015, a large leak was
discovered at the Aliso Canyon natural gas storage facility.
The methane leak forced more than 4,600 households into
temporary housing and took 112 days to plug . Los Angeles Board
of Supervisors declared a state of emergency in December,
2015. Governor Brown declared a state of emergency in January
of 2016.
A news story by KPCC in January, 2016, discussed the extent to
which rental prices increased after the leak was discovered.
KPCC quoted, Allen Brodetsky, president of Boutique Realty in
Tarzana, who stated "Where rental prices would normally go
between $3,000 and $4,000, now landlords are asking six,
seven, eight, nine thousand dollars- double, triple the rent
of what it should be."
(http://www.scpr.org/news/2016/01/07/56700/fears-of-price-gougi
ng-as-porter-ranch-families-lo/)
Brodetsky also said that "The rental market around Porter Ranch
has gotten so hot, that some homesellers, including a neighbor
of his, have taken their houses off the market and turn them
into short-term rentals."
(http://www.scpr.org/news/2016/01/07/56700/fears-of-price-gougi
ng-as-porter-ranch-families-lo/)
To the extent that the rent increases described above, were for
month to month leases and the leases were entered into after
the declaration of a state of emergency, the conduct would be
prohibited under the current price gouging law.
However, there was concern that existing law was not providing
sufficient protection to individuals and families displaced by
the Aliso Canyon disaster when landlords were demanding a year
lease in conjunction with the high monthly rental prices.
Current law does not cover rental contracts entered during a
declared emergency, if the rental contracts were for any
period longer than month to month. This bill expands the
scope of the leases that would be covered under criminal price
gouging to include leases with an initial term of up to one
year.
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3)Revised Definition of State of Emergency and Local Emergency:
This bill clarifies the definition of State of Emergency and
Local Emergency. This bill applies the definitions
consistently within the existing statute prohibiting price
gouging during a declared emergency. The existing statute
prohibits raising prices above a specified amount, for a
variety of goods and services, once an emergency has been
declared. The existing statute has different definitions of
what constitutes a triggering emergency depending on the type
of goods or services being sold. For example, the prohibition
against increasing hotel or motel prices more than 10% does
not apply if the emergency is a result of a manmade disaster.
In contrast, the prohibition on price increases for goods such
as food, medical supplies, housing, or gasoline includes both
natural and manmade disasters. This bill provides a
consistent definition of emergency throughout the statute,
including both natural and manmade disasters.
4)Argument in Support: According to The Consumer Attorneys of
California, "AB 2820 will prevent prices for short-term
housing units and towing services from being raised more than
10% without justification when a state of emergency has been
declared. AB 2820 further provides that all consumer price
gouging protections in current law apply during a state of
emergency whether the disaster was natural or manmade.
"The need for this bill is highlighted by the aftermath of the
Aliso Canyon gas leak. Following the devastating leak,
unscrupulous individuals took advantage of a traffic loophole
in current law and raised the prices of short-term rentals.
Landlords in nearby Woodland Hills and Northridge jacked up
rents after the gas leak was discovered. Rental prices in the
area were typically between $3,000 and $4,000 per month,
during the gas leak, landlords were commonly asking for $6000
to $9000 per month - double or triple the amount of normal
rents. Current law protects those with month-to-month leases,
but does not apply if the initial lease is longer than 30
days. It also does not apply to hotel and motel operators if
the disaster is man-made rather than natural, leaving families
vulnerable to exploitation.
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"During some disasters residents have had no choice but to
abandon their vehicles as they fled to safety. Towing
companies have taken advantage of the crisis by charging
exorbitant rates. AB 2820 will specifically prohibit towing
service providers from raising rates more than 10% when a
state of emergency is declared."
5)Prior Legislation:
a) AB 457 (Nunez), Legislative Session of 2005-2006, would
have authorized the Governor to proclaim an abnormal market
disruption, as defined. AB 457 died in the Senate.
b) SB 1363 (Ducheny), Chapter 492, Statutes of 2004,
prohibits the owner or operator of a hotel or motel from
increasing its regular advertised rates by more than 10%
for 30 days following a proclamation or declaration of
emergency, except as specified.
REGISTERED SUPPORT / OPPOSITION:
Support
Consumer Attorneys of California
Opposition
None
Analysis Prepared
by: David Billingsley / PUB. S. / (916) 319-3744
AB 2820
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