BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2820| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2820 Author: Chiu (D), et al. Amended: 8/19/16 in Senate Vote: 21 SENATE PUBLIC SAFETY COMMITTEE: 6-0, 6/14/16 AYES: Hancock, Anderson, Glazer, Leno, Liu, Monning NO VOTE RECORDED: Stone SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 68-10, 5/9/16 - See last page for vote SUBJECT: Crimes: price gouging: states of emergency SOURCE: Author DIGEST: This bill revises the definition of state of emergency and local emergency for purposes of criminal price gouging, specifying that criminal price gouging during a declared emergency includes the rental of any housing with an initial lease of up to one year and also the transportation of persons and towing services. Senate Floor Amendments of 8/19/16 (1) specify further which events will constitute an emergency or major disaster; (2) remove "air pollution" and "sudden and severe energy shortages" from the type of disasters in which this bill applies; (3) and clarify that this bill can apply in local emergencies. Senate Floor Amendments of 8/1/16 (1) add Assembly Member Wilk as a principal coauthor; and (2) add technical, non-substantive AB 2820 Page 2 amendments. ANALYSIS: 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. (Penal Code § 396, subd. (a).) 2) States that it is the intent of the Legislature 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. (Penal 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 percent above the price charged by that person for those goods or services immediately prior to the proclamation of emergency. (Penal Code § 396, subd. (b).) 4) States that upon the declaration of a state of emergency resulting from an earthquake, flood, fire, riot, or storm AB 2820 Page 3 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. (Penal 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. (Penal 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. (Penal 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. (Penal Code § 396, subd. (e).) 8) States that the conduct described above is a misdemeanor punishable by imprisonment in a county jail for a period not AB 2820 Page 4 exceeding one year, or by a fine of not more than ten thousand dollars ($10,000), or by both that fine and imprisonment. (Penal Code § 396 subd. (f).) 9) Specifies that the conduct described above shall constitute an unlawful business practice and an act of unfair competition. (Penal 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." (Penal 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." (Penal 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. (Penal 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. (a).) AB 2820 Page 5 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).) 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. AB 2820 Page 6 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 declaration in any city, county, or city and county in California. 3) Applies the definitions above, throughout the criminal price gouging statute and also includes the transportation of persons and towing services in the crime of price gouging during a declared emergency. Additionally, this bill specifies that criminal price gouging during a declared emergency includes any rental housing with an initial lease term of up to one year. Background 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. [http://thinkprogress.org/climate/ 2016/02/12/3749190/aliso-canyon-methane-leak-stopped/] The Los Angeles Board of Supervisors declared a state of emergency in December of 2015. Governor Brown declared a state of emergency in January of 2016. A news story by KPCC in January of 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-gouging -as-porter-ranch-families-lo/] Brodetsky also said that "The rental market around Porter Ranch has gotten so hot, that some home sellers, including a neighbor of his, have taken their AB 2820 Page 7 houses off the market and turn them into short-term rentals." [ibid.] 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. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes SUPPORT: (Verified8/19/16) Office of Attorney General Kamala D. Harris Consumer Attorneys of California OPPOSITION: (Verified8/19/16) California Public Defenders Association ASSEMBLY FLOOR: 68-10, 5/9/16 AYES: Achadjian, Alejo, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Roger Hernández, Holden, Irwin, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, McCarty, Medina, Melendez, Mullin, Nazarian, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, AB 2820 Page 8 Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Weber, Wilk, Williams, Wood, Rendon NOES: Travis Allen, Chávez, Gatto, Hadley, Harper, Jones, Mayes, Obernolte, Wagner, Waldron NO VOTE RECORDED: Beth Gaines, Eduardo Garcia Prepared by:Molly Lao / PUB. S. / 8/22/16 22:43:26 **** END ****