BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE VERSION: 02/21/95 S
Senator William A. Craven, Chairman SET: First B
HEARING: 05/03/95
FISCAL: Approp. 5
Senate Bill 537 - Hughes CONSULTANT: Tennyson 3
7
COUNTY RECORDER'S FEES
Background and Existing Law:
State law creates the office of county recorder and specifies the
recorder's duties and manner of recording, indexing and
reproducing legal documents.
State law also prescribes fees which may be charged by the county
recorder for various recording services, such as $4 for recording
the first page, and $3 for each additional page, of a document.
Pursuant to 1992 legislation (SB 1842 - Watson), Los Angeles
County has begun a Fraud Notification Program, which attempts to
monitor the forgery of a property owner's signature on real estate
loan documents, which are then recorded without the homeowner's
knowledge, by authorizing the L.A. County Recorder to mail actual
notice to the owner when a document is recorded. The recorder may
charge up to $10 for recording any such instrument.
As a result of the notification program, 3,876 cases, where the
property owner did not execute the deeds or loan documents, have
been discovered and referred to the L.A. County District
Attorney's Real Estate Fraud Division since 1994.
Proposed Law:
Senate Bill 537 provides a county recorder with the authority to
impose an additional $1 recording fee for real estate fraud
prevention and prosecution.
SB 537 specifically provides:
I. Additional $1 Recording Fee. Upon adoption of a resolution by a
county board of supervisors, in addition to existing fees
prescribed by law for recording documents, a $1 fee shall be paid
to record any document, unless the document is specifically
exempted by law from paying a recording fee.
II. Controller Apportions. Revenue from the fee shall be paid by
the County quarterly to the State Controller, who shall disburse
the monies, less administrative costs, to counties, which have
adopted the resolution, based on the number of documents recorded
for addresses within the county.
SB 537 - 02/21/95 Page 3
III. 60/40 Split. After incidental expenses, monies allocated by
the Controller shall be distributed, 60% to the district attorney
and 40% to local law enforcement agencies, for deterring,
investigating, and prosecuting real estate fraud crimes.
IV. Department of Real Estate. Unexpended funds, not exceeding
25% of the total funding from the previous fiscal year, may be
utilized by local agencies which have undertaken fraud
investigations or prosecutions continued in a subsequent program
year. But monies not otherwise spent locally for the purpose of
deterring, investigating and prosecuting real estate fraud within
the following fiscal year, shall be returned to the Controller to
be reallocated to other counties or the state Department of Real
Estate which have the appropriate real estate fraud programs.
V. No Offsetting Purpose. No funds dedicated to the purposes
specified in SB 537 shall be used to offset a reduction in any
other source of funds.
Comments:
1. Follow-through. SB 537 provides a funding mechanism for
counties to investigate and prosecute the growing crime of real
estate fraud, including home-equity fraud. Los Angeles County's
new notification program has started the ball rolling by
identifying more than 3,800 potential cases of lender or loan
fraud involving documents affecting title to real property. For
L.A. County District Attorney, involved in combating such fraud,
the funding provided by this measure will help to assure that
cases brought to light by the notification process are followed up
by adequate investigation and prosecution.
2. Costs vs. benefits. Unless specifically exempt by law, SB 537
would impose the $1 fee on all documents recorded by the county
recorder. In Los Angeles County, there are an estimated 2 million
documents recorded each year, 25% of which are deed instruments.
But the bill would impose the fee, not just on the recording of
deed instruments which may give rise to real estate loan fraud,
but maps, judgment liens, and every other non-exempt document
recorded. Do the costs outweigh the benefits? The committee may
wish to consider narrowing the fee to apply to deed instruments or
documents affecting title to real property, which relate to the
potential fraud in question.
SB 537 - 02/21/95 Page 4
3. Built-in bureaucracy. SB 537 would provide that the county
recorder turn over the revenue from the $1 fee to the State
Controller, who, minus an administrative fee, allocates the money
back to the counties. Why should the Controller administer the
money, when the counties could do it themselves more quickly and
without the Controller taking a share for administrative costs?
4. What law enforcement agencies? SB 537 provides that 40% of the
money will go to local law enforcement agencies but does not
distinguish between county and city law enforcement. Is the
SB 537 - 02/21/95 Page 5
controller-tax collector or county officer in charge of disbursing
the SB 537 money supposed to evaluate the merits of the real
estate fraud programs of various city police departments within
the county, as well as the county sheriff's program, in
determining which ones get the money? Should the disbursing
officer have some guidelines or should the money more simply be
disbursed only to county law enforcement?
5. Revisited. Real estate loan fraud is also the subject of SB
963 (Watson), before the committee on May 3rd, which lifts a
sunset clause on the L.A. County recorder's authority to levy a
$10 fee on deed recordings to fund a fraud notification program.
Support and Opposition: (04/27/95)
Support: California District Attorneys Association, Los Angeles
County District Attorney's Office.
Opposition: California Association of Realtors, California
Association of Collectors, Ventura County.