BILL NUMBER: SB 187 CHAPTERED 09/27/99 CHAPTER 512 FILED WITH SECRETARY OF STATE SEPTEMBER 27, 1999 APPROVED BY GOVERNOR SEPTEMBER 27, 1999 PASSED THE ASSEMBLY SEPTEMBER 3, 1999 PASSED THE SENATE APRIL 19, 1999 AMENDED IN SENATE MARCH 18, 1999 INTRODUCED BY Senator Hughes JANUARY 14, 1999 An act to amend Section 7159.2 of the Business and Professions Code, and to amend Section 1804.1 of the Civil Code, relating to home improvement contracts. LEGISLATIVE COUNSEL'S DIGEST SB 187, Hughes. Home improvement contracts. Existing provisions of the Unruh Act prohibit a retail installment contract from containing specified provisions. This bill would prohibit a provision in a retail installment contract for a home improvement, as defined, under which the seller takes a security interest, other than a mechanics' lien, in the buyer' s principal residence where the buyer is 65 years of age or older. A violation of the prohibition would be a misdemeanor, thereby imposing a state-mandated local program. Existing law prohibits a home improvement goods or services contract of $5,000 or less from providing for a security interest in real property, except for a mechanic's lien or other interest that arises by operation of law, and provides that any lien in violation of that prohibition is void and unenforceable. Existing law also prohibits a person or entity making a loan secured by a mortgage on real property from paying a contractor the proceeds of a loan that provides funding for goods or services pursuant to a home improvement goods or services contract of more than $5,000, except by specified methods. This bill would provide that a violation of these provisions would make the person or entity liable for actual damages, that an intentional violation would make the person or entity liable for 3 times the contract price for the home improvement, and that the person or entity would be liable to a senior citizen or disabled person, as defined, for an additional award up to $5,000. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 7159.2 of the Business and Professions Code is amended to read: 7159.2. (a) No home improvement goods or services contract of a value of five thousand dollars ($5,000) or less shall provide for a security interest in real property, except for a mechanic's lien or other interest in property that arises by operation of law. Any lien in violation of this subdivision is void and unenforceable. (b) When the proceeds of a loan secured by a mortgage on real property are used to fund goods or services pursuant to a home improvement goods or services contract of more than five thousand dollars ($5,000), the person or entity making the loan shall only pay a contractor under the home improvement goods or services contract from the proceeds of the loan by either of the following methods: (1) By an instrument payable to the borrower or jointly to the borrower and the contractor. (2) At the election of the borrower, through a third-party escrow agent pursuant to the terms of a written agreement signed by the borrower, the person or entity making the loan, and the contractor prior to the disbursement. (c) Any person or entity who violates any provision of this section shall be liable for actual damages suffered by the borrower for damages that proximately result from the violation. (d) Any person or entity who intentionally or as a pattern or practice violates any provision of this section shall be additionally liable for three times the contract price for the home improvement. (e) Any person who is a senior citizen or disabled person, as defined in subdivisions (f) and (g) of Section 1761 of the Civil Code, as part of any action for a violation of this section, may seek and be awarded, in addition to the remedies provided in this section, up to five thousand dollars ($5,000) as provided in subdivision (b) of Section 1780 of the Civil Code. (f) The court shall award court costs and attorney's fees to a prevailing plaintiff in an action brought pursuant to this section. Reasonable attorney's fees may be awarded to a prevailing defendant upon a finding by the court that the plaintiff's prosecution of the action was not in good faith. SEC. 2. Section 1804.1 of the Civil Code is amended to read: 1804.1. No contract or obligation shall contain any provision by which: (a) The buyer agrees not to assert against a seller a claim or defense arising out of the sale or agrees not to assert against an assignee such a claim or defense other than as provided in Section 1804.2. (b) In the absence of the buyer's default in the performance of any of his or her obligations, the holder may accelerate the maturity of any part or all of the amount owing thereunder. (c) A power of attorney is given to confess judgment in this state, or an assignment of wages is given; provided, that nothing herein contained shall prohibit the giving of an assignment of wages contained in a separate instrument, executed pursuant to Section 300 of the Labor Code. (d) The seller or holder of the contract or other person acting on his or her behalf is given authority to enter upon the buyer's premises unlawfully or to commit any breach of the peace in the repossession of goods. (e) The buyer waives any right of action against the seller or holder of the contract or other person acting on his or her behalf, for any illegal act committed in the collection of payments under the contract or in the repossession of goods. (f) The buyer executes a power of attorney appointing the seller or holder of the contract, or other person acting on his or her behalf, as the buyer's agent in collection of payments under the contract or in the repossession of goods. (g) The buyer relieves the seller from liability for any legal remedies which the buyer may have against the seller under the contract or any separate instrument executed in connection therewith. (h) The buyer agrees to the payment of any charge by reason of the exercise of his or her right to rescind or void the contract. (i) The seller or holder of the contract is given the right to commence an action on a contract under the provisions of this chapter in a county other than the county in which the contract was in fact signed by the buyer, the county in which the buyer resides at the commencement of the action, the county in which the buyer resided at the time that the contract was entered into, or in the county in which the goods purchased pursuant to the contract have been so affixed to real property as to become a part of such real property. (j) The seller takes a security interest, other than a mechanics' lien, in the buyer's real property which is the buyer's primary residence where the buyer is a person who is 65 years of age or older and the contract is for a home improvement, as defined in Section 7151.2 of the Business and Professions Code. SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.