BILL ANALYSIS
AB 864
Page 1
GOVERNOR'S VETO
AB 864 (Davis)
As Amended September 4, 2007
2/3 vote
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|ASSEMBLY: |43-34| (June 7, 2007) |SENATE: |23-17|(September 11, |
| | | | | |2007) |
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ASSEMBLY: 46-30 (September 12, 2007)
Original Committee Reference: H. & C. D.
SUMMARY : Requires a person or entity who acquires a property
that is uninhabitable or otherwise found to be in substandard
condition to provide the building code enforcement agency
(enforcement agency) with specified information.
The Senate amendments :
1)Exempt properties for which a notice of violation has been
properly recorded and noticed, existing law provisions that
require a transferor of real property to provide personal
information about the buyer and seller to the enforcement
agency within five days after the transfer, if a violation of
building standards has not yet been remedied.
2)Require any recording of a notice of violation after July 1,
2008 to include the following: "State law requires
disclosures to be made to the local enforcement agency upon
transfer of a substandard property. Local enforcement
agencies may impose additional obligations."
3)Add that a plan for correction shall be submitted to the
enforcement agency within 30 calendar days of the completion
of transfer. Requires delivery by personal service,
facsimile, electronic mail, or US mail.
4)Provide that the enforcement agency shall not publicly
disclose the plan for correction unless under court order.
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5)Remove the provisions declaring failure to comply a
misdemeanor, and instead establishes civil penalties ranging
from $2,500 to $25,000.
6)Exempts, for 60 days after acquiring possession, a lender,
other than a financial institution, that has a recorded deed
of trust on the real property securing a loan and acquires
possession through judicial or non-judicial foreclosure.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required, upon a sale or exchange of real property, a person
or entity who acquires such real property that has a notice of
substandard condition, notice of substandard building, or
uninhabitability to provide specified information to the
enforcement agency, including the following:
a) Filing with the enforcement agency a notarized document
containing:
i) The name, true mailing address, telephone, fax and
e-mail of all owners;
ii) The address of the subject property;
iii) Date of transfer;
iv) The plan (including timeline, costs, available
financial resources, and if applicable relocation of
tenants) for correction of substandard conditions; and,
v) Proof, if any, of liability insurance.
b) Provided the enforcement agency with personal
identification issued by the federal, California, another
state, local government, or another country; and,
c) Posting of information contained in #2) a) i-iii) above
at the subject property if 16 units or more and any portion
of the property is occupied within 15 days after the date
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of sale or transfer of the property.
2)Enumerated the persons to be identified if an entity is a
corporation, limited liability company, partnership, limited
partnership, trust, or real estate investment trust.
3)Required an owner who resides outside California, to identify
a natural person who resides in state and who manages the
property.
4)Allowed the enforcement agency to disclose to the tenants,
upon request, the name and address of the person or entity
that acquires the property.
5)Prohibited the enforcement agency from disclosing to a member
of the public the telephone number, fax number, e-mail address
or the document used to establish the owner's identity unless
ordered by a court.
6)Allowed local governments to adopt and enforce laws consistent
with this bill.
7)Established a misdemeanor for failure to comply with these
provisions or otherwise provide false information to an
enforcement agency.
8)Provided that a person or entity that does not comply with
this bill may not raise or collect rent or issue a three day
notice to pay or quit.
9)Exempted any real property owned by a governmental entity, or
real property acquired by a financial institution that has a
deed of trust recorded on the real property securing a loan.
10)Repealed a cross reference to existing law that expired in
2005.
FISCAL EFFECT : According to the Senate Appropriations
Committee, this bill would impose a reimbursable state-mandated
local program by imposing additional duties on local code
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enforcement agencies, such as the collection of additional data
on buyers of substandard properties. These costs would likely
be minor, however, since the bill would shift responsibility for
reporting buyers' contact information from the seller to the
buyer of the substandard property. Additional data collected
pursuant to this bill would assist local code enforcement
agencies in the performance of their function of ensuring
abatement of substandard conditions. Furthermore, to the extent
that civil actions brought against those that fail to comply
with the reporting requirements are successfully prosecuted,
this bill would result in potentially significant penalty
revenue gains.
COMMENTS : Vacant and run-down homes, apartments, and commercial
buildings can often pose on-going health and public safety
problems for neighborhoods. Existing law allows local building
officials to abate nuisances and building code violations after
giving a 30-day notice. After inspecting a property, the local
building official requires the property owner to repair or
demolish the building. If the property owner does not make
timely repairs, the local building official can make the repairs
or demolish the building and seek to recover costs from the
owner. As the affordable housing shortage continues it is
critical that housing stock not be lost when repairs could have
been made early on to prevent condemnation.
Under the State Housing Law, all residential dwellings are
subject to building standards as adopted by the California
Building Standards Commission in the California Building
Standards Code (Title 24 of the California Code of Regulations).
Building codes are generally enforced by local building
officials, often as local ordinances. When violations are
discovered or a nuisance conditions exists, a building official
sends the owner a letter notifying him or her of the deficiency.
Owners are then generally given at least 30 days to correct the
violation. If violations remain uncorrected after 30 days, code
officials may institute any appropriate action or proceeding to
correct building code violations or abate nuisances.
AB 1112 (Goldberg), Chapter 487, Statutes of 2001, establishes a
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similar real property registration requirement as provided under
AB 864 to apply as a pilot program in Los Angeles County. AB
1112 creates a residential rental property registry which
allowed local code enforcement to locate the owner of the
property in the event of an emergency, or code violation.
The rationale behind AB 1112 articulated the same concerns as
those expressed by the author of AB 864, which is that in some
cases it is difficult to locate the legal owner of property.
According to the author of AB 1112, "in efforts to hide true
legal ownership, such owners have been know to create limited
liability partnerships, out-of-state or offshore corporations,
family trusts and/or sham operations."
AB 1034 (Mullin), Chapter 474, Statutes of 2003, applies the
registration requirement statewide.
In transfer of ownership, new owners are given notice of a
condition and given an opportunity for correction. Code
enforcement and/or criminal prosecution are suspended during
this period.
According to the author, it is common place for unscrupulous
owners of substandard properties to transfer ownership to escape
responsibility for fixing or maintaining rental properties.
There is nothing in the law that requires a buyer to record
anything accepting the deed, so that even if the new "owner" is
located, he or she is easily able to disclaim ownership stating
that the grant deed was never accepted. Without the new buyer
acknowledging ownership and providing a plan for correction, the
repair of substandard properties may be indefinitely delayed or
never accomplished
Supporters argue that this bill is vital in order to determine
responsibility for compliance with code enforcement actions.
Too often, properties with building code violations are
"flipped" to other owners, often shells within shells, making it
difficult if not impossible to enforce code compliance.
This bill now requires recipients of real property to identify
themselves to the code enforcement agency and provide a plan for
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correction, if code violations exist. AB 864 allows the
enforcement agency to seek civil penalties between $2,500 and
$25,000 from transferees who fail to comply with these
provisions.
GOVERNOR'S VETO MESSAGE :
While I share the goals of this bill, the solution is
targeted at the wrong party in these real estate
transactions by placing the burden of compliance on
the buyer, not the seller. The bill, in essence,
makes the buyer responsible for the sins of the
previous owner.
In addition, the bill creates a compliance mechanism
that is virtually unworkable and violates the privacy
of perspective buyers. If enacted into law, this bill
would most likely stymie the goal of restoring the
habitability of these substandard dwellings by
suppressing the sale of these properties to new owners
who are willing to rehabilitate these buildings. The
bill also contains drafting errors that make any
attempt at compliance unfeasible.
I urge the Legislature to consider legislation next
year that more judiciously addresses the serious
problem of bringing substandard buildings into
compliance.
Analysis Prepared by : Hubert Bower / H. & C.D. / (916)
319-2085
FN: 0003684