BILL ANALYSIS
AB 985
Page 1
ASSEMBLY THIRD READING
AB 985 (De La Torre)
As Introduced February 27, 2009
Majority vote
JUDICIARY 10-0
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|Ayes:|Feuer, Tran, Brownley, | | |
| |Evans, Jones, Knight, | | |
| |Krekorian, Lieu, Monning, | | |
| |Nielsen | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires a title insurance company involved in the
transfer of a deed or other written instrument relating to title
in real property to strike any provision in the deed or other
documents that impose an unlawful and unenforceable covenant, as
specified. Specifically, this bill :
1)Requires a title insurance company involved in any transfer of
property that provides a copy of a deed or other written
document relating to title to real property, to strike from
the deed or other written documents any provision that
purports to forbid, restrict, or condition the right of any
person to sell, buy, lease, rent, use or occupy the property
on account of certain characteristics of that person,
including, but not limited to, race, color, religion, sex,
marital status, national origin, ancestry, familial status,
disability, source of income, or sexual orientation.
Specifies that the provisions must be stricken from the deed
or other written instruments before the property is
transferred.
2)Specifies that with respect to provisions relating to familial
status, nothing in this bill shall be construed to apply to
housing for older persons or senior citizens, as defined.
FISCAL EFFECT : None
COMMENTS : In the 1948 companion decisions of Shelley v. Kramer
334 U.S. 1 and Hurd v. Hodge 334 U.S. 24, the United States
Supreme Court held that state court enforcement of racially
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restrictive property covenants violated the due process and
equal protection clauses of the 14th Amendment of the U.S.
Constitution. While the Supreme Court ruling made such
covenants unenforceable, subsequent state legislation makes
racial discrimination in housing accommodations in any manner,
including the use of exclusionary covenants, unlawful. Although
originally targeting racial discrimination, these laws have
subsequently been amended to include discrimination on other
grounds, such as gender, religion, or sexual orientation, among
others. However, despite their unlawfulness and
unenforceability, these offensive exclusionary restrictions -
especially those based upon race - can still appear in existing
covenants, conditions and restrictions (CC&Rs) that are
transferred to the buyer, unless the restrictions have been
previously stricken, modified, or recorded over.
Existing law permits a buyer or homeowner to file a "Restrictive
Covenant Modification" (RCM) document with the county recorder
that allows the homeowner to effectively "record over" the
restrictive covenant, so that the language of the covenant is
not generated in any subsequent documents produced for transfer
to a prospective buyer. Also, title insurers and any others who
transfer documents that contain a restrictive covenant must
attach a cover sheet notifying the buyer that the documents may
contain restrictive covenants, that these covenants are not
enforceable, and that the buyer may file an RCM to remove the
covenant. Once an RCM has been filed, the county recorder must
have county counsel review the covenant to ensure that the
covenant is indeed invalid before striking. While the
invalidity of some restrictions may be obvious, it is necessary
to have some form of review in order to ensure that an owner
does not attempt to unilaterally remove a valid covenant or
restriction.
This bill would require a title insurer to strike a restrictive
covenant from any deed or related document upon transfer of any
real property. The striking of the covenant would have to occur
before sending the documents to the prospective buyer and before
the transfer of property could occur. According to the author,
the existing process of removal is too passive and unfairly puts
the onus on the property owner to take action. According to the
author, this bill "addresses one of the most disgraceful
discriminatory practices in California's history." Although
racially restrictive covenants may no longer be enforceable, the
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author argues, the deeply offensive language is still often
imbedded in documents sent to the prospective buyer. This
measure, the author believes, will put into place a system that
will systematically eliminate these offensive provisions from
the documents before they are received by buyers.
The author contends that the existing law, which permits
individual buyers and owners to record over the covenants, is
insufficient because the process "is underutilized and public
awareness on the issue is low. The passiveness of current law
allows restrictive covenants to remain in the title documents.
Ignoring the problem does not mean that the problem does not
exist. Therefore, this legislation will take a major step
toward resolving the issue." The bill is supported by several
civil rights groups.
This bill is opposed by the California Escrow Association and
the California Land Title Association. Opponents argue that
title insurers are not the appropriate party to have this
responsibility for a number of reasons, but most notably: 1)
that they only insure against defects of title, not against
CC&Rs, and at any rate they would have no reason to read through
historical documents that might contain unlawful CC&Rs; 2) that
they have no legal interest in the property, and therefore have
no clear legal authority to remove portions of official
documents; 3) that they generally do not have the legal
expertise to determine if the restriction is unlawful; 4) that
the county recorders, who have possession of the documents,
would be the more logical party to remove the covenants; and, 5)
that requiring the title insurers to remove the covenants at the
time of transfer would add significant costs to, and
significantly delay, property transfers. Ultimately, they
contend, this added time and cost would fall on the very buyers
that the bill seeks to protect.
This bill is virtually identical to the author's AB 2204 of last
session, as that bill was heard by the Assembly Judiciary
Committee. Largely in response to concerns raised by the
opponents, the author amended AB 2204 to require the county
recorders, rather than the title insurers, to develop a process
from removing the offensive language before transfer. Shifting
that responsibility to county recorders made AB 2204 fiscal, and
it was held in the Senate Appropriations Committee.
AB 985
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Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334
FN: 0000378