BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 985
Assemblymember De La Torre
As Amended June 9, 2009
Hearing Date: June 16, 2009
Government Code
BCP:jd
SUBJECT
Real Property: Discriminatory Provisions
DESCRIPTION
Under existing law, any provision in any deed of real property
in California that purports to restrict the right of any persons
to sell, lease, rent, use, or occupy the property to persons
having any characteristic protected by the Fair Employment and
Housing Act is void. A property owner can record a Restrictive
Covenant Modification (RCM) form in order to remove any void or
unenforceable covenant, condition, or restriction on their
property.
This bill would additionally allow a title insurance company,
escrow company, real estate broker, real estate agent, or other
person to record a RCM, and require the county recorder to
notify the owner of the property of the request.
This bill would make other changes to facilitate the removal of
unlawfully restrictive covenants, including: (1) requiring RCM
forms to be provided with instructions; (2) allowing for batch
processing or submission on behalf of several homes or lots; and
(3) requiring county counsel to make a determination about the
lawfulness of a covenant within a reasonable amount of time.
This bill would require county recorders to create a dual
records system made up of "official records" which contain the
unlawful restriction but are exempt from disclosure under the
Public Records Act (except pursuant to a subpoena or court
order) and "public records" which are an exact copy of the
official record, but with the unlawful restriction redacted.
(more)
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The bill would allow a recorder, if approved by its county board
of supervisors, to charge up to __ dollars for recording a
document to pay for the system.
BACKGROUND
Racially restrictive covenants were declared unconstitutional by
the Supreme Court in 1948, and restrictive covenants that
discriminate against other protected groups are also unlawful
under state and federal law. (See Hurd v. Hodge (1948) 334 U.S.
24; Gov. Code Sec. 12955.) Although such restrictive covenants
are clearly unlawful and unenforceable, some of the documents
which contain the offensive language remain simply because no
action has been taken to delete the language.
The issue of removing unlawfully restrictive covenants has been
addressed by the Legislature in different ways over the past 10
years. First, in 1999, a news report revealed that a San
Francisco resident had found a racially restrictive covenant in
the declaration that governed his home and other homes in his
subdivision. SB 1148 (Burton, Chapter 589, Statutes of 1999)
responded by establishing that a homeowner could ask a county
recorder to remove a "blatant racial restrictive covenant" from
any recorded document related to a property. After SB 1148's
enactment, county recorders contended that it was inappropriate
for them to make the legal determination whether restrictive
covenants were lawful. AB 1493 (Nakano, Chapter 291, Statutes
of 2000), therefore amended the law to require a person to apply
for a determination from the Department of Fair Employment and
Housing (DFEH) whether a covenant was unlawful before recording
a modification to delete that covenant. The process was
modified again by AB 1926 (Horton, Chapter 803, Statutes of
2002), to make the process "easier" on homeowners by permitting
them to ask the county recorder to record a modification
document, without first obtaining a DFEH determination whether
the covenant was unlawful. Recorders were given discretion to
either record the modification or to refer the applicant to the
DFEH.
To further facilitate the modification of those covenants, AB
394 (Niello, Chapter 297, Statutes of 2005), removed DFEH from
the process and, instead, permitted any owner who believed that
there was an unlawful covenant attached to his or her property
to record a "Restrictive Covenant Modification" (RCM) to which
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the owner must attach a copy of the original document with the
unlawful language stricken. Prior to recording the modification
document, the county recorder must submit the RCM to the county
counsel to determine whether the original document contains an
unlawful restriction. The county recorder must refuse to record
a modification document if the county counsel finds that the
original document does not contain an unlawful restriction.
(Gov. Code Sec. 12956.2.)
As a further step to facilitate the removal of unlawful
provisions, this bill would allow third parties to file a RCM
with respect to a particular property, make other changes to
facilitate the recording of a RCM, and provide the framework
that would allow county recorders to establish an unlawfully
restrictive covenant redaction program that creates a dual
system of "public records" and "official records."
This bill is double-referred to the Senate Committee on Banking,
Finance and Insurance.
CHANGES TO EXISTING LAW
1. Existing law , the Fair Employment and Housing Act (FEHA),
makes it unlawful to discriminate or harass any person with
respect to housing because of race, color, religion, sex,
sexual orientation, marital status, national origin, ancestry,
familial status, source of income, or disability of that
person. (Gov. Code Sec. 12955 et seq.)
Existing law provides that any provision in any deed of real
property in California that purports to restrict the right of
any persons to sell, lease, rent, use, or occupy the property
to persons having any characteristic protected by FEHA is
void. Existing law provides that with respect to familial
status, the prohibition shall not be construed to apply to
housing for older persons, as specified. (Civ. Code Sec.
782.)
Existing law further provides that any deed or other written
instrument that relates to title to real property, or any
written covenant, condition, or restriction annexed or made a
part of, by reference or otherwise, any deed or instrument,
that contains any provision that purports to forbid, restrict,
or condition the right of any person or persons to sell, buy,
lease, rent, use, or occupy the property on account of any of
the characteristics protected by FEHA, shall be deemed to be
revised to omit that provision. (Civ. Code Sec. 782.5.)
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Existing law permits a person with an ownership interest in a
property to record a "Restrictive Covenant Modification" (RCM)
form in order to remove any void or unenforceable covenant,
condition, or restriction, as specified, and permits the
county recorder to waive any fees for filing the RCM.
Existing law requires the county recorder to submit the
modification document and original document to the county
counsel and requires the county recorder to refuse to record
the modification document if the county counsel finds that the
original document does not contain an unlawful restriction, as
specified. (Gov. Code Sec. 12956.2.)
This bill would additionally allow a title insurance company,
escrow company, real estate broker, real estate agent, or
other person to record a RCM. If one of those third parties
requests the recordation of a RCM, the county recorder must
notify each person who holds an ownership interest of record
in the property of that request and the action taken. The
requestor shall also be notified of that request; however, the
notice shall not include the name of any owner of record or
any confidential information regarding the property. That
notice may be sent on a postcard mailed by first-class mail.
This bill would require the county counsel to make a
determination and return the documents within a reasonable
amount of time, not to exceed three months, unless
extraordinary circumstances apply. This bill would also
permit the county counsel to compile a list of phrases
identified as unlawfully restrictive language for purposes of
expediting their determination.
2. Existing law requires the county recorder to make the RCM
forms available to the public. (Gov. Code Sec. 12956.2.)
This bill would require those forms to include instructions
for completion and shall permit submissions on behalf of
several homes or in lots for processing in batches.
3. Existing law requires a notice to be attached to copies of
deeds and other documents, which states:
If this document contains any restriction based on
race, color, religion, sex, sexual orientation,
familial status, marital status, disability, national
origin, source of income as defined in subdivision (p)
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of Section 12955, or ancestry, that restriction
violates state and federal fair housing laws and is
void, and may be removed pursuant to Section 12956.2
of the Government Code. Lawful restrictions under
state and federal law on the age of occupants in
senior housing or housing for older persons shall not
be construed as restrictions based on familial status.
(Gov. Code Sec. 12956.1(b)(1).)
This bill would also require a Restrictive Covenant
Modification form, with instructions, to be provided in
addition to the above notice.
4. Existing law requires the county recorder of each county to
establish a social security number truncation program in order
to create a public record version of each official record.
The public record copy consists of the original record, in
electronic format, with the social security numbers truncated.
(Gov. Code Sec. 27300 et seq.)
Existing law also limits the ability of an individual to
request, inspect, or copy the official record when a public
record version exists, and requires the county recorder to
petition the board of supervisors for authority to levy a
specified fee. (Gov. Code Secs. 27303, 27304.)
This bill would enact a similar program for the redaction of
unlawfully restrictive covenants. Specifically, this bill
would:
Require the county recorder of each county to create a
public record version of each official record for which a
RCM is recorded on or after January 1, 2010. The public
record shall be in electronic format and an exact copy of
the official record, except that all unlawfully restrictive
covenants shall be redacted.
State that nothing shall be construed to restrict,
delay, or modify access to any official record, or modify
any existing agreements regarding access to any official
record, prior to the creation and availability of a public
record version of that official record.
Provide that a county recorder is not required to create
a public record version of an official record if the fee
authorized by this bill is determined by the recorder to be
insufficient to meet the cost of creating the public record
version.
State that if a public record version of an official
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record exists, both of the following shall apply: (1) upon
a request for inspection, copying, or any other public
disclosure of an official record that is not exempt from
disclosure, a county recorder shall only make available the
public record version of that record; and (2) a county
recorder shall publicly disclose an official record only in
response to a subpoena or order of a court of competent
jurisdiction.
Require the county recorder of each county, by June 1,
2010, to petition the board of supervisors in that county
for authority to levy the fee authorized by this bill.
This bill would further provide that, notwithstanding any
other provision of law, a county recorder is authorized to
take all the actions required above.
5. Existing law establishes the fees that a county recorder
may charge for the recording and indexing of documents
required or permitted by law to be recorded. (Gov. Code Sec.
27361.)
This bill would authorize a county recorder to charge a fee of
__ dollars for recording the first page of every instrument,
paper, or notice required or permitted by law to be recorded,
as authorized by each county's board of supervisors. Those
fees shall be used only for purposes of implementing the
unlawfully restrictive covenant redaction program described
above.
This bill would provide that if a county secures a revenue
anticipation loan, or other outside source of funding for the
implementation of the redaction program, the county is
authorized to charge the fee for a period not to exceed the
term of repayment of the funding. This bill would
additionally require a board of supervisors that authorizes
the above fee to also require the county auditor to conduct
two reviews of the funds generated by the fee, as specified.
COMMENT
1. Stated need for the bill
According to the author:
Assembly Bill 985 addresses one of the most disgraceful
discriminatory practices in California's history.
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Previously, homeowners were allowed to insert discriminatory
language into deeds and covenants prohibiting the sale of
their home to members of specific ethnic groups, religions,
or characteristics. Although these once lawful restrictive
covenants are no longer enforced, this offensive language
excludes groups from owning property by sometimes using
derogatory terms for a particular race and/or ethnicity.
As a result, staff notes that the provisions of this bill are
intended to expedite the removal of unlawful discriminatory
language from recorded documents relating to title.
2. Allowing third parties to record a RCM
As discussed in the Background, AB 394 (Niello, 2005) set up a
process by which the legal owner of a property who believes that
they are subject to a restrictive covenant that unlawfully
discriminates because of race, color, religion, sex, sexual
orientation, familial status, marital status, disability,
national origin, source of income, or ancestry, may record a
document entitled "Restrictive Covenant Modification." (Gov.
Code Secs. 12955, 12956.2.) That document must include a copy
of the original document containing the unlawful language with
that language stricken. The county recorder must then submit
the modification document and the original document to the
county counsel for a determination of whether the original
document contains an unlawful restriction. The county counsel
must then return the documents, and inform the recorder of its
determination. The county recorder must refuse to record the
modification document if the county counsel finds that the
original document does not contain an unlawful restriction.
To facilitate the removal of unlawfully restrictive covenants,
this bill would additionally allow a title insurance company,
escrow company, real estate broker or agent, or other person to
record a Restrictive Covenant Modification. Although that
expansion would allow third parties to record a RCM on
properties for which they have no ownership interest, the RCM
must be approved by county counsel, and, as unlawfully
restrictive covenants are unenforceable, the striking of those
covenants would have no substantive effect on title. It should
also be noted that a recorded RCM relates back to the original
document that contained the unlawful restriction, thus, the
subsequent recording does not affect the chain of title for the
property at issue. (See Gov. Code. Sec. 12956.2 (d),(e).)
This bill would also require the county recorder to notify each
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person who holds an ownership interest of record in the property
of the request by the third party and the action taken. That
notification would ensure that the legal owners of the property
are aware of any action taken to remove unlawfully restrictive
covenants from their chain of title. Given that county
recorders have traditionally been required to perform tasks that
are relatively ministerial in nature, the author should work
with the county recorders to ensure that the recorders are able
to comply with the requirements of this bill without having to
make a legal determination as to the owner of a property.
3. Additional provisions to facilitate removal of unlawfully
restrictive covenants
This bill would additionally: (1) require a RCM form, with
instructions, to be provided with copies of documents; (2)
require county counsel to make its determination within a
reasonable period of time, not to exceed three months; (3) allow
counsel to compile a list of phrases identified as unlawfully
restrictive language; and (4) require RCM forms to include
instructions for completion and to permit submissions on behalf
of several homes or in lots for processing in batches.
Those modifications seek to address various issues that may
currently impede the recording of RCM forms by property owners
and interested parties. Specifically, those changes would place
RCM forms, and their instructions, in the hands of property
owners who receive documents relating to title, ensure that
county counsel is relatively prompt in their legal
determination, and facilitate the removal of unlawful
restrictive language when the same language appears on every
home within a specific subdivision.
While the bill does allow county counsel to compile a list of
common unlawful phrases, that list is only for the purpose of
expediting the counsel's determination and would not remove the
requirement that the document must be submitted to counsel.
That submission is important because the determination about
whether a phrase is legal or illegal is one that must be made by
an attorney licensed to practice law in the state of California.
4. Creation of a public record and official record of
documents
In 2007, AB 1168 (Jones, Chapter 627, Statues of 2007) required
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the county recorder of each county to establish a social
security number truncation program that used a dual records
system made up of "official records" which contain social
security numbers but are exempt from disclosure under the Public
Records Act (except pursuant to a subpoena or court order) and
"public records" which are an exact copy of the official record,
but with the social security numbers truncated.
This bill would establish a similar dual records system for
records containing unlawfully restrictive covenants for which an
interested party has filed a RCM.
a. Public record version
Specifically, this bill would require the county recorder to
create a public record version of each official record for
which a RCM is recorded. (RCM's are not recorded unless
county counsel finds the document contains an unlawful
restriction.) The public record version would be in an
electronic format and must be an exact copy of the official
record except that any unlawfully restrictive covenant
contained in the official record must be redacted.
Since both AB 1168 and the present language of the bill
require the public record version to be an "exact copy" of the
official record except that the public record must either
truncate the social security number or redact an unlawfully
restrictive covenant, the author should continue to work with
the county recorders to ensure that that the language provides
them with sufficient authority in situations where an official
record contains both a social security number and an unlawful
restriction. Given that AB 1168 only required county
recorders to examine records back to January 1, 1980, and that
most restrictive covenants were recorded prior to 1960, an
actual overlap between the two provisions appears unlikely.
Analogous to AB 1168, this bill would provide that a county
recorder is not required to create a public record version of
an official record if the authorized fee, discussed in Comment
4(c), is insufficient to meet the cost of creating the public
record version.
b. Restricting access to the official record
In cases where a public record version of an official record
exists, this bill would provide that upon a request for
inspection, copying, or other public disclosure, the recorder
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shall only make the public record version available. The
official record may only be disclosed in response to a
subpoena or court order.
While those restrictions were a requisite part of AB 1168
because they prevented a party from circumventing the social
security number truncation requirements by requesting the
original unaltered document, it is unclear whether the same
restrictions should be imposed with regards to records
containing an unlawful covenant. For example, those
restrictions could inhibit academic research into California's
discriminatory past - any interested researchers would be
required to seek a subpoena or court order to complete their
research. The author should consider whether the restrictions
should contain certain exceptions, such as academic research,
to ensure that the information is available for historical
reasons. Any exception should be crafted to prevent the
disclosure of any non-truncated social security number that
may be contained in the official record.
SHOULD THE BILL ALLOW DISCLOSURE OF AN ORIGINAL RECORD FOR
PURPOSES OF ACADEMIC RESEARCH WITHOUT THE NECESSITY OF
OBTAINING A COURT ORDER OR SUBPOENA?
It should also be noted that under the California Public
Records Act, state and local agencies must make public records
available for inspection unless they are expressly exempt from
disclosure. Section 6 of the bill contains Legislative
findings that the above provision would impose a limitation on
the public's right of access and includes the following
finding to demonstrate the interest protected by that
limitation and the need for protecting that interest:
In order to protect against the risk of discrimination
when government documents maintained by county recorders
contain unlawfully restrictive covenants, it is necessary
to enact legislation that minimizes the existence of
unlawfully restrictive covenants in those government
documents.
c. Ability to charge a fee that is yet to be determined
This bill would allow a county recorder to charge a fee of __
dollars for recording the first page of every document
required or permitted by law to be recorded. That fee must be
authorized by the county board of supervisors, the county
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recorder of each county must petition their board of
supervisors for authority to levy that fee, and the fee must
be used for purposes of implementing the above program.
It should be noted that AB 1168 similarly authorized a $1 fee
for the social security number truncation program, and,
consistent with that cap, the author should work with
committee staff to replace the current blank fee with a
specified nominal amount. As that fee would be imposed on all
documents, that fee must not be so onerous as to overly burden
those who are required to record documents.
5. Unknown whether there is opposition to the present form of
the bill
The California Escrow Association (CEA), California Land Title
Association (CLTA), and California Association of Realtors (CAR)
opposed a prior version of this bill that would have required a
title company to strike unlawfully restrictive covenants before
a property is transferred. The June 9, 2009 amendments removed
those requirements and, instead, inserted the present method for
addressing the issue of discriminatory language.
As of the writing of this analysis, the CLTA and the California
Association of Realtors state that they are neutral with the
understanding that costs will not exceed two dollars per
document.
6. AB 2204 (De La Torre, 2008) held on suspense
This committee approved a similar bill, AB 2204, by the same
author last year. That bill similarly sought to address the
issue of unlawful discriminatory restrictions by requiring a
person who records a deed to attach all written covenants,
conditions, or restrictions associated with the property. The
county recorder was then required to submit all of those
documents to county counsel for a determination of whether any
of those documents contained an unlawful restriction. That bill
was held under submission on the Senate Appropriations
Committee's suspense file.
Support : Jewish Community Relations Council (JCRC) of San
Francisco, the Peninsula, Marin, Sonoma, Alameda and Contra
Costa Counties; California State Conference of the NAACP; North
Monterey County League of United Latin America Citizens; Asian
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Pacific American Legal Center (APALC); Mexican American Legal
Defense and Educational Fund (MALDEF); American Civil Liberties
Union; San Francisco Chapter of the Japanese American Citizens
League (JACL); Asian Americans for Civil Rights & Equality
(AACRE); Equality California (EQCA)
Opposition : California Escrow Association (to the prior version
of the bill)
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
SB 1148 (Burton, Chapter 589, Statutes of 1999), permitted a
person with any interest in property to require a county
recorder to remove a racially restrictive covenant from any
recorded document associated with the property.
AB 1493 (Nakano, Chapter 291, Statutes of 2000), modified the
process from SB 1148 (Burton, 1999), permitting a person with an
ownership interest in a property to file an application with the
DFEH for a determination whether a restrictive covenant violates
fair housing laws and is void; the DFEH could then prepare a
covenant modification document, which the person could then
record with the county recorder.
AB 1926 (Horton, Chapter 803, Statutes of 2002), modified the
process from AB 1493 (Nakano, 2000), permitting a person with an
ownership interest to request that the county recorder record a
modified document to strike out unlawfully restrictive covenant
language; the recorder could record the document or refer the
person to the DFEH, where the person would file an application
seeking a determination whether the restrictive covenant
violates fair housing laws and is void.
AB 394 (Niello, Chapter 297, Statutes of 2005), reworked the
existing process for deleting unlawfully restrictive covenants
from the governing documents for real property by making the
modification process easier for property owners by permitting
county recorders to waive fees, and by arranging for county
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counsel to review the legality of proposed modifications without
requiring property owners to separately seek out the legal
determination.
AB 1168 (Jones, 2007), See Comment 4.
AB 2204 (De La Torre, 2008), See Comment 5.
Prior Vote :
Assembly Judiciary Committee (Ayes 10, Noes 0)
Assembly Floor (Ayes 71, Noes 0)
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