BILL NUMBER: AB 1246 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Member Jones
FEBRUARY 27, 2009
An act to amend Section 11003.4 of the Business and Professions
Code, and to amend Section 33007.5 of, and to add Section
33075.6 to to add Sections 33007.6 and 33007.7 to, and
to add Article 4 (co mmencing with Section 33520) to
Chapter 5 of Part 1 of Division 24 of , the Health and Safety
Code, relating to housing.
LEGISLATIVE COUNSEL'S DIGEST
AB 1246, as amended, Jones. Housing cooperative trust and
workforce housing cooperative trust.
(1) Existing law defines "limited-equity housing cooperative" to
be a corporation that meets specified criteria. Existing law exempts
a limited-equity housing cooperative from specified requirements for
the regulation of transactions of subdivided lands.
This bill would revise the definition of a "limited-equity housing
cooperative" to also apply to a "housing cooperative trust" and
"workforce housing cooperative trust." The bill would exempt an
entity as so defined from these provisions governing the regulation
of transactions of subdivided land if, among other organizations, the
Federal Home Loan Bank System or any of its member institutions and
school districts directly finance or subsidize at least 50% of the
total construction or development cost or $100,000, whichever is
less. The bill also would exempt such an entity from these provisions
if the real property to be occupied by the cooperative was sold or
leased by the Department of Transportation, other state agency, a
city, a county, or a school district for the development of the
cooperative and has a regulatory agreement, as specified.
(2) The Community Redevelopment Law defines "limited-equity
housing cooperative" to mean a corporation organized on a cooperative
basis that meets specified requirements.
This bill would revise the definition of a "limited-equity housing
cooperative" to also apply to a "housing cooperative trust" and
"workforce housing cooperative trust." The bill would prohibit a
board of directors from returning transfer value, either full or
partial, to a member of the board while he or she still remains a
member of the board, and would prohibit an existing member of the
board of directors from accepting the return of his or her transfer
value, either full or partial. The bill would require that, in any
suit against a board of directors and its members for not upholding
the statutes that apply to such an entity the plaintiff
prevailing party be awarded all
attorneys attorneys' fees and compensatory
and punitive damages. The bill would prohibit an organization
formed under this section that uses public funds from using any
corporate funds to avoid compliance with the Community Redevelopment
Law, and from pursuing dissolution if the intent or outcome is for
the members to occupy those units upon dissolution. The bill would
prohibit the members of the board of directors and the board of
directors from arranging to occupy units in fee simple or as a rental
after dissolution of the organization. The bill would impose
procedural requirements relating to the dissolution of the
organization.
This bill also would provide for the manner in which a workforce
housing cooperative trust is organized and operated, as specified.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 11003.4 of the Business and Professions Code is
amended to read:
11003.4. (a) A "limited-equity housing cooperative" or a "housing
cooperative trust" or a "workforce housing cooperative trust" is a
corporation that meets the criteria of Section 11003.2 and that also
meets the criteria of Sections 33007.5 and 33007.6 of the Health and
Safety Code, as applicable. Except as provided in subdivision (b), a
limited-equity housing cooperative shall be subject to all the
requirements of this chapter pertaining to stock cooperatives.
(b) A limited-equity housing cooperative, a housing cooperative
trust , and a workforce housing cooperative trust shall be
exempt from the requirements of this chapter if the limited-equity
housing cooperative, housing cooperative trust , or
workforce housing cooperative trust complies with all the following
conditions:
(1) The United States Department of Housing and Urban Development,
the Farmers Home Administration, the National Consumers Cooperative
Bank, the California Housing Finance Agency, or the Department of
Housing and Community Development, the Federal Home Loan Bank System
or any of its member institutions, alone or in any combination with
each other, or with the city, county, school district, or
redevelopment agency in which the cooperative is located, directly
finances or subsidizes at least 50 percent of the total construction
or development cost or one hundred thousand dollars ($100,000),
whichever is less; or the real property to be occupied by the
cooperative was sold or leased by the Department of Transportation,
other state agency, a city, a county, or a school district for the
development of the cooperative and has a regulatory agreement
approved by the Department of Housing and Community Development for
the term of the permanent financing, notwithstanding the source of
the permanent subsidy or financing.
(2) No more than 20 percent of the total development cost of a
limited-equity mobilehome park, and no more than 10 percent of the
total development cost of other limited-equity housing cooperatives,
is provided by purchasers of membership shares.
(3) A regulatory agreement that covers the cooperative for a term
of at least as long as the duration of the permanent financing or
subsidy, notwithstanding the source of the permanent subsidy or
financing has been duly executed between the recipient of the
financing and either (A) one of the federal or state agencies
specified in paragraph (1) or (B) a local public agency that is
providing financing for the project under a regulatory agreement
meeting standards of the Department of Housing and Community
Development. The regulatory agreement shall make provision for at
least all of the following:
(A) Assurances for completion of the common areas and facilities
to be owned or leased by the limited-equity housing cooperative,
unless a construction agreement between the same parties contains
written assurances for completion.
(B) Governing instruments for the organization and operation of
the housing cooperative by the members.
(C) The ongoing fiscal management of the project by the
cooperative, including an adequate budget, reserves, and provisions
for maintenance and management.
(D) Distribution of a membership information report to any
prospective purchaser of a membership share, prior to purchase of
that share. The membership information report shall contain full
disclosure of the financial obligations and responsibilities of
cooperative membership, the resale of shares, the financing of the
cooperative including any arrangements made with any partners,
membership share accounts, occupancy restrictions, management
arrangements, and any other information pertinent to the benefits,
risks, and obligations of cooperative ownership.
(4) The federal, state, or local public agency that executes the
regulatory agreement shall satisfy itself that the bylaws, articles
of incorporation, occupancy agreement, subscription agreement, any
lease of the regulated premises, any arrangement with partners, and
arrangement for membership share accounts provide adequate protection
of the rights of cooperative members.
(5) The federal or state agency shall receive from the attorney
for the recipient of the financing or subsidy a legal opinion that
the cooperative meets the requirements of Section 33007.5 of the
Health and Safety Code and the exemption provided by this section.
(c) Any limited-equity cooperative, housing cooperative
trust, or workforce housing cooperative trust that meets the
requirements for exemption pursuant to subdivision (b) may elect to
be subject to all provisions of this chapter.
(d) The developer of the cooperative shall notify the Department
of Real Estate, on a form provided by the department, that an
exemption is claimed under this section. The Department of Real
Estate shall retain this form for at least four years for statistical
purposes.
SEC. 2. Section 33007.5 of the Health and Safety Code is amended
to read:
33007.5. "Limited-equity housing cooperative" or a "housing
cooperative trust" or a "workforce housing cooperative trust" means a
corporation organized on a cooperative basis that, in addition to
complying with Section 33007.6 as may be applicable, meets all of the
following requirements:
(a) The corporation is any of the following:
(1) Organized as a nonprofit public benefit corporation pursuant
to Part 2 (commencing with Section 5110) of Division 2 of Title 1 of
the Corporations Code.
(2) Holds title to real property as the beneficiary of a trust
providing for distribution for public or charitable purposes upon
termination of the trust.
(3) Holds title to real property subject to conditions that will
result in reversion to a public or charitable entity upon dissolution
of the corporation.
(4) Holds a leasehold interest, of at least 20 years' duration,
conditioned on the corporation's continued qualification under this
section, and providing for reversion to a public entity or charitable
corporation.
(b) (1) The articles of incorporation or bylaws require the
purchase and sale of the stock or membership interest of resident
owners who cease to be permanent residents, at no more than a
transfer value determined as provided in the articles or bylaws, and
that shall not exceed the aggregate of the following:
(A) The consideration paid for the membership or shares by the
first occupant of the unit involved, as shown on the books of the
corporation.
(B) The value, as determined by the board of directors of the
corporation, of any improvements installed at the expense of the
member with the prior approval of the board of directors.
(C) Accumulated simple interest, or an inflation allowance at a
rate that may be based on a cost-of-living index, an income index, or
market-interest index. Any increment pursuant to this paragraph
shall not exceed a 10 percent annual increase on the consideration
paid for the membership or share by the first occupant of the unit
involved.
(2) For purposes of a return of transfer value, all of the
following are prohibited:
(A) A board of directors returning transfer value, either full or
partial, to a member of the board while he or she
still remains a member of the board .
(B) An existing member of the board of directors
accepting the return of his or her transfer value, either
full or partial.
(c) The articles of incorporation or bylaws require the board of
directors to sell the stock or membership interest purchased as
provided in subdivision (b), to new member-occupants or resident
shareholders at a price that does not exceed the "transfer value"
paid for the unit.
(d) The "corporate equity," which is defined as the excess of the
current fair marketed value of the corporation's real property over
the sum of the current transfer values of all shares or membership
interests, reduced by the principal balance of outstanding
encumbrances upon the corporate real property as a whole, shall be
applied as follows:
(1) So long as any such encumbrance remains outstanding, the
corporate equity shall not be used for distribution to members, but
only for the following purposes, and only to the extent authorized by
the board, subject to the provisions and limitations of the articles
of incorporation and bylaws:
(A) For the benefit of the corporation or the improvement of the
real property.
(B) For expansion of the corporation by acquisition of additional
real property.
(C) For public benefit or charitable purposes.
(2) Upon sale of the property, dissolution of the corporation, or
occurrence of a condition requiring termination of the trust or
reversion of title to the real property, the corporate equity is
required by the articles, bylaws, or trust or title conditions to be
paid out, or title to the property transferred, subject to
outstanding encumbrances and liens, for the transfer value of
membership interests or shares, for use for a public or charitable
purpose.
(e) Amendment of the bylaws and articles of incorporation requires
the affirmative vote of at least two-thirds of the resident-owner
members or shareholders.
(f) In any suit against a board of directors and
or its members for not upholding the statutes
that apply to limited-equity housing cooperatives, the plaintiff
shall be awarded all attorneys fees and punitive damages.
(g) (1) If an organization formed under this section uses public
funds, it shall not use any corporate funds to avoid compliance with
this act and to pursue dissolution if the intent or outcome is for
some or all of the members to occupy those units upon
dissolution.
(2) The members of the board of directors and
or the board of directors shall not arrange to occupy
units in fee simple or as a rental as an outcome of their dissolution
of the organization.
SEC. 3. Section 33007.6 is added to the Health and Safety Code, to
read:
33007.6. (a) A "workforce housing cooperative trust" is an entity
organized under this section that complies with Section 33007.5 and
with all of the following:
(1) Allows the governing board to be composed of two classes of
board members. One class is elected by the residents, and one class
is appointed by sponsor organizations, including employer and
employee organizations, chambers of commerce, government entities,
unions, religious organizations, nonprofit organizations, cooperative
organizations, and other forms of organizations. Resident members
shall elect a majority of the board members. However, sponsor
organizations may appoint up to one less than a majority of the board
members. The numerical composition and class of the sponsor and
resident board members shall be set in the articles of incorporation
and in the bylaws.
(2) Requires the charter board of a workforce housing cooperative
trust to be composed of only sponsor board members, to remain in
place for the first three years after the first resident occupancy.
After three years of occupancy, resident members shall elect a
majority of the board members.
(3) Prohibits the removal of the appointees of sponsor
organizations, except for cause.
(4) (A) Allows for the issuance of separate
classes of shares to sponsor organizations or support organizations.
These shares shall be denominated as "workforce housing shares" and
shall receive a rate of return of no more than 10 percent simple
interest pursuant to paragraph (3) of subdivision (b) of Section
33007.5.
(B) A sponsor organization of a workforce housing cooperative
trust shall be entitled to perfect a security interest in a
cooperative interest or in sponsor shares it has funded.
(5) Requires, upon amendment of the bylaws and articles of
incorporation of a workforce housing cooperative trust, as needed,
the affirmative vote of at least a majority of the resident-owner
members or shareholders and a majority of each class of board
members. The rights of the sponsor board members or the sponsors
shall not be changed without the affirmative vote of two-thirds of
the sponsor board members.
(6) Requires conformance with every aspect of this section to seat
sponsor directors in accordance with the original bylaws. These
directors shall be removed only for cause. This section also applies
to any organization previously formed under this section prior to
January 1, 2010, that had sponsor seats designated in its bylaws.
(b) A workforce housing cooperative trust shall be entitled to
operate statewide at multiple locations
in order to sponsor limited-equity housing cooperatives at
multiple locations . A workforce housing cooperative trust
may either own or lease land for the purpose of developing
limited-equity housing cooperatives.
(c) A workforce housing cooperative trust may be created when at
least 51 percent of the occupied units in a multifamily property that
is in foreclosure support efforts to buy the building or property.
SEC. 4. Section 33007.7 is added to the
Health and Safety Code , to read:
33007.7. The procedure for the dissolution of a limited equity
housing cooperative, housing cooperative trust, or workforce housing
cooperative trust shall be as follows:
(a) A public hearing, conducted by the county in which the limited
equity housing cooperative, housing cooperative trust, or workforce
housing cooperative trust is located, shall be held. The cooperative
or trust shall pay for all costs associated with the public hearing.
(b) The county shall provide notice to all interested parties. The
notice shall be given at least 120 days prior to the date of the
hearing. The notice shall be provided to all other limited equity
housing cooperatives and cooperative development organizations in the
state in an effort to create a merger with an existing limited
equity housing cooperative, housing cooperative trust, or workforce
housing cooperative trust, and shall be mailed first-class, postage
prepaid, in the United States mail.
(c) If the dissolving limited equity housing cooperative, housing
cooperative trust, or workforce housing cooperative trust merges with
an existing cooperative or trust, to the extent possible, the merger
shall be with the geographically closest cooperative or trust.
(d) If the dissolving limited equity housing cooperative, housing
cooperative trust, or workforce housing cooperative trust does not
merge with an existing cooperative or trust, both of the following
shall occur:
(1) The public hearing required under subdivision (a) shall ensure
that any dissolution plan is free of private inurement, and meets
the requirements of state and federal law.
(2) Any dissolved housing units held by the limited equity housing
cooperative, housing cooperative trust, or workforce housing
cooperative trust shall be made available through a public lottery
supervised by the county in which the cooperative or trust is
located.
SEC. 5. Article 4 (commencing with Section 33520)
is added to Chapter 5 of Part 1 of Division 24 of the
Health and Safety Code , to read:
Article 4. Actions Involving Limited-Equity Housing
Cooperatives, Housing Cooperative Trusts, and Workforce Housing
Cooperative Trusts
33520. Each entity named as a sponsor organization of a workforce
housing cooperative trust formed under Section 33007.5 shall have
the legal standing of a member unless it revokes, in writing, its
sponsorship.
33521. In any action instituted against a board of directors and
its members based upon a breach of corporate or fiduciary duties or a
failure to comply with statutes that apply to limited-equity housing
cooperatives, housing cooperative trusts, or workforce housing
cooperative trusts, the prevailing party shall be awarded
compensatory and punitive damages and attorney's fees.
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Text--Pages 4 and 5.
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