BILL ANALYSIS
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|Hearing Date:April 13, 2009 |Bill No:SB |
| |109 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: SB 109Author:Calderon
As Amended:April 13, 2009 Fiscal: Yes
SUBJECT: Auctioneers.
SUMMARY: Revises the definition of "auction" to include
real estate sales, as specified; requires notification to
an auction audience of all fees that will be levied as a
condition of bidding, and an explanation of certain terms
relating to the auction; requires the return of deposits
and fees in a specified time if the high bidder's offer is
rejected or if the seller does not respond to the offer.
Existing law:
1)Requires auctioneers and auction companies to maintain a
surety bond in the amount of $20,000 and file a copy of
the bond certificate with the Secretary of State, or a
cash deposit may be made in lieu of a bond.
2)Defines various terms relating to auctioneers and auction
companies including:
a) "Auction" as a sale transaction conducted by oral
or written exchanges, whether in person or through
electronic media, between an auctioneer and an
audience, consisting of a series of invitations for
offers for the purchase of goods made by the
auctioneer and offers to purchase made by members of
the audience and which culminates in the acceptance by
the auctioneer of the highest or most favorable offer
by a member of the audience. Exempts from the
definition:
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i. Wholesale motor vehicle auctions regulated by
the Department of Motor Vehicles.
ii. Real estate sales or real estate sold together
with personal property or fixtures, or sold together
in a unified sale as specified in the California
Commercial Code (i.e. foreclosure sales).
a) "Goods" as any goods, wares chattels, merchandise,
or other personal, including domestic animals and farm
products.
1)Subjects auctioneers and auction companies to specified
requirements in conducting an auction, including:
a) Disclose the name, trade or business name,
telephone number, and bond number on all auction
advertising.
b) Post a sign at the main auction entrance stating
that the auction is being conducted in compliance with
specified provisions of law.
c) Post or distribute to the audience the terms,
conditions, restrictions, and procedures under which
goods will be sold at the auction, and announce any
changes to the audience prior to the beginning of the
sale.
d) Within two working days after an auction, return
the blank check or deposit of each buyer who purchased
no goods at the sale.
1)Makes a violation of the provisions generally a
misdemeanor, and makes violation of certain of the
provisions an infraction punishable by specified fines.
This bill:
1)Recasts the real estate exemption to instead exempt the
following:
a) The sale of real property pursuant to a
non-judicial foreclosure.
b) A unified sale pursuant to the California
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Commercial Code (i.e. foreclosure sales).
2)Revises the definition of "goods" to additionally include
real property .
3)Requires an auction company and auctioneer to
additionally post or distribute to the audience a
description of all fees, both refundable and
nonrefundable, that will be levied as a condition of
bidding, and announce any changes prior to the beginning
of the sale.
4)For auctions of real property in which one or more
properties will be auctioned with a reserve, requires an
auction company and auctioneer to post or distribute to
the audience a clear explanation of:
a) The meaning of "auctioned with reserve."
b) The meaning of "sale subject to seller
confirmation, approval or acceptance."
c) The procedures and timelines to be used in
connection with sales subject to these requirements.
5)After a real estate auction which is subject to seller
confirmation, requires the return of all deposits and
fees collected from the bidder as follows:
a) If the bidder's offer is rejected, within 2 working
days.
b) If the seller does not respond to the bidder's
offer, within 15 working days.
6)Makes violation of the new provisions above infractions,
punishable by specified fines in existing law.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal"
by Legislative Counsel.
COMMENTS:
1.Purpose. This bill is sponsored by the Author to protect
Californians who bid on real estate during real property
auctions, such as those which have become popular among
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banks to dispose of foreclosed homes. According to the
Author, the bill does so by removing the exemption for
sales of real estate that currently exists within the
Auctioneer and Auction Companies Law (Civil Code Sections
1812.600 et seq.). By removing the exemption, the Author
states that the bill will require those who auction real
property to post a bond with the Secretary of State;
require auction companies and auctioneers to provide
bidders for real property the terms, conditions,
restrictions, and procedures by which the property will
be sold at auction prior to the beginning of the auction
sale; disclose the existence and amount of any liens or
other encumbrances on the property, if any exist; return
the blank check or deposit of each bidder whose bid is
not accepted in a timely manner; and subject auction
companies and auctioneers of real property to specified
fines for failure to comply with the law.
This measure is also intended to ensure that when real
property is auctioned off with reserve, bidders
understand what is meant by the terms "with reserve" and
"subject to seller confirmation, approval, or
acceptance;" and that bidders understand the procedures
and timelines that will be used in connection with sales
subject to seller approval, according to the Author.
2.Background. Currently, auctioneers and auction companies
are regulated by the provisions of the California Civil
Code. Under the law, an auctioneer or auction company
must show proof that they maintain a $20,000 surety bond,
or cash deposit filed with the Secretary of State. As
described above, under the "Existing Law" part of the
analysis, auctioneers must make certain disclosures and
practices specified under that Code.
In 1982, the Auctioneer and Auction Licensing Act in the
Business and Professions Code established a California
Auctioneer Commission. That act was intended to protect
the public from deceptive and fraudulent sales practices
by establishing minimal requirements for the licensure of
auctioneers and auction businesses and prohibiting
certain types of conduct.
During the state budget crisis of the early 1990s, under
the 1991-92 Budget Act, revenues in excess of three
months' operating "reserves" were transferred to the
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General Fund from the special funds of various state
boards and commissions in order to help close the state's
budget deficit. The Auctioneer Commission challenged the
legality of special fund transfers in 1992, and the
Legislature in turn took action to completely de-fund the
Commission. In the 1992-93 Budget Act, the California
Auctioneer Commission received no appropriation thereby
effectively dissolving the Commission. Furthermore, the
Budget Act reallocated the balance of the Commissions
funds to the General Fund. The Auctioneer and Auction
Licensing Act was stayed in 1992, and in 1993, the
licensing and regulatory requirements of the de-funded
Commission were repealed and, instead, bonding
requirements were established to be administered by the
Secretary of State.
Since that time, no significant legislation relating to
auctioneers and auction companies has been enacted.
3.Arguments in Support. The Author argues that California
has a law intended to establish rules for auctioneers who
auction other types of property, but sales of real estate
are explicitly exempted from existing law requirements.
As a result, there are no laws that protect consumers who
bid at these auctions. The Author states that frustrated
bidders have reported "winning" the auction on a
property, only to be informed after the auction that
their bid did not meet the bank's reserve, and that, for
that reason, they may not purchase the property for the
amount of their winning bid. Other bidders have reported
having trouble obtaining refunds of refundable deposits
they placed with auction companies, even after complying
with a company's rules for claiming these refunds.
4.Conforming Author's Amendment. The Author's staff has
pointed out an inconsistency in the recent amendments to
the bill. The bill would require the audience to be
given a clear explanation of several terms related to the
real estate auction, including "sale subject to seller
confirmation, approval or acceptance" (see "This Bill"
item # 4, above). However the amendments requiring the
bidder's deposits or fees to be returned are for a sale
"subject to seller confirmation" (see "This Bill" item #
5, above). Staff recommends conforming these provisions
by adding "approval or acceptance," and clarifying that
the return must be made within two "working" days.
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The following conforming amendments will be proposed as
Author's amendments to Civil Code 1812.607 (l) (2) in
Committee:
(2) After an auction sale of real property sold
subject to seller confirmation, approval or
acceptance, within two working days after the high
bidder's offer is rejected, or within 15 working days
after the high bidder's offer is made and the seller
fails to respond to the offer, return all deposits and
fees collected from the bidder in connection with the
auction.
NOTE : Double-referral to Judiciary Committee second.
SUPPORT AND OPPOSITION:
Support:
None received as of April 6, 2009.
Opposition:
None received as of April 6, 2009
Consultant:G. V. Ayers