BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 109|
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THIRD READING
Bill No: SB 109
Author: Calderon (D)
Amended: 5/6/09
Vote: 21
SENATE BUS., PROF. & ECON. DEVEL. COMMITTEE : 7-2, 4/13/09
AYES: Negrete McLeod, Wyland, Corbett, Florez, Oropeza,
Romero, Yee
NOES: Aanestad, Walters
NO VOTE RECORDED: Correa
SENATE JUDICIARY COMMITTEE : 4-1, 4/21/09
AYES: Corbett, Harman, Florez, Leno
NOES: Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Auctioneers: real estate
SOURCE : Author
DIGEST : This bill revises the definition of auction to
include real estate sales, as specified, and 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. This bill also
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.
CONTINUED
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Senate Floor Amendments of 5/6/09 recast the exemption for
a foreclosure sale, to additionally exempt a sale of real
property under a judicial foreclosure ordered under a money
judgment pursuant to the Code of Civil Procedure.
ANALYSIS :
Existing law:
1.Requires every auctioneer and auction company to maintain
a $20,000 surety bond, as specified, and to file a copy
of the bond with the Secretary of State. The bond must
be in favor of, and payable to, the people of the State
of California and shall be for the benefit of any person
or persons damaged by any fraud, dishonesty,
misstatement, misrepresentation, deceit, unlawful acts of
omissions, or failure to provide the services of the
auctioneer or auction company in performance of the
auction by the auctioneer or auction company or its
agents, representatives, or employees while acting within
the scope of their employment. Existing law permits a
deposit to be made in lieu of a bond, as specified.
2.Provides that if an auctioneer or auction company fails
to perform any of the duties imposed under Title 2.96
(Auctioneer and Auction Companies), any person may
maintain an action for enforcement of those duties or to
recover a civil penalty in the amount of $1,000, or both,
for enforcement and recovery, and allows a prevailing
plaintiff to recover reasonable attorney's fees and
costs.
3.Requires every auction company and auctioneer to, among
other things: disclose their name, telephone number, and
bond number in all advertising; post a specified sign at
the main entrance to each auction; post or distribute the
terms, conditions, restrictions, and procedures whereby
goods will be sold at the auction; disclose the existence
and amount of any liens or encumbrances; and return the
blank check or deposit of each buyer who purchased no
goods at the sale. Existing law imposes specified fines
for violation of the above provisions.
4.Exempts the following from the definition of auction:
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(a) wholesale motor vehicle auction; and (b) a sale of
real estate or a sale of real estate with personal
property or fixtures or both in a unified sale in
accordance with Section 9604 of the Commercial Code.
This bill revises the real estate exemption to exempt the
following:
1. Sales of real property pursuant to a non-judicial
foreclosure.
2. Sales of real property pursuant to a judicial
foreclosure ordered under a money judgment pursuant to
the Code of Civil Procedure.
3. Unified sale if an obligation secured by a security
interest in personal property or fixtures is also
secured by an interest or an estate in real property.
This bill additionally revises the above requirements on
auction companies and auctioneers by:
1.Requiring the posting or distribution of terms and
conditions to include a description of all fees, both
refundable and nonrefundable, that will be levied as a
condition of bidding.
2.Requires announcement of any changes to fees prior to the
beginning of the auction sale.
3.Requiring, for auctions of real property, the posting or
distribution of a clear explanation of the terms
"auctioned with reserve" and "sale subject to seller
confirmation, approval, or acceptance," and the
procedures and timelines to be used in connection with
sales subject to those requirements.
4.Requiring, 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
made and the seller fails to respond to the offer, return
all deposits and fees collected from the bidder in
connection with the auction.
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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 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 (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
Commission received no appropriation, thereby effectively
dissolving the Commission. Furthermore, the Budget Act
reallocated the balance of the Commission's funds to the
General Fund. The Auctioneer and Auction Lic3nsing 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
ARGUMENTS IN SUPPORT : According to the author office,
California does have 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
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requirements. As a result, there are no laws that protect
consumers who bid at these auctions. 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 the companies' rules
for claiming these refunds.
JJA:do 5/7/09 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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