BILL ANALYSIS
SB 109
Page 1
Date of Hearing: June 16, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
SB 109 (Calderon) - As Amended: June 8, 2009
SENATE VOTE : 24-13
SUBJECT : Auctioneers: real estate.
SUMMARY : Revises the definition of "auction" to include real
estate sales, revises notification requirements, and requires
the return of deposits and fees within certain timeframes, as
specified. Specifically, this bill :
1)Deletes the general exemption of real property sales under the
definition of "auction," except judicial and nonjudicial
foreclosure sales, as specified, and sales in which an
obligation secured by a security interest in personal property
or fixtures is also secured by an interest or an estate in
real property.
2)Includes real property in the definition of "goods."
3)Permits an auctioneer or auction company to satisfy the
signage requirement for an electronic auction by requiring any
person who wishes to bid to acknowledge electronically that
the auction is being conducted in compliance with relevant law
before being allowed to bid.
4)Requires an auctioneer or auction company to post or
distribute to the audience:
a) The terms, conditions, restrictions, and procedures
whereby goods will be sold at the auction, and a
description of all fees, both refundable and nonrefundable,
that will be levied as a condition of bidding, and announce
any changes to those terms, conditions, restrictions,
procedures, and fees prior to the beginning of the auction
sale; and,
b) With respect to auctions of real property, during which
one or more properties will be auctioned with reserve, a
clear explanation of the terms "auctioned with reserve" and
"sale subject to seller confirmation, approval, or
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acceptance," and the procedures and timelines to be used in
connection with sales that are subject to these
requirements.
5)Requires an auctioneer or auction company to return, or cause
to be returned, all deposits and fees collected from the
bidder in connection with an auction as follows:
a) If a buyer did not purchase goods at the sale, within
two working days after an auction;
b) After an auction sale of real property sold subject to
seller confirmation, approval, or acceptance:
i) Within five working days after the high bidder's
offer is rejected; or,
ii) Within 15 working days after the high bidder's offer
is made and the seller fails to respond to the offer;
c) In the case of an auction sale of real property sold
subject to beneficiary or mortgagee confirmation, approval,
or acceptance, if the property is proposed to be sold for
less than the full amount owed the beneficiary or
mortgagee:
i) Within five working days after the high bidder's
offer is rejected by the beneficiary or mortgagee; or,
ii) Within five working days after a request by the high
bidder, if the beneficiary or mortgagee fails to respond
to the offer and more than 15 working days have passed
since the date of the auction.
6)Permits an auction company or auctioneer to satisfy the refund
requirements by instructing the escrow agent to return all
funds placed on deposit by the bidder, and permits an auction
company to act as the agent of the seller, beneficiary, or
mortgagee for this purpose.
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
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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 wholesale motor vehicle auctions and the sale of real
estate or a sale of real estate with personal property or
fixtures or both in a unified sale, as specified, from the
definition of auction.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "SB 109
protects Californians who bid on real estate during real
property auctions, such as those which have become popular among
banks to dispose of foreclosed homes. It does so by removing
the exemptions for sales of real estate that currently exist
within the Auctioneer and Auction Companies Law (Civil Code
Sections 1812.600 et seq.). Removing the exemption will require
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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, in a timely manner, the
blank check or deposit of each bidder whose bid is not accepted
by the seller; and subject auction companies and auctioneers of
real property to specified fines for failure to comply with the
law."
Background . Public auction of land by the government is
strictly regulated by various code sections, but there is no
specific authority governing auctions of homes by private
individuals and entities. Due to the rise of foreclosures, the
auction market is growing as an efficient way to sell properties
that would otherwise sit on the traditional market for months.
According to the National Auctioneers Association, the national
market for real estate live auctions grew about 5.3% in 2007 to
$16.8 billion, and a total of about $58.4 billion worth of all
types of real estate was sold in live auctions during 2007.
Although the perception exists that items sold at auction go to
the highest bidder, sometimes real estate is sold by "reserve
auction," in which property may not go to the highest bidder if
the reserve price, which may not be disclosed during the
auction, is not reached.
Double-referred : This bill is double-referred to the Assembly
Judiciary Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301