BILL ANALYSIS
SB 1427
Page 1
Date of Hearing: June 29, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 1427 (Price) - As Amended: May 12, 2010
PROPOSED CONSENT (As Proposed to be Amended)
SENATE VOTE : 29-0
SUBJECT : Foreclosures: Property Maintenance
KEY ISSUES :
1)Should local governments, before imposing fines for failure to
maintain a vacant property acquired through foreclosure, give
the owner notice and an opportunity to correct?
2)Should assessments and liens for abating nuisances be Based on
actual and reasonable costs determined at a public hearing?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
One result of the foreclosure crisis has been an increase in the
number of properties that sit empty and inadequately maintained.
Pursuant to both state law and local ordinance, a local
government entity may impose fines upon owners who fail to
maintain vacant properties and may levy assessments and liens to
cover the cost of abating any public nuisance attributable to
the un-maintained property. An existing state law provides that
if a local government entity seeks to impose a prescribed civil
fine of $1000 for failure to maintain a foreclosed property, it
must first give the owner notice of the alleged violation and
not less than 30 days to correct the violation. However, the
statute setting forth this time frame also specifies that it
"shall not preempt any local ordinance." Cities can fine
property owners pursuant to state law or local ordinance, and
most local ordinances already provide an opportunity to cure and
provide for a hearing to determine abatement costs. This bill,
however, would establish as a matter of state law that a local
entity must provide notice and an opportunity to correct, albeit
without mandating an exact time frame. In addition, this bill
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would specify that any assessment or lien that a governmental
entity imposes to recover the costs of abating an assessment
must be based on the actual and reasonable costs of nuisance
abatement. The bill also specifies that the costs must be
determined at a public hearing prior to imposition of the
assessment or lien. The League of California Cities and two
individual cities opposed an earlier version of this bill that
would have required a local governmental entity to maintain a
"schedule of costs" for all abatement measures. However,
because of the diversity of possible abatement measures and the
uncertainty of costs, the author has agreed to remove that
provision. These amendments appear to remove all opposition.
The analysis reflects these amendments.
SUMMARY : Requires a governmental entity, prior to imposing a
fine for failure to maintain a vacant property acquired by
foreclosure, to provide the owner of the property with notice
and an opportunity to correct the violation, subject to certain
exceptions, and imposes limits on the amount of nuisance
abatement costs that may be recovered by the governmental entity
in regard to that property. Specifically, this bill :
1)Requires that, prior to imposing a fine or penalty for failure
to maintain a vacant property purchased or acquired through
foreclosure, a governmental entity shall provide the owner of
that property with a notice of the violation and an
opportunity to correct that violation.
2)Provides that an assessment or lien to recover the costs of
nuisance abatement measures taken by a governmental entity
with regard to property acquired or purchased through
foreclosure shall not exceed the actual and reasonable costs
of nuisance abatement.
3)Provides that a governmental entity shall not impose an
assessment or lien unless the costs that constitute the
assessment or lien have been previously adopted by the elected
officials of that governmental entity at a public hearing.
EXISTING LAW :
1)Requires the owner of a vacant residential property acquired
through a foreclosure to maintain that property. Defines a
"failure to maintain" that property to mean failure to care
for the exterior of the property, including, but not limited
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to, failure to prevent excessive foliage growth, failure to
prevent squatters from occupying the property, or permitting
other conditions that create a public nuisance. (Civil Code
Section 2929.3 (a)-(b))
2)Authorizes a governmental entity to impose a civil fine of up
to $1000 per day for failing to maintain vacant residential
property acquired through foreclosure. If the governmental
entity seeks a fine pursuant to this provision, it must
provide the owner with at least 30 days notice and an
opportunity to correct the violation. It shall also provide a
hearing and an opportunity to contest the amount of the fine.
(Civil Code Section 2929.3 (a)(2).)
3)Notwithstanding the above, a governmental entity may provide
less than 30 days notice to remedy a condition before imposing
a fine if the entity determines that the conditions on the
property threaten public health and safety. (Civil Code
Section 2929.3 (c).)
4)Specifies that the above provisions shall not preempt any
local ordinance. (Civil Code Section 2929.3 (f).)
5)Provides that the above provisions remain in effect only until
January 1, 2013, unless a later enacted statute deletes or
extends that date. (Civil Code Section 2929.3 (i).)
COMMENTS : In 2008, SB 1137 (Perata, Chapter 69, Stats. of 2008)
enacted a number of measures designed to deal with the
foreclosure crisis in California. One problem created by that
crisis was an increase in the number of abandoned vacant
residential properties. Run-down properties not only create an
eyesore, they can create conditions that endanger public health
and safety. One of the several provisions of SB 1137 required
property owners to maintain vacant residential properties
acquired at foreclosure and authorized local governmental
entities to seek a fine of up to $1000 per day for each day that
the owner failed to correct the problem. However, the statute
also specified that before the fine could be imposed, the local
governmental entity would be required to give at least 30 days
notice and an opportunity to correct. The bill also required
that the governmental entity to hold a public hearing to
determine the amount of the fine and to give the property owner
an opportunity to contest that amount.
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Background : Local governments are free to seek the $1000 per
day fine under the SB 1137 provision, or they may simply elect
to impose a fine or assessment for nuisance abatement under a
local ordinance - and SB 1137 expressly stated that the state
law shall not preempt local ordinances. According to the League
of California Cities, over 80 California cities have adopted a
model ordinance known as a Registration of Abandoned Residential
Properties Ordinance, or something to that effect. The
ordinances are strikingly familiar. The purpose of the
ordinance is to establish a registration program as a mechanism
to protect neighborhoods from blight. These ordinances
generally require anyone who holds a deed of trust on a property
to perform an inspection of the property prior to recording a
notice of default, the first step in a foreclosure. Once the
properties become subject to foreclosure, the local ordinances
imposes basic maintenance requirements to prevent the property
from becoming a public health or safety danger or lowering the
value of surrounding properties. If an owner, after receiving
notice of a violation, fails to correct the problem with a
"reasonable" period of time, a city may undertake the nuisance
abatement itself (either by city personnel or contract with a
private party) and impose an assessment on the owner to cover
the cost of abatement. Although Committee staff could not check
every city, all of the cities randomly selected in an on-line
search had an abandoned residential property ordinance of some
sort that authorized assessments to recover abatement costs and
provided the owner an appeal or hearing of some sort. For
example, the City of Murrietta requires the City of Council to
consider a statement of abatement costs and notifies the owner
of the time and place when the City Council shall consider the
costs. (City of Murrietta, Municipal Code Chapter 8.44, Section
8.44.090.)
Although the author does not necessarily deny that most cities
already provide notice and an opportunity to correct, he
believes that there should be some degree of uniformity in terms
of notice and opportunity to correct, even if the period to
correct is not the 30-day period required by the state law.
Therefore, this bill does three things: (1) It requires a local
governmental entity to give notice of any violation to the owner
of a foreclosed residential property and to provide an
opportunity to correct, without specifying a precise time frame;
(2) It provides that any assessment or lien that a local
governmental entity imposes on a property owner to recover the
costs of nuisance abatement on a foreclosed property must be
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based on the actual and reasonable costs of nuisance abatement;
and (3) It provides that a local governmental entity shall not
impose an assessment or lien to recover the costs of nuisance
abatement unless the costs are adopted by a body of elected
officials at a public hearing.
ARGUMENTS IN SUPPORT : According to the author and sponsor, the
California Association of Realtors, local ordinances sometimes
fail to provide owners of distressed properties with adequate
notice of a violation for failure to maintain property, or they
impose assessments that exceed the actual costs of abatement.
Although CAR has offered no concrete examples of cities that do
this, it nonetheless argues that as a matter of state policy, if
a local governmental entity seeks to impose a fine or assessment
on the basis of a local ordinance, it should, consistent with
the state law provision, provide the owner with reasonable
notice and an opportunity to correct. Also, the author believes
that any assessment or lien levied against the property owner to
recover the costs of nuisance abatement should be based on the
actual and reasonable costs of nuisance abatement. CAR claims
that these "changes to existing law are needed to provide
homeowners and lenders with clear notice of an abandoned
property maintenance violation, the opportunity to correct the
violation before fines can be assessed, and clear understanding
of exactly how much each nuisance abatement measure taken by the
local city will cost should the [lenders or owners] fail to
correct the violations themselves."
OPPOSITION REMOVED BY AMENDMENTS TO BE TAKEN IN THIS COMMITTEE :
A prior version of this bill would have required the city to
adopt a "schedule of costs" for all nuisance abatement measures.
According to the author and sponsor it is important for the
owner to know the costs of abatement before any nuisance
abatement measure is taken so that the owner or lender will know
the cost should they "fail to correct the violations
themselves." However, it is not clear why the owner would need
to know this in advance before acting; rather, it would seem
that the owner should fulfill the legal obligation to maintain
the property once notice of the violation has been received, and
not make a decision on whether or not to correct the violation
based on the amount of assessment for failure to do so.
Moreover, as the League of California Cities persuasively argued
in its letter of opposition (unless amended to remove the
"schedule of costs" provision), requiring cities to draw up such
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a general schedule prior to the fact would be impractical.
Abatement costs can vary widely depending on the nature of the
nuisance and the size of the property. "Every situation is
unique," the League notes, "and to develop a schedule of costs
for all potential abatement measures is not feasible." The City
of Sacramento argues that in most cases the City must solicit
bids for nuisance abatement, and it cannot know in advance what
the lowest bid would be for every possible nuisance situation.
"Thus," the City of Sacramento writes, "we would have to enter
into long-term abatement contracts" even though the costs of
abatement necessarily vary.
If the rationale of the schedule of costs is that property
owners should not be surprised by excessive assessments or
liens, this concern would seem to be covered by the provision in
the bill that states that assessments and liens cannot exceed
the actual and reasonable costs of nuisance abatement.
Moreover, the vast majority of cities that have adopted some
version of the Registration of Vacant Residential Properties
ordinance already provide an opportunity to appeal and most if
not all appear to require the elected body, most likely a City
Council, to determine the costs at an open public meeting at
which the property owner is free to contest the abatement costs.
Given the absence of evidence that cities are generally failing
to provide such opportunities or imposing excessive assessments,
it seems imprudent to require all cities to adopt an impractical
"schedule of costs" when they already have methods that appear
to be working.
Proposed Committee Amendments : In light of the above, the
author has agreed to accept the following amendments that will
remove the "schedule of costs" provision while at the same time
ensuring that all cities do what the vast majority already
apparently do: that is, require the local elected body to
determine the costs of nuisance abatement at a public hearing.
- On page 2 delete lines 18-20
- On page 2 at line 18 insert:
(b) A governmental entity shall not impose an assessment or lien
unless the costs that constitute the assessment or lien have
been previously adopted by the elected officials of that
governmental entity at a public hearing.
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REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors (sponsor)
Executive Council of Home Owners (ECHO)
Opposition (as proposed to be amended)
None on file
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334