BILL NUMBER: AB 1216	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Fuentes

                        FEBRUARY 18, 2011

   An act to amend Section 65863.11 of the Government Code, relating
to land use.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1216, as introduced, Fuentes. Land use: notice of proposed
change: assisted housing developments.
   The Planning and Zoning Law requires an owner of an assisted
housing development, as defined, to provide specified entities notice
of an opportunity to submit an offer to purchase the development,
containing specified information, prior to the termination of a
subsidy contract applicable to, the prepayment of a mortgage on, the
expiration of rental restrictions applicable to, or, under specified
circumstances, the sale or disposition of, the development. That law
authorizes these requirements to be enforced either in law or in
equity by specified entities.
   This bill would additionally authorize any affected public entity,
as defined, or any affected tenant, as defined, to enforce these
requirements either in law or in equity.
   The Planning and Zoning Law requires an owner selling, leasing, or
otherwise disposing of an assisted housing development, prior to the
close of escrow, to certify that the owner has complied with
specified provisions of that law. That law also requires this
certification to be recorded, to contain a legal description of the
property, and to be indexed, as specified, and authorizes the
certification to be relied upon by good faith purchasers and
encumbrances for value, as specified.
   This bill would prohibit a specified provision of that law from
affecting the rights of a purchaser or encumbrancer for value who
acts in good faith and without notice of a failure to comply with
specified provisions of that law, regardless of whether the
certification has been recorded.
   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 65863.11 of the Government Code is amended to
read:
   65863.11.  (a) Terms used in this section shall be defined as
follows:
   (1) "Assisted housing development" and "development" mean a
multifamily rental housing development as defined in paragraph (3) of
subdivision (a) of Section 65863.10.
   (2) "Owner" means an individual, corporation, association,
partnership, joint venture, or business entity that holds title to an
assisted housing development.
   (3) "Tenant" means a tenant, subtenant, lessee, sublessee, or
other person legally in possession or occupying the assisted housing
development.
   (4) "Tenant association" means a group of tenants who have formed
a nonprofit corporation, cooperative corporation, or other entity or
organization, or a local nonprofit, regional, or national
organization whose purpose includes the acquisition of an assisted
housing development and that represents the interest of at least a
majority of the tenants in the assisted housing development.
   (5) "Low or moderate income" means having an income as defined in
Section 50093 of the Health and Safety Code.
   (6) "Very low income" means having an income as defined in Section
50105 of the Health and Safety Code.
   (7) "Local nonprofit organizations" means not-for-profit
corporations organized pursuant to Division 2 (commencing with
Section 5000) of Title 1 of the Corporations Code, that have as their
principal purpose the ownership, development, or management of
housing or community development projects for persons and families of
low or moderate income and very low income, and which have a broadly
representative board, a majority of whose members are community
based and have a proven track record of local community service.
   (8) "Local public agencies" means housing authorities,
redevelopment agencies, or any other agency of a city, county, or
city and county, whether general law or chartered, which are
authorized to own, develop, or manage housing or community
development projects for persons and families of low or moderate
income and very low income.
   (9) "Regional or national organizations" means not-for-profit,
charitable corporations organized on a multicounty, state, or
multistate basis that have as their principal purpose the ownership,
development, or management of housing or community development
projects for persons and families of low or moderate income and very
low income.
   (10) "Regional or national public agencies" means multicounty,
state, or multistate agencies that are authorized to own, develop, or
manage housing or community development projects for persons and
families of low or moderate income and very low income.
   (11) "Use restriction" means any federal, state, or local statute,
regulation, ordinance, or contract that, as a condition of receipt
of any housing assistance, including a rental subsidy, mortgage
subsidy, or mortgage insurance, to an assisted housing development,
establishes maximum limitations on tenant income as a condition of
eligibility for occupancy of the units within a development, imposes
any restrictions on the maximum rents that could be charged for any
of the units within a development; or requires that rents for any of
the units within a development be reviewed by any governmental body
or agency before the rents are implemented.
   (12) "Profit-motivated organizations and individuals" means
individuals or two or more persons organized pursuant to Division 1
(commencing with Section 100) of Title 1 of, Division 3 (commencing
with Section 1200) of Title 1 of, or Division 1 (commencing with
Section 15001) of Title 2 of, the Corporations Code, that carry on as
a business for profit.
   (13) "Department" means the Department of Housing and Community
Development.
   (14) "Offer to purchase" means an offer from a qualified or
nonqualified entity that is nonbinding on the owner.
   (15) "Expiration of rental restrictions" has the meaning given in
paragraph (5) of subdivision (a) of Section 65863.10.
   (b) An owner of an assisted housing development shall not
terminate a subsidy contract or prepay the mortgage pursuant to
Section 65863.10, unless the owner or its agent shall first have
provided each of the entities listed in subdivision (d) an
opportunity to submit an offer to purchase the development, in
compliance with subdivisions (g) and (h). An owner of an assisted
housing development in which there will be the expiration of rental
restrictions must also provide each of the entities listed in
subdivision (d) an opportunity to submit an offer to purchase the
development, in compliance with subdivisions (g) and (h). An owner
who meets the requirements of Section 65863.13 shall be exempt from
this requirement.
   (c) An owner of an assisted housing development shall not sell, or
otherwise dispose of, the development at any time within the five
years prior to the expiration of rental restrictions or at any time
if the owner is eligible for prepayment or termination within five
years unless the owner or its agent shall first have provided each of
the entities listed in subdivision (d) an opportunity to submit an
offer to purchase the development, in compliance with this section.
An owner who meets the requirements of Section 65863.13 shall be
exempt from this requirement.
   (d) The entities to whom an opportunity to purchase shall be
provided include only the following:
   (1) The tenant association of the development.
   (2) Local nonprofit organizations and public agencies.
   (3) Regional or national nonprofit organizations and regional or
national public agencies.
   (4) Profit-motivated organizations or individuals.
   (e) For the purposes of this section, to qualify as a purchaser of
an assisted housing development, an entity listed in subdivision (d)
shall do all of the following:
   (1) Be capable of managing the housing and related facilities for
its remaining useful life, either by itself or through a management
agent.
   (2) Agree to obligate itself and any successors in interest to
maintain the affordability of the assisted housing development for
households of very low, low, or moderate income for either a 30-year
period from the date that the purchaser took legal possession of the
housing or the remaining term of the existing federal government
assistance specified in subdivision (a) of Section 65863.10,
whichever is greater. The development shall be continuously occupied
in the approximate percentages that those households who have
occupied that development on the date the owner gave notice of intent
or the approximate percentages specified in existing use
restrictions, whichever is higher. This obligation shall be recorded
prior to the close of escrow in the office of the county recorder of
the county in which the development is located and shall contain a
legal description of the property, indexed to the name of the owner
as grantor. An owner that obligates itself to an enforceable
regulatory agreement that will ensure for a period of not less than
30 years that rents for units occupied by low- and very low income
households or that are vacant at the time of executing a purchase
agreement will conform with restrictions imposed by Section 42(f) of
the Internal Revenue Code shall be deemed in compliance with this
paragraph. In addition, the regulatory agreement shall contain
provisions requiring the renewal of rental subsidies, should they be
available, provided that assistance is at a level to maintain the
project's fiscal viability.
   (3) Local nonprofit organizations and public agencies shall have
no member among their officers or directorate with a financial
interest in assisted housing developments that have terminated a
subsidy contract or prepaid a mortgage on the development without
continuing the low-income restrictions.
   (f) If an assisted housing development is not economically
feasible, as defined in paragraph (3) of subdivision (h) of Section
17058 of the Revenue and Taxation Code, a purchaser shall be entitled
to remove one or more units from the rent and occupancy requirements
as is necessary for the development to become economically feasible,
provided that once the development is again economically feasible,
the purchaser shall designate the next available units as low-income
units up to the original number of those units.
   (g) (1)  If an owner decides to terminate a subsidy contract, or
prepay the mortgage pursuant to Section 65863.10, or sell or
otherwise dispose of the assisted housing development pursuant to
subdivision (b) or (c), or if the owner has an assisted housing
development in which there will be the expiration of rental
restrictions, the owner shall first give notice of the opportunity to
offer to purchase to each qualified entity on the list provided to
the owner by the department, in accordance with subdivision (o), as
well as to those qualified entities that directly contact the owner.
The notice of the opportunity to offer to purchase must be given
prior to or concurrently with the notice required pursuant to Section
65863.10 for a period of at least 12 months. The owner shall contact
the department to obtain the list of qualified entities. The notice
shall conform to the requirements of subdivision (h) and shall be
sent to the entities by registered or certified mail, return receipt
requested. The owner shall also post a copy of the notice in a
conspicuous place in the common area of the development.
   (2) If the owner already has a bona fide offer to purchase from an
entity prior to January 1, 2001, at the time the owner decides to
sell or otherwise dispose of the development, the owner shall not be
required to comply with this subdivision. However, the owner shall
notify the department of this exemption and provide the department a
copy of the offer.
   (h) The initial notice of a bona fide opportunity to submit an
offer to purchase shall contain all of the following:
   (1) A statement addressing all of the following:
   (A) Whether the owner intends to maintain the current number of
affordable units and level of affordability.
   (B) Whether the owner has an interest in selling the property.
   (C) Whether the owner has executed a contract or agreement of at
least five years' duration with a public entity to continue or
replace subsidies to the property and to maintain an equal or greater
number of units at an equal or deeper level of affordability and, if
so, the length of the contract or agreement.
   (2)  A statement that each of the type of entities listed in
subdivision (d) has the right to purchase the development under this
section.
   (3) (A) Except as provided in subparagraph (B), a statement that
the owner will make available to each of the types of entities listed
in subdivision (d), within 15 business days of receiving a request
therefor, that includes all of the following:
   (i) Itemized lists of monthly operating expenses for the property.

   (ii) Capital improvements, as determined by the owner, made within
each of the two preceding calendar years at the property.
   (iii) The amount of project property reserves.
   (iv) Copies of the two most recent financial and physical
inspection reports on the property, if any, filed with a federal,
state, or local agency.
   (v) The most recent rent roll for the property listing the rent
paid for each unit and the subsidy, if any, paid by a governmental
agency as of the date the notice of intent was made pursuant to
Section 65863.10.
   (vi) A statement of the vacancy rate at the property for each of
the two preceding calendar years.
   (vii) The terms of assumable financing, if any, the terms of the
subsidy contract, if any, and proposed improvements to the property
to be made by the owner in connection with the sale, if any.
   (B) Subparagraph (A) shall not apply if 25 percent or less of the
units on the property are subject to affordability restrictions or a
rent or mortgage subsidy contract.
   (C) A corporation authorized pursuant to Section 52550 of the
Health and Safety Code or a public entity may share information
obtained pursuant to subparagraph (A) with other prospective
purchasers, and shall not be required to sign a confidentiality
agreement as a condition of receiving or sharing this information,
provided that the information is used for the purpose of attempting
to preserve the affordability of the property.
   (4) A statement that the owner has satisfied all notice
requirements pursuant to subdivision (b) of Section 65863.10, unless
the notice of opportunity to submit an offer to purchase is delivered
more than 12 months prior to the anticipated date of termination,
prepayment, or expiration of rental restrictions.
   (i) If a qualified entity elects to purchase an assisted housing
development, it shall make a bona fide offer to purchase the
development. A qualified entity's bona fide offer to purchase shall
identify whether it is a tenant association, nonprofit organization,
public agency, or profit-motivated organizations or individuals and
shall certify, under penalty of perjury, that it is qualified
pursuant to subdivision (e). During the first 180 days from the date
of an owner's bona fide notice of the opportunity to submit an offer
to purchase, an owner shall accept a bona fide offer to purchase only
from a qualified entity. During this 180-day period, the owner shall
not accept offers from any other entity.
   (j) When a bona fide offer to purchase has been made to an owner,
and the offer is accepted, a purchase agreement shall be executed.
   (k) Either the owner or the qualified entity may request that the
fair market value of the property, as a development, be determined by
an independent appraiser qualified to perform multifamily housing
appraisals, who shall be selected and paid by the requesting party.
All appraisers shall possess qualifications equivalent to those
required by the members of the Appraisers Institute. This appraisal
shall be nonbinding on either party with respect to the sales price
of the development offered in the bona fide offer to purchase, or the
acceptance or rejection of the offer.
   (  l )  During the 180-day period following the initial
180-day period required pursuant to subdivision (i), an owner may
accept an offer from a person or an entity that does not qualify
under subdivision (e). This acceptance shall be made subject to the
owner providing each qualified entity that made a bona fide offer to
purchase the first opportunity to purchase the development at the
same terms and conditions as the pending offer to purchase, unless
these terms and conditions are modified by mutual consent. The owner
shall notify in writing those qualified entities of the terms and
conditions of the pending offer to purchase, sent by registered or
certified mail, return receipt requested. The qualified entity shall
have 30 days from the date the notice is mailed to submit a bona fide
offer to purchase and that offer shall be accepted by the owner. The
owner shall not be required to comply with the provisions of this
subdivision if the person or the entity making the offer during this
time period agrees to maintain the development for persons and
families of very low, low, and moderate income in accordance with
paragraph (2) of subdivision (e). The owner shall notify the
department regarding how the buyer is meeting the requirements of
paragraph (2) of subdivision (e).
   (m) This section shall not apply to any of the following: a
government taking by eminent domain or negotiated purchase; a forced
sale pursuant to a foreclosure; a transfer by gift, devise, or
operation of law; a sale to a person who would be included within the
table of descent and distribution if there were to be a death
intestate of an owner; or an owner who certifies, under penalty of
perjury, the existence of a financial emergency during the period
covered by the first right of refusal requiring immediate access to
the proceeds of the sale of the development. The certification shall
be made pursuant to subdivision (p).
   (n) Prior to the close of escrow, an owner selling, leasing, or
otherwise disposing of a development to a purchaser who does not
qualify under subdivision (e) shall certify under penalty of perjury
that the owner has complied with all provisions of this section and
Section 65863.10. This certification shall be recorded and shall
contain a legal description of the property, shall be indexed to the
name of the owner as grantor, and may be relied upon by good faith
purchasers and encumbrances for value and without notice of a failure
to comply with the provisions of this section.  Regardless of
whether a certification has been recorded as required under this
subdivision, this section shall not affect the rights of a purchaser
or encumbrancer for value who acts in good faith   and
without notice of a failure to comply with this section. 
   Any person or entity acting solely in the capacity of an escrow
agent for the transfer of real property subject to this section shall
not be liable for any failure to comply with this section unless the
escrow agent either had actual knowledge of the requirements of this
section or acted contrary to written escrow instructions concerning
the provisions of this section.
   (o) The department shall undertake the following responsibilities
and duties:
   (1) Maintain a form containing a summary of rights and obligations
under this section and make that information available to owners of
assisted housing developments as well as to tenant associations,
local nonprofit organizations, regional or national nonprofit
organizations, public agencies, and other entities with an interest
in preserving the state's subsidized housing.
   (2) Compile, maintain, and update a list of entities in
subdivision (d) that have either contacted the department with an
expressed interest in purchasing a development in the subject area or
have been identified by the department as potentially having an
interest in participating in a right-of-first-refusal program. The
department shall publicize the existence of the list statewide. Upon
receipt of a notice of intent under Section 65863.10, the department
shall make the list available to the owner proposing the termination,
prepayment, or removal of government assistance or to the owner of
an assisted housing development in which there will be the expiration
of rental restrictions. If the department does not make the list
available at any time, the owner shall only be required to send a
written copy of the opportunity to submit an offer to purchase notice
to the qualified entities which directly contact the owner and to
post a copy of the notice in the common area pursuant to subdivision
(g).
   (p) (1)  The provisions of this   This 
section may be enforced either in law or in equity by any qualified
entity entitled to exercise the opportunity to purchase and right of
first refusal under this section,  or any affected public entity,
as defined in paragraph (2) of subdivision (a) of Section 65863.10,
or any affected tenant, as defined in paragraph (2) of subdivision
(a) of Section 65863.10,  that has been adversely affected by an
owner's failure to comply with this section.
   (2) An owner may rely on the statements, claims, or
representations of any person or entity that the person or entity is
a qualified entity as specified in subdivision (d), unless the owner
has actual knowledge that the purchaser is not a qualified entity.

   (3)  If the person or entity is not an entity as specified in
subdivision (d), that fact, in the absence of actual knowledge as
described in paragraph (2), shall not give rise to any claim against
the owner for a violation of this section. 
   (q) It is the intent of the Legislature that the provisions of
this section are in addition to, but not preemptive of, applicable
federal laws governing the sale, or other disposition of a
development that would result in either (1) a discontinuance of its
use as an assisted housing development or (2) the termination or
expiration of any low-income use restrictions that apply to the
development.