BILL ANALYSIS �
AB 2314
Page 1
Date of Hearing: April 17, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2314 (Carter) - As Amended: April 11, 2012
SUBJECT : Real Property: Blight
KEY ISSUES :
1)Should the sunset on the existing law that requires owners to
maintain vacant foreclosed property be eliminated, thus making
the provision permanent?
2)Should local enforcement agencies be given additional tools so
that they can more effectively take action against blighted
properties?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This is one of a package of bills sponsored by the Attorney
General's Office that seeks to address the many adverse
consequences of the mortgage foreclosure crisis. Specifically,
this bill addresses the problem of blight, which is made worse
by a large number of often vacant and run-down properties that
have been foreclosed upon or are in danger of foreclosure. In
2008, the Legislature enacted and the Governor signed SB 1137.
Among several provisions addressing foreclosure-related
problems, that bill required legal owners of foreclosed
properties to maintain the property and authorized local
governments to impose stiff penalties for failure to do so.
That provision is set to expire as of January 1, 2013. This
bill would remove that sunset and thus make the provision
permanent. In addition, this bill makes several changes in the
way that local enforcement agencies take corrective action
against blighted properties and substandard buildings. For
example, in order to facilitate the return of the property to
the residential market, this bill would give new owners who are
actively working to improve the property a 60-day grace period
before any enforcement action is taken against existing
violations. The bill would also require an entity that releases
a lien on a blighted property to notify the enforcement agency,
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so as to better facilitate commencement of an enforcement
action. Finally, the bill would provide that when a blighted
property is placed in receivership - generally the last step
that an enforcement agency might take against a recalcitrant
owner - the receiver or the enforcement agency may obtain a
court order requiring the legal owner to pay any unrecovered
costs of the receivership. In sum, this bill would enact
several changes that would permit local authorities to more
easily and efficiently use their existing powers to address the
problem of foreclosure-related blight.
SUMMARY : Removes the sunset on a statute that permits local
governments to fine property owners for failure to maintain
certain property and makes other changes relating to the ability
of a local enforcement agency to abate nuisances and correct
substandard building violations. Specifically, this bill :
1)Removes the sunset on and thereby makes permanent a statute
that requires a legal owner to maintain vacant residential
property purchased or acquired at foreclose.
2)Provides that if a person has purchased, and is in the process
of abating a violation at, a residential property that has
been foreclosed upon on or after January 1, 2008, then a local
enforcement agency shall not commence any action or proceeding
until at least sixty days after the person takes title to the
property, unless a shorter period of time is deemed necessary
by the enforcement agency to prevent or remedy an immediate
threat to the health and safety of the public or occupants of
the structure.
3)Requires an entity, that releases a lien securing a deed of
trust or mortgage on a property for which a notice of pendency
of action has been recorded by an enforcement agency, to
notify the enforcement agency within 30 days of releasing the
lien.
4)Provides that where a receiver has been appointed to take
possession of a substandard building, a court may, upon the
request of either the receiver or an enforcement agency, order
the owner of the property to pay all unrecovered costs
associated with the receivership.
EXISTING LAW :
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1)Requires, until January 1, 2013, a legal owner to maintain
vacant residential property purchased at a foreclosure sale or
acquired by that owner through foreclosure under a mortgage or
deed of trust. Authorizes a local governmental entity to
impose civil fines and penalties for failure to maintain that
property of up to $1000 per day for a violation. (Civil Code
Section 2929.3(a)(1).)
2)Requires the governmental entity to provide a period of not
less than 30 days for the legal owner to remedy a violation of
the above provision before imposing a civil fine or penalty
and to allow for a hearing and an opportunity to contest any
fine, as specified. However a governmental entity may provide
less than 30 days' notice, as specified, if a specific
condition of the property threatens public health or safety.
(Civil Code Section 2929.3(a)(2) and (c).)
3)Defines "failure to maintain," for purposes of the above, to
mean failure to care for the exterior of the property,
including, but not limited to, permitting excessive foliage
growth that diminishes the value of the surrounding
properties, failing to take action to prevent trespassers or
squatters from remaining on the property, or failing to take
action to prevent mosquito larvae from growing in standing
water or other conditions that create a public nuisance.
(Civil Code Section 2929.3(b).)
4)Specifies that fines and penalties collected pursuant to the
above shall be directed to local nuisance abatement programs;
that a governmental entity may not impose fines under both the
above provisions and a local ordinance; that the above
provisions do not preempt any local ordinance; and that any
rights and remedies provided by the above provisions are
cumulative and in addition to any other rights and remedies
provided by law. (Civil Code Section 2929.3(d)-(h).)
5)Provides that if any building is constructed or maintained in
violation of any provision of law or regulation, as specified,
or if a nuisance exists in any building or upon the lot on
which it is situated, an enforcement agency shall, after 30
days' notice to abate the nuisance or violation, institute any
appropriate action or proceeding to prevent, restrain,
correct, or abate the violation or nuisance. Provides that
the enforcement agency shall commence proceedings to abate the
violation by repair, rehabilitation, vacation, or demolition
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of the building, as specified. (Health & Safety Code Section
17980(a)-(b).)
6)Provides that if an owner fails to comply within a reasonable
time with the terms of an order or notice to abate a nuisance
or violation, the enforcement agency may seek and a court may
order fines and penalties as specified, including the
appointment of a receiver to take possession of the property
in order to correct the conditions that give rise to the
nuisance or violation. Specifies the power and duties that
shall be granted to the receiver, including but not limited
to, the power to make contracts and employ contractors as
necessary to correct the condition cited in the violation; the
power to collect rents and income from the substandard
building; the power to borrow funds to pay for necessary
repairs and, with the approval of the court, to secure a lien
on the property to secure that debt. (Health & Safety Code
Section 17980.7.)
COMMENTS : This bill is part of a package of foreclosure-related
bills that is sponsored by the California Attorney General's
Office and known collectively as the California Homeowner Bill
of Rights. One consequence of the foreclosure crisis, according
to the author and sponsor, is that foreclosed properties often
remain empty, fall into disrepair, and become a source of blight
in many California communities. This bill, therefore, seeks to
give local jurisdictions more tools to fight blight. It does so
first by removing the sunset on an existing law that requires
the legal owner of vacant foreclosed property to maintain that
property or potentially face a fine of up to $1000 per day per
violation. In addition, this bill seeks to facilitate the
existing authority of local enforcement agencies to take various
actions against owners of substandard buildings.
Removal of Sunset on SB 1137 Provision Requiring Owners to
Maintain Property : In 2008 the Legislature enacted and the
Governor signed SB 1137 (Chapter 69, Stats. of 2008) in an
effort to address an array of problems created by the
foreclosure crisis. Although most of the bill's provisions
sought to reduce the number of foreclosures (e.g. requiring
lenders and servicers to take certain steps before filing a
notice of default), one provision of the bill required the legal
owners of vacant foreclosed residential properties to maintain
their property and it authorized local governmental entities to
fine owners who failed to maintain their property up to $1000
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per day per violation. The law defined "failure to maintain" to
include failure to care for the exterior of the property,
including failure to clear excessive foliage; failure to take
action to prevent trespassers and squatters from remaining on
the property; or failure to take action to prevent mosquito
larvae from growing in standing water; or failure to take action
to prevent any other conditions that create a public nuisance.
Existing law requires the governmental entity to give the legal
owner at least 30 days to remedy the violation prior to imposing
the fine, and the owner is also entitled to a hearing and an
opportunity to contest the fine. Currently these provisions are
due to sunset on January 1, 2013. By removing this sunset date,
this bill will permit local jurisdictions to continue using this
remedy.
Code Enforcement and Receivership Provisions : In addition to
extending the sunset on SB 1137's "failure to maintain"
provisions, this bill would make three modest but important
changes to the manner by which local code enforcement agencies
address the problem of foreclosure-related blight.
First, this bill would give the new owner of a previously cited
property additional time to correct substandard building
conditions on blighted property. Existing law permits a local
enforcement agency to inspect buildings and issue notices to
owners whose buildings create a public nuisance or violate
certain state or local building codes. If after 30 days' notice
the owner fails to abate the nuisance or correct the violation -
or after a shorter period if the conditions create an immediate
public threat - the enforcement agency must institute an
appropriate action or proceeding to prevent, restrain, correct,
or abate the violation or nuisance. This bill would amend this
law by providing that where the owner has purchased a recently
foreclosed property and is in the process of abating the
nuisance or correcting the violation, then the enforcement
agency shall not commence an enforcement action until at least
60 days after the person takes title to the property unless the
severity of the conditions warrant a shorter period. The aim of
this provision is to encourage the transfer of blighted
residential property into the hands of persons who will fix-up
the property and make it habitable. According to the sponsor,
persons who might otherwise purchase and rehabilitate
residential property are reluctant to do so if the property has
been cited for a violation that must be corrected within 30
days. This would give an owner who genuinely seeks to either
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occupy the building or restore it to the residential market a
reasonable amount of time to do so.
Second, this bill would require a lienholder who releases a lien
on any property on which the enforcement agency has recorded a
lis pendens to notify the enforcement agency within 30 days of
releasing the lien. According to the sponsor, when an
enforcement agency must make a determination as to the
appropriate enforcement action, if any, to take against a
substandard property, it is often helpful for it to know whether
or not any liens have been recorded against the property and if
and when the lien is released. This would create an efficient
means for the enforcement agency to know when a lien has been
released.
Third, this bill would allow for the recovery of certain costs
associated with a health and safety receivership. Such
receiverships are typically used as a last resort. But where a
property owner refuses to take any action, even after receiving
notice and given adequate time to correct a violation, the
enforcement may seek, and the court may appoint, a receiver to
take possession of the property. Existing law sets forth the
conditions for establishing the receivership and lists certain
powers that a court may grant to the receiver. The receiver's
primary function in taking possession of the property is to do
whatever is necessary to correct the conditions that gave rise
to the receivership. For example, the receiver typically hires
contractors to make needed repairs. In order to pay these
contractors, the receiver might be empowered to collect rents on
the property or to obtain loans that are secured by a lien upon
the property. This bill does not change any of the statutory
requirements for establishing a receivership or affect the
receiver's statutory powers; it would, however, once a
receivership has been established, permit either the receiver or
the enforcement agency to seek a court order requiring the owner
of the property to pay any "unrecovered costs" of the
receivership (i.e. presumably those costs not covered by the
loans, rents, or other revenue sources). This would ensure that
costs associated with rehabilitating the property are borne by
the responsible party: the recalcitrant owner who refuses to
correct conditions even after being placed on notice. Arguably,
existing receivership statutes, which grant courts considerable
discretion, would permit such a requirement in the initial court
order creating the receivership. This bill, however, would
expressly state that the receiver or the enforcement agency
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could request such an order if one is not initially provided.
The bill specifies that the court "may" grant such an order;
discretion will ultimately remain, consistent with existing law,
with the court.
ARGUMENTS IN SUPPORT : According to the sponsor, the California
Attorney General's Office, one the many legacies of the mortgage
crisis is that "communities throughout California are being
inundated with foreclosed homes, which often remain empty and
fall into disrepair." The resulting blight, the sponsor
contends, creates a nuisance for neighboring residents and
further diminishes home values. Furthermore vacant properties
create health and safety risks by, among other things, creating
fire hazards, attracting criminal activity, and leaving standing
water that breeds mosquitos. Local governments and taxpayers,
the sponsor notes, are ultimately "saddled with the expense of
dealing" with these problems. The sponsor believes that AB 2314
will "provide local jurisdictions with additional tools to fight
blight."
REGISTERED SUPPORT / OPPOSITION :
Support
California Attorney General's Office (sponsor)
California Nurses Association
Opposition
None on file
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334