BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 2314 (Carter)
As Amended June 14, 2012
Hearing Date: June 26, 2012
Fiscal: No
Urgency: No
SK/BCP:rm
SUBJECT
Real Property: Blight
DESCRIPTION
Under existing law, a legal owner is required to maintain vacant
residential property purchased by that owner at a foreclosure
sale or acquired through foreclosure under a mortgage or deed of
trust. A governmental entity may impose a civil fine of up to
$1,000 per day for a violation. These provisions sunset on
January 1, 2013. This bill would delete this sunset date.
This bill would also provide purchasers of foreclosed
residential properties 60 days to remedy code violations before
being subject to enforcement actions and would allow the
imposition of the costs of a receivership on blighted property
to be imposed directly against the owner of the blighted
property.
BACKGROUND
California leads the nation with one of the highest rates of
foreclosures. According to RealtyTrac, in California, one in
every 324 housing units received a foreclosure filing in May
2012, compared to one in every 639, nationwide and 42,243 houses
received a foreclosure notice in February alone. The San Diego
CityBeat newspaper described the impact of blighted foreclosed
properties on neighborhoods, noting:
. . . foreclosed, abandoned and neglected properties- largely
clustered in San Diego's low-income neighborhoods-continue to
be magnets for squatters, drug dealers, prostitutes and stray
(more)
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animals, reducing property values and potentially becoming
public-health hazards. . . . �CityBeat's Kelly Davis'] piece
led with the tale of Gabriela Castellanos, who had to close
her home daycare business in Mountain View because parents
were too concerned about the conditions and unseemly
characters around nearby abandoned homes. Davis reported that
a study by CPI �Center for Policy Initiatives] and ACCE
�Alliance of Californians for Community Empowerment] found
that an estimated 57,000 foreclosures in San Diego between
2008 and 2012 would cost the city upwards of $134 million in
police, fire and code-enforcement services and result in more
than $19 billion in lost property value. (San Diego CityBeat,
"Fixing San Diego's foreclosure blight," April 11, 2012.)
Over the past few years, the California Legislature has passed
legislation in an effort to respond to the ongoing foreclosure
crisis. In 2008, the Legislature passed and the Governor signed
SB 1137 (Perata, Corbett, Machado, Ch. 69, Stats. 2008), an
urgency measure intended to, among other things, encourage loan
modifications in order to prevent avoidable foreclosures. SB
1137 also included provisions to empower local governments to
protect residents from blight caused by foreclosed properties.
Those provisions, which sunset January 1, 2013, require a legal
owner to maintain vacant residential property, as specified, and
allow for the imposition of fines for the failure to maintain
that property.
This bill, which is part of the six-bill package sponsored by
Attorney General Kamala Harris entitled the "California
Homeowner Bill of Rights," would delete this sunset date. The
bill, which is intended to provide additional tools to local
governments to address issues related to foreclosed properties,
would also encourage new purchasers of blighted, foreclosed
properties to fix up those properties and give them additional
time to do so.
CHANGES TO EXISTING LAW
1. Existing law provides that anything that is injurious to
health, indecent or offensive to the senses, obstructs the
free use of property, or unlawfully obstructs free passage is
a nuisance. (Civ. Code Sec. 3479.)
Existing law requires a legal owner to maintain vacant
residential property purchased by that owner at a foreclosure
sale, or acquired by that owner through foreclosure under a
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mortgage or deed of trust. (Civ. Code Sec. 2929.3.)
Existing law authorizes a governmental entity to impose a
civil fine of up to $1,000 per day for a violation, and
provides that if a governmental entity chooses to impose a
fine pursuant to this section, it shall give notice of the
violation and notice of intent to assess a civil fine if
corrective action is not commenced within 14 days and
completed within a period of not less than 30 days. (Civ. Code
Sec. 2929.3.)
Existing law requires a governmental entity to provide a
period of not less than 30 days for the legal owner to remedy
the violation prior to imposing a civil fine, but permits less
than 30 days' notice to remedy a condition if a specific
condition of the property threatens public health or safety,
as specified. (Civ. Code Sec. 2929.3.)
Existing law states that these provisions shall not preempt
any local ordinance and applies those provisions only to
residential real property. (Civ. Code Sec. 2929.3.) Existing
law provides that fines and penalties collected pursuant to
this section shall be directed to local nuisance abatement
programs. (Id.)
Existing law provides that the above provisions shall remain
in effect only until January 1, 2013, and as of that date is
repealed, unless a later enacted statute, that is enacted
before January 1, 2013 deletes or extends that date. (Civ.
Code Sec. 2924.8.)
This bill would delete the sunset date and would provide that
fines and penalties collected under this section may also be
directed to legal abatement proceedings.
2. Existing law authorizes a local government enforcement
agency to issue a notice of violation to the owner of a
residential property for the failure to comply with building
codes or for the existence of a nuisance on the property.
After 30-days' notice to abate the nuisance or violation, the
enforcement agency may institute an action or proceeding to
prevent, retrain, correct or abate the nuisance. Shorter
notice may be provided if deemed necessary to prevent or
remedy an immediate threat to the health and safety of the
public or occupants of the structure. (Health & Saf. Code
Sec. 17980.)
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Existing law requires an enforcement agency that institutes an
action or proceeding to record a notice of the pendency of the
action or proceeding in the county recorder's office, as
specified, and permits the agency to charge the property owner
for any cost involved in recording the notice. (Health & Saf.
Code Sec. 17985.) Existing law also requires filing of a
notice of the pendency of an action whenever an action is
commenced to declare a building uninhabitable, and permits the
filing of the notice by a party to an action who asserts a
real property claim. (Code Civ. Proc Secs. 405.2, 405.20.)
This bill would additionally provide that if a person has
purchased and is in the process of diligently abating any
violation at a residential property that has been foreclosed
on or after January 1, 2008, an enforcement agency shall not
commence any action or proceeding until at least 60 days after
the person takes title to the property, unless a shorter
period of time is deemed necessary by the enforcement agency
in its sole discretion to prevent or remedy an immediate
threat to the health and safety of the neighboring community,
the public or occupants of the structure.
This bill would provide that if an entity releases a lien
securing a deed of trust or mortgage on a property for which a
notice of pendency of action has been recorded, as specified,
it shall notify in writing the enforcement agency that issued
the order or notice within 30 days of releasing the lien.
3. Existing law permits an enforcement agency, tenant, or
tenant association or organization to seek court appointment
of a receiver for a substandard building if the owner fails to
comply with the terms of an order or notice to repair or
abate, as specified, and provides, unless the court otherwise
permits, that the receiver shall have the following powers:
(1) take full control of the property; (2) manage the building
and pay expenses; (3) secure a cost estimate and construction
plan from a licensed contractor for the necessary repairs; (4)
enter into contracts and employ a licensed contractor to
correct the conditions; (5) collect all rents and income; (6)
use all rents and income to pay the cost of rehabilitation and
repairs, as specified; (7) borrow funds as necessary to
correct conditions and pay for any relocation benefits, as
specified, and secure that debt as a lien on the property with
court approval; and (8) exercise other specified powers.
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This bill would authorize a court, upon the request of a
receiver, to require the owner of the property to pay all
unrecovered costs associated with the receivership in addition
to any other remedy authorized by law.
COMMENT
1. Stated need for the bill
According to the author:
Communities throughout the State are being inundated with
foreclosed homes which often fall into disrepair. Public
health and safety are implicated by vacant foreclosed homes
because they attract gangs, prostitution, drug users,
squatters, and unattended property can create a mosquito
abatement problem.
The author also points out that AB 2314 would provide additional
tools to local governments to address the issue of blight by
removing the sunset on blight enforcement, creating an incentive
for individuals to purchase a blighted property, allowing the
costs of receivership to be imposed directly against the owner
of the property, and requiring banks that release liens on
certain properties to inform local agencies of that release.
In support of this bill, the Attorney General writes:
As a lingering legacy of the mortgage crises, communities
throughout California are being inundated with foreclosed
homes, which often remain empty and fall into disrepair. This
blight creates a nuisance for neighboring residents, and
further diminishes the value of their homes. . . . Local
governments and taxpayers are increasingly saddled with �the]
expense of dealing with blighted, vacant foreclosed homes. .
. . These provisions will assist local jurisdictions in
protecting communities from the health, safety and financial
consequences of blight exacerbated by the mortgage foreclosure
crisis.
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2. Removal of sunset
Over the past few years, the California Legislature has passed
legislation in an effort to respond to the ongoing foreclosure
crisis. In 2008, the Legislature passed and the Governor signed
SB 1137, an urgency measure intended to encourage loan
modifications in order to prevent avoidable foreclosures. That
measure, which sunsets on January 1, 2013, contained various
provisions to address issues in the foreclosure process,
including a requirement that legal owners maintain vacant
residential properties purchased at foreclosure sales.
Maintenance of vacant properties is essential to protecting the
surrounding homes (and community) from the effect of neglected
foreclosed homes. Regarding problems posed by neglected
foreclosed properties, the Los Angeles Times' August 28, 2007
article "Blight moves in after foreclosures" noted:
Houses abandoned to foreclosure are beginning to breed
trouble, adding neighbors to the growing ranks of victims.
Stagnant swimming pools spawn mosquitoes, which can carry
the potentially deadly West Nile virus. Empty rooms lure
squatters and vandals. And brown lawns and dead vegetation
are creating eyesores in well-tended neighborhoods.
The authors note that foreclosure blight is a problem that is
not going away in the near future, writing, "The problem of
blighted abandoned properties is likely to get worse in the
coming years. In California defaults jumped 14% from February
to March and many experts believe that we are on the cusp of
another wave of foreclosures. In a recently released statement,
Brandon Moore, the CEO of RealtyTrac, said, 'The dam may not
burst in the next 30 to 45 days, but it will eventually burst,
and everyone downstream should be prepared for that to happen -
both in terms of new foreclosure activity and new short sale
activity.' . . . foreclosed properties bring down the values
of surrounding homes."
To additionally empower local governments to take action and
require maintenance of those properties, SB 1137 allowed, until
January 1, 2013, those governments to impose a fine of up to
$1,000 per day for failing to maintain a home, after providing
notice of their intent to fine. SB 1137 also ensured that local
governments retained discretion to fashion their own ordinances.
This bill would remove the January 1, 2013 sunset date, thus
extending these provisions indefinitely. From a public policy
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standpoint, the permanent extension of these provisions would
appear to ensure that local governments retain the ability to
protect residents, as well as the community, from foreclosure
blight. Furthermore, from the perspective of a legal owner, the
required maintenance of vacant properties would appear to only
increase the properties' resale and rental value.
It should also be noted that by not preempting local ordinances,
local governments would retain the ability to enact their own
ordinances, if necessary, to deal with their own unique
situations. Thus, this bill would permanently extend an
optional tool that local governments have full discretion to
either use, not use, or enact a version that is more uniquely
suited to their needs. Failure to extend the sunset would
remove the ability of local governments to use this specific
foreclosure related provision to address blight.
3. Additional time to correct
Under existing law, a local enforcement agency may bring an
action to prevent, restrain, correct, or abate a building code
violation or nuisance after providing a 30-day notice to abate
the nuisance or violation. To encourage persons to purchase
foreclosed homes that may have violations or be a nuisance, this
bill would, instead, prohibit an enforcement agency from
commencing the above actions or proceedings until at least 60
days after a person takes title to a residential property that
had been foreclosed on or after January 1, 2008 provided that
the person is in the process of diligently abating any violation
at the property. The authors note that the goal of the
provision is to "provide an incentive for potential purchasers
of nuisance propert�ies] that will provide additional
flexibility and reduce the burden of abating violations." Thus,
by potentially delaying enforcement of these violations against
new homeowners, an individual may be more inclined to purchase
and fix up a foreclosed property. It would appear to be
beneficial for foreclosing banks, the surrounding community, and
the homeowners to encourage the purchasing of nuisance
properties by individuals who are willing to address the issues
in a timely fashion. These new homeowners would likely purchase
the home for below market value (facilitating home ownership)
and then invest time and money into bringing the property up to
code.
In order to adequately protect the public and any residents in
the property, it should be noted that under both existing law
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and the proposed 60-day time period, a shorter notice may be
provided if the enforcement agency in its sole discretion deems
it necessary to prevent or remedy an immediate threat to the
health and safety of the neighboring community, the public or
occupants of the structure.
4. Receivership
Under existing law, an enforcement agency may issue an order or
notice to repair or abate code violations that are "so extensive
and of such a nature that the health and safety of residents or
the public is substantially endangered." (Health & Saf. Code
Sec. 17980.6.) If an owner fails to comply with the terms of
that order or notice within a reasonable time, the enforcement
agency, tenant, or tenant association organization may seek
court appointment of a receiver for the "substandard building."
A receiver appointed by the court has various powers, including
the ability to borrow funds to pay for repairs necessary to
correct conditions cited in the notice of violation and, with
court approval, secure that debt and any moneys owed to the
receiver for services performed as a lien on the property.
This bill would augment those provisions by additionally
allowing a court, upon request of the receiver, to require the
owner of the property to pay "all unrecovered costs associated
with the receivership in addition to any other remedy authorized
by law." The author asserts that this provision 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." Although
any lien placed on the property could arguably be paid off at
any time, it likely would not be satisfied until the actual sale
of the property to a new owner (who would want clean title) -
that delay between securing of the lien and sale could be a
significant period of time. The effect of the proposed
provision would be to allow the court to directly order the
owner to pay the "unrecovered costs associated with the
receivership," although as a practical matter, it is unclear
whether those orders will be complied with in more timely manner
than the satisfaction of any lien on the property. To the
extent that receivers elect to forgo the use of liens in favor
of the court directly requiring the owner to pay for costs, that
effect could avoid the filing of liens that would need to be
satisfied as part of the sale of the property in order to convey
clean title.
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5. Lien release
This bill requires any entity releasing a lien securing a deed
of trust or mortgage on a property for which a code enforcement
agency has recorded a notice of pending action to notify in
writing the enforcement agency within 30 days of releasing the
lien. This provision reflects the National Mortgage Settlement
Agreement, which requires loan servicers, when making a
determination not to pursue foreclosure action on a property
with respect to a first lien mortgage loan, to notify local
authorities, such as tax authorities, courts, or code
enforcement departments. The intent of this provision is to
expedite enforcement or condemnation of a nuisance property.
Support : American Federation of State, County and Municipal
Employees (AFSCME), AFL-CIO; California Bankers Association;
California Credit Union League; California Financial Services
Association; California Independent Bankers; California Mortgage
Association; California Mortgage Bankers Association; California
Nurses Association; California Professional Firefighters;
California State Association of Counties; Community Associations
Institute; Los Angeles County Democratic Party; National Asian
American Coalition; National Nurses Organizing Committee; Public
Counsel; United Trustees Association
Opposition : None Known
HISTORY
Source : Attorney General Kamala Harris
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Related Pending Legislation : SB 1472 (Pavley & DeSaulnier),
which is identical to this bill, is scheduled to be heard in the
Assembly Housing and Community Development Committee on June 27,
2012.
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AB 2557 (Feuer) would provide injunctive relief to a person
whose property is injuriously affected by a neighboring owner's
failure to maintain a vacant foreclosed residential property and
permits a city attorney, county counsel, or district attorney to
seek the appointment of a receiver for a substandard building.
This bill failed passage on the Assembly Floor.
Prior Legislation : SB 1137 (Perata, Corbett, Machado, Ch. 69,
Stats. 2008) See Background.
Prior Vote :
Senate Transportation and Housing Committee (Ayes 8, Noes 0)
Assembly Floor (Ayes 71, Noes 0)
Assembly Housing and Community Development Committee (Ayes 7,
Noes 0)
Assembly Judiciary Committee (Ayes 10, Noes 0)
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