BILL ANALYSIS �
AB 2557
Page 1
Date of Hearing: April 17, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2557 (Feuer) - As Amended: March 29, 2012
As Proposed to be Amended
SUBJECT : Real Property: Maintenance and Abatement
KEY ISSUES :
1)Should a person whose property is injuriously affected by
conditions of blight on neighboring property be entitled to
injunctive relief against the owner of the blighted property?
2)Should a city attorney, district attorney, or county counsel
be ABLE to seek the appointment of a receiver for a
substandard building, in the same manner that a local
enforcement agency, tenant, or tenant organization CAN
presently seek the appointment of a receiver?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
One of the many consequences of the foreclosure crisis in
California, as elsewhere, is an increase in the number of vacant
properties that fall into a state of disrepair. Beyond creating
an eyesore, these vacant properties can create health risks,
attract criminal activity, and depress the values of surrounding
homes. Existing law requires that owners of vacant foreclosed
properties maintain those properties or face significant fines.
However, for a variety of reasons, including a lack of resources
for enforcement activity, local governments are often unable to
take full advantage of this law. Under this bill, however, if
the owner of the vacant property violates the law by failing to
maintain the property, a neighbor whose property is injuriously
affected by the violation may seek an injunction forcing the
owner to correct the violation. In effect, the neighbors could
obtain through injunctive relief an outcome that local
governments, for a variety of reasons, are unable to obtain. In
addition, this bill would also authorize a city attorney,
district attorney, or county counsel to seek a court-ordered
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receivership for a seriously substandard building. Such
receiverships may already be sought by a local enforcement
agency, a tenant, or tenant organization. This bill would not
alter any of the requirements for obtaining a receivership or
the powers of the receiver. It would simply add local
prosecuting attorneys to the list of people who may seek
appointment of a receiver from the court. As a practical
matter, enforcement agencies already rely upon city attorneys,
district attorneys, or county counsel when they petition the
court for a receiver. This provision of the bill makes a
technical change that creates a more efficient process by which
local prosecuting attorneys can be used.
SUMMARY : Provides 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.
Specifically, this bill :
1)Permits a person whose property is injuriously affected or
whose enjoyment is lessened by another property owner's
failure to maintain a vacant foreclosed property to bring an
action for injunctive relief. Specifies that an action may be
brought in either a small claims court or a superior court in
which the property is situated and requires the person seeking
injunctive relief to comply with the same notice requirements
that local governmental entities must comply with prior to
imposing a fine. Provides that a prevailing plaintiff in a
superior court action may recover court costs and reasonable
attorney's fees.
2)Adds a city attorney, district attorney, and county counsel to
the list of persons and entities that may seek a
court-appointed receiver for a substandard building.
EXISTING LAW :
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).)
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2)Requires a governmental entity, prior to imposing the above
fine, to give the legal owner notice of the alleged violation,
and notice of the entity's intent to assess a civil fine if
action is commenced with 14 days to correct the violation and
not completed within 30 days. Requires that the legal owner
be provided with 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
of the building, as specified. (Health & Safety Code Section
17980(a)-(b).)
6)Provides that if a building is maintained in a manner that
violates the provisions of state or local law, and the
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violations are so extensive and of such a nature that the
health and safety of residents or the public is substantially
endangered, the enforcement agency may issue an order or
notice to repair or abate. (Health & Safety Code Section
17980.6.)
7)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, as described in 6) above, 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
powers 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 : One of the many consequences of the foreclosure
crisis in California, as elsewhere, is an increase in the number
of vacant foreclosed property that fall into a state of
disrepair. Beyond creating an eyesore, these vacant properties
can create health risks, attract criminal activity, and depress
the values of surrounding homes. Making matters worse, as a
recent report issued by the National Fair Housing Alliance
indicates, failure to maintain foreclosed property - including
real estate owned (REO) properties - tends to disproportionately
affect properties in poorer neighborhoods and neighborhoods of
color. �See National Fair Housing Alliance, "The Banks are
Back, Our Neighborhoods are Not: Discrimination in the
Maintenance and Marketing of REO Properties," April 4, 2014; and
"Group accuses Wells Fargo of bias in maintaining foreclosed
homes," Los Angeles Times, April 10, 2012.]
Injunctive Relief for Persons Affected by a Failure to Maintain
Foreclosed Property : Existing law requires that owners of
vacant foreclosed properties maintain those properties and it
permits local governmental entities to fine owners if they fail
to maintain them. However, for a variety of reasons, including
a lack of resources for enforcement activity, local governments
are often unable to take full advantage of this law. Under this
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bill, however, if the owner of the vacant property violates the
law by failing to maintain the property, a neighbor or other
person whose property is injuriously affected by the violation
may seek an injunction forcing the owner to correct the
violation. In effect, the neighbors could obtain through
injunctive relief an outcome that local governments, for a
variety of reasons, are unable to obtain.
According to the author, the injunctive relief provided by this
bill is intended to supplement existing law; therefore, the
cause of action created by this bill is added and conforms to
existing provisions that already require legal owners to
maintain their vacant foreclosed properties. Existing law
permits a local government entity to issue a fine of up to $1000
per day per violation. However, a number of city attorneys in
California have informed the Committee that they cannot always
use this option, in part because of budgetary restrictions and
in part due to the geographically dispersed nature of the
problem. This bill, therefore, would permit persons who are
most directly affected by the blight - i.e. neighbors - to take
action against a legal owner who refuses to maintain his or her
vacant foreclosed property as required by law.
The language of this bill mirrors an existing nuisance abatement
statute that permits private persons who are adversely affected
by nuisance property to seek relief from the courts.
Specifically, Section 731 of the Code of Civil Procedure permits
"any person whose property is injuriously affected, or whose
personal enjoyment is lessened by a nuisance" �emphasis added]
may bring an action for damages or injunctive relief. However,
the definition of "nuisance" in this statute requires the
offending conditions to rise to the level of being "injurious to
health," create "an obstruction to the free use of property," or
"obstruct free passage or use . . . of any navigable river, bay,
stream, canal, or basin, or any public park, square, street, or
highway." (Civil Code Section 3479.) By comparison, Civil Code
Section 2929.3, which this bill amends, defines "failure to
maintain" 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." Clearly,
there is considerable overlap between what constitutes an
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actionable "nuisance" and what constitutes a "failure to
maintain" under existing law. Just as clearly, some of the
violations that constitute a "failure to maintain," such as
failure to clear excessive foliage or maintain the exterior,
might not necessarily rise to the level of a "nuisance," even
though such violations might injuriously affect the value of
neighboring properties or lessen a neighbor's quiet enjoyment of
property.
Because the purpose of this bill is to allow neighbors to take
action against the same violations for which a local government
entity may seek a $1000 per day fine, it would also require the
person seeking the injunction to comply with the same notice
requirements that a local government must comply with before
imposing a fine. Specifically, existing law requires a local
government entity that chooses to impose a fine to give the
legal owner notice of the alleged violation, including a
description of the conditions that give rise to the allegation,
and of the entity's intent to assess a fine if action to correct
the violation is not taken within a period of less than 14 days
and completed within a period of not less than 30 days.
Similarly this bill, as proposed to be amended today, would
require a person seeking an injunction to send a similar written
notice to the legal owner describing the alleged violation and
notifying the owner of the person's intent to enjoin the
violation. In addition to conforming the private right of
action as closely as possible to a local governmental entity's
ability to impose a fine, these notice requirements - which will
be added in Committee - should address many of the concerns
raised by the opposition: that is, it will give a new owner who
acquires a blighted property adequate time to take correct
steps; and it will relieve banks and lenders from unexpected
litigation, or any litigation at all, so long as they are
actively seeking to correct violations (which they are already
required by law to do or face substantial fines.)
Finally, this bill would make injunctive relief more accessible
by expressly authorizing a person to seek the injunction in
small claims court, where filing fees are lower and attorneys
are not necessary. If, however, a person chooses to file in
superior court and attorneys must be used, then that person
would be able to recover reasonable attorney's fees.
In light of the opposition arguments (see below) that this bill
is "imprecise and unclear" in its terminology, it should be
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stressed that the author deliberately tracked the language of an
existing nuisance abatement statute. In short, the nuisance
abatement statute gives any person "whose property is
injuriously affected" or whose "personal enjoyment is lessened"
by a nuisance the right to bring an action for damages or
injunctive relief. This bill would give any person "whose
property is injuriously affected" or whose "personal enjoyment
is lessened" by an owner's failure to maintain , as defined in
existing law, the right to seek injunctive relief. (Unlike the
nuisance abatement statute, this bill would not permit actions
for damages; though the person could seek damages in a nuisance
suit if the conditions caused by the failure to maintain rose to
the level of a nuisance.) Since 1872 California courts have
been able to determine when a nuisance "injuriously affects" a
person's property or lessens the enjoyment of that person.
Presumably, the courts will similarly be capable of determining
when a violation for failure to maintain causes these results,
since they have been doing so for at least 140 years.
Because it amends existing Civil Code Section 2929.3 (the
section created by SB 1137), this bill only applies to a vacant
residential property that was purchased at a foreclosure sale or
acquired through foreclosure under a mortgage or deed of trust.
This reflects the fact that SB 1137 sought to address problems
of blight that were linked to the foreclosure crisis, and
especially real-estate owned (REO) properties that are typically
held by banks or lenders. (The opposition contends that this
bill is unfair because it does not apply universally to all
blighted properties but only applied to foreclosed properties.
This is true, but this is a product of SB 1137, which the
opponents claim to have helped create; it is not a product of
this bill.) In other words, this bill does not envision a
situation in which one neighbor sues another neighbor; by
definition, the offending property will be a vacant residential
property that is, necessarily, owned by an absentee party.
Presumably where both parties are residents and neighbors, they
could seek a resolution without resort to litigation. However,
where the owner is not a resident and not immediately on hand,
the possibility of a neighborly resolution is diminished.
Technical Fix: Permitting Local Prosecuting Attorneys to Seek
Receiverships : Existing law authorizes local code enforcement
agents to inspect, cite, and notice building owners who violate
existing state and local building codes, or whose buildings are
maintained in such a manner as to cause a public nuisance.
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(Health & Safety Code Sections 17980 et seq.) Where a city has
given the owner notice that a building violates the law or
creates a nuisance, the owner is typically given 30 days to
correct the violation or abate the nuisance. When the
conditions that give rise to the violation or nuisance "are so
extensive and of such a nature that the health and safety of
residents or the public is substantially endangered," and the
owner fails to take any action within the 30-day period, then
the enforcement agency - or tenants or a tenant organization -
may seek, and the court may order, the appointment of a receiver
to take possession of the property and fix the problems. How
the receivership will operate, how repairs will be paid for, how
the city and receiver will be reimbursed for its costs, and, if
necessary, how the property will be disposed of are generally
specified in the court order. Based on the Committee's
conversations with a number of city attorneys and
representatives of the California Receivership Group, which acts
as receiver for many of the receiverships appointed under the
Health & Safety Code, receiverships are usually reserved for the
most serious violations and where the owner has failed to
respond to repeated notices to correct conditions.
The receivership provision of this bill provides a relatively
modest and technical fix to existing law. Under existing law,
an enforcement agency, tenant, or tenant organization may seek a
receivership, though the vast majority of these are sought by
enforcement agencies, typically the local agency in charge of
building safety. However, when an enforcement agency seeks
these receiverships they must rely upon general counsel or city
attorneys from the civil division to bring the action "in the
name of the City." However, some of the larger cities divide
their city attorney offices into civil and criminal divisions;
this sometimes means that criminal attorneys - who often have
the most experience in enforcing code violations - cannot be
involved in these actions.
This bill would remedy this largely technical problem by
specifying that a city attorney, county counsel, or district
attorney could seek a receivership in "the name of the people"
and thereby clarify that the receivership can be sought as an
enforcement action and that the more experienced criminal
division attorneys can participate. Because a receivership can
only be brought where an enforcement agency has issued a notice
to an owner for conditions that create a substantial danger, and
where the owner has refused to comply with orders, the
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receivership process would still be generated by the enforcement
agency (e.g. compare H&S Code Section 17980.6 with Section
17980.7); but with the technical change made by this bill
attorneys from the criminal division of a city attorney's
office, as well as a district attorney, could be utilized by the
enforcement agency. It should be stressed that this bill does
nothing to change the required preconditions for seeking a
receivership, the powers granted to a receiver, or the court's
discretion to appoint or not appoint a receiver. It simply
specifies that city attorneys, county counsel, and district
attorneys may seek a court-appointed receiver in the same manner
that enforcement agencies, tenants, and tenant organizations may
already do so.
Proposed Author Amendment : The author wishes to amend the bill
in this Committee so that the person seeking an injunction must
comply with the same prior notification requirements that local
governments must adhere to before imposing a fine.
Specifically, the amendment will read as follows:
- Subdivision (b) on beginning on page 3 line 14 is
amended to read as follows:
- (b) A legal owner who fails to maintain a vacant
residential property in violation of paragraph (1) of
subdivision (a) shall be subject to an action for
injunctive relief brought by any person whose property is
injuriously affected, or whose personal enjoyment is
lessened, by the property owner's violation. Prior to
filing an action for injunctive relief pursuant to this
section, the person seeking the injunctive relief shall
comply with the same obligations that a governmental entity
must comply with prior to imposing a fine, as described in
paragraph (1) of subdivision (a). An action brought
pursuant to this subdivision may be brought either in a
small claims court or the superior court of the county in
which the property is situated. If the action is brought in
superior court, a prevailing plaintiff may recover court
costs and reasonable attorney's fees.
ARGUMENTS IN SUPPORT : According to the author, this bill will
enhance "the ability of California residents and municipalities
to fight foreclosure-related blight." The author argues that
"many homes that are retained by lending institutions at
foreclosure auctions are left vacant and unmaintained" and
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claims that "studies have shown that increased foreclosure
blight decreases neighboring property values and increases
crime." The author believes that foreclosure-related blight and
its associated crime and loss of property value compounds the
pain and suffering in neighborhoods already hard-hit by the
foreclosure crisis.
PICO California, a congregation-based community organizing
network, supports this bill because it "will provide an
important tool for neighbors to fight foreclosure-related blight
in their community." While existing law authorizes cities and
counties to fine owners who failed to maintain their properties,
PICO California believes that this bill will provide a remedy to
"adjacent homeowners, who have the most to lose from
foreclosure-related neighborhood blight." PICO California
contends that this bill will be especially useful for residents
in counties or cities that may be hesitant to fine large lending
institutions. The Housing and Economic Rights Advocates (HERA),
supports this bill for similar reasons, but adds that this bill
will ensure that these blight-fighting tools "will be accessible
to all by allowing for recovery of reasonable attorney's fees in
superior court �and by allowing] . . . an injunction to be
sought in small claims court, where attorneys are not
necessary."
The Los Angeles City Attorney's Office supports both provisions
in this bill because, taken together, they will help both cities
and citizens combat blight. According to the City Attorney's
Office, Los Angeles "has many buildings replete with building
and safety code violations that are owned by recalcitrant owners
who refuse to bring the buildings up to code. These blighted
properties have serious negative consequences for the occupants
of the buildings, for the surrounding community and for the City
of Los Angeles. A substandard building diminishes the quality
of life of occupants, decreases neighboring property values and
increases crime." This bill, the City Attorney believes, will
clarify that a district attorney, county counsel or city
attorney with jurisdiction over the building can bring a suit in
the name of the people for appointment of a receiver. This will
especially assist large cities, the City Attorney contends,
where building enforcement actions are already being handled by
prosecutors.
The Los Angeles City Attorney's Office also supports the
provision of this bill that will authorize "a neighbor adjacent
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to an unmaintained, vacant, foreclosed property to obtain a
court order forcing the owner to maintain the property," because
it will "reduce neighborhood blight and increase community
safety"
ARGUMENTS IN OPPOSITION : A coalition of trade associations
representing the banking and mortgage industry opposes this bill
for a number of reasons. Opponents contend that this measure
"is imprecise and unclear with respect to the terms of
application," noting in particular a lack of clarity as to "what
qualifies as 'injuriously affected' or what is meant by
'personal enjoyment is lessened.'" In addition, opponents
contend that lenders already experience a financial loss when a
borrower defaults and the lender is forced to use non-judicial
foreclosure. This bill, opponents claim, will only exacerbate
that loss and extend the time necessary to reintegrate the
property into the market. Opponents also contend that the bill
is "discriminatory," apparently because it follows existing law
in only applying to foreclosed properties.
Finally, opponents note the bill's "flagrant application to
innocent third-party purchasers of property, including families
that are first-time homebuyers, who will be sidled with
increased frivolous litigation risk." Opponents contend,
therefore, that this bill may be counterproductive in that it
will discourage third-party purchases of foreclosed properties
and prolong the very problem of blight that the bill seeks to
address. �Staff note: this concern would appear to be at least
partly addressed by the author's amendment requiring the person
seeking the injunction to provide a 30-day notice describing the
violation and notifying the owner of intent to seek an
injunction. It should be noted, too, that a legal owner -
whether a bank or a first-time buyer with a family - is already
required by existing law to maintain the property or face a fine
of $1000 per day if, of course, the property is vacant and was
purchased or acquired at foreclosure. Thus, the prospect of an
injunction would presumably not discourage a buyer any more than
the prospect of a $1000 per day fine, especially given that the
injunction would only require the owner to do what he or she is
already required to do by existing law.]
REGISTERED SUPPORT / OPPOSITION :
Support
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Housing and Economic Rights Advocates (HERA)
Los Angeles City Attorney's Office
PICO California
Western Center on Law & Poverty
Opposition
California Bankers Association
California Credit Union League
California Financial Services Association
California Independent Bankers
California Land Title Association
California Mortgage Bankers Association
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334