BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 1472 (Pavley and DeSaulnier)
As Amended April 11, 2012
Hearing Date: April 24, 2012
Fiscal: No
Urgency: No
SK/BCP
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 303 housing units received a foreclosure filing in March
2012, and 48,422 houses received a foreclosure notice in
February alone. The San Diego CityBeat newspaper recently
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 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.
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.)
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.
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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 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 to prevent or remedy an immediate threat
to the health and safety of 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 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.
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
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1. Stated need for the bill
According to the authors:
Communities throughout the State are being inundated with
foreclosed homes which often remain empty, and fall into
disrepair. This blight not only creates a nuisance for
neighboring residents, but further lowers the value of
surrounding homes, driving homeowners further underwater.
This problem has been at the forefront of the discussions that
the Attorney General has had with local officials throughout
the State. These discussions with law enforcement partners,
and others, indicate that blighted homes are a nuisance,
reduce neighboring home values, and threaten the health and
safety of communities hardest hit by the mortgage crisis.
Public health and safety are implicated by vacant, foreclosed
homes because they attract gangs, prostitution, drug users,
squatters, and untended property creates mosquito abatement
problems and creates a risk of wildfire in areas of high fire
risk.
The authors also state that SB 1472 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:
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. Public health
and safety are put at risk by vacant, foreclosed homes because
they attract squatters, gangs, prostitution, and drug users.
Unattended property also creates mosquito abatement problems,
unsafe structures, and fire risk. Local governments and
taxpayers are increasingly saddled with �the] expense of
dealing with blighted, vacant foreclosed homes.
2. Most recent amendments
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This bill previously increased the civil fine that may be
imposed by a governmental entity against a legal owner for
failure to maintain a foreclosed property from up to $1,000 per
day to up to $5,000 per day. In response to concerns expressed
by a number of trade associations and other stakeholders, the
bill was amended on April 11, 2012 to restore this civil fine to
the current law amount of up to $1,000 per day. Because of this
change, the following trade associations have indicated that
they now support the bill: California Bankers Association,
California Chamber of Commerce, California Credit Union League,
California Financial Services Association, California
Independent Bankers, California Mortgage Association, California
Mortgage Bankers Association, and United Trustees Association.
3. 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
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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
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.
4. 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. 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
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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
and the proposed 60-day time period, a shorter notice may be
provided if the enforcement agency deems it necessary to prevent
or remedy an immediate threat to the health and safety of the
public or occupants of the structure.
5. 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 authors assert that the goal of this provision is
to "expedite payment to receivers for services rendered on
nuisance properties and to avoid an additional loan on the title
if it can be avoided." 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
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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.
6. 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 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
authors note that the intent of this provision is to expedite
enforcement or condemnation of a nuisance property.
Support : California Bankers Association; California Chamber of
Commerce; California Credit Union League; California Financial
Services Association; California Independent Bankers; California
Mortgage Association; California Mortgage Bankers Association;
California Professional Firefighters ; Public Counsel; United
Trustees Association; over 200 individuals; California Nurses
Association
Opposition : None Known
HISTORY
Source : Attorney General Kamala Harris
Related Pending Legislation :
AB 2314 (Carter), which is identical to this bill, was approved
by the Assembly Judiciary Committee on April 17, 2012.
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
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permits a city attorney, county counsel, or district attorney to
seek the appointment of a receiver for a substandard building.
This bill was approved by the Assembly Judiciary Committee on
April 17, 2012.
Prior Legislation :
SB 1137 (Perata, Corbett, Machado, Ch. 69, Stats. 2008) See
Background.
Prior Vote :
Senate Transportation and Housing Committee (Ayes 9, Noes 0)
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