BILL ANALYSIS �
AB 2039
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2039 (Muratsuchi)
As Amended August 21, 2014
Majority vote
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|ASSEMBLY: |74-0 |(May 5, 2014) |SENATE: |34-0 |(August 26, |
| | | | | |2014) |
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Original Committee Reference: JUD.
SUMMARY : Regulates certain contracts regarding auction sales of
real property. Specifically, this bill :
1)Provides that notwithstanding Civil Code Section 1812.601 an
auction includes the sale of real property and an "auctioneer"
means any individual who is engaged in, or who by advertising
or otherwise holds himself or herself out as being available
to engage in, the calling for, the recognition of, and the
acceptance of, offers for the purchase of real property at an
auction.
2)Specifies that a person shall not cause or allow a person to
bid at a sale for the sole purpose of increasing the bid on
any real property being sold by the auctioneer, including, but
not limited to, stating any increased bid greater than that
offered by the last highest bidder when, in fact, no person
has made an increased bid, except as specified. However, an
auctioneer or another authorized person may place a bid on the
seller's behalf during an auction of real property, if both of
the following are true:
a) Notice is given to all auction participants, including
all other bidders, that liberty for that type of bidding is
reserved and that type of bid will not result in the sale
of the real property.
b) The person placing that type of bid contemporaneously
discloses to all auction participants, including all other
bidders, that the particular bid has been placed on behalf
of the seller.
3)Provides that for the purpose of the conduct of online
auctions of real property, "notice" means a statement of the
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required information within the end user license agreement,
terms of service, or equivalent policy posted on, or provided
by, the operator of an Internet Web site, online service,
online application, or mobile application, and by
conspicuously posting the required information in any of the
following ways:
a) Upon the Internet Web page or its equivalent through
which a user directly interacts with the site, service, or
application during the online auction.
b) With an icon that hyperlinks to an Internet Web page or
its equivalent upon which the required information is
posted, if the icon is located on the Internet Web page or
its equivalent through which a user directly interacts with
the site, service, or application during the online
auction. The icon shall use a color that contrasts with
the background color of the Internet Web page or is
otherwise readily distinguishable.
c) With a text link that hyperlinks to an Internet Web page
or its equivalent upon which the required information is
posted, if the text link is located on the Internet Web
page or its equivalent through which a user directly
interacts with the site, service, or application during the
online auction. The text link shall be written in capital
letters that are in larger type than the surrounding text,
or shall be written in contrasting type, font, or color to
the surrounding text of the same size, or shall be set off
from the surrounding text of the same size by symbols or
other marks that call attention to the language.
d) With any other functional hyperlink or its equivalent
that is displayed on the site, service, or application
through which a user directly interacts with the site,
service, or application during the online auction so that a
reasonable person would notice it and understand it to
hyperlink to the required information.
4)Provides that the foregoing shall not apply to a credit bid
made by a creditor holding a deed of trust, mortgage, or other
lien on the property that is the subject of auction when the
credit bid can result in the transfer of title to property to
the creditor.
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5)Provides that the foregoing shall be operative on July 1,
2015.
6)Provides that neither a lender nor an auction company retained
by a lender to control aspects of a transaction of real
property subject to this part, including validating the sales
price, may require the homeowner or listing agent to defend or
indemnify the lender or auction company from any liability
alleged to result from the actions of the lender or auction
company as a condition of receiving the lender's approval of
the transaction. Any clause, provision, covenant or agreement
purporting to impose an obligation to defend or indemnify an
auction company or lender in violation of this subdivision is
against public policy, void, and unenforceable.
The Senate amendments :
1)Provide that an auction includes the sale of real property,
and an "auctioneer" means any individual who is engaged in or
who by advertising or otherwise holds himself or herself out
as being available to engage in, the calling for, the
recognition of, and the acceptance of, offers for the purchase
of real property at an auction.
2)Provide that a person shall not cause or allow a person to bid
at a sale for the sole purpose of increasing the bid on any
real property being sold by the auctioneer, including, but not
limited to, stating any increased bid greater than that
offered by the last highest bidder when, in fact, no person
has made an increased bid. However, an auctioneer or another
person may place a bid on the seller's behalf during an
auction of real property, provided prior notice has been given
that liberty for such bidding is reserved, and that the person
placing such a bid contemporaneously discloses to all auction
participants, including all other bidders, that the particular
bid has been placed on behalf of the seller.
3)Further provide that for the purpose of the conduct of online
auctions of real property, "notice" means a statement of the
required information to be given as specified.
4)Specify that the foregoing shall not apply to a credit bid
made by a creditor holding a deed of trust, mortgage, or other
lien on the property that is the subject of auction when the
credit bid can result in the transfer of title to property to
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the creditor.
5)Delay implementation of the foregoing until July 1, 2015.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : The author explains the reason for the bill as
follows:
This bill would change existing law to address a new
phenomenon where listing agents of short sales are
being required to accept liability over transactions
in which they have no control. Under current law, the
lender retains complete control over the contract,
which can have a provision which requires the selling
agent to accept liability for auction company mistakes
and for any damages arising out of any action taken by
the auction company. These provisions only exclude
cases of gross negligence, willful misconduct, bad
faith, an unlawful act or fraud. In other words, the
auction company is held harmless for mistakes it makes
in the regular course of business. This policy may
lead to future lawsuits. This bill? places the
responsibility for liability with the party whose
actions caused the liability.
According to the sponsor, California Association of Realtors:
Understandably, lenders want to make sure the price
they are being offered in a short sale transaction
reflects the best price they are likely to get for the
home. The lender is contemplating accepting less than
is owed on the mortgage and wants to minimize their
loss. To that end, lenders are sometimes requiring
that short sale homes be put out to bid using an
auction company retained for that purpose. If the
bids come in under the original offer, the original
offer is accepted; if not, the new high bidder becomes
the purchaser of the home. The lender completely
controls the contract under which the seller agrees to
have his or her home put out to bid (if the seller
disagrees with any aspect of the contract, the lender
will simply reject the short sale offer). These
contracts can have a provision that requires the
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seller to accept liability for auction company
mistakes for any damages arising out of any action
taken by the auction company. These provisions only
exclude cases of gross negligence, willful misconduct,
bad faith, an unlawful act or fraud. In other words,
the auction company is held harmless for mistakes it
makes in the regular course of business. AB 2039
places the responsibility for liability for damages
with the party whose actions are the cause of the
liability.
Under the bill, neither a lender nor an auction company retained
by a lender to control aspects of a transaction of real property
subject to this part, including validating the sales price, may
require the homeowner or listing agent to defend or indemnify
the lender or auction company from any liability alleged to
result from the actions of the lender or auction company as a
condition of receiving the lender's approval of the transaction.
Any clause, provision, covenant or agreement purporting to
impose an obligation to defend or indemnify an auction company
in violation of this subdivision is against public policy, void,
and unenforceable.
In addition the bill provides that an auction includes the sale
of real property and an "auctioneer" means any individual who is
engaged in, or who by advertising or otherwise holds himself or
herself out as being available to engage in, the calling for,
the recognition of, and the acceptance of, offers for the
purchase of real property at an auction. In addition, the bill
specifies that a person shall not cause or allow a person to bid
at a sale for the sole purpose of increasing the bid on any real
property being sold by the auctioneer, including, but not
limited to, stating any increased bid greater than that offered
by the last highest bidder when, in fact, no person has made an
increased bid, except as specified. However, an auctioneer or
another authorized person may place a bid on the seller's behalf
during an auction of real property, if both of the following are
true: 1) Notice is given to all auction participants, including
all other bidders, that liberty for that type of bidding is
reserved and that type of bid will not result in the sale of the
real property; and 2) the person placing that type of bid
contemporaneously discloses to all auction participants,
including all other bidders, that the particular bid has been
placed on behalf of the seller.
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With respect to the conduct of online auctions of real property,
the bill specifies a minimum method of providing the required
notice. While these rules may be appropriate in the context of
this particular type of transaction involving relatively
sophisticated consumers they would not appear to be appropriate
in other contexts.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
FN: 0005508