2018 Legislative Highlights

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2018 Legislative Highlights

Robert M. McCormick and Michael Maurer

Robert M. McCormick is Of Counsel at Downey Brand LLP in Sacramento and a member of its Corporate, Real Estate, Securities and Tax Group. He is also currently an Advisor to the Real Property Law Section of the California Lawyers Association. His practice is focused on commercial real estate transactions, including office and retail leasing, acquisitions, real estate secured financing, and the formation of common interest developments.

Michael J. Maurer is a partner at Best Best Krieger’s Los Angeles office and a member of its municipal law practice group. He serves as City Attorney to the cities of San Jacinto and L Habra Heights. His practice focuses on land use, infrastructure, and community economic development.

I. INTRODUCTION

The 2018 California legislative session included many starts and stops, particularly after the Democrats lost their supermajority early in the year when three lawmakers facing sexual harassment accusations stepped down. While several key policy priorities failed to advance, there was significant advancement on several fronts including a comprehensive bill to address the increasing problem of wildfires (AB 2911), a comprehensive data privacy bill (AB 375), as well as at least 20 bills introduced to respond to the wave of sexual harassment scandals. In total the Legislature approved over 1,200 bills this year and the Governor signed 1,016 of those bills and vetoed 201. Among those bills signed by the Governor that were of particular interest for real estate practitioners were a pair of bills which set forth a comprehensive update and code cleanup of the laws governing the licensure and regulation of real estate brokers and sales persons (AB 2884 and AB 1289). There were also enacted a large number of new laws intended to address the affordable housing crisis, which continues despite the Legislature’s prior efforts. These new laws can be found in the Housing section below. Equally important is the new law (SB 818) which reenacts and supplements the expiring California Homeowners Bill of Rights, and confirms that the Legislature is still not done reacting to the trauma of the great recession.

This legislative review selectively focuses on new laws enacted in 2018 that the authors believe are the most significant for real property law practitioners. It does not, therefore, cover every real-property-related law enacted in 2018, and in particular, does not cover new laws that affect only a specific locality or which are primarily revenue raising or funding measures. This article also provides only summary references to the text of the bills selected for comment. Practitioners should always review the actual chaptered versions including specific references to the statutory provisions that have been modified, deleted, or added instead of relying solely on the summaries in this article. The State Legislature’s website provides copies of these bills at http://leginfo.legislature.ca.gov, under Bill Information for Session Year: 2017-2018. Unless otherwise noted in this article, all bills covered in this review became operative on January 1, 2019.

II. APPRAISERS

A. SB 70, Bates. Real Estate: Uniform Standards of Professional Appraisal Practice.

Amends section 11319 of the Business and Professions Code.

SB 70 is intended to give consumers of real estate appraisals a lower cost product option in the form of a "restricted appraisal report." These reports contain limited information about a property being appraised and do not comply with the Uniform Standards of Professional Appraisal Practice ("USPAP"), which are the minimal standards of conduct and performance for appraisers under prior California law.

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In particular, SB 70 temporarily exempts a licensed real estate appraiser, until January 1, 2020, from compliance with that provision under existing California law which requires appraisals to comply with the federal standards for appraisals which place a limitation on the issuance of "restricted appraisal reports" to intended users other than the client. The SB 70 exemption applies only if both of the following conditions are met:

  1. The licensee obtains the consent of the client in advance; and,
  2. The report the licensee prepares is not related to any of the following:
    1. A federally related real estate transaction;
    2. The purchase or refinance of a residential dwelling of one to four units; or,
    3. A transaction subject to specified requirements in the real estate act related to broker investment transactions (i.e., Business and Professions Code section 10232.5).

This narrow exemption is intended to sunset on January 1, 2020 in order to avoid a potential conflict with the next edition of USPAP. We can anticipate the issue of restricted appraisal reports will be revisited after this occurs.

III. BROKERS

A. AB 2884, Irwin. Real Estate Broker Law: Omnibus Update.

Amends sections 10001, 10016, 10027, 10050, 10131, 10133.1, 10133.2, 10137, 10140.6, 10142, 10143.5, 10144, 10158, 10159, 10159.6, 10159.7, 10164, 10176, 10177, 10178, 10179, 10186.2, 10232.3, 10238, 10243, 10509, 10561, 11212, and 11267 of, adds sections 10010.5, 10015.1, 10015.2, 10015.3, 10015.4, 10015.5, 10018.01, 10018.02, 10018.03, 10018.04, 10018.05, 10018.06, 10018.07, 10018.08, 10018.09, 10018.10, 10018.11, 10018.13, 10018.14, 10018.15, 10018.16, and 10018.17 to, repeal sections 10132 and 10160 of, and repeal and add section 10161.8 of, the Business and Professions Code.

AB 2884 was sponsored by the California Association of Realtors and along with its companion legislation AB 1289, is intended to be a non-controversial wholesale update of the underlying statutes that govern the licensure and regulation of real estate brokers and sales persons by the Real Estate Commissioner under the Department of Real Estate ("DRE"). As such it eliminates antiquated terminology and requirements in the existing law; defines a number of terms that have become commonly used in the real estate sector; and provides technical cleanup, such as the adjustment of some gender pronouns from the masculine to "his or her." Additionally AB 2884 recognizes the use of online record keeping and allows the transmission of licenses or contracts via electronic means. There are also a number of changes to mandatory reporting requirements. Most notably, AB 2884 clarifies the type of criminal complaints that must be reported and requires licensees to report indictments, criminal complaints, or information charging a felony against the licensee. AB 2884 also clarifies a number of other mandatory notifications to the Real Estate Commissioner, including whenever a licensee joins or leaves a brokerage, and if the sole designated broker-officer of a corporation dies. AB 2884 accomplishes other technical and clarifying changes by moving definitions to compile relevant definitions in the same section, and by changing terms to more consumer friendly language. In particular AB 2884 among other things does the following:

  1. Redefines "salesperson" as a person retained by a licensed real estate broker and defines "retained" as the relationship between a broker and the real estate licensee who is an independent contractor affiliated with, or an employee of, a broker to perform real estate activities subject to a broker’s supervision.
  2. Provides definitions for "seller," "listing licensee," "seller’s licensee," "buyer," "buyer’s licensee," "real property," "residential property," commercial real property," "sell, sale, or sold," "dual broker," "dual licensee," "appraiser," "promotional listing," "exclusive rights to sell listing," and "open listing."
  3. Authorizes a corporation, in the event of the death or incapacity of a sole designated broker officer, to operate continuously under its existing license if notice and an application are provided to the DRE within 10 days.
  4. Requires a real estate licensee to immediately notify the Real Estate Commissioner whenever a licensee affiliates or is retained by a real estate broker, if that agreement is terminated, or if the licensee acquires a new business address.
  5. Requires that the copy of any contract pertaining to services or transactions must be delivered either in print or electronic record to the person signing it, as soon as practicable after obtaining the signature.
  6. Eliminates the requirement that the real estate broker maintain paper licenses for salespersons and allows for electronic record keeping.
  7. Authorizes a licensee to enter into an agreement with another licensee to share compensation provided that the compensation is paid through the responsible broker as defined.
  8. Authorizes the Real Estate Commissioner to suspend or revoke a license that was issued in error or by mistake.

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AB 2884 also makes other technical changes and includes code cleanup provisions not covered here. Although purporting not to modify a broker’s duty to supervise and oversee the licensed activities of his or her sales persons and broker-associates, AB 2884 includes, nonetheless, significant provisions regarding licensing and compliance which should be incorporated into broker practices. It is, therefore, highly recommended that practitioners who represent licensees carefully review this new legislation.

B. AB 1289, Arambula. Real Property Transfer and Disclosure Requirements: Omnibus Update.

Amends sections 1086, 1087, 1088, 1102, 1102.1, 1102.2, 1102.3, 1102.4, 1102.5, 1102.6a, 1102.6b, 1102.6c, 1102.9, 1102.155, 1103, 1103.1, 1103.2, 1103.3, 1103.4, 1103.5, 1103.8, 1103.9, 2079, 2079.6, 2079.7, 2079.8, 2079.9, 2079.10, 2079.10.5, 2079.10a, 2079.13, 2079.14, 2079.15, 2079.16, 2079.17, 2079.21, and 2079.22 of, adds sections 1102.18, 1103.15, and 2079.25 to, repeals sections 1090, 1102.14, 1103.14, and 2079.18 of, and repeals and adds section 1089 of, the Civil Code.

AB 1289, like AB 2884 discussed above, was sponsored by the California Association of Realtors and in conjunction with AB 2884 was intended to provide greater clarity to consumers and practitioners regarding terminology, definitions and existing practice by making various "noncontroversial" changes to existing law that governs the transfer of real property and the associated duties that real estate agents have to disclose information to buyers and sellers in residential real estate transactions, (and in some cases, commercial transactions). AB 1289 was needed because in addition to the provisions of the Business and Professions Code which provide for the licensure and regulation of real estate brokers and sales persons by the Department of Real Estate, (which were addressed by AB 2884), there are several articles in the Civil Code that govern the transfer of real property, establish various duties and disclosure requirements, and otherwise regulate the conduct of real estate brokers, agents, and salespersons involved in these transactions that also needed to be updated and clarified in conjunction with the revisions undertaken by AB 2884. For example, under existing law some key terms were defined at multiple locations within the Civil Code using nonidentical definitions or were without explanation used interchangeably. Other terms needed to be changed and redefined to be more current and understandable. This was the main purpose of AB 1289, to work in conjunction with AB 2884, to help standardize the use of key real estate terms, and to consolidate the definitions of all these terms.

Specifically, AB 1289 revises definitions of several key terms appearing throughout portions of the Civil Code governing the transfer of real property and associated disclosure requirements, and makes various other technical and clarifying changes. For example, AB 1289:

  1. Revises several definitions applicable to Civil Code sections 2079.7 and 2079.14 to 2079.24, inclusive, including "seller’s agent" and "buyer’s agent," and standardizes the use of certain terms within the Civil Code. For example, the term "sale" is changed to "transfer"; "transferor" is changed to "seller"; "transferee" is changed to "buyer"; and "selling agent" is changed to "buyer’s agent."
  2. Deletes various provisions scattered in the Civil Code that define key terms, and instead provides that the definitions contained in Chapter 1 (commencing with section 10000) of Part 1 of Division 4 of the Business and Professions Code (BPC) shall apply. (Consolidation of these definitions in the BPC is actually carried out by AB 2884, not this act.)
  3. Clarifies that a person who is a trustee of a property placed in a revocable trust, whether single or married, is not exempt from existing law requiring a Transfer Disclosure Statement (TDS) and a Natural Hazard Disclosure (NHD) to be provided when the property is sold in the course of administering the trust.
  4. Clarifies that a TDS is not required in connection with the sale of any property other than single-family residential property.
  5. Authorizes a revised TDS to be provided to a buyer through electronic means, as specified, and provides a buyer who receives an electronic version of a revised TDS has up to 5 days in which to terminate his or her offer to purchase.
  6. Deletes provisions relieving third party experts from being responsible for information they include in a report or opinion prepared in conjunction with a TDS or NHD statement pursuant to a request by a prospective buyer, except as stated through a specified written statement.
  7. Revises and recasts existing law prohibiting a dual agent, without obtaining express permission, from disclosing to the seller any confidential information that is obtained from the buyer, and conversely, from disclosing to the buyer any confidential information obtained from the seller. AB 1298 defines "confidential information" to mean facts relating to the client’s financial position, motivations, bargaining position, or other personal information that may impact price, such as that the seller is willing to accept a price less than the listing price or that the buyer is willing to pay a price greater than the price offered.

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It should be noted that AB 1289 makes other technical and clarifying amendments, which are not covered here, and practitioners are highly encouraged to carefully review this new legislation.

C. AB 2138, Chiu. Licensing Boards: Denial of Application: Revocation or Suspension of Licensure: Criminal Conviction.

Amends, repeals, and adds sections 7.5, 480, 481, 482, 488, 493, and 11345.2 of, and adds section 480.2 to, the Business and Professions Code.

AB 2138 applies to licensure and regulation of various professions and vocations by various boards within the Department of Consumer Affairs including among others the Department of Real Estate. This legislation was sponsored by a coalition of criminal justice advocacy groups and revises and recasts existing provisions regarding certain board prescribed actions that may be taken against a licensee who has been convicted of certain specific crimes. In particular, AB 2138 institutes a 7-year "wash out" or "look back" limitation that operates as a restriction on the DRE’s power to deny licenses and take disciplinary action with respect to criminal convictions. Specifically, AB 2138 authorizes a board (and in particular the DRE) to, among other things, deny, revoke, or suspend a license on the grounds that the applicant or licensee has been subject to formal discipline or convicted of a crime, only if the applicant or licensee has been convicted of a crime within the preceding 7 years from the date of application and the crime was substantially related to the qualifications, functions, or duties of the business or profession for which the application is made. This prohibition is applicable regardless of whether the applicant was incarcerated for that crime, or if the applicant has been convicted of a crime that is substantially related to the qualifications, functions, or duties of the business or profession for which the application is made and for which the applicant is presently incarcerated or for which the applicant was released from incarceration within the preceding 7 years. AB 2138 also prohibits such boards from denying a person a license based on the conviction of a crime, or on the basis of acts underlying a conviction if one of the following circumstances applies: (i) the conviction has been dismissed or expunged, (ii) the person has provided evidence of rehabilitation, (iii) the person has been granted clemency or a pardon, or (iv) an arrest resulted in a disposition other than a conviction. It should be noted that the wash out period exemption does not apply to serious felonies, as defined, sex offenders, and (with respect to the DRE) for financially related crimes.

AB 2138, in addition, requires boards like the DRE to develop criteria for determining whether a crime is substantially related to the qualifications, functions, or duties of the business or profession being regulated, and requires a board to consider whether a person has made a showing of rehabilitation if certain conditions are met. AB 2138 also requires a board to follow certain procedures when requesting or acting on an applicant’s or licensee’s criminal history information and requires a board to annually submit a report to the Legislature and post the report on its Internet Web site containing specified deidentified information regarding actions taken by a board based on an applicant or licensee’s criminal history information.

AB 2138 also prohibits a board from denying a license based solely on an applicant’s failure to disclose a fact that would not have been cause for denial of the license had the fact been disclosed, the so-called "candor trap," and revises and recasts other provisions regarding various actions that may be taken by a board in the review process to eliminate some of the more specific options that the board may take in certain circumstances.

In order to provide affected agencies with the time needed to prepare for compliance, these provisions are made operative on July 1, 2020.

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IV. BUILDING STANDARDS

A. SB 721, Hill. New Inspection Requirements for Balconies and Raised Decks.

Amends section 1954 of the Civil Code, and adds Article 2.2 (commencing with section 17973) to Chapter 5 of Part 1.5 of Division 13 of the Health and Safety Code.

In the summer of 2015, a fifth-story balcony collapsed at an apartment building near the University of California, Berkeley. At the time of the incident, a group of Irish exchange students were on the balcony. Six students died as a result, and another seven were injured. The cause of the collapse determined to be faulty construction, which enabled moisture to enter the joists, causing dry rot and weakening the balcony. The Contractor’s State License Board revoked the license of the company that installed the balcony.

In response to this tragedy, the Legislature passed SB 721 to impose additional inspection requirements on the owners of buildings containing "exterior elevated elements," such as raised decks or balconies. Owners must obtain an inspection of exterior elevated elements and associated waterproofing elements, which is to be performed by a licensed architect, licensed civil or structural engineer, a building contractor holding specified licenses, or an individual certified as a building inspector or building official. The inspector must present its report to the owner of the building within 45 days of the completion of the inspection, and the owner must maintain copies of the report for 2 inspection cycles. Each inspection cycle is six years. The first inspection must be completed prior to 2025. A condominium conversion must obtain an inspection before the close of escrow.

If the inspection reveals conditions that pose an immediate hazard to the safety of the occupants, the inspection report must be delivered to the owner of the building within 15 days and emergency repairs be undertaken, with notice given to the local enforcement agency. If repairs are not completed on time, the local enforcement agency to may send a 30-day corrective notice to the owner of the building and assess civil penalties and liens against the property.

There were reports that evidence of dry rot had been observed on the balcony before the Berkeley incident occurred. Given the significant loss of life resulting from this incident, the additional safeguards in the bill will hopefully identify dangerous conditions and prevent another tragedy.

V. COMMON INTEREST DEVELOPMENTS

A. SB 261, Roth. Common Interest Developments: Governance Improvements.

Amends sections 4040 and 4360 of the Civil Code.

SB 261 was sponsored by Laguna Woods Village, a common interest development of more than 18,000 residents. Laguna Woods Village has identified for the Legislature three areas under the Davis-Stirling Common Interest Development Act, which governs the management and operation of common interest developments by an association where improvements can be made to increase the efficiency of association operations with respect to the delivery of documents, notice requirements, and uncontested elections. SB 261 addresses two of these areas.

The first improvement concerns the requirement that the association deliver various specified documents by "individual delivery" or "individual notice." Under prior existing law, the association is authorized to deliver such documents by email, facsimile, or other electronic means, but only if the recipient has consented in writing to such modes of delivery, which consent may also be revoked by written notice. SB 261 clarifies that this consent and any subsequent revocation thereof can both be provided by email, thereby simplifying the process.

The second improvement concerns the requirement under prior law that an association provide notice of a proposed rule change to its residents at least 30 days prior to making the change. To avoid unnecessary delays that can arise from certain months having less than 30 days, SB 261 reduces the notice period to 28 days.

The third proposed improvement concerning board nominations and election by acclamation had been included in SB 1128 (Roth) which was vetoed by the Governor.

B. SB 1173, Vidak. Common Interest Developments: Annual Notices for Time-Share Plan Interests.

Amends section 4041 of the Civil Code.

SB 1173 is intended to address potentially costly, duplicative, ownership list requirements that arise when a time-share project exists within a common interest development. Under the Davis-Stirling Common Interest Development Act, each separate owner is required to provide a notice to the association each year to update the owner’s current address for purposes of receiving official community notices. Under the Vacation Ownership and Time-share Act of 2004, the time-share governing association is required to update the name and address of each time-share owner at least once every six months. Both these ownership list requirements are intended to ensure that in both cases property owners receive actual notice about their respective association elections and any decisions that may impact their property interests. However, in mixed use developments these laws are not consistent particularly as the nature of the ownership interests in each case is not comparable.

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To resolve this dilemma, SB 1173 provides that a common interest development association, which includes time-share plan interests that are part of a mixed-use project, is deemed to have complied with the notice requirements under the Davis-Stirling Common Interest Development Act if, at least once annually, it obtains from the time-share plan association a copy of the list of owners in the time-share plan and enters that data into its books and records. SB 1173 also provides that a time-share plan association in a mixed use development is required to provide this list to the common interest association at least annually for this purpose.

C. AB 2912, Irwin. Association Finances: Anti-Fraud Protections.

Amends sections 5380 and 5500 of, and adds sections 5501, 5502, and 5806 to, the Civil Code.

AB 2912 is intended to address an increase in fraudulent activities related to the finances of homeowners associations. In particular AB 2912 increases the protections under the Davis-Stirling Common Interest Development Act by (i) expanding the scope and increasing the frequency (from quarterly to monthly) of the required review of financial documents and statements related to the homeowners association’s accountings (ii) prohibiting any electronic transfer of funds from being made from the homeowners association’s reserve or operating account of more than $10,000 or 5% of the combined total of those accounts without prior written board approval, and (iii) requiring the homeowners association to maintain fidelity bond coverage, as specified.

D. SB 1016, Allen. Common Interest Developments: EV-Dedicated TOU Meters.

Amends sections 4745 of, and adds section 4745.1 to, the Civil Code.

SB 1016 supplements prior existing law under the Davis-Stirling Common Interest Development Act that invalidates any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest in a common interest development, or any provision of the governing documents of a common interest development that prohibits or unreasonably restricts the ability of residents to install electric vehicle (EV) charging stations in a common area or an exclusive use common area. Specifically, SB 1016 expands the prohibition on unreasonable restrictions to include restrictions on the installation of metering infrastructure necessary for EV charging stations to function efficiently. It also simplifies insurance requirements with respect to these installations.

VI. DEEDS

A. AB 1739, Chau. Nonprobate Transfers: Revocable Transfer on Death Deeds.

Amends section 5626 of the Probate Code.

AB 1739 clarifies that the "common questions" language contained in the statutory form provided for a revocable transfer on death deed need not be recorded with the deed portion of the form, and that a failure to record those pages does not affect the effectiveness of a revocable transfer on death deed. AB 1739 applies these provisions to revocable transfer on death deeds executed before, on, or after the effective date of these provisions and was enacted as an urgency statute that took effect July 9, 2018.

VII. ENVIRONMENTAL

A. AB 1804, Berman. California Environmental Quality Act: Residential or Mixed-Use Housing Projects.

Adds and repeals section 21159.25 of the Public Resources Code.

The California Environmental Quality Act (CEQA) contains a categorical exemption for residential or mixed use infill developmentā€”meaning, residential development in already built-up areas. However, prior to AB 1804, the exemption only applied to cities. AB 1804 now extends the exemption to unincorporated county areas.

Supporters of the bill argue that infill development contains less environmental impacts than other development because it builds within existing developed footprints, which therefore does not result in loss of open space, agricultural lands or important ecological areas. It also reduces the amount of greenhouse gas emissions because it results in less driving than areas that are further from existing development. Common sense argues that there is no reason for CEQA policy to distinguish between incorporated and unincorporated areas when infill development occurs in both.

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VIII. HOUSING

A. AB 686, Santiago. Housing Discrimination: Incorporation of the Federal "Affirmatively Further Fair Housing" Rule.

Amends sections 65583 and 65583.2 of, and adds Chapter 15 (commencing with section 8899.50) to Division 1 of Title 2 of, the Government Code.

A landmark piece of civil rights legislation, the federal Fair Housing Act has long required the Department of Housing and Urban Development to affirmatively further the goals of the Fair Housing Act. In the abstract, affirmatively furthering the goals of such an important Act is surely laudable. But how, exactly, does HUD accomplish this goal? Since the inception of the Act, this question has mostly remained unanswered. It is a commendable goal that has had no practical application.

Under the Obama administration, HUD made its first effort to create an Affirmatively Furthering Fair Housing Rule. The administration adopted a regulation requiring local government recipients of HUD funds to perform an assessment of fair housing in their respective jurisdictions. Recipients must analyze barriers to housing and formulate a plan to remedy impediments. Under the Trump administration, HUD Secretary Ben Carson effectively eliminated the Rule; it remains suspended pending potential changes and additional public comments.

This bill is essentially California’s Democratically-controlled Legislature’s referendum on the Republican administration’s suspension of the Rule. The bill goes so far as to expressly state that its requirements are to be interpreted to be consistent with the Obama era "Affirmatively Furthering Fair Housing Rule," and that "[s]ubsequent amendment, suspension, or revocation of this Final Rule or its accompanying commentary by the federal government shall not impact the interpretation of this [bill]."

As with many State laws in this and other recent session, AB 686 carries out its policy goals through the housing element mechanism. Housing elements that are updated after January 1, 2021, will have to incorporate an assessment of fair housing or an analysis of impediments to fair housing. Public agencies will have to administer programs and activities to housing and community development in a manner that "affirmatively furthers fair housing," which means: taking meaningful actions that address significant disparities in housing needs, fostering inclusive communities by replacing segregating living patterns with truly integrated and balanced living patterns, and transforming racially, ethnically, and

concentrated areas of poverty into areas of opportunity. Public agencies are prohibited from implementing policies that are inconsistent with these goals.

B. AB 1768 Steinworth. County of San Bernardino Housing Authority: Middle Income Housing Projects.

Amends section 34340 of the Health and Safety Code.

California’s housing crisis is often discussed in terms of availability of low income and homeless housing. But, arguably, the overall shortage and cost of housing also affects access to home ownership for middle income Californians, and mixed-income projects may establish a better return on investment for developers, resulting in the creation of more low-income units.

As a pilot program to test these theories, the Legislature adopted AB 1768, which expands an existing pilot program involving the City of San Diego and the County Santa Clara to San Bernardino County. Housing authorities are generally limited to providing housing to serve low-income residents, but can provide financing and developing of projects up to the middle income levelā€”meaning 150% of AMI. The pilot program extends the Housing Authority’s ability to provide "gap financing" to the higher income portion of a mixed income project. Qualifying projects still have to be at least 40% low income units and at least 10% middle income units, but developers will be able to access public financing options to cover the full project.

Given that it involves a pilot program, it remains to be seen whether this bill will result in more low- and middle-income units in San Bernardino County. However, the program has the potential to address part of the underlying economic constraints in building affordable units and may result in the overall development of more housing. Considering our severe shortage, it would not be surprising to see the program expanded to other geographic areas.

C. AB 1771, Bloom. Planning and Zoning: Modifications to the Regional Housing Needs Assessment Process.

Amends sections 65584, 65584.01, 65584.04, 65584.05, and 65584.06 of the Government Code.

AB 1771 makes changes to what used to be a relatively arcane regional planning and development tool: The Regional Housing Needs Assessment, or "RHNA." RHNA is an assessment performed by regional councils of governments throughout the state and approved by the Department of Housing and Community Development. The RHNA determines the existing and projected need for housing in each region, and allocates a share of the regional housing need, of all income levels, to each city and county in the region.

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In light of the housing crisis, the RHNA has become a flashpoint between the state and local governments. The heightened discord began last session with Senator Scott Wiener’s controversial SB 35, which streamlines the approval process for low or moderate income housing projects by removing local governments’ authority to have discretionary review of such projects. The streamlined process applies to any city or county that fails to meet its RHNA goals. Cities’ abilities to meet their RHNA numbers vary significantly, due to factors that are not always clear. Beverly Hills, for example, famously surpassed its RHNA goal of three affordable housing unitsā€”one very-low income unit, one low-income unit, and one moderate income unitā€”over an 8-year period. It constructed nine total units. For cities and counties facing a much larger deficit in their own RHNA numbers, it is obviously concerning to see the notoriously wealthy 90210 zip code get a free pass on housing obligations. Unsurprisingly, critics claim the RHNA numbers are determined more by politics than regional need.

AB 1771 is an attempt to address the criticism. The bill takes a number of steps to attempt to make the RHNA process more objective and transparent. It requires COGs to explain the methodology supporting their RHNA allocations and to post all RHNA information on public websites. It also eliminates market demand for housing as a factor, focusing instead on need; for example, the market demand for affordable housing in Beverly Hills may be low even though the need in the greater Los Angeles region is significant. It also prohibits cities and counties from swapping their housing needs. Objectivity and transparency are certain important goals, particularly where the results of the RHNA massively impact how development occurs within each community. AB 1771 is a step in the right direction in that regard. Perhaps it will lead to more diversified housing in Beverly Hills. But this is little solace to the communities faced with SB 35’s punitive approach to housing development.

D. AB 2035, Mullin. Affordable Housing Authorities.

Amends sections 62250, 62251, 62252, 62253, 62254, and 62255 of, and adds section 62261.1 to, the Government Code.

AB 2035 is a follow-up to AB 1598 (2017, Mullin), which enabled local agencies to create "affordable housing authorities." AB 1598 is one of several recent bills that took a piecemeal approach to replacing redevelopment. Similar to the former redevelopment law, AB 1598 enables the use of both eminent domain and tax increment financing, but affordable housing authorities are only able to use this financing for low-or moderate-income housing.

AB 2035 makes mostly technical and clarifying changes to AB 1598. However, the new bill specifically authorizes the use of tax increment financing for water, sewer, and other infrastructure serving affordable housing, and limits challenges to affordable housing plans, allocation of tax increments, or issuance of bonds to 30 days after the local government’s resolution authorizing the respective action. These changes expand the uses of the funds and make financing more secure, which hopefully will lead to construction of more affordable housing.

A housing crisis necessitates new and creative tools to encourage the development of more affordable units. Providing affordable housing developers with more potential options supports this goal. However, whether new affordable housing developments will generate enough tax increment on their own to enable financing remains to be seen. The loss of redevelopment was a self-inflicted wound, and its more-limited replacements are also going to be more limited in their ability to provide more housing.

E. AB 2162, Chiu. Planning and Zoning: Housing Development: Anti-NIMBYism for Supportive Housing Developments.

Amends section 65583 of, and adds Article 11 (commencing with section 65650) to Chapter 3 of Division 1 of Title 7 of, the Government Code.

A trend in the recent housing crisis-era legislation is to create-state level by-right approvals of certain housing developments. The goal is to prevent NIMBYism in the local approval process that prevents certain projects moving forward. Essentially, if local governments have no discretion over projects, they cannot use their discretion to block projects that the community might not want.

AB 2162 is less ambitious than many of the other anti-local-zoning proposals but is also more tailored to a specific housing need. This bill prohibits local governments from applying a conditional use permit or other discretionary review to the approval of housing projects that provide 100% affordable units where at least 25% or 12 units, whichever is greater, are for supportive housing units. "Supportive housing" is affordable housing with intensive services promoting housing stability. To qualify for the exception, the project must offer on-site supportive services and must be located in a multi-family residential zone.

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According to the bill’s author, "decades of research" show that supportive housing is successful means for ending chronic homelessness, which of course has ancillary benefits of reducing blight, improving property values, decreasing public health costs, and reducing recidivism in prisons and jails. The bill received broad support from various, housing, non-profit, industry, and governmental groups, with a handful of cities opposing. As with any legislation that strips local control, the opponents of this bill argue that it unfairly removes community participation in local decisions. The bill’s success is likely to come down to the nature of the supportive services offered. Truly supportive housing provides significant benefits. If, however, developers are able to use proposed support services as a mere pretext for streamlined development approval, there could be a negative backlash and calls for more local control.

F. AB 2372, Gloria. Planning and Zoning: Floor Area Ratio Bonus as an Alternative Approach to Density Bonuses.

Adds section 65917.2 to the Government Code.

One obvious conundrum for developers constructing affordable housing units is that the affordability restrictions limit the potential return on investment. Since 1979, affordable housing developers have been able to access density bonuses to deal with this conundrum. A density bonus is a concession that allows the construction of more units than would otherwise be allowed under the agency’s development standards. The bonus comes with other concessions, such as reduced parking requirements, that would offset the cost of constructing affordable units.

AB 2372 provides a different mathematical approach to the same issue. As an alternative to basing the bonus on density, it enables a local agency to base it on floor area ratio, or "FAR." Density refers to the number of dwelling units per acre. FAR refers to the intensity of the use; it is a ratio of the developed square footage to the lot size. For example, a FAR of 1.0 would mean that a one-story building covers the entire lot. A FAR of 2.0, for the same building, would mean that a two-story building covers the entire lot. (To clarify, these examples are simplified to illustrate the ratio. FAR does not necessarily allow for constructing floor space on an entire lot; there may still be setbacks. A FAR of 1.0, would usually require at least a two-story building.)

Because AB 2372 provides an opt-in program, there was no opposition to the bill. Along with support from the California Building Industry Association and other building and housing organizations, the City of San Diego supported this bill, referring to it as a common-sense approach to incentivize rather than penalize affordable housing development.

G. AB 2562, Mullin. Department of Housing and Community Development Loans.

Amends sections 50406.7 and 50560 of the Health and Safety Code.

The Department of Housing and Community Development administers the Multi-Family Housing Program ("MHP"), which provides below-market loan financing for affordable housing developers. The program provides loans at 3% simple interest for 55 years. However, the loans are deferred, making the entire amount of principal and accumulated interest due at the end of the 55-year period.

The Low-Income Housing Tax Credit ("LIHTC") is another key source of financing for affordable housing. The LIHTC enables qualified affordable housing developers to sell tax credits to investors in order to provide equity for affordable housing construction. The LIHTC requires that the other funding sources be structured as loans and not grant. For deferred loans, such as MHP loans, the developer has to show that it could plausibly repay the loan. The LIHTC investor may exit the transaction after fifteen years, which could make it impossible for developers to repay MHP loans at 3%.

This bill enables HCD to reduce certain qualifying loans below 3%, where a reduction is necessary in order to obtain LIHTC financing. Despite the various new approaches that the Legislature is taken for affordable housing construction, the LIHTC program remains one of the most important tools for developing affordable housing stock. Protecting its efficacy should be a priority during this housing crisis.

H. AB 2753, Friedman. Density Bonuses: Local Agencies to Provide Certain Information to Applicants When Density Bonus Application Is Deemed Complete.

Amends section 65915 of the Government Code.

AB 2753 is a response to complaints from the development community that the density bonus process is not always clear and can be unwieldy. Each local agency adopts its own density bonus ordinance that defines the application and approval process. This bill requires the local agency to provide certain information to density bonus applicants when the application is deemed complete. Specifically, the local agency must identify (1) the amount of density bonus for which the applicant is eligible, (2) the parking ratio for which the applicant is eligible, and (3) whether the applicant has provided adequate information for other concessions the applicant has requested.

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AB 2753 was also supported by the California Building Industry Association and passed without any opposition on record.

I. AB 2797, Bloom. Planning and Zoning: Density Bonuses Do Not Require Changes to Local Coastal Plans for Developments in the Coastal Zone.

Amends section 65915 of the Government Code.

For development within the California’s coastal zone, which takes precedence: the density bonus law or the Coastal Act? Unsurprisingly given the housing crisis, the Legislature has decided that density bonus law reigns supreme, at least to an extent.

In the recent case of Kalnel Gardens, L.L.C. v. City of Los Angeles 3 Cal. App. 5th 927 (2016), the developer obtained initial approval of a density bonus project in the City of Los Angeles’s coastal zone. A neighborhood group appealed the approval to the city’s planning commission, which denied the project, finding that it did not comply with the Coastal Act because its height, density, setbacks, and other characteristics were inconsistent with the existing neighborhood. The matter eventually made its way to the Court of Appeal, which held that the density bonus law is subordinate to the Coastal Act, essentially holding that a proposed project in the coastal zone must be consistent with the Coastal Act before proceeding with any entitlements.

AB 2797 is the Legislature’s response, which seeks to harmonize the two laws. In essence, it states that the density bonus, in and of itself, shall not require an amendment to a local coastal plan. This essentially means that a development that otherwise complies with the local coastal plan will not be denied as a result of the density bonus. The legislation includes a policy statement that its goal is to increase affordable housing in the coastal zone, while also protecting coastal resources and coastal access. The bill is apparently a suitable compromise as it was supported by the Surfrider Foundation, as well as building and housing advocates.

J. AB 2973, Gray. Land Use: Additional Limited Extensions for Approved Maps under the Subdivision Map Act.

Amends section 65961 of, and adds section 66452.26 to, the Government Code.

AB 2973 enables a local government to extend a subdivision map for an additional 24 months if the map is related to the construction of housing. The extension only applies for unexpired maps that were approved on or after January 1, 2006 and not later than July 11, 2013, and extended pursuant to AB 1303 (2015, Gray). AB 1303 provided a map extension for counties meeting certain income, unemployment, and poverty benchmarks. The 11 qualifying counties are Fresno, Imperial, Kern, Kings, Madera, Merced, Modoc, Siskiyou, Stanislaus, Tulare, and Yuba.

If a map expires, the applicant generally has to re-submit the whole application and proceed through the entitlement process again, possibly under revised local codes. By potentially removing this red tape and providing more time for developments to proceed, the Legislature is increasing the likelihood that approved maps will result in new housing stock.

K. AB 3194, Daly. Housing Accountability Act: Projects to Be Approved If in Compliance with the General Plan.

Amends section 65589.5 of the Government Code.

AB 3194 makes modest changes to the Housing Accountability Act. In general, the Housing Accountability Act prohibits a local agency from disapproving, or conditioning approval in a manner that renders infeasible, a housing development project for very low, low-, or moderate-income households or an emergency shelter unless the local agency makes specified written findings that the project will have an adverse effect on health and safety. The findings must be made by a preponderance of the evidence.

AB 3194 provides that if a local agency’s zoning standards are not consistent with the agency’s general plan, and a proposed housing project is consistent with objective standards in the general plan, the local agency must approve the project without requiring a rezoning. Essentially, even though the general plan is the "constitution," its standards become the rule if zoning is inconsistent. Or, to put it another way, local agencies cannot use inconsistent zoning to block housing projects.

L. SB 765, Wiener. Planning and Zoning: Clarifications to SB 35.

Amends sections 8698.4 and 65913.4 of the Government Code.

SB 765 is essentially an omnibus clean-up of SB 35, Senator Scott Wiener’s controversial legislation from the 2013 session. SB 35 created a streamlined review process for affordable housing projects in jurisdictions that issued fewer permits for affordable housing than its Regional Housing Needs Assessment required.

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Perhaps the most important clarification contained in this bill is the length of affordability required for streamlining. For rental units, the affordability period must be 55 years; for ownership units, it must be 45 years. Additionally, the bill clarifies that application for a streamlined project under SB 35 is not a "project" for purposes of the California Environmental Quality Act and is, therefore, not subject to CEQA review. Various other clean-ups are also included.

For infill development, CEQA review may already be limited, but requiring long-term affordability is an important adjustment. Without this explicit requirement, developers theoretically could have obtained streamlined review without creating true long-term affordable housing opportunities.

M. SB 828, Wiener. Land Use: Additional Oversight of the RHNA Process.

Amends sections 65584, 65584.01, and 65584.04 of the Government Code.

SB 828, another bill from Senator Wiener involving housing, makes several changes to the Regional Housing Needs Assessment. Most notably, the bill prohibits councils of governments or "COGs"ā€”the entities preparing the RHNAā€”from using prior underproduction or stable population numbers to justify reducing an agency’s share of the RHNA. It also requires other data that COGs must provide to Housing and Community Development as part of the RHNA process. The bill gives more oversight authority to HCD to adjust the methodology a COG uses to determine the RHNA.

The bill’s author indicates that the goal of the bill is to give more oversight to HCD in order to address concerns that the RHNA process is highly politicized. The author provides the example of Redondo Beach, who was allocated 1,397 units, even though neighboring Hermosa Beach and Manhattan Beach were allocated 2 and 37 units, respectively.

A less-politicized process seems common sense. However, there is no easy solution for allocating regional housing needs. Replacing local control with additional state oversight is an unpopular approach to a concern that is necessarily and uniquely local. Indeed, this bill was opposed by a broad range of neighborhood groups and coalitions, as well as the American Planning Association.

N. SB 1227, Skinner. Density Bonuses for Student Housing.

Amends section 65915 of the Government Code.

The concept of the struggling college student is an overused cliché. But it ignores the fact that many students throughout California are lower income, and our state lacks adequate housing for low-income students.

SB 1227 specifically applies the density bonus concept to student housing. It requires local agencies to grant a 35% density bonus to developers who reserve at least 20% of the development’s units for low-income undergraduate, graduate, or professional students enrolled full-time at an accredited college our university. To determine eligibility, qualifying students are recipients of Cal Grant Awards for student aid. Developers who receive a density bonus must enter a master lease with one or more colleges or universities to fill the units.

Unsurprisingly, the bill received support from building and economic development industry groups. Interestingly, the legislative history does not indicate support (or opposition) from any institutions of higher education.

O. SB 1333, Wieckowski. Applies the Planning and Zoning Law to Charter Cities as well as General Law Cities.

Amends sections 65356, 65700, 65852.150, 65852.25, 65860, 65863, 65863.4, 65863.6, 65863.8, 65866, 65867.5, and 65869.5 of the Government Code.

The California Constitution grants charter cities with "home rule" authority over all municipal affairs. That is, a city’s charter actually takes precedence over conflicting state law. The only exception would be if the state law at issue governs a "matter of statewide concern." This is judicially created doctrine that looks to whether the local regulation is purely a municipal affair or whether it wades into a more state-wide issue. Importantly, because the "home rule" provision derives from the Constitution, the Legislature cannot simply apply a statute to a charter city by legislative action. The substance of the legislation must go beyond a charter city’s municipal affairs.

Of course, that does not stop the Legislature from trying to govern the municipal affairs of charter cities, and many bills include express language that the bill is applicable to charter cities. SB 1333 goes a step further. It declares that the Planning and Zoning Law, previously only applicable to general law cities, is now applicable to charter cities.

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This bill is a response to Kennedy Commission v. City of Huntington Beach 16 Cal. App. 5th 841 (2017), which held that even though the Planning and Zoning Law requires a specific plan to be consistent with the city’s general plan, the consistency requirement does not apply to charter cities. Of course, this dispute arose over housing: the Huntington Beach amended a specific plan to include fewer units of affordable housing, which made the specific plan inconsistent with the housing element.

The purpose of the bill is to make charter cities’ development actions consistent with their housing elements, which are subject to HCD approval. Whether the state can take this action remains to be seen. The City of Huntington Beach has already instituted litigation to determine whether SB 35’s streamlining provisions apply to charter cities; a court battle over this bill seems like it might be inevitable.

IX. LANDLORD/TENANT

A. AB 1796, Muratsuchi. Rental Property: Electric Vehicle Charging Stations.

Amends section 1947.6 of the Civil Code.

AB 1796 removes, with respect to any lease executed, extended, or renewed on or after January 1, 2019, the exemption under prior law that allowed lessors of dwellings subject to a residential rent control ordinance to deny requests of lessees to install electric vehicle (EV) charging stations at parking spaces. This modification in effect requires a lessor of a dwelling subject to the residential rent control ordinance to approve a written request of a lessee under a qualifying lease to install an electric vehicle charging station provided the installation is in accordance with specified requirements. However, AB 1796 preserves the exemption with respect to dwellings located in a local jurisdiction that, on or before January 1, 2018, adopted an ordinance requiring the lessor of such a dwelling to approve a written request of a lessee to install an electric vehicle charging station. The retention of the exemption in these circumstances allows local jurisdictions to maintain existing local rules if they so choose.

B. AB 1919, Wood. Price Gouging: State of Emergency.

Adds section 8588.8 to the Government Code, and amends section 396 of the Penal Code.

AB 1919 closes loopholes and clarifies ambiguities in existing price gouging protections that have been exposed by 2017 wildfire events. One loophole concerns new rentals that were not on the market at the time of the proclamation or declaration of an emergency. AB 1919 provides a formula for setting rents for these properties, (160% of the Fair Market Rent established by the US Department of Housing and Urban Development.) AB 1919 additionally, upon the proclamation or declaration of an emergency, makes it a misdemeanor for a person, business, or other entity to increase the rental price, as defined, advertised, offered, or charged for housing to an existing or prospective tenant by more than 10% and extends the prohibition with regards to housing for any period that the proclamation or declaration is extended. AB 1919 also makes it a misdemeanor for a person, business, or entity to evict a housing tenant after the proclamation of a state of emergency and then rent or offer to rent to another person at a rental price higher than the evicted tenant could be charged.

C. AB 2173, Santiago. Commercial Real Property: Termination of Tenancy: Disposition of Personal Property.

Amends sections 1993.04 and 1993.07 of the Civil Code.

AB 2173 increases the threshold amount that triggers a commercial landlord’s duty to auction off personal property left behind when a commercial tenant vacates. Specifically, AB 2173 sets this threshold at the lesser of $2,500 or an amount equal to one month’s rent for the premises. Below these amounts a public sale is not required. AB 2173 in addition modifies the statutory form of the "Notice of Right to Reclaim Abandoned Property" to reflect the new method of calculating the threshold value.

D. AB 2219, Ting. Landlord-Tenant: 3rd-Party Payments.

Amends section 1947.3 of the Civil Code.

AB 2219 was sponsored by the Western Center on Law and Property which seeks to find ways to preserve existing tenancies. In the case of AB 2219, the issue was the ability of landlords to refuse to accept rent payments from anyone other than the tenant. This refusal right, according to the sponsor, potentially could put renters in particularly financial difficulties who rely on rental assistance programs. AB 2219, subject to specified limitations, requires a landlord or a landlord’s agent to allow a tenant to pay rent through a third party.

E. AB 2343, Chiu. Real Property: Possession: Unlawful Detainer.

Amends sections 1161 and 1167 of the Code of Civil Procedure.

AB 2343 was co-sponsored by the Western Center on Law and Poverty and the California Rural Legal Assistance Foundation. It is intended to help preserve existing tenancies and ensure tenant’s due process rights by enacting extensions of time for tenants to respond to notices and revocation papers. Specifically, AB 2343 changes the 3-day notice to cure or vacate period to exclude judicial holidays, including Saturday and Sunday. AB 2343 also clarifies that the period in which a defendant may respond to a notice of summons in connection with any action to obtain possession does not include judicial holidays, including Saturday and Sunday. AB 2343 provides that the provisions become operative on September 1, 2019.

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F. AB 2413, Chiu. Tenancy: Law Enforcement and Emergency Assistance.

Adds section 1946.8 to the Civil Code, amends section 1161.3 of the Code of Civil Procedure, and repeals and adds section 53165 of the Government Code.

AB 2413 declares void, as contrary to public policy, any provision in a rental or lease agreement that limits or prohibits, or threatens to limit or prohibit, a tenant’s, resident’s, or other person’s right to summon law enforcement assistance or emergency assistance as, or on behalf of, a victim of abuse, a victim of crime, or an individual in an emergency if the tenant, resident, or other person believes that the law enforcement assistance or emergency assistance is necessary to prevent or address the perpetration, escalation, or exacerbation of the abuse, crime, or emergency. AB 2413 also prohibits a landlord from imposing, or threatening to impose, penalties in this context as well. AB 2417 declares any waiver of these provisions contrary to public policy, void, and unenforceable. In addition, AB 2413 prescribes evidentiary presumptions to be applicable with respect to the exercise of these rights and authorizes a tenant, resident, or other aggrieved person to seek an injunction for a violation of these provisions.

With respect to unlawful detainer actions, AB 2413 authorizes a tenant to document an act of domestic violence, sexual assault, stalking, human trafficking, or elder or dependent adult abuse, by attaching a statement from a qualified third party, as defined, and AB 2413 requires that this documentation be in substantially the same form as a statement that AB 2413 prescribes for this purpose. Further, AB 2413 prohibits the landlord from disclosing information that a tenant has submitted in this context, except as specified. Additionally, AB 2413 requires the Judicial Council, by September 1, 2019, to develop a new form or revise an existing form for use by a party to assert an affirmative defense to an unlawful detainer action.

Finally, AB 2413 prohibits a local agency from promulgating, enforcing, or implementing any ordinance, rule, policy, or regulation that authorizes or requires the imposition or threatened imposition of a penalty against a resident, owner, tenant, landlord, or other person as a consequence of law enforcement assistance or emergency assistance by, or on behalf of, a victim of abuse, a victim of crime, or an individual in an emergency.

G. AB 2847, Rubio. Commercial Real Property: Abandonment of Tenancy.

Amends sections 1946 and 1951.3 of, and adds section 1951.35 to, the Civil Code.

AB 2847 revises and recasts the existing law pertaining to tenant abandonment to provide specific provisions tailored for commercial tenancies. In particular, AB 2847 authorizes a notice of belief of abandonment be given where rent on commercial real property has been due and unpaid for at least the number of days required for the lessor to declare a rent default under the terms of the lease, but in no case less than three days. AB 2847 also authorizes the notice of belief of abandonment of commercial real property be sent by an overnight courier service. These changes reduce the waiting time necessary before a lessor can send a Notice of Abandonment, and simplify service. Finally, for clarity purposes, AB 2847 reorganizes these provisions into a separately numbered section of the Civil Code.

X. LOCAL GOVERNMENT

A. AB 2263, Friedman. Parking Reductions for Historic Properties Converted to Residential Use.

Adds section 18962 to the Health and Safety Code.

One factor that can significantly increase the cost of development is parking. According to the author of AB 2263, the average construction cost for one aboveground space is $24,000 and $34,000 for underground parking. In addition to construction costs, parking spaces also take up potentially valuable and limited real estate, which can be a waste when a space is often unused. Of course, not enough parking leads to its own set of problems. Right-sizing the amount of parking a development should construct can be a challenge.

AB 2263 attempts to address the parking space issue in a limited context. The bill requires that a development project that converts a historical resource to a residential use within one-half mile of a transit stop shall not be required to have more parking spaces than the number currently existing on the site. For conversions to non-residential uses, local agencies must require a 25% reduction in the amount of parking spaces that would otherwise be required. To qualify, the historic resource must be officially designated on a local register of historical resources, the California Register of Historical Resources, or the National Register of Historic Places.

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AB 2263 is largely based on the City of Los Angeles’s Adaptive Reuse Ordinance, which enabled the creation of thousands of downtown housing units through the conversion of existing historical office buildings. Without removing the parking restrictions, these locations might not have been repurposed. The goal of the legislation, of course, is to access underutilized resources as a potential source for increased housing stock by removing a key barrier to redevelopment.

B. SB 946, Lara. Limits Local Government Regulation of Sidewalk Vendors.

Adds Chapter 6.2 (commencing with section 51036) to Part 1 of Division 1 of Title 5 of the Government Code.

SB 946 gives new meaning to the old adage in real estate: location, location, location. For businesses, this can often mean a prime downtown or street front location. Presumably, part of the value for such business would derive from the sidewalk and foot traffic. The downtown businesses might even band together to form a business improvement district to maintain the downtown area, ensuring that it is inviting to customers. Now, however, those valuable downtown sidewalks can be taken over by competing businesses who do not participate in the local BID.

SB 946 strips local governments of their ability to regulate sidewalk vending. Though local governments can require permits for vendors, they can no longer prohibit vending on sidewalks or even restrict sidewalk vending to certain locations or times. To put this in perspective: a mobile hot dog vendor now has an absolute right to set up a vending stand in the public right-of-way in front of a competing hot dog restaurant. Essentially, in order to prohibit sidewalk vending in a particular area or time, the local agency must make findings that vending is a threat to health and safety. Perhaps most concerning for downtown business groups, SB 946 prohibits local agencies from requiring any third party permission for sidewalk vending. This means that sidewalk vendors can have a free ride on the work performed by a business improvement district to maintain the area.

The bill was supported by a number of social justice organizations and opposed by the League of California Cities, as well as several individual cities. Providing additional work opportunities is a worthy goal, especially for lower-income businesses such as street vendors. However, it is unfortunate that the Legislature did not take a more nuanced approach to also protect existing business locations, particularly where the existing businesses are the ones investing in the right-of-way infrastructure and maintenance.

XI. MOBILE HOMES

A. AB 2056, Garcia. Loans for Rehabilitation of Mobile Home Parks.

Amends sections 50784.5 and 50784.7 of, and adds section 50784.6 to, the Health and Safety Code.

AB 2056 addresses two areas of housing policy that are not necessarily overlooked, but have not been front and center in the housing crisis discussion: maintenance of existing affordable housing stock and mobilehomes. This bill enables funding for the redevelopment of affordable units within mobilehome parks.

Since 1984, the Housing and Community Development Department ("HDC") has managed the "Mobilehome Park Purchase Fund," which is a special fund that is used to provide low-income loans to residents, resident organizations, nonprofit housing sponsors, and local governments to enable the conversion of mobile home parks to resident ownership. The program is funded through fee paid concurrently with mobilehome registration fees. In many cases, residents own their mobile home units, but rent a pad from the owner of the park. Residents may band together to purchase the park, but this process can involve significant challenges for structuring and financing the purchase. Loans from the Fund are intended to bridge this gap.

The problem, though, is that the Housing and Community Development Department cannot find any willing borrowers. It did not receive a single application in response to its most recent notice of funding availability. This bill therefore enables the Department to loan or grant funds for rehabilitation of mobilehome parks, rather than just for a purchase. To be eligible for funding, the rehabilitation must cure significant health and safety violations and must substantially benefit low-and moderate-income homeowners, and the recipients must agree to keep rents affordable.

Collecting fees in order to supplement a revolving fund that is rarely accessed is futile. Repurposing the funds to ensure that a key segment of affordable housing stockā€”mobile home unitsā€”are safe and habitable is a sensible approach to provide more adequate housing.

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B. AB 3066, Mark Stone. Mobilehome Residency Law Protection Act.

Amends sections 18021.7 and 18502 of, and adds and repeals Part 2.2 (commencing with section 18800) of Division 13 of, the Health and Safety Code.

AB 3066 enacts the Mobilehome Residency Law Protection Act beginning July 1, 2020, and establishes the Mobilehome Residency Law Protection Program within HCD. In particular, this program requires the HCD to provide assistance in resolving and coordinating the resolution of complaints from homeowners under the Mobilehome Residency Law, as defined. The intent of this legislation is to provide vulnerable mobilehome owners with an additional avenue to enforce violations of existing laws with respect to mobilehomes. However, it also provides that the HCD shall not arbitrate, mediate, negotiate, or provide legal advice in connection with mobilehome park rent disputes, lease or rental agreements, or disputes arising from such agreements. And, it requires the HCD refer matters within its jurisdiction to its Division of Codes and Standards, and authorizes it to refer matters not within its jurisdiction to the appropriate enforcement agency. In addition, AB 3066 requires the HCD to select complaints for evaluation under the program as further described. AB 3066 also requires management to provide specified information to the HCD within 15 business days from the postmark date or electronic transmission of a request for that information, and requires the imposition of a $250 noncompliance citation for each failure to comply.

Beginning January 1, 2019, AB 3066 requires the HCD to assess upon, and collect from, the management of a mobilehome park subject to the Mobilehome Residency Law, an annual registration fee of $10 for each permitted mobilehome lot located within the mobilehome park. This fee must be paid at the time of payment of the annual operating fee imposed under the Mobilehome Parks Act. AB 3066 further authorizes management to pass this fee on to the homeowners within the mobilehome park. All moneys collected pursuant to these provisions are to be deposited into the Mobilehome Dispute Resolution Fund, which shall be established. Those moneys shall be made available, upon appropriation by the Legislature, for purposes of implementing the Mobilehome Residency Law Protection Act, as provided.

Finally, AB 3066 requires on January 1, 2023, that the HCD submit a written report with specific information to the Legislature outlining data collected from the program and make that report available on its Internet Web site. It requires the HCD to additionally report certain information to a task force convened pursuant to specified law to provide input to the department on the conduct and operation of a certain mobilehome park maintenance inspection program.

AB 3066 repeals the Mobilehome Residency Law Protection Act as of January 1, 2024.

XII. MORTGAGES

A. SB 1183, Morrell. Mortgages: Reverse Mortgage Notices for Successors in Interest.

Amends section 2920.7 of the Civil Code.

SB 1183 seeks to clarify that certain lender notice requirements and due process protections provided for successors in interest that are going through foreclosure under the Survivors Bill of Rights ("SBOR") enacted in 2016, do not apply to reverse mortgages, which are, by their nature, non-assumable.

According to the United Trustees Association, the sponsor of SB 1183, this clarification was needed because reverse mortgage lenders were uncertain about whether to send notices required by SBOR to successors in interest. Many were, out of an abundance of caution, sending unneeded notices which were confusing or misleading to recipients with respect to their right to assume a reverse mortgage when there was none. SB 1183 accordingly, exempts reverse mortgages from the notice requirements contained in the SBOR to reduce potential confusion among consumers.

B. SB 818, Beall. Mortgages and Deeds of Trust: Foreclosure under the California Homeowner Bill of Rights.

Amends section 2924 of, amends and repeals sections 2923.4, 2923.5, 2923.6, 2923.7, 2924.12, 2924.15, and 2924.17 of, adds sections 2923.55, 2924.9, 2924.10, 2924.18, and 2924.19 to, repeals section 2920.5 of, and repeals and adds section 2924.11 of, the Civil Code.

SB 818 permanently re-enacts the provisions of SB 900 that were first enacted in 2012 and set to sunset on January 1, 2018. Commonly referred to as the California Homeowner Bill of Rights, these provisions established a variety of requirements in connection with foreclosures on mortgages and deeds of trust. These provisions include restrictions on mortgage servicers’ actions while a borrower is attempting to secure a loan modification or has submitted a loan modification application. The foreclosure provisions of the act were generally limited to first lien mortgages and deeds of trust on owner-occupied residences. SB 818 not only reenacts various provisions of the California Homeowner Bill of Rights, it also makes additional changes to the provisions.

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One significant aspect of SB 818 is that it restores the distinction between small lending and servicing entities that have not foreclosed on more than 175 first lien mortgages or deeds of trust on residential real properties, and large lending and servicing entities that have done so, in the prior annual reporting period.

With respect to those entities that exceed the 175 foreclosures threshold, SB 818 specifically prohibits these entities from recording a notice of default or notice of sale, or conducting a trustee’s sale, after a borrower submits a complete application for a first lien loan modification and that application is pending. SB 818 does require that the complete application be submitted at least five business days before a scheduled foreclosure sale. This prohibition on recording a notice of default or a notice of sale continues until one of three specified events occurs. In addition, SB 818 grants a borrower 30 days to appeal if the loan modification is denied, and authorizes the borrower to provide evidence that the mortgage servicer’s determination was in error. During this appeal period, SB 818 prohibits filing a notice of default, or if that notice has already been filed, from recording a notice of sale or conducting a trustee’s sale until the later of specified events. SB 818 further requires a mortgage servicer to send a written notice to the borrower that identifies the reasons for denial and that includes certain information in connection with the denial and provides that a mortgage servicer satisfies specified telephone contact requirements if the borrower makes a written request to cease communications.

SB 818 also prohibits entities with more than 175 residential foreclosures in the prior annual reporting period from recording a notice of default until a mortgage servicer provides the borrower specified information in writing, 30 days have passed after contacting the borrower or after making diligent effort to do so, and after compliance by the mortgage servicer with the applicable requirements for completed applications for loan modification. SB 818 requires that a notice of default include a specified declaration regarding contact with a borrower and makes other technical changes to provisions requiring a mortgage servicer to establish a single point of contact for a borrower requesting a foreclosure prevention alternative.

In addition to the original requirements enacted under SB 90, SB 818 requires a mortgage servicer that offers a foreclosure prevention alternative to send a written communication containing specified information regarding the alternative to a borrower within five days after recording a notice of default. The servicer must provide a borrower who submits a "complete" first lien loan modification application, or any document connected to that modification, written acknowledgment of receipt within five business days of receipt, along with other information regarding the loan modification process. SB 818 further prohibits recording a notice of default if a foreclosure prevention alternative is approved in writing before the notice is recorded and other specified conditions are met. If a foreclosure prevention alternative is approved after recording the notice, SB 818 prohibits recording a notice of sale or conducting a trustee sale if specified conditions are met. It also requires that a notice of default be rescinded or a pending trustee sale be canceled when a borrower executes a permanent foreclosure alternative. SB 818 prohibits a mortgage servicer from charging fees for a first lien loan modification or other foreclosure prevention alternative, as specified, and requires modifications and prevention alternatives previously approved to be honored following transfer or sale to another servicer.

Finally, SB 818 provides for liability to borrowers for material violations of these provisions, as specified, and permits a court to award the greater of treble actual damages or specified statutory damages in cases of intentional or reckless violations. A mortgage servicer that engages in multiple and repeated filing of unsubstantiated documents related to foreclosure is liable under SB 818 for a civil penalty of up to $7,500 per mortgage or deed of trust in an action brought by specified state and local government entities. Administrative enforcement is also authorized against specified licensees by their regulatory agencies.

With respect to first lien mortgages or deeds of trust on residential real property in connection with an entity that has foreclosed on fewer than 175 real properties in the preceding annual reporting period, SB 818 enacts a second set of provisions. These provisions prohibit recording a notice of default, notice of sale, or conducting a trustee’s sale while a complete first lien loan modification application is pending and until the mortgage servicer provides the borrower with a written determination regarding his or her eligibility for the requested modification. It also requires that the complete application be submitted at least five business days before a scheduled foreclosure sale. SB 818 also prohibits recording a notice of default if a foreclosure prevention alternative is approved in writing before the notice is recorded and other specified conditions are met. The law prohibits recording a notice of sale or conducting a trustee sale if a foreclosure prevention alternative is approved after recording the notice and certain specified conditions are met. SB 818 also prescribes a process by which these entities become subject to the provisions described above that are applicable to entities that foreclose on more than 175 real properties within the previous annual reporting period.

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SB 818 authorizes a borrower to seek injunctive relief to enjoin material violations of certain of its provisions if a trustee’s deed upon sale has not been recorded. If the deed has been recorded, SB 818 provides for liability to borrowers for material violations of these provisions, and permits a court to award the greater of treble actual damages or specified statutory damages in cases of intentional or reckless violations. Importantly, SB 818 authorizes a court to award attorney’s fees and costs, as specified.

It should be noted that violations of certain of the provisions described above by licensees of the Department of Corporations, the Department of Financial Institutions, and the Department of Real Estate are also deemed to be violations of those respective licensing laws.

C. SB 1139, Morrell. Real Property Liens: Suspension and Closing of Equity Lines of Credit.

Amends section 2943.1 of the Civil Code.

Prior law enacted in 2014 as AB 2770 requires a creditor to make certain disclosures to a consumer applying for a home equity loan and suspends the borrower’s equity line of credit for a minimum of 30 days upon receipt of a specified written request from a borrower. Upon receipt of both that request and a specified payment, existing law requires a lender to close the borrower’s equity line of credit and release or reconvey the property secured by the line of credit, as specified. Prior law provided for the repeal of these equity line of credit suspension and closure provisions on July 1, 2019. SB 1139 extends the operation of these provisions indefinitely.

D. SB 1201, Jackson. Contracts: Consumer Protection: Residential Mortgage Lending.

Amends section 1632.5 of the Civil Code, and amends section 50200 of the Financial Code.

SB 1201 serves a two-fold purpose. First, it extends to loan modifications the requirement that a supervised financial organization that negotiates primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean, whether orally or in writing, in the course of entering into a contract or agreement for a loan or extension of credit secured by residential real property, deliver to the other party to that contract or agreement before execution of the contract or agreement, a specific form, created by the Department of Business Oversight, in each of these languages for use by a supervised financial organization to summarize the terms of a mortgage loan.

Specifically, SB 1201 requires a supervised financial organization that negotiates the modification of any of the terms of a loan or extension of credit secured by residential real property primarily in one of the above languages, and that offers a borrower a final loan modification in writing, to deliver to that borrower, at the time the final loan modification offer is made, a specified form summarizing the modified loan terms in the same language as the negotiation.

Additionally, SB 1202 requires delivery of an applicable form or forms for transactions subject to certain federal regulations. In this regard, it authorizes the Department of Business Oversight, in making available each of its forms in each of the languages set forth above, to use as guidance two additional forms from the Consumer Financial Protection Bureau and three additional forms from the Federal National Mortgage Association. These provisions become operative 90 days following the issuance of the forms by the Department of Business Oversight, but in no instance before January 1, 2019.

The second purpose of SB 1201 is to address a defect in the California Residential Mortgage Lending Act regarding the timing of administrative hearings in connection with the revocation of the license of a licensee who fails to file a certified financial statement prepared by an independent certified public accountant, as required for audit purposes. SB 1201 specifies that, if, after a revocation order is made, a request for hearing is filed in writing by the licensee within 30 days from the date of service of the order, and a hearing is not held within 90 days of the filing, the order is deemed rescinded as of its effective date. SB 1201 further specifies that a licensee is prohibited, during the revocation period, from conducting business, except as specified.

XIII. OBLIGATION RELEASES

A. SB 1431, Morrell. Obligations: Release.

Amends sections 1541 and 1542 of the Civil Code.

SB 1451 addresses the confusion that can arise regarding the interpretation of the terms "creditor" and "debtor" as used in Civil Code sections 1541 and 1542. This confusion particularly concerns self-represented parties, who expect these terms as used in these statutes to apply only to releases in cases where money is owed. SB 1431 acknowledges that these statutes are commonly understood by the legal community to apply to a much broader scope of obligations and claims. It adds the wording "releasing party" and "released party" to the statutes where creditor and debtor occur, to ratify this broader interpretation. SB 1431 also changes the wording in Civil Code section 1542 from "must have materially affected" to "would have materially affected," thereby enacting an apparently lesser standard. The bill states that its changes are declaratory of existing law, but practitioners who utilize 1542 waivers in their settlement agreements and other documents should, nevertheless, make sure to modify their documents to include these revisions in the language of the statutes.

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XIV. PROPERTY ASSESSED CLEAN ENERGY (PACE) PROGRAM

A. AB 2063, Aguiar-Curry. PACE Program Administrators: Requirements to Verify Repayment Ability.

Amends sections 22017, 22018, 22105, 22157, 22680, 22681, 22682, 22684, 22686, 22687, 22689, 22691, 22693, and 22716 of the Financial Code, and sections 5898.24 and 5913 of the Streets and Highways Code.

Property Assessed Clean Energy, or "PACE," programs enable property owners to finance clean energy upgrades, such as solar installations, that are repaid through special assessments or taxes on the property. The programs are carried out with local governmental authority to form improvement districts or Mello-Roos community facilities districts. In most cases, the local government agencies establish the framework for the program and then contract with a third party to administer it.

PACE encourages clean energy upgrades, and the savings that may come with it, by providing an alternative source of financing. However, there is a risk that PACE financing may appear to be free money, particularly if an improvement is pushed by an unscrupulous contractor or administrator, and the property owner may not actually be able to pay to service the financing. Given that the debt service is collected through the property tax roll, the inability to pay may result in large interest penalties and even foreclosure. As a result, several bills in recent years have sought to tighten consumer protections for PACE financing.

AB 2063 continues this trend. The bill prohibits execution of an assessment contract for residential improvements, or the commencement of work on residential improvement, until the homeowner’s ability to repay can be verified. The program administrator must document how the ability to pay was verified. Homeowners who have been a party to bankruptcy within the past four years, or who have made late mortgage payments within the past six months, are not eligible.

PACE is useful tool for property owners to find energy savings and reduce their carbon footprint. Ensuring that the cost of the improvements is within reach will hopefully enable the program to continue as a net benefit.

B. SB 465, Jackson. PACE Financing for Wildfire Safety Improvements.

Amends, repeals, and adds section 22003.5 of the Financial Code, section 53313.5 and 53355.7 of the Government Code, sections 5898.16, 5898.17, 5902, 5913, and 5954 of, and adds and repeals section 5899.4 of, the Streets and Highways Code.

Not all PACE legislation involves restrictions. SB 465 contains a massive expansion of the types of improvements that may be financed through a PACE program. Traditionally, PACE financing has only been accessible for energy and water efficiency and seismic safety upgrades. SB 465 allows homeowners utilize this financing for "wildfire hardening" improvements, provided that the property is in an area designated as a very high fire hazard severity zone.

The impetus for this bill is obvious. With record-setting fires occurring throughout the state over the past two years, homeowners are increasingly wary of losing their homes to wildfire. Additionally, wildfire hardening improvements can be a force multiplier, preventing the spread of fire to other properties. The scope of eligible improvements is broad and includes any improvements identified by CalFIRE (the California Department of Fire and Forestry) that can be fixed to an existing building or structure. Some examples of improvements include ember-resistant roofs, dual-paned windows, and various ignition-resistant products such as walls, decks, and patio covers.

The bill incorporates existing consumer protections contained in the PACE program. Opposition, such as that from the California Association of REALTORS, tracks with criticism of PACE programs in general. The bill was supported by a number of firefighter organizations, as well as the Sierra Club.

XV. PRIVATE TRANSFER FEES

A. AB 3041, Cunningham. Real Estate Transfer Fees: Prohibition.

Adds section 1098.6 to the Civil Code.

AB 3014 addresses concerns regarding the creation of "transfer fees," which are defined as any fee payment requirement imposed within a covenant, restriction, or condition in any deed, contract, security instrument, or other document affecting the transfer or sale of, or any interest in, real property that requires a fee be paid as a result of transfer of the real property, and as further defined in, Civil Code section 1098(a). Concern at the federal level over the potential abuse and negative impact of such transfers fees on housing cost dates back to 2010, when the Federal Housing Finance Agency ("FHFA") developed new regulations covering when Fannie Mae, Freddie Mac, and the Federal Home Loan Bank may purchase mortgages on properties that are encumbered with a property transfer fee. The new federal regulations became effective February 8, 2011. They prohibit Fannie Mae, Freddie Mac, and the Federal Home Loan Bank from acquiring such mortgages unless the property transfer fee conveys a "direct benefit" on the property subject to the fee. Direct benefits are defined under the federal regulations (12 C.F.R. 1228.1.) to occur when transfer fees are used for the "acquisition, improvement, administration and maintenance" of property owned by the covered association. Additionally, "direct benefit" includes "cultural, educational, charitable, recreational, environmental, conservation, or other similar activities" that are "conducted in or protect the burdened community or adjacent or contiguous property or are conducted on other property that is used primarily by residents of the burdened community."

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California has previously enacted a series of laws concerning transfer fees that among other things, (i) require anyone seeking payment of a property transfer fee to record, among the property documents on file with the applicable county recorder, a notification setting forth the nature, purpose, duration, and amount of the fee, as a precondition for receiving payment (AB 980 (Calderon, Ch. 689, Stats. 2007)); (ii) clarified that property transfer fee disclosures must appear on a single document and cannot be incorporated by reference into other documents (AB 807 (Stone, Ch. 634, Stats. 2015)); and (iii) require anyone seeking payment of a property transfer fee to record notice that the existence of the fee may make it more difficult for the property owner or a prospective buyer to obtain financing unless the transfer fee provides a "direct benefit" to the property in question (AB 1139 (Reyes, Ch. 148, Stats. 2017)). AB 3014 goes beyond the limited approach of giving warnings on potential negative effects that can arise from transfer fees that do not provide a direct benefit on the property. AB 3014 directly prohibits in California the creation of property transfer fees that do not provide a direct benefit to the property as defined in federal law. This prohibition became effective on January 1, 2019, and acts prospectively. It therefore does not affect property transfer fees created prior to that date.

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