2002 California Legislation
(ALTA SLRAC Report)
By Craig C. Page
Vice President & Legislative Counsel, CLTA
Notes: California's bill text can be accessed through the Legislative Counsel's website address
at www.leginfo.ca.gov or by clicking on the bill numbers as they appear below.
All legislation included in this report will go into effect on January 1, 2003 unless
otherwise noted.
I. CIVIL ACTIONS
H. Consumer Protection
SB 800 – Burton. Public Records.
This act makes major changes to the substance and process of the law governing construction
defects and 1) provides for detailed and specific liability standards for newly constructed
housing; 2) creates a pre-trial process that includes a builder’s right to repair an alleged defect;
and 3) provides third-party inspectors with immunity from liability.
A builder may provide a written “enhanced protection agreement” to the homeowner no later
than close of escrow and allows the builder the opportunity to “fix” the defect prior to the
homeowner initiating litigation.
Subsequent non-original homeowners are subject to the terms of the “enhanced protection
agreement” only if it is recorded or the non-original homeowner has actual notice of its
existence. The builder also must record a document setting forth the procedures for acquiring
this information and to provide this information to the home buyer in the original sales
documentation.
AB 1868 – Koretz. Injunctions: Nuisance Abatement.
This act provides that a court may issue a temporary restraining order or injunction to enjoin
subsequent owners, commercial lessees, or agents who acquire the building or place where
the controlled substances nuisance exists with notice of the order or injunction. This act
provides that the order or injunction, which is not recorded, shall not constitute a title defect,
lien, or encumbrance on the real property.
Prospective purchasers, commercial lessees, or other successors in interest are required to be
notified of the existence of the order or injunction, and of its application to successors in interest,
prior to entering into any agreement to sell or lease the property
PO Box 13968, Sacramento, CA 95853-3968 * 1110 K Street, Suite 100, Sacramento, CA 95814-3905
Tel (916) 444-2647 * Fax (916) 444-2851 * www.clta.org * mail@clta.org
Federal Tax ID 95-0595810
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J. Child Support Lien
AB 3032 – Committee on Judiciary. Recording Notice of Support.
This act authorizes the Department of Child Support Services to enforce a child support
obligation by recording a notice of support judgment which has the force, effect and priority of
an abstract relating to child support once it is recorded.
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IV. INSURANCE/BUSINESS ISSUES
A. Agents/Abstracter Licensing
SB 2093 – Speier. Title Insurance: Liability for Insolvency.
Existing law provides that if an underwritten title company is placed into bankruptcy,
receivership, or conservatorship by the Commissioner and there is a shortage in a subescrow or
escrow account, each title insurer operating under an underwriting agreement with the
underwritten title company during the previous six months shall be liable for a proportionate
share of the shortage.
This act also requires an affected title insurer to be liable, in addition to any escrow shortages
attributed to the failed underwritten title company, for a proportionate share of the costs and
expenses of the Commissioner in administering the insolvency and in advancing funds from the
Insurance Fund to temporarily cover a subescrow or escrow account shortage. This act further
provides that a title insurer has a preferred claim for reimbursement of these payments from
assets of the insolvent entity.
P. Privacy Concerns
AB 2238 – Dickerson. Public Safety Official Home Protection Act.
Existing law prohibits any state or local agency from posting the home address or telephone
number of any elected or appointed official on the Internet without first obtaining the written
permission of that individual.
This act prohibits any person from knowingly posting the home address of any elected or
appointed official, or the official’s spouse or child residing at the same location, on the
Internet knowing that person is an elected, appointed official, or public safety official, and
intending to cause imminent great bodily harm that is likely to occur, or threatening to cause
imminent great bodily harm, to that individual. This act makes a violation of these provisions a
misdemeanor, or a felony if it leads to the bodily injury of the official or his or her residing
spouse or child.
Under existing law, every person who maliciously, and with the intent to obstruct justice or the
due administration of the laws, publishes, disseminates, or otherwise discloses the residence
address or telephone number of any peace officer, nonsworn police dispatcher, or employee of
a city police department or county sheriff' s office, or that of the spouse or children of these
persons, without the authorization of the employing agency, is guilty of a misdemeanor.
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This act adds “public safety officials,” as defined in the bill, to the list of those who may not have
their information published. It also prohibits disclosure of the addresses and telephone numbers
of spouses and children residing with them. This act further creates an advisory task force to
determine, by September 1, 2003, how to better protect a public safety official's home
information from release to individuals who may harass or harm them or their families. The task
force is to be chaired by the Attorney General and is to be comprised of various representatives
from law enforcement, the legal community, and the real estate community.
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V. STATUTORY LIENS
D. Child Support Liens
AB 3032 – Committee on Judiciary. Recording Notice of Support.
This act authorizes the Department of Child Support Services to enforce a child support
obligation by recording a notice of support judgment which has the force, effect and priority of
an abstract relating to child support once it is recorded.
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VI. TAXES
A. Real Estate
AB 2065 – Oropeza. Withholding on Real Estate Sales
This act makes various changes to the Revenue and Taxation Code and to the Unemployment
Code. Of particular interest to the title industry is the following:
Dispositions of California real estate interests that occur on or after January 1, 2003 are subject
to withholding. As part of the budget solutions proposed by members of the California
Legislature, this act, requires all real estate transferees (buyers) to withhold 3 1/3% of the sales
price of specified California real property. The amount withheld shall be held in trust for the
State of California according to the law. The sales price is defined to mean the cash paid, plus
the fair market value of property transferred plus any liability assumed. It does not subtract any
expenses of the sale.
The law sets forth a notice to be supplied by the escrow agent to the transferee with the escrow
agent handling various certifications and, if necessary, the withholding and transmittal of funds
to the Franchise Tax Board in the form and manner and at the time specified by the Franchise
Tax Board.
The provisions in this act are patterned after Cal-FIRPTA (Foreign Investment in Real Property
Tax Act) which became effective in 1988, which was in turn patterned after the federal law first
adopted in 1980. Cal-FIRPTA currently relates only to withholding of real estate proceeds of
foreign, non-resident aliens. The law amends CAL-FIRPTA to set up withholding requirements
relating to three classes of transferors:
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a)
Individuals;
b)
Persons (but not certain partnerships, or an individual or a corporation) where the funds
are to be distributed to a transferor outside the state or to the financial intermediary of
the transferor;
c)
Corporations.
Under the new law, 3 & ⅓% of the sales price is required to be withheld unless:
1)
The property sales price is less than $100,000; or
2)
The property is the principal residence of an individual transferor based on a written
certification signed under penalty of perjury; or
3)
The property is transferred to a corporate beneficiary by a foreclosure or a deed in lieu;
or
4)
The property transferred by an individual and will be replaced in a like kind exchange,
based on a written certification by the transferor or signed under penalty of perjury; or
5)
The property is transferred by an individual as an involuntary conversion and the
transferor certifies an intent to acquire replacement property eligible for deferral under
Section 1033 of the Internal Revenue Code.
6)
The transferor is an individual who certifies under penalty of perjury that the transaction
will result in a loss for California income tax purposes.
7)
The transferor is a corporation unless immediately after the transfer, the corporation has
no permanent place of business in California. A corporation has no permanent place of
business if all of the following apply:
a)
It is not organized and existing under the laws of California.
b)
It does not qualify with the office of the Secretary of State to transact business in
California.
c)
It does not maintain and staff a permanent office in California.
An escrow agent would:
1)
Provide written notification of the withholding requirements to the parties;
2)
Provide certification forms for the exemptions contained in the bill;
3)
Provide instructions to be signed by the parties authorizing the withholding and remitting
of the amount to the Franchise Tax Board along with any charge imposed for withholding
and remitting, not to exceed $45.
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It is unlawful for any escrow person to charge any customer for complying with the provisions of
the law unless “assistance” is provided. Assistance is not simply providing written notification of
the requirements. Assistance can be:
a)
Helping the parties clarify with the Franchise Tax Board the issue of whether
withholding is required, or
b)
Helping the parties request that the Franchise tax Board authorized a reduced
amount or no amount to be withheld, or
c)
Upon request of the parties withholding and remitting the funds.
This act allows transferors that are corporations or other entities to request a waiver from the
Franchise Tax Board if documentation is provided showing that to substitute a reduced or no
amount will not jeopardize collection of the tax. In such case, the withholding amount may be
escrowed for 45 days to allow for a determination. This act also allows an election for
installment sales to have each installment subject to the withholding in a manner specified by
the Franchise Tax Board. It also has provisions applicable to exchange accommodators
regarding withholding where the exchange does not qualify for non-recognition.
Note: The withholding provisions apply to dispositions of California real property
interests that occur on or after January 1, 2003.
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VIII. REAL PROPERTY INTERESTS
C. Covenants, Conditions & Restrictions
AB 1913 – Lowenthal. Coastal Lands: Recorded Notice of Violation.
Existing law requires any person wishing to perform or undertake any development in the
coastal zone to obtain a coastal development permit from the California Coastal Commission or
from a local government.
In the event that the Commission believes that real property has been developed in violation of
the California Coastal Act of 1976, (CCA) the Commission must notify the real property owner
by mail of the alleged violation and the agency’s intent to record a notice of violation in the
county recorder’s office. This act also provides for the following:
1) A public hearing is required to be held at the next regularly scheduled Commission
meeting if the owner submits a timely objection to the proposed recordation of the notice of
violation;
2) A clearance letter must be issued if the Commission finds that no violation has occurred. If
the Commission determines that a violation has occurred, the executive director must
record a notice of violation in the county recorder’s office;
3) If it is determined that the violation no longer exists, the executive director must record a
notice of recision within 30 days of making that determination in the county recorder’s
office, indicating that the notice of violation is no longer valid;
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4) The Commission may, at any time and for any cause, on its own initiative or at the request
of the property owner, cause a notice of recision to be recorded invalidating the notice of
violation.
5) The notice of violation, if recorded, is for informational purposes only and is not a defect,
lien, or encumbrance on the property pursuant to Public Resources Code Section
30812(e)(2).
AB 2776 – Simitian. Aviation Noise: CC&R’s: Disclosures.
Existing law requires any person who intends to offer subdivided lands within California for sale
or lease to file with the Department of Real Estate an application for a public report consisting of
a notice of intention and a completed questionnaire that includes, among other things, the
location of all existing airports, and of all proposed airports shown on the general plan of any
city or county, located within two statute miles of the subdivision. Existing law also requires that
a copy of the public report of the Real Estate Commissioner, when issued, be given to the
prospective purchaser by the owner, subdivider, or agent prior to the execution of a binding
contract or agreement for the sale or lease of any lot or parcel in a subdivision or upon request
by any member of the public.
This act requires the notice of intention filed with the application for a public report, to include a
statement regarding whether the property is encompassed within an “airport influence area” as
defined by this act.
The Davis-Stirling Common Interest Development Act regulates common interest developments
and defines the contents of declarations and other governing documents that govern the
operation of common interest developments and the associations that manage common interest
developments. Existing law also provides that an owner of a separate interest in a common
interest development must provide certain documents and disclosures to a prospective
purchaser prior to transfer of title including a copy of the governing documents and declarations
of the common interest development.
This act requires that any declaration, recorded after January 1, 2004, contain the following
statement:
This property is presently located in the vicinity of an airport, within what is known as a airport
influence area. For that reason, the property may be subject to some of the annoyances or
inconveniences associated with proximity to airport operations (for example: noise, vibration,
or odors). Individual sensitivities to those annoyances can vary from person to person. You
may wish to consider what airport annoyances, if any, are associated with the property before
you complete your purchase and determine whether they are acceptable to you.
Existing law requires a seller of residential property, to make disclosures upon the transfer of
that property, and sets forth the content and form of these disclosures in a Real Estate Transfer
Disclosure Statement (TDS) and a Natural Hazard Disclosure Statement. Existing law also
requires sellers of residential real property who have actual knowledge that the property is
affected by airport uses to give written notice of that knowledge, as soon as practicable before
transfer of title.
This act revises the TDS to require that statement to advise the prospective purchaser of other
disclosures required by law, including the Natural Hazard Disclosure Report/Statement that may
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include airport annoyances, earthquake, fire, flood, or special assessment information, that have
or will be made in connection with the transfer.
Note: This measure goes into effect on January 1, 2004.
AB 2436 – Frommer. Public Records: Cleanup and Abatement: Land Use Restrictions.
Existing law requires the Department of Toxic Substances Control to notify the planning and
building department of each city, county, or regional council of governments of land use
restrictions imposed upon hazardous waste or border zone properties, sites listed for remedial
or removal action or land use controls. Existing law also requires the planning department of
those local agencies to record those restrictions and requires the Department to maintain an
aggregate list of these land use restrictions and to make the list available to interested parties.
This act requires various state agencies and the Department of Toxic Substances Control to
maintain a current list of all instruments and agreements restricting land uses imposed by those
agencies and requires the list to provide the street address and the assessor’s parcel number.
If a street address or assessor’s parcel number is not available, or if a street address or
assessor’s parcel number does not adequately describe the property affected by the instrument
or agreement restricting land use, the list shall include a description of location or the location’s
geographic coordinates. This act requires each agency to display the list on the agency's Web
site and to make the list available to the public upon request.
Existing law, the Porter-Cologne Water Quality Control Act, prohibits the state and the regional
boards from considering cleanup or site closure proposals from the primary or active
responsible discharger, issuing a closure letter, or making a determination that no further action
is required, with respect to a site subject to a cleanup or abatement order, unless all current
record owners of fee title to the site of the proposed action have been notified.
This act provides that, if the state board or regional board finds the property is not suitable for
unrestricted use and that a land use restriction is necessary for the protection of public health or
safety or the environment, the state board or regional board is prohibited from taking those
actions with regard to a site that is not an underground storage tank site, unless a land use
restriction is recorded.
Existing law provides for the recording of an instrument containing an Environmental Restriction
covenant made by an owner of land or by the grantee of land to do or refrain from doing an act
that is reasonably necessary to protect present or future human health or safety or the
environment as a result of the presence on the land of hazardous materials.
This act authorizes the office of the county recorder to send a certified copy of the recorded
environmental restriction instrument to the Cal-EPA for posting on its Web site, for informational
purposes only. This act provides the office of the county recorder and any of its employees
immunity from any liability under any state law or in any action for damages if the office of the
recorder does not send a certified copy of the instrument pursuant to the requirements of the
act.
AB 1926 – Horton. CC&R’s: Removal of Discriminatory Covenant.
Existing law authorizes any person holding an ownership interest of record in property
containing a restrictive covenant, to submit the document directly to the Department of Fair
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Employment and Housing (DFEH) to determine if it violates the fair housing laws. If the DFEH
determines the restriction or covenant does violate fair housing laws, it must return the
document and determination to the submitter who may, in turn, cause the recording of a
modified document with the covenant stricken. Typical illegal or void covenants and restrictions
falling into this category often deal with race, creed, religion, sex, national origin, etc.
This act authorizes any person holding an ownership interest of record in property that he or she
believes is subject to an unlawfully restrictive covenant to submit a modified document with the
covenant stricken for recordation to the county recorder and the county recorder then may either
record the new modified document (with the covenant stricken) or forward it to the DFEH for
review to determine if the covenant or restriction is illegal or void.
This act also requires any title insurance company or escrow company providing a copy of a
declaration, governing document or deed to any person, to place a cover page or stamp on the
document stating (in at least 14-point boldface type) the following:
If this document contains any restriction based on race, color, religion, sex,
familial status, marital status, disability, national origin, or ancestry, that restriction
violates state and federal fair housing laws and is void, and may be removed
pursuant to Section 12956.1 of the Government Code.
Lawful restrictions under state and federal law on the age of occupants in senior
housing or housing for older persons shall not be construed as restrictions based
on familial status.
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IX. DEEDS AND SECURITY INTERESTS
E. Mortgages/Deeds of Trust
SB 1504 –Ackerman. Delivery of Reconveyance: Trustee Sales.
Existing law requires a person recording a notice of default of a mortgage or deed of trust to
provide a copy of a notice of sale to the Internal Revenue Service if a "Notice of Federal Tax
Lien" has been recorded against the real property to which the notice of sale applies.
This act provides that the failure to provide the Internal Revenue Service the notice of sale is
sufficient cause to rescind the trustee's sale and invalidate the trustee's deed at the option of the
successful bidder at the trustee's sale or the trustee with the consent of the beneficiary. This
act also permits the rescission of the trustee's deed to be recorded.
Existing law provides that when an obligation secured by a deed of trust has been satisfied, the
beneficiary, or its assignee, shall execute and deliver to the trustee the original note, deed of
trust, request for a full reconveyance, and other documents as may be necessary to reconvey
the deed of trust. Existing law also requires the trustee deliver a copy of the reconveyance to
the beneficiary if known, and requires the reconveyance instrument to specify the trustor as the
person to whom the recorder will deliver the recorded instrument.
This act permits the reconveyance to alternatively specify that the recorder shall deliver the
recorded instrument to the trustee's address or the address of the trustor or successor in
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interest, but the recorder has no duty to validate those addresses. This act also requires that, if
the trustee's address is specified for delivery, the trustee must mail the recorded instrument to
the trustor or the successor in interest at the last known address for that party. This act also
permits the reconveyance instrument to specify the successor in interest of the trustor as the
person to whom the recorder will deliver the recorded instrument.
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