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SB 284
CONSENT
Bill No:
Author:
Amended:
Vote:
SB 284
Harman (R)
4/5/11
21
SENATE JUDICIARY COMMITTEE: 4-0, 3/29/11
AYES: Evans, Harman, Blakeslee, Leno
NO VOTE RECORDED: Corbett
SUBJECT:
Real property: marketable title
SOURCE:
California Land Title Association
DIGEST: This bill provides a January 1, 2013 sunset date on existing law
relative to an option to purchase real property, as specified, and after
January 1, 2013, this bill provides that an option to purchase real property
expires of record six months after the date the instrument that creates or
gives constructive notice of the option is recorded.
ANALYSIS: Existing law provides that if a recorded instrument creates or
gives constructive notice of an option to purchase real property, the option
expires of record if no conveyance, contract, or other instrument that gives
notice of exercise or extends the option is recorded within the following
timeframe:
 Six months after the option expires according to its own terms; or
 If the option provides no expiration date, six months after the date the
instrument that creates or gives constructive notice of the option is
recorded.
This bill provides that the above provisions sunset on January 1, 2013.
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After January 1, 2013, this bill revises those timeframes to, instead, expire
those options of record:
 six months after an expiration date that is ascertainable from the recorded
instrument; or
 six months after the recordation of the instrument that creates or gives
notice of the option if (1) the expiration date of the option is not
ascertainable from the recorded instrument, or (2) the recorded
instrument indicates that the option provides no expiration date.
This bill also makes a technical/typographical change to a related section.
Background
Recording statutes play an important role in resolving conflicts as to who
may own a piece of property. California, a “race-notice” jurisdiction,
requires conveyances of real property to be recorded in order to be valid
against other purchasers of the same property from the owner, provided
certain conditions are met. A subsequent purchaser of the same property for
value “wins” if they had no knowledge of the prior transfer, and they record
before the prior purchaser. As a result of that principle, prospective
purchasers must search records to see if there are any adverse records that
may create a cloud on title, and, upon purchase, must record as soon as
possible to preserve clear title. (Essentially, a cloud on title is a property
interest that prevents a party from receiving a clear title to the property.)
To address issues relating to obsolete recorded interests, the California Law
Revision Commission (CLRC) recommended enacting several provisions to
address some of the most common title-clouding interests in California.
That recommendation resulted in the enactment of the Marketable Record
Title statute in 1982, which included a provision that recorded notices of
options to purchase real property expire, by operation of law. Those options
give the potential purchaser the ability to purchase the property during the
stated option term, subject to the conditions of the contract. Under existing
law, those notices expire of record either within (1) six months after the
option expires according to its own terms; or (2) if there is no expiration
date, six months after the notice of option is recorded. (Civil Code Section
884.010.) It should be noted that the statute expires the “record notice” of
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the option, not the actual option itself; that record notice is important due to
California being a “race-notice” jurisdiction.
In 2009, the CLRC identified a gap in coverage of the above statute that
could cause an obsolete option to cloud title in cases where “off-record”
information is used to determine the option’s expiration. This bill,
sponsored by the California Land Title Association, implements the CLRC’s
recommendation to clarify that an option whose expiration date is not
ascertainable from the recorded instrument expires of record six months
after recording.
Need for a deferred operative date
CLRC has recommended a one-year operative date “[i]n order to avoid any
unfair surprise to those who have recorded notice of an option to purchase
real property under existing law …” That delayed operation is necessary so
as to “provide sufficient time for those who have recorded notices to adjust
to the change in the law.”
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
SUPPORT: (Verified 4/5/11)
California Land Title Association (source)
ARGUMENTS IN SUPPORT: According to the author:
“In most cases, the status of record notice of an option can be readily
determined from the information provided in the notice itself, without
any need to consult off-record information. However, there are
circumstances in which the status of record notice cannot be determined
from the title records alone.
“That is because the status of record notice of an option depends on the
expiration date of the option (if any). That information might not be
included in the record, in which case off-record information would be
required to determine the status of the record notice.
“That would make it difficult or impossible for a title researcher to
determine whether the record notice is effective, creating a cloud on title
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that may persist long after the underlying option has become obsolete.
Judicial proceedings could be required to determine the status of title.”
The author notes that this bill corrects this issue, after January 1, 2013, by
allowing the statute at issue to “operate entirely on the basis of information
that is ascertainable from the recorded document.”
RJG:mw 4/6/11 Senate Floor Analyses
SUPPORT/OPPOSITION:
SEE ABOVE
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