Craig C. Page
Vice President & Legislative Counsel, CLTA
California's bill text can be accessed through the Legislative Counsel's website address at www.leginfo.ca.gov.
I. CIVIL ACTIONS
AB 1467 - Kehoe. Housing: Liens:Substandard Conditions.
This act revises the State Housing Law by permitting a court to order the appointment of a nonprofit organization or community development corporation as a receiver for a substandard building.
This act also provides procedures for a receiver of real property containing rental housing to obtain a court order to assist in the abatement of substandard conditions, including expanding those costs and reimbursements that may be added to the recorded lien to reimburse the receiver.
This act also revises provisions relating to the imposition of criminal penalties upon owners, as well as prohibitions on the owner from claiming any deduction for state taxes and the appointment of a receiver. "Owner" includes any successor in interest who had actual or constructive knowledge of the agency’s enforcement proceedings.
F. Estates and Probate
SB 668 - Poochigian. Probate: Allocation of Debts.
Existing law provides a method for the allocation of debts between a decedent's estate and a surviving spouse.
This act revises the provisions relating to the allocation of debts in the absence of an agreement, requiring that a court characterize the debts as separate or community, and then setting forth a procedure for allocating the separate or community debts to assets similarly characterized, which would then be primarily liable for the debts.
This act also requires that if the net value of either spouse's separate property assets are less than that spouse's unsecured separate property debts, the unsatisfied portion of the debts be allocated to that spouse's one-half share of the community property assets. If the net value of that spouse's one-half share of the community property is less than the spouse's unsatisfied and unsecured separate debt, the act requires that the remaining unsatisfied portion of the debt be allocated to the net value of the other spouse's one-half share of the community property.
This act defines a "nonrecourse debt" as a debt for which the debtor's obligation to repay is limited to the collateral securing the debt and for which a deficiency judgment against the debtor is not permitted, and limits the amount of a nonrecourse debt to the net equity in the collateral. This act permits a court to order a different allocation of debts if the court finds it to be equitable under the circumstances.
SB 669 - Poochigian. Property Claims.
Existing law provides a procedure in probate court for the conveyance of real property or transfer of personal property claimed to belong to a ward or conservatee, decedent, or trust or other third party.
Existing law provides that a person, who in bad faith wrongfully takes, conceals, or disposes of property in the estate of a ward or conservatee, is liable for twice the value of the property, recoverable in an action brought by the guardian or conservator, decedent’s personal representative, or trustee on behalf of the estate.
This act repeals these provisions, and recasts and consolidates these separate probate court proceedings in a single procedure for the trial of all property questions within the probate court’s jurisdiction, whether the estate concerned is that of a decedent, minor or conservatee, or trust.
This act allows the estate of a decedent, minor or conservatee, or trust to recover twice the value of the property from an offending person who has in bad faith wrongfully taken, concealed or disposed of property belonging to the estate of the decedent, conservatee, ward or trust.
H. Consumer Protection
AB 344 - Migden. Loans: Predatory Lending.
Existing law provides for regulation of banks and savings associations by the Department of Financial Institutions. Existing law provides for regulation of real estate brokers by the Department of Real Estate. Existing law also provides for regulation of finance lenders and residential mortgage lenders by the Department of Corporations. Existing law further provides that willful violations of provisions governing savings associations, real estate brokers, and residential mortgage lenders are crimes.
This act imposes various requirements on high risk consumer loans secured by real property, defined as "covered loans." A "covered loan" is defined in this act to include a consumer loan in which the original principal balance of the loan does not exceed $250,000 for a mortgage or deed of trust, and where one of the following conditions are met:
1) For a mortgage, the annual percentage rate at consummation of the transaction will exceed by more than eight percentage points the yield on Treasury securities having comparable periods of maturity
2) Total points and fees payable by the consumer at or before closing for a mortgage will exceed six percent of the total loan.
The act prohibits various acts in making covered loans, including the following:
(a) Failing to consider the financial ability of a borrower to repay the loan;
(b) Financing certain types of credit insurance into a consumer loan transaction;
(c) Recommending or encouraging a consumer to default on an existing consumer loan in order to solicit or make a covered loan that refinances the consumer loan; and
(d) Making a covered loan without providing the consumer a disclosure to that effect.
The act provides that a violation of its provisions would be subject to a civil penalty.
SB 168 - Bowen. Privacy: Confidentiality: Identity Theft.
This act contains numerous changes to law involving privacy and identity theft relating to consumer credit reporting agencies not summarized herein. Of particular interest to the title industry is the following:
Existing law provides for the use of social security numbers as a means of identification in numerous applications.
This act prohibits any person or entity (not including a state or local agency) as of July 1, 2002, from using an individual's social security number in certain ways, including publicly posting or displaying it so that it is available to the general public. However, this act also provides that its provisions do not prevent the collection, use, or retention of social security numbers as required by state or federal law, or the use of social security numbers for internal verification or administrative purposes.
This act also specifically exempts from its requirements certain public records, including recorded documents, and government tax records required to be open to the public pursuant to certain state laws.
AB 245 - Wyland. Privacy: Identity Theft.
Existing law provides that every person who willfully obtains personal identifying information about another person without that person's consent and uses that information for any unlawful purpose is guilty of a crime punishable by imprisonment in a county jail not to exceed one year, a fine not to exceed $1,000, or both, or by imprisonment in the state prison, a fine not to exceed $10,000, or both.
This act eliminates the requirement that the person who uses another person's personal identifying information for an unlawful purpose obtain that information without the person's consent. Therefore, it is now a crime to use another person's personal identifying information for an unlawful purpose, regardless of whether the information was obtained with the person's consent.
II. Environmental Issues
B. Hazardous Waste
SB 732 - Ortiz. Disclosures: Mold.
This act enacts the Toxic Mold Protection Act of 2001. The act requires the State Department of Health Services to convene a task force to advise the Department on the development of permissible exposure limits to mold and standards for assessment of molds.
If it is determined to be feasible, the Department would be required to adopt, in consultation with the task force, permissible exposure limits to mold for indoor environments that avoid adverse health effects. The Department would be required to report its progress on developing the permissible exposure limits for molds by July 1, 2003.
This act requires a seller or transferor of commercial or industrial real property, to provide written disclosure to prospective buyers, as soon as practicable before the transfer of title when the seller or transferor knows of the presence of mold, both visible and invisible or hidden, that affects the unit or building and the mold either exceeds permissible exposure limits to molds or poses a health threat.
A seller or transferor of commercial or industrial real property is exempt from providing written disclosure if the presence of mold was remediated according to the mold remediation guidelines developed by the Department.
The disclosure requirements do not apply until the first January 1 or July 1 that occurs at least six months after the Department adopts standards and develops guidelines.
IV. Insurance/Business Issues
K. Legal Ethics Opinions
SB 708 - Speier. Insurance. Department of Insurance: Investigation of Complaints: Disclosures of Legal Opinions.
This act addresses a number of insurance-related provisions that are not summarized herein. Of particular interest to title companies is the following:
This act provides that the Commissioner may not decline to investigate complaints on various grounds, including that the insured is represented by an attorney or is involved in a civil action against an insurer, or that the complaint is from an attorney.
This act also requires the Department to make public a letter or legal opinion signed by the Commissioner or the Department's chief counsel that was prepared in response to an inquiry from an insured or other person or entity and that discusses the application of the Insurance Code or regulations promulgated by the Commissioner.
Such a letter or opinion does not operate as a guideline or standard of general application. This act defines the term "extraordinary circumstances" for the purpose of the Department determining noncompliance with the insurance laws and regulations and determining appropriate penalties. This act imposes limitations on the authority of the Department to enter into settlement agreements referencing the existence of "extraordinary circumstances", as defined, for a period of more than six months.
P. Privacy Concerns
SB 125 - Alpert. Identity Theft.
Existing law provides that every person who willfully obtains personal identifying information of another person without the authorization of that person, and uses that information for any unlawful purpose in the name of the other person without the consent of that person is guilty of a crime. Existing law further provides that a person who learns or reasonably suspects that his or her personal identifying information has been used by another to commit a crime may initiate a law enforcement investigation by contacting the local law enforcement agency. Under existing law, the law enforcement agency must take a police report of the matter and provide the complainant with a copy of that report.
This act entitles a person who discovers that an unauthorized person has applied for a loan, credit line or account, credit card, charge card, or utility service or has opened an account with a financial institution or utility, in his or her name, to receive a copy of the application or information related to that unauthorized activity.
Before receiving these copies, this act requires the entity with which the application was filed or the account was established, to inform the requesting person of the categories of identifying information that the unauthorized person used to complete the application and requires the requesting person to provide identifying information in those categories and a copy of the police report.
SB 771 - Figueroa. Privacy: Unsolicited Telephone Solicitations
Existing law prohibits certain unfair business practices, including certain advertising practices.
This act requires the Attorney General, not later than January 1, 2003, to maintain a "do not call" list containing the telephone numbers and ZIP Codes of residential or wireless telephone subscribers who do not wish to receive unwanted telephone calls from telephone solicitors. It prohibits a telephone solicitor from renting, selling, exchanging, promoting, gifting, or leasing any goods or services by telephone to a consumer who is found on the "do not call list."
It also prohibits persons who sell, lease, exchange, or rent telephone solicitation lists, except for directory assistance and telephone directories sold by telephone companies, from including in their lists telephone numbers that appear on the then current "do not call" list. The development, creation and maintenance of the "do not call list" would be paid for by subscribers.
V. STATUTORY LIENS
A. Mechanics’ Liens
AB 1534 - Longville. Notice of Construction Loan: Security for Work of Improvement.
Existing statutory law generally governs payment provisions contained in contracts for works of improvement.
This act requires an owner of property who contracts for a work of improvement, for construction, alteration, addition to, or repair of the property, where the value of the contract is either (1) more than $5,000,000 where the owner's interest is a fee simple absolute interest in the property, or (2) more than $1,000,000 where the owner's interest is less than a fee simple absolute interest in the property, to provide to the original contractor, if a lending institution is providing a construction loan, a copy of the recorded construction mortgage or deed of trust that shall disclose the amount of the construction loan.
This act also requires an owner who is not the majority owner of the original contractor to provide security for that project by a payment bond, irrevocable letter of credit, or a construction security escrow account.
This act’s requirements do not apply to the construction of single-family residences, certain associated fixed works, public works projects, certain publicly traded companies, qualified private companies and housing developments eligible for a density bonus.
SB 562 - Morrow. Mechanics’ Liens: Procedures to Release Lien.
Existing law establishes the parameters for limited civil cases. Existing law provides that actions to enforce and foreclose liens of mechanics, materialmen, artisans, laborers, and all other persons having mechanics' liens, where the total amount of the liens is $25,000 or less, constitute limited civil cases. Existing law also establishes the requisite conditions for an action or proceeding to be treated as a limited civil case.
This act addresses various aspects of limited civil cases. Of interest to title companies, this act includes petitions to release mechanics’ liens where the total amount of a lien is $25,000 or less, to the list of proceedings that constitute limited civil cases.
A. Real Estate
SB 1122 - Poochigian. Assessments: Disclosure of Assessments.
Existing law requires disclosures to be made upon the transfer of real estate and prescribes the manner and form of the disclosures. In the case of the transfer of real property subject to a continuing lien securing the levy of special taxes pursuant to the Mello-Roos Community Facilities Act, the seller is required to make a good faith effort to notify the prospective purchaser of the lien in the manner and time provided in a prescribed disclosure form.
This act requires the legislative body of a local government collecting assessment installments to secure bonds issued pursuant to the Improvement Bond Act of 1915, to designate an office to perform certain duties relating to the assessment, including furnishing to any requester, or the owner of any property subject to the assessment, a notice of assessment containing financial information, including tax liability.
The act also requires the seller to make a good faith effort to obtain and deliver to the prospective purchaser a disclosure notice concerning the assessment liability. This act requires this notice to be combined with notices relating to the collection of those special taxes, to the extent feasible.
AB 1021 - Goldberg. Assessments: Parking and Business Improvement Areas
The Property and Business Improvement District Law of 1994 authorizes cities to form property and business improvement districts that may levy assessments within a business improvement area for the purpose of making improvements and promoting activities of benefit to the properties within the district. Existing law requires that for the purpose of making improvements and promoting activities of benefit to the properties within the district, the collection of assessments shall be made at the time and in the manner set forth by the city council in the management district plan. Existing law requires that the management district plan include the specific number of years, to a maximum of five, in which assessments would be levied.
This act recasts and reorganizes those provisions. In addition, this act requires that all delinquent payments for assessments levied shall be charged interest and penalties. This act also permits the renewal of any district previously established whose term has expired. Upon renewal, a district would have a term not to exceed ten years.
SB 1183 - Committee on Revenue and Taxation. Property Taxes: Refund.
Under existing law, if a taxpayer mistakenly pays property tax on property he or she does not own, the property tax is transferred to the property of the taxpayer for which the payment is intended.
This act allows for the refund of taxes mistakenly paid in the case in which there is no property of the taxpayer to which the payment may be applied.
VIII. REAL PROPERTY INTERESTS
F. Husband & Wife/Community Property
AB 873 - Harman. Probate: Non-Probate Transfers: Former Spouses.
Existing law provides for the transfer of property upon death by various means, including wills, trusts, joint tenancies, insurance policies, and retirement death benefits, among others.
This act provides that certain property transfers to a transferor's spouse upon death would fail if, at the time of death, that person is no longer the transferor's surviving spouse, due to annulment or dissolution of marriage, except where the transfer is not subject to revocation at time of death, or where there is clear and convincing evidence that the transferor intended to preserve the transfer to the former spouse (Probate Code Section 5601).
This act also provides that a joint tenancy (or community property with right of survivorship) created between a decedent and the decedent's former spouse is severed if it was created before or during marriage and, at the time of death, the former spouse is not the decedent's surviving spouse, due to annulment or dissolution of marriage. This act also provides protections for the bona fide purchaser who subsequently purchases or encumbers property in good faith, is reliance on the vesting of title as joint tenancy.
SB 221 - Kuehl. Land Use: Water Supplies.
This act prohibits approval of a tentative map, or a parcel map for which a tentative map was not required, or a development agreement for a subdivision of property of more than 500 dwelling units, except as specified, including the design of the subdivision or the type of improvement, unless the legislative body of a city or county or the designated advisory agency provides written verification from the applicable public water system that a sufficient water supply is available or, in addition, a specified finding is made by the local agency that sufficient water supplies are, or will be, available prior to completion of the project.
This act provides that for proposed subdivisions subject to certain requirements of the Subdivision Map Act, the true statement of the provisions that have been made for water required to be in an application for a public report is satisfied by submitting a copy of the written verification of the availability of a sufficient water supply.
SB 210 - Committee on Local Government. Leasehold Interest: Certificate of Correction.
The existing Subdivision Map Act provides that a conveyance of land to a governmental agency (including a fee interest, easement, or license) is not considered a "division of land" for purposes of computing the number of parcels, and provides that a parcel map is not required except under certain conditions.
This act includes the conveyance of a leasehold interest to a governmental agency within those provisions, thereby exempting it from the definition of a "division of land" under the Subdivision Map Act.Existing law authorizes certain documents to be recorded without acknowledgment, certificate of acknowledgment, or further proof.
This act includes a certificate of correction for a subdivision final map or parcel map within the list of those recorded documents not needing an acknowledgment.
SB 497 - Sher. Lot Line Adjustments.
This bill makes a number of changes to existing law not summarized herein. Of particular interest to title companies is the following:
Existing law makes the Subdivision Map Act (SMA) inapplicable to a lot line adjustment between two or more existing adjacent parcels, where the land taken from one parcel is added to an adjacent parcel, and where a greater number of parcels than originally existed is not thereby created, if the lot line adjustment is approved by the local agency or advisory agency.
Under current law, a local agency or advisory agency is limited in its review and approval to a determination of whether or not the parcels resulting from the lot line adjustment conforms to local zoning and building ordinances.
This act makes the SMA inapplicable to a lot line adjustment between four or fewer existing adjoining parcels, where the land taken from one parcel is added to an adjoining parcel, and where a greater number of parcels than originally existed is not thereby created, if the lot line adjustment is approved by the local agency or advisory agency. However, this act would now require a local agency or advisory agency to expand its review and approval to a determination of whether or not the parcels resulting from the lot line adjustment will conform to (a) the local general plan, (b) any applicable coastal plan, and (c) zoning and building ordinances. Lot line adjustments between five or more parcels are subject to the SMA in addition to the above - mentioned local review process.
The Subdivision Map Act requires a local agency to issue a certificate of compliance or a conditional certificate of compliance even if it determines that real property does not comply with the act or local ordinances enacted pursuant to the act.
This act eliminates the provision for issuance of a certificate of compliance and requires the issuance of a "conditional" certificate of compliance in those instances.
AB 452 - Correa. Public Report Disclosures.
Existing law requires the Real Estate Commissioner to examine a proposed subdivision and to issue, unless grounds for denial exist, the subdivider a public report authorizing the sale or lease of the lots or parcels within the subdivision.
This act requires, if the subdivision is used for residential purposes, the Commissioner's report to disclose that a prospective buyer or the buyer's designee has the right to negotiate property inspections with the seller under terms mutually agreeable to both parties.
IX. Deeds & Security Interests
SB 958 - Ackerman. Notice to I.R.S.: Postponement of Sale: Trustees Fees.
Existing law requires a person recording a notice of default of a mortgage or deed of trust to perform certain actions.
This act requires that person recording the notice of default to provide a copy of the 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.
Existing law provides for the postponement of sales of property under the power of sale in a deed of trust or mortgage.
This act, operative January 1, 2002, revises the postponement of those sales that are subject to postponement pursuant to a stay imposed under federal bankruptcy law.
Existing law limits specified trustee's or attorney's fees in connection with certain procedures required upon default in payment of obligations under a mortgage or deed of trust to $240 with respect to any portion of the unpaid principal sum secured that is $50,000 or less, plus additional incremental allowable percentages of the principal sum over that amount.
This act, operative January 1, 2002, increases the specified maximum amount of that fee to $300 plus additional incremental percentages of a principal sum of $50,000 or less, or $250 plus additional incremental percentages of a principal sum in excess of $50,000.
Existing law limits specified trustee's or attorney's fees in connection with the enforcement of certain terms of obligation upon default in payment under a mortgage or deed of trust to $350 with respect to any portion of the unpaid principal sum secured that is $50,000 or less, plus additional incremental allowable percentages of the principal sum over that amount.
This act, operative January 1, 2002, increases the specified maximum amount of that fee to $425 plus additional incremental percentages of a principal sum of $150,000 or less, or $360 plus additional incremental percentages of a principal sum in excess of $150,000.
Existing law limits specified trustee's or attorney's fees in connection with a sale of property, that may be deducted from the proceeds of the sale, to $350.
This act, operative January 1, 2002, increases that fee limit to $425. This act also makes clarifying changes with respect to reconveyance fees.
Note: This is an urgency measure effective on October 2, 2001.
E. Mortgages/Deeds of Trust
SB 364 - Alpert. Loans: Accrual of Interest.
Existing law provides that a borrower shall not be required to pay interest on a loan secured by a mortgage on residential real property prior to the close of escrow or, if there is no escrow, prior to the date the loan proceeds have been made available for withdrawal. This law does not apply, however, if the funds are made available from a federally insured financial institution with an office in this state.
This act amends the Civil Code to conform to a similar statute, enacted last year as an amendment to the Financial Code (AB 2403 Maddox/Chapter 968, Statutes of 2000), setting forth clear rules as to when mortgage lenders may begin charging interest on a mortgage loan. Chapter 968 of last year affected lenders licensed by the State Department of Corporations (DOC). This act places similar rules in the Civil Code section applying to other mortgage lenders.
This act provides that a borrower shall not be required to pay interest on a mortgage loan secured by any real property (i.e., residential or commercial) for more than one day prior to the recording of the mortgage or deed of trust, if the loan proceeds are paid into escrow, or if there is no escrow, for more than one day prior to the date the loan proceeds have been made available for withdrawal.
This act further provides that, if the borrower requests and the lender agrees that the recording occur on a Monday or the day after a bank holiday, interest may accrue beginning the day before the weekend or holiday, provided the lender informs the borrower in writing as to the amount of the additional interest that will accrue and the ability to avoid the additional interest by recording on a day immediately following a business day.
This act deletes the existing code section excluding loans from federally insured financial institutions from coverage by these provisions.
AB 1090 - Hertzberg. Deeds of Trust: Reconveyances.
Existing law (Civil Code Section 2941) provides that: (1) When an obligation secured by a deed of trust has been satisfied, the beneficiary shall execute and deliver to the trustee the original documents and request for a full reconveyance for recordation; (2) If a reconveyance fee of up to $65.00 is charged by a trustee for this service it shall be presumed "reasonable"; (3) Any beneficiary, or trustee, who fails to perform it’s duties set forth in Section 2941 is subject to a forfeiture of $300 per violation; (4) Under (c)(2) of Section 2941, if a beneficiary and trustee send the original documents and request for reconveyance to an escrow holder (i.e. title or escrow company) for delivery directly to the trustor through an open escrow, they are not required to record the reconveyance; and (5) Allows a title company to execute and record a release of obligation if the reconveyance process fails. Existing law remains silent as to whether or not release of obligation or tracking fees may be charged by a title company.
In addition to existing statutory law, a recent Appellate Court case, Bartold v. Glendale Federal Bank (2000) 81 Cal. App. 4th 816, found that a beneficiary must immediately after satisfaction of an obligation execute the request for reconveyance.
1) Requires the beneficiary to deliver to the trustee the original documents, if any, deemed necessary by the trustee to execute and record the reconveyance within 30 calendar days after the obligation secured by any deed of trust has been satisfied;
2) Increases the forfeiture penalty for violations of Section 2941 from $300.00 to $500.00 per violation;
3) Specifically allows title insurance companies handling the escrow to be substituted as trustees of record for purposes of executing and recording the reconveyance in escrow;
4) Reduces the reconveyance fee (presumed to be reasonable) from $65.00 to $45.00;
5) Reduces the payoff demand statement fee charged by a beneficiary from $60.00 to $30.00;
6) Specifically seeks to overturn the Bartold vs. Glendale case by stating that, a) delivery of a full reconveyance within 60 calendar days of satisfaction of an obligation to an escrow that had closed was not a violation of Section 2941 if, by such delivery, the reconveyance was actually recorded by the former escrow holder as a voluntary accommodation to the trustee; b) that the trustee satisfied its obligation to cause a reconveyance to be recorded where it delivered to a closed escrow a full reconveyance within 60 calendar days of satisfaction of an obligation if, by that delivery, the reconveyance was actually recorded by the former escrow holder as a voluntary accommodation to the trustee;
7) Deletes 2941 (c) in its entirety, thereby eliminating all exceptions to recordation under this subdivision;
8) Specifically prohibits the charging of any fees other than those specifically authorized under Section 2941; and
9) If a beneficiary collects a fee for reconveyance and thereafter has knowledge or should have knowledge that no reconveyance has been recorded, the beneficiary is required to record a reconveyance unless a release of obligation has been recorded in which case the beneficiary must refund the fee charged for the reconveyance to the trustor.
C. Recording Requirements
AB 1011 - Pavley. Records: Index of Conservation Easements.
This act requires the county recorder in each county to develop and maintain, within the existing indexing system, a comprehensive index of recorded conservation easements on land in that county.
The act also requires the county recorder, with respect to conservation easements affecting property within the county, recorded on or after January 1, 2002, to include the conservation easement in the index, if the document is properly labeled, or if a newly created Notice of Conservation Easement is also recorded.
This act authorizes certain parties to conservation easements to fill out and record a Notice of Conservation Easement for conservation easements recorded prior to January 1, 2002 so that these easements may be added to the new comprehensive conservation easement indices created by this act.