Bill Text: CA AB919 | 2023-2024 | Regular Session | Introduced
Bill Title: Residential real property: sale of rental properties: right of first offer.
Spectrum: Partisan Bill (Democrat 4-0)
Status: (Failed) 2024-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB919 Detail]
Download: California-2023-AB919-Introduced.html
CALIFORNIA LEGISLATURE—
2023–2024 REGULAR SESSION
Assembly Bill
No. 919
| Introduced by Assembly Member Kalra (Coauthors: Assembly Members Bonta, Lee, and Ortega) |
February 14, 2023 |
An act to add Article 1.6 (commencing with Section 1102.50) to Chapter 2 of Title 4 of Part 4 of Division 2 of, and to add Section 2923.56 to, the Civil Code, relating to real property.
LEGISLATIVE COUNSEL'S DIGEST
AB 919, as introduced, Kalra.
Residential real property: sale of rental properties: right of first offer.
Existing law establishes various real estate disclosure requirements applicable to the transfer of residential real property.
This bill would require an owner of residential real property, defined to include a single-family residential property that is occupied by a tenant or a multifamily residential property to take various actions before offering the residential real property for sale to any purchaser, soliciting any offer to purchase the residential real property, or otherwise entering into a contract for sale of the residential real property. The bill would exempt certain transfers of a residential real property from its provisions, including, among others, a transfer between spouses, domestic partners, parent and child, siblings, grandparent and grandchild, a transfer pursuant to a court order, and a transfer by eminent domain.
This bill would require the owner of the residential real property to notify each tenant and each qualified entity, as defined, of the owner’s intent to sell the residential real property. The bill would provide each qualified entity with 10 days to notify the property owner of their interest in purchasing the property and further provide a qualified entity with either 60 days or 40 days, depending on the number of units of the property, to submit an offer to purchase the residential real property.
This bill would allow a property owner to sell the property to any party if the property owner does not receive any interest to purchase the property from a qualified entity or receive an offer from a qualified entity within these timeframes. The bill would allow a property owner to reject any offer received from a qualified entity and sell to a party that is not a qualified entity, but would provide a qualified entity that submits
a rejected offer with 10 days to invoke a right of first refusal to match a subsequent offer accepted by the property owner.
This bill would require a qualified entity that purchases a residential real property pursuant to these provisions and all successive owners to retain all existing tenancies and to restrict the units of the property to rents affordable to persons and families of low and moderate income, with the maximum average income of the tenants not to exceed 80% of the area median income. The bill would make these affordability requirements recordable and enforceable.
This bill would require the qualified entity to provide the tenants of a single-family residential real property or a current or future resident organization in a multifamily residential real property with 18 months to purchase the entire residential real property, or, if ownership of the land will be retained by a community land trust under a
99-year ground lease, the opportunity to purchase improvements, after the qualified entity takes title of the property.
This bill would require the Department of Housing and Community Development to develop a process for qualified entities, including, among others, a local public entity, eligible nonprofit corporation, limited equity housing cooperative, and resident organizations formed for the purpose of acquiring a multifamily residential real property, to notify the department of their interest in purchasing residential real property. The bill would require the department to maintain a list of those organizations that have submitted this notice on its internet website.
This bill would require each owner that sells a residential real property to record, or cause to be recorded, a certification of compliance under penalty of perjury at the time of sale, as specified, and would make failure to file the certificate an
infraction punishable as specified. By expanding existing crimes, the bill would impose a state-mandated local program.
The bill would also grant a private cause of action to specified entities to enforce the provisions of the bill, and would allow for civil remedies, as specified.
Existing law imposes various requirements to be satisfied prior to exercising a power of sale under a mortgage or deed of trust. Existing law, with respect to residential real property containing up to 4 dwelling units, requires a mortgagee, trustee, beneficiary, or authorized agent to provide to the mortgagor or trustor a copy of the recorded notice of default and a copy of the recorded notice of sale.
This bill would additionally require a mortgagee, trustee, beneficiary, or authorized agent to, upon filing a notice of default, provide to the mortgagor or trustor a list of qualified entities located
within the county of the residential real property, as defined. The bill would also require the mortgagee, trustee, beneficiary, or authorized agent to notify the tenant of the residential real property of the filing of a notice of default.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YESBill Text
The people of the State of California do enact as follows:
SECTION 1.
Article 1.6 (commencing with Section 1102.50) is added to Chapter 2 of Title 4 of Part 4 of Division 2 of the Civil Code, to read:Article 1.6. Stable Homes Act
1102.50.
For purposes of this article, the following definitions apply:(a) “Department” means the Department of Housing and Community Development.
(b) (1) “Residential real property” means any of the following:
(A) A single-family residential property that is occupied by a tenant.
(B) A multifamily residential property, whether vacant or occupied by tenants.
(2) For purposes of this article, “residential real property” includes, but is not limited to, all of the following:
(A) A mobilehome park, as defined in Section 798.4.
(B) A manufactured housing community, as defined in Section 18210.7 of the Health and Safety Code.
(C) A mixed-use property that includes residential and commercial uses.
(3) “Residential real property” does not include any of the following:
(A) A property that is currently subject to a regulatory agreement with a governmental agency that restricts rents to occupancy by low-income households and is being transferred to a nonprofit entity, or a limited partnership or limited liability company controlled by a nonprofit, that agrees to a condition of the sale or transfer to record a new regulatory agreement with a governmental agency that
restricts occupancy to eligible low-income households for at least 30 years.
(B) A property owned by a local, state, or federal government.
(C) A property owned by and operated as a hospital, convent, monastery, extended care facility, or convalescent home.
(D) A dormitory owned and operated by an educational institution.
(E) A single-family property that an owner occupies as their principal residence.
(F) A single-family property with an accessory dwelling unit or other secondary dwelling unit where an owner occupies either the single-family property or the secondary unit as their principal residence.
(G) A property owned by
a corporation that is owned and controlled by a majority of residents who occupy the property and are at least 18 years of age.
(c) “Qualified entity” means either of the following:
(1) A tenant of a single-family residential property.
(2) An organization registered pursuant to Section 1102.56.
1102.52.
(a) An owner of residential real property shall comply with the requirements of this section before taking any of the following actions:(1) Offering the residential real property for sale to any purchaser other than a qualified entity.
(2) Soliciting any offer to purchase the residential real property from any purchaser other than a qualified entity.
(3) Accepting any unsolicited offer to purchase the residential real property from any party other than a qualified entity.
(4) Entering into a contract for sale of the residential real property with any
party other than a qualified entity, whether through listing or off-market sale, whether individual properties or a bundled portfolio of properties.
(b) (1) An owner of residential real property shall send notice of the owner’s intent to sell the property to each tenant, and to each organization that has registered with the department pursuant to Section 1102.56.
(2) The notice required by this subdivision shall include all of the following:
(A) The location and a description of the residential real property.
(B) The unit number or other designation of each rental unit of the residential real property.
(C) The number of bedrooms and bathrooms in each rental unit.
(D) The annual expenses for the residential real property, including, but not limited to, management, insurance, utilities, and maintenance costs.
(E) A statement that tenants can find a list on the department’s internet website, described in subdivision (c) of Section 1102.56, of qualified entities in their area that can make an offer to purchase the property and the link to that internet website.
(c) (1) A qualified entity may, within 10 days of receipt of the notice, send notice to the property owner expressing interest in purchasing the property.
(2) If the property owner does not receive notice expressing interest in purchasing the property from any qualified entity within 10 days of the last date on which a qualified entity
received notice under paragraph (1) of subdivision (b), the property owner may proceed in selling the property without regard to this section.
(d) If the property owner receives a written notice expressing interest in purchasing the property from any qualified entity, the property owner shall provide the interested party with a disclosure package that provides, at a minimum, all of the following information:
(1) The move-in date of each tenant of the residential real property.
(2) Base rent for each rental unit of the residential real property.
(3) The residential real property’s costs that are passed through to each tenant, if any.
(4) Whether each tenant has a written lease or rental
agreement and the terms of those tenancies.
(5) Contact information for each tenant.
(e) Within 20 days of receiving the disclosure package, the qualified entity shall review the disclosure package, inform the tenants of the qualified entity’s interest in purchasing the residential real property, and request to meet and confer with the property owner to confirm interest in purchasing the residential real property. The property owner shall meet and confer with the qualified entity within the applicable timeframe in paragraph (1) of subdivision (f) upon request. If the qualified entity does not request to meet and confer with the property owner to confirm interest in purchasing the residential real property within 20 days of receiving the disclosure package, the property owner may proceed in selling the property without regard to this section.
(f) (1) A qualified entity desiring to purchase a residential real property consisting of five or more units shall submit an offer to purchase the property so that it reaches the property owner within 60 days of the date on which the qualified entity received the disclosure package required pursuant to subdivision (d). If the property consists of four or fewer units, the qualified entity desiring to purchase a residential real property shall submit an offer to purchase the property so that it reaches the property owner within 40 days of the date on which the qualified entity received the disclosure package.
(2) If a qualified entity submits an offer to purchase the property, it shall simultaneously give notice to each tenant that it has made an offer to purchase the property.
(3) If the property
owner does not receive an offer to purchase the property within the applicable timeframes in paragraph (1), the property owner may proceed in selling the property without regard to this section.
(4) If a property owner receives an offer from both a qualified entity that is not a resident organization and a tenant of a single-family residential real property or a resident organization in a multifamily residential real property, and the property owner decides to accept any of these offers, the property owner shall accept the tenant’s or the resident organization’s offer.
(g) (1) If the property owner accepts an offer submitted pursuant to this section, the property owner and qualified entity shall, within 10 days of accepting the offer, enter into a voluntary agreement setting the timeline within which the qualified entity shall secure financing and within
which both parties shall close the deal.
(2) If the property owner and qualified entity fail to enter into a voluntary agreement setting the timeline within which to secure financing and close the deal, the following timelines shall govern, unless the parties later enter into a voluntary agreement:
(A) (i) If the property owner accepts an offer submitted pursuant to this subdivision for a single-family residential real property, the property owner shall afford the qualified entity 30 days after the date the offer was accepted to secure financing.
(ii) If, within 30 days after the date the property owner accepts the qualified entity’s offer for the single-family residential real property, the qualified entity presents the property owner with the written statement of a lending institution or
agency that the institution or agency estimates that a decision with respect to financing or financial assistance will be made within 45 days after the date the offer was accepted, the property owner shall afford an extension of time consistent with the written estimate.
(B) (i) If the property owner accepts an offer submitted pursuant to this subdivision for a multifamily residential real property containing two to four units, the property owner shall afford the qualified entity 90 days after the date the offer was accepted to secure financing.
(ii) If, within 90 days after the date the property owner accepts the qualified entity’s offer for the multifamily residential real property containing two to four units, the qualified entity presents the property owner with the written statement of a lending institution or agency that the institution or agency
estimates that a decision with respect to financing or financial assistance will be made within 120 days after the date the offer was accepted, the property owner shall afford an extension of time consistent with the written estimate.
(C) (i) If the property owner accepts an offer submitted pursuant to this subdivision for a multifamily residential real property containing more than four units, the property owner shall afford the qualified entity 120 days after the date the offer was accepted to secure financing.
(ii) If, within 120 days after the date the property owner accepts the qualified entity’s offer for the multifamily residential real property containing more than four units, the qualified entity presents the property owner with the written statement of a lending institution or agency that the institution or agency estimates that a decision with
respect to financing or financial assistance will be made within 160 days after the date the offer was accepted, the property owner shall afford an extension of time consistent with the written estimate.
(3) If the qualified entity does not secure financing within the timeframe agreed upon pursuant to a voluntary agreement, or within the applicable timeframes in paragraph (2) in the absence of a voluntary agreement, the property owner may proceed in selling the property without regard to this section.
(h) (1) A property owner may reject any offer submitted to purchase a residential real property pursuant to this section.
(2) If the property owner receives an offer pursuant to subdivision (f) and rejects that offer, the property owner may sell the property to any other buyer subject to paragraph
(3).
(3) If the property owner rejects an offer received pursuant to subdivision (f) and then intends to accept an offer from a party that is not a qualified entity, the property owner shall do both of the following:
(A) Notify the qualified entity that the property owner intends to accept an offer from a party that is not a qualified entity.
(B) Provide the qualified entity of a rejected offer with 10 days to invoke a right of first refusal to match the offer submitted by a party that is not a qualified entity on the same terms as the offer. The qualified entity may invoke its right of first refusal by submitting a notice that reaches the property owner within 10 days of the date on which the qualified entity received notice under subparagraph (A).
(4) A qualified entity that does not receive notice from a property owner as required by subdivision (b) shall be given 80 days to invoke a right of first refusal to match an offer submitted by a party that is not a qualified entity that is accepted by the property owner, on the same terms as that offer. The qualified entity may invoke its right of first refusal by submitting a notice that reaches the property owner within 80 days of the date on which the property owner accepted the offer submitted by a party that is not a qualified entity.
(i) Notices and the disclosure package required pursuant to this section shall be delivered by certified mail and additionally by email if email addresses are available.
(j) This section shall not apply to the following transfers of residential real property:
(1) An
inter vivos transfer, whether or not for consideration, between spouses, domestic partners, parent and child, siblings, or grandparent and grandchild.
(2) A transfer for consideration by a decedent’s estate to members of the decedent’s family if the consideration arising from the transfer will pass from the decedent’s estate to, or solely for the benefit of, a charity. For purposes of this paragraph, “members of the decedent’s family” includes all of the following:
(A) A spouse, domestic partner, parent, child, grandparent, or grandchild.
(B) A trust for the primary benefit of a spouse, domestic partner, parent, child, grandparent, or grandchild.
(3) A transfer of bare legal title into a revocable trust, without actual consideration for the transfer,
where the transferor is the current beneficiary of the trust.
(4) A transfer to a named beneficiary of a revocable trust by reason of the death of the grantor of the revocable trust.
(5) A transfer pursuant to court order or court-approved settlement.
(6) A transfer by eminent domain or under threat of eminent domain.
(k) An owner of residential real property shall not retaliate against or harass a tenant seeking to exercise their rights under this article or engage in conduct intended to prevent a tenant from exercising those rights.
(l) (1) A tenant or resident organization may assign their rights under this section to any qualified entity at any time prior to
expiration of the deadline to invoke the right of first refusal under paragraph (3) of subdivision (h).
(2) An agreement providing for an assignment of rights pursuant to this subdivision shall address whether the qualified entity as an assignee shall be required to offer to resell the property to the tenant or resident organization after a specified period of time after the qualified entity acquires the property.
1102.54.
(a) A qualified entity that acquires a residential real property pursuant to Section 1102.52, as well as all successive owners, shall be subject to all of the following:(1) (A) All existing tenancies of the residential real property shall be retained on the same terms that were in effect before the acquisition, except as permitted by state and local law. An existing tenancy shall not be terminated for failure to meet income restrictions imposed by this section.
(B) A tenant, including existing tenancies and new tenancies created after the acquisition of the residential real property pursuant to Section 1102.52, shall not be evicted except for just cause as
permitted by state and local law.
(2) (A) The qualified entity shall restrict the rental rate of vacant units of the residential real property to be affordable to persons and families of low and moderate income and lower income households, with the maximum average rent of the units to be affordable to persons and families with 80 percent of the area median income.
(B) (i) If, upon acquiring the residential real property the average rental rate of the units exceeds the maximum average rental rate required pursuant to subparagraph (A), the owner of the residential real property shall rent vacant units at a rate affordable to persons and families whose incomes do not exceed 60 percent of the area median income until the average rental rate complies with subparagraph (A).
(ii) If the average rental rate of the residential real property complies with subparagraph (A), the owner of the residential real property may rent vacant units at a rental rate affordable to persons and families of low and moderate income, provided that the average rental rate remains in compliance with subparagraph (A).
(C) For purposes of this paragraph, whether a rental rate is affordable shall be determined in the manner described in Section 50053 of the Health and Safety Code.
(3) If the residential real property was purchased by a qualified entity pursuant to an assignment agreement that includes a resell requirement as specified in paragraph (2) of subdivision (l) of Section 1102.52, the qualified entity shall provide the tenant of a single-family residential real property or current or future resident organization in a multifamily residential real property
the opportunity to purchase the entire residential real property, or, if ownership of the land will be retained by a community land trust under a 99-year ground lease, the opportunity to purchase improvements, within the time period specified in the assignment agreement.
(4) (A) The residential real property shall not be sold for more than an affordable resale price.
(B) This paragraph does not apply to a single-family residential property that is purchased by a tenant without the use of public subsidy.
(b) For purposes of this section:
(1) “Affordable resale price” means the purchase price paid by the qualified entity to acquire the residential real property pursuant to this article adjusted for both of the following:
(A) Inflation as measured by the regional Consumer Price Index.
(B) Capital improvements made by the qualified entity, but no more than 25 percent of the appreciated value as determined by the difference between the appraised value at the time of purchase by the qualified entity and the appraised value at the time of resale.
(2) “Area median income” means the same as defined in Section 50093 of the Health and Safety Code.
(3) “Lower income households” means the same as defined in Section 50079.5 of the Health and Safety Code.
(4) “Persons and families of low and moderate income” means the same as defined in Section 50093 of the Health and Safety Code.
1102.56.
(a) (1) The Department of Housing and Community Development shall develop a process by which any of the organizations described in subdivision (b) may notify the department of their interest in purchasing residential real property pursuant to this article.(b) The following types of organizations may submit a notification to the department pursuant to subdivision (a):
(1) A local public entity, as defined in Section 50079 of the Health and Safety Code.
(2) An eligible nonprofit corporation with all of the following attributes:
(A) It has a determination letter from the Internal Revenue Service affirming its tax-exempt status pursuant to Section 501(c)(3) of the Internal Revenue Code and is not a private foundation as that term is defined in Section 509 of the Internal Revenue Code.
(B) It has its principal place of business in California.
(C) The primary residences of all board members are located in California.
(D) One of its primary activities is the development and preservation of affordable rental housing or homeownership in California.
(E) It is registered and in good standing with the Attorney General’s Registry of Charitable Trusts, pursuant to the Supervision of Trustees and Fundraisers for Charitable Purposes Act (Article 7 (commencing with Section
12580) of Chapter 6 of Part 2 of Division 3 of Title 2 of the Government Code).
(3) A limited partnership in which the managing general partner is an eligible nonprofit corporation meeting all of the requirements of paragraph (2).
(4) A limited liability company wholly owned by one or more eligible nonprofit corporations meeting all of the requirements of paragraph (2).
(5) A community land trust, as defined in clause (ii) of subparagraph (C) of paragraph (11) of subdivision (a) of Section 402.1 of the Revenue and Taxation Code.
(6) A corporation controlled by a majority of residents.
(7) A limited-equity housing cooperative as defined in Section 817.
(8) A resident organization formed for the purpose of acquiring a multifamily residential real property in which the residents reside, or a single-family residential real property in order to convert the property to resident ownership.
(c) The department shall maintain on its internet website an up-to-date listing of all organizations that have submitted a notification to the department pursuant to subdivision (a) on its internet website.
1102.58.
(a) Each owner that sells a residential real property shall record, or cause to be recorded, a certification of compliance under penalty of perjury at the time of sale, that one of the following applies:(1) The owner has substantially complied with the requirements of this article, with a copy of the notice required under paragraph (1) of subdivision (b) of Section 1102.52 to tenants attached.
(2) The owner or transaction is exempt from the requirements of this article pursuant to Section 1102.52.
(b) (1) Each certification of compliance shall include the address of the relevant residential
real property.
(2) (A) Failure to file the certification of compliance shall be an infraction punishable in accordance with the fine schedule established pursuant to subdivision (b) of Section 36900 of the Government Code. Willful or knowing failure to file the certification of compliance shall be punishable by a fine of one thousand dollars ($1,000) per unit of the residential real property for each day of noncompliance.
(B) Fines under subparagraph (A) shall be paid as follows, following notice and an opportunity for hearing:
(i) If the property is located in a city, to that city.
(ii) If the property is located in a city and county, to that city and county.
(iii) Otherwise, to the county in which the property is located.
(c) The affordability requirements in Section 1102.54 shall be contained in a covenant or restriction recorded against the residential real property at the time of sale, which shall run with the land and shall be enforceable, against any owner who violates a covenant or restriction and each successor in interest who continues the violation, by any of the following:
(1) A resident of a unit subject to this section.
(2) A residents’ association with members who reside in units subject to this section.
(3) A former resident of a unit subject to this section who last resided in that unit.
(4) An applicant seeking to
enforce the covenants or restrictions for a particular unit that is subject to this section, if the applicant conforms to all of the following:
(A) Is of low or moderate income, as defined in Section 50093 of the Health and Safety Code.
(B) Is able and willing to occupy that particular unit.
(C) Was denied occupancy of that particular unit due to an alleged breach of a covenant or restriction implementing this section.
(D) Is on an affordable housing waiting list, is of low or moderate income, as defined in Section 50093 of the Health and Safety Code, and is able and willing to occupy a unit subject to this section.
(5) The state or the city, county, or city and county in which the
residential real property is located.
(6) An organization registered pursuant to Section 1102.56.
(d) (1) Any party listed in subdivision (c) may seek enforcement of any right or provision under this article in the superior court and, upon prevailing, shall be entitled to the following remedies:
(A) Actual damages. There shall be a rebuttable presumption that the amount of damages for a violation of Section 1102.52 is equal to the difference between the price of the residential real property at the time of sale in violation of this article and the price for which the qualified entity could purchase the residential real property at the time that damages are awarded.
(B) If the owner willfully or knowingly sells the residential real
property without complying with this article, the court shall impose additional damages in an amount proportional to the culpability of the owner and the value of the residential real property. There shall be a rebuttable presumption that the amount is equal to 10 percent of the sale price for a first violation, 20 percent for a second violation, and 30 percent for each subsequent violation.
(C) Costs and reasonable attorneys’ fees.
(2) In addition to any other remedy available under this article or any other law, the superior court may enjoin a sale or other action taken by the owner of the residential real property in violation of this article.
1102.60.
(a) Except as provided in subdivision (b), this article shall not preempt or invalidate a local ordinance, regulation, or other policy that provides a qualified entity with a right of first offer, right of first refusal, or other opportunity to purchase a residential real property.(b) (1) If a local ordinance, regulation, or other policy conflicts with this article, the provision that provides the qualified entity with a stronger right to purchase the residential real property shall prevail.
(2) For purposes of this section, “stronger right to purchase” includes, but is not limited to, any of the following:
(A) A longer period of time for a qualified entity, including a tenant or resident organization, to make or consider an offer, to secure financing, or to otherwise close the deal on purchasing the property.
(B) Additional eligible properties, including single-family residential real properties, and additional qualified entities or tenants who can make or match an offer.
(C) A longer term of affordability restrictions on the residential real property and longer terms of tenancy for existing or future tenants.
1102.61.
The provisions of this article are severable. If any provision of this article or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.SEC. 2.
Section 2923.56 is added to the Civil Code, to read:2923.56.
With respect to a multifamily residential property, as referenced in subparagraph (B) of paragraph (1) of subdivision (b) of Section 1102.50, a mortgagee, trustee, beneficiary, or authorized agent shall do both of the following within 3 business days of recording a notice of default:(a) Provide the mortgagor or trustor with a list of the qualified entities located within the county of the multifamily residential property that have provided notice to the Department of Housing and Community Development pursuant to Section 1102.56.
(b) Post a copy of the notice of default in a conspicuous place on the multifamily residential property, where possible and where not restricted for any reason. If restricted,
then the notice shall be posted in a conspicuous place on the property; however, if access is denied because a common entrance to the property is restricted by a guard gate or similar impediment, the notice may be posted at that guard gate or similar impediment.
