Bill Text: CA SB1079 | 2019-2020 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Residential property: foreclosure.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2020-09-28 - Chaptered by Secretary of State. Chapter 202, Statutes of 2020. [SB1079 Detail]

Download: California-2019-SB1079-Amended.html

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Amended  IN  Senate  May 13, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill

No. 1079

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Introduced by Senator Skinner

February 19, 2020

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An act to add Chapter 2.75 (commencing with Section 1954.60) to Title 5 of Part 4 of Division 3 amend Sections 2924g and 2929.3 of the Civil Code, to add Section 726.7 to the Code of Civil Procedure, and to add Section 50415 to the Health and Safety Code, relating to housing. real property.

LEGISLATIVE COUNSEL'S DIGEST

SB 1079, as amended, Skinner. Residential property warehousing. property: foreclosure.

The California Constitution permits private property to be taken or damaged for public use only when just compensation is paid. Existing law, the Eminent Domain Law, prescribes how that constitutionally authorized power may be exercised and permits that exercise only for a public use.

This bill would authorize a city, county, or city and county to acquire a residential property within its jurisdiction by eminent domain if the property has been vacant for at least 90 days, the property is owned by a corporation or a limited liability company in which at least one member is a corporation, and the local agency provides just compensation to the owner based on the lowest assessment obtained for the property by the local agency. The bill would require the local agency that obtains residential property pursuant to these provisions to maintain the property and make the property available at affordable rent to persons and families of low or moderate income or sell it to a community land trust or housing sponsor, as specified.

The California Constitution authorizes cities to make and enforce within their limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws, and further authorizes cities organized under a charter to make and enforce all ordinances and regulations in respect to municipal affairs, which supersede inconsistent general laws.

This bill would authorize a local agency to adopt an ordinance that imposes a civil penalty in an unspecified amount on an owner of residential property located within its jurisdiction if the residential property has been vacant for at least 90 calendar days and the property is owned by a corporation or a limited liability company in which at least one member is a corporation. The bill would require the local agency to earmark and use the moneys collected from the civil penalty for homeless diversion, rental assistance, and other affordable housing purposes.

This bill would require a corporation that owns residential property that has been vacant for at least 90 consecutive days to, before offering the residential real property for sale on the open market, offer that property to a community land trust, or housing sponsor, referred to collectively as “priority entities,” before offering the residential real property for sale on the open market. The bill would require that a priority entity provide a notice of interest within five business days of receiving an offer or of receiving a specified notice, as applicable, and to make an offer for purchase within 90 calendar days. If the seller determines that the offer is a competitive offer, as defined, the bill would require the seller to accept that offer and sell the residential real property to the priority entity.

Existing law prescribes various requirements to be satisfied before the exercise of a power of sale under a mortgage or deed of trust and prescribes a procedure for the exercise of that power. With regard to the exercise of a power of sale under a mortgage or deed of trust, existing law requires the sale to be held in the county where the property or some part of it is situated and to be made at auction, to the highest bidder, as specified. Existing law generally requires that if the property consists of several lots or parcels, they are to be sold separately unless the deed of trust or mortgage provides otherwise.

This bill, for purposes of the exercise of a power of sale as described above, would prohibit a purchaser from buying more than 3 properties at any auction regardless of the seller of the property. The bill would prohibit a seller from bundling properties for the purpose of sale, instead requiring each property to be bid on separately.

Existing law specifically requires the owner of vacant residential property purchased at a foreclosure sale, or acquired through foreclosure under a mortgage or deed of trust, to maintain that property. Existing law authorizes a governmental entity to impose a civil fine of up to $1,000 for each day that the owner fails to maintain the property, subject to the owner being given an opportunity to cure the violation, as specified.

This bill would increase the above-described civil fine to up to $10,000.

Existing law specifies the procedure for the foreclosure of a mortgage or deed of trust secured by real property or an estate for years by judicial action. Under existing law, in an action for the recovery of any debt or enforcement of any right secured by a mortgage, the court may direct the sale of the encumbered real property or estate for years and order the proceeds applied to the payment of court costs, the expenses of levy and sale, and the amount due to the plaintiff, as provided.

This bill, if the court directs the sale of encumbered property pursuant to these provisions to recover a debt or enforce a right secured by mortgage upon a residential real property, as defined, would require the mortgagee to offer that property, first, to any tenant or association of tenants currently occupying the property and, second, to a city, county, community land trust, or housing sponsor, referred to collectively as “priority entities,” before offering the residential real property for sale on the open market. The bill would require that a tenant, association of tenants, or priority entity provide a notice of interest within five business days of receiving an offer or of receiving a specified notice, as applicable, and to make an offer for purchase within 90 calendar days. If the mortgagee determines that the offer is a competitive offer, as defined, the bill would require the mortgagee to accept that offer and sell the residential real property to the tenant, association of tenants, or priority entity. The bill would require the mortgagee to allow a tenant, association of tenants, or priority entity to make a second offer for purchase. first to individuals who will be owner-occupants of the home, or to a public entity that is utilizing public funds to purchase the property, for the first 20 days the property is listed. The bill would authorize any person to submit an offer to purchase the property after the first 20 days following the listing and would require that these offers be considered along with the offers submitted during the first 20-day listing period. The bill would require an owner-occupant purchaser to sign a specified certification. The bill would prescribe definitions of “owner-occupants” and “public entity” for these purposes.

This bill would require the Department of Housing and Community Development to establish a process whereby a city, county, or various housing entities may register with the department to receive related notifications. notifications of foreclosure sales, as specified.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.Chapter 2.75 (commencing with Section 1954.60) is added to Title 5 of Part 4 of Division 3 of the Civil Code, to read:

2.75.Residential Warehousing

1954.60.

For purposes of this chapter:

(1)“Local agency” means a city, county, or city and county.

(2)“Persons and families of low or moderate income” means the same as defined in Section 50093 of the Health and Safety Code.

(3)“Residential real property” means any real property located in this state that contains at least one residential dwelling unit.

(4)“Vacant” means the residential real property is not owner-occupied or lawfully occupied by a tenant.

1954.61.

(a)A legislative body of a local agency may adopt an ordinance that imposes a civil penalty on an owner of residential property located within its jurisdiction when all of the following conditions are met:

(1)Each dwelling unit of the property has been vacant for at least 90 consecutive calender days.

(2)The owner of the property is one of the following:

(A)A corporation.

(B)A limited liability company in which at least one member is a corporation.

(3)The amount of the civil penalty does not exceed ___ dollars ($___) per day that the property is vacant in excess of 90 consecutive calendar days.

(b)The local agency shall earmark and use the moneys collected from the civil penalty described in subdivision (a) for homeless diversion, rental assistance, and other affordable housing purposes.

1954.62.

(a)A local agency may acquire a residential property within its jurisdiction by eminent domain when all of the following conditions are met:

(1)Each dwelling unit of the property has been vacant for at least 90 calendar days.

(2)The owner of the property is one of the following:

(A)A corporation.

(B)A limited liability company in which at least one member is a corporation.

(3)The local agency provides just compensation to the owner for the residential property based the lowest assessment obtained for the property by the local agency.

(b)A local agency that acquires a residential property pursuant to this section shall do one of the following:

(1)Maintain the property and make the property available at affordable rent to persons and families of low or moderate income.

(2)Sell the property to one of the following:

(A)A community land trust that has registered with the department pursuant to Section 50415 of the Health and Safety Code.

(B)A housing sponsor that has registered with the department pursuant to Section 50415 of the Health and Safety Code.

(c)Any revenues received by the local agency resulting from the purchase and sale of property under this section shall be earmarked for homeless diversion, rental assistance, and other affordable housing purposes.

1954.63.

(a)A corporation that owns residential property that has been vacant for at least 90 consecutive calendar days shall, before offering the residential real property for sale on the open market, offer that property to one of the following in accordance with subdivision (b):

(1)A community land trust that has registered with the department pursuant to Section 50415 of the Health and Safety Code.

(2)A housing sponsor that has registered with the department pursuant to Section 50415 of the Health and Safety Code.

(b)(1)(A)Except as otherwise provided in subparagraph (B), the seller shall provide notice to the department and publish, or cause to be published, a copy of that notice in a newspaper of general circulation within the county in which the residential real property is located.

(B)The seller may, in lieu of providing notice pursuant to subparagraph (A), elect to offer the residential real property directly to a priority entity that has registered with the department pursuant to Section 50415 of the Health and Safety Code.

(2)A priority entity may, within five business days of the publication of a notice or offer pursuant to paragraph (1), provide the seller with a notice of interest in the residential real property. The priority entity shall have 90 calendar days after the date of the notice of interest to make an offer for purchase of the residential real property.

(3)Upon receipt of an offer for purchase pursuant to paragraph (2) by the seller, the seller shall do one of the following:

(A)If the seller determines that the offer for purchase is a competitive offer, the seller shall accept that offer and sell the residential real property to the applicable priority entity.

(B)If the seller determines that the offer for purchase is not a competitive offer, the seller shall so notify the entity and allow the priority entity to make a second offer within the 90 day period, or at least 4 business days, whichever is greater.

(c)The seller may sell the residential real property on the open market in accordance with this chapter if any of the following conditions apply:

(1)A priority entity did not provide a notice of interest within the five-business-day period specified in paragraph (2) of subdivision (b).

(2)A priority entity made an offer for purchase that the seller determines is not a competitive offer and the priority entity did not make a second offer for purchase pursuant to subparagraph (B) of paragraph (3) of subdivision (b) within the 90-day specified period.

(3)A priority entity made a second offer for purchase pursuant to subparagraph (B) of paragraph (3) of subdivision (b) that the seller determined was, also, not competitive offer.

(d)For purposes of this section:

(1)“Competitive offer” means an offer for the purchase of a parcel of residential real property that is reasonably commensurate with the sales price that the seller would expect on the open market.

(2)“Community land trust” means a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:

(A)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.

(B)All dwellings and units located on the land owned by the nonprofit corporation are sold to a qualified owner to be occupied as the qualified owner’s primary residence or rented to persons and families of low or moderate income.

(C)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.

(3)“Department” means the Department of Housing and Community Development.

(4)“Housing sponsor” has the same meaning as defined in Section 50074 of the Health and Safety Code.

(5)“Priority entity” means a community land trust or housing sponsor.

SECTION 1.

 Section 2924g of the Civil Code is amended to read:

2924g.

 (a) (1) All sales of property under the power of sale contained in any deed of trust or mortgage shall be held in the county where the property or some part thereof is situated, and shall be made at auction, to the highest bidder, between the hours of 9 a.m. and 5 p.m. on any business day, Monday through Friday.

The

(2) The sale shall commence at the time and location specified in the notice of sale. Any postponement shall be announced at the time and location specified in the notice of sale for commencement of the sale or pursuant to paragraph (1) of subdivision (c).

If

(3) If the sale of more than one parcel of real property has been scheduled for the same time and location by the same trustee, (1) (A) any postponement of any of the sales shall be announced at the time published in the notice of sale, (2) (B) the first sale shall commence at the time published in the notice of sale or immediately after the announcement of any postponement, and (3) (C) each subsequent sale shall take place as soon as possible after the preceding sale has been completed.

(4) Notwithstanding any other law, a sale of property under the power of sale contained in any deed of trust or mortgage shall be subject to the follow restrictions:

(A) A purchaser shall not be permitted to buy more than three properties at any auction regardless of the seller of the property.

(B) A seller shall not bundle properties for the purpose of sale. Each property shall be bid on separately.

(b) When the property consists of several known lots or parcels, they shall be sold separately unless the deed of trust or mortgage provides otherwise. When a portion of the property is claimed by a third person, who requires it to be sold separately, the portion subject to the claim may be thus sold. The trustor, if present at the sale, may also, unless the deed of trust or mortgage otherwise provides, direct the order in which property shall be sold, when the property consists of several known lots or parcels which may be sold to advantage separately, and the trustee shall follow that direction. After sufficient property has been sold to satisfy the indebtedness, no more can be sold.

If the property under power of sale is in two or more counties, the public auction sale of all of the property under the power of sale may take place in any one of the counties where the property or a portion thereof is located.

(c) (1) There may be a postponement or postponements of the sale proceedings, including a postponement upon instruction by the beneficiary to the trustee that the sale proceedings be postponed, at any time prior to the completion of the sale for any period of time not to exceed a total of 365 days from the date set forth in the notice of sale. The trustee shall postpone the sale in accordance with any of the following:

(A) Upon the order of any court of competent jurisdiction.

(B) If stayed by operation of law.

(C) By mutual agreement, whether oral or in writing, of any trustor and any beneficiary or any mortgagor and any mortgagee.

(D) At the discretion of the trustee.

(2) In the event that the sale proceedings are postponed for a period or periods totaling more than 365 days, the scheduling of any further sale proceedings shall be preceded by giving a new notice of sale in the manner prescribed in Section 2924f. New fees incurred for the new notice of sale shall not exceed the amounts specified in Sections 2924c and 2924d, and shall not exceed reasonable costs that are necessary to comply with this paragraph.

(d) The notice of each postponement and the reason therefor shall be given by public declaration by the trustee at the time and place last appointed for sale. A public declaration of postponement shall also set forth the new date, time, and place of sale and the place of sale shall be the same place as originally fixed by the trustee for the sale. No other notice of postponement need be given. However, the sale shall be conducted no sooner than on the seventh day after the earlier of (1) dismissal of the action or (2) expiration or termination of the injunction, restraining order, or stay that required postponement of the sale, whether by entry of an order by a court of competent jurisdiction, operation of law, or otherwise, unless the injunction, restraining order, or subsequent order expressly directs the conduct of the sale within that seven-day period. For purposes of this subdivision, the seven-day period shall not include the day on which the action is dismissed, or the day on which the injunction, restraining order, or stay expires or is terminated. If the sale had been scheduled to occur, but this subdivision precludes its conduct during that seven-day period, a new notice of postponement shall be given if the sale had been scheduled to occur during that seven-day period. The trustee shall maintain records of each postponement and the reason therefor.

(e) Notwithstanding the time periods established under subdivision (d), if postponement of a sale is based on a stay imposed by Title 11 of the United States Code (bankruptcy), the sale shall be conducted no sooner than the expiration of the stay imposed by that title and the seven-day provision of subdivision (d) shall not apply.

SEC. 2.

 Section 2929.3 of the Civil Code is amended to read:

2929.3.

 (a) (1) A legal owner shall maintain vacant residential property purchased by that owner at a foreclosure sale, or acquired by that owner through foreclosure under a mortgage or deed of trust. A governmental entity may impose a civil fine of up to one ten thousand dollars ($1,000) ($10,000) per day for a violation. If the governmental entity chooses to impose a fine pursuant to this section, it shall give notice of the alleged violation, including a description of the conditions that gave rise to the allegation, and notice of the entity’s intent to assess a civil fine if action to correct the violation is not commenced within a period of not less than 14 days and completed within a period of not less than 30 days. The notice shall be mailed to the address provided in the deed or other instrument as specified in subdivision (a) of Section 27321.5 of the Government Code, or, if none, to the return address provided on the deed or other instrument.

(2) The governmental entity shall provide a period of not less than 30 days for the legal owner to remedy the violation prior to imposing a civil fine and shall allow for a hearing and opportunity to contest any fine imposed. In determining the amount of the fine, the governmental entity shall take into consideration any timely and good faith efforts by the legal owner to remedy the violation. The maximum civil fine authorized by this section is one ten thousand dollars ($1,000) ($10,000) for each day that the owner fails to maintain the property, commencing on the day following the expiration of the period to remedy the violation established by the governmental entity.

(3) Subject to the provisions of this section, a governmental entity may establish different compliance periods for different conditions on the same property in the notice of alleged violation mailed to the legal owner.

(b) For purposes of this section, “failure to maintain” means failure to care for the exterior of the property, including, but not limited to, permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action to prevent trespassers or squatters from remaining on the property, or failing to take action to prevent mosquito larvae from growing in standing water or other conditions that create a public nuisance.

(c) Notwithstanding subdivisions (a) and (b), a governmental entity may provide less than 30 days’ notice to remedy a condition before imposing a civil fine if the entity determines that a specific condition of the property threatens public health or safety and provided that notice of that determination and time for compliance is given.

(d) Fines and penalties collected pursuant to this section shall be directed to local nuisance abatement programs, including, but not limited to, legal abatement proceedings.

(e) A governmental entity may not impose fines on a legal owner under both this section and a local ordinance.

(f) These provisions shall not preempt any local ordinance.

(g) This section shall only apply to residential real property.

(h) The rights and remedies provided in this section are cumulative and in addition to any other rights and remedies provided by law.

SEC. 2.SEC. 3.

 Section 726.7 is added to the Code of Civil Procedure, to read:

726.7.

 (a) If in any action to recover a debt or enforce a right secured by mortgage upon a residential real property pursuant to this chapter the court directs the sale of the encumbered property pursuant to Section 726, the mortgagee shall, before offering the residential real property for sale on the open market in accordance with this chapter, first offer that property to any of the following, as provided in this section: exclusively to individuals who will be owner-occupants of the home, or to a public entity that is utilizing public funds to purchase the property, for the first 20 days the property is listed on the market. After the first 20 days that the property is listed, any person may submit an offer to purchase the property and these offers shall be considered along with the offers submitted during the first 20-day listing period. An owner-occupant purchaser shall be required to sign an owner-occupant certification as a rider to the residential real estate purchase and sale contract.

(1)First, to any tenant or association of tenants currently occupying the residential real property as of the date of the court’s order directing the sale, in accordance with subdivision (b).

(2)Second, to any of the following priority entities, in accordance with subdivision (c):

(A)The city in which the residential real property is located or, if the property is located within an unincorporated area, the county in which it is located.

(B)A community land trust that has registered with the department pursuant to Section 50415 of the Health and Safety Code.

(C)A housing sponsor that has registered with the department pursuant to Section 50415 of the Health and Safety Code.

(b)(1)Any tenant or association of tenants currently occupying the residential real property may, within five business days of receiving an offer pursuant this section, provide the mortgagee with a notice of interest in the residential real property. The tenant or association of tenants shall have 90 calendar days after the notice of interest to make an offer for purchase of the residential real property.

(2)Upon receipt of an offer for purchase pursuant to paragraph (1), the mortgagee shall do all of the following:

(A)If the mortgagee determines that the offer for purchase is a competitive offer, the mortgagee shall accept the offer and sell the residential property to the tenant or association of tenants.

(B)If the mortgagee determines that the offer for purchase is not a competitive offer, the mortgagee shall so notify the tenants and allow the tenant or association of tenants to make a second offer within the 90 day period, or at least four business days, whichever is greater.

(c)(1)If any of the following conditions apply, the mortgagee shall provide notice as specified in paragraph (2):

(A)There are no tenants currently occupying the residential real property as of the date of the court’s order directing the sale.

(B)If there is a tenant or association of tenants currently occupying the residential real property, the tenant or association of tenants did not provide a notice of interest within 72 hours of receiving an offer pursuant to paragraph (1) of subdivision (b).

(C)A tenant or association of tenants made an offer for purchase that the mortgagee determines is not a competitive offer and did not make a second offer for purchase pursuant to subparagraph (B) of paragraph (2) of subdivision (b) within the 90-day specified period.

(D)A tenant or association of tenants made a second offer for purchase pursuant to subparagraph (B) of paragraph (2) of subdivision (b) within the 90-day period specified in paragraph (1) of subdivision (b) that the mortgagee determined was, also, not competitive.

(2)(A)Except as otherwise provided in subparagraph (B), the mortgagee shall provide five business days’ notice to the department and publish, or cause to be published, a copy of that notice in a newspaper of general circulation within the county in which the residential real property is located.

(B)The mortgagee may, in lieu of providing notice pursuant to subparagraph (A), elect to offer the residential real property directly to a priority entity that has registered with the department pursuant to Section 50415 of the Health and Safety Code.

(3)A priority entity may, within five business days of the publication of a notice or offer pursuant to paragraph (2), provide the mortgagee with a notice of interest in the residential real property. The priority entity shall have 90 calendar days after the date of the notice of interest to make an offer for purchase of the residential real property.

(4)Upon receipt of an offer for purchase pursuant to paragraph (3) by the mortgagee, mortgagee shall do one of the following:

(A)If the mortgagee determines that the offer for purchase is a competitive offer, the mortgagee shall accept that offer and sell the residential real property to the applicable priority entity.

(B)If the mortgagee determines that the offer for purchase is not a competitive offer, the mortgagee shall so notify the entity and allow the priority entity to make a second offer within the 90 day period, or at least 4 business days, whichever is greater.

(d)The mortgagee may sell the residential real property on the open market in accordance with this chapter if any of the following conditions apply:

(1)A priority entity did not provide a notice of interest within the five business days period specified in paragraph (3) of subdivision (c).

(2)A priority entity made an offer for purchase that the mortgagee determines is not a competitive offer and did not make a second offer for purchase pursuant to subparagraph (B) of paragraph (4) of subdivision (c) within the 90-day period specified in paragraph (3) of subdivision (c).

(3)A priority entity made a second offer for purchase pursuant to subparagraph (B) of paragraph (4) of subdivision (c) that the mortgagee determines is not a competitive offer.

(e)For purposes of this section:

(1)“City” includes a city and county.

(2)“Competitive offer” means an offer for the purchase of a parcel of residential real property that is reasonably commensurate with the sales price that the mortgagee would expect at a foreclosure sale.

(3)“Community land trust” means a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:

(A)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.

(B)All dwellings and units located on the land owned by the nonprofit corporation are sold to a qualified owner to be occupied as the qualified owner’s primary residence or rented to persons and families of low or moderate income, as that term is defined in Section 50093 of the Health and Safety Code.

(C)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.

(4)“Department” means the Department of Housing and Community Development.

(5)“Housing sponsor” has the same meaning as defined in Section 50074 of the Health and Safety Code.

(6)“Priority entity” means a city, county, community land trust, or housing sponsor.

(7)“Residential real property” means any real property located in this state that contains at least one residential dwelling unit.

(b) For the purpose of this section:

(1) “Owner-occupants” means buyers who will occupy the property as their principal residence within 60 days of closing and will maintain their occupancy for at least one year.

(2) “Public entity” means the state, the Regents of the University of California, a county, city, district, public authority, public agency, and any other political subdivision or public corporation in the state, including, but not limited to, a community land trust or a nonprofit entity providing affordable housing.

SEC. 3.SEC. 4.

 Section 50415 is added to the Health and Safety Code, to read:

50415.

 (a) Not withstanding any law, the department shall establish a process whereby a city, county, community land trust, or housing sponsor may register with the department in order to receive notification of a foreclosure sale of residential real property that is subject to Section 726.7 of the Code of Civil Procedure or notification pursuant to Section 1954.63 of the Civil Code.

(b) Upon receipt of a notice received pursuant to paragraph (2) of subdivision (c) of Section 726.7 of the Code of Civil Procedure or paragraph (1) of subdivision (b) of Section 1954.63 of the Civil Code, the department shall notify each entity that has registered with it pursuant to this section of that notice.

(c) Upon request, the department shall provide a list of each entity that has registered with it pursuant to this section.

(d) For purposes of this section:

(1) “Community land trust” has the same meaning as defined in Section 726.7 of the Code of Civil Procedure.

(2) “Mortgagee” means any entity that has issued a loan that is secured by a mortgage on residential real property.

(3) “Residential real property” has the same meaning as defined in Section 726.7 of the Code of Civil Procedure.