Bill Text: CA SB547 | 2009-2010 | Regular Session | Amended
Bill Title: Real estate: subdivided lands.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2010-02-01 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB547 Detail]
Download: California-2009-SB547-Amended.html
BILL NUMBER: SB 547 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 23, 2009
INTRODUCED BY Senator Runner
FEBRUARY 27, 2009
An act to amend Section 22003 of the Financial Code,
relating to lending. An act to amend Section 11000.1
of the Business and Professions Code, relating to subdivided lands.
LEGISLATIVE COUNSEL'S DIGEST
SB 547, as amended, Runner. Lending. Real
estate: subdivided lands.
Existing law provides for the regulation of real estate
transactions, including subdivided lands transactions, and defines
"subdivided lands" and "subdivision" for these purposes with the
exception of undivided interests that meet specified conditions.
This bill would exclude from the definition of "subdivided lands"
and "subdivision" an undivided interest in raw land that meets 5
specified conditions, including the condition that a purchaser be
given a completed disclosure statement before executing a purchase
and sale agreement.
Existing law, the California Finance Lenders Law, specifies that
the definitions it sets forth govern that law, unless otherwise
required by the context.
This bill would make nonsubstantive changes to that provision.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 11000.1 of the
Business and Professions Code is amended to read:
11000.1. (a) "Subdivided lands" and "subdivision," as defined by
Sections 11000 and 11004.5, also include improved or unimproved land
or lands, a lot or lots, or a parcel or parcels, of any size, in
which, for the purpose of sale or lease or financing, whether
immediate or future, five or more undivided interests are created or
are proposed to be created.
(b) This section does not apply to the creation or proposed
creation of undivided interests in land if any one of the following
conditions exists:
(1) The undivided interests are held or to be held by persons
related one to the other by blood or marriage.
(2) The undivided interests are to be purchased and owned solely
by persons who present evidence satisfactory to the Real Estate
Commissioner that they are knowledgeable and experienced investors
who comprehend the nature and extent of the risks involved in the
ownership of these interests. The Real Estate Commissioner shall
grant an exemption from this part if the undivided interests are to
be purchased by no more than 10 persons, each of whom furnishes a
signed statement to the commissioner that he or she (A) is fully
informed concerning the real property to be acquired and his or her
interest in that property including the risks involved in ownership
of undivided interests, (B) is purchasing the interest or interests
for his or her own account and with no present intention to resell or
otherwise dispose of the interest for value, and (C) expressly
waives protections afforded to a purchaser by this part.
(3) The undivided interests are created as the result of a
foreclosure sale.
(4) The undivided interests are created by a valid order or decree
of a court.
(5) The offering and sale of the undivided interests have been
expressly qualified by the issuance of a permit from the Commissioner
of Corporations pursuant to the Corporate Securities Law of 1968
(Division 1 (commencing with Section 25000) of Title 4 of the
Corporations Code).
(6) All of the following conditions of the raw land are met:
(A) The undivided interests are sold in raw land that is not
improved by any structure, except roads or utilities, and with no
promise on the part of the subdivider to develop the raw land.
(B) There are 25 or fewer undivided interests.
(C) The purchase and sale agreement provides for a deposit of no
more than 3 percent of the purchase price and grants the purchaser
the right to cancel the agreement and receive a full refund of the
deposit up to four days before the closing date set forth in the
agreement.
(D) There are no blanket encumbrances on the raw land following
the sale of the first undivided interest.
(E) The purchaser is given the following disclosure statement
before the purchaser's execution of the purchase and sale agreement:
IMPORTANT DISCLOSURE INFORMATION - RISK FACTORS
CAREFULLY READ ALL OF THE INFORMATION ON THE
FOLLOWING PAGES BEFORE CONTRACTING TO BUY OR
BUYING A TENANT-IN-COMMON INTEREST
SPECULATIVE INVESTMENT. The purchase of raw land
is highly speculative. While property values
have increased over certain periods, there can
be no assurance that they will continue to do
so, and downturns are inevitable. As a result,
purchasers of tenant-in-common interests have to
be prepared to hold their interest and pay the
related property taxes on the property for an
extended period of time and to be able to bear
the loss of all or a significant portion of the
price paid for these interests.
GET AN APPRAISAL. The best way to determine the
value of the tenant-in-common interest you are
purchasing is to obtain an independent appraisal
of the parcel by a qualified MAI appraiser.
ILLIQUID HOLDINGS. Tenant-in-common interests
are not liquid. There is no established trading
market for these interests, as there is for many
other types of investments such as stocks and
mutual funds. As a result, purchasers shall not
be able to liquidate their interests to fund
their retirement needs or make other important
expenditures.
NO MANAGEMENT--DEVELOPMENT RISK. Neither the
subdivider nor any third party will be
responsible for managing or developing the
interests in raw land that you are purchasing.
Purchasers of the tenant-in-common interests in
the property being offered will be responsible
for making their own decisions with respect to
the property in the manner provided for in the
tenancy-in-common agreement. The absence of
professional management and the potential
difficulty in reaching agreement with other
holders of tenant-in-common interests concerning
the sale of the parcel could have a material and
adverse impact on the profit potential
associated with a purchase of the tenant-in-
common interests.
If you are contemplating the purchase of a
tenant-in-common interest with the idea of
reselling it with or without further development
of the parcel, you should bear the following in
mind:
A. The parcel may not be developed without first
obtaining all necessary government approvals,
which are likely to include, without limitation,
zoning approvals, parcel maps, building permits,
a public report from the California Department
of Real Estate, an environmental review under
the California Environmental Quality Act (CEQA)
and other permits and approvals. These are
typically obtained by hiring planners,
engineers, surveyors, environmental specialists,
lawyers, budget preparers, and other
professionals at substantial expense.
B. Any development of the property will require
standard improvements be completed as a
condition of approval. The improvements will
likely include, but not be limited to, providing
access and roads, installation of utilities such
as water mains, appurtenances and fire hydrants,
electrical power, telecommunications, and
conformance with the standards of the local
jurisdiction.
C. It is likely to be very difficult to resell
the parcel at a profit without a well-financed
promotional campaign or sales organization.
D. In any effort to resell the parcel, you are
likely to be in an unfavorable competitive
position with other persons experienced in
developing and selling parcels in the vicinity.
E. It will probably be difficult for you to
reach an agreement with owners of surrounding
parcels with respect to further development and
financing of further development may be hard if
not impossible to arrange.
F. The prospect that a land developer will
purchase your parcel along with others for the
purpose of effecting improvement is remote.
G. Any plans you as a purchaser might have of
developing this land in any way should be
thoroughly investigated by consulting with
appropriate local governmental officials before
your purchase of the property.
WATER, FLOOD, AND EARTHQUAKE RISKS. Under
California law, governmental approval of any
significant residential development requires a
certification from the relevant water authority
that there are adequate supplies of water for
the homes being developed. If adequate supplies
of water are no longer available, it may be very
difficult to market the real property being
offered. You should determine if the land is in
a flood zone or earthquake fault zone.
CONFLICT OF INTEREST. Subdivider is the owner
and seller of the tenant-in-common interest and
is motivated to obtain the best price.
Subdivider does not represent you in this sale.
You are responsible to protect your own
interest. We urge you to obtain independent
legal, brokerage, and tax advice.
PROPERTY TAXES. If all of the units are sold at
the offering price, your annual property tax
bill will be ______________ (Insert the
purchaser's share of annual property taxes).
Property taxes are subject to annual increase in
accordance with Proposition 13.
BANKRUPTCY, CIVIL, OR CRIMINAL JUDGMENTS AGAINST
SUBDIVIDER. (List all bankruptcy filings and
civil and criminal judgments entered against the
subdivider, its owners, officers, and directors.)
SECTION 1. Section 22003 of the Financial Code
is amended to read:
22003. Unless the context otherwise requires, the definitions in
this article govern this division.
