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SB-1212 Real estate investment trusts: purchase, acquisition, and sale of housing.(2023-2024)

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Date Published: 04/22/2024 02:00 PM
SB1212:v97#DOCUMENT

Amended  IN  Senate  April 22, 2024
Amended  IN  Senate  March 19, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 1212

Introduced by Senator Skinner

February 15, 2024

An act to add Chapter 5 (commencing with Section 745) to Title 2 of Part 1 of Division 2 of the Civil Code, relating to real property.


LEGISLATIVE COUNSEL'S DIGEST


SB 1212, as amended, Skinner. Investment entities: purchasing and acquisition interests in housing. Real estate investment trusts: purchase, acquisition, and sale of housing.
Existing law provides that all property has an owner, whether that owner is the state and the property is public, or the owner is an individual and the property is private.
This bill, on and after January 1, 2025, would prohibit an investment entity, make it unlawful for a real estate investment trust, as defined, from purchasing or acquiring to purchase or acquire an interest, as defined, in a single-family dwelling or other dwelling that consists of one or 2 residential units within this state. The bill would provide that a purchase or acquisition of an interest in housing in violation of this prohibition is void. The bill would define “investment entity” as a real estate investment trust or an entity that manages funds pooled from investors and owes a fiduciary duty to those investors. The bill would exempt nonprofit organizations, entities primarily engaged in the construction of housing, and governmental entities from the definition of “investment entity.” units, unless the housing has been listed for sale to the general public for at least 60 days. The bill would reset that 60-day timeline if the seller changes the asking price for the housing. The bill would prohibit a real estate investment trust that purchases or acquires any housing in compliance with these provisions from paying a final sales price that less than 95% of the publically listed asking price. The bill would impose civil damages upon a real estate investment trust that violates these provisions in an amount not to exceed $1,000,000. The bill would absolve a seller of housing from liability under these provisions if the seller obtains a written release signed by the buyer stating that the buyer is not an investment entity. a real estate investment trust.
This bill, on and after January 1, 2025, would require a real estate investment trust, before offering to sell housing to any purchaser other than an existing tenant, to send notice of its intent to sell the property to each adult tenant who is named in the rental agreement and who currently resides at the property. The bill would authorize a tenant to send a notice to the real estate investment trust expressing interest to purchase the housing within 20 days. The bill would require a real estate investment trust that receives a notice from the tenant expressing interest to purchase the housing to afford the tenant 60 days to secure financing and submit a formal offer. The bill would authorize a real estate investment trust to reject any offer submitted to purchase housing pursuant to these provisions, but would prohibit a real estate investment trust that rejects an offer from a tenant from listing the housing for sale to the general public in an amount less than the amount offered by the tenant to purchase the housing, except as specified.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

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


SECTION 1.

 Chapter 5 (commencing with Section 745) is added to Title 2 of Part 1 of Division 2 of the Civil Code, to read:
CHAPTER  5. Corporate and real Real Estate Investment Trust Ownership of Housing

745.
 The Legislature finds and declares all of the following:
(a) California has a housing supply and housing affordability crisis of historic proportions. The consequences of failing to effectively and aggressively confront this crisis are hurting millions of Californians, robbing future generations of the chance to call California home, stifling economic opportunities for workers and businesses, worsening poverty and homelessness, and undermining the state’s environmental and climate objectives.
(b) Lack of supply and rising costs are compounding inequality and limiting advancement opportunities for many Californians.
(c) Home ownership has been a primary driver of household wealth, with homeowners holding over 40 times the median net worth of renters as of 2019.
(d) Large corporations corporations, formed as real estate investment trusts, have purchased tens of thousands of homes in California and hundreds of thousands of homes across the globe, limiting the available supply of housing for purchase by individuals and families.
(e) Investors purchased a record share of homes sold in the United States in 2021, purchasing nearly one out of every seven homes sold.
(f) It is incredibly difficult for individuals and families to compete with large corporations when trying to purchase a home because corporations have the funds to purchase homes in cash, buy multiple homes at once, and pay above market rate prices.
(g) Large corporate landlords are often less responsive to the needs of their tenants, raise rents more aggressively, and evict people more frequently than other types of landlords. These practices exacerbate housing insecurity and fuel California’s homelessness crisis.
(h) It is in the public and state’s interest to ensure that families and all Californians have a reasonable opportunity to purchase homes and to protect California’s housing market from monopolies. Large corporations purchasing family homes directly conflicts with those goals.

745.1.
 For purposes of this chapter:
(a) “Interest” means any estate, remainder, or reversion enumerated in Chapter 1 (commencing with Section 761) of Title 2 of Part 2, or portion of the estate, remainder, or reversion, or an option pursuant to which one party has a right to cause legal or equitable title to housing to be transferred.

(b)(1)“Investment entity” means either of the following:

(A)A real estate investment trust as defined in Section 23000 of the Corporations Code.

(B)An entity that satisfies both of the following conditions:

(i)The entity manages funds pooled from investors.

(ii)The entity owes a fiduciary duty to those investors.

(2)“Investment entity” does not include any of the following:

(A)An entity organized pursuant to Section 501(c)(3) of the Internal Revenue Code.

(B)An entity primarily engaged in the construction of housing.

(C)Any governmental entity.

(c)

(b) “Housing” means a single-family dwelling or other dwelling that consists of one or two residential units.
(c) “Real estate investment trust” means the same as defined in Section 23000 of the Corporations Code.

745.2.
 (a) Notwithstanding any other law, on and after January 1, 2025, an investment entity shall not purchase or acquire any interest in housing in this state. it shall be unlawful for a real estate investment trust to purchase, acquire, or offer to purchase or acquire any interest in housing unless the housing has been listed for sale to the general public for at least 60 days.

(b)A purchase or acquisition of an interest in housing in violation of this section is void.

(b) The 60-day timeline described in subdivision (a) shall reset if the seller changes the asking price for the housing, and a real estate investment trust shall be prohibited from purchasing, acquiring, or offering to purchase or acquire any interest in the housing until it has been listed for sale to the general public at the new asking price for at least 60 days.
(c) A real estate investment trust that purchases, acquires, or offers to purchase or acquire any housing shall pay a final sales price that is not less than 95 percent of the publically listed sales price.
(d) A real estate investment trust that violates this section shall be subject to civil damages in an amount not to exceed one million dollars ($1,000,000).

745.3.
 A seller of housing and anyone acting as an agent for the seller shall not be liable for any violation of this chapter if the seller obtains a written release signed by the buyer stating that the buyer is not an investment entity. a real estate investment trust.

745.4.
 (a) A real estate investment trust that sells housing in this state after January 1, 2025, shall comply with the requirements of this section before offering to sell housing to any purchaser other than an existing tenant.
(b) (1) A real estate investment trust shall send notice of its intent to sell the housing to each adult tenant who is named in the rental agreement and who currently resides at the property. If no tenant resides at the property, the real estate investment trust may proceed in selling the housing without regard to this section.
(2) The notice required pursuant to paragraph (1) shall include all of the following:
(A) The location and a description of the housing.
(B) The unit number or other designation of each rental unit of the housing, if any.
(C) The number of bedrooms and bathrooms in each rental unit.
(D) The price at which the housing will be listed for sale to the general public.
(E) The annual expenses for the housing, including, but not limited to, management, insurance, utilities, and maintenance costs.
(c) (1) A tenant may, within 20 days of receipt of the notice, send notice to the real estate investment trust expressing interest to purchase the housing.
(2) If the real estate investment trust does not receive notice from the tenant expressing interest to purchase the housing within 20 days of the tenant receiving notice under paragraph (1) of subdivision (b), the real estate investment trust may proceed in selling the housing without regard to this section.
(d) If the real estate investment trust receives notice from the tenant expressing interest to purchase the housing within 20 days of the tenant receiving notice under paragraph (1) of subdivision (b), the real estate investment trust shall afford the tenant 60 days after the date it received the notice expressing interest to secure financing and submit a formal offer. If the tenant does not secure financing and submit a formal offer within 60 days, the real estate investment trust may proceed in selling the housing without regard to this section.
(e) (1) A real estate investment trust may reject any offer submitted to purchase housing pursuant to this section.
(2) If the real estate investment trust receives a formal offer pursuant to subdivision (d) and rejects that offer, the real estate investment trust may sell the housing to any other buyer in accordance with this chapter. However, the real estate investment trust shall not list the housing for sale to the general public in an amount less than the amount offered by the tenant to purchase the housing unless one of the following conditions are satisfied:
(A) The tenant revokes the formal offer.
(B) The tenant fails to secure financing.
(C) The housing appraises for less than the amount offered in the formal offer.