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SB-1079 Residential property warehousing.(2019-2020)

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Date Published: 02/19/2020 09:00 PM
SB1079:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1079


Introduced by Senator Skinner

February 19, 2020


An act to add Chapter 2.75 (commencing with Section 1954.60) to Title 5 of Part 4 of Division 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.


LEGISLATIVE COUNSEL'S DIGEST


SB 1079, as introduced, Skinner. Residential property warehousing.
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 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.
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.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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:
CHAPTER  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.

SEC. 2.

 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:
(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.

SEC. 3.

 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.