Michael Belote, Esq.

By Michael Belote, Esq., California Advocates, UTA California Lobbyist

Like so much in life, including nonjudicial foreclosures, the legislative process in California moves from a series of deadline to deadline. During the first part of the year, the end of February deadline is to have new bills introduced for the year. As this column is written, the Assembly and Senate are facing floor deadlines to send bills to the other house. The whole process winds up in the fall, when the fall recess begins on September 11 and Governor Brown faces a 30-day deadline to sign or veto the many hundreds of bills sent to him.

In order to meet the “house of origin” deadline, where the Assembly and Senate pass their own bills and send them to the “second house” for consideration, hundreds of bills will be considered in a very few days. A number of the more than three dozen bills relevant to UTA will be considered during these marathon floor sessions. While there are really no “stop the press” foreclosure bills, there are still important issues affecting UTA and allied real estate organizations.

Among those issues is a proposal to fund the development of affordable housing through a surcharge on recording fees, included in AB 1335 (Atkins). Assembly Member Atkins serves as Speaker of the Assembly, which provides very considerable political heft to the effort. Ms. Atkins also has been dedicated for housing issues for many years, including her time spent in local government in San Diego. Everyone in Sacramento acknowledges the sincerity of the Speaker’s commitment to housing.

The proposal to surcharge the recording of real estate documents to fund affordable housing has failed previously in the California legislature. There are at least two key differences in 2015, however. The first is the involvement of Speaker Atkins, and the 19 co-authors she has assembled in support of the measure. The second difference is that this year, amendments to the bill have brought the very powerful California Association of Realtors into a position of support. More on that shortly.

As before, AB 1335 proposes a $75 dollar surcharge on every real estate document presented for recordation, except that expressly exempted from paying recording fees, those subject to the imposition of a documentary transfer tax, and those recorded “in connection” with transfers “to an owner-occupier”. The bill contains a non-exclusive list of those documents to which the surcharge expressly will apply, and that list includes notices of default and notices of trustees sale.

In contrast with previous years, this year’s bill includes a cap on the surcharge of $225, “per each single transaction per parcel of real property”. The bill thus raises a number of questions which will likely be sorted out by recorders in 58 different counties. Out of the hundreds of documents eligible for recordation, which are real estate instruments, papers or notices subject to the surcharge, others than those expressly included? What is a “single transaction per parcel of real property”, such that the aggregation limit of $225 will apply? At this point, it seems unlikely that the bill will provide this level of detail if it reaches the Governor’s desk.

Not unnoticed by UTA members is the irony of requiring homeowners struggling to stay in their homes by reinstating their loans to pay surcharges for those who lack housing. But there are other interesting disconnects in the bill. For example, the surcharge will apply statewide, and thus be imposed on documents recorded in dozens of largely rural counties where no affordable housing is ever likely to be constructed.

For legal reasons, AB 1335 requires a two-thirds vote of each house of the legislature, rather than a simple majority. Because Democrats are (just) shy of two-thirds in both the Assembly and Senate, some Republican votes will be required to pass the bill, assuming that every Democrat votes “AYE”. Can the Speaker convince a small number of Republicans to support the bill?

Here the support of the California Association of Realtors could be significant. As amended on April 30, AB 1335 creates the “Building Homes and Jobs Trust Fund Governing Board” to administer the money generated by the surcharge. In language specifying the membership of the Governing Board, the following sentence is included: “The governing board shall consist of not less than two real estate licensees, one from northern California and one from southern California, each with not less than 10 years of real estate experience and membership in a real estate trade organization with not less than 20,000 licensees”.

The legislative process is endlessly fascinating.