By Michael J. Arnold & Michael Belote, Esq., Legislative Advocates

Resignations Likely To Move Legislature Left

Just as Harvey Weinstein created a laser-focus on sexual harassment in Hollywood, the “we said enough” movement revealed decades of sexual harassment allegations with little or no consequence in Sacramento. Already three legislators have resigned over alleged inappropriate or potentially criminal behavior, and active investigations reportedly continue. Most observers believe more legislators will be named in the coming months.

The resignations have temporarily taken Democrats below the coveted two-thirds vote threshold in both the Assembly and Senate. Special elections will occur soon to replace these members. Notably, it is likely if not certain that those elected in the special elections will be philosophically to the left of those they are replacing. Therefore, our very blue legislature will become more blue, perhaps even “shocking blue,” to invoke a 60’s cultural reference!

Sexual harassment also is a key theme in new legislation introduced prior to the February 16 bill introduction deadline. Proposals to extend sexual harassment training beyond supervisors to all employs, lengthen the statute of limitations, create more liability for not acting reasonably to prevent harassment, and prohibit mandatory arbitration in the context of sexual harassment allegations, have already been introduced. Expect to see one or more of these bills enacted.

Of more direct relevance to CMA members are bills dealing with the Homeowner’s Bill of Rights, recording surcharges for affordable housing, and regulation of real estate brokers and CFLs, particularly in the context of commercial lending. In all, nearly 150 bills are in the CMA electronic folder for 2018, and hearings on the bills will start in the very near future.

Related to HOBR, several statutes which created enhanced obligations for lenders and servicers conducting more than 175 foreclosures during the calendar year were allowed to expire, or “sunset,” at the end of 2017. This was part of the negotiations and compromise when HOBR was enacted in 2012. Of course, lenders and servicers re-tooled their systems for this year in light of the sunsetted procedures; at least for now, HOBR is the same for all servicers, regardless of the number of foreclosures. Now, SB 818 would re-enact these expired provisions, thus recreating the distinctions between “under-175s” and “over-175s.”

Clearly, HOBR was enacted to address an extraordinary situation at a specific point in time, and the situation has changed quite dramatically, but query whether legislators will be able to resist the possibility of “reenhancing” the law in any event.

As to recording surcharges, real estate professionals of all stripes are struggling to deal with the ambiguities and lack of uniformity amongst counties in implementing SB 2 from last year. This issue was explored a few weeks back in a CMA webinar well-organized by Lori Randich. For 2018, there are at least three bills dealing with SB 2, and one has already passed. AB 110 clarifies that documents, including lien releases, recorded by federal, state, or local government entities are exempt from the surcharge. Another bill specifically exempts mining claims, and the third bill is a “spot bill” introduced by the author of SB 2 last year, Senator Toni Atkins. It is unclear what she intends to do ultimately with this bill, but we should
definitely not expect wholesale changes to SB 2.

Other bills of interest to CMA include the following:

AB 2500 (Kalra):

Raises the loan threshold from $2500 to $10,000 over which specified fee limitations on California Finance Lenders no longer apply.

SB 1174 (Stone):

Requires real estate brokers offering “underwriting” of commercial real estate “transactions” to offer both certified and uncertified underwriting of the transactions; “certified” underwriting would require verification of the accuracy of information given to the client, with liability for errors.

SB 1235 (Glazer):

Imposes new disclosure requirements for “commercial financing,” which, as introduced, appears to cover both secured and unsecured loans for other than personal, family or household purposes.

SB 1269 (Hueso):

Similar to SB 1235, except that it covers “small business financing” to businesses with gross receipts of less than $5 million annually.