California Senate Bill SB547 Amended / Bill

 BILL NUMBER: SB 547AMENDED 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.