California Assembly Bill AB2693 Amended / Bill

 BILL NUMBER: AB 2693AMENDED BILL TEXT AMENDED IN SENATE JUNE 6, 2016 AMENDED IN ASSEMBLY MAY 10, 2016 AMENDED IN ASSEMBLY APRIL 28, 2016 AMENDED IN ASSEMBLY APRIL 11, 2016 AMENDED IN ASSEMBLY MARCH 17, 2016 INTRODUCED BY Assembly Member Dababneh (Coauthors: Assembly Members Travis Allen, Hadley, and Linder) FEBRUARY 19, 2016 An act to amend Section 53328.1 of the Government Code, and to amend Section 5898.15 of,  and  to amend, renumber, and add Section 5898.16 of,  and to add Section 5898.17 to,  the Streets and Highways Code, relating to property improvements. LEGISLATIVE COUNSEL'S DIGEST AB 2693, as amended, Dababneh. Financing requirements: property improvements. (1) Existing law authorizes the legislative body of a public agency, as defined, to determine that it would be convenient, advantageous, and in the public interest to designate an area within which authorized public agency officials and property owners may enter into voluntary contractual assessments to finance certain improvements, including the installation of distributed generation renewable energy sources or energy or water efficiency improvements that are permanently fixed to real property, as specified. Existing law prohibits a public agency from permitting a property owner to participate in any program established pursuant to these provisions if the owner's participation would result in the total amount of any annual property taxes and assessments exceeding 5% of the property's market value, as determined at the time of approval of the owner's contractual assessment. This bill would also prohibit a public agency from permitting a property owner  who is a homeowner applicant  to participate in a program pursuant to these provisions unless the property owner has been provided with a completed financing estimate document or a substantially equivalent document and the property owner is given the right to cancel the contractual assessment at any time prior to midnight on the 3rd business day after the date of the transaction to enter into the agreement without penalty or  obligation. The   obligation, consistent with certain requirements.   The bill would provide that the failure of a public agency to comply with these prohibitions renders the contractual obligations of the property owner for the contractual assessment void.   This  bill would also prohibit a public agency from permitting a property owner to participate in a program pursuant to these provisions if the total mortgage-related debt and contractual assessment-related debt on the underlying property would exceed the fair market value of the property at the time of the owner's contractual assessment, if the mortgage-related debt on the property alone is equal to 90% or greater of the property's fair market value at the time of the approval of the owner's contractual assessment, or if the owner is unable to meet specified requirements.  This bill would provide that the failure of a public agency to comply with these prohibitions renders the contractual obligations of the property owner for the contractual assessment void.   This bill would limit these provisions to a property owner who seeks to participate in a program pursuant to these provisions for a residential property with 4 or fewer units.  (2) The Mello-Roos Community Facilities Act of 1982 specifies the requirements for the establishment of a community facilities district, including, among other things, a petition, a hearing, the establishment of the boundaries of the community facilities district, and an election on the question. Existing law authorizes a community facilities district formed pursuant to an alternative procedure under which the district initially consists solely of territory proposed for annexation to the community facilities district in the future and territory is annexed and subjected to special taxes only upon unanimous approval of the owners, to finance and refinance the acquisition, installation, and improvement of energy efficiency, water conservation, and renewable energy improvements. This bill would require a legislative body to comply with the requirements described above prior to the annexation of a parcel or parcels to a community facilities district formed pursuant to the alternative procedure. 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.   (a)     The Legislature finds and declares all of the following:   (1) The Property Assessed Clean Energy program has been promoted in California widely as an innovative and alternative form of financing for environmental improvements for the benefit of the public and California's environment.   (2) The promotion of the Property Assessed Clean Energy financing is now a popular and widespread form of alternative financing for consumers seeking solar energy, water conservation, energy efficiency, and earthquake retrofitting improvements to the benefit of all Californians.   (3) The consumer obligation to repay voluntary contractual assessments created by the Property Assessed Clean Energy program is sometimes misunderstood and may affect the consumer's ability to refinance their loan or sell their property.   (4) Making residential real estate secured loans to consumers through Property Assessed Clean Energy financing for home improvements has grown rapidly, raising questions as to whether the Property Assessed Clean Energy program is adequately supported by government regulation.   (5) The passage of this act is essential to promote standardized disclosures and protections for consumers to ensure that the Property Assessed Clean Energy program can continue to be widely used to offset the adverse impacts of years of climate change.   (b) This act shall be known, and may be cited, as the PACE Preservation and Consumer Protections Act.   SECTION 1.   SEC. 2.  Section 53328.1 of the Government Code is amended to read: 53328.1. (a) As an alternate and independent procedure for forming a community facilities district, the legislative body may form a community facilities district that initially consists solely of territory proposed for annexation to the community facilities district in the future, with the condition that a parcel or parcels within that territory may be annexed to the community facilities district and subjected to the special tax only with the unanimous approval of the owner or owners of the parcel or parcels at the time that the parcel or parcels are annexed. In that case, the legislative body shall follow the procedures set forth in this article for the formation of a community facilities district, with the following exceptions: (1) The legislative body shall not be obligated to specify the rate or rates of special tax in the resolution of intention or the resolution of formation, provided that both of the following are met: (A) The resolution of intention and the resolution of formation include a statement that the rate shall be established in an amount required to finance or refinance the authorized improvements and to pay the district's administrative expenses. (B) The maximum rate of special tax applicable to a parcel or parcels shall be specified in the unanimous approval described in this section relating to the parcel or parcels. (2) The legislative body shall not be obligated to specify in the resolution of intention the conditions under which the obligation to pay the specified special tax may be prepaid and permanently satisfied. Instead, a prepayment provision may be included in the unanimous approval of the owner or owners of each parcel or parcels at the time that the parcel or parcels are annexed to the community facilities district. (3) In lieu of approval pursuant to an election held in accordance with the procedures set forth in Sections 53326, 53327, 53327.5, and 53328, the appropriations limit for the community facilities district, the applicable rate of the special tax and the method of apportionment and manner of collection of that tax, and the authorization to incur bonded indebtedness for the community facilities district shall be specified and be approved by the unanimous approval of the owner or owners of each parcel or parcels at the time that the parcel or parcels are annexed to the community facilities district. No additional hearings or procedures are required, and the unanimous approval shall be deemed to constitute a unanimous vote in favor of the appropriations limit for the community facilities district, the authorization to levy the special tax on the parcel or parcels, and the authorization to incur bonded indebtedness for the community facilities district. (4) Notwithstanding Section 53324, this paragraph establishes the applicable protest provisions in the event a local agency forms a community facilities district pursuant to the procedures set forth in this section. If 50 percent or more of the registered voters, or six registered voters, whichever is more, residing within the territory proposed to be annexed to the community facilities district in the future, or if the owners of one-half or more of the area of land proposed to be annexed in the future and not exempt from the special tax, file written protests against establishment of the community facilities district, and protests are not withdrawn so as to reduce the protests to less than a majority, no further proceedings to form the community facilities district shall be undertaken for a period of one year from the date of decision of the legislative body on the issues discussed at the hearing. If the majority protests of the registered voters or of the landowners are only against the furnishing of a specified type or types of facilities or services within the district, or against levying a specified special tax, those types of facilities or services or the specified special tax shall be eliminated from the resolution of formation. (5) The legislative body shall not record a notice of special tax lien against any parcel or parcels in the community facilities district until the owner or owners of the parcel or parcels have given their unanimous approval of the parcel's or parcels' annexation to the community facilities district, at which time the notice of special tax lien shall be recorded against the parcel or parcels as set forth in Section 53328.3. (b) Notwithstanding the provisions of Section 53340, after adoption of the resolution of formation for a community facilities district described in subdivision (a), the legislative body may, by ordinance, provide for the levy of the special taxes on parcels that will annex to the community facilities district at the rate or rates to be approved unanimously by the owner or owners of each parcel or parcels to be annexed to the community facilities district and for apportionment and collection of the special taxes in the manner specified in the resolution of formation. No further ordinance shall be required even though no parcels may then have annexed to the community facilities district. (c) The local agency may bring an action to determine the validity of any special taxes levied pursuant to this chapter and authorized pursuant to the procedures set forth in this section pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure. Notwithstanding Section 53359, if an action is brought by an interested person pursuant to Section 863 of the Code of Civil Procedure to determine the validity of any special taxes levied against a parcel pursuant to this chapter and authorized pursuant to the procedures set forth in this section, the action shall be brought pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure, but shall, notwithstanding the time limits specified in Section 860 of the Code of Civil Procedure, be commenced within 15 days after the date on which the notice of special tax lien is recorded against the parcel. Any appeal from a judgment in any action or proceeding described in this subdivision shall be commenced within 30 days after entry of judgment. (d) A community facilities district formed pursuant to this section may only finance facilities pursuant to subdivision (l) of Section 53313.5. (e) The legislative body shall comply with the requirements specified in Sections  5898.15 and  5898.16  and 5898.17  of the Streets and Highways Code prior to the annexation of a parcel or parcels to a community facilities district formed pursuant to this section. (f) In connection with formation of a community facilities district and annexation of a parcel or parcels to the community facilities district pursuant to this section, and the conduct of an election on the proposition to authorize bonded indebtedness pursuant to the alternate procedures set forth in Section 53355.5, the local agency may, without additional hearings or procedures, designate a parcel or parcels as an improvement area within the community facilities district. After the designation of a parcel or parcels as an improvement area, all proceedings for approval of the appropriations limit, the rate and method of apportionment and manner of collection of special tax and the authorization to incur bonded indebtedness for the parcel or parcels shall apply only to the improvement area. (g) In connection with a community facilities district formed under this section, as an alternate and independent procedure for making the changes described in Section 53330.7, the changes may be made with the unanimous approval of the owner or owners of the parcel or parcels that will be affected by the change and with the written consent of the local agency. No additional hearings or procedures are required, and the unanimous approval shall be deemed to constitute a unanimous vote in favor of the proposed changes. If the proceeds of a special tax are being used to retire any debt incurred pursuant to this chapter and the unanimous approval relates to the reduction of the special tax rate, the unanimous approval shall recite that the reduction or termination of the special tax will not interfere with the timely retirement of that debt.  SEC. 2.   Section 5898.15 of the Streets and Highways Code is amended to read: 5898.15. (a) A public agency shall not permit a property owner to participate in any program established pursuant to this chapter if any of the following apply: (1) The owner's participation would result in the total amount of the annual property taxes and assessments exceeding 5 percent of the property's fair market value, as determined at the time of approval of the owner's contractual assessment. (2) The total mortgage-related debt and contractual assessment-related debt on the underlying property would exceed the fair market value of the property, as determined at the time of the owner's contractual assessment. (3) The total mortgage-related debt on the property alone is equal to 90 percent or greater of the property's fair market value, as determined at the time of approval of the owner's contractual assessment. (4) The property owner is unable to meet all of the following criteria: (A) The property owner shall certify that the property taxes for the property are current and that there is no more than one late payment during the previous three years or the period of time during which the owner has owned the property, whichever is less. (B) The property owner shall certify that he or she is not currently in default on any debt secured by the property and that there is no more than one late payment during the 12-month period preceding the time of the owner's contractual assessment and that late payment, if any, was submitted no later than 30 days after the due date. (C) If the property owner is a homeowner applicant, the property owner has not had any active bankruptcies within the last seven years. This criterion can be met if a property owner's bankruptcy was discharged between two and seven years before the application date and the property owner has not had any mortgage or nonmortgage payments past due for more than 60 days in the most recent 24 months. (D) The property owner does not have an involuntary lien recorded against the property in excess of one thousand dollars ($1,000). (b) If a property owner is a homeowner applicant, a public agency shall not permit the property owner to participate in any program established pursuant to this chapter unless both of the following requirements are met: (1) The property owner has been provided with a completed financing estimate document set forth in Section 5898.16, or a substantially equivalent document that displays the same information in a substantially similar format. (2) The property owner is given the right to cancel the contractual assessment at any time prior to midnight on the third business day after the date of the transaction to enter into the agreement without penalty or obligation. The property owner is deemed to have given notice of cancellation at the moment that the property owner sends the notice by mail or email or at the moment that the property owner otherwise delivers the notice, as applicable. (c) Failure to comply with the requirements of either subdivision (a) or (b) renders the contractual obligations of a property owner for a contractual assessment entered into pursuant to this chapter void. (d) Except as provided in subdivisions (a) and (b), nothing in this chapter shall be construed to void or otherwise release a property owner from the contractual obligations incurred by a contractual assessment on a property.   SEC. 3.   Section 5898.15 of the  Streets and Highways Code   is amended to read:  5898.15. (a) A public agency shall not permit a property owner to participate in any program established pursuant to this chapter if the owner's participation would result in the total amount of any annual property taxes and assessments exceeding 5 percent of the property's market value, as determined at the time of approval of the owner's contractual assessment. (b) Nothing in this chapter shall be construed to void or otherwise release a property owner from the contractual obligations incurred by a contractual assessment on a property, particularly in the event that the total amount of annual property taxes and assessments exceeds 5 percent of a property's market value after the property owner has entered into a contractual assessment pursuant to this chapter.  (c) This section applies to a property owner who seeks to participate in a program established pursuant to this chapter for types of property not subject to the requirements of Sections 5898.16 and 5898.17.   SEC. 3.   SEC. 4.  Section 5898.16 of the Streets and Highways Code is amended and renumbered to read: 5898.17.   5898.18.  All references to financing in this chapter shall be deemed to also refer to refinancing, except that with respect to refinancing, the legislative body shall conclude that providing the refinancing will result in an increased adoption of the improvements authorized to be financed by this chapter. This section does not constitute a change in, but is declaratory and a clarification of existing law.  SEC. 5.   Section 5898.16 is added to the   Streets and Highways Code   , to read:   5898.16. (a) A public agency shall not permit a property owner to participate in any program established pursuant to this chapter if any of the following apply: (1) The property owner's participation would result in the total amount of the annual property taxes and assessments exceeding 5 percent of the property's fair market value, as determined at the time of approval of the property owner's contractual assessment. (2) The total mortgage-related debt and contractual assessment-related debt on the underlying property would exceed the fair market value of the property, as determined at the time of the property owner's contractual assessment. (3) The total mortgage-related debt on the property alone is equal to 90 percent or greater of the property's fair market value, as determined at the time of approval of the property owner's contractual assessment. (4) The property owner is unable to meet all of the following criteria: (A) The property owner shall certify that the property taxes for the property are current and that there is no more than one late payment during the previous three years or the period of time during which the property owner has owned the property, whichever is less. (B) The property owner shall certify that he or she is not currently in default on any debt secured by the property and that there is no more than one late payment during the 12-month period preceding the time of the property owner's contractual assessment and that late payment, if any, was submitted no later than 30 days after the due date. (C) The property owner has not had any active bankruptcies within the last seven years. This criterion can be met if a property owner's bankruptcy was discharged between two and seven years before the application date and the property owner has not had any mortgage or nonmortgage payments past due for more than 60 days in the most recent 24 months. (D) The property owner does not have an involuntary lien recorded against the property in excess of one thousand dollars ($1,000). (b) A public agency shall not permit the property owner to participate in any program established pursuant to this chapter unless both of the following requirements are met: (1) The property owner has been provided with a completed financing estimate document set forth in Section 5898.17, or a substantially equivalent document that displays the same information in a substantially similar format. (2) The property owner is given the right to cancel the contractual assessment at any time prior to midnight on the third business day after the date of the transaction to enter into the agreement without penalty or obligation, consistent with the following: (A) The property owner shall receive two copies of the right to cancel document set forth below or a substantially similar document that displays the same information in a substantially similar format.   Right to Cancel   Property Owner: ____________________________   (Owner Full Name), (Phone),   ________   (Email)   Property Address: ____________________   (Property Address)   Your Right to Cancel:   You are entering into a contractual assessment   with __________ for financing that will result   (Provider)   in a lien on the property at _________   (Property   ________. You may cancel this transaction,   Address)   without cost, within three business days from  the date on which you signed the contractual   assessment.   If you cancel the transaction:   46 You will not be charged a   cancellation fee; and   46 You will be refunded any money you   have given, excluding application and processing   fees as applicable.   To cancel this transaction, you may submit this   form to __________ in writing at:   (Provider)   Provider: __________   Attn: Right to Cancel Notification   Address: __________   Deadline to Cancel:   If you want to cancel this transaction, you must   submit this form on or before (Insert date).   If you cancel by mail or email, you must send   the notice no later than midnight of the third   business day following the date on which you   signed the contractual assessment. If you send   or deliver your written notice to cancel some   other way, it must be delivered to the above   address no later than the time indicated above.   (B) The property owner is deemed to have given notice of cancellation at the moment that the property owner sends the notice by mail or email or at the moment that the property owner otherwise delivers the notice, as applicable. (c) Failure to comply with the requirements of subdivision (b) renders the contractual obligations of a property owner for a contractual assessment entered into pursuant to this chapter void. (d) Except as provided in subdivision (b), nothing in this chapter shall be construed to void or otherwise release a property owner from the contractual obligations incurred by a contractual assessment on a property. (e) This section only applies to a property owner who seeks to participate in a program established pursuant to this chapter for a residential property with four or fewer units.   SEC. 4.   SEC. 6.  Section  5898.16   5898.17  is added to the Streets and Highways Code, to read:  5898.16.   5898.17.   (a)    The disclosure set forth  below   below, or a substantially equivalent document that displays the same information in a substantially similar format,  shall be completed and delivered to a  homeowner as soon as practicable before, and in no event later than when, a homeowner becomes obligated on an agreement to   property owner at least three business days before the property owner consummates  a voluntary contractual assessment described in this chapter or a special tax described in Section 53328.1 of the Government Code.  The disclosure shall be provided to the property owner as a pr   inted copy, if requested by the property owner. A sample of the disclosure set forth below shall be maintained on a public Internet Web site available to property owners.   (b) This section only applies to disclosure to a property owner who seeks to participate in a program established pursuant to this chapter for a residential property with four or fewer units.  Financing Estimate and Disclosure  Notice to Homeowners: The financing arrangement   described below will result in an assessment   Notice to Property Owner: You have the right to   request that a hard copy of this document be  provided to you before and after reviewing and   signing. The financing arrangement described below   will result in an assessment  against your property  which will be collected   which will be collected  along with your property  taxes. The assessment   may   taxes. The lien against your property may  jeopardize your ability to sell or refinance your property unless you repay the underlying debt.    You   may request a subordination of the lien in order   to address complications in your ability to   refinance or sell your property.  There may be cheaper alternative financing  arrangements available from conventional lenders.   arrangements available.  You should read and review  the terms carefully,   the terms carefully, and if necessary, consult   and if necessary, consult  with a tax professional  or attorney.   or attorney.   Customer Service Toll-Free telephone number and   email:   In the event you have a consumer complaint,   questions about your financing obligations related   to the contractual assessment or your contractual   rights under the terms of this contract, you can   contact either this toll-free telephone number or  email address provided below and receive a   response within 24 hours or one business day.   Toll-Free telephone number: ___________   Customer service email address: ___________  Products and Costs Product costs (including labor/installation ) $________ Description 1. 2. 3. Financing Costs Application fees $________ and costs $________ Prepaid Interest $________ Other Costs $________ Total Amount Financed Annual Percentage Rate (APR) ______% Simple Interest Rate ______% Total Annual Principal, $______ Interest, and Administrative Fees Note: If your property taxes are paid through an impound account, your lender may apportion the amount and add it to your monthly payment. See ""Other important considerations,'' below Total Amount you will have paid over the life of the loan $________ Other Costs Appraisal Fees Bond related costs Annual Administrat ive fees $________ Estimated closing $________ costs $________ Credit Reporting $________ Fees $________ Recording Fees $________ Total Financing Costs and Closing Costs $________ Estimated Cash (out of pocket) to close $________ Other Terms Prepayment fee ( ) Yes ______ Assumable by new ( ) No ( ) Yes owner ( ) No ______ Additional Information About Th  i   e  s  e  Financing Comparisons (Use this information to compare to other financing options) ------------------ $________ Principal you will have paid off. $________ Amount of interest you have paid. In 10 years $________ Amount of financing and other costs you will have paid. $________ Total you will have paid. ------------------ Annual Percentage ______% Rate + -------------------------------- + Total Interest Paid (as a percentage of all the payments ______% you have made)  Estimated market value of home without the   improvement:__________   Estimated market value of home with the   improvement:__________   The estimated market value of your home is derived   using one of the following: 1) an automated   valuation model, which is a computerized property   valuation system that is used to derive a real   property value; 2) a broker's price opinion   conducted by a real estate broker licensed   pursuant to Part 1 (commencing with Section 10000)   of Division 4 of the Business and Professions   Code; or, 3) an appraisal conducted by a state   licensed real estate appraiser licensed pursuant   to Part 3 (commencing with Section 11300) of   Division 4 of the Business and Professions Code.  Other Important Considerations Assumption by New ( ) Yes - Allowed Buyer on original terms ( ) No - Not Allowed on original terms I understand that if I refinance my home, my mortgage company may require me to pay off the  full remaining balance of this obligation, unless   I request that the lien be subordinated to an   existing mortgage. If I sell my home, the buyer or   their mortgage company may require me to pay off   the  full remaining balance of this obligation.  If I   sell my home, the buyer or their mortgage company   may require me to pay off the full remaining   balance of this obligation.  _______________ (Borrower initials) Monthly Mortgage Payments Your payments will be added to your property tax bill. Whether you pay your property taxes through your mortgage payment, using an impound account, or if you pay them directly to the tax collector, you will need to save an estimated $_______ for your first tax installment.  A   I  f  ter   you   your first payment, if you  pay your taxes through  an impound account you   an impound account, your monthly mortgage payment   should be adjusted by your lender to cover your   should notify your lender, so that your monthly   mortgage payment can be adjusted by your lender to   cover your  increased property tax bill. _______________ (Borrower initials) Tax Benefits: Consult your tax advisor regarding tax credits, credits and deductions, tax deductibility, and other tax benefits available. Making an appropriate application for the benefit is your responsibility. _______________ (Borrower initials) Three Day Right to Cancel  You, the homeowner, may cancel the contract at any   You, the property owner, may cancel the contract   at any  time prior to midnight on the third  business   day     business day  after the date of the transaction to  enter into   enter into  the agreement without any penalty or  obligation.   obligation.  To cancel this transaction, you may  mail or   mail or  deliver a signed and dated copy of the  contract   contract  with notice of cancellation to: ___________ (name of business) at ___________ (address) You may also cancel the contract by sending notification of cancellation by email to the following email address: _________________(email address of business). _______________ (Borrower initials)  Senior Lien Resulting from This TransactionThis   contractual assessment will result in a senior   lien on your property. A lien occurs when an   assessment, obligation, or claim (debt) is secured   by the value of your property, such as a mortgage.   Once the debt associated with the lien is paid in   full, the lien can be released. If you fail to pay   the debt, a lien permits the foreclosure (sale) of   your property in order to pay the amount owed. If   the property is sold or refinanced, the debt must   generally be paid from the proceeds. If you have   more than one lien on your property, the priority   of liens will determine which debts must be paid   first from the sale proceeds. The lien attached to   your property in connection with assessment has   ""senior'' lien status, which means that it has   priority and must be satisfied before any other   private liens, including a mortgage. The existence   of this senior lien may jeopardize your ability to   refinance or sell your property unless the debt is   paid in full or the holder of the lien agrees to   subordinate (allow another lien to take a higher   priority). The foreclosure of a property subject   to a senior lien will terminate all other liens on   the property with a lower priority. A senior lien   may be in conflict with the terms of your mortgage   contract with your lender. It is your   responsibility to ensure that you are authorized   to enter into this transaction.   _______________   (Borrower initials)  Confirmation of Receipt This confirms the receipt of the information in this form. You do not have to accept this financing just because you acknowledge that you have received or signed this form, and it is NOT a contract. __________________________ __________________ (Property Owner Signature - ________ Date) (Property Owner Signature - Date)