New Water Policy Legislation Not Just About Water; Imposes New Delta Land Use Regime

March 4, 2010
Real Estate Law

LEGISLATIVE UPDATE
2009 Legislation in Review

The 2009 legislative year proved to be one of the most difficult in recent years as the California Legislature remained preoccupied with an ever increasing budgetary crisis and an ultimatum from the Governor for water reform. The depth of the gridlock in 2009 was evidenced by a dramatic decrease in the volume of legislation that resulted in the fewest bills passed, and the fewest signed into law, in more than 40 years. Despite the lack of volume in 2009, the Legislature did enact several laws of significance to the commercial real estate industry.

1. Water Policy. The most important ground breaking legislation signed into law last year, particularly for our region, was the five bill water agreement package that many believe to be the most significant reform of water policy in California in 50 years. While the stated intent of the legislation is to ensure a sufficient supply of water for all Californians, a central focus of this legislation remains the environmental plight of the Sacramento-San Joaquin Delta. As a result of this focus, the water package is not just about water as it includes a new land use regime for the Delta. The water agreement package is made up of the following new laws:

SB 1, 7X which provides for a comprehensive new governance structure for the Delta and the myriad of agencies that oversee the Delta, setting up a Delta Stewardship Council which will among other things develop a Delta Plan that will include critical land use protections for development projects with in the Delta.
SB 2, 7X which authorizes the issuance of an $11.4 billion dollar state general obligation bond to finance a wide range of improvements and enhancements to the state's water system that will assure water supply and delivery. The bond will be on the ballot in November 2010.
SB 6, 7X which establishes new groundwater monitoring requirements with enforcement penalties.
SB7, 7X which establishes new statewide water conservation and efficiency targets for urban users (20% by 2020) and industrial users (10% by 2020).
SB 8, 7X which seeks to limit illegal diversions of surface water from the Delta by establishing monthly reporting requirements with civil penalties.

There are many critics of the water package especially in the Delta region which was given only token membership on the Delta Stewardship Council. Irrespective of various positive and negative attributes of the water agreement package, the key to its success rests on the passage by the voters in November of the enormous bond measure which is likely to encounter fierce opposition not only because it includes several billions in pork, but also because it is believed that the bond will be used to finance, among other things, a new massive peripheral canal. It also remains to be seen if the voters will be receptive to placing more debt on to the State in this struggling economy.

2. Appraisers. SB 237 follows up on last year's legislation that responded to the belief that the failure to properly regulate the appraisal industry was a contributing cause to the mortgage crisis. Last year's legislation expressly prohibited interested parties from improperly influencing appraisers. This year's legislation enumerates additional prohibited acts, such as withholding timely payment for an appraisal, or requesting the payment of compensation to achieve higher priority in the assignment of appraisal business.

At the request of the Appraisal Institute, this act also closes a loophole with respect to appraisal management companies defined as companies that employ or broker for a group of eleven or more appraisers. This act requires those companies to now register with the Office of Real Estate Appraisers and comply with the same licensing and certification program standards that apply to independent appraisers.

3. Expiring Tentative Maps. AB 333 and AB 1084 as of July 15, 2009 extend by an additional 24 months the applicable expiration date of previously-approved tentative or vesting tentative subdivision maps and parcel maps that had not expired as of that date and that would otherwise expire before January 1, 2012. This act is a continuation of similar prior legislation with the addition of some permit fee acceleration provisions intended to help mitigate the economic effects of these extensions on local governments and some enhancements to the developer's right to request an audit to establish current costs to construct public facilities.

4. Confidential Destruction of Records. AB 1094 requires all licensed businesses, including real estate firms, to take all reasonable steps to confidentially dispose of records containing personal information. Records containing, but not limited to, a name, social security number, signature, address, telephone number and account numbers are generally considered records containing personal information. This act allows customers to recover civil penalties for violations of the law. You can check out the Office of Privacy Protection website at www.oispp.ca.gov for more information.

5. Subprime Mortgages. We have all learned the hard lesson that the health of the residential mortgage market is of great importance to the commercial real estate industry. It is, therefore, of interest that that some important new legislation was enacted last year to address what were identified as abusive practices that contributed to the subprime residential mortgage meltdown. Several of these new laws are intended to bring California into compliance with recently-enacted federal legislation with respect to “higher priced mortgage loans” (AB 260) and the licensing and regulation of mortgage loan originators (SB 36). Several other bills represent independent California efforts to address and eliminate on-going harmful practices with respect to loan modification scams (SB 94) and deceptive reverse mortgages (AB 329) or to facilitate the prosecution of mortgage fraud (SB 239). Other than the addition of a modest 90-day delay in the foreclosure timeline provided by the California Foreclosure Prevention Act (AB 7), some additional notices now required as part of the foreclosure process (SB 306), and a $25,000 increase in the homestead exemption (AB 1046), little direct help has been provided at the state level to those homeowners still suffering the consequences of prior subprime mortgage excesses.

6. Climate Change. Climate change and the reduction of greenhouse gases remained a continued focus of the Legislature from prior years. In 2009 the Legislature passed a series of bills that were intended to implement or facilitate the California Global Warming Solutions Act of 2006 (AB 1404 , SB 104 , ARC 77)and the Sustainable Communities and Climate Protection Act of 2008 (SB 575). These bills deserve particular attention because of their far-reaching potential consequences for the economy of California.

7. Water Conservation. In the area of water conservation, the Legislature last year established a new timeline for mandatory replacement of non-conforming plumbing fixtures with water-conserving plumbing fixtures in residential and commercial buildings built and available for use on or before January 1, 1994 (SB 467). This timeline requires such replacement be completed for multifamily residential and commercial properties in connection with certain building alterations and improvements after January 1, 2014, and in any event by January 1, 2019. This act also requires after January 1, 2017 that sellers and transferors must disclose to purchasers and transferees the status of the property with respect to these replacement requirements.

8. Energy Conservation. On the energy conservation front, the Legislature took a slight step backwards repealing the hard implementation date of January 1, 2010, established by prior legislation, for reporting and disclosure of Energy Star energy consumption data by owners of nonresidential buildings in favor of an implementation schedule to be developed by the California Energy Commission.

9. Biogas Leasing. Also last year, in a related action the legislature expounded the list of exemptions from compliance with the Subdivision Map Act to include the leasing of, or the granting of an easement on, land in conjunction with a biogas project that in part utilizes agricultural waste or byproducts from the subject land and reduces overall emissions of greenhouse gases from agricultural operations on the land, all as further specified in the legislation. The lack of an exemption had previously worked to unnecessarily complicate biogas project leasing in California.

This legislative update is intended only as a brief summary of the legislation reviewed. If you are interested in more detail regarding any of the new bills discussed, you can contact Bob McCormick. In addition, for more comprehensive analysis of last year’s legislation, see the
2009 Legislative Review published in the CEB Real Property Law Journal. Full copies of the bills can also be obtained from the California Legislature's official website for legislative information at http://www.leginfo.ca.gov.


Please note that the information contained in this newsletter is not intended to provide specific legal advice. You should consult with an attorney and not rely on any information contained herein regarding your specific situation.

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