Sacramento Report
By Ron Kingston

Did you ever consider buying an investment property that is a “fixer-upper” or one that was in a condition that even local government considers the property to be in substandard condition.

If AB 864 (Davis) becomes law, any local enforcement agency that has recorded a notice of a “substandard building code violation” can require a buyer of that property to register specific information about the buyer and the buyer’s plan for the property within 30 days.  Failure to comply for any reason would prohibit the new owner from collecting ANY rent on all of the units, even perfectly habitable units, and subject the buyer with a civil fine of up to $25,000.

Our Association is opposed to the bill, It severely punishes unsuspecting new property owners. Because the bill does not require a local government to include in its building code citation a notice to a buyer of his or her new reporting requirements, it will be very difficult for the owner to learn about the new law. Additionally, failure of the buyer to inform the local agency of the transfer of property and to provide a plan of re-construction such as timelines to repair, costs, and financing within 30-days of acquisition, the owner will face a prohibition from collecting rent on units that are not deemed to be substandard and the significant civil fine.

We are unaware of any precedent to penalize new owners in this manner. Let local government go after the property owner immediately following the issuance of the citation. Do not go after the new landlord that had nothing to do with the cause of the violation.

The bill will severely cripple legitimate transfer of property where a recorded notice of a substandard building condition exists. It requires that the new owner shall file a plan of correction for all the substandard condition. In our judgment new owners will never be able to meet this unrealistic demand because they will not be able to identify the contractors, designers, engineers and the other professionals  that he or she will use, let alone develop a plan to correct the building code problems.

Additionally, the bill will reward cities for re-inspecting substandard property. This will result in prohibiting tenants from moving into the rental units until after the problems are corrected for the local government. Just how will it reward the local governments for dragging its feet?  If they take time to re-inspect the property and the property is sold and the new owner fails to inform the local government of the transfer, etc., the cities may come down on the new owner with a $25,000 fine. What a sweet deal!

At presstime, we met with the author and he agreed in principle to take our amendments.  Stay tuned!