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

Legislative Wins (Mostly) for CMA

On August 31 at midnight, the California Legislature concluded, as it must under the state constitution, the 2019-2020 two-year legislative session. And at midnight, September 30, Governor Newsom concluded, as he must, affixing his signature or veto to the more than 425 bills which reached his desk. The Governor vetoed approximately 11% of the bills sent to him, meaning that approximately 375 bills were ultimately signed and “chaptered” into the California Codes.

And so ended the weirdest, most frustrating, and probably most difficult year of modern California history.

Of course, no segment of society went unaffected by the pandemic, but the California Legislature was dramatically impacted, practically, legally and even constitutionally. On the practical side, the Assembly and Senate were forced to drastically scale back the number of bills considered, because there was simply no way to process the usual 2500 or so bills introduced in a typical year. Constitutionally, COVID forced consideration of such fundamental questions as whether operations could be moved out of the Capitol to facilitate social distancing, whether the Capitol could be closed during session and whether members would be permitted to vote remotely or by proxy. While those questions were never answered definitively, by the end of session Senators had to be permitted to vote remotely when one Senator tested positive and potentially exposed virtually the entire Senate Republican Caucus.

The Assembly and Senate were sent home for nearly half the legislative year. This made holding the usual number of policy committee hearings impossible, with obvious impact on the ability to thoughtfully consider complicated policy questions. And for CMA and thousands of other “stakeholders,” virtually all lobbying had to be performed remotely, as there was essentially no one in the Capitol to meet with, and no ability to even enter the Capitol except to testify, alone, on individual bills. This changed lobbying strategy enormously, putting a premium on having cell phone numbers for legislators and staff.

With the legislature home and courts effectively closed, Governor Newsom was basically running the entire state. To date, he has issued over 60 executive orders, from huge issues like stay-at-home orders, to the mundane, like permitting publicly-traded companies to hold shareholder meetings online. While everyone is entitled to their opinions, and feelings run strong, the Governor has enjoyed high approval ratings for his handling of the pandemic.

Certainly one of the biggest issues considered by the Legislature throughout the pandemic was evictions and mortgages. Legislators expressed sentiments to us like “If I don’t do something about evictions, I literally can’t go back to my district.” Early on, the Legislature considered AB 2501 (Limon), which mandated forbearance on residential mortgage loans, car loans, payday loans, and PACE assessments. Residential evictions were the subject of AB 828 (Ting) and commercial tenancies were addressed in SB 939 (Wiener).

CMA participated in a very broad coalition of real estate lending organizations and others in opposition to AB 2501, which failed passage on the Assembly floor in a stunning loss for proponents. The bill required 41 affirmative votes and obtained only 39. Unfortunately, we knew that the story would not end there, as the pandemic continued to rage. Meanwhile, AB 828 was never heard in the Senate, and SB 939 was held in the Senate Appropriations Committee.

As the session approached its conclusion in August, it became clear that some legislators favored very significant action on evictions and foreclosures, and CMA obtained drafts of language essentially identical to the mandatory forbearance element contained in AB 2501.

Again participating in a large coalition of real estate groups, and working with Governor Newsom’s office, language ultimately was included in AB 3088 (Ting) which created no foreclosure moratorium or mandatory forbearance, but did require lenders not providing forbearances to disclose the reason why. The bill also provided a short moratorium on evictions into 2021, and added small landlords to the protected class of borrowers under the Homeowner’s Bill of Rights. On the basis of this far more moderate approach, CMA and other groups all adopted neutral positions, the bill obtained large majority votes in each house, and Governor Newsom signed the bill just prior to the expiration of the state Supreme Court’s eviction moratorium.

This was an excellent result for CMA members, but not everyone in the Legislature was happy. Some Senators railed against what they perceived as an inappropriate surrender to big lenders, predicting that more significant eviction and foreclosure relief will be necessary next year. The issue is not over!

Perhaps the second most significant bill for CMA in 2020 was SB 1079 (Skinner). Designed to address what the author perceives as a problem of large investors scooping up foreclosed houses, leading to “corporate rental” neighborhoods, SB 1079 proposes a complicated scheme creating a 45-day period after trustee’s sales, during which certain entitled parties can obtain properties by “overbidding” the last and highest bid at the foreclosure sale.

CMA and our other real estate partners argued that this approach could well discourage bidding at sales, to the detriment of owners losing their properties, and contribute to blight, since no party will be incentivized to maintain properties during this 45-day period. While we were unsuccessful in defeating the bill, which was ultimately signed by Governor Newsom, we did obtain a series of amendments to improve the bill. Be sure to attend the CMA Fall Seminar for more details on this very significant bill.

The upshot? Given the pandemic, the year could have been a lot worse. But also given the pandemic, legislative attention to evictions and foreclosures could well continue into 2021. Stay tuned!