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SR-11-B (11) . . A"., -r; tl-lr MAY 1 5 1990 CA:RMM:bar072jhpadv city council Meeting 5-15-90 ! ~:" ~:o'_ ~ :- ~~ ) C,: Santa Monica, California SUPPLEMENTAL STAFF REPORT TO: Mayor and City Council FROM: city Attorney SUBJECT: Proposed Amendments to Tenant Ownership Rights Charter Amendment, Santa Monica City Charter section 2000 et seq. since the city Council's last meeting, this office met with Paul DeSantis to discuss this office's proposed amendments to the Tenant Ownership Rights Charter Amendment ("TORCAII) set forth in its May 8, 1990 staff report to the Council. Based on these discussions, this office proposes the following changes to TORCA: 1. TORCA requires that a Tenant-Participating Conversion Application be signed by cosigning tenants occupying not less than two-thirds (2/3) of the residential units in the building~ To qualify as a consigning tenant, an individual must be a tenant and have resided at the building continuously for at least six (6) months prior to the date that the individual signs a Tenant-Participating Conversion Application agreeing to the conversion. See Charter section 2001 (b) . The City Attorney's Office recently became aware that the Planning Department has considered an owner living on the property as a cosigning tenant and intending to purchase tenant. We have advised the Planning Department that this practice is not permitted by TORCA. - 1 - ATIl> If" /l-B MAY 1 5 1990 . . city Charter section 2002 (f) has been modified to provide that an owner who has continuously resided at the building as his or her principal place of residence for at least two years prior to filing the Tenant-Participating Conversion Application shall be considered a cosigning tenant. This will facilitate TORCA conversions in small buildings where the two-thirds requirement is difficult to obtain if the landlord's unit is not included. This office does not believe that the definition of Intending to Purchase Tenant should also be expanded to include owners. TORCA presently requires tenants occupying not less than 50% of the residential units in the building to have signed the statement of Tenant Intent to Purchase before the City accepts a Tenant-Participating Conversion Application. This requirement ensures that a majority of the tenants residing in a building desire to purchase their units. Particularly in smaller buildings, allowing an owner to be counted as an Intending to Purchase Tenant could easily serve to defeat the purpose of the 50% requirement. Moreover, since the landlord already owns the entire building, his or her statement of intent to purchase really has no significance. Thus, TORCA will continue to require that a majority of tenants intend to purchase their units before the conversion will go forward. 2. Charter Section 2002 (l) has been added to require an owner to declare in the TORCA application that in obtaining the necessary tenant approval for the TORCA conversion, neither the owner nor the owner's agent or representative coerced a tenant to agree to the conversion of the building or to purchase a unit at - 2 - . . the building by threatening to utilize the Ellis Act if the conversion does not take place. 3. Charter Section 2004 (a) has been modified to provide that an owner's threatening to utilize the Ellis Act if a proposed conversion does not take place shall be evidence that a tenant's signature on either the Tenant-Participating Conversion Application or the statement of Tenant Intent to Purchase was obtained through coercion. This proposed modification supersedes the proposed modification of Charter section 2004(a) contained in the City Attorney's May 8, 1990 staff report. 4. Charter Section 2004 (b) (9) has been added to provide that no owner shall fail to complete the repairs and alterations agreed to pursuant to Charter Section 2002 (c) (4) in a timely fashion. Additionally, for each day that the owner fails to meet the requirements of Section 2002(C) (4), the owner shall be liable to the City in the amount of $100.00 per day. This proposed modification supersedes the modification of Charter Section 2004 (b) (9) proposed in the City Attorney's May 8, 1990 staff report. 5. Charter Section 2004(b) (12), formerly Charter Section 2004(b) (8) has been further modified to expand the non-discrimination clause required in the CC & R's to include prohibitions against discrimination based on sexual orientation. 6. This office's proposed modifications to Charter Sections 2001(l), 2002(k), 2004(b)(2), 2004(b)(7), and 2004(b) (8) contained in its May 8, 1990 staff report remain unchanged. - 3 - . . RECOMMENDATION It is respectfully recommended that the City Council direct the city Attorney to prepare the necessary resolution to submit the attached proposed amendments to the voters at the November general municipal election. PREPARED BY: Robert M. Myers, city Attorney Barry A. Rosenbaum, Deputy city Attorney - 4 - . . PROPOSED AMENDMENTS TO TORCA Santa Monica City Charter Section 2001 is amended to read as follows: SECTION 2001. Definitions. For purposes of this Article, the following words and phrases shall have the following meaning: (a) Applicant. The owner of a building for which a Tenant-Participating Conversion Application is filed. (b) Cosigninq Tenant. Any tenant agreeing to the conversion by his or her signature on the Tenant-Participating Conversion Application who has personally occupied his or her unit continuously for a period of at least six (6) months prior to the date he or she signs the Tenant-Participatlng Conversion Appllcation. (c) Disabled Person. Any person who is receiving benefits from a Federal, state, or local government, or from a private entity on account of a permanent disabil i ty that prevents the person from engaging in regular, fulltime employment. - 1 - . . (d) Intending to Purchase Tenant. Any tenant who has personally occupied his or her unit in the building continuously for a period of at least six (6) months immediately preceding the date the tenant signs a Tenant Intent to Purchase. (e) Limi ted Equity. Programs subj ect to the restrictions set forth in the Health and Safety Code section 33007.5 and other programs which limit, to a similar extent and a similar length of time, the owner's return at resale. For purposes of this Article, shared appreciation equity loans or similar loans shall not be construed to be forms of limited equity. (f) Low and Moderate Income Households. Persons and families whose income does not exceed eighty percent (80%) of the median gross income for Los Angeles County, adjusted for family Slze as determined by the Secretary of Housing and Urban Development and under Section B(f)(3) of the United States Housing Act of 1937, as amended, or if programs under Section 8 (f) are terminated, eighty percent (80%) of the median gross income determined under the method used by the Secretary prior to such termination. - 2 - . . (g) Middle Income Households. Persons and families whose income exceeds eighty percent (80%) but is less than one hundred and twenty percent (120%) of the median gross income for Los Angeles county, adjusted for family size as determined by the Secretary of Housing and Urban Development under section 8 (f) (3) of the united States Housing Act of 1937, as amended, or if programs under Section B(f) are terminated, more than eighty percent (80%) but less than one hundred twenty percent (120%) of the median gross income determined under the method used by the Secretary prior to such termination. (h) Building. Owner. The owner of a Qualifying (i) Participating Tenant. Any tenant, including both cosigning and non-co signing tenants, residing in the building at the date of the approval of the Tenant-Participating conversion Application. (j ) Price Index. The index for Urban Wage Earners and Clerical Workers, United states city Average, as published by the Uni ted States Bureau of Labor statistics, or - 3 - . . in the event such index is discontinued any comparable index. (k) Tenant Intent to purchase. A form prepared by the City to comply with state law and which shall be in substantially the following form and substance: STATEMENT OF TENANT INTENT TO PURCHASE This is a Tenant Intent to Purchase form that is used to determine how many tenants want to purchase the apartment units that they currently are renting. Everything that the owner guarantees or promises you in exchange. for your signature, including the sales price, is set forth in writing in the Tenant-participating Conversion Application. These promises, including the promise to sell you the unit for the price stated on the form, will be made conditions of the approval of the conversion and the signed form will become public record. Signing this form does not mean that you must buy the unit. It only means that you currently want and intend to buy the unit for - 4 - . . the sales price indicated on the form if you are able to obtain satisfactory financing and if the application is approved. IF~ AFTER FINAL APPROVAL OF THE CONVERSION, THE OWNER REFUSES TO SELL THE UNIT AS AGREED OR DEMANDS A HIGHER PRICE, YOU SHOULD IMMEDIATELY CONTACT THE APPROVING ATTORNEY AND THE CITY ATTORNEY. I/We, the undersigned, as tenant (s) of unit at Santa Monica, California, at the time of filing of the Tenant-Participating Conversion Application of such property, do certify my/our intent to purchase my/our occupied Unit No. I/We have seen and received a copy of the Tenant-Participating Conversion Application which lists the maximum sales prices for all tenant occupied units in this building and other information on the Tenant-Participating Conversion Application to be filed with the City of Santa Monica, and this list indicates that the maximum sales price for my/our unit is to be $ - 5 - . . I/We further understand that this Intent to Purchase Form will be filed with the City for the purpose of establishing the percentage of tenants that may be expected to purchase units pursuant to this Article. I/We declare I under penalty of perj ury I that all of my/our statements above are true an correct. (Signed and Separately Dated by Intending to Purchase Tenant(s) and owner.) (1). Qualifying Building. Any building used for residential rental purposes in the City for which no eviction has occurred pursuant to Government Code Section 7060 et seq. (the Ellis Act) within a five (5) year period prior to the filinq of an Application for Tenant-Participatinq Conversion and for which no eviction has occurred pursuant to Section 1806(h) of this Charter (relating to eviction for purposes of owner occupancy or occupancy by relative of the owner) within a two (2) year period prior to the filinq of an Application for Tenant-Participating Conversion. (m) Senior Citizen. Any person sixty-five (65) years of age or older. - 6 - . . (n) Tenant. authorized tenant residential rental Tenant-Participating is being processed. Any person who is an of an owner of a building for which a Conversion Application form of Tenant ownership. Ownership in the either condominiums, community stock cooperatives, cooperative limited equity stock any other means authorized (0) apartments, associations, cooperatives or under state law. (p) Tenant-participating Conversion. Any conversion to tenant ownership implemented pursuant to this Article. (q) Tenant's Sales Price. The maximum price for each unit as set forth in the Tenant-Participating Conversion Application. santa Monica City Charter section 2002 shall be amended to read as follows: SECTION 2002. Application for Tenant Participating Conversion. An application for a Tenant-participating Conversion shall be complete if it meets the following requirements: - 7 - . . (a) Identifies the building, and its owner, which is the subject of application and contains a declaration such building is a qualifying building. (b) Sets forth, for each tenant occupied unit, the following sales information: the that (1) The maximum sales price for each unit. (2) The minimum down payment for each unit. (3) If seller financing will be offered, the minimum amount to be financed, the maximum rate of interest and the minimum term of the loan offered by the seller. (c) Sets forth, for following common areas, budget information: each unit, maintenance the and (1) The plan for the assignment and use of parking spaces. (2) The plan for the use of all common area facilities. ( 3 ) The occupancy and management plans and policies. - 8 - . . (4) A list of all repairs and alterations, if any, which will be performed before the close of the first escrow. (5) The plan for allocating costs and expenses for the building. (6) A prepared monthly maintenance budget based upon actual maintenance expenses for at least the preceding two years plus a reserve fund which states the monthly maintenance assessment for each unit. (7) The procedures for allocation and use of such reserve funds. (d) contains a declaration with the following information: (1) That there has been a building inspection report of the accessible portions of the entire building, including but not limited to, the roof, walls, floors, heating, air conditioning , plumbing, electrical systems or components of a similar or comparable nature, and recreational facilities of the building prepared by a Building Inspection Service or similar agency within the preceding three (3) months. - 9 - . . (2) That, for each tenant occupied unit, a written statement setting forth any substantial defects or malfunctions identified in the building inspection report regarding the unit and the common areas has been delivered to the unit or a tenant occupying the unit. (3) That, for each tenant occupied unit, a copy of the complete building inspection report has been del i vered to the unit or a tenant occupying the unit. (e) Sets ownership for submitted. forth which the the form of tenant application is (f) Is signed by cosigning tenants occupying not less than two-thirds (2/3) of all the residential units in the building. I f there is more than one tenant in a unit, the signature of only one tenant shall be required. For purposes of this subsection, an owner of the buildinq shall be deemed a cosigninq tenant if the owner has continuously resided at the buildinq as his or her principal place of residence for at least two years prior to the filinq of the - 10 - . . Application Conversion. for Tenant-Participatinq (g) Identifies the cosigning tenants and the units occupied by such tenants and lists all other tenants known to the owner in the building and the units they occupy. (h) Contains a declaration that the signature of each cosigning tenant was obtained only after the delivery, in writing, to such tenant of the information required in Subsections (a) (b) (c) (d) and (e) of this Section. (i) Contains a lawful notices have declaration that been given of all the application for conversion. (j) Has attached to the application Statements of Tenant Intent to Purchase, signed by intending to Purchase Tenants occupying not less that fifty percent (50%) of the total number of residential units in the building. If there is more than one tenant in a unit, the signature of only one tenant shall be required. (k) contains a declaration that in obtaininq the siqnatures of cosiqninq tenants - 11 - . . and intending to purchase tenants, the owner neither offered nor agreed to pay money or other financial consideration to participating tenants if the tenants would release all riqhts that they had to purchase a rental unit in the buildinq. (1) Contains a declaration that in obtaininq the signatures of consigning tenants and intending to purchase tenantsr nei ther the owner nor the owner 's aqent or representative coerced a tenant to sign by threatening that the owner, or any successor thereof, would cease operatinq the property as residential rental property pursuant to Government Code Section 7060 et seq. ("the Ellis Act") if the proposed conversion of the building pursuant to this Article did not occur. (m) That 1 for each tenant occupied unit 1 a Tenant Intent to Purchase has been delivered to the unit or a tenant occupying the unit. Santa Monica City Charter section 2004 shall be amended to read as follows: SECTION 2004. Approval or Denial of Tenant Participating Conversion Application. A Tenant-participating conversion Application - 12 - . . shall be approved or denied within the time periods set forth in section 2003 of this Article and in accordance with the following standards: (a) A Tenant-Participating Conversion Application, along with any required tentative subdivision map or tentative parcel map shall be denied if the Tenant-Participating Conversion Application fails to meet any of the requirements of this Article, was the result of fraud, misrepresentation, or threat or similar coercion, or fails to meet any mandatory requirements of the Subdivision Map Act of the state of California. Evidence of coercion shall include1 but not be limited to, obtaininq any tenant's siqnature on the Tenant-Participatinq Conversion Application or on the statement of Tenant Intent to Purchase form attached to the Application by threateninq that the owner 1 or any successor thereof 1 might cease opera ting the property as residential rental property pursuant to the Ellis Act if the proposed conversion of the building pursuant to this Article did not occur. - 13 - . . (b) A Tenant-Participating Conversion Application, along with any required tentative subdivision map or tentative parcel map, shall be approved if it meets the requirements of this Article and shall be subject to the following conditions and no others: (1) The owner must file with the City wri tten consent to each condition imposed in connection with the approval of a Tenant-Participating Conversion Application. The written consent shall be filed prior to the approval of any required final subdivision map or final parcel map, or if no such map is required, within six (6) months from the date of approval of the Tenant-Participating Conversion Application. The filing of such written consent shall constitute an agreement, with the City of Santa Monica and each participating tenant, binding upon the owner and any successors in interest, to comply with each and every condition imposed in connection with approval of a Tenant-participating Conversion Application. The city and any participating tenant shall have the right to specific enforcement of this Agreement in addition to - 14 - . . any other remedies provided by law. (2) The owner shall offer and continue to offer the exclusive right to purchase each rental unit in the building to the participating tenant thereof upon the terms set forth in the application, without change, for a period of not less than two (2) years from the date of final approval by the California Department of Real Estate or the date the first unit in the building is offered for sale, if no approval by the California Department of Real Estate is required. Unless a participating tenant has already provided the owner with written acceptance of the offer, the Tenant's Sale Price may be adjusted at the beginning of the second year according to any change reflected in the Price Index occurring during the preceding year. Upon the written acceptance of the offer by the participating tenant at any time within the two year period, escrow shall open wi thin thirty (30) days from the written acceptance by the participating tenant. Unless otherwise agreed by the parties, the period of the escrow shall not exceed sixty (60) days. - 15 - . . (3) No participating tenant shall at any time after the approval of the Tenant-Participating Conversion Application be evicted for the purpose of occupancy by the owner, occupancy by any relative of the owner, or for demolition of the unit. In the event the participating tenant does not exercise his or her right to purchase within the time period set forth in this Article, the owner may transfer the unit without any price restriction to the participating tenant or any other person. However, in the event such transfer is to someone other than the participating tenant, the transfer shall be expressly made subj ect to the rights of the partic1pating tenant to continue to occupy the unit as provided for in this Article. (4) Each unit shall at all times remain subj ect to all the terms and conditions of Article XVIII of this Charter, except Section 1803(t), before, during and after any Tenant-Participating conversion. If any unit is rented, the maximum allowable rent for each unit shall be no greater than the maximum allowable rent allowed under Article XVIII of this Charter. - 16 - . . (5) The building may be required to comply only with the applicable laws, including the building, safety, and zoning codes, which were in effect as of the date the building was constructed. No new, additional requirements including, but not limi ted to, parking, room size, or interior or exterior improvements of any kind, may be imposed as a condition, either directly or indirectly, of the Tenant-Participating Convers ion. Notwi thstanding the above, the City may impose reasonable health or safety requirements consistent with this Article upon such buildings provided that such requirements uniformly apply to all similar multiresidential structures in the City of Santa Monica, regardless of the form of ownership of the building. (6) Prior to the approval of any required sUbdivision map or final parcel map for the Tenant-Participating Conversion, or if no such map is required, prior to the filing of the written consent required by Subdivision (b) (1) of this Section, each participating tenant shall be informed in wri ting , in a form approved by the city, of his or her rights under this Article. - 17 - . . (7) In addition to the protections of Subdivisions (b) (3) and (b) (4) of this Section: (A) all non-purchasing Participating Tenants who are senior citizens or disabled on the date of filing the Tenant-participating Conversion Application and who personally occupied a rental unit in the qualifying building continuously for at least six (6) months immediately preceding the date of the filing of Tenant-Participating Conversion Application shall be glven the nonassignable right to continue to personally reside in their unit as long as they choose to do so subject only to just cause evictions provided that the eviction is not for the purpose of occupancy by the owner, occupancy by any relatlve of the owner, or for demolition of the unit. In addi tion, should the maximum allowable rent provision of Article XVIII of this Charter no longer apply, the rent for each such unit shall be adjusted annually to allow an increase of no more than the increase in the Price Index plus a reasonable, pro rata share of capital improvements for the buildings common areas or agreed to capital improvements for the unit. within sixty (60) - 18 - . . days after the approval of a Tenant-Participating Conversion Application, any senior citizen participating tenant who is entitled to the protections of this Subdivision may designate in writing the name of one person who is entitled to continue living in the rental unit under the same terms as the senior citizen if the senior citizen pre-deceases him or her and if the person designated is residing in the unit at the time of the death of the senior citizen. The person designated by the senior citizen must be a lawful occupant of the unit, at least fifty-five (55) years of age on the date of the filing of the Tenant-Participating Conversion Application, and must have resided in the unit for a continuous period of six months prior to the filing of the Tenant-Participating Conversion Application. (B) All other non-purchasing Participating Tenants who personally occupied a rental unit in a qualifying building continuously for at least six (6) months immediately preceding the date filing the Tenant-Participating Conversion Application shall be given the nonassignable right to - 19 - . . continue to personally reside in their unit subject only to just cause eviction for a period of five (5) years form the date the first unit is offered for sale. No eviction shall be allowed during this time period except for just cause provided the eviction is not for the purpose of occupancy by the owner, occupancy by any relative of the owner, or demo I it ion of the uni t. In addition, during this time period, should the maximum allowable rent provisions of Article XVIII of this Charter no longer apply, the rent for each unit shall be adjusted annually to allow an increase of no more than the increase in the Price Index plus a reasonable pro rata share of capital improvements for the building's common areas or agreed to capital improvements for the unit. All rights under this Subsection shall expire upon the termination of the landlord-tenant relationship between the owner and the participating tenant entitled to the protection of this Subsection. For purposes of this Subsection, lIJust cause" means one of the reasons set forth in Subdivisions (a) through (g) of Section 1806 of this Charter. - 20 - . . This Subsection shall be interpreted in accordance with Santa Monica City Attorney Informal Opin1on Number 84-57. All amendments to this Subsection are declaratory of existinq law. (8) Non-purchasinq Participatinq Tenants shall not be subiect to eviction pursuant to Government Code Section 7060 et seq. (lithe Ellis Act"). (9) No owner shall close the first escrow without completinq the repairs and alterations agreed to pursuant to Section 2002 (c) (4) of this Article~ In addition to any other remedy provided by law t for each consecutive calendar day followinq the close of the first escrow that an owner fails to complete the repairs and alterations agreed to pursuant to section 2002 (c) (4) t the owner shall be liable to the city in the amount of one hundred dollars ($100.00) per day. ( 10) The requirements of this section shall be set forth in the Declaration of Covenants, Conditions, and Restrictions, or equivalent document, and shall specifically name the Participating Tenants in each unit enti tIed to the benefits and protections of - 21 - . . this Article. The City shall review and approve for compliance with this Article the Covenants, Conditions, and Restrictions, or equivalent documents, prior to the approval of any required final subdivision map or final parcel map, or if no such map is required, prior to the filing of the written consent required by Subdivision (b) (1) of this section. To the extent applicable, the requirements of this Article shall be made a part of the rental agreement wi th the Participating Tenants. (11) The Tenant-Participating manner required by Article. owner shall pay conversion Tax in section 2008 of the the this (12) The Declaration of Covenants, Conditions, and Restrictions, or equivalent document, shall contain a non-discrimination clause in substantially the following form: "No unit owner shall execute or file for record any instrument which imposes a restriction upon the sale, leasing or occupancy of his or her unit on the basis of sex, race, color, religion, ancestry, national status, origin, family age, pregnancy, composition, marital handicap, - 22 - . . Acquired (A.LD.S.), potential children. Immune sexual Deficiency orientation, syndrome or the or actual occupancy The association of shall minor not discriminate on the basis of sex, race, color, religion, ancestry, national orlgin, age, pregnancy, marital status, family composition, handicap, Acquired Immune Def iciency Syndrome (A. I . D. S . ) , sexual orientation, or the. potential or actual occupancy of minor children." (13) The approval of a Tenant-participating Conversion Application shall expire if any required final subdivision map or final parcel map is not approved within the time periods set forth in the Subdivision Map Act of the State of California, or if no such map is required, if the written consent required by Subdivision (b) (1) is not filed within the required time period. bar070jhpadv - 23 - -; . . ~~-z:- //4 PAUL C DESANTIS ~ SALLY ANN L MOllOY + + !?!3u,> @$a:J< 0/ PAUL C. DESANTIS 3002 SANTA MONICA BOULEVARD, SUITE C SANTA MONICA. CALIFORNIA 90404-2506 TELECOPIE"ll213l829-1476 TElEPHONE (213) 453-1888 ; ~ 07 ~ OF CO'J"'SO:L t.~'='i.._E"'- "-C;:-I:"'1.t..N ?'D C:8:..t-.,EG: Ai-SO "-'IE'\o1BEP OF .....SV'.. .....ORK BA"P ... ALSC> MEr.IIE!EFi OF PENNSVLVA......A 5A~ May 15, 1990 Honorable Mayor and Members of the City Council Santa Monica City Hall 1685 Main Street Santa Monica, CA 90401 Re: Prooom Amendmen~ to Tenant Ownership Ri2'hts Charter Amendment (TORCA) Dear Mayor and Members of the City Council: I support your intention to make technical corrections which would restate the law more clearly, including your intention to respond to Ellis Act issues. The following suggestions do not necessarily reflect the poSItion of any political group. I am writing as an individual who was instrumental m developing the TORCA program and as one who has had experience representing both tenants and owners in over seventy projects. As you know, TORCA was enacted with strong hi-partisan support. That historic "social contract" between renter leaders and apartment owner leaders is now almost six years old. The purpose of the proposed amendment to TORCA is to make technical changes in the Charter and to respond to Ellis concerns. It is not intended to re-open the major substantive rules which have been in effect for the last six years. Self-discipline is essential to avoid the enormous temptation to re-write one or another of the major provisions to favor one side or the other. TORCA was a compromise of different points of view. Each side would hke to remake one or another provision to favor its point of view. It there IS any evidence of tampering WIth the main provisions. then the six year old social contract will be broken. I believe that the staff is to he commended for its intention to respect the major substantive provisions and to merely make technical corrections to preserve the integrity of the program. I believe that the majority of the staff suggestions would not affect the way TORCA has operated during the past few years. On a small number of issues, however, the changes proposed may be viewed by many apartment owners as being one-sided. Ironically, two of those provisions actually would mcrease Ellis evictions. If those provisions were left in their present form, community consensus would be difficult to achieve. After the initial pubhc staff report was released for last week's heanng, I discussed several issues with the City Attorney. The discussions were very constructive. DIfferences remain, but the gap has been narrowed considerably. I still believe that on those few ... . . Mayor and Members of the City Councll May 15, 1990 Page - 2 mstances~ additlOnallanguage and/or modifications of the staff language are necessary. The staff report for the May 8th heanng recommends nine (9) changes to the TORCA Charter Amendment. I wIll dIvIde the proposed amendments mto three groups~ those where the staff language is accepted~ those where new amendments are suggested and, third, those where modification to the staff language is suggested. I will also attempt to respond to certam changes 10 the staff report whIch may be ISSUed for tonight's hearing. SUPPORT LANGUAGE AS DRAFTED: 1. CHANGE DEFINITION OF "QUALIFYING BUILDING" (Section 2001 (L)) Symbolically, this is probably the most significant provision in the staff report. Under current law, there are a number of obstacles to "Ellis- TORCA" conversions, including significant barriers under State law and a two year time limit currently under Secuon 2001 (L) for an owner-occupancy eviction, other legal issues, as well as a number of financial dismcentives due to the long bme it takes to complete a TORCA conversion. So far, these obstacles have deterred would-be "E1lis-TORCA tI converters. To my lrnowledge only one " Ellis- TORCA tI application has been filed in the last six years. I did not counsel that applicant. I have been told, however, that in this case TORCA was not the motive for the Ellis evictions. The staff's language will prevent TORCA applications where there has been an Ellis withdrawal in the previous five years. Please note that, from a practical pomt of view, the staff's proposed language does not break new ground. A two year anti- " Ellis-TORCA to provision would be essentially declarative of current law. The variance with current law is that the proposed language calls for a five year prohibition on such Ellis- TORCA conversions. 2. IMPARTIAL VOTE PROVISION (Section 2002 (k)) Adds new sectIon to insure that tenants did not receive financial conSIderation for signature apart from reduced purchase price. This section would prevent both owners from offering such consideratIon and tenants from requiring such consideration. 3. WHEN PRICE INCREASE APPLIES (Section 2004 (b)(1)) Surprisingly ~ this issue has caused the highest number of phone calls to me, and I understand one of the highest number of calls to the City Attorney's office. WhIle both the City Attorney's office and I agree how this provision should be interpreted, . . Mayor and Members of the Clty Council May 15, 1990 Page - 3 that meamng obVIously IS not clear to the average reader, Often, tenants wait until very last mmute to exercise theIr optIon, frequently Just before the end of the first year when the owner has the nght to mcrease the purchase price accordmg to the increase in the Consumer Price Index. ThIS provIsion would make clear that If a written offer from the tenant is made l;>efor~ the end of the first year, then no cpr increase applies, even if the tenant's escrow had not closed at the end of the first year, assummg of course, that the tenant closed escrow in a reasonable time after exercismg the opnon. According to TORCA, a reasonable time for escrow is sixty days (Section 2004(b)(2)), This clarification should make it clearer that the CPI increase does not apply to offers made before the end of the first year 4. INCORPORATING SECTION (b)(3) AND (b)(4) (Section 2004(7)) Technical correction to incorporate by reference Section (b)(4) concerning the applicability of Article 18 into recitatIon of Section 2004 (7). I am not aware of any problem under current law but see no reason why this change should not be made. 5. REFERENCE TO CITY ATIORNEY OPINION (Section 2008) Restates current law. Reference to CIty Attorney Opinion dated May 21, 1984, #84- 57 which contains interpretations used during the last six years. 6. NO ELLIS EVICTIONS (Section 2004(8)) This restates current Jaw. The Court already sustained the City's position in the only attempted EllIS eviction after a TORCA conversion. Santa Monica vs. GItlen. ThIS section would be useful to give clearer notice that such eVlctions are not permitted after TORCA project is approved. 7. A,I.D.S. (Section 2004 (b) (12)) Restates current law prohIbIting discnmination on basis of A.I.D.S. or sexual orientation. This provision is already being added to all TORCA Declarations of Covenants, CondItions and Restricnons. . . Mayor and Members of the CIty CouncIl May 15, 1990 Page - 4 SUGGESTED ADDmONAL TECHNICAL PROVISIONS: 1. (New) Sectlon 2002(1) Add to eXIsting language: For purposes of this subsection, an owner of a qualifymg buildmg whIch IS the subject of the application, who reszdes aJ the qualifj'mg building as hIs or her pnnclpal place of residence and has mailUained such residency for at least SiX momhs pnor to applicatlOn, shall be eligible to be mcluded as a Coslgning Tenant. 2, (New) SecUon 2002G) Add to existing language: For purposes of chIS subsection, an owner of a qualifymg .:. which is the subject of the application. who resides at che qualifying buzlding as his or her princzpal place of residence and has mazntamed such reSIdency for Gl least six malUm pnor 10 applicanon, shall be eligible to be included as an Intending to Purchase TenalU. Both of these proposed addItions are declarative of eXisting law. When the very first TORCA application was filed, TPC#Ol, the City considered thiS issue. The four unit buildmg had an owner-occupant who voted for the project. At that time it was decJded that such owner-occupants should be allowed to vote If they met all other TORCA requirements, For almost six years, the City has allowed owner-occupants to vote. Recently, I have been mformed that an internal staff discussion has begun on whether owners may vote for the project on the Consent form and on the non-binding Intent to Purchase form. The Act does not exclude resident owners from voting. There has been nearly six years of past practice of allowmg resIdent owners to vote (including City Attorney approval of CC&Rs and other legal documents designating without exception resIdent owners as partIcipating tenants). To clarify this Issue, it would be helpful to add language clarifying that resident owners who reSIde at the property as their principal place of residence and have lived there for at least six months can be included as cosigmng tenants and tenants intending to purchase. Again, such language would merely be declarative of long-standing City policy. (See attached Exhibu A lest of City- approved TORCAs having resident owners.) To my knowledge, there has been no sIgnificant abuse caused by allowing owners to vote. Most of the owners have lived m their units for many years, some since before rent control was enacted. I presume that the CIty Attorney's dIscussion with the Planning staff was motivated by Ellis concerns. Since the proposed charter revision will contain new, very exacting ann-EIlls provisions, the concern over whether owners may vote would be moot. Ironically, to disallow owners from votlng would have the opposite effect on Ellis eVlctlon. If one is really concerned about reducing Ellis evictions, then why prevent the owners of smaller bUIldings -- whose propertIes are most prone to Ellis development -- from voting? I . . Mayor and Members of the CIty CouncIl May 15, 1990 Page - 5 respectfully suggest that tenants would be harmed by changing: our long.-standing !'Olicy. If the owners of these bmldings are prohibited from using TORCA. then there wIll be more Ellis eVIctions. To date. afmQst a (hird Qf qfl TORCA profec(s are filed by small mom and pop owners who live in their apartment bwldinf!s. I have known many of these owners. Typically, they are moving into retirement age and want to get out of the rental business. TORCA allows them to sell the project to their tenants at affordable prices while allowing the owners to remain as one of the condominium owners. Usually the TORCA conversion will be as economIcally profitable as selling to an Ellis developer. Also, tenants are helped in smaller buildings when new owners purchase in order to complete a TORCA rather than an Ellis/new development project. The proposed language would simply set forth the City's long-standing polIcy. SUGGESTED TEXT FOR STAFF'S PROVISIONS: 1. COMPLETE COMMON AREA REPAIRS Section 2004(b)(9) In the May 8th staff report, the provision C3lled for a $IOO/day penalty for failure to complete a repair or alternation, regardless of the amount of the repair/improvement and regardless of whether the owner was acting in good faith to correct the situation. It also did not make clear to whom the penalty would be paid, although the theory of the penalty was that the City was a third party beneficiary to TORCA and that the City. as well as the buyers, were bemg harmed by the failure to complete the repair/alteration. I have discussed my concern with the CIty Attorney's office. I stated that this provision should not penalize an owner for a good f31th improvement whIch was subsequently proven to be defective. For example, if a new electric gate were added but it dId not operate properly, and If the owner promptly corrected the problem, then the $100 penalty would not apply. The intention of this - provision IS to deal WIth gross neglect of the TORCA responsibilities before closing the first escrow. Also, fairness suggests that the penalty should fit the offense. The $lOO/day penalty should be lImited to 150% of the cost of the repair not completed. In other words, there should not be a $2,500 fine for a leaky faucet but a $10,000 fine may be appropriate if major portions of the plumbing were not completed. In the last few days I have been exploring another ffself-enforcingff approach which would more likely prevent the problem from happening. There is a rigorous procedure in effect established by the California Department of Real Estate ("DRE") which could prevent this problem using standard procedures and regulations. These regulations are based on years of experience m admmistering sales of hundreds of thousands condominium umts. They WIll work for TORCA repairs and alteratlons provic;l~ that these repairs and alterations are clearly set forth in the Purchase Contract, If they are included in the Purchase Contract, which must be reVIewed by the DRE in each and every project which conSIst of five umts or more (the . . Mayor and Members of the CIty CounCIl May 15. 1990 Page - 6 vast majority of TORCA projects). then escrow cannot close unless the common area unprovements are completed or that future completion is assured. The reason this has been a problem in the past is that the TORCA repairs and Improvements are not clearly set forth In the Purchase Contract and thus It has been routinely assumed that the repairs and lmprovements were completed or that none existed. I suggest the following language: Replace the proposed language: "Each Deposit Receipt andlor Purchase Contract and each complete set of escrow instructions for the first sale of each unit shall contain a "Certification Concerrnng Completion of TORCA Repairs and Alterations" in substantiall y the language set forth below. Intentional failure to comply with this provision shall constitute a misdemeanor. "Cenification Concemine Comt>letion of TORCA Reoairs and Alterations" - - - II We. . bemg all of the Buyer(s) woo is/are purchasing Urnt and the SelIer(s) or Seller's authorized agenl. certify that we have read the TORCA application filed with the City of Santa Monica and certify that attached to the Deposit Receipt and/or Purchase Contract and to the escrow instructions is a photocopy of each page. if any. of the TORCA application which contains any repair and/or alteration as required by Secrion 2002(b)(4). Both Buyer and Seller have inspected the project and the repalT(s) and alteration(s). if any, which were listed in the TORCA applicaJion. Buyer and Seller cenify that one of the following statements is true by placing their initials below the appropriate statement: 1) no repair or alteration was setfonh in the TORCA application filed with the City of Santa Monica for this project; tt"~: Ill!} Elt__ ~ _ _ Yf"\: SE[ /,/":J( __ _ 2) the repairs and alterations have been completed to Buyer's satisfaction; Yc"': /l1.~ )'1"1( )','.' . \"1.I./I.N 3) a mutually agreed amount o/funds will be placed in escrow and remain in escrow until any remaming incomplete repairs or . . Mayor and Members of the City Counell May 15, 1990 Page - 7 alterations have been completed. Written details of this arrangement is set forth In our escrow InstructiOns,' y,"!: m:)"l1l Yt'\: S/~/1.M(_. _. 4) a Complenon Bond approved by the California DepartmenJ of Real Estate IS in effect to insure the completion of the repairs or alteratIOns. Details of the Completion Bond are set fonh in our escrow instructions. Yt": lIlJYI,R... Yt .\,' S/~/.l J.N _ _ Completion of common area improvements has only been a problem with a few projects. Prevention is the best way to avoid the problem. I believe that the above provisIon, which is patterned after the Department of Real Estate approach towards the similar problem of completion of common area improvements should solve the problem. (Attached as Exhibit B is DRE information on how the DRE assures common area completion.) We do not have to re-invent the wheel. It is important to bear in mind that there are very few violations in this area. The contracts on Common Area improvements are almost completed. In those Instance where they ar not, the self-pohcmg mechanism of this provision would allow any violations to be resolved without involving the City Staffs energy and time. 2. ANTI-ELLIS COERCION PROVISIONS (New) SectIons 2002(m) and 2004(a) I suggested the following in response to the staffs May 8th report. Since that time, there has been some modification of the staff language. For purposes of discussIons, I Will restate my original proposal: [Add]: Contains a declaration that in obtaming the signatures of Cosigning Tenants and Intending to Purchase tenants, neither the owner nor owner's agent or representative has coerced a tenant to sign by threatenmg to evict tenants pursuant to Government Code SectIOn 7060 (the "Ellis Act"). and [Replace proposed language]: A tenam-paniclpating conversion application shall be denied if it is determined that the owner, or any representative or agent of the owner has, coerced any telUln/ . . Mayor and Members of the City CounCIl May 15, 1990 Page - 8 at the property to sign the Statement of Tenant Intent to Purchase or Agreemem to Conven form with threats of an evictIOn pursuant to Government Code Section 7060 et seq. The CIty already has authonty to deny a TORCA apphcation if there IS fraud or coerCIon under current law m Section 2004(a). The staff language goes beyond current law by addmg overly broad language to Sectlon 2004(a). I suggest approaching tlns objective by adding language to two sections lIsted above, instead of the one section recommended by May 8th staff report. The staff's May 8th proposed language would prevent legitlmate discussion and encourage abuse. I fear that the staff language violates the protective speech provisions of the First Amendment m the U.S. Constitution. It also attempts to make a legitimate dIscussion of the Elhs Act illegal -- an area where the State of California has chosen to pre-empt Santa Monica law. The staff language creates an impossible burden of proof for the owner to prove himself/herself "innocent". Whenever anyone alleges that an owner said that eIther the owner or a successor in mterest -might" cease operating the property under the Ellis act~ the owner would then have the burden of proof to prove himself/herself innocent. The invitation for abuse is obvious. It is human nature -- whether one is a tenant or a property owner -- to attempt to leverage one's negotiating position. Once a project is filed, a tenant could then threaten the owner WIth making a claim that Ellis was discussed unless the owner agreed to new conceSSIOns. How could anyone meet the burden of proof! Typically, TORCA negotiations take many weeks~ often many months. Owners would have to video tape each and every tenant contact and only communicate in wnting on other questions they may have, A misguided tenant could use this provision for extortion because the leverage here is more than mere denial of the project. The owner could be exposed to potential criminal penalties within TORCA for violating Its provisions, What is our objective? Is the objective to prevent coercive speech or to prevent all diSCUSSIOn of the EllIs Act? By analogy, is our intention to prohibit all speech about fire in a crowded theater or do we allow someone to shout "fire" if the building is actually on fire? I believe that we must look to the intent of the speech. If the Ellis speech was intended to threaten and be coercive ("I wIll evict you under the EllIS Act if you do not sign the TORCA forms"), then it is legitimate to prohibit such speech. If the speech were not intended to be coercive, but to merely truthfully set forth facts, then such speech should be permitted. Unfortunately, proposed language prohibits all speech about the EllIS Act~ regardless of the speaker's intent. I suggest that the objective should be to prevent coercive speech. Let us see how thIS language would work in a typical rea1life situatIon. The Whiteacre Development Company approaches Mr. & Mrs. Apartment Owner who own a five . . Mayor and Members of the CIty CouncIl May 15, 1990 Page - 9 unit apartment buIldmg North of WIlshire Boulevard. Whiteacre presents Mr. & Mrs, Apartment Owner with an all cash purchase offer for a "fifteen times the gross rental Income", a price much higher than the property could command based on its rental income. Whlteacre tells Mr. & Mrs. Apartment Owner that he intends to eVIct all the tenants under EllIs Act and then to build luxury condomimums. Mr. & Mrs. Apartment Owner want to retire from the rental business. They find the cash offer very tempting. Mr. Apartment Owner has heard of TORCA and decides that he should give hIS tenants a chance to buy theIr umts under TORCA. After doing his homework he finds that after all expenses, he could sell the units to the tenants at half the price of the luxury umts Whiteacre plans to build and still end up WIth about the same profit as he could receIve from Whlteacre. Mr. Apartment Owner begins discussion with hIS tenants. The tenants ask why he is offering the units for sale to them. At this point, what should Mr. Apartment Owner do? Should he tell the truth and risk having his TORCA application denied on the grounds of coercion? Or should he share the truth about the economic realIties with the tenants? Do the tenants have a right to know about Whiteacre's pending offer? Are tenants entitled to information which will have such a dramatic impact upon their lives? I believe that Mr. Apartment Owner should be able to truthfully present the situation, proVlded it is not presented in a coerCIve, threatemng fashion. EllIs withdrawals represent a real or potential threat to tenants. All that Wlll be accomplished by the staff language IS to make owners even more reluctant to use TORCA. Who IS served by language which will discourage owners from choosing TORCA when the alternative for tenants Will be an Ellis withdrawal? Certainly not the tenants. To solve the "Ellis Coercion" challenge without at the same time causing new problems, I respectfully suggest adding a declaration by the owner in the application and by the tenant intending to purchase in the actual intent to purchase statement. I believe such declarations are sufficiently specific to adVise both applicants and tenants of the seriousness of the issue, Also, experience has shown that bad faith tactics on the part of either tenants or owners of any sort will usually kIll a project long before the application stage. There must be a feeling of good faith or the project will not succeed. I believe the declaration will be a suffiCient deterrent. I believe the incidents of such coercive threats are quite low. As a practIcal matter, threats or Intimidation of any sort -- by owners or tenants -- are extremely counterproductive. TORCA requires a super-majority tenant approval. This is the best deterrent against bad faith tactics. Smtl\fARY . . Mayor and Members of the CIty CouncIl May 15, 1990 Page - 10 The Ellis Act has had an extraordmary impact on this City. Most tenants think that Ellis is a threat but most apartment owners feel that Ellis is theIr only way to regain theIr lost equity. One thing is clear. We cannot escape the market forces which have increased the value of Santa Moruca real estate. Ellis withdrawal adds an additional, harsh dimension to our housmg crisis. I fear that tlus Fall we will see two well financed, terribly contentious campaigns talking about the Ellis Act. Tonight, we are proposing an amendment to the CIty Charter. I belIeve that there is agreement on the basic objective to preserve the integrity of the TORCA Act. I would urge you to do continue the bi-partIsan spirit which has been the hallmark of the TORCA program for the past six years. We must avoid over-reaction as well as under-action. We also must be careful to avoid rushing to a solution which would actually cause more Ellis Act eVIctions. If desired, I am willing to work with you and with staff in an effort to resolve these technical differences while worlang toward a mutual goal of preserving the integnty of this landmark legislation. Very truly yours, ~{'. j)p~ Paul C. DeSantis attachments Icp\h\torlet7 . ., ... ~ . Exhibit A APPENDIX . List of TORC4 conversions approved by Planning Commission where resident ownen were cenified by City as participating tenanls in City-approved Consents to Conditions and CC&.Rs. (No files were found where resident owners were not certified by City as paJticipating tenants.) No. Owner- Tenant Tenant Occupied Agreements Intents TPC# Owner or Addres$ No. l,Jnits Units to C€;mv~rt to Purchase 001 Wilson 4 1 4 4 003* Scaccianoce 6 1 4 4 005* Stanton 4 1 3 3 007 Handin 7 I 6 6 008* Weil 4 1 '3 3 009* Grinshpun 5 5 5 5 011 Gratz 6 1 5 5 013 Bejany 6 1 5 3 020* Yahrous 5 5 5 5 034 Copeland 4 4 4 4 036 Feinstein 4 4 4 4 038 1127 15th 6 1 6 6 041 Doubek 12 1 10 9 042 Kamomick 4 1 3 3 043* Meepos 7 1 5 5 044 Overin 6 I 5 4 045 Doctorow 5 1 5 4 052 1227 Berkeley 6 1 5 4 053 2431 3rd St. 11 1 11 8 059 Pratt 4 1 4 3 061 Chi 7 1 7 7 063 Yahrous 5 5 5 5 067* Erickson 4 1 3 3 076 Lipman 4 1 4 4 083* Gray 5 2 4 4 086 Kanze 6 1 5 5 087* Lamy 7 1 5 5 No. of files with resident owners and Jess than 12 units: 27 * Files where owner's vote was determinative: 9 ~ . . SrATE OF CAUFOR.....'lA CXNI Sir B PACKET INSTRUCTIONS (RE 621, A, and C) RE 621B (Rev 12187) . DEPARTMEl>,-r OF REAr. ESTATE SUBDMSIO-':S RE 621, 62 I A and 62 I C were desIgned for the express purpose of allowmg subdlVlders to postpone the submIttal of a bond (or other secuTIty) to the Department of Real Estate (DRE) m complIance With Section 11018 5(a) of the Busmess and ProfessiOns (B&P) Code untIl after a Fmal PublIc Report has been ISSUed The use of 11115 procedure may result m savmg the substantIal cost of bond premmms The followmg fonns are dIscussed m thIS fonn: RE 6]0 RE 611 RE 611-2 RE 621 RE 621A RE 621 C RE 629 Sample Escrow InstructIons [11018 5(a)(2)(E) Bond For Compleuon of FacllIues Planned Construcuon Statement Escrow InstruchOns r~llOI8.5(a)J Supplemental Instrucuons [~110l8.5(a)J SubdivIder Statement Sample Set-AsIde Letter [~11018.5(a)(2)(E)J Do not use RE 621. 621 A and 62 I C 1f you mtend to use one of the followmg established practIces: SubdiVIders who choose to comply WIth Section 11018 5(a)(2)(B) of the B&P Code, may use tradluonal meth- ods to demonstrate tmanc12.1 arrangements and escrow msttuc- lIOns that compl y with the provISIons of the above code section. SubdIVIders who choose to comply wllh Section l1018.5(a)(2)(A) o{theB&PCode Code prior to obtainmg a Fmal Pubhc Report may furmsh a bond or other secunty along WIth RE 611-2 and the appropriate clause m the escrow mstruc- tions. Include proVISions In the covenants, condmons and restnctions (CC&Rs) that comply WIth CommIssIoner's Regu- latton 2792.4. .:. If the "621 Procedure" 15 chosen the bond or other secunty and RE 62lA and 621C should be furnished at least 45 days prior to the mtended close of escrows in the subdI VISion, 11115 should allow DRE enough time for approval of me secunty amount If you want to obtaIn a Fmal SubdIviSIon Pubhc Report before the common areas and faCllll1es In the SUbdIVISIon are completed and you Intend to close escrows and convey utle to subdIVISIOn mterests pnor to completion of the common areas and facrlitIes, men you should conSider the use of me RE 62], 62lA and 621C III accor- dance With the followmg procedure' Submit a completed, executed, RE 621 as one of the documents when you file your apphcatlOn for your pubhc report InslTuct your attorney to mclude CommISSIOner's RegulatIOn 2792 4 m the project CC&Rs After a Fmal SubdJvislOn PublIc Report has been ISSUed, sales escrows cannot close uotd the project IS completed, free aod clear of hens and encumbrances or untIl you have furnished a bond or other fmanclal secunty, along WIth RE 611.2 and attendant documents, to guarantee compleuon of the common areas and faclliues that remam Incomplete as of the date of submtttal of the bond and RE 611.2 to DRE, In a "cluster" planned development or a condommmm project, the secwity should ordInanly mclude the residenual umts If the common areas are not complete, at least 45 days before the subdIvider intends to close sales escrows, the subdl\'Jder may fUea cOmpleted RE 621A and 621 C, fonnal of the secunty (RE 611 or 629) and a completed RE 611-2 The RE 611-2 must descnbe In detatl the Improvements whose hen-free compleuon is to be guaranteed by bond or other SecurIty. Submit maps, drawmgs, contracts, bIds or other matenals which venfy the adequacy of the secunty amount to complete the remainder of the prOject SubdIviders who use Lellers of Credit m lieu of bonds must use specIal escrow instructions. RE 610 Submn RE 610 With the Letter of CredIt A DRE appraIser wIll mspect the sIte to determine the ade- quacy of the secunty amount proposed for work not yet com- pleted, After approval by the appnnser, RE 621A WIll be executed by a DRE Deputy or Manager and forwarded to the escrow depoSItory. After recelvmg RE 621Aand the security (WIth special escrow mstrucuons, If the secunty is a Lener of Cred1t), the escrow depoSItory wIll: 1) execute RE 621A (and If apphcable, the special escrow mstrUCuons for a Letter of CredIt) 2) forward to the DRE Deputy who IS handlIng the SUbWVl- Slon file, caples of the fully-executed RE 621A, the secu- nty instrument and specIal escrow mstrucuons, If applI- cable: 3) close the open escrows, If otherwIse appropnate. If lins procedure IS selected, we recommend you make your submIttals promptly WIthout long delays between acuons. The longer the delay between the issuance of the final Pubhc Report and the submIttal of the secun ty and the RE 621 A, the greater the posslblhty of a mateflal change .:. If there are matenal changes to the SUbdIVISIOn (see CommISSIOner's Regulation 2800), an Amended SubdiVISIOn PublIc Report must be obtamed ~ ~1<t ' k: ;~-~i ~~~~t .~.. . . . ; ~~~.~ ~ ~ ~ f:.i {YJ~-t~f~_;~~j~. f' ~ ~1-~rt;*;: ~~: 1~ft~.? ~ ~ tl~= ~::r~.;-~= J~ . ~ r :; _\.~". 1 ~ ~ , . ~.-...;~ >, '"' ~ _ .:lI!: i~ i:;.~ ;v~ . STA TE or CALIFORS1A . . DEPART\{E"',OFREAL Es7..TE St. 'BDf\1SlQ'\S ESCROW INSTRUCTIONS [~11018.5(a)] RE 62) (Rev 6/88) In accordance wlm the provIsions of Sectlon ] 1018 5(a} of the Business and ProfCSSlOns (B&P) Code, rc2.sona[\Jc Coumy of arr:mgemems to assure completion of.. (hereaner The $Ubd]VIslOn) meludmg .3ll (Swbdll"SJOII StJrnL or..d Tr~CI or Pared Map ^'unibcr) DRE FIle No Willmon areas and faclllUcs Included In the offenng, (.....a~ of Escrow D~pOSll0ry) (heremafter Escrow DeposltoJY) ]S hereby mSlrucz.ed that no funds receIved by Escrow Depository from or on behalf cf 2 prospective buyer of a lot. parcel. unit or Olher subd]vls]on mterest m The SubdivIsIon shall be disbursed from escrow, ;"lor shall any charge be made agamst the escrow account ofIhe prospecuve buyer by Escrow DepOSllory unless and U....l111 t;1.lc- or other Interest contracted for by the prospecuve buyer - to the lot, parcel, urut or other SUbdIVIsion mterest IS cOu\'e:: ed to the buyer and untIl the appllcable condmons ~pec1fied m paragraph (A) (1) and (2) or m paragraph (B) hereof are rr:Cl (~) (1) A l'ouce of CompletIon as defined m CIVIl Code Sectlon 3093 was recorded for ....a (1) o (Use for non-cluster hOUSing planned development) ,till common facIliues inc1udmg the improvementS on Common Area Lot ~o (s) as listed on RE 624A appended hereto and marked Exhibn A. of Tract (]i) (Use for cluster housmg planned developme.ntS ) o .AJ.l common faCIlil1es includmg the improvements on Common Area Lot No(s), of Tract as listed on RE 624.-\ appended hereto and marked Exhibit A. o and the cluster residential structure(s) which contam(s) the subJ eet lot's 11 vi ng uni t, covenng all lots and unIts In the cluster (List each of the groups of lots wluch comprise a cluster building) (ui) (Usefor COndomlnlwnpro)ects wherem evu)"thzng except the Jlvzng untts IS owned In common {undl'olded interests] by all owners) .AJl common facilities. on Common Area Lot No.(s) appended hereto and marked E'"(}ubIt A, including residential units. o of Tract as listed on RE 6~~A structures contauung a total of (iv) (Use/or condominiwn projectS wherein the land parcelLS conveyed to the homeowners aSSOClanon and the resldentlal buildmg parcels, excepting units, are owned In common [undivided mterests] by all owners of 1Ii- dividual units located within the buildmg.) All common faCilities includmg the Improvements on common Area Lot No(s). as listed on RE 624A appended hereto and marked Exhibit A, o of Tract . . o and the residential structure which contains the subject unit, covering all unItS In lhe struc[Ure (List each of the groups of lots whIch compnse a cluster buildmg ) ASD (2) The statutory period for recording mechamcs lien clalffis against all the improvements descnbed In paragraph (A)( 1) has explTed or, 10 the alternative. buyer wIll receIve a policy of tItle Insurance covering the imereslmal the buyer WIll receive in The SubdIvisIOn and insunng agamst possIble future mechamcs liens that are nOl recorded as of the close of escrow RE 62J e - Pose 2 of2 OR (B) You have accepted a deposit. by or on behalf of the undersigned as subdivider. of a bond. cash deposit or other financial secunty in a fonn and amount acceptable to the Department of Real Estate of the Stale of CalIfornia (hereafter DRE) 10 assure the hen-free completion of all those Improvements which are not completed and paid for as of the date of furnishmg the financIal security to assure completion The estim.iled completion dale of ilie non-resIdential common areas and faclliues is the estimated completion date of the resIdential units in the subdivision is and SUBDIVIDER Evidence of the security (as defined In (B)) to assure completion must be accomparued by RE 621A Supplemental Instructions to Escrow DepoSItory. executed by or on behalf of the undersigned and countersigned by a DRE Deputy or M anagerto signify DRE approval of the form of the Supplemental Escrow Instructions and the amount of the finanCial security to assure completion Slll- nure of SubchVldcr Date >- Prinled :\une of SubdiVider Title Addre5S euy Stau: Zip Code ESCROW DEPOSITORY Escrow Depository acknowledges receipt of an executed copy of these instructions and agrees to carry out the terms thereof. Sli~.lurc Dale >- ucrow Dq>aSUOl)' TItle of SlJnor Address City StaU: ZIp code ST ^ TE OF CA!.IFOR....1A . . DEPARTMENT OF REAL EsT ^ TE SL,l3DIVISIO....S SUPPLEMENTAL INSTRUCTIONS [~11018.5(a)J RE 621A (Rev 6/88) These instructions supplement ongmal escrow mSlrucLlons heretofore furnished to (hereafter Escrow DepoSItory) on RE 621 for the subdlVlslOn (hereafter The SubdiVision) lden- tlfied as County of , Department of Real Estate File No. Subdivider has transmmed herewith to Escrow Depository as trustee, a o Surety Bond o Cash Deposit o Lener of Credit and escrow instructIons as per RE 610 Q Other In the amount of Dollars ($ ). A copy of said secunty or eVidence of said cash deposlt is attached hereto. This secunty IS bemg proVided by subdiVIder pursuant to o Section 11018.5 (a)(2)(A) of the BUSiness and ProfeSSions Code o Section 11018.5 (a)(2)(E) of the Busmess and Professions Code for the purpose of assunng the ben-free completion of the subdivision improvements m The SubdIViSIOn for wluch assurance of lien-free completion is not otherwise provided as of the date of fuffilshmg of tlus security. Any security instrument shall remain in the custody or subject to the comrol of Escrow Depository until the explra- lion of all appllcable lien periods after receIpt of notification by escrow from the homeowners association that all of the common area lII1provements and any cluster building(s) designated in the Planned Construction Statement have been completed to the satisfaction of the homeowners association. SIgnature of SubdtVlder Date ~ Pnnted Name of SulxhVlder Title ..: Address Cuy SLaLe Z1p Code . . Page 20/2 '- RE 621 A DEPARTMENT OF REAL ESTATE Based upon eVidence submmed by subdivider. these supplemental escrow instructions and the fonn and amount of the security instrument referred to above are approved by the Deparunent of Real Estate of the State of California as a reasonable arrangement within the meaning of Secuon 1] 018 Sea) to assure completion of The SubchvislOn and all Improvements for wruch the finanCIal secunty IS provIded. Slgnalure of Deputy ComnusSIOIIc.f Dale ~ Pruned Name of Deputy CcmmUSloner Tille Address City State ESCROW DEPOSITORY Escrow Deposito!')' ACknowledges receipt of an executed copy of these supplemental instrucnons and agrees to cany out the tenns lhereof. SlgrJaWR: of &erg.... Holder Date >-- P~ted Name of Escrow Holder TlIle Address euy State ST A IT OF CAlIFORh'lA . . DEPARTME......-r OF REAL ESTATE Sl.'BOI>1SIOo,,;S SUBDIVIDER STATEMENT r~ 11 018.5(3)] RE 621C (Rev. 12/87) In consideration of lhe use ofRE 621A submitted herewith for the purpose of assunng the lIen~free completion of the Improvements m The SubdIviSIOn Identlfied as County. I hereby cemfy under penalty ofpelJury that 1. As of thIS date, % (percent) of the common facIlities in thIs SUbdiViSIon are now complete. (Include the percentage of residential structures com pleted if reSidential units are hsted on the PI anned Construction Statement Residennal structures are ordinanly included on the Planned Construction Statement in condommmm, Slack cooperative. limited equity housmg cooperative. time share, commuruty apartment or "cluster housing" planned development subdivIsions) , 2 As of date of transmission to escrow deposito!')'. or trustee. of a 0 surety 1:xmd. 0 cash depoSit, 0 letter of credit. o other, e.videnced by the attached copy of completely executed RE 621A. all mechanics and materialmen v. ho have furmshed labor or material which contnbuted to a work of improvement In the subdIvision have been pmd in full, and 3. There are no mechanics' or materialmen's lIens currently fIled against The Subdivision, and 4. Arrangements have been made for buyers in open escrows to receive a policy of title insurance covering the interest that the buyer will receive in The SubdiVision which insures agamst poSSible future mechanics hens which are not recorded as of the close of escrow. I am the owner of the SubdiVIsion descnbed above or I am the agent authonzed by such person to complete thiS state- ment. (If agent, submit written authonzation to act as agent.) Signature of St:lbdlvlder/Agenl Dale >- Pnnu:d Name of SubdiVIder/Agent lille.CaplcJly Address CllY State Zlp Code to ST "TE OF c.....uFoR..~"lA , . . DEPART~El'\T OF REAL ESTATE SUBDIVISIO"\S BOND (Completion o/Common Facilities) RE 611 (Rev. 3/89) Bond Number. PremIUm: $ Know all men by these presents: That we as Principal. and a corporation organized under the laws of the State of busmess of surety In the State of California as Surety. are finnly held and bound unto (Name (Name of Subdnlder) (Name of Sure!)') . and authorized to transact the of Homeowners' ASsoCUlIlon) , (hereinafter referred 10 as OblIgee) in the penal sum of Dollars ($ ) for wluch sum, well and nuly to be paid. we bind ourselves, our hms. adminIstrators. successors and assigns, Jomtly and severally, firmly by these presents, This bond is given pursuant to ~ l1018.5(a)(2)(A) of the California Business and ProfeSSIOns Code 10 assure lien.free completion of the improvementS described in Pnnclpal's "Planned Construction Statement", a copy of which IS anached hereto and incorporated herein by reference, for the SUbdiVision development known as situated in the County of , State of Surety, for value received. hereby agrees that the matters set forth in California Civil Code 93225, or simIlar acts or omissions which might release the Surety pursuant to law. shall not in any way release Surety from the obbgation ofth1s bond or reduce Surety's obligation thereunder. Surety. for value received. does hereby waive the right granted to Surety under CalIfornia Clvll Code g2845 10 reqUIre that Obhgee proceed independently against PrinCipal to enforce this obligation, but reserves to Itself any right under saId ~2845 to require that Obligee proceed jointly aga10st Principal and Surety in any such action. The condltion of this obligation is such that if Principal shall complete or cause 10 be completed said improvements free ofbens and claims on or before the latest completion date specIfied in said "Planned Construction Statem ent", or an extension thereof given in writing by Obligee to Pnncipal and assented to in writing by Surety, then tlus obligation shall be null and VOId; otherwise, it shall remain in full force and effect A suit or action of this bond must be filed within two (2) years after the latest completion date set fOM in the Planned Construction Statement or any extension thereof given 10 wnting by Obligee to Principal an assented to in wnting by Surety. The terms, conditions and coverage of this bond have been approved by the Real Estate Commissioner of the State of California. In Witness Whereof, Principal and Surety have caused these presents to be duly signed and sealed this 19 day of SIgnature of PrlN:l{Jal SlgNJlure of Surety By. By: (. Bond must bear corporate seal of Surety . lfname of state and date of incorporation are speCIfied in sealt Surety' S SIgnature need not bear Notary's acknowledgment. Otherwise, Notary's acknowledgment is required