BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Joseph L. Dunn, Chair
2005-2006 Regular Session
AB 394 A
Assembly Member Niello B
As Amended June 20, 2005
Hearing Date: July 12, 2005 3
Government Code 9
AMT:rm 4
SUBJECT
Housing: Unlawfully Restrictive Covenants
DESCRIPTION
This bill would rework an existing process for deleting
unlawfully restrictive covenants from the governing
documents for real property. It would make the
modification process easier for property owners by
permitting county recorders to waive fees, and by arranging
for county counsel to review the legality of proposed
modifications without requiring property owners to
separately seek out the legal determination. The bill
would also establish that one property owner may modify a
restrictive covenant located in covenants, conditions, and
restrictions (CC&Rs) for an entire subdivision, making it
so that each owner in the subdivision would not have to
make a separate application.
(This analysis reflects author's amendments to be offered
in committee.)
BACKGROUND
A recent news report reflects that many Sacramento County
homes are currently subject to CC&Rs which require that
ownership of the homes "be restricted to persons of the
Caucasian Race forever." Racially restrictive covenants
were declared unconstitutional by the Supreme Court in
1948, and restrictive covenants that discriminate against
other protected groups are also unlawful under state and
(more)
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federal law. [See Hurd v. Hodge (1948) 334 U.S. 24; Cal.
Gov. Code 12955.] Although such restrictive covenants
are clearly unlawful and unenforceable, some of the
documents which contain the offensive language in
Sacramento County date back to the 1940s and 1950s. The
restrictive language remains in those documents simply
because no action has been taken to delete the language.
Now is not the first time the question of modifying
unlawfully restrictive covenants has been considered by
this Legislature. In 1999, a news report revealed that a
San Francisco resident had found a racially restrictive
covenant in the declaration that governed his home and
other homes in his subdivision. SB 1148 (Burton), Ch. 589,
Stats. of 1999, responded by establishing that a homeowner
could ask a county recorder to remove a "blatant racial
restrictive covenant" from any recorded document related to
a property. After SB 1148's enactment, county recorders
contended that it was inappropriate for them to make the
legal determination whether restrictive covenants were
lawful. AB 1493 (Nakano), Ch. 291, Stats. of 2000,
therefore amended the law to require a person to apply for
a determination from the Department of Fair Employment and
Housing (DFEH) whether a covenant was unlawful before
recording a modification to delete that covenant.
The process was modified again in AB 1926 (Horton), Ch.
803, Stats. of 2002, to make the process "easier" on
homeowners by permitting them to ask the county recorder to
record a modification document, without first obtaining a
DFEH determination whether the covenant was unlawful.
Recorders were given discretion to either record the
modification or to refer the applicant to the DFEH. The
author's staff asserts that recorders chose in every
instance to refer petitioners to the DFEH for a legal
determination, rather than taking advantage of their
statutory authority to record modifications for obviously
unlawful covenants. The author's staff also asserts that
DFEH never established a policy for efficiently dealing
with such applications, since those applications are seldom
made.
This bill would modify the process to make the removal of
unlawfully restrictive covenants less burdensome on
property owners, while maintaining necessary protections to
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ensure that documents are not modified inappropriately.
CHANGES TO EXISTING LAW
Existing law declares that it is unlawful to use a
restrictive covenant to discriminate on the basis of race,
color, religion, sex, sexual orientation, familial status,
marital status, disability, national origin, source of
income, or ancestry. [Gov. Code 12955(l).]
Existing law requires a notice to be attached to copies of
deeds and other documents, which states:
If this document contains any restriction based
on race, color, religion, sex, familial status,
marital status, disability, national origin, or
ancestry, that restriction violates state and
federal fair housing laws and is void, and may be
removed pursuant to Section 12956.1 of the
Government Code. Lawful restrictions under state
and federal law on the age of occupants in senior
housing or housing for older persons shall not be
construed as restrictions based on familial
status. [Gov. Code 12956.1(b)(1).]
Existing law permits a person with an ownership interest in
property to submit for recordation with the county recorder
a document that strikes out what he or she believes is an
unlawfully restrictive covenant. [Gov. Code
12956.1(g)(1).] The county recorder may either record the
document or refer the person seeking the modification to
DFEH for a determination whether the covenant is unlawful.
[Gov. Code 12956.1(g)(2).] If the DFEH determines that
the document contains a restrictive covenant, the applicant
may record the DFEH determination along with a document
striking out the restrictive covenant. [Gov. Code
12956.1(c)(2), (3).]
This bill would provide that a person may seek to record a
Restrictive Covenant Modification document if he or she
believes the property is subject to an unlawfully
restrictive covenant. Before the county recorder could
record the document, this bill would require the county
recorder to submit that document and the original document
containing the restrictive covenant language to county
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counsel for a determination whether the original document
contains an unlawful restriction based on race, color,
religion, sex, sexual orientation, familial status, marital
status, disability, national origin, source of income as
defined in subdivision (p) of Section 12955, or ancestry.
County counsel would inform the recorder whether the
restrictive language is an unlawful covenant, and if it is
not, the county recorder would refuse to record the
modification document.
This bill would require a recorded modification document to
be "indexed in the same manner as the original document
being modified." It would also establish that the
restrictions in the modification document, once recorded,
are the only restrictions having effect on the property.
This bill would establish that the county recorder is not
liable if a property owner causes a modified document to be
recorded pursuant to this section if that document contains
modifications not authorized by this section. Liability
would be the "sole responsibility" of the property owner
who caused the recordation.
COMMENT
1.Stated need for the bill
a) Making the modification process less burdensome on
applicants
The bill would rework a statutory scheme under which a
person may currently seek to strike out unlawfully
restrictive language by recording a modification with
a county recorder. Under the existing scheme, the
recorder may refuse a modification request and instead
refer the person to DFEH for a determination whether
the request is lawful. A DFEH determination may take
up to 90 days to issue. Once DFEH has issued its
determination, the person seeking the modification
must then return to the county recorder with the
DFEH's written finding before the county recorder will
record the requested modification.
Under the process proposed in this bill, the person
seeking the modification would make only one trip to
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the county recorder to request the modification. The
county recorder would then submit the proposed
modification to county counsel for review, and county
counsel would inform the recorder whether the document
contains an unlawfully restrictive covenant. If the
document did not to contain an unlawfully restrictive
covenant, the recorder would refuse to record the
proposed modification. Otherwise, the modification
document would be recorded.
b) Fee waiver
The bill's sponsor, the Sacramento County Board of
Supervisors, states that the current process for
removing unlawfully restrictive covenant language from
documents "is not only cumbersome, but the homeowner
bears the cost through recording fees." The
Sacramento Bee reports that the current process for
deleting an unlawfully restrictive covenant is as
follows:
A homeowner who wants to remove the language
must buy a certified copy of the entire CC&Rs -
not just the racist clause - at a cost of $11
for the first page and $1 for each additional
page. After homeowners cross out the
illegal language, they must re-record the
amended document at an additional cost of $9
for the first page and $3 for every other page.
CC&Rs can run as long as 50 pages.
This bill permits a county recorder to waive the fee
prescribed for recording and indexing modification
documents, but does not make the waiver mandatory.
According to the author's staff, a representative of
the County Counsel Association has verified that
county counsel would not be empowered to charge a fee
to applicants for the legal determination contemplated
in this bill.
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c) Application of modification to CC&Rs for entire
subdivision
Supporter Arden Park Home Owners Association notes
that it was dismayed when it recently discovered that
each of the 1,900 property owners in that neighborhood
would have to come forward individually in order to
remove the racially restrictive provisions contained
in the governing CC&Rs.
The author states:
AB 394 will eliminate the need for all the
homeowners in a subdivision governed by common
CC&Rs to travel to the county recorder's office
to remove [unlawful] language. Instead, ? AB
394 will allow county recorders to update the
master document for a particular subdivision at
the request of a single representative
homeowner.
The modification of the "master document" is
accomplished by the bill's added requirement that a
modification document to be "indexed in the same
manner as the original document being modified." If
the unlawful language is in the CC&Rs for a
subdivision, the recording of one modification
document would amend the CC&Rs themselves and become
applicable to all homes governed by those CC&Rs.
1.Opposition argument regarding "priority of recording"
Community Associations Institute (CAI), which has an
"oppose unless amended" position, argues that there may
be unintended consequences to the requirement that the
restrictions contained in a modification document become
"the only restrictions having effect on the property."
CAI states it is concerned that this language would
apparently give the modification document new "priority"
based on the new date of recordation. CAI speculates
that this new priority could undermine existing ownership
interests, or could make the lawful terms of the original
document unenforceable.
The author's staff states that the language at issue is
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necessary to ensure that the modification document takes
effect. County recorders have informed the author's
staff that a governing document that does not contain
such language may be invalid or unenforceable.
In order to address CAI's concerns that this language
could be interpreted to assign a new date of priority for
the original document (which could affect property rights
in various ways), the author has agreed to an author's
amendment to add a "relation-back" clause to ensure that
the recordation date of the original document is the
operative priority date for the new document. (See
Comment 6(h).]
2.Other CAI opposition argument
CAI also argues that it could potentially infringe on the
property rights and contracting rights of other
homeowners if one homeowner is able to remove an
unlawfully restrictive covenant from the CC&Rs applicable
to all of the houses in a subdivision. It is unclear
what property or contract right would entitle a person to
maintain an unlawful, unenforceable restrictive covenant
in the CC&Rs governing his or her home.
3.Clarification of county recorder's ability to refuse to
record a modification
A representative of the Assessor/Recorder/County Clerk
for San Diego County notes that the bill does not
expressly permit a county clerk to refuse to record a
modification document if a county counsel determines that
the language sought to be modified is lawful. The
representative notes that a county recorder may not
refuse to record a document "on the basis of its lack of
legal sufficiency" if a statute authorizes or requires
the document to be recorded. [Gov. Code 27201(a).] In
order to clarify that a county recorder is not required
by statute to record a modification document when the
language sought to be modified is determined to be
lawful, the author has agreed to an author's amendment to
require a county recorder to refuse to record a
modification document if county counsel finds that the
language sought to be modified is lawful. [See Comment
6(f).]
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4.Inclusion of "source of income" restrictions as a basis
for relief under the bill
Section 12955(l) of the Government Code provides that it
is unlawful to discriminate in a restrictive covenant
against a person on the basis of several factors,
including "source of income." This bill adopts those
prohibitions, specifying that a person with an ownership
interest in a property may record a modification document
if he or she believes the property is subject to an
unlawfully restrictive covenant in violation of that
statute.
However, the author has excluded restrictions based on
"source of income" from the factors county counsel must
consider in determining whether a document contains an
unlawfully restrictive covenant, and from the statutory
notice that details what unlawfully restrictive language
may justify relief under this statute. The author's
staff indicates that this exclusion was made at the
request of the California Association of Realtors (CAR).
CAR argued that certain "source of income" restrictions
are lawful, and that the determination of whether source
of income restrictions are lawful is not as clear as with
other restrictions addressed in the statute.
Committee staff suggested that a less extreme solution
would be to clarify in the language of the bill which
"source of income" restrictions are lawful or unlawful,
and the author put the bill over for a week to work on
language to that effect. Following discussions with CAR
and the Western Center on Law & Poverty, the author has
agreed to an author's amendment to clarify that the
"source of income" restrictions referenced in the bill
are limited to those restrictions described in Section
12955 of the Government Code, i.e., restrictions on the
"lawful, verifiable income paid directly to a tenant or
paid to a representative of a tenant." (See Comment
6(a), (e).]
5.Author's amendments
The author's staff indicates he will accept these
amendments in committee.
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a) On page 3, line 14, after the second comma insert:
source of income as defined in subdivision (p) of
Section 12955 of the Government Code,
b) On page 4, line 14, strike "illegal language with
the illegal" and insert:
unlawfully restrictive language with the unlawfully
restrictive
c) On page 4, line 14, after "stricken" insert a
period, and strike line 15.
d) On page 4, line 19, strike "illegal" and insert:
unlawful
e) On page 4, line 21, after "origin" insert:
, source of income as defined in subdivision (p) of
Section 12955
f) On page 4, line 23, after the period insert:
The county recorder shall refuse to record the
modification document if the county counsel finds that
the original document does not contain an unlawful
restriction, as specified in this paragraph.
g) On page 4, line 32, strike "illegal" and insert:
unlawfully restrictive
h) On page 4, line 36, after the period insert:
The effective date of the terms and conditions of the
modification document shall be the same as the
effective date of the original document.
i) On page 5, line 15, strike "1352.2" and insert:
1352.5
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Support: American Federation of State, County and
Municipal Employees (AFSCME), AFL-CIO; Arden Park
Homeowners Association; California State Association
of Counties; JERICO; Western Center on Law & Poverty
Opposition: Community Associations Institute
HISTORY
Source: Sacramento County Board of Supervisors
Related Pending Legislation: None Known
Prior Legislation: SB 1148 (Burton), Ch. 589, Stats. of
1999, permitted a person with any interest in
property to require a county recorder to
remove a racially restrictive covenant from
any recorded document associated with the
property.
AB 1493 (Nakano), Ch. 291, Stats. of 2000,
modified the process from SB 1148 (Burton,
1999), permitting a person with an ownership
interest in a property to file an application
with the DFEH for a determination whether a
restrictive covenant violates fair housing
laws and is void; the DFEH could then prepare
a covenant modification document, which the
person could then record with the county
recorder.
AB 1926 (Horton), Ch. 803, Stats. of 2002,
modified the process from AB 1493 (Nakano,
2000), permitting a person with an ownership
interest to request that the county recorder
record a modified document to strike out
unlawfully restrictive covenant language; the
recorder could record the document or refer
the person to the DFEH, where the person
would file an application seeking a
determination whether the restrictive
covenant violates fair housing laws and is
void.
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Prior Vote: Assembly Floor: 73 - 0
Assembly Appropriations Committee: 18 - 0
Assembly Judiciary Committee: 9 - 0
Assembly Housing & Community Development
Committee: 7 - 0
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