New Legislation Limits Tax Sharing Agreements
California Senate Bill (SB) 533, which was signed into law in October 2015, went into effect on Jan. 1, 2016, and limits local government from executing tax-sharing agreements with certain retailers. The legislation's goal is to prevent local agencies from siphoning each other's sales tax revenues.
The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose a local sales and use tax of up to 1 percent on personal property sold at retail locations in the city and county – or on personal property purchased outside of the city/county if it is for use in that city/county. Given the need for more and more general fund dollars in city and county coffers, local municipalities often compete with each other to attract retailers and thereby increase their sales tax revenues. In the past, that has included enticing retailers with tax-sharing agreements, which effectively return some of the net new sales tax back to the private entities.
Under SB 533, a local agency is prohibited from entering into any form of agreement that would result in the payment, transfer, diversion or rebate of any amount of Bradley-Burns local tax proceeds to any person for any purpose when 1) the agreement results in a reduction in the amount of such proceeds that, in the absence of the agreement, would be received by another local agency, and 2) the retailer continues to maintain a physical presence within the territorial jurisdiction of that other local agency.
Expanded Scope of Anti-Deficiency Protections
The scope of California's anti-deficiency protections have been expanded again. A recent Supreme Court of California case, decided in January of this year, involved a major New York-based bank and considered whether certain statutory restrictions prohibiting a lender's right to obtain a deficiency following a foreclosure also apply to a short sale.
The plaintiff borrowed money from the bank in order to buy her home and secured the loan with a deed of trust on the property. The borrower failed to make the loan payments, and the bank sent her a "notice of default and election to sell." While the bank was pursuing foreclosure, the borrower asked whether the bank would agree to release its deed of trust so that she could sell the property to a third party for an amount less than the outstanding debt (i.e., a short sale). The bank agreed to the sale provided that the borrower satisfied various conditions, including that all proceeds from the sale be remitted to the bank; however, the bank's approval also stated that the amount that the borrower was required to pay to the bank was solely for the bank’s release of the deed of trust and that the borrower would remain liable for any deficiency to the extent provided in the loan documents.
The borrower sold the property and remitted all of the proceeds, which were less than the amount owing, to the bank. The bank subsequently demanded that the borrower pay the deficiency. In response, the borrower brought an action for declaratory relief, claiming that the bank was barred from obtaining a deficiency as a result of California Code of Civil Procedure Section 580b.
Originally enacted in 1933, 580b has been widely interpreted to prohibit a creditor from obtaining a deficiency against a borrower following any foreclosure (judicial or non-judicial) if the proceeds of the loan were used by the borrower to acquire his or her residence. Prior to the aforementioned case, no court had considered whether 580b applied to short sales. In evaluating the matter, the court looked at previous judicial interpretations of the statute as well as the policy underlying the statute. The court held that 580b applies to short sales, holding that the statute was based both on its conclusion that applying it to short sales was consistent with the policy underlying the statute, as well as its determination that the subject transaction was a standard purchase money loan, and that 580b automatically applies to any standard purchase money loan.
New 2016 Standards for ALTA/NSPS Land Title Surveys
In October 2015, the American Land Title Association (ALTA) and the National Society of Professional Surveyors (NSPS) approved the new 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys. These standards have been used to set the minimum performance level for surveys used by title insurance companies for the purpose of insuring title to real property free and clear of survey matters (except those matters disclosed by such surveys).
The new 2016 standards will become effective Feb. 23. ALTA and NSPS, the legal successor to the American Congress on Surveying and Mapping (ACSM), established these revisions to the existing 2011 standards in order to clarify the existing standards for surveyors and to minimize questions and ambiguities that had been raised among surveyors, title companies and survey clients.
Most notably, the title of the standards has changed from "ALTA/ACSM" to "ALTA/NSPS" and all references have been revised throughout the standards and survey certification. Other notable revisions in the 2016 standards include, but are not limited to:
- In an effort to eliminate any confusion as to whether the surveyor needs to locate evidence of utilities, surveyors are now required to include evidence on or above the surface of the property, which evidence may indicate utilities on, over or beneath the surveyed property. Accordingly, the 2011 Table A Item 11(a) (i.e., observed evidence of the location of utilities) has been removed from the list of Optional Survey Responsibilities and Specifications.
- Plat or Map
- Except in the case of an original survey, if a new legal description has been prepared, a note shall be provided stating (a) that the new description describes the same property as the record description, or, if it does not (b) how the new description differs from the record description.
- Optional Table A Items
- If the client requests Item 6(b), the surveyor shall graphically depict zoning setback requirements as set forth in the zoning report or letter, but if the application of such setbacks requires interpretation by the surveyor, the surveyor may not be able to comply with this item.
- "Observed evidence of site use as a solid waste dump, sump or sanitary landfill" has been deleted from the 2011 Item 18, as this is generally considered a matter to be addressed in the Phase One Environmental Assessments. However, Item 8 has been revised accordingly to include "substantial areas of refuse" as a possible observed substantial feature, which may be graphically depicted.
- The existing Table Item 19 ("Location of wetland areas as delineated by appropriate authorities") has been deleted and restated in Item 18 to provide that the surveyor shall locate wetlands only if there has been a separate field delineation of wetlands conducted by a qualified specialist.