California MBA’s Legislative Day 2024
Slatt Capital’s COO, Jason Berry, and Principal, Cody Charfauros, were in Sacramento this week for the California Mortgage Banker’s Association’s annual Legislative Day. As a founding member of the commercial real estate arm of the CMBA, Slatt Capital has a long history of advocating for the greater commercial real estate industry in California and at the national level.
With renewed vigor, the CMBA’s legislative team lined up meetings for the day’s participants with key lawmakers and staff to discuss several pressing issues affecting the real estate finance and real estate markets more broadly. Below are just a few legislative issues we are working on with our CMBA partners.
A recurring theme in our meetings was the urgent need to address California’s insurance crisis. We shared that many of our clients are facing a doubling or tripling of insurance costs even outside of fire-prone areas, and obtaining coverage of any kind has become much more difficult for some properties. There are several statutory and political reasons why the crisis has worsened. Specifically, the inability to perform even marginal premium increases (due to Prop 103 requirements), the lack of allowance for disaster modeling on California policies, and the California FAIR plan’s highly punitive requirement that insurers active in the state be liable to backstop a FAIR insolvency (which is becoming more likely as it holds exclusively higher-risk policies) has led insurers and reinsurers to flee the state en masse to avoid bearing the brunt of potential losses.
Without significant and rapid corrections, a large-scale fire event or other natural disaster could leave taxpayers on the hook in an environment where California has depleted its once-stunning surplus. With constant prodding from the CMBA and a broad statewide coalition of stakeholders, this has become perhaps the only fully bipartisan issue in the state, with many lawmakers on both sides of the aisle acknowledging that their own constituents (and in one specific case, one of the members we met with herself) are each suffering needlessly under the current state of insurance.
In September of last year, the governor’s office issued an executive action to prompt the insurance commission to work with the industry to find acceptable solutions rapidly. We’ve heard from many stakeholders that the proposed solutions are very close to acceptance. We are optimistic that the insurance commission will be able to resolve many of the inherent problems and hope they find a way to do so much more quickly.
Another item we focused on is an effort to change the requirements of landlords and limitations of pass-through costs in certain commercial leases. SB1103, as currently amended, would apply many of the disclosure, contract translation, and deposit requirements typically required by statute for leases affecting residential real estate to commercial real estate leases as well. Additionally, the bill seeks to limit certain cost recoveries specific to mom-and-pop type tenants in commercial properties. We see several key issues with this legislation and are currently strongly opposed to it. We are engaging our leasing brokerage partners to weigh in on the draft legislation and are encouraging lawmakers to amend or eliminate problematic or untenable language in the bill.
We are actively monitoring many more proposed legislative changes in the earliest days of this year’s legislative session. A summary of all of the issues currently being tracked is available on CMBA’s website at https://cmba.com/advocacy/
As with all matters, it is incumbent upon everyone with a vested interest to get and stay involved. We are proud to be a resource to our industry partners and lawmakers in Sacramento. If you’d like to support our legislative efforts at the CMBA, please consider donating or sponsoring a foursome at our golf tournament supporting CAMPAC, the California Mortgage Bankers Association’s political action committee. You can find more information and ways to support these efforts on the CMBA’s CAMPAC website at https://cmba.com/campac/
Cody Charfauros
Principal / Managing Director
D: 858.257.2110
codyc@slatt.com