Bulletin: CA2012001

Dear Associates:

In 2011, the California Legislature passed AB1X26 and AB1X27.  AB1X26 eliminated Redevelopment Agencies. AB1X27 allowed the ‘reconstitution’ of Redevelopment Agencies by making voluntary payments to schools and special districts. A legal challenge was brought (California Redevelopment Association vs. Matosantos) and the California Supreme Court agreed to hear the case on an expedited basis. The Supreme Court filed their opinion on December 29, 2011. 

The Court upheld AB1X26, thereby allowing the dissolution of Redevelopment Agencies. The Court struck down and overturned AB1X27 thereby cutting off the only legislative avenue to reconstitute a Redevelopment Agency. California Redevelopment Agencies are gone, they no longer exist. 

There are hundreds of Redevelopment Agencies in California. Many were at the start of, in the middle, or about to conclude various real estate transactions. Many owe money and many are collecting money.  Neither AB1X26 nor the Court decision were clear on who or what is to become a successor to a Redevelopment Agency, what they have to do to establish themselves as a successor, what documents are necessary to transfer title, and what happens to monies held by or due a Redevelopment Agency. It is expected that there will be more lawsuits and of course, we can expect a variety of plans put forth by cities, counties and law firms regarding their opinions on how to go forward. We are not sure that there is an answer out there in the absence of amending and clarifying legislation. 

Therefore, any proposed real estate transactions involving a Redevelopment Agency are most likely not insurable at this time. Any request for title insurance to be issued in any transaction involving a Redevelopment Agency or any alleged successor to a Redevelopment Agency must be referred to STG Underwriting as soon as you have knowledge that a Redevelopment Agency or Successor is involved in the transaction in any manner or held title to the property subject of the request for insurance any time after January 1, 2011. There will be no local exceptions to this requirement.  
 
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