Update on SB-50; Federal Public Land Conveyed In California

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By Barbara Pronin

Effective on January 1, 2018, California adopted a law, SB-50, prohibiting the federal government from conveying public lands in California to another party or entity without first offering to convey the land to the State Lands Commission.

Essentially establishing a first right of refusal, the new law was intended to discourage conveyances of private federal lands to private developers for resource extraction. Under the law, most conveyances of federal lands in the state are invalid from the outset unless the State Lands Commission provides a certificate indicating compliance with the new statutes, and any person who presents for recording a document conveying federal interests in land without the certificate of compliance from the State Lands Commission may be liable for civil penalties.

In April of this year, the federal government filed a lawsuit against the State of California challenging SB-50. The federal complaint claims that SB 50 has been interfering with routine property transactions by the federal government in California. It raises two legal claims: One, SB- 50 violates the federal constitution by improperly imposing state regulation on the federal government (an “intergovernmental immunity” claim), and two, that SB-50 is preempted by the Property Clause of the federal constitution (which gives Congress the power to dispose and/or issue rules and regulations for federal lands) and various federal land disposal statutes.

While we’ll have to wait for the outcome in the courts, for the moment, however, the underwriting guidelines are as follows:

Underwriting Department approval is required to close any conveyance or transaction involving a federal interest in real property. This requirement includes fee transfers, leases and exchanges.
Exception: Since the statute provides an exemption for the sale of property acquired through foreclosure underwriting approval is not required for sale of residential property following foreclosure. (Note: this exception does not apply to deeds in lieu of foreclosure.)

Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.

This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice. The material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy.

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