Government Code section 54237
(a)
Notwithstanding Section 11011.1, an agency of the state disposing of surplus residential property shall do so in accordance with the following priorities and procedures:(1)
First, all single-family residences presently occupied by their former owners shall be offered to those former owners at the appraised condition-adjusted price of the fair market value.(2)
Second, all single-family residences shall be offered, pursuant to this article, to their present occupants who have occupied the property for two years or more and who are persons and families of low or moderate income.(3)
Third, all single-family residences shall be offered, pursuant to this article, to their present occupants who have occupied the property for five years or more and whose household income does not exceed 150 percent of the area median income.(4)
Fourth, a single-family residence shall not be offered, pursuant to this article, to present occupants who are not the former owners of the property if the present occupants have had an ownership interest in real property in the last three years.(b)
(1)Single-family residences offered to their present occupants pursuant to paragraphs (2) and (3) of subdivision (a) shall be offered to those present occupants at an affordable price. The price shall not be less than the price paid by the agency for original acquisition, unless the acquisition price was greater than the current fair market value, and shall not be greater than the fair market value. If the affordable price is calculated to be less than the price paid by the agency for original acquisition, the residence shall be offered at the original acquisition price to the present occupants. When a single-family residence is offered to present occupants at a price that is less than fair market pursuant to paragraph (2) or (3) of subdivision (a), the selling agency shall impose terms, conditions, and restrictions to ensure that the housing will remain available to persons and families of low or moderate income and households with incomes no greater than the incomes of the present occupants in proportion to the area median income. The Department of Housing and Community Development shall provide to the selling agency recommendations of standards and criteria for these prices, terms, conditions, and restrictions. The selling agency shall provide repairs required by lenders and government housing assistance programs, or, at the option of the agency, provide the present occupants with a replacement dwelling pursuant to Section 54237.5. If the present occupants pursuant to paragraphs (2) and (3) of subdivision (a) desire to purchase the single-family residences at fair market value or are offered the single-family residences at fair market value by the agency of the state disposing of surplus residential property, the price shall not be greater than the condition-adjusted price of the fair market value. In that case, the selling agency shall not be required to provide repairs, including repairs required by lenders and government housing assistance programs.(2)
A present occupant or present tenant purchasing a single-family residence at an affordable price or condition-adjusted price of the fair market value may receive purchase assistance pursuant to this paragraph if the purchaser is unable to obtain primary financing sufficient to complete the purchase.(A)
The purchase assistance shall consist of a deferred-payment subordinate loan secured by a deed of trust in a position junior to the purchaser’s primary financing.(B)
For a residence purchased at an affordable price, the principal amount of the subordinate loan shall not exceed the difference between the affordable price and the condition-adjusted price of the fair market value.(C)
For a residence purchased at the condition-adjusted price of the fair market value, the principal amount of the subordinate loan shall not exceed the lesser of the following:(i)
The amount reasonably necessary for the purchaser to qualify for and close the primary financing, as documented by the purchaser’s lender.(ii)
Twenty-five percent of the condition-adjusted fair market value of the property.(D)
The subordinate loan shall not require periodic payments or provide the department with any share of appreciation. On each anniversary of the close of escrow, the outstanding principal shall be adjusted by the lesser of the following:(i)
The annual percentage increase, if any, in the Consumer Price Index for All Urban Consumers for the Los Angeles-Long Beach-Anaheim metropolitan area, as published by the United States Bureau of Labor Statistics.(ii)
Three percent.(E)
The outstanding principal shall not be reduced if the index described in clause (i) of subparagraph (D) is negative.(i)
Sale or transfer of the property, other than a transfer permitted by the department.(ii)
A cash-out refinancing of the primary financing.(iv)
Forty-five years after the close of escrow.(F)
The department shall agree to subordinate its deed of trust to a bona fide rate-and-term refinancing that does not provide cash proceeds to the purchaser, except for customary closing costs, and does not extend beyond the maturity of the subordinate loan.(G)
The purchaser may repay all or any portion of the subordinate loan without penalty.(H)
Amounts repaid pursuant to this paragraph constitute deferred proceeds from the department’s sale of the property and shall be deposited to the Affordable Housing Trust Account pursuant to subdivision (b) of Section 54237.7.(c)
If single-family residences are offered to their present occupants pursuant to paragraphs (2) and (3) of subdivision (a), the occupants shall certify their income and assets to the selling agency. When a single-family residence is offered to present occupants at a price that is less than the fair market value, the selling agency may verify the certifications, in accordance with procedures used for verification of incomes of purchasers and occupants of housing financed by the California Housing Finance Agency and with regulations adopted for the verification of assets by the United States Department of Housing and Urban Development. The income and asset limitations and term of residency requirements of paragraphs (2) and (3) of subdivision (a) shall not apply to sales that are described as mitigation measures in an environmental study prepared pursuant to the Public Resources Code, if the study was initiated before this measure was enacted, and shall not apply to present occupants, in order to avoid displacement.(d)
(1)Except as otherwise provided in paragraph (2), all other surplus residential properties and all properties described in paragraphs (1), (2), and (3) of subdivision (a) that are not purchased by the former owners or the present occupants shall be then offered as follows:(A)
Except as required by subparagraph (B), the property shall be offered to a housing-related private or public entity at a reasonable price, which is best suited to economically feasible use of the property as decent, safe, and sanitary housing at affordable rents and affordable prices for persons and families of low or moderate income, on the condition that the purchasing entity shall cause the property to be rehabilitated and used as follows:(i)
If the housing-related entity is a public entity, the entity shall dedicate profits realized from a subsequent sale, as specified in subdivision (b) of Section 54237.7, to the construction of affordable housing within the Cities of Pasadena, South Pasadena, Alhambra, La Cañada Flintridge, and the 90032 postal ZIP Code.(ii)
If the entity is a private housing-related entity or a housing-related public entity, the entity shall cause the property to be developed as limited equity cooperative housing with first right of occupancy to present occupants, except that where the development of cooperative or cooperatives is not feasible, the purchasing entity shall cause the property to be used for low- and moderate-income rental or owner-occupied housing, with first right of occupancy to the present tenants. The price of the property in no case shall be less than the price paid by the entity for original acquisition unless the acquisition price was greater than current fair market value and shall not be greater than fair market value. Subject to the foregoing, it shall be set at the level necessary to provide housing at affordable rents and affordable prices for present tenants and persons and families of low or moderate income. When residential property is offered at a price that is less than fair market value, the selling agency shall impose terms, conditions, and restrictions that will ensure that the housing will remain available to persons and families of low or moderate income. The Department of Housing and Community Development shall provide to the selling agency recommendations of standards and criteria for prices, terms, conditions, and restrictions.(B)
(i)If the property is a historic home, the property shall be offered first to a housing-related public entity subject to clause (i) or (ii) of subparagraph (A) or to a nonprofit private entity dedicated to rehabilitating and maintaining the historic home for public and community access and use subject to clause (ii) of subparagraph (A).(ii)
For purposes of this subdivision, “historic home” means single-family surplus residential property that is listed on, or for which an application has been filed for listing on, at least one of the following by January 1, 2015:(I)
The California Register of Historical Resources, as established pursuant to Article 2 (commencing with Section 5020) of Chapter 1 of Division 5 of the Public Resources Code.(II)
The National Register of Historic Places, as established pursuant to Chapter 3021 of Title 54 of the United States Code.(2)
This subdivision shall not apply to properties offered for sale pursuant to Section 54239.1, 54239.5, or 54239.6.(e)
A surplus residential property not sold pursuant to subdivisions (a) to (d), inclusive, or Section 54239.1, 54239.5, or 54239.6, as applicable, shall then be sold at condition-adjusted fair market value, with priority given first to purchasers who are present tenants in good standing with all rent obligations current and paid in full, and second to former tenants who were in good standing at the time they vacated the premises, with priority given to the most recent tenants first. Next priority shall be given to purchasers who will be owner-occupants, except that in such case, the surplus residential property shall be sold at fair market value. The selling agency shall not be required to provide repairs, including repairs required by lenders and government housing assistance programs, for surplus residential property sold at condition-adjusted fair market value.(1)
A tenant purchasing pursuant to this subdivision may receive a subordinate loan pursuant to paragraph (2) of subdivision (b).(2)
The selling agency may commence the sale of property that former tenants may possess a right to purchase as provided by this subdivision 30 days after the selling agency has done both of the following:(A)
Posted information regarding the sale under this subdivision on the selling agency’s internet website.(B)
Made a good faith effort to provide written notice, by first-class mail, to the last known address of each former tenant.(f)
(1)Tenants in good standing of nonresidential properties shall be given priority to purchase, at fair market value, the property they rent, lease, or otherwise legally occupy.(2)
(A)A tenant in good standing of a nonresidential property shall be given priority to purchase, at the lesser of fair market value or value in use, if the tenant is a city or a nonprofit organization qualified as exempt under Section 501(c)(3) of the Internal Revenue Code.(B)
The Department of Transportation shall not sell a nonresidential property to a tenant described in subparagraph (A) at a value below the minimum sales price, as defined by Section 1476 of Title 21 of the California Code of Regulations as that regulation read on July 1, 2019.(C)
If a nonresidential property is offered at a price that is less than fair market value, the selling agency shall impose appropriate terms, conditions, and restrictions.(D)
As used in this paragraph, “value in use” means the value of a nonresidential property assuming a specific use, that may or may not be the property’s highest and best use on the effective date of the property’s appraisal.
Source:
Section 54237, https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=GOV§ionNum=54237. (updated Sep. 30, 2026; accessed Oct. 5, 2026).
