Below are are a summary of new laws that that took effect on January 1, 2015 and passed by the California Legislature. Many different groups work every year to sponsor or directly implement new laws that aid in the progress of California real estate business, most notably the California Association of Realtors.
The law requires commercial real estate brokers to disclose to clients at the outset of their working relationship whether they represent the seller/landlord, the buyer/tenant, or both in any real estate transaction. These are the three classifications:
- Agent represents only the landlord/seller;
- Agent represents only the tenant/buyer;
- Dual Agency: Agent represents both the landlord/seller and the tenant/buyer.
This law was pioneered by Hughes Marino President & CEO, Jason Hughes
Agency Disclosure Requirement Expanded
Civil Code, Section 2079.13
The new law extends agency disclosure requirements to include transactions for the sale of commercial real property, and to the lease for more than one year of commercial real property. The new law defines commercial property to include vacant land, industrial property or any residential property containing more than four dwelling units.
Document Bundling Prohibited by HOAs. Sellers Must Pay HOA Fees
Civil Code Sections 4528 and 4530
The law requires that the fees for the HOA mandated disclosures must be individually itemized for each document, and that the fees for all mandated disclosures must be separately stated and separately billed from all other fees, fines or assessments. Only statutorily mandated disclosures may appear on the statutory form.
Procedurally, once a written request for the mandated disclosures is made, the HOA must estimate the cost of the mandated disclosures prior to processing the request. Where there is no “hard copy” delivery of documents, the HOA may not charge an additional fee for electronic delivery in lieu of a hard copy.
This new law also states that a seller will be required to provide a prospective purchaser with all mandated common interest development disclosures in the seller’s possession, free of charge. If a seller confirms in writing that the document they are providing is a current document, then the HOA may not bill for it. An HOA may collect a reasonable fee based on the HOA’s actual cost for the procurement, preparation, reproduction, and delivery of the mandated disclosures, but only from the seller. It is the responsibility of the seller to pay the HOA, person or entity that provides the mandated disclosures.
Documentary Transfer Tax — Purchase Price Cannot Be Kept Secret
Revenue and Tax Code, Section 11932 and 11933
This law requires that every document subject to the documentary transfer tax must show on its face the amount of the tax due when submitted to the County.
Business and Professions Code, Section 10148 and also at Civil Code, Section 1624
Professionals will not need to retain as part of their permanent record of a transaction “electronic messages of an ‘ephemeral nature’ such as text messages, instant messages and tweets. The law does not clearly exclude emails from record retention.
Solar Energy Property Tax Exclusion Extended
Section 73 of the California Revenue and Taxation Code
Extends a solar tax exemption for new active solar energy systems installed until 2025. The old law was set to expire in 2017, bars property tax increases based upon the construction or addition of a solar system
Tax Exclusions For Mortgage Debt Forgiveness
Revenue and Taxation Code 17144
This law extends California’s exclusions of taxation of mortgage debt forgiveness for qualified principal residence indebtedness in partial conformity with the federal Mortgage Forgiveness Debt Relief Act of 2007. Qualified principal residence indebtedness is limited to $800,000 ($400,000 for taxpayers filing separately). Forgiven debt will not be treated as cancellation of debt income, but will instead be capital gains. Taxpayers may exclude from capital gains up to $500,000 ($250,000 for taxpayers filing separate) of qualified mortgage debt forgiven.
Landlords and Tenants May Agree To Use Email Regarding Security Deposits
Civil Code 1633.3.
New landlord/tenant law permits landlords, professional property managers and tenants to agree to the use of emails for some notices and agreements regarding security deposits. The new law includes the Notice of Right to Inspection Prior to Termination of Tenancy.
This law facilitates the seller’s/borrower’s request to suspend the HELOC by creating a form for the seller/borrower to sign in escrow, the ultimate purpose being to avoid the mistake of drawing upon a HELOC during the escrow or immediately following the sale of the house.
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