| 1.
Natural Hazard Disclosure Reports
Existing law requires sellers and listing agents to
investigate and disclose if the property being sold
is located in a special flood hazard area, an area of
potential flooding, an earthquake fault zone, a seismic
hazard zone, a wildland area with forest fire risks
or a very high fire severity zone. Sellers also have
an obligation to disclose if the property is in a Mello
Roos Tax District or 1915 Act Assessment District. Civil
Code Section 1103 provides that sellers and listing
agents can transfer their responsibility to make these
disclosures to a third party, and when this responsibility
is transferred all of the liability is also transferred.
The statute also states that sellers and agents must
use good faith in selecting a third party report provider,
and good faith is defined as “honesty in fact
in the conduct of the transaction”.
The required disclosures are made on a statutory document
known as the Natural Hazard Disclosure Statement. A
recent statute (AB 920) has slightly modified this Natural
Hazard Disclosure Statement law. First, it is now clear
that when a third party company provides a natural hazard
disclosure report it must include the statutory Natural
Hazard Disclosure Statement exactly as it is reproduced
in the Civil Code. Second, the format of the Statement
has changed slightly; there are now two signature lines
for transferors, and below the signature of the transferors
and the listing agent there are now two checkboxes,
one of which should always be checked. Most will probably
check the second box, which indicates that “transferors
and their agents acknowledge that they have exercised
good faith in the selection of a third party report
provider as required in Civil Code Section 1103.7, and
that the representations made in this Natural Hazard
Disclosure Statement are based upon information provided
by the independent disclosure provider as a substituted
disclosure pursuant to Civil Code Section 1103.4.
Neither transferor nor their agents: 1) has independently
verified the information contained in this statement
or report or 2) is personally aware of any errors or
inaccuracies in the information contained on the statement.
This statement is provided by the provider below”.
Below this statement the third party disclosure provider
now signs. The form also recites that the representations
made on the Natural Hazard Disclosure Statement do not
constitute all of the transferors’ or agent’s
disclosure obligations in this transaction (of course,
other disclosures are required, such as the Transfer
Disclosure Statement).
2. Industrial Use Zone Disclosure
In transactions involving one to four units, existing
law mandates that sellers disclose if the property for
sale is “located in” an industrial use zone,
which is defined as a zone allowing an airport, manufacturing
or commercial facility. Existing law also mandates that
sellers disclose if the property is “affected”
by such a zone. AB 920 has changed this law. Beginning
in 2005 sellers will instead be required to disclose
if the property is “located in or adjacent to”
an industrial use zone. In addition, instead of being
asked to disclose if the property is “affected”
by an industrial use zone the new law requires sellers
to disclose if the property is “affected by a
nuisance created by” an industrial use zone.
3. Privacy Notices
Effective July 1, 2004, AB 68 requires operators of
commercial websites or online services who collect personally
identifiable information from California residents on
a website or online service to post its privacy policy
on its website or online service and to comply with
that policy. This law also requires that the policy
identify the categories of personally identifiable information
that the operator collects from individual consumers
who visit the website or online service, and identify
third parties with whom they cooperate or may share
the information.
4. Translation of Legal Documents
Effective July 1, 2004, real estate licensees who negotiate,
with consumers, personal loans secured by real property
or residential lease agreements longer than thirty (30)
days, and who negotiate these loans or leases in Spanish,
Korean, Chinese, Vietnamese or Tagalog, must either
provide translated copies of the loan documents or lease
or have the consumers with whom they have been negotiating
supply their own interpreters, who are at least eighteen
years old and fluent in both English and the language
in question.
5. Rental Payments in Cash
SB 115 provides that beginning January 1, 2005, landlords
and their agents will be prohibited from requiring cash
as the exclusive form for payment of rent or security
deposits. Cash payments may not be required in the original
lease or rental agreement, or thereafter, unless the
tenant has previously attempted to pay rent with a check
drawn on insufficient funds or the tenant has instructed
a bank to stop payment on a check. In either of these
cases a landlord may give a tenant a new statutory form
called the “Notice Of Obligation To Pay Rental
Or Lease Payments In Cash” and after providing
this form the landlord may demand payment in cash for
up to three (3) months.
6. Landlord Tenant Laws
SB 1145 makes permanent several recently enacted pieces
of legislation that originally had “sunset”
or termination dates. The requirement to give a sixty
(60) day notice to a tenant when increasing rent by
more than 10%, the prohibition on landlords being able
to discriminate against prospective tenants based on
source of income, and the requirement that all residential
tenants be given the option of having a pre-move out
inspection from the landlord in order to tell them which
items on the property need to be cleaned or repaired
to avoid any deduction from their security deposit have
all been made permanent.
This legislation also provides that there will be a
change in the law concerning access to court files of
unlawful detainer actions. Currently, county clerks
may not provide access to court files with respect to
unlawful detainer actions if the defendant prevails
in the action within sixty days after the complaint
has been filed.
Effective January 1, 2005, a county clerk may provide
such access to certain persons, including parties to
the action, attorneys for parties to the action, any
person who provides the court with a name of at least
one plaintiff and one defendant and the address of the
property, including the unit number, any resident who
provides the clerk with the name of the parties or case
number, and anyone else who obtains a court order upon
a showing of good cause.
7. Evicting Drug Dealers
SB 1145 extends to January 1, 2010 the law that permits
prosecutors in certain Los Angeles county judicial districts
to file, in the name of the people, an unlawful detainer
action against any tenant engaged in illegal drug activities.
Next year this right to evict will be expanded to city
and county prosecutors in Alameda and San Diego counties.
8. Common Interest Developments
AB 2718 will mandate, effective in 2005, that homeowners
associations prepare and distribute to their members
on an annual basis, along with the other required financial
statements and documents, a form called the “Assessment
and Reserve Funding Disclosure Summary” which
will spell out, among other things, the current assessment,
additional assessments that have already been scheduled,
and a statement as to whether or not based on the most
recent reserve study current reserve account balances
will be sufficient at the end of each year to meet the
homeowners association’s obligation to repair
or replace the major components during the next 30 years,
and if not, what assessments will be necessary to ensure
that sufficient funds are available each year. This
bill also requires the Board of Directors of a homeowners
association to inform the members in the next available
mailing of money transfers from the reserve account
to the general operating budget and the method of replacing
those funds.
9. California Withholding Law Update
California Law requires, in many residential transactions,
that buyers withhold 3-1/3% of the total sales price
and send those funds to the California Franchise Tax
Board. Certain transactions are exempt from this withholding
requirement, such as installment sales, 1031 exchanges,
and involuntary conversions, as well as transactions
where the seller is selling a principal residence or
when the seller is a corporation, limited partnership,
LLC or other entity. Some of these exemptions will be
amended soon. For example, under current law sellers
are eligible for the “principal residence”
exemption only if they have lived in the property as
a principal residence for two of the last five years,
as well as owned the property for two of the last five
years, unless there are special circumstances.
Under the new law sellers will not have to have lived
there two of the last five years, as long as the “last
use” of the property was as a principal residence.
(Sellers will still have to pay capital gains taxes
to the federal and state governments if they sell a
principal residence before living in and owning it for
two of the last five years, absent special circumstances).
Exemptions for non-individual taxpayers have also been
changed. Previously, corporations were exempt from the
withholding as long as they were incorporated in California,
qualified through the Secretary of State or with a permanent
place of business in California. When the new regulations
become effective, corporations will be exempt only when
they have a permanent place of business in California.
Similarly, under current law, estate sales where the
decedent lived in California are exempt, but starting
when the new regulations become effective, these sales
will only be exempt if the property being sold was the
principal residence of the decedent. Finally, sales
of property in California owned by an irrevocable trust
with a California trustee will no longer be automatically
exempt.
10. Registered Sex Offenders
AB 48 provides that by July 1, 2005, the California
Attorney General’s office will be required to
post on its website specific information about serious
and high risk sex offenders. Currently, the registered
sex offender database is only available at a 900 number
or at certain police and sheriff stations and the information
currently available only includes the registered sex
offender’s, name, alias, photograph, physical
description, gender, race, age, criminal history, county
of residence and zip code of residence. Beginning next
July (or sooner) not only will the information be available
on the internet but for those sex offenders who have
been convicted of committing a lewd act with a child
under fourteen (14), or a crime involving force or fear,
or who have been convicted of two or more offenses at
separate trials, or who are designated Sexually Violent
Predators, their actual street address will also be
listed.
11. Electronic Recording of Documents
AB 578 authorizes all 58 California counties to record
real property documents in an electronic delivery system
in the form of a “digitized electronic record”.
In other words, county recorders may scan hard copies
and then record the documents electronically. In addition,
if the document in question is a reconveyance instrument,
a substitution of trustee or an assignment of trust
deed the document may be created electronically and
then stored. Thus, for these documents no hard copies
need be created at all. These are known as “digital
electronic records.” In order for a County Recorder
to take advantage of this new law the Recorder must
first obtain the approval of the Board of Supervisors
of the county, certification from the California Attorney
General’s office and a written contract signed
between all authorized submitters of documents to be
recorded electronically and the Recorder.
12. Community Property
SB 1407, effective January 1, 2005, will affect reimbursements
for contributions made during a marriage, upon divorce.
Existing law provides that when couples get divorced
either party can get reimbursed for his/her fair contributions
to the acquisition of community property owned by the
couple to the extent that that party can trace the contributions
to a separate property source. The new law provides
the parties may also get reimbursed for their separate
property contributions to the acquisition of property
of the other person’s separate property estate
during the marriage unless there has been a waiver in
writing of the right to reimbursement.
13. High Cost Mortgages
The Federal Reserve recently announced that the amount
of fees that trigger the limitations on certain provisions
in high cost mortgages have been adjusted. Existing
law provides that home mortgage loans with high interest
rates and/or fees above a certain amount require certain
special disclosures and restrict the lender’s
ability to use certain credit terms, such as balloon
payments. The trigger that invokes this law has been
increased to either 8% of the total loan amount or $510,
whichever is higher.
14. Fair Housing Guidelines
HUD has issued new guidelines concerning the requirement
that housing providers make exceptions and modifications
to rules, policies, practices or services when such
accommodations may be necessary to afford a person with
a disability the equal opportunity to enjoy and use
the dwelling. For example, an apartment complex must
allow the use of scooters by disabled persons inside
a clubhouse even though scooters would normally not
be permitted. Apartment owners must make an exception
to a no dogs rule for a blind person who uses a guide
dog. On the other hand, a landlord can discriminate
against someone who is currently abusing controlled
substances, and does not have an obligation to transport
disabled tenants to the grocery store to do their shopping
for them.
Copyright© 2005 CALIFORNIA ASSOCIATION
OF REALTORS® (C.A.R.). Reprint and use of this information
is provided by courtesy of the C.A.R. Legal Department.
Contact
us for more info on California 2005 Laws Affecting Real
Estate.
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