2015 Laws Affecting Real Estate
As the last quarter of 2014 looms before us, our California Legislature, spurred on by real estate interest groups including the California Association of Realtors, has been busy implementing and sponsoring new legislation that either directly or indirectly affects real estate in California. Below are some of the new laws that will take effect on January 1, 2015.
NO RECORD RETENTION REQUIREMENT FOR REAL ESTATE PROFESSIONALS FOR TWEETS AND TEXT MESSAGES.
Beginning January 1, 2015, real estate 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 (unless designed to be retained or to create a permanent record).” The law does not clearly exclude emails from record retention. Hence, if you want a communication to be included as a permanent part of a transaction, at the very least communicate via email, rather than texting, tweeting or instant messaging. This law will be codified as Business and Professions Code, Section 10148 and also at Civil Code, Section 1624.
AGENCY DISCLOSURE REQUIREMENT EXPANDED.
Current law requires that listing and selling agents in a residential (single family one to four units) real estate transaction provide the seller and buyer with a prescribed disclosure form containing general information on real estate agency relationships. This requirement applies not just to purchases and sales, but also to lease transactions for more than one year. Additionally, current law requires the listing and selling agents to confirm their agency relationship by disclosing to the buyer and seller whether the agent is acting as the buyer’s agent exclusively, the seller’s agent exclusively, or as a dual agent representing both the buyer and the seller. Effective January 1, 2015, a new law extends these 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. The law is codified at Civil Code, Section 2079.13.
DOCUMENT BUNDLING PROHIBITED BY HOAs AS PART OF THE REQUIRED COMMON INTEREST DEVELOPMENT DISCLOSURES. SELLER MUST PAY HOA FEES.
Existing law requires delivery of various common interest disclosure documents upon the transfer of a real property interest in a common interest development. These disclosures include, without limitation, CC&Rs, Bylaws, Operating Rules, rental and age restrictions, budget reports, regular and special assessments, etc. Some HOAs have, in the past, engaged in “document bundling” defined as requiring the purchase of a package of documents together with the legally mandated disclosures. Under Civil Code Sections 4528 and 4530, beginning January 1, 2015, HOAs are prohibited from the practice of document bundling.
The new 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.
Also under this new law, 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 s/he is 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. This law makes it 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.
Existing law allows a buyer or seller to demand from the County that the documentary transfer tax to be paid on the sale of a property be shown on a separate document. This enabled some buyers or sellers to effectively keep the sales price secret, since the amount of the documentary transfer tax can be reliably used to deduce the purchase price. This new 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. This law is codified at Revenue and Tax Code, Section 11932 and 11933 and is effective January 1, 2015.
September is a particularly busy month in the Legislature with many bills being sent to the Governor for his consideration and execution. The Governor is required to act on these bills in October. As bills are signed in to law, and to the extent the new laws affect real property, we will keep you abreast of them here at Terra Terroir.