FHA CONDO REGULATIONS Owner Occupancy Percentage lowered and Recertification Process Made Less Burdensome. HR 3700 requires FHA to reduce its minimum owner-occupancy ratio from the current 50 percent to 35 percent, unless the FHA can provide justification for a higher percentage. FHA’s regulations must be changed within 90 days of enactment. Specifically, in order for a condominium project to be acceptable for FHA insurance, only 35 percent of all family units (including units not covered by FHA-insured mortgages) need be occupied by the owners as a principal residence or a secondary residence (as such terms are defined by the Secretary), or must have been sold to owners who intend to meet such occupancy requirement.
Additionally, FHA is required to streamline the entire recertification process for condo associations and make compliance “substantially less burdensome.” The law requires FHA to consider, among other things, lengthening the time between certifications for approved properties, and allowing updating of information rather than resubmission. Condo experts predict this alone could convince significant numbers of associations to return to the FHA fold, thereby opening up sales and purchases to thousands more condo units.
This law also requires FHA to replace existing policy on transfer fees with the less-restrictive model already in place at the Federal Housing Finance Agency.
HOUSING “Junior Accessory Dwelling Units” AB 2406 authorizes a city or county to provide by ordinance for the creation of Junior accessory dwelling units within an existing dwelling.
Existing law authorizes a local agency to provide by ordinance for the creation of 2nd units in single-family and multifamily residential areas.
This law authorizes a city or county to provide by ordinance for the creation of junior accessory dwelling units in single-family residential zones. It requires the ordinance to include, among other things, standards for the creation of a junior accessory dwelling unit, required deed restrictions, and occupancy requirements. It prohibits an ordinance from requiring, as a condition of granting a permit for a junior accessory dwelling unit, additional parking requirements.
HOUSING “Accessory Dwelling Units” Renames “Second Units” as “Accessory Dwelling Units” (ADUs). AB 2299 reorganizes existing law to apply a clear standard for the ADU permit review process regardless of whether a local government has adopted an ordinance or not. Additionally, eases some of the barriers to the development of ADUs
LANDLORD/TENANT Bedbugs Disclosure AB 551 introduces new disclosure requirements for new tenants commencing July 1, 2017 and for existing tenants commencing January 1, 2018. The landlord is prohibited from showing or renting vacant units if the landlord “knows” it has a current bed bug infestation. However, there is no duty on a landlord to inspect a dwelling unit or the common areas of the premises for bed bugs if the landlord has no notice of a suspected or actual bed bug infestation. Requires landlords to provide copies of pest control reports to tenants whose units have been inspected and other tenants if infestation in common area is confirmed.
LANDLORD/TENANT Commercial Leasing Disclosures re CASp Report AB 2093 requires a lessor to state on a commercial lease whether or not the property has been inspected by a Certified Access Specialist (CASp). Additionally, if the property has been issued an inspection report by a CASp, indicating that it meets applicable standards, the commercial property owner or lessor shall provide a copy. If no report has been issued, then a specific disclosure statement would be required. Prior to signing the lease, the prospective lessee has the right to review an inspection report issued by a CASp, if one exists, and may cancel lease within 72 hours after signing based on the report. This law goes into effect immediately as of 9/16/2016.
LANDLORD/TENANT Unlawful Detainer Reporting No public access to Unlawful Detainer records permitted unless theplaintiff/landlord prevails within 60 days of filing. Previously, it was the defendant/tenant who had to prevail within 60 days of filing to bar such access.
Existing law permanently restricts access to unlawful detainer action public records if the defendant (that is, the tenant) prevails within 60 days after the UD complaint is filed.
AB 2819 would allow public access to unlawful detainer records only if
1) the plaintiff (that is, the landlord) prevails within 60 days from the filing of the complaint or
2) by order of the court when judgment is entered for the plaintiff after trial more than 60 days since filing of the complaint.
LANDLORD/TENANT Water Submeters SB 7 requires that submeters be installed on all new multifamily residential units or mixed commercial and multifamily units, and requires that landlords bill residents of these new units for the increment of water they use. This requirement will come into effect pursuant to standards which may only be proposed and adopted after January 1, 2018.
When a multi-unit property has submeters installed prior to 2018 and the landlord elects to charge a tenant separately for water service, then all of the requirements of this new law must be complied with commencing January 1, 2018. However, this law does not affect existing properties without submeters where tenants are billed separately through ratio-allocation utility systems (RUBS).
LOANS Homeowner Bill of Rights Extended in Part to Successor in Interest after Death of Borrower Extends provisions of the Homeowner’s bill of rights to a successor in interest after the borrower has died. This law is in effect only until January 1, 2020.
Existing law gives a borrower various rights and remedies against a lender, servicer and others in regards to foreclosure prevention alternatives, including loan modifications, under the California Homeowner Bill of Rights.
SB 1150 until January 1, 2020, prohibits a mortgage servicer, upon notification that a borrower has died, from recording a notice of default until the mortgage servicer requests reasonable documentation of the death of the borrower from a claimant, among other things. A claimant is a person claiming to be a successor in interest, who is not a party to the loan or promissory note. The law provides a reasonable period of time for the claimant to present the requested documentation.
MOBILE HOMES Three Year Temporary Waiver Program for Taxes and HCD Charges
AB 587 requires waiver of all vehicle license registration fees (VLF) by the Department of Housing and Community Development (HCD) against a person who is not currently the registered owner of a manufactured home or mobilehome prior to transfer of title. If the manufactured home or mobilehome is subject to local property taxation (LPT) then the HCD must issue a conditional transfer of title and would require a county tax collector to issue a tax liability certificate with only partial payment of the taxes owed. This window for waiver of charges and taxes expires at the end of 2019.
Due to the sometimes informal nature of mobilehome sales, buyers and sellers may not be aware that delinquent taxes and fees prevent title from transferring. This law creates an abatement program to address the situation where a buyer has already purchased a mobilehome, but is unable to transfer title into his or her name due to delinquent fees or taxes. Nonpayment of VLF constitutes a lien on the mobilehome in favor of the state. Nonpayment of LPT means the county tax collector may pursue collection of the delinquent LPT in the same manner as other delinquent taxes on the unsecured roll. Both of these scenarios prevent HCD from amending the title into the new owner’s name. If the buyer cannot pay the delinquent charges associated with the home, and the seller does not agree to pay or cannot be located, then the buyer cannot obtain legal ownership.
Beginning January 1, 2020, this law will make it unlawful for any person to use for occupancy any manufactured home or mobilehome that does not conform to the registration requirements of the department, if the department provides notice to the occupant of the registration requirements and any registration fees due.
NOTARY PUBLIC Maximum Fees Maximum fees that can be charged by a notary public for taking a proof of deed will increase from $10 to $15.
Currently, the law sets maximum fees that may be charged by a notary public for many services at $10. AB 2217 increases the maximum permissible charge from $10 to $15 on the following services:
- Taking an acknowledgment or proof of a deed, or other instrument, to include the seal and the writing of the certificate
- Certifying a copy of a power of attorney
PACE LIENS Detailed Financial Disclosure and 3-Day Rescission Right A property owner may not participate in a PACE lien program without delivery of a detailed financial disclosure document received before contractual consummation. The disclosure document contains a variety of notices and warnings including a notice that the property owner may not be able to refinance or sell without paying off the PACE obligation. The property owner also retains a 3-day rescission right detailed in a statutory form. Statements as to increased value of the property cannot be made unless based on a valuation as specified.
Existing law requires home loans to be accompanied by the Truth in lending RESPA Integrated Disclosure (TRID), which is intended to allow an “apples to apples” comparison shopping of various loan products. However, PACE transactions are technically not loans and are not required to be accompanied by a TRID disclosure. Current law gives delinquent PACE assessments “super-priority” status, as part of the tax bill, over other recorded obligations; lenders require these “super liens” to be paid off before any new financing can be obtained.
AB 2693 will require a TRID-like disclosure be provided to a property owner participating in a PACE program, a 3 day right of rescission, and a notice that the property owner may not be able to refinance or sell without paying off the PACE obligation.
This law prohibits making monetary or percentage representations of increased value to a property owner regarding the effect the financed improvements will have on the market value of the property unless the estimate of market value is based upon either “an automated valuation model,” a broker price opinion or an appraisal by a licensed appraiser.
PACE LIENS FHA permits limited subordination with disclosures. FHA permits properties encumbered with a Property Assessed Clean Energy (PACE) obligation to be eligible for FHA-insured mortgage financing, whether for new purchases or refinancing, under certain circumstances. If the PACE lien is to remain, then the property sales contract must include all terms and conditions of the PACE obligation by closing.
Under FHA guidance, for a property to be eligible for FHA-insured mortgage financing, PACE obligations may be superior or subordinate, but may not fully accelerate. The FHA guidance stresses that PACE obligations must be treated as and follow the same rules as other special tax assessments levied by municipalities. In that vein, FHA will allow that only delinquent payments may take priority over a mortgage. A delinquency on a PACE obligation cannot trigger acceleration of the entire loan. In the event of a sale, including a foreclosure, the PACE obligation will run with the land, and the new homeowner will be responsible for payments on any outstanding PACE amounts.
For PACE-encumbered property to be considered for FHA-insured mortgage financing, the mortgagee must verify that the following requirements are met:
- Must be treated like a special assessment
- Only delinquent special assessment payments may take priority over a mortgage.
- PACE obligations must freely and automatically transfer upon sale.
- PACE obligations must be recorded on the land records
- Outstanding PACE obligations must run with the land
New Disclosure and Appraisal Requirements
Under the FHA guidance, when a PACE-encumbered property is sold, the property sales contract must indicate whether the seller will satisfy the PACE obligation at or before closing or whether the obligation will remain with the property. If the obligation will remain with the property, the property sales contract must include and incorporate all terms and conditions of the PACE obligation. Additionally, if the obligation will remain with the property, the appraiser must analyze and report the impact of the PACE-related improvements on the value of the property.
Based on guidance from the Federal Housing Administration issued in
Mortgagee Letter 2016-11. This guidance went into effect on September 17, 2016.
RED FLAG: This is always a red flag. The lender will not accept these conditions. The violation will have to be eliminated and the local enforcement agency will have to issue a release before closing. Escrow (or the seller or the seller’s representative) will usually have to deal directly with the appropriate agency to resolve these types of issues.
RED FLAG: Any order/judgment is a red flag. Support judgments can take up to six weeks to get a demand and release from the creditor (usually the district attorney’s office). If you see an order or judgment, contact escrow immediately to verify that the demand has been ordered.
RED FLAG: All open bankruptcies require the debtor to get permission from the court to sell or encumber an asset (the home) or to take on new debt. Chapter 7 and 13 bankruptcies against the seller are the most common found in a sale situation. A letter from the bankruptcy trustee will be required to close escrow. The trustee will sometimes require that a payment be made to the court at close. We sometimes find a Chapter 13 against a buyer, which will also require a letter from the trustee allowing the debtor to take on more debt. An open Chapter 7 against the buyer is rare, and the buyer probably cannot get a loan as long as he is in a Chapter 7. (See “Statement of Information”).
RED FLAG: This is a big red flag. This means that someone has a lawsuit pending that may affect the title to the property. These are often found in acrimonious divorce situations. A demand (the aggressing party usually wants money before releasing) and withdrawal (a “withdrawal of lis pendens” is a legal document that must be recorded to release the lis pendens) will be required
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