Our legislators passed 41 bills affecting the real estate business last year. This is part 1 of our 3-part summary of those bills. For the full text of a law visit http://leginfo.ca.gov/ for California laws – or – http://www.gpo.gov/fdsys/ for federal laws. A legislative bill may be referenced in more than one section.

BROKER PRACTICE TRUST FUNDS Brokers now have a choice of whether to use fidelity bonds or insurance to cover their unlicensed employees who are authorized to withdraw money from the broker’s trust fund accounts. Previously, the broker was limited to bond coverage. This law further clarifies exactly which wrongful employee acts must be covered. Whether it’s a bond or insurance, it must protect the broker from intentional wrongful acts committed by an employee of that business, including theft, dishonest acts, or forgery. Senate Bill 764 codified as Business & Professions § 10145. Effective January 1, 2018.

DISCLOSURES Existing law requires a “commercial” property owner or lessor to state on every lease form or rental agreement executed on or after January 1, 2017, whether or not the premises have undergone inspection by a Certified Access Specialist (CASp). This new law defines commercial property as, among other things, a place of lodging such as an inn, hotel or motel and other short-term rentals with amenities similar to a hotel, motel or inn. AB 1148 codified as Civil Code § 1938. Effective July 22, 2017.

DISCLOSURES – HOA An HOA must disclose directly to sellers on the billing form (C.A.R. Form HOA2) that the seller is not required to purchase all of the listed documents but may provide the buyer, at no cost, current copies of any of the disclosures that the seller already has. Moreover, the annual budget report must individually identify the cost of each separate disclosure document on the billing form for the mandatory disclosures. Managers must disclose to the HOA whether they receive a referral fee or other benefit from a third party who provides disclosure documents, and must provide a written acknowledgement that the disclosure documents are the property of the association and not those of the manager or the manager’s firm. Finally, this law creates a legal obligation for the manager to facilitate delivery when contractually obligated to do so. Assembly Bill 690 codified as Business and Professions Code § 11504 and Civil Code §§ 4528, 4530, 5300, 5375, 5375.5 and 5376. Effective January 1, 2018.

DISCLOSURES MEAGAN’S LAW This law establishes 3 tiers of sex offender registration based on specified criteria, for periods of at least 10 years, at least 20 years, and life, respectively (with different periods for juvenile court). It establishes procedures for termination from the sex offender registry for a registered sex offender who is a tier one or tier two offender and who completes his or her mandated minimum registration period under specified conditions. Senate Bill 384 codified as Penal Code 290, 290.006, 290.008, 290.45, 290.5, 4852.03, 9002 and 13125. The effective date is January 1, 2021.

DISCLOSURES LIABILITY EXEMPTION The law currently exempts an agent from liability for having provided various types of reports prepared by an expert where the report is in error. This new law adds a report prepared by a C-39 roofing contractor to the list of reports for which an agent is exempted from liability for any error in information disclosed upon transfer of residential real property. Assembly Bill 1357 codified as Civil Code § 1102.4 and Business and Professions Code § 7197. Effective January 1, 2018.

DISCLOSURES PRIVATE TRANSFER FEES This updates the Private Transfer Fee (PTF) disclosure law to inform homebuyers of the FHA and FHFA regulations relating to PTFs and how those regulations may impact the ability to obtain financing. The notice must be part of a separate disclosure document recorded by the person or entity imposing the transfer fee as a condition of payment. PTFs are fees, typically imposed by a builder, which require the buyer and any subsequent purchaser to pay a fee upon the transfer. In 2012, the Federal Housing Finance Agency (FHFA) adopted a rule for Fannie Mae and Freddie Mac backed mortgages requiring that the funds generated by any PTF provide a “direct benefit” to the encumbered property (PTFs established prior to the date of the rule are “grandfathered”). Federal law now requires the Federal Housing Administration (FHA) to adopt the same rule regarding PTFs. Thus, PTFs can create difficulties in the financing of real property sales which must be disclosed. Assembly Bill 1139 codified as Civil Code § 1098.5. Effective January 1, 2018.

EMPLOYMENT CRIMINAL HISTORY Employers cannot ask up-front for information regarding criminal history, but may only request this information after the applicant has received a conditional offer of employment. Neither arrests that did not lead to a conviction nor expunged convictions can be considered at all. Employers may not deny an applicant for a job unless the conviction directly impacts the job duties. A denial letter must cite the conviction and give the applicant five days to contest its accuracy and/or provide other evidence of mitigating circumstances. Assembly Bill 1008 codified as Government Code § 12952 and repeal of Labor Code § 432.9. Effective January 1, 2018.

EMPLOYMENT GENDER IDENTITY Requires that employers with 50 more employees include, as a part of the existing sexual harassment training, training on harassment based on gender identity. A transgender rights poster, to be developed by the DFEH, must be posted in a prominent location. Senate Bill 396 codified as Government Code §§ 12950 and 12950.1 and Unemployment Insurance Code §§ 14005 and 14012. Effective January 1, 2018.

EMPLOYMENT MATERNITY LEAVE Provides 12 weeks of unpaid maternity or paternity leave for Californians who work for companies with 20 – 49 employees and protects these new parents from losing their jobs and health care benefits. Senate Bill 63 codified as Government Code § 12945.6. Effective January 1, 2020.

EMPLOYMENT SALARY HISTORY Prohibits all employers from seeking salary history information about an applicant for employment and requires an employer to provide the pay scale for a position to an applicant upon reasonable request. Assembly Bill 168 codified as Labor Code § 432.3. Effective January 1, 2018.

GOVERNMENT The Bureau of Real Estate (CalBRE) is returned to its standing as the Department of Real Estate (DRE). Formerly under the Department of Consumer Affairs (DCA), the DRE will now be directly under the Business, Consumer Services, and Housing Agency (BCSH). Senate Bill 173 codified as Business and Professions Code §§ 30, 101, 10004, 10005, and 10050 and Government Code § 12804. Effective July 1, 2018.

HOA DISCLOSURES An HOA must disclose directly to sellers on the billing form (C.A.R. Form HOA2) that the seller is not required to purchase all of the listed documents but may provide the buyer, at no cost, current copies of any of the disclosures that the seller already has. Moreover, the annual budget report must individually identify the cost of each separate disclosure document on the billing form for the mandatory disclosures.

Managers must disclose to the HOA whether they receive a referral fee or other benefit from a third party who provides disclosure documents, and must provide a written acknowledgement that the disclosure documents are the property of the association and not those of the manager or the manager’s firm. Finally, this law creates a legal obligation for the manager to facilitate delivery when contractually obligated to do so. Assembly Bill 690 codified as Business and Professions Code § 11504 and Civil Code §§ 4528, 4530, 5300, 5375, 5375.5 and 5376. Effective January 1, 2018.

HOA – SOLAR ENERGY SYSTEMS Prohibits an association from establishing a general policy prohibiting the installation or use of a rooftop solar energy system for household purposes on the roof of the building in which the owner resides, or a garage or carport adjacent to the building that has been assigned to the owner for exclusive use. Assembly Bill 634 codified as Civil Code 714.1, 4600 and 4746. Effective January 1, 2018.

HOME INSPECTORS SWIMMING POOL SAFETY New pools must be constructed with at least two of seven drowning prevention safety features (as opposed to the current one) for a private single-family home. The exemption for localities that have their own pool ordinances is eliminated. In regard to home inspectors, it requires them to include within their inspection a noninvasive physical examination of the pool or spa for the purpose of identifying which of the seven drowning prevention safety features the pool or spa has. This information must then be included in the home inspection report. This law does not create any new disclosure obligation on the part of agents. Senate Bill 442 codified as Business and Professions Code § 7195 and Health and Safety Code §§ 115922 and 115925. Effective January 1, 2018.