New Rules Affecting California Real Estate Withholdings

Posted on February 12, 2020 by Emi Tsuji

Franchise Tax Board Changes Effective January 1, 2020

Note: All Sale Transactions Must File a Form 593

Click HEREto download a pdf version of this flyer

New California Laws for 2020 – Part 2

Posted on January 22, 2020 by Emi Tsuji

Our legislators were busy as bees last year, enacting 50 new laws affecting your real estate practice. As a real estate advisor, you need to be able to explain how these new laws may affect your clients. Bookmark this post and refer back to it often. I have provided links to summaries and texts of each of the new laws to answer all your questions.

This is the second of two posts covering the new laws for 2020.

LANDLORD/TENANT: DISCRIMINATION ON THE BASIS OF SOURCE OF INCOME SB 329

“Discrimination” on the basis of “source of income” has been expanded to include a refusal to rent to a tenant based on the tenant’s receipt of federal, state or local housing subsidies including “Section 8. Effective 1-1-20

LANDLORD/TENANT: RELIGIOUS ITEMS MAY BE DISPLAYED ON ENTRY DOORS SB 652

This law, with certain exceptions, prohibits a residential property owner and a common interest development from enforcing or adopting a restriction that prohibits the display of religious items on an entry door or entry door frame of a dwelling. Effective 1-1-20

LANDLORD/TENANT: TENANT ALLOWING OCCUPANCY OF PROPERTY TO PERSON AT RISK OF HOMELESSNESS

SB 1188 Creates a legal framework allowing a tenant, with the written approval of the owner/landlord, to take in a “person at risk of homelessness.” Effective 1-1-20

LANDLORD/TENANT: STATEWIDE RENT CAPS AND JUST CAUSE EVICTION

AB 1482 Imposes statewide rent caps of 5% plus inflation and just cause eviction requirements on rental properties. Various exemptions apply including single-family homes and condos (not owned by a corporation or REIT) and properties where a certificate of occupancy has been issued within the past 15 years. Effective 1-1-20

LANDLORD/TENANT: FAMILY DAYCARE HOMES

SB 234 Requires large family daycare homes with up to 14 children to be treated as a residential use for purposes of all local ordinances. Clarifies that apartments may be used as family daycare homes. Effective 1-1-20

LANDLORD/TENANT: RENT INCREASES ABOVE 10% REQUIRES 90-DAY NOTICE AB 1110

The notice period for increasing rent above 10% in any 12-month period is 90 days. Previously, it was 60 days. Effective 1-1-20

LANDLORD/TENANT: RECYCLING BINS AB 827

This new law requires a multi-family dwelling of five or more units, among other businesses, to provide customers with a recycling bin or container for a waste stream that is visible, easily accessible, adjacent to each bin or container for trash other than that recyclable waste stream (except in restrooms) and clearly marked with educational signage. Effective 1-1-20

LANDLORD/TENANT: EXTENDS INDEFINITELY A LAW PROVIDING VARIOUS PROTECTIONS TO TENANTS IN FORECLOSED PROPERTY INCLUDING 90-DAY NOTICE TO TERMINATE A MONTH TO MONTH TENANCY SB 18

This new law extends indefinitely the requirement that a landlord of a foreclosed property provides a month to month tenant with a 90-day notice of termination and that existing leases must generally be honored. Effective 1-1-20

INSURANCE: 75-DAY NOTICE OF NONRENEWAL

AB 1816 Requires insurers to provide at least a 75-day notice of nonrenewal of a homeowner’s policy (currently 45 days) and raises the limit on a homeowner insurance claim covered by the California Insurance Guarantee Association (CIGA) to $1 million. This law also allows the insurer to be proportionately relieved of their responsibility to participate in the Fair Access to Insurance Requirements (FAIR) plan. For policies that expire on or after 7-1-20

LEAD PAINT ABATEMENT IMMUNITY

AB 206 Grants immunity to landlords or agents who voluntarily abate lead paint hazards and provides that such efforts cannot be considered evidence of uninhabitability pursuant to certain lead paint abatement programs. Effective 1-1-20

LOANS: PROHIBITS CALIFORNIA FINANCING LAW LICENSEES FROM RECEIVING CERTAIN CHARGES ON A CONSUMER LOAN

AB 539 Prohibits California Financing Law (CFL) licensees from receiving charges on a consumer loan at a rate exceeding 36% per annum plus the Federal Funds Rate for loans with a principal amount from $2,500 to $10,000. Effective 1-1-20

REAL ESTATE LAW CLEANUP: TECHNICAL CHANGES THAT CONFIRM EXISTING LAW REGARDING DELIVERY OF THE TDS, NHD AND AD AB 892

This law clarifies and confirms existing law that delivery of the TDS and NHD is generally not required for leases of any duration, but the Agency Disclosure form is required for residential leases of more than one year.

Confirms that there is no cancellation right for a buyer based upon delivery of the visual inspection when purchasing from an unrepresented seller. Effective 1-1-20

RECORDING FEES: COUNTY MAY INCREASE FEE BY $1

AB 212 Counties are authorized to increase their recording fees by $1 to defray the cost of document storage. Effective 1-1-20

TAX: NO CONFORMITY WITH OPPORTUNITY ZONE TAX BENEFITS AB 91

California did not identify Opportunity Zones (OZ) to mirror federal law which would have resulted in greater incentivization of real property investments in these areas.

TAX: EXEMPTIONS FROM REASSESSMENT: NARROW EXCLUSION FOR CERTAIN PARENT-CHILD TRANSFERS OF PROPERTY THROUGH A CORPORATION

AB 872 Creates a property tax change in ownership exclusion in the case of a parent to child transfer of stock in a qualified corporation following the last surviving parent’s death limited in scope to the parents’ residence and the parcel of land upon which the home is located provided that among other things: 1) the residence has continuously served as the child’s home, and 2) the property’s assessed value does not exceed $1 million. Effective 10-9-19

UTILITIES: COSTS FOR EXTENSION OF WATER AND SEWER SERVICES SB 646

This law requires the estimated reasonable costs of labor and materials for installation of facilities associated with a water or sewer connection to bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the water connection or sewer connection. Effective 10-9-19

APPRAISAL REQUIREMENTS INCREASES FROM $250,000 TO $400,000 FOR CERTAIN HOME SALES

Certain home sales of $400,000 no longer require an appraisal as federal regulators increase the threshold at which residential home sales require an appraisal from $250,000 to $400,000. The rule will not apply to loans sold to or guaranteed to the VA, FHA, HUD, Fannie Mae or Freddie Mac. The final rule has yet to be published. Once published the rule will be effective

MOBILE HOMES: APPLICATION PROCESS; RIGHTS OF BUYER AND SELLER WHEN SELLING A MOBILE HOME THAT WILL REMAIN IN THE PARK; RIGHT OF FIRST REFUSAL AFTER DISASTER; AND RIGHT TO A COMPANION SB 274

Park Management must respond within 15 days to a seller and the prospective purchaser by providing application standards for the park where the mobile home being sold is located and a list of the necessary documentation. If a buyer is rejected for financial reasons, they have a right to supply additional financial information which the park must consider. A park that fails to comply is liable for damages to the seller.

Additionally, a homeowner has a first right of refusal when a park elects to rebuild after a disaster. A homeowner that lives alone has the right to designate one companion at a time to live with them free of charge, up to three a year. Effective 1-1-20

New California Laws for 2020 – Part 1

Posted on December 21, 2019 by Emi Tsuji

This is the first of two posts covering the new laws for 2020.

APPRAISERS: APPRAISERS AND HOME INSPECTORS

AB 1018 Home inspectors are prohibited from giving an opinion of valuation on a property. Effective 1-1-20

ARBITRATION AGREEMENTS WITH CONSUMERS AND EMPLOYEES SB 707

This law provides that the drafting party of a consumer or employment-related arbitration agreement is in material breach of the arbitration agreement if the drafting party fails to pay, as required by existing law, specified costs and fees associated with the arbitration proceeding. Effective 1-1-20

CONSUMER PRIVACY: CHANGES TO THE CONSUMER PRIVACY PROTECTION ACT AND OTHER PRIVACY LAWS

Exempts from the CCPA information collected from employees and independent contractors for one year. AB 25

Broadens the public information exemption for personal information (PI). AB 874

Creates a new category and registration requirement for “data brokers.” AB 1202

SB 1355 excludes consumer information that is de-identified or aggregate consumer information from PI definition.

Rescinds requirement for a business that operates exclusively online and has a direct relationship with the consumer to provide multiple means for consumers to submit information requests. AB 1564

Expands the type of data subject to the Information Practices Act of 1977. AB 1130

DISCLOSURE: DISCLOSURE AND POINT-OF-SALE COMPLIANCE RE WILDFIRE DEFENSIBLE SPACE AND VEGETATION MANAGEMENT LAWS, AND HOME HARDENING

AB 38 Requires delivery of a statutory disclosure re home hardening for homes in designated high fire areas built before 2010, and that seller list specified retrofits. Effective dates of the disclosure requirements will be 1-1-20; 1-1-21; 7-1-21; and 7-1-25; depending on the disclosure

EMPLOYMENT: ARBITRATION AGREEMENTS AS CONDITION OF EMPLOYMENT PROHIBITED

AB 51 Prohibits employers from requiring employees or applicants for employment to waive a right, forum, or procedure for a violation of the Fair Employment and Housing Act or the Labor Code as a condition of employment or an employment-related benefit. It also prohibits employers from threatening, retaliating discriminating against, or terminating employees or applicants because they refused to waive any such right, forum, or procedure. Existing contracts for employment entered into, modified or extended on or after January 1, 2020, are exempt.

EMPLOYMENT: INDEPENDENT CONTRACTOR STATUS OF AGENTS RECONFIRMED AB 5

The right of real estate agents to be treated as independent contractors has been explicitly reconfirmed. Effective 1-1-20

EMPLOYMENT: SEXUAL HARASSMENT TRAINING SB 778

The sexual harassment training deadline required for employers with five or more “employees” has been postponed. Deadline extended until 1-1-21 – Effective 8-30-19

FIRE MITIGATION: BEST PRACTICES FOR DEVELOPING RESILIENCE AGAINST WILDFIRES BY HOME HARDENING DEFENSIVE SPACES AND OTHER MEASURES SB 190

Defines the specific requirement to develop best models for defensible space and additional standards for home hardening and construction materials to increase the resilience of communities. Effective 1-1-20

FIRE INSURANCE: FOR TOTAL LOSS, INSURED IS ENTITLED TO REPLACEMENT COST LESS DEPRECIATION AB 188

This law provides that the measure of cash recovery, less depreciation, for a structure or its contents, lost under an “open” policy is the cost to repair, replace, or rebuild the structure or contents. Effective 1-1-20

HOUSING: ALLOWS FOR CONSTRUCTION AND RENTAL OF ACCESSORY DWELLING UNITS IN HOA’S AB 670

Any provision in a CC&R that prohibits or unreasonably restricts the construction, use or rental of an accessory dwelling unit or junior accessory dwelling unit on a lot zoned for single-family residential use is void and unenforceable. Effective 1-1-20

HOUSING: STREAMLINES HOUSING PERMITTING AND APPROVAL PROCESS SB 330

Establishes the Housing Crisis Act of 2019, which will accelerate housing production in California by streamlining permitting and approval processes, ensuring no net loss in zoning capacity (“Down zoning”) and limiting fees after projects are approved.

HOUSING: TRANSPORTATION – MAJOR STOPS AB 1560

This law redefines “major transit stop” under CEQA to include “bus rapid transit”. Effective 1-1-20

HOUSING: DECLARATION OF STATE OF EMERGENCY: BUILDING STANDARDS FOR SOLAR AB 178

This exemption will allow low-income homeowners to rebuild their homes with the requirement that was in effect at the time their home was originally constructed. Effective 1-1-20

HOUSING: CEQA: COMMUNITY PLANS AB 1515

This law seeks to bring greater certainty to developers by allowing updates to community plans without the threat of noncompliance based on the environmental impact report and will help with housing production. Effective 1-1-20

HOUSING: STREAMLINED APPROVAL PROCESS AND REMOVES BARRIERS TO CONSTRUCTION FOR ACCESSORY DWELLING UNITS

This group of three laws removes impediments to ADU construction by restricting local jurisdictions’ permitting criteria.

AB 68 makes major changes to facilitate the development of more ADUs and address barriers to building. It expands the categories of ADUs that cities must approve without applying any local development standards to include an 800 sq. ft. detached ADU. The bill also requires cities to allow “junior ADUs,” which in some instances can be developed in addition to a conventional ADU.
AB 881 removes impediments to ADU construction by restricting local jurisdictions’ permitting criteria, clarifying that ADUs must receive streamlined approval if constructed in existing spaces and eliminating minimum lot size requirements. It also prohibits jurisdictions from establishing a maximum square footage requirement for an ADU that is less than 850 sq. ft., or 1,000 sq. ft. if the ADU contains more than one bedroom. This will allow future ADUs in various cities to be a few hundred feet larger.
SB 13 eliminates local agencies’ ability to require owner-occupancy for five years and eliminates impact fees for ADUs under 750 sq. ft. For larger ADUs, it creates a tiered fee structure based on size. The Bill also addresses other barriers by shortening the application approval time frame, creating an avenue to get unpermitted ADUs up to code, and enhancing an enforcement mechanism allowing the state to ensure that localities are following ADU statutes. Effective 1-1-20

LANDLORD/TENANT: $20 MILLION BUDGETED TOWARD LEGAL SERVICES FOR EVICTION DEFENSE AB 74

The budget provides $20 million for legal services for renters facing eviction. Effective 1-1-20

LANDLORD/TENANT: ELLIS ACT AB 1399

Makes changes to the Ellis Act to 1) clarify that owners may not pay prior tenants liquidated damages in lieu of offering them the opportunity to re-rent their former unit; and, 2) clarify that the date on which the accommodations are deemed to have been withdrawn from the rental market is the date on which the final tenancy among all tenants is terminated. Effective 1-1-20

LANDLORD/TENANT: REDUCED SECURITY DEPOSIT FOR SERVICE MEMBERS SB 644

A landlord may only collect one month security for an unfurnished unit, or two months for furnished units, from a service member who resides on the property. Effective 1-1-20

LANDLORD/TENANT: DISCRIMINATION ON THE BASIS OF MILITARY OR VETERAN STATUS SB 222

Discrimination in housing on the basis of veteran or military status is now unlawful under the Fair Employment and Housing Act.

Homeowners’ Exemption

Posted on June 8, 2019 by Emi Tsuji

California property tax laws provide two alternatives by which the Homeowners’ Exemption, up to a maximum of $7,000 of assessed value, may be granted.

Alternative 1: The exemption is available to an eligible owner of a dwelling which is occupied as the owner’s principal place of residence as of 12:01 a.m., January 1 each year; or

Alternative 2: The exemption is available to an eligible owner of a dwelling subject to supplemental assessment(s) resulting from a change in ownership or completion of new construction on or after January 1, provided:

The owner occupies the property as his or her principal place of residence within 90 days after the change in ownership or completion of construction; and
The property is not already receiving the Homeowners’ Exemption or another property tax exemption of greater value. If the property received an exemption of lesser value on the current roll, the difference in the amount between the two exemptions shall be applied to the Supplemental Assessment.

To help you determine your principal residence, consider

where you are registered to vote,
the home address on your automobile registration, and
where you normally return after work.

If after considering these criteria you are still uncertain, choose the place at which you have spent the major portion of your time this year.

Filing for exemption under Alternative 2 will apply to the supplemental assessment(s), if any, and serve as filing for the exemption for the following fiscal year(s).

To obtain the exemption, the claimant must be an owner or co-owner or a purchaser named in a contract of sale. The dwelling may be any place of residence subject to property tax; a single-family residence, a structure containing more than one dwelling unit, a condominium or unit in a cooperative housing project, a houseboat, a manufactured home (mobile home), land you own on which you live in a state-licensed trailer or manufactured home (mobile home), and the cabana for such a trailer or manufactured home (mobile home) are examples. A dwelling does not qualify for the exemption if it is or is intended to be, rented, vacant and unoccupied, or the vacation or secondary home of the claimant.

If the Homeowners’ Exemption is granted and the property later becomes ineligible for the exemption, you are responsible for notifying the Assessor of that fact immediately. Section 531.6 of the Revenue and Taxation Code provides for a penalty of 25 percent of the escape assessment added for failure to notify the Assessor of the county where the property is located in a timely manner when property is no longer eligible for the exemption.

As a reminder, your tax bill, or copy, mailed by November 1each year should be accompanied by a notice concerning ineligibility for the exemption. Once granted, the exemption remains in effect until terminated. Once terminated, a new claim form must be obtained from and filed with the Assessor to regain eligibility.

Time For Filing

Alternative 1: The full exemption is available if the filing is made by 5 p.m. on February 15. If a claim is filed between February 16 and 5 p.m. on December 10,80 percent of the exemption is available.

Alternative 2: The full exemption (up to the amount of the supplemental assessment), if any, is available providing the full exemption has not already been applied to the property on the regular roll or on a prior supplemental assessment for the same year. To be applied, the filing must be made by 5 p.m. on the 30th day following the Notice of Supplemental Assessment issued as a result of a change in ownership or completed new construction. If a claim is filed after the 30th day following the date of the Notice of Supplemental Assessment, but on or before the date on which the first installment of taxes on the supplemental tax bill becomes delinquent, 80 percent of the exemption available may be allowed. Thereafter, no exemption is available on the supplemental assessment

New California Real Estate Laws for 2019

Posted on January 22, 2019 by Emi Tsuji

Our legislators passed a raft of laws affecting the real estate industry last year. Following is a summary of the most significant changes affecting you. For the full text of a California law visit http://leginfo.ca.gov/ – or – http://www.gpo.gov/fdsys/ for federal laws. A legislative bill may be referenced in more than one section.

Building Permits Expiration Period Extended (AB 2913) – Effective 1/1/19 A building permit remains valid despite changes in the building code as long as work is commenced within 12 months after issuance.

Sexual Harassment Liability Expanded for Real Estate Agents (SB 224) – Effective 1/1/19 Even if a business, service, or professional “relationship” does not presently exist, a real estate agent (and “investor” among other persons) may be liable for sexual harassment when he or she holds himself or herself out as being able to help the plaintiff establish a business, service, or professional relationship with the defendant or a third party. This law eliminates the element that the plaintiff prove there is an inability by the plaintiff to easily terminate the relationship.

HOA Board Financial Review Requirement and Anti-Fraud Precautions (AB 2912) – Effective 1/1/19 The bill requires a managing agent of a common interest development who accepts or receives funds belonging to the association to, upon written request by the board, deposit those funds into an interest-bearing account in a bank, savings association, or credit union in this state, provided certain requirements are met. This bill would prohibit transfers greater than $10,000 or 5% of an association’s total combined reserve and operating account deposits, whichever is lower, without prior written approval from the board. This bill would further require the HOA board to review its financials on a monthly basis.

Revocable Transfer on Death Deeds (AB 1739) – Retroactively to 1/1/2016 The Revocable Transfer on Death Deed would no longer require the statutory FAQ to be recorded as part of the deed.

Home Inspections Requirement – Irrigation System (AB 2371) – Effective 1/1/19 Authorizes a home inspection report on an in-ground landscape irrigation system to include information regarding the operation and observation of the irrigation system.

Applicant for Real Estate License Not Required to Disclose Citizenship or Immigration Status (SB 695) – Effective 1/1/19 Prohibits the DRE from requiring a real estate license applicant to disclose either citizenship status or immigration status for purposes of licensure, or from denying licensure to an otherwise qualified and eligible individual based solely on his or her citizenship status or immigration status.

Criminal Conviction (AB 2138) – Effective 7/1/2020 This law institutes a seven year look back period for a board, including the DRE, to consider a criminal conviction in denying a license, and only if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the application is made. However, there are exceptions such as convictions for serious crimes and sex offenders, and a specific exception for the DRE, among other boards, in regard to financially related crimes. In any case, a board may not deny a license to a rehabilitated applicant or one whose criminal record has been expunged.

Private Transfer Fee Prohibited (AB 3041) – Effective 1/1/19 This bill prohibits various private transfer fee by developers imposing new property covenants, conditions, or restrictions that force subsequent owners to pay specially designated fees every time the property is transferred, unless the fee provides a “direct benefit” to the property. This bill would provide that any transfer fee created in violation of this prohibition is void against public policy.

3 Days’ Notice Excludes Holidays and Weekends – Effective 9/1/19 In counting a three days’ notice to pay rent or quit or a three days’ notice to perform covenant or quit, or in responding to a complaint for unlawful detainer, Saturdays, Sundays and judicial holidays are excluded.

Electric Vehicle Charging Stations (AB 1796) – Effective 1/1/19 Eliminates the rent control exemption for the requirement that a landlord permit installation of an Electric Vehicle Charging Station.

Commercial Property Abandonment (AB 2847) – Effective 1/1/19 Allows a commercial landlord to serve Notice of Belief of Abandonment after the rent is unpaid for three days (at a minimum, depending on the number of days the lease requires before a landlord may declare a default), and allows delivery of that notice by overnight courier. This notice will expire after 15 days regardless of the form of delivery.

Commercial Property Disposal of Tenant’s Personal Property (AB 2173) – Effective 1/1/19 Increases the calculation of the total resale value of the personal property from $750 (or $1 per square foot, whichever is lesser) to either $2,500 or an amount equal to one month’s rent for the premises the tenant occupied, whichever is greater.

Inspection of Decks, Balconies, Stairways and Walkways (SB 721) – Effective 1/1/19 This law requires that buildings with 3 or more multi-family dwelling units with decks, balconies, stairways, and walkways must be inspected by a properly licensed person by 2025, and a subsequent inspection must be done every 6 years. The owner would have to make repairs if the inspector found that the decks or balconies were in need of repair.

Requires Landlord to Accept Rent from Third Parties (AB 2219) – Effective 1/1/19 Requires landlord to accept rent tendered by a third party. But no right of tenancy is created by acceptance, nor is a landlord required to accept housing assistance programs such as section 8. To ensure that no right of tenancy is created, the landlord may condition acceptance of rent from a third party on a signed acknowledgment to that effect.

Law Enforcement and Emergency Assistance (AB 2413) – Effective 1/1/19 Expands protections for victims of domestic violence and other types of abuse to not face eviction or other penalties on the basis of having summoned law enforcement or 9-1-1 emergency assistance on their own behalf, or on behalf of another, to respond to incidents of violence or abuse.

Price Gouging and Eviction During a Declared Emergency (AB 1919) – Effective 1/1/19Retains the 10% maximum rental price increase during a declared state of emergencies, and additionally:

Expands the scope of criminal price gouging by including rental housing that was not on the market at the time of the proclamation or declaration of emergency.
Clarifies that the cap on rent increases will remain in effect during an extension of a declared emergency.
Makes it illegal to evict a tenant without cause during a state of emergency except for specified reasons if the property is then offered at a higher rent.
Allows a greater than 10% rental price increase if directly attributable to additional costs for repairs or additions beyond normal maintenance that were amortized over the rental term.

Military Services Member Protections (AB 3212) – Effective 1/1/19 Existing law allows a service member to terminate a lease of premises occupied when that person entered a period of military service or receives deployment or change of status orders. This law additionally requires “any person,” such as a landlord, who receives a good faith request from a service member and who believes the request is incomplete, not legally sufficient or that the service member is not entitled to the relief requested, to, within 30 days of the request, provide the service member with a written response acknowledging the request and setting forth the objections. If the person fails to make such a response the person waives any objection to the request, and the service member shall be entitled to the relief requested.

Pest Reports – Certification and Warranty (SB 1481) – Effective 1/1/19 This law requires a specified certification when the property is free of evidence of active infestation and requires all certifications to be included on the complete, limited, supplemental, or reinspection reports. Additionally, where a consumer has directly contracted for the fumigation, this law requires a Branch 1 registered company to also provide the certification of completion.

Property Taxes: Understanding Escrow

Posted on November 22, 2018November 23, 2018 by Emi Tsuji

Perhaps one of the most confusing aspects of dealing with real estate is the taxes. Taxes can be addressed in several ways in your escrow. If you are obtaining a new loan, the lender may require tax impounds and tax service. If you are involved in a purchase, the seller may require a tax proration. There may be taxes to be paid based on delinquent or current tax bills. Your escrow instructions may contain a disclosure and release regarding future supplemental taxes. Below is a review of each of these aspects of taxes

Taxes to Be Paid

The fiscal tax year commences on July 1^st of each year, BUT liens for that tax year begin on the preceding March 1^st. This means that every property in the state subject to taxes automatically has a tax lien on it commencing March 1^st of each year for the coming fiscal year. The end of each fiscal year is the following June 30^th. Taxes are payable in two installments (although you have the option to pay them in full when you pay the first installment,) with the first installment due on November 1^stand delinquent after December 10^th; the second installment is due and payable on February 1^st of each year and delinquent after April10^th of each year. NOTE: If the tenth falls on a Saturday or Sunday, the delinquent date is extended until 5:00 p.m. of the next business day.

Tax Impounds

The lender may collect taxes monthly with the loan payment. The amount is equivalent to 1/12^th of the projected tax payment due annually. At closing, the lender calculates the number of payments that they need to be in receipt of at the time the next tax installment is due. Then, at closing, they collect the necessary monthly taxes to ensure that when the taxes become due they are in receipt of a minimum of six months of tax payments. Each lender differs slightly on their calculation; therefore, it is important to check with your lender regarding the formula they use.

Tax Service Fee

Since in the majority of cases the tax bill is mailed to the taxpayer and not the lender, the lender will secure the help of a tax service company. The tax service company notifies the lender if borrowers do not keep their property taxes current. This helps lenders protect their access to collateral if a borrower defaults.

Tax Prorations

At closing, if required, the escrow agent will determine what portion of the next tax installment is the seller’s responsibility; they will then charge the seller and credit the buyer with said amount. When the next installment is due, the buyer will pay the total amount since the buyer was reimbursed the seller’s portion at closing. Likewise, if the seller has prepaid his taxes, then the portion that he has prepaid will be charged to the buyer and credited to the seller.

Supplemental Taxes

Due to “Proposition 13” after a property has been assessed(as of March 1^st of each year) and a property transfers, the law provides for an increase of the tax basis of the property based upon the sales price. The difference between that year’s tax base and the increase caused by the sale, if any, is charged to the buyer. For instance, if a property is valued at $275,000 on March 1^st of the taxable year and is sold during the year for $327,000, the increase in the tax bill as a result of the sale and subsequent reevaluation will be separately billed to the new buyer for that portion of the fiscal tax year that they owned the property. If the property transfers more than once during the tax year there may be multiple supplemental tax bills to each new owner if the sales represent increases in value.

If taxes are impounded, the buyer is advised to notify his loan servicer of the supplemental tax bill. The servicer will then advise the borrower whether he is responsible for the payment of that bill or alternatively if the servicer will pay that bill.

Proposition 5 – Property Tax Transfer Initiative

Posted on September 22, 2018 by Emi Tsuji

This Initiative would allow California’s senior citizens to sell their home and buy another, retaining some or all of their Proposition 13 property tax savings.

Why is This Needed?

Under Proposition 13, homeowners are protected from rapidly increasing property taxes. However, seniors, who are a big property tax increase if they sell their existing home and buy another one, discouraging them from ever moving. As a result of this “moving penalty,” almost three-quarters of homeowners 55 and older haven’t moved since 2000. This initiative will allow them to sell their home while keeping some property tax protections, and therefore create homeownership opportunities for young families.

How Do Property Tax Assessments Work Now?

The amount any homeowner pays in property taxes is based on the assessed value of their home at the time of purchase. Generally, Proposition 13 limits property taxes to 1% of the assessed value at the time of purchase even if the value of the property subsequently increases.

Unfortunately, homeowners lose their Proposition 13 property tax savings when they move to another home. Under another law, Proposition 60, senior homeowners – defined as 55 years of age or older – are allowed to transfer their property tax bases to another home in the same county so long as the purchase price of the replacement home is equal to, or less than, the sale price of the original residence.

Under Proposition 60, a senior homeowner is limited to making only one such transfer over the course of his or her lifetime. And, if the spouse of a senior homeowner has already transferred a property tax base, that senior homeowner is disqualified from making another transfer of the tax base.

Proposition 90 is an extension of the original Proposition 60 program. Proposition 90 allows senior homeowners to transfer their property tax base to a home in a different county so long as that county accepts such transfers (at last count, only 11 counties in California are accepting transfers from other counties).

Propositions 60 and 90 are relatively limited. That’s where Proposition 5 comes in.

How Will the Initiative Work?

Prop 5 would allow homeowners 55 years of age or older to transfer some of their Proposition 13 property tax bases to a home of any price, located anywhere in the state, any number of times.

What’s Next?

Prop 5 will now appear on the November 2018 ballot to decide it’s fate.

Where Can I Find More Information?

California Association of Realtors

916.492.5200

portability@car.org

https://ballotpedia.org/California_Proposition_5,_Property_Tax_Transfer_Initiative_(2018)

Common Types of LIENS and JUDGMENTS

Posted on August 15, 2018August 3, 2018 by Emi Tsuji

There are a number of types of judgments and liens that can attach to your client and/or their property that affect title when they sell or refinance. Many of these will remain on title for anywhere from 7-20 years or more and must be satisfied accordingly. They may be required by their lender to pay off the lien or judgment in order to close their refinance, or if they’re selling their property, a portion of the proceeds may be used in order to satisfy the lien so they can pass on a clean title to the buyer.

Below are some of the most common types you may encounter on a preliminary title report that will notify you up front if there are any that will need to be addressed throughout the transaction process.

BLANKET LIENS

Federal Tax Liens State Tax Liens EDD Liens County Tax Liens

All above-mentioned liens have a duration of 10 years from the date recorded unless they are released.
The lien can be continued for successive periods and its original priority is maintained by recording and re-filing notice before the original lien expires.
Like judgments, these liens are blanket liens and attach themselves to ALL property belonging to the delinquent taxpayer.
Escrow will order the demand and the title company will manage the payment in order for the lien holder to record the release.
Escrow must have an IRS Power of Attorney form to obtain a demand.
Title will not close without a demand on federal and state tax liens.

LIENS THAT ATTACH TO A SPECIFIC PROPERTY

Mechanic’s Liens Notice of Action (Lis Pendens, Homeowner Association Liens, & Substandard/ Abatement Liens)

Mechanic’s liens are created when a contractor/subcontractor who has done work on a specific property was not paid when the work was completed. The duration of a mechanic’s lien is 90 days from the date recorded.

The contractor can foreclose on the property on which they recorded the mechanic’s lien but must commence the action within 90 days.

A lis pendens is a notice that a court action affecting the property has been filed. This document is also used to foreclose on a property under a mechanic’s lien. This item has an unlimited duration and must be released or withdrawn. · ·

Homeowner’s liens are recorded when a person is delinquent on their association dues. There is no fixed duration associated with this lien. Escrow must get demand.

Substandard liens are recorded by the city or county. They can be for weed abatement, hazardous substances, or substandard dwellings. This lien does not have a fixed duration. Escrow must order demand in order to find out if money is owed.

JUDGMENTS

Money Judgments Spousal and/or Child Support Judgments

A money judgment has a duration of 10 years from the date the judgment is filed.
A spousal/child support judgment duration will extend over 10 years. Spousal support judgments will be considered until released; child support liens will be considered up to 5 years after the child reaches the age of majority.
A money judgment can be extended for an additional10 years when a renewal of judgment is recorded within 10 years of the original date of entry of the judgment.
The only judgment that has a duration of 20 years is one in favor of the United States of America, a Federal Corporation.
Escrow orders the demand and full or partial satisfaction from the judgment creditor. The title company pays demands at the close of escrow.

California Property Tax Savings Programs

Posted on July 7, 2018May 22, 2019 by Emi Tsuji

Over the years, California voters and legislators have enacted a number of programs that can save you and your clients substantial amounts on their property taxes. Following is a brief summary of the most important programs and links to more information already published on this site.

FOR HOMEOWNERS AGE 55 PLUS

Proposition 60 – This measure offers anyone over the age of 55 relief from Proposition 13 by allowing them to move within the same county without undergoing a change in their basic property taxes.

Proposition 90 – The same provisions and qualifications as Proposition 60. The difference is that it allows base year transfers from one county to another county in California. The only counties that have adopted an ordinance to allow values from other counties are Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura.

HOMEOWNERS’ EXEMPTIONS

If you owned and occupied your principal place of residence on January 1, you may qualify for a Homeowners’ Exemption that would exempt $7,000 of your property’s value from taxation.

PARENT-CHILD TRANSFERS

Proposition 58 – A Constitutional amendment approved by the voters of California in 1986 to exclude from reassessment transfers of real property between parents and children.

GRANDPARENT-GRANDCHILD TRANSFERS

Proposition 193 – A constitutional amendment approved by the voters of California in 1996 to exclude from reassessment transfers of real property from grandparents and grandchildren, providing that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer.

FOR SEVERELY & PERMANENTLY DISABLED HOMEOWNERS

Proposition 110 – A constitutional amendment approved by the voters of California in 1990 that allows homeowners who are severely and permanently disabled to transfer an existing Prop. 13 factored base year value to a replacement residence if certain qualifying conditions are met. Some counties have not adopted local ordinances to implement Prop. 110. Before attempting to transfer your base year value to another county under the provisions of Prop. 110 you should contact the local County Assessor to discuss eligibility.

FOR BLIND, DISABLED OR SENIOR CITIZENS

Property Tax Postponement – If you are blind, disabled, or at least 62 years of age and meet certain income restrictions, you may defer the payment of property taxes on your house, condominium or mobile home. Under this program, taxes would be paid by the State and the deferred payment would create a lien on the property.

PROPERTY SUBSTANTIALLY DAMAGED BY DISASTER OR PROPERTY TAKEN BY GOVERNMENT ACTION

Proposition 3 – A constitutional amendment approved by the voters of California in 1982 that allows property owners to transfer the Prop. 13 factored base year value of the real property taken by government action to a comparable replacement property located anywhere in California if certain qualifying conditions are met.

Proposition 50 – Taxpayers whose property has been destroyed or damaged in a Governor-declared disaster area can transfer the Prop. 13 base year value to a comparable property.

How Long Should You Save Records?

Posted on April 1, 2018April 18, 2018 by Emi Tsuji

Decluttering your home is great – but what about all those important papers you have stashed around the house? Which ones do you actually need to keep, when can you get rid of them, and where should you put them in the meantime?

This is actually more important than you may imagine as losing or even just misplacing them could cost you serious money.

Below is a list of suggested ways to store these documents and the recommended amount of time to keep them on hand.

For a pdf version of this flyer, please email me at Emi4Title@gmail.com.