Our legislators passed 41 bills affecting the real estate business last year. This is part 3 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.

LAND USE Authorizes any local agency overlying a groundwater basin to decide to become a groundwater sustainability agency for that basin and specifically consider the interests of farmers, ranchers, and dairy professionals. Assembly Bill 321 codified as Water Code § 10723.2. Effective date January 1, 2018.

MANUFACTURED HOMES This law prohibits an owner from being liable for taxes and fees specified in the Manufactured Housing Act of 1980 that accrue after the compliance date if the owner properly endorses and delivers the certificate of title to the transferee and delivers or mails to the Department of Housing and Community Development the completed notice of sale or transfer form developed by the department. Senate Bill 542 codified as Health and Safety Code § 18107. Effective date is January 1, 2018.

MANUFACTURED HOMES All state and local programs designed to facilitate home ownership must now include manufactured homes, to the extent feasible. Senate Bill 329 codified as Government Code 65852.35. Effective January 1, 2018.

MANUFACTURED HOMES The Mobilehome Residency Law governs residency in mobilehome parks and requires the management of a mobilehome park to disclose the name, business address, and business telephone number of the park owner upon a homeowner’s request. Assembly Bill 294 codified as Civil Code § 798.28. Effective date is January 1, 2018.

PACE LIENS CONSUMER PROTECTIONS A “solar energy system” disclosure document that provides a consumer with accurate, clear, and concise information regarding the installation of a solar energy system must be provided prior to completion of a sale. The Public Utilities Commission, on or before July 1, 2019, will develop standardized inputs and assumptions to be used in the calculation and presentation of electric utility bill savings to a consumer. Assembly Bill 1070 codified as Business and Professions Code §§ 7169 and 7170, and Public Utilities Code § 2854.6. Its requirements come into force at various times.

PACE LIENS CONSUMER PROTECTIONS Adopts various consumer protections and best practices recommended by the federal Department of Energy in regard to PACE lien financing and improvements by requiring, among other things, a program administrator, before a property owner executes an assessment contract, to make oral confirmation of various consumer rights. Senate Bill 242 codified as Streets and Highways Code § 5900 et. seq. Effective January 1, 2018.

TAX The fire prevention fee is suspended beginning with the 2017-2018 fiscal year which runs from July 1, 2017, to June 30, 2018. The provision suspending the fee sunsets at the end of 2030. The fire prevention fee is charged on each habitable structure on a parcel within a state fire responsibility area. The fee was typically paid was approximately $117 and was owed by whoever the owner of the property was on July 1 regardless of subsequent transfer. The actual payment of the fee was typically in March, April or May of the following year. This fee is now suspended. Assembly Bill 398 codified as Health and Safety Code §§ 38501, 38562, 38594, 38505.5, 38590.1, 38591.1, 38591.2, 38591.3, 38592.5, and 38592.6; Public Resources Code 4213.05 and 4229; and Revenue and Taxation Code 6377.1. Effective July 1, 2017.

TAX AB 398 strengthens and extends the state’s cap-and-trade program, which would have expired without legislative action. The program, along with other state carbon reduction measures, is intended to ensure that California will meet its SB 32 target to reduce greenhouse gas emissions 40 percent below 1990 levels by 2030. Assembly Bill 398 codified as Health and Safety Code §§ 38501, 38562, 38594, 38505.5, 38590.1, 38591.1, 38591.2, 38591.3, 38592.5, and 38592.6; Public Resources Code 4213.05 and 4229; and Revenue and Taxation Code 6377.1. Effective July 26, 2017.

TAX This new law authorizes the board of supervisors of a county to provide that a tax on real or personal property is not a lien against the property assessed or the person being assessed if the amount of the tax assessed against that property or the person is less than an amount set by that ordinance or resolution, up to $200, excluding any interest, penalties, or other fees. Senate Bill 624 codified as Revenue and Taxation Code § 2191.10. Effective January 1, 2018.

TAX Allows stormwater management assessments by a simple majority as opposed to a 2/3 majority as required by Proposition 218. Senate Bill 231 codified as Government Code §§ 53750 and 53751. Effective January 1, 2018.

TAX Effective July 1, 2017, AB 102 transfers most of the State Board of Equalization’s (SBE) primary administrative, collection and regulatory duties, powers and responsibilities with respect to sales and use taxes and other taxes and fees to a newly formed department – the California Department of Tax and Fee Administration (DTFA). Assembly Bill 102 codified as Government Code §§ 12803.2, 15570 et seq., 15670 et seq., 15600, 15601 15605.5, 15618.5, 15623 and 15609.5; and Revenue and Taxation Code § 20. Effective  July 1, 2017.

TAX – RECORDING TAX REVENUES ALLOCATED TO HOUSING FUND A fee of $75 is imposed at the time of recording of every real estate instrument, paper or notice which is required or permitted to be recorded. The fee shall not exceed $225 per transaction. However, the fee does not burden purchase transactions or sales in general based on the two following exemptions. First, the fee is not imposed for any document recorded in connection with a transfer of real property that is a residential dwelling to an owner-occupant. Second, the fee is not imposed whenever a documentary transfer tax (DTT) must be paid which is whenever real property is sold for valuable consideration. The most common circumstances when the fee would be imposed would be on a refinance or reconveyance. Senate Bill 2 codified as Government Code § 27388.1 and Health and Safety Code § 50470 et. seq. Effective January 1, 2018.

WOOD-BURNING STOVES New program to provide incentives for the voluntary replacement of older wood-burning stoves. Senate Bill 563 codified as Health and Safety Code § 39733. Effective January 1, 2018, but there is no deadline for when the program would actually be implemented.

Click HERE  and select REGISTER to get started with Fidelity Vault

The phrase “life estate” often comes up in discussions of estate and Medicaid planning, but what exactly does it mean? A life estate is a form of joint ownership that allows one person to remain in a house until his or her death when it passes to the other owner. Life estates can be used to avoid probate and to give a house to children without giving up the ability to live in it.  They also can play an important role in Medicaid planning.

The Basics

In a life estate, two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the remainderman — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out, and make improvements to it.

What Happens at Death of the Life Tenant

When the life tenant dies, the house will not go through probate, since at the life tenant’s death the ownership will pass automatically to the holders of the remainder interest. Because the property is not included in the life tenant’s probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets. Even if the state does place a lien on the property to recoup Medicaid costs, the lien will be for the value of the life estate, not the full value of the property.

What about Taxes?

Although the property will not be included in the probate estate, it will be included in the taxable estate. Depending on the size of the estate and the state’s estate tax threshold, the property may be subject to estate taxation.

What Happens when the Property is Sold?

The life tenant cannot sell or mortgage the property without the agreement of the remaindermen. If the property is sold, the proceeds are divided up between the life tenant and the remaindermen. The shares are determined based on the life tenant’s age at the time — the older the life tenant, the smaller his or her share, and the larger the share of the remaindermen.

What if I Encounter a Listing with a Life Estate?

If you encounter a listing or sale involving a Life Estate, contact me to discuss your options so we can insure your property without any glitches.

The Medicaid Problem

Be aware that transferring your property and retaining a life estate can trigger a Medicaid ineligibility period if you apply for Medicaid within five years of the transfer. Purchasing a life estate should not result in a transfer penalty if you buy a life estate in someone else’s home, pay an appropriate amount for the property and live in the house for more than a year.

For example, an elderly man who can no longer live in his home might sell the home and use the proceeds to buy a home for himself and his son and daughter-in-law, with the father holding a life estate and the younger couple as the remaindermen. Alternatively, the father could purchase a life estate interest in the children’s existing home. Assuming the father lives in the home for more than a year and he paid a fair amount for the life estate, the purchase of the life estate should not be a disqualifying transfer for Medicaid.  Just be aware that there may be some local variations on how this is applied, so check with your attorney.

This post was originally published by elderlawanswers.com.

The California Mechanics’ Lien law provides special protection to contractors, subcontractors, laborers, and suppliers who furnish labor or materials to repair, remodel or build your home.

If any of these people are not paid for the services or materials they have provided, your home may be subject to a mechanics’ lien and eventual sale in a legal proceeding to enforce the lien. This result can occur even where full payment for the work of improvement has been made by the homeowner.

In a Nutshell

The mechanics’ lien is a right that California gives to workers and suppliers to record a lien to ensure payment. This lien may be recorded where the property owner has paid the contractor in full and the contractor then fails to pay the subcontractors, suppliers, or laborers. Thus, in the worst case, a homeowner may actually end up paying twice for the same work.

Is That Fair?

Why, you may ask, can a homeowner be placed in the impossible situation of having to pay twice for the same work? The answer lies in the Constitution and laws of California. The overriding theory behind the mechanics’ lien law is that between two potentially blameless parties, the homeowner who has ordered the work and made full payment of the agreed amount and obtained the value of the work is in a better position to bear the loss than the laborer or supplier who has provided work or materials to the job site and has not been paid for his efforts by the contractor. It is the homeowner who bears the ultimate responsibility for making payment for services rendered.

How Can That Be Justified?

The theory is that the value of the property upon which the labor or materials have been bestowed has been increased by virtue of these efforts and the homeowner who has reaped this benefit is required in return to act as the ultimate guarantor of full payment to the persons responsible for this increase in value. In practice, a homeowner faced with a valid mechanics’ lien may be compelled to pay the lien claimant and then pursue conventional legal remedies against the contractor or subcontractor who initially failed to pay the lien claimant but who himself was paid by the homeowner. Another justification for this result relates to the relative financial strengths of the parties to a work of improvement. The law views the property owner as being in a better situation to absorb the financial setback occasioned by having to pay the amount of a valid mechanics’ lien, as opposed to a laborer or materialman who is viewed as being less able to absorb the financial burdens occasioned by not being paid for services or materials provided in connection with a work of improvement.

How Do I Protect Myself?

The best protection against these claims is for the homeowner to employ reputable firms with sufficient experience and capital and/or require completion and payment bonding of the construction work. The issuance of checks payable jointly to the contractor, material-men and suppliers is another protective measure, as is the careful disbursement of funds in phases based upon the percentage of completion of the project at a given point in the construction process. The protection offered by mechanics’ lien releases can also be helpful.

Now, What Do I Do?

Even if a mechanics’ lien is recorded against your property you may be able to resolve the problem without further payment to the lien claimant. This possibility exists where the proper procedure for establishing the lien was not followed. While it is true that mechanics’ liens may be recorded by persons who have provided labor, services, or materials to a job site, each is required to strictly adhere to a well-established procedure in order to create a valid mechanics’ lien.

Maybe All Is Not Lost

Needless to say, this is one area of the law that is very complex, thus it may be worthwhile to consult an attorney if you become aware that a mechanics’ lien has been recorded against your property. In the event you discover that a lien has been recorded but no effort has been made to enforce the lien, a title company may decide to ignore the lien. However, be prepared to be presented with a positive plan to eliminate the title problems created by this type of lien. This may be accomplished by means of a recorded mechanics’ lien release from the person who created the lien or other measures acceptable to the title company.

A Word to the Wise

As in all areas of the real estate field, the best advice is to investigate the quality, integrity, and business reputation of the firm with which you are dealing. Once you are satisfied you are dealing with a reputable company and before you begin your construction project, discuss your concerns about possible mechanics’ lien problems and work out, in advance, a method of ensuring that they will not occur

Propositions 60 and 90

These constitutional tax initiatives allow senior citizens to transfer the trended base value from their current home to a replacement property if certain requirements are met. This may result in substantial tax savings.

Who Qualifies?

If you or your spouse that resides with you are age 55 or older, you may buy or construct a new home of equal or lesser value than your existing home and transfer the trended base value to your new property.

This is a one-time only benefit. You must buy or complete construction of your replacement home within two years of the sale of the original property. Both the original
home and the new home must be your principal place of residence. A claim must be
filed within three years of purchasing or completing new construction of the replacement property. If a claim is filed after the three-year period, relief will be granted beginning with the calendar year in which the claim was filed.

Once you have filed and received this tax relief, neither you nor your spouse who resides with you can ever file again.

Eligibility Requirements:

1. The replacement property must be your principal residence and must be eligible for the Homeowners’ Exemption or Disabled Veterans’ Exemption.
2. The replacement property must be of equal or lesser “current market value” than the original property. The “equal or lesser” test is applied to the entire replacement residence, even if the owner of the original property acquires only a partial interest in the replacement residence. Owners of two qualifying original residences may not combine the values of those properties in order to qualify for a Proposition 60 base-year transfer to a replacement residence of greater value than the more valuable of the two original residences.
3. The replacement property must be purchased or built within two years (before or after) of the sale of the original property.
4. Your original property must have been eligible for the Homeowners’ or Disabled Veterans’ Exemption.
5. You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.

Frequently asked questions

What is the difference between Proposition 60 and Proposition 90?

Proposition 60 relates to transfers within the same county (intra-county). Proposition 90 relates to transfers of base value from one county to another county in California (inter-county).

If I qualify for Proposition 60/90 benefits, do I still need to file for a Homeowner’s Exemption on the replacement property?

Yes. Homeowners’ Exemptions are not granted automatically.

What is the Proposition 60/90 filing deadline?

A claim must be filed within three years of purchasing or completing new construction of the replacement property.

If a claim is filed after the three-year period, relief will be granted beginning with the calendar year in which the claim was filed.

My original home is located outside Los Angeles County, but my replacement home is in Los Angeles County. Do I qualify for relief?

Yes.

I plan to relocate from Los Angeles County to another county. Do I qualify for relief?

You may qualify for relief. Other counties in California have passed ordinances enabling Proposition 90. We recommend that you contact the county to which you wish to move regarding Proposition 90 eligibility.

Do all replacement homes qualify?

If you meet all other eligibility requirements, relief is granted for a single family residence, condominium, unit in planned development, cooperative housing, community apartment, manufactured home subject to local real property tax, and living unit within a larger structure consisting of both residential and non-residential accommodations.

If I make an improvement to my replacement home within two years of purchase, can I get additional tax relief for the new construction?

Yes, as long as the total amount of your purchase and the new construction does not exceed the market value of the original property at the time of the sale.

What does “equal or lesser value” of a replacement property mean?

The meaning of “equal or lesser value” depends on when you purchase the replacement property. In general, equal or lesser value means:

 100% or less of the market value of the original property if a replacement property was purchased or newly constructed before the sale of the original property, or

 105% or less of the market value of the original property if a replacement property was purchased or newly constructed within the first year after the sale of the original property, or

 • 110% or less of the market value of the original property if a replacement property was purchased or newly constructed within the second year after the sale of the original property.

When making the “equal or lesser value” test, it is important to understand that the market value of a property is not necessarily the same as the sale or purchase price.

The Assessor will determine the market value of each property. In some new developments, the indicated sale price does not include upgrades paid for outside of escrow. The Assessor must consider the value of these upgrades when determining the market value of the property. If the market value of your replacement dwelling exceeds the “equal or lesser value” test, no relief is available. It is “all or nothing” with no partial benefits granted.

Can I give my original home to my son or daughter and still get Proposition 60/90 benefits when I purchase a replacement property?

No. An original property must be sold and subject to reappraisal at full market value.

If an original property has multiple owners, can Proposition 60/90 tax relief be split?

No. The co-owners must determine between themselves which one will get the benefit. Only one original owner can claim Proposition 60/90 tax relief.

How does the “equal or lesser value” test apply if my original property is a multi-unit dwelling?

The “equal or lesser value” test applies to the original single unit that the homeowner calls their principal residence. The market value of the replacement property has to be of “equal or lesser value” to the market value of the original single unit. An example would be one unit of a duplex.