New Real Estate Laws for 2018 – Part 1 of 3

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 for California laws – or – 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.

RampDISCLOSURES 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.

Roofing InspectionDISCLOSURES 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.

Graphic:  DRE LogoGOVERNMENT 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.

Swimming Pool SafetyHOME 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.

Severely and Permanently Disabled Resident Exclusion

Proposition 110

Proposition 1101 is a constitutional initiative passed by California voters that provides property tax relief for severely and permanently disabled claimants when they sell an existing home and buy or build another. It allows the transfer of the base-year value of their existing home to a newly purchased or constructed home within select counties in the State of California. In addition, the initiative also provides relief for modifications that make a home more accessible for a severely disabled person.

Who Qualifies?

If you or your spouse that lives with you are severely and permanently disabled2, you can buy a home of equal or lesser value than your existing home and transfer the trended base year value of your existing home to your new property. Also, you can modify your current home as long as the modifications directly satisfy disability requirements.

The transfer of a trended base value from one property to another is a one-time benefit only. You must buy or newly construct a replacement property within two years of the sale of the original property. Both the original property and the replacement property must be your principal place of residence, and you must file your claim within three years to receive retroactive relief following the purchase or completion of new construction of your replacement property. Once you have filed and received this tax relief, neither you nor your spouse who resides with you will qualify to receive this benefit again.

If a person has been granted a Proposition 60/90 benefit and subsequently becomes severely and permanently disabled, he/she may also qualify for a Proposition 110 benefit.

1 For expanded definitions of Proposition 110, see Revenue and Taxation (R&T) Code Sections 69.5 and 74.3. It is available online at

2 The Revenue and Taxation Code defines “a severely and permanently disabled person” as any person who has a physical disability or impairment which results in a functional limitation as to employment, or substantially limits one or more major life activities of that person, and which has been diagnosed as permanently affecting the person’s ability to function.

Eligibility Requirements

  1. Both your original and replacement property must be eligible for the homeowners’ or disabled veterans’ exemption and the replacement property must be your principal residence.
  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 though the owner of the original property may acquire 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 110 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.  To receive retroactive relief from the date of transfer, you must file your claim within three years following the purchase or completion of new construction of the replacement property.  A claim that is filed after the three-year filing period may receive the benefits commencing with the lien date of the assessment year in which the claim is filed.
  4. You or a spouse residing with you must be severely and permanently disabled when the original property was either sold or modifications were completed.
  5. The disabled person, spouse or legal guardian must submit a Physician’s Certificate of Disability (Form OWN-107)with the claim.


Frequently Asked Questions

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


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

You may qualify for relief. As of June 5, 2015, the following counties in California have an ordinance enabling Proposition 110:

  • Alameda
  • El Dorado
  • Los Angeles
  • Orange
  • Riverside
  • San Bernardino
  • San Diego
  • San Mateo
  • Santa Clara
  • Tuolumne
  • Ventura

Since the counties indicated above are subject to change, we recommend contacting the county to which you wish to move to verify Proposition 110 eligibility.

Do all replacement homes qualify?

If you meet all other eligibility requirements, relief is granted for single family residences, condominiums, units in planned developments, cooperative housing, community apartments, manufactured homes subject to local real property tax, and living units 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 its 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 the following:

100% or less of the market value of the original property if a replacement property is purchased or newly constructed before the original property is sold, or

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

110% or less of the market value of the original property if a replacement property is purchased or newly constructed within the second year after the original property is sold.

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/purchase price. The Assessor will determine the market value of each property. If the market value of your replacement property exceeds the “equal or lesser value” test, no relief is available. It is “all or nothing” with no partial benefits granted.

If I qualify for Proposition 110 benefits, do I still need to file for a Homeowners’ Exemption on the replacement property?

Yes. Homeowners’ exemptions are not automatically granted.

Does the owner of a home that is modified to make it more accessible need to be disabled to qualify for Proposition 110 benefits?

No. The severely and permanently disabled person need only be a permanent resident of the dwelling.

What tax relief is available for homes modified to improve accessibility?

If qualified, the value of the improvement, addition, modification, or feature that specially adapts a home’s accessibility for a severely and permanently disabled person is excluded from property tax assessment.

Living Room

Vesting Options for Married Couples

There are three ways a married couple can take title to real property in California:

  • As Joint Tenants
  • As Community Property
  • As Community Property with Right of Survivorship

The key distinguishing feature of these options is what happens when one spouse dies. This article explains what happens under all three scenarios in the following areas:

  • How the property is vested
  • How the tax basis of the property is stepped up.

Vesting upon the death of one spouse

When title is taken as Joint Tenants or As Community Property with Right of Survivorship and one spouse dies, the surviving spouse automatically receives the property. This is called a right of survivorship. (Although the property does not go through any probate proceedings, the surviving spouse must still file an affidavit of death of joint tenant to remove the deceased’s name from the deed.)

When title is taken as Community Property however, and one spouse dies, there is no right of survivorship and the surviving spouse does not automatically receive title to the property. If the deceased spouse died without a will, the deceased spouse’s interest in the community property would go to the surviving spouse. If there was a will, the deceased spouse’s interest would be handled as outlined in the will. In other words, each spouse has ownership of their half of the community property and can leave it by will to their surviving spouse or any other third party.

One way of looking at the death scenario is that Joint Tenancy and Community Property with Right of Survivorship have more certainty and Community Property has more flexibility.


How the Tax Basis of the Property is Stepped Up

If property is held as Joint Tenants, the tax basis of the deceased spouse’s half interest would be “stepped-up” to the fair market value at the time of his/her death. The tax basis of the surviving spouse’s half interest would remain at its original basis.

  • For example: Husband and Wife purchased their house for $100,000 with each spouse’s tax basis at $50,000. At the date of Husband’s death, the property’s fair market value was $200,000. Since they held the property in joint tenancy, Wife automatically received Husband’s half interest upon his death.
  • Husband’s half interest tax basis (originally $50,000) is “stepped-up” to the fair market value at his death (i.e. $100,000).
  • Wife then has property worth $200,000 with a tax basis of $150,000 (her original $50,000 basis plus her deceased husband’s stepped up basis of $100,000). If the property were sold for $200,000, there would be $50,000 of taxable gain.

If title is taken as Community Property or as Community Property with Right of Survivorship, however, the entire property receives a “stepped-up” basis to the fair market value at the date of one spouse’s death.For example: Assume the same $100,000 purchase and $200,000 value at

  • For example: Assume the same $100,000 purchase and $200,000 value at date of death and further assume Husband’s willed his interest to Wife. Wife’s original $50,000 basis gets stepped-up along with Husband’s original $50,000 basis to the current $200,000 fair market value.
  • Wife then has property worth $200,000 with a basis of $200,000. If the property were sold for $200,000, there would be no taxable gain.

Your Partners in this Decision

As with any form of title, there are tax and other legal consequences that must be considered by husbands and wives choosing how to take title. The decision should not be made until parties have consulted with their attorney and tax advisor.




New California Laws for 2017 – Part II

FHA_homeownership_logoFHA 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.

solaria-water-meter-roomLANDLORD/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 HomeMOBILE 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.



New California Laws for 2017 – Part I


Advertising – Uniform Standards AB 1650  creates uniform advertising standards across a variety of media and types.

Beginning January 1, 2018, all first point of contact solicitation materials must include:

  • the name and number of the licensee and
  • the responsible broker’s “identity,” meaning the name under which the broker is currently licensed by the BRE and conducts business in general or is a substantial division of the real estate f The broker’s license number is optional.

There is no longer an exception for advertisements in print or electronic media; or for newspapers and magazines. However, “for sale,” “open house,” rent, lease, and directional signs that contain no licensee information or only the broker’s information are OK.


ADVERTISING Team Names SB 710 corrects existing law regulating team name and agent-owned DBA advertising such that only the responsible broker’s name must be displayed alongside the team name or agent-owned DBA. The display of the responsible broker’s license number is optional.


BROKER ASSOCIATES Searchable Information AB 2330  Beginning January 1, 2018, CalBRE’s public licensee information, as provided on CalBRE’s website, will indicate whether a licensee is an “associate licensee” and, if the associate licensee is a broker will identify each responsible broker with whom the licensee is contractually associated.

Additionally, this law requires the responsible broker to immediately notify CalBRE in writing whenever a broker-associate is hired or terminated.


COMMON INTEREST DEVELOPMENTS  Owner to Provide Contact Information to HOA SB 918 Requires the owner of a separate interest in a common interest development to annually provide the association with specified written information for the purpose of receiving notices from the association.

1)  Requires an owner of a separate interest to, on an annual basis, provide written notice to the association of all of the following:

  • The address or addresses to which notices from the association are to be delivered;
  • An alternate or secondary address to which notices from the association are to be delivered;
  • The name and address of an owner’s legal representative, if any, including any person with power of attorney or other person who can be contacted in the event of the owner’s extended absence from the separate interest; and
  • Whether the separate interest is owner-occupied, is rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land.

2)  Requires an association to solicit annual notices of each owner and, at least 30 days prior to making certain required disclosures, enter the data into its books and records.

  • Specifies that if an owner fails to provide the information specified in the above provision, the property address shall be deemed to be the mailing address to which notices are to be deliver

DISCIPLINARY ACTION RECORDS Petition Process to Remove Disciplinary Action Records from Public Profile after 10 Years  AB 1807 creates a process by which beginning January 1, 2018, a licensee may petition CalBRE to remove a past disciplinary action record from his or her online profile after 10 years. CalBRE retains discretion to grant the petition.


DISCLOSURES Death of Occupant Rule Clarified The existing law concerning disclosure of death of an occupant is clarified by AB 73  to say that the death of an occupant, or the manner of death, occurring more than three years prior to an offer to purchase is not a material fact which requires disclosure.


DISCLOSURES Liability Protections of Environmental Hazards Booklet Extended to Landlords

Liability protections for delivery of the Residential Environmental Hazards booklet extended to include leases of more than one year.

 AB 1750 clarifies that the liability protections for delivery of the Residential Environmental Hazards booklet extend to leases of more than one year’s duration. Under Civil Code 2079.7 when a seller or broker elects to deliver this booklet the information is deemed legally adequate to inform the transferee regarding common environmental hazards such as asbestos, formaldehyde, hazardous waste, household hazardous waste, lead, mold and radon, and additional general information on these issues is not required (unless the broker or seller has actual knowledge). This protection now includes leases of more than one year. The delivery of this booklet is optional.

The booklet is intended for “consumers” and is described as a “consumer information booklet.” Nonetheless the new law would make its protections applicable to “real property” which includes all commercial and vacant land properties, but not multi-unit residential rentals of five units or more.

LICENSING Eliminates References to “Salesmen”; Issuance of License for Person Previously cited  “Real estate salesman” is now renamed “real estate person” in the real estate law.

Prohibits issuance of a real estate license to a person who was cited for the illegal practice of real estate and either the terms of the citation have not been complied with or an unpaid fine remains outstanding.

The Real Estate Law includes outdated terminology that does not reflect both genders. AB 685 makes some necessary technical corrections, which include eliminating references to “salesman” and “salesmen” and instead replacing those with “salesperson” and “salespersons,” respectively.

billboards-art-blah-2014LICENSING Outdoor Advertising Exemption AB 1381 An “outdoor advertising representative,” defined as an employee of a corporation that holds an outdoor advertising business license, is exempt from BRE licensing requirements when arranging for lease or transfer of real property which is solely for the placement of an advertising display and where the owner or operator of the advertising display meets minimum insurance requirements.

An “outdoor advertising representative” is excluded from BRE licensing requirements in connection with specified transactions.


LICENSING Retired Status Any board under the Department of Consumer Affairs (DCA),

including the Bureau of Real Estate, may establish the category of “retired” licensees.

AB 2859 would authorize any of the boards within the DCA to establish by regulation a system for a retired category of license for persons who are not actively engaged in the practice of their profession or vocation. This law does not require boards to offer a retired license.

TAX Parcel Tax Vote Notification Requires notice of a new parcel tax to the owner, if that owner does not reside within the jurisdictional boundaries of the taxing entity. Under current law, resident property owners receive notice of proposed parcel taxes with receipt of their ballot pamphlet while non-resident property owners do not receive any notice whatsoever.

AB 2476 requires that non-resident owners be provided with notice of a new parcel tax which includes (1) The amount or rate of the parcel tax in sufficient detail to allow each property owner to calculate the amount of the tax to be levied against the owner’s property. (2) The method and frequency for collecting the parcel tax, and the duration of time during which the parcel tax will be imposed. (3) The telephone number and address of an individual, office, or organization that interested persons may contact to receive additional information about the parcel tax.

misting-and-oversprayWATER USE Fines may be imposed for “excessive water use.” SB 814 requires each
public/private urban retail water supplier to define “excessive water use” by a residential customer and permits these water suppliers to fine residential customers up to $500 per 748 gallons (100 cubic feet) of water used above the defined local standard for excessive water use during a drought emergency.


Red Flags in the Title/Escrow Process – Part II

A “red flag” is a signal to pay attention! Below are some of the items which may cause delays or other problems within a transaction and must be addressed well before the closing.

  • Bankruptcies
  • Business trusts
  • Clearing liens and judgments, including child or spousal support liens
  • Encroachment or off record easements
  • Establishing fact of death–joint tenancy Family trusts
  • Foreclosures
  • Physical inspection results–Encroachment, off-record easements
  • Probates
  • Power of Attorney–Use of, proper execution
  • Proper execution of documents
  • Proper jurats, notary seals
  • Recent construction
  • Transfers or loans involving corporations or partnerships
  • Last minute change in buyers
  • Last minute change in type of title insurance coverage




AGREEMENTS: These commonly take the form of road maintenance agreements, mutual easement agreements (like a shared driveway) or improvement agreements, and will bind the owner to certain actions. A copy of the agreement should be requested from title and provided to the buyer. It is the buyer’s responsibility to contact their own counsel if they do not understand how the agreement would affect them.

These are common. Escrow will order a demand from the lender(s) which will allow the title company to pay off the existing loan(s) using the proceeds from the new buyer’s loan (or proceeds if all cash).

small-red-flagRED FLAG: Watch out for old trust deeds from a previous owner (or sometimes the current owner if he has refinanced). If you find a trust deed listed that has already been paid, or that looks like it was taken out by a previous owner, call your title officer immediately. He will research the trust deed, and take the necessary steps to either remove it from the public record (by working with escrow to get release documents) or by acquiring an “indemnity” from the title company who paid off the old loan. Old trust deeds with private party beneficiaries (individual people acting as lender, such as an old seller carry-back) are difficult to get removed, especially if several years have gone by since the loan has been paid off. A bond will sometimes be necessary in order to clear title of an old trust deed. These bonds must be covering twice the face value of the deed of trust, and will cost upwards from 1% of the bond amount (usually around 2 or 3 percent, more for higher risk bonds), depending on how much supporting documentation is provided to the bonding company. Note: If you have a client/buyer who is getting financing from the seller, or any individual, advise them to contact you or their title officer when the loan is being paid off. The release documents are much easier to get now rather than in a few years when the lender may no longer be around.

ENCROACHEMENTS: Sometimes a structure (commonly a fence or driveway) encroaches upon a property. This usually means that a client will have to take the property subject to the encroachment. Contact your title officer if you see encroachment language in your prelim.

small-red-flagRED FLAG: The lender will usually not want to lend on a property where encroachments exist. In some circumstances, an endorsement to the lender’s policy (usually with an extra charge) can allow the lender to close. These are determined on a case-by case basis. Again, contact your title officer


For Smooth Sailing…


If you find something on your prelim that is not listed in this series here, it is probably a red flag and you should contact your title officer. He (or she) will be happy to provide you with copies of recorded documents and advise you as to what is needed in order to remove the item (if necessary). Sometimes, though, removing an item is so time consuming, costly, or both, that it becomes a decision on the part of your buyer. We cannot advise you regarding the risk in making such a decision. You should contact your own counsel if you have these types of concerns.

Common Title Endorsements

title endorsement is an addition or limitation of coverage that is attached to a title insurance policy. Endorsements provide coverage that tailors the policy to fit the needs of the insured for a specific transaction.

Following are common endorsements you will find.

100-06 – Restrictions, Encroachments & Minerals

This endorsement offers an explicit extension of coverage to an ALTA Extended Coverage Loan Policy by adding insurance for certain recorded and “off-record” matters. The coverage is extended for Covenants, Conditions, and Restrictions (CC&Rs): encroachments and the rights to use the land surface for mineral developments. This endorsement is not issued in conjunction with policies covering raw land or construction loans.

100.12-06 – CC&R’s, Right of Reversion

Also used with ALTA policies. Form 100.12 assures a lender or owner that existing CC&Rs do not contain any enforceable reverter, right of re-entry or power of termination.

100.18-06  – CC&R’s, Right of Reversion

Provides insured ALTA lender or owner with coverage against loss by reason of the exercise or attempt to exercise reverter rights in CC&Rs.

100.23-06  – Minerals, Surface Damage

Provides insured ALTA lender with coverage against loss by reason of the exercise of surface rights for the extraction or redevelopment of minerals leased under an oil gas lease.

100.29-06  – Minerals, Surface Damage

Provides insured ALTA lender with coverage against loss by reason of the exercise of surface rights for the extraction or redevelopment of minerals expected from the description of the land or shown as a reservation in Schedule B.

103.1-06  – Easement – Damage or Enforced Removal

Provides insured lender with coverage against loss by reason of the exercise of the right of use or maintenance or a particular easement by the easement holder.

 103.3-06 – Encroachments, None Exist

Provides insured lender with coverage against loss by reason of the forced removal of improvements which encroach upon a particular easements.

103.7-06 – Land Abuts Street

Provides insured owner or lender with assurance that the land described in Schedule A abuts upon a specific, physically open public street.

104.1-06 – Assignment of Mortgage

Provides assignee of the insured mortgage with assurance concerning (a) validity of a recorded assignment transferring the beneficial interest to the named assured assignee: and (b) full or partial reconveyances, modification or subordination of the insured mortgage.

110.5-06 – Modification of Mortgage

Provides insured ALTA lender with assurance concerning proper modification of the insured mortgage, including express priority coverage.

110.9-06 – Environmental Protection Lien

Provides insured ALTA residential lender with coverage against loss by reason of lack of priority over (a) any federal or state environmental protection set forth in Schedule B, and (b) any state environmental protection lien providing for by any state stature in effect at Date of Policy, except as provided for by state statues specified in the endorsement.

111.10-06 – Revolving Credit Loan – Optional Advance

Assured lender that future advances made under a “revolution line of credit” shall have the same priority as do advanced made as of Date of Policy.

111.5-06 – Variable Rate Mortgage

Provides insured ALTA variable rate mortgage lender with coverage against loss by reason of (a) invalidity or unenforceability of the insured mortgage resulting from the terms therein providing for changes in the rate of interest, or (b) loss of priority of the insured mortgage lien caused by the changed in the rage of interest, unpaid interest added to principal and/or interests on interest.

115-06 – Condominium

Provides insured lender with assurance that the estate or interest covered by the policy is a condominium, in fee, and such is entitled to be assessed and taxed as a separate parcel.

116-06 – Designation of Improvements, Address

An Address Endorsement used with ALTA policies, designating the street address of the land insured and specifying the type of improvements on said land

Prop 13 – Did you know…?

Those who have owned their homes for a while, easily see the value of Proposition 13. Many of us remember that before Proposition 13 the average property tax rate in California was three percent of assessed value and there was no limit on annual increases. In those days, if a house on your block sold for much more than you paid for your house, you shuddered in fear when you received your next property tax bill. Chances are, your new taxes would be based on what your new neighbor was willing to pay for his home. Things got so bad in the late 1970’s that people were actually losing their homes because of uncontrolled tax increases.

The assessment rate is now only one percent for all California property and annual tax increases are limited to no more than two percent. When property is sold it is then reassessed at market value, but the rate remains at one percent and the new owner is then protected by the two percent cap on annual increases.

What good is Proposition 13 to me?

Every owner of property in the state is covered. Proposition 13 is Article XIII A of the California Constitution.

How come I’m paying more in property taxes than some of my neighbors who have similar houses?

Under Proposition 13 you determine how much your property taxes will be. Your taxes are not based on your neighbors’, but are based on the price you voluntarily agreed to pay for your new home.

We all get the same services, but I pay more. How can this be fair?

In California, just like other states, services have never been related to the amount you pay in property taxes. If services were tied to what you paid, you might see four fire trucks assigned to a costly home while only one would protect a less expensive residence. In fact, property taxes are not allocated for specific services. They go into the general fund along with other taxes and it is local public officials who determine how the money will be spent.

Houses of taxesIt still seems like I’m paying too much!

We all feel that way, but in fact, thanks to Proposition 13, the tax rate for all Californians is only a third of what it was. If you think things are bad now, multiply your tax bill by three and see what you get.

That’s easy for your to say, you’re still paying less than I am.

That may be true, but I’ve been paying for years. It’s the neighbors that were here ahead of you that paid for all these local improvements you now enjoy.

I still don’t see what good Proposition 13 is to me.

Besides your lower tax rate, it makes your taxes predictable. In a few years when new houses sell in the neighborhood for two or three times what you paid, you will be protected. Under Proposition 13 your property taxes can’t go up more than two percent a year. You are going to find that very important when you get around to planning your retirement. If you ever find yourself on a fixed income, chances are, because of Proposition 13, you’ll be able to keep your home.

How to Hold Title

Individuals either in Sole Ownership or in Co-Ownership may hold title to real property in California. Co-Ownership of real property occurs when two or more persons hold title. There are several variations as to how title may be held in each type of ownership. The following brief summaries reference some of the more common examples of Sole Ownership and Co-Ownership.


A Single Man/Woman

This is reserved for a man or woman who is not and has never been legally married.

Example: John Doe, a single man

Single Woman-Home-BuyerAn Unmarried Man/Woman

A man or woman, who having been married is legally divorced

Example: Joe Doe, an unmarried man

 A Married Man/Woman, as His/Her Sole and Separate Property

When a married man or woman wishes to acquire title in his or her name alone, the spouse must consent, by quitclaim deed or otherwise, to the transfer thereby relinquishing all right, title and interest in the property.

Example: John Doe, a married man, as his sole and separate property


 Community Property

The California Civil Code defines community property as property acquired by husband and wife, or by either. Real property conveyed to a married man or woman is presumed to be community property, unless otherwise stated. Under community property, both spouses have the right to dispose of one half of the community property. If a spouse does not exercise his/her right to dispose of one-half to someone other than his/her spouse, then the one-half will go to the surviving spouse without administration. If a spouse exercises his/her right to dispose of one-half, that half is subject to administration in the estate.

Example: John Doe and Mary Doe, husband and wife, as community property

Example: John Doe and Mary Doe, husband and wife

Example: John Doe, a married man

Joint Tenancy

A joint tenancy estate is defined in the Civil Code as follows: “A joint interest is one owned by two or more persons in equal shares, by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy.” A chief characteristic of joint tenancy property is the right of survivorship. When a joint tenant dies, title to the property immediately vests in the surviving joint tenant(s). As a consequence, joint tenancy property is not subject to

disposition by will. Example: John Doe and Mary Doe, husband and wife, as joint tenants 

Tenancy in Common

Under tenancy in common, the co-owners own undivided interests, but unlike joint tenancy, these interests need not be equal in quantity or duration, and may arise at different times. There is no right of survivorship; each tenant owns an interest which, on his or her death, vests in his or her heirs or devisees. Example: John Doe, a single man, as to an undivided 3/4th interest, and George Smith, a single man, as to an undivided 1/4th interest; as tenants in common.


Title to real property in California may be held in a title holding trust. The trust holds legal and equitable title to the real estate. The trustee holds title for the trustor/beneficiary who retains all of the management rights and responsibilities.

Community Property with Right of Survivorship

CommAsian couple in front of their houseunity Property of a husband and wife, when expressly declared in the transfer document to be community property with the right of survivorship, and which may be accepted in writing on the face of the document by a statement signed or initialed by the grantees, shall, upon the death of one of the spouses, pass to the survivor, without administration, subject to the same procedures as property held in joint tenancy.

The preceding summaries are a few of the more common ways to take title to real property in California and are provided for informational purposes only. For a more comprehensive understanding of the legal and tax consequences, appropriate consultation is recommended. There are significant tax and legal consequences on how you hold title. We strongly suggest contacting an attorney and/or CPA for specific advice on how you should actually vest your title.