For a total list of all the real estate laws digested by first tuesday for the 2009-2010 legislative session, click here.
Topics:
- Tax requirements for reviving a limited partnership
- Loan agreements secured by real estate to be provided in translation
- Limits on HOA fees
- HOA CC&Rs may not prohibit water-efficient landscaping
- Transfer taxes and notice in change of ownership
- New regulations for assessment reduction services
- Financing energy efficiency
- Property is nuisance if it is inhabited by tenants found guilty of counterfeiting
- Common interest development management must provide written disclosures to members
- Escrow agent licensing
- Regulation of water pollution — water softeners
- Impounds may be mandated on Regulation Z loans or their modification
Reported by Giang Hoang-Burdette
Tax requirements for reviving a limited partnership
Corporations Code §15902.09 and Revenue & Taxation Code §19591
Amended by A.B. 1546
Effective January 1, 2010
A cancelled domestic limited partnership must now file tax returns for each taxable year between the cancellation of its certificate and its revival before it will be issued a certificate of revival.
A specialized tax service fee of $100 will be charged for a letter for confirmation of limited partnership revival for requests made prior to January 1, 2011. On or after January 1, 2011, the fee will be set by regulation in keeping with the costs for providing the specialized tax service.
Loan agreements secured by real estate to be provided in translation
Civil Code §1632.5
Amended by A.B. 1160
Effective the later of July 1, 2010 or 90 days after the creation of the form referenced below*
Any bank, savings association or credit union negotiates a loan agreement in Spanish, Chinese, Tagalog, Vietnamese or Korean, a translated version of the loan agreement must be provided to the borrower no later than three days after the receipt of the written application. If any of the terms of the loan agreement change after the translated version is provided but prior to the loan closing, a translated version of the updated agreement must be provided to the borrower.
This section does not apply to a bank, savings association or credit union which negotiates primarily in one of the above languages if:
- the negotiating party uses his own interpreter;
- the interpreter is not a minor;
- the interpreter is fluent in English and the language of the negotiations; and
- the interpreter is not an employee of the bank, savings association or credit union.
A translated form does not need to translate any of the following:
- names and titles;
- addresses;
- brand names, trade names, trademarks or registered service marks;
- full or abbreviated designations of the make or model of goods;
- alphanumeric codes; or
- individual words or expressions with no non-English translations.
The contract in English will control the rights and obligations of the parties. The translated version will be admissible as evidence in case of a substantial difference in the material conditions of the agreement.
Failure to provide a translated loan agreement may result in a penalty of:
- $2,500 for the first violation;
- $5,000 for the second violation; and
- $10,000 for each subsequent violation.
Licensing agencies have the authority to enforce this provision, including investigating and examining books and records. Reasonable charges for these activities may be charged. Any bank, savings association or credit union which violates this provision will be considered to be in violation of its licensing law.
The Department of Corporations and the Department of Financial Institutions will create a form summarizing the terms of a mortgage loan. This form will be made available in each of the preceding languages. *
These provisions do not apply to federally chartered banks, savings associations or credit unions, or real estate brokers.
Reported by Nick Love
California Civil Code §1366.4
Added by A.B. 313
Effective: January 1, 2010
A homeowners’ association (HOA) cannot assess fees on individual units within a common interest development (CID) based on the assessed value of the units as set by the county assessor unless on or before December 31, 2009, the HOA assessments were already based on those assessed values.
An HOA that is responsible for paying taxes on individual units within a CID is an exception and may charge fees on the separate units related to the HOA’s payment of property taxes for those units.
Editor’s Note – HOA assessments have nothing to do with the time a unit was purchased as that moment bears no relationship to the current costs of maintaining the unit compared to all other units of equal size that require equal service from the HOA. Assessment based on the time a unit was purchased is an entirely inequitable way to assess property value, whether in an HOA situation or a valuation from the county assessor’s office.
HOA CC&Rs may not prohibit water-efficient landscaping
California Civil Code §1353.8
Repealed & Added by A.B. 1061
Effective: January 1, 2010
Homeowners’ associations (HOAs) were previously restricted from prohibiting low water-use plants, but now any Covenants, Conditions, and Restrictions (CC&Rs) of an HOA are void and unenforceable if the CC&Rs:
- prohibit in any way the use of low water-use plants; or
- prohibit or restrict compliance with:
- local and state water-efficiency landscaping ordinances; or
- water conservation programs or programs for drought relief.
Nothing in this section prohibits an HOA from creating and enforcing uniform landscaping that does not conflict with local and state water-efficiency landscaping ordinances, water-conservation law or drought relief programs.
Determining Documentary Transfer Tax
Revenue and Taxation Code §408
Amended by S.B. 816:
Effective: January 1, 2010
An assessor must allow the county recorder access to all information possessed by his office when the county recorder conducts an investigation to determine a documentary transfer tax (DTT), which is paid on the conveyance of an interest in property.
45 day deadline for notifying the State Board of Equalization of a change in control of a legal entity
Revenue and Taxation Code §480.1
Amended by S.B. 816:
Effective: January 1, 2010
A corporation, partnership, limited liability company (LLC), or other legal entity must submit a signed change of ownership statement to the State Board of Equalization within 45 days from the date of any change in control.
Notice in the change of ownership statement
Revenue and Taxation Code §480.2
Amended by S.B. 816:
Effective: January 1, 2010
The change of ownership statement must contain the following notice with the title in at least 12-point boldface type and the body in at least 8-point boldface type:
Important Notice
The law requires any corporation, partnership, LLC, or other legal entity owning real property in California subject to local property taxation and transferring shares or other ownership interest in such legal entity which constitute a change in ownership pursuant to subdivision (d) of Section 64 of the Revenue and Taxation Code to complete and file a change in ownership statement with the State Board of Equalization at its office in Sacramento. The change in ownership statement must be filed within 45 days from the date that shares or other ownership interests representing cumulatively more than 50 percent of the total control or ownership interests in the entity are transferred by any of the original coowners in one or more transactions. The law further requires that a change in ownership statement be completed and filed whenever a written request is made therefore by the State Board of Equalization, regardless of whether a change in ownership of the legal entity has occurred. The failure to file a change in ownership statement within 45 days from the earlier of the date of the change in ownership of the corporation, partnership, LLC, or other legal entity, or the date of a written request by the Board of Equalization results in a penalty of 10 percent of the taxes applicable to the new base year value reflecting the change in ownership of the real property owned by the corporation, partnership, LLC, or legal entity (or 10 percent of the current year’s taxes on that real property if no change in ownership occurred). This penalty will be added to the assessment roll and shall be collected like any other delinquent property taxes, and be subject to the same penalties for nonpayment.
Failure to file a change of ownership statement results in added penalty
Revenue and Taxation Code §482
Amended by S.B. 816:
Effective: January 1, 2010
Failure to file a change of ownership statement within 45 days from the earlier of the date of the change in control or the change in ownership of a corporation, partnership, LLC or other legal entity will result in a penalty of:
- 10% of the taxes applying to the new full cash value of the change in control of real estate owned by the corporation, partnership, LLC or other legal entity
- 10% of the current year’s property taxes if no change in control or ownership occurred.
This penalty will be added to the property taxes due on all taxable properties owned by the corporation, partnership, LLC or other legal entity.
Revenue and Taxation Code §11935
Added by S.B. 816:
Effective: January 1, 2010
A corporation, partnership LLC or other legal entity may pursue an administrative appeal process to resolve any disputes regarding the DTT
Even if the DTT is determined by an administrative appeal process or established by a court, the valuation used to determining DTT has no affect on a valuation for the purposes of determining property taxes.
Reported by Bradley Markano
New regulations for assessment reduction servicers
Business and Professions Code § 17537.9
Amended by A.B. 992
Effective: January 1, 2010
A person who offers or performs any paid service in connection with the preparation or completion of requests to reduce the assessed value of residential property must not make any untrue or misleading statements in connection with that service. This includes stating that a late fee will be required if the property owner fails to respond to an advertised reduction filing service offer by a certain date.
Anyone who offers assessment reduction service must make the following disclosure:
“THIS ASSESSMENT REDUCTION FILING SERVICE IS NOT ASSOCIATED WITH ANY GOVERNMENT AGENCY. IF YOU DISAGREE WITH THE ASSESSED VALUE OF YOUR PROPERTY, YOU HAVE THE RIGHT TO AN INFORMAL ASSESSMENT REVIEW, AT NO COST, BY CONTACTING THE ASSESSOR’S OFFICE DIRECTLY. IF YOU AND THE ASSESSOR CANNOT AGREE TO THE VALUE OF THE PROPERTY OR IF YOU DO NOT WISH TO CONTACT THE ASSESSOR YOU CAN OBTAIN AND FILE AN APPLICATION FOR CHANGED ASSESSMENT WITH THE COUNTY BOARD OF EQUALIZATION OR ASSESSMENT APPEALS BOARD ON YOUR OWN BEHALF. AN APPEALS BOARD HAS THE AUTHORITY TO RAISE PROPERTY VALUES (BUT IN NO CASE HIGHER THAN THE PROPOSITION 13 PROTECTED VALUE) AS WELL AS TO LOWER PROPERTY VALUES.”
A person who offers assessment reduction services may not charge any money for a request for review until after the request has been filed with the county assessor. Furthermore, they may not charge a fee for an assessment appeal application until an application has been filed with the assessment appeals board.
A person who offers assessment reduction service may not file any request to reduce a property’s assessed value without first obtaining written authorization from the property owner.
A copy of this written authorization must be submitted with any application for assessment reduction. The provider of reduction service must keep the original written authorization for at least three years, and must make it available for inspection and copying within 24 hours of any request from law enforcement, the Attorney General, or a district or city attorney.
[For more information on applying for a reduced assessment, see first tuesday’s article “Reassessment and Tax Reduction Assistance down on the Farm.”]Disclosure of energy assessment to all prospective buyers of encumbered property
Civil Code §§1102.6
Amended by A.B. 474
Effective: January 1, 2010
The seller of a property subject to an assessment by a public agency for the purpose of financing improvements intended to promote renewable energy sources, or energy or water efficiency, must disclose the assessment to all prospective purchasers of the encumbered property. The disclosure is made by delivery of a copy of the “Payment of Contractual Assessment Required” notice recorded by the public agency, or a substantially equivalent notice obtained from another source.
Public agencies authorized to create permanent energy efficiency improvement assessment liens.
Streets and Highway Code §5898.12
Amended by A.B. 474
Effective: January 1, 2010
Public agencies are now permitted to create assessment liens on property, to be voluntarily entered into by the owners, in order to arrange financing and installation of distributed generation renewable energy sources or energy efficiency improvements that are permanently affixed to real estate (including agricultural property). Public agencies may also assess property in order to obtain financing for the installation of water efficiency improvements that are permanently attached to real estate, including recycled water connections, synthetic turf, cisterns for stormwater recovery and permeable pavement. Assessments may not be imposed for appliances or nonpermanent attachments, and may not be used by a developer, builder or subdivider to improve and sell real estate.
A public agency establishing such an assessment program will give advance notice to water and electric service providers in the area.
Public agencies empowered to finance energy and water efficiency
Streets and Highway Code §5898.20
Amended by A.B. 474
Effective: January 1, 2010
The local governing body of any public agency (including a city, county, municipal utility district, community services district, sanitary distract, sanitation district, water district or irrigation district) may choose to designate the agency as one which can enter into voluntary contractual assessments with property owners for permanent improvements and financing to increase distributed generation renewable energy sources or permanent installations to increase water efficiency.
To do this, the local governing body must create a statement of intention with a description of the intended project, including brief description of the criteria for determining the creditworthiness of the involved property owner.
Property owners may purchase water efficiency equipment
Streets and Highway Code §5898.21
Amended by A.B. 474
Effective: January 1, 2010
Authorized public agency officials may provide written permission allowing individual property owners to directly purchase equipment and materials for the installation of water efficiency improvements.
Notices and hearing for the creation of an assessment lien
Streets and Highway Code §5898.24
Amended by A.B. 474
Effective: January 1, 2010
A public agency which holds a hearing to create an assessment lien on real estate to finance energy or water efficiency developments will publish notice of that hearing at least 20 days before it takes place, and continue to publish notice of the hearing at least once a week for two successive weeks.
The local governing body is to provide written notice of any proposed contractual assessment program to all water or electric providers within the boundaries of the area within which the assessments may be entered into. This notice is provided at least 60 days before the legislative body adopts any resolution to create an assessment.
The public agency will establish procedures to respond to inquiries regarding the current and future estimated liability for assessment. Neither the agency nor its local governing body is liable if this estimated liability proves to be inaccurate or a seller fails to request notice of his estimated liability.
For the seller of real estate subject to an energy efficiency assessment to provide notification to prospective buyers, the public agency will record a document with the county recorder. This document will be titled “Payment of Contractual Assessment Required” in at least 14pt. font, and include the following information:
- the names of all property owners subject to the assessment;
- the legal description and assessor’s parcel number for the property;
- the annual amount of the assessment;
- the date or circumstances under which the assessment will expire;
- the purpose for which the funds from the assessment will be used;
- the entity which will receive the funds from the assessment, and the entity’s contact information; and
- the signature of the authorized representative of that entity.
The county recorder will examine this document to determine that it has the information listed above. The recorder is not responsible for any other information in the document. The document is indexed under the names of the property owners subject to the assessment and the name of the entity which receives funds from the assessment.
Reported by Anthony Renaud
Property is a nuisance if it is inhabited by tenants found guilty of counterfeiting
Business & Professions Code §§ 17800, 17802
Added by A.B. 568
Effective: Jan 1, 2010
If a non-residential tenant is convicted of counterfeiting goods to the extent that it constitutes grand theft, then the property used to produce, store or sell those counterfeit goods is deemed a nuisance.
The owner of the property will be notified 30 days prior to the filing of an action to abate the nuisance.
This section is effective until January 1, 2015.
Common interest development management must provide written disclosures to members
Calif. Civil Code §§ 1350.7, 1363.005
Amended and added by A.B. 899
Effective: Jan 1, 2010
The managing association of a common interest development (CID) must deliver to any member on request, the following Disclosure Documents Index (DDI):
| Disclosure Documents Index | ||
| Description | Reference Code | |
| Assessment and Reserve Funding Disclosure Summary | Civil Code §1365.2.5 | |
| Pro Forma Operating Budget or Pro Forma Operating Budget Summary | CC § 1365(a) | |
| Assessment Collection Policy | CC §§ 1365(e), 1367.1(a) | |
| Notice/Assessments and Foreclosure (form) | CC § 1365.1 | |
| Insurance Coverage Summary | CC § 1365(f) | |
| Board Minutes Access | CC § 1363.05(e) | |
| Alternative Dispute Resolution (ADR) Rights (Summary) | CC § 1369.590 | |
| Internal Dispute Resolution (IDR) Rights (Summary) | CC § 1363.850 | |
| Architectural Changes Notice | CC § 1378(c) | |
| Secondary Address Notification Request | CC § 1367.1(k) | |
| Monetary Penalties Schedule | CC § 1363(g) | |
| Reserve Funding Plan (summary) | CC § 1365(b) | |
| Review of Financial Statement | CC § 1365(c) | |
| Annual Update of Reserve Study | CC § 1365(a) | |
The association may transmit the DDI by email or other electronic means, but only if the member signs an agreement to accept correspondence electronically from the association. Any agreement between the association and its members must inform members of:
- the right to a nonelectronic version of any information conveyed electronically;
- hardware and software requirements necessary to receive electronic correspondence; and
- the procedures for updating contact information to receive electronic correspondence.
CID management must add disclosures for reserve fund interest rates and replacement cost inflation
Calif. Civil Code §§ 1365.2.5
Amended by A.B. 899
Effective: Jan 1, 2010
The Assessment and Reserve Funding Disclosure Summary form must include:
- the fiscal year to which the information pertains; and
- added to paragraph (7), the language:
“At the time this summary was prepared, the assumed long-term before-tax interest rate earned on reserve funds was ___ percent per year, and the assumed long-term inflation rate to be applied to major component repair and replacement costs was __ percent per year.”
Reported by Connor Wallmark
The rules reported here increase the fees paid to the Commissioner of Corporations in connection with escrow licensure and extend the time period to pay these fees.
Increased fees in connection with escrow licensure
Financial Code §17207
Added by S.B. 204
Effective: January 1, 2010
Currently and remaining in effect after January 1, 2010, an escrow agent must pay an annual license fee of up to $2,800 for each office or location they operate from. The Commissioner of Corporations (the Commissioner) may levy a special assessment on each escrow agent for each office or location of up to $1,000 (up from $500) to cover the cost of collecting the annual license fee. The escrow agent has 60 days (up from 30) to pay the special assessment upon receiving notification of the special assessment by mail from the Commissioner.
The rules reported here require the Commissioner of Corporations to determine the surrender of an escrow license is in the public interest for the license to be surrendered.
Surrender of an escrow license
Financial Code §17600
Added by S.B. 204
Effective: January 1, 2010
An escrow license may only be surrendered when the Commissioner of Corporations (the Commissioner) reviews and accepts an escrow agent’s closing audit report and provides written acceptance of the surrendered license. Additionally, the Commissioner must determine the surrender of the escrow license is in the public interest, replacing the requirement that the Commissioner must determine no violation of law occurred.
The rules reported here add eligible surplus line insurers to the list of authorized providers of fidelity bonds and errors and omissions insurance.
Bonding requirements for exchange facilitators
Financial Code §§51003; 51005; 51007
Added by S.B. 204
Effective: January 1, 2010
An exchange facilitator must comply with one or more of the following:
- maintain fidelity bonds of at least $1,000,000 by an authorized insurer or eligible surplus line insurer as determined and published by the Insurance Commissioner;
- maintain errors and omissions insurance of at least $250,000 from an authorized insurer or eligible surplus line insurer as determined and published by the Insurance Commissioner;
- deposit all exchange funds in a qualified trust or escrow account with an institution allowing withdrawals that require the written authorization of the exchange facilitator and his client; or
- deposit at least $1,000,000 of cash, securities or irrevocable letters of credit in an interest-bearing or money market account. The exchange facilitator is entitled to the interest which accrues on the account.
An individual damaged by an exchange facilitator may receive compensation from the exchange facilitator subject to the conditions and terms of the bonds, letters of credit or deposits held by the exchange facilitator. The amount of the bonds, letters of credit or deposits held by the exchange facilitator will be reduced accordingly with each payment made to the damaged individual.
Editor’s note – The Insurance Commissioner issues a list of eligible surplus line insurers every June and December. The list of eligible surplus line insurers can be obtained online here or by calling the Insurance Commissioner at (800) 927-HELP.
Local agency’s authority to regulate salinity input from residential self-regenerating water softeners
Water Code §13148
Added by A.B. 1366
Effective January 1, 2010
The following applies to these areas identified in the California Water Plan:
- the Central Coast;
- the South Coast;
- the San Joaquin River; and
- Tulare Lake.
It also applies to the following counties identified in the California Water Plan:
- Butte;
- Glenn;
- Placer;
- Sacramento;
- Solano;
- Sutter; and
- Yolo.
Any local agency operating a community water recycling facility or sewer system may regulate salinity input from residential self-regenerating water softeners if the regional water quality control board, established under the California Water Plan, has made a finding at a public hearing that a local agency’s control of salinity input would contribute to the board’s water quality goals. A residential self-regulating water softener is a water softening appliance which discharges brine into the community sewer system.
The regional board’s finding may relate to any of the following water quality control actions:
- a maximum daily load of salinity-related pollution in a body of water;
- a nutrient and salt management plan for a groundwater basin or sub-basin;
- waste discharge requirements for a local agency discharger;
- master reclamation permit for a distributor or supplier of recycled water;
- water recycling requirements for a distributor or supplier of recycled water; or
- a cease and desist order directed at a local agency.
The regional board’s finding must be based on evidence in the record, such as an appropriate study.
Based on a regional board’s finding, a local agency may adopt a water softening ordinance or resolution. The local agency’s ordinance or resolution must be presented at a second, local public hearing and will be adopted no sooner than 30 days from the hearing. The regulation will become effective 30 days from adoption.
Local agency regulations of residential self-regulating water softeners may require:
- residential self-regulating water softeners be certified by the NSF International or American National Standards Institute and be rated at the highest efficiency level commercially available;
- plumbing permits be obtained prior to installing a residential self-regulating water softener;
- residential self-regulating water softeners be connected to hot water only;
- a non-mandatory exchange or buy-back program of pre-existing residential self-regulating water softeners consistent with current law;
- the removal of a pre-existing residential self-regulating water softener, or if not removed, that it be retrofitted with a demand or clock control system; and
- the replacement of a residential self-regulating water softener with an appliance meeting salinity rating requirements.
The local agency may also prohibit the installation of new residential self-regulating water softeners.
If the local agency requires the removal of a pre-existing residential self-regulating water softener, the local agency will compensate the owner of the appliance for the reasonable cost of the removal.
The rules reported here do not limit the use of portable exchange water softening appliances or restrict the authority of the local agency to regulate the discharge from a centralized portable exchange tank servicing facility into the community sewer system.
Impounds may be mandated on Regulation Z loans or their modification
Civil Code § 2954
Amended by S.B. 633
Effective January 1, 2010
A lender cannot mandate impound accounts for payment of taxes, insurance premiums or other purposes relating to single-family, owner-occupied residences.
The exceptions to this rule are:
- home purchases funded by a Regulation Z-controlled as higher priced Section 32 (CAL-32) loans; and
- refinances or loan modifications made in connection with a lender’s homeownership preservation program or other such programs sponsored by a federal, state or local government or a nonprofit organization.
