See all new real estate laws passed in the 2011-2012 state and federal legislative sessions.
Topics:
- Broker management of trust fund account placement
- Documents and fees required in the sale of interest in a CID
- Prohibitions against housing discrimination based on genetic information
- Real estate licensees and appraisal management companies may not improperly influence appraisers
- Residence of surviving spouse of veteran confined to care facility exempt from property taxes
- Tax exemptions for surviving spouse of disabled veterans terminate upon remarriage
- Broker responsibilities related to debarred licensees
- Easements remain after property tax sale
- Procedure for disputing the sale of tax-defaulted property
- CEQA requirements for city or county projects
- Landlord may not prohibit political signs
These regulations define a real estate broker’s proper handling of trust funds for his client
DRE Regulation Article 15 Section 2830
Effective: October 26, 2011
Broker management of trust fund account placement
An agency relationship exists between a real estate broker and a client for whom the broker holds trust funds. In this relationship, the broker owes a fiduciary duty to the client. A benefit the broker receives related to the handling of a client’s trust funds belongs to the client and must be passed to the client.
Without possession of written permission from the client, it is unlawful for a real estate broker or corporate broker to directly or indirectly receive personal or professional fees, compensation or consideration from a person or institution other than the client as inducement for trust fund account placement.
Without possession of written permission from the client, the following activities performed directly or indirectly by a person are considered inducements for trust fund account placement and are unlawful:
- receiving or requesting payment for, provision of or assistance with business expenses, including but not limited to rent, employee salaries, furniture, copiers, facsimile machines, automobiles, telephone service or equipment or computers;
- receiving or requesting consideration intended for the benefit of the broker rather than the trust account, including cash, below market rate loans, automobile charges, merchandise or merchandise credits;
- receiving or requesting to receive on behalf of the broker or corporation, compensating balances or benefits in the pricing or fees for the maintenance of a compensating balance account (a “compensating balance” is defined as the balance maintained in a checking account or other account in a bank or recognized depository in the name of a real estate broker for the purpose of paying bank fees on a separate trust fund account);
- receiving or requesting all or any part of the time or effort of an employee of the bank or other recognized depository for a service unrelated to the trust account; and
- receiving or requesting expenditures for food, beverages and entertainment.
Receipt or request of the following does not violate law:
- promotional items with a permanently affixed company logo of the bank or recognized depository with a value of $10 or less for each item (items exclude gift certificates, gift cards or other items with a specific monetary value on its face, or that may be exchanged for any other item having a specific monetary value); and
- education or educational materials related to the business of trust fund management provided continuing education credits are not given.
It is presumed unlawful to receive or request any form of consideration as an inducement for the placement of a trust account if the consideration is not specifically set forth in this section.
These rules specify the standards and procedures for handling the documents and fees related to the sale or transfer of condominium units in a residential common interest development (CID).
Documents and fees required in the sale of interest in a CID
Civil Code §1368, 1368.2
Added by A.B. 771
Effective: January 1, 2012
Before the sale or transfer of a common interest development (CID) unit, the owner of the unit is now required to provide a prospective purchaser with a copy of the minutes for homeowners’ association (HOA) meetings (excluding meetings held by the board of directors in executive session) which took place in the last 12 months and were approved by the board of directors.
Upon an owner’s written request, the HOA must provide the owner (or a recipient authorized by the owner) with a copy of the documents specified in the owner’s request within 10 days of the mailing or delivery of the request. The requested documents may include any of those documents the owner is required to provide a prospective purchaser.
If the documents are maintained in electronic form, they may be posted on the HOA website. The owner also has the option of receiving the documents electronically, without an additional fee.
The HOAmay collect a fee for the cost of preparing and delivering the requested documents. However, upon receipt of the owner’s written request for the documents, the HOA must first provide the owner (or a recipient authorized by the owner) with a written or electronic estimate of the fee on the form described in CC §1368.2. [For more information on the form which fulfills this request for HOA documents, see the February 2012 first tuesday form of the month, Request for HOA documentation.]
Editor’s note – The form required of an HOA is to the advantage of the prospective buyer of a CID unit, since it provides more transparency in the transaction process. [Click here to download a free copy of first tuesday Form 135, the updated Request for Homeowner Association Documents.]
The HOA must distinguish the fee for providing the documents from any costs associated with the sale or transfer of the interest and may not withhold delivery of the documents for any reason unless payment of the fee for providing the documents is not received.
The HOA may contract with any person or entity in order to perform any of the requirements specified in this section.
This legislation adds to the California Unruh Civil Rights Act and Fair Employment and Housing Act by further prohibiting discrimination in business establishments and in housing based on genetic information.
Unruh Civil Rights Act protects genetic information
Civil Code §51
Added by S.B. 559
Effective: January 1, 2012
All persons within the jurisdiction of the state of California are entitled to full and equal accommodations, advantages, facilities, privileges or services in all business establishments regardless of their genetic information.
In this section, genetic information is defined as any of the following:
- the genetic tests of the individual;
- the genetic tests of the individual’s family members; or
- the manifestation of a disease or disorder in family members of the individual.
Genetic information includes a request or receipt for genetic services, or participation by an individual or the individual’s family members in clinical research which includes genetic services.
Fair Employment and Housing Act prohibits discrimination in housing based on genetic information
Government Code §12921
Added by S.B. 559
Effective: January 1, 2012
It is a civil right to seek, obtain and hold housing without discrimination based on genetic information.
DFEH duty to protect against genetic information-based housing discrimination
Government Code §12930
Added by S.B. 559
Effective: January 1, 2012
The Department of Fair Employment and Housing (DFEH) has the function, power and duty to issue publications and results of investigations and research which will minimize or eliminate discrimination in housing based on genetic information.
The DFEH may also provide assistance to communities and persons in resolving disputes, disagreements or difficulties relating to discriminatory practices based on genetic information.
FEH Commission duty to promote study of genetic information-based housing discrimination
Government Code §12935
Added by S.B. 559
Effective: January 1, 2012
The Fair Employment and Housing Commission (Commission) has the function, power and duty to create or provide financial or technical assistance to agencies and conciliation councils to study the problems of discrimination in housing based on genetic information.
Licensing boards may not base qualifications on genetic information
Government Code §12944
Added by S.B. 559
Effective: January 1, 2012
It is unlawful for a licensing board to require examination or establish qualification of licensing based on genetic information.
It is unlawful for a licensing board to print or circulate or cause to be printed or circulate, any publication, or make a non-job-related inquiry which expresses a limitation, specification or discrimination based on genetic information.
Unlawful acts of housing discrimination based on genetic information
Government Code §12955, §12955.8
Added by S.B. 559
Effective: January 1, 2012
It is unlawful for the owner of any housing accommodation to:
- discriminate against or harass a person based on genetic information; or
- make or cause to be made any written or oral inquiry related to the genetic information of a person seeking to purchase, rent or lease a housing accommodation.
It is unlawful for a person to:
- make, print or publish, or cause to be made, printed or published, a notice, statement or advertisement for the sale or rental of a housing which indicates preference based on genetic information;
- to discriminate against a person on the basis of genetic information (subject to the provisions of CC §51);
- induce a person to sell or rent any dwelling in order to profit, by representations regarding the entry into the neighborhood of a person or group of persons with particular genetic information;
- deny a person access, membership or participation in a multiple listing service, real estate brokerage or other service based on genetic information;
- make unavailable or deny a dwelling because of discrimination based on genetic information; or
- discriminate through public or private land use practices, decisions and authorizations based on genetic information.
It is unlawful for a person, bank, mortgage company or other financial institution that provides financial assistance for the purchase, organization or construction of housing to discriminate against a person or group of persons on the basis of genetic information.
It is unlawful for a person, organization or entity involved in a real estate-related transaction to discriminate against a person in making available a transaction or in the terms and conditions of a transaction based on genetic information.
Proof of an intentional violation of any of the above includes when genetic information is a motivating factor in committing a discriminatory housing practice, even though other factors may have also motivated the practice. Proof of a violation causing a discriminatory effect is shown in an act or failure to act based on genetic information.
Claims for restrictive covenants on property include restrictions based on genetic information
Government Code §12956.1, §12956.2
Added by S.B. 559
Effective: January 1, 2012
The cover page or stamp with which a county recorder, title insurance company, escrow company, real estate broker, real estate agent or association includes a copy of a declaration, government document or deed for a person making a claim for a restrictive covenant must state the declaration, government document or deed is void if it contains any restriction based on genetic information.
When determining if a restrictive covenant on the interest of record in property is unlawful the county counsel must also consider if the restriction is based on genetic information.
Interpreting discrimination based on genetic information
Government Code §12993
Added by S.B. 559
Effective: January 1, 2012
The provisions established to prohibit discrimination based on genetic information do not repeal any provision in the Civil Rights Law or any other law of the state relating to discrimination based on genetic information, unless those provisions provide less protection.
Reported by Mary Balash and Tara Tran
This regulation defines the improper influence a real estate licensee or an appraisal management company is prohibited from exercising in a real estate transaction involving an appraisal.
Real estate licensees and appraisal management companies may not improperly influence appraisers
Business and Professions Code §11345.4, California Civil Code §1090.5
Added by S.B. 6
Effective: January 1, 2012
DRE Regulation Article 11.1 Section 2785
A real estate licensee and an appraisal management company in a real estate transaction involving an appraiser may not exercise or attempt to exercise the improper influence of the development, reporting, result or review of an appraisal sought for a mortgage loan controlled by the Real Estate Settlement and Procedures Acts (RESPA). [See first tuesday Form 200]
Improper influence includes any of the following activites:
- withholding or threatening to withhold timely or partial payment for a completed appraisal report, regardless of whether a sale or financing transaction closes;
- withholding or threatening to withhold future business from an appraiser;
- demoting or terminating, or threatening to demote or terminate an appraiser;
- expressly or implicitly promising future business, promotions or increased compensation for an appraiser;
- conditioning the ordering of an appraisal report or the payment of an appraisal fee, salary or bonus based on the opinion, conclusion, valuation or preliminary value estimate requested from an appraiser;
- requesting an appraiser provide an estimated, predetermined or desired valuation in an appraisal report prior to entering into a contract or completing a report;
- requesting an appraiser provide comparable sales prior to the completion of the report;
- providing an appraiser with an estimated, predetermined or desired value for a property or a proposed or target amount to be loaned to the borrower, except that the appraiser may be handed a copy of the purchase agreement; or
- requesting the removal from an appraisal report of comments disclosing adverse property conditions or physical, functional or economic obsolescence.
- hiring an appraiser based on the valuation likely to be generated by the appraiser;
Real estate licensees are further prohibited from providing an appraiser, appraisal company or appraisal management company with stock or financial or non-financial benefits.
Appraisal management companies are further prohibited from requiring compensation from an appraiser in order for the appraiser to attain priority in the assignment of business.
Editor’s note – Civil Code §1090.5, which was adopted in 2007, already barred a person with an interest in a real estate transaction from improperly influencing an appraiser of real estate. Additional amendments which finalized the Truth in Lending Act (TILA) in 2010 also defined the improper influence of the appraisal process. DRE Regulation Article 11.1 Section 2785 above was added by the DRE to highlight heo relevance of federal legislation to the practice of real estate in California and to add to the state’s list of actions defined as the improper influence of the appraisal process. [For more information on appraisal reform legislation passed in 2010, see the December 2010 first tuesday Legislative Watch, Dodd-Frank changes to appraisal procedures; for more information on the use of appraisal management companies in response to appraisal reform legislation, see the December 2011 first tuesday article, Appraisal management to the rescue?]
Anyone with an interest in a real estate transaction may ask an appraiser to do any of the following:
- consider additional relevant property information, including information regarding comparable properties;
- provide further explanation for the valuation;
- correct errors in the appraisal report;
- provide a copy of the sales contract with purchase transaction.
- obtain multiple valuations in order to assure reliability in value assessment;
- withhold compensation due to breach of contract or inferior service; or
Editorial note – The last point in the list above goes against the intended effect of the law. Being privy to the purchase agreement directly influences the appraiser to value the property at a price equal to or greater than the amount stated in the agreement.
These revisions exempt the principal residence of an unmarried surviving spouse of a veteran from property taxes if the unmarried spouse is confined to a care facility.
Residence of surviving spouse of veteran confined to care facility exempt from property taxes
Revenue and Taxation Code 205.5
Amended by A.B. 188
Effective 2012-2013 fiscal year
Beginning the 2012-2013 fiscal year, the principal residence of an unmarried surviving spouse of a veteran who died as a result of a service-connected disease or injury, or died while on active military duty, is exempt from property taxation if the unmarried spouse would reside in that property as a principal residence were it not for confinement to a hospital or other care facility. This exemption is conditioned upon the residence not being rented. Family members residing at the residence are not considered to be tenants.
These amendments clarify eligibility of tax exemptions for disabled veterans, and affirm the exemption terminates for the surviving spouse of a disabled veteran upon remarriage.
Tax exemptions for surviving spouse of disabled veterans terminate upon remarriage
Revenue and Taxation Code 279
Amended by A.B. 188
Effective 2012-2013 fiscal year
A principal residence becomes eligible for disabled veterans’ property tax exemption as of:
- the effective date of a disability rating;
- the date the property is purchased, provided residency is established within 90 days of purchase;
- the date residency is established at the property by the veteran or spouse; or
- the date of the veteran’s death resulting from service-connected injury or disease, in which case the unmarried spouse receives the exemption.
The property tax exemption is terminated when the surviving spouse remarries.
This regulation specifies the duties and responsibilities of real estate brokers regarding previously licensed persons now debarred from licensed activities by the Department of Real Estate (DRE) Commissioner.
Broker responsibilities related to debarred licensees
DRE Regulation Article 4 Section 2725.5
Effective: October 26, 2011
The Department of Real Estate (DRE) Commissioner is authorized to debar a licensed or unlicensed person from:
- employment with or management of a real estate business;
- participation in the business activity of a real estate salesperson or broker; and
- engagement in real estate-related business activity on the premises where a real estate salesperson or broker conducts business.
A broker is responsible for screening licensed and unlicensed employees, as well as regular business associates engaged in real estate-related business activity on the broker’s premises. These responsibilities include a review of the DRE’s listing of debarred persons and publication of disciplinary actions.
A broker is required to report violations to the DRE.
Editor’s note – Under Department of Real Estate (DRE) mandate, a broker is responsible for monitoring his employees, including agents. first tuesday’s CalPaces broker appreciation program assists brokers with this task. Brokers enrolled in the CalPaces program receive monthly reports of the status of all licensees the DRE has on record as working under their broker license. The reports include information on:
- an agent’s name, DRE license number and date of license expiration; and
- which agents in the prior month have enrolled in a continuing education course with first tuesday.
For more information on how brokers can participate in the CalPaces program, contact a first tuesday representative.
This law provides for existing easements on tax-defaulted property to remain on title when the property is sold.
Easements remain after property tax sale
CA Revenue & Taxation Code §3712
Amended by A.B. No. 261
Effective January 1, 2012
When tax-defaulted property is sold, the deed conveys title to the purchaser free of all encumbrances existing before the sale except easements of any kind, including prescriptive easements.
This law sets procedure for disputing the validity of a property tax sale.
Procedure for disputing the sale of tax-defaulted property
CA Revenue & Taxation Code §§3725, 3731
Amended by A.B. No. 261
Effective January 1, 2012
When a tax-defaulted property is sold and the sale is believed to be invalid or irregular, proceedings challenging the sale’s validity can be commenced if:
- the individual challenging the sale’s validity first petitions the board of supervisors within one year after the tax-defaulted property was sold; and
- the proceeding commences within one year after the board of supervisors determines a tax-defaulted property sale is valid.
These changes only apply to sales made on or after January 1, 2012.
This law clarifies the procedures for determining the environmental impact of city or county projects as required by the California Environmental Quality Act (CEQA).
CEQA requirements for city or county projects
CA Public Resources Code §21083.9
Amended by S.B. No. 226
Effective January 1, 2012
The adoption or amendment to a general plan by a city, county or special district may be conducted concurrently with the scoping meeting required by the California Environmental Quality Act (CEQA) for any building project of statewide, regional or area-wide significance.
Editor’s note — A general plan is a plan made by a local agency for the adoption or amendment of zoning or subdivision ordinances, improvements or other public works projects. A “scoping meeting” is a meeting organized by a city, county or special district open to the public for input about environmental information to be considered in the adoption or amendment of a general plan.
CA Public Resources Code §21084
Amended by S.B. No. 226
Effective January 1, 2012
If a project’s greenhouse gas emissions have no significant impact on the environment, the project is not necessarily exempt from CEQA requirements.
Editor’s note — The “projects” to which these laws are referring include the enactment or amendment of zoning ordinances, the issuance of zoning variances, the issuance of conditional use permits and the approval of tentative subdivision maps, excluding any actions undertaken to prevent or mitigate an emergency.
These regulations bar landlords from prohibiting the posting of political signs by tenants.
Landlord may not prohibit political signs
California Civil Code 1940.4
Added by S.B. No. 337
Effective: September 30, 2011
Landlords may not prohibit a tenant from displaying political signs in relation to:
- an election or legislative vote;
- the initiative, referendum or recall process; or
- issues elected for vote before a public body.
Tenants may display political signs on a window or door of a leased multifamily dwelling, or in a yard, window, door, balcony or wall of a leased detached single-family residence (SFR).
A landlord may prohibit a tenant from posting a political sign if the sign is:
- more than six square feet;
- in violation of local, state or federal law;
- in violation of an enforceable provision in the conditions, covenants and restrictions (CC & Rs) of a common interest development (CID).
The tenant is to remove any political signs not in compliance with reasonable time limits set for deplaying such signs (by landlord or CID), beginning no later than at least 90 days prior to the date of the election or vote to which the sign relates and ending at least 15 days following the date of the election or vote.
