January 4th, 2021 at 1:26 pm
New Sales Disclosure for Home Fire Hardening Features: Effective January 1, 2021 for properties with one-to-four residential units built before 2010, a seller who is subject to the TDS requirement should also complete the new C.A.R. standard-form Home Fire Hardening Disclosure and Advisory (HHDA). A seller completing the HHDA should inform the buyer if the property is located in a high or very high fire hazard severity zone (see paragraph II.1. of the HHDA). The seller must also disclose whether the seller is aware of certain home features that may make the property vulnerable to wildfire, such as excessive ventilation as specified, untreated roof shingles, and combustible materials nearby (see paragraph II.3.). In comparison to the new law, the existing Natural Hazard Disclosure (NHD) law generally requires sellers to disclose whether a property is located in any of 2 fire hazard zones, 2 earthquake hazard zones, or 2 flood hazard zones. The first fire hazard zone identified in an NHD Statement is a “very high fire hazard severity zone,” which is also a required disclosure under the new HHDA. However, the second fire hazard zone identified in the NHD Statement is a “wildland area,” which is not the same as the “high fire hazard severity zone” required under the new HHDA. Sellers who do not know whether their property is located in a “high fire hazard severity zone” may be able to obtain that information from, among other resources, their NHD provider, their insurance agent, or online maps provided by government authorities. C.A.R. is working to get NHD companies to add “high fire hazard severity zones” to their NHD Statements.
Homestead Exemption Significantly Increased to $600,000: Beginning on January 1, 2021, a homeowner’s homestead exemption has been increased to a maximum of $600,000. Under the old law, California had a 3-tierred homestead exemption of $75,000 for single individuals, $100,000 for married couples, and $175,000 for seniors, disabled persons, and certain low-income individuals as defined. Under the new law, the homestead exemption for all eligible residents is now the greater of $300,000 or the county’s median sales price for a single-family home not to exceed $600,000 (as adjusted annually for inflation). The median sales price for most Southern California counties is over $600,000. The purpose of a homestead exemption is to generally protect a homeowner’s equity against foreclosure by certain judgment creditors, and also if the homeowner files bankruptcy.
Condo Complexes Must Allow 25% Rentals: Commencing January 1, 2021, a homeowners’ association (HOA) of a condominium complex cannot restrict the rental or leasing of separate interests to less than 25% of the separate interests. A “separate interest” for purposes of this law excludes accessory dwelling units. Furthermore, a “separate interest” shall not be counted as occupied by a renter if it is also occupied by the owner. An HOA must not only comply with this new law starting January 1, 2021, but it also has a deadline of December 31, 2021 to revise its governing documents accordingly if needed. Another provision of this new law allows an HOA to prohibit transient or short-term rentals of 30 days or less.
New Foreclosure Procedures to Keep Homes for Homeowners, Not Corporations: Starting from January 1, 2021 until January 1, 2026 for properties with one-to-four residential units, a non-judicial foreclosure sale by auction to the last and highest bidder may not be final for up to 45 days thereafter. If the foreclosure sale purchaser is a prospective owner-occupant as defined, the trustee’s sale shall be final. Otherwise, for foreclosure sales to non-owner occupants, certain eligible bidders as defined shall have a right of first refusal to purchase the foreclosed-upon property by submitting at least a written notice of intent to purchase within 15 days after the trustee’s sale. One type of eligible bidder is an arm’s-length “tenant buyer” of the property as defined, who apparently has priority for 45 days after the trustee’s sale to purchase the property for the foreclosure sale price. Absent such “tenant buyer,” other eligible bidders as defined, including prospective owner-occupants and certain affordable housing entities, also have 45 days after the trustee’s sale to purchase the property as the highest bidder for more than the foreclosure sale price. The foreclosure trustee is required to post online pertinent information about foreclosure sales, including the date of the trustee’s sale, the last and highest bid at the trustee’s sale, and an address for receiving documents. Also effective January 1, 2021 until January 1, 2026, this new law prohibits a foreclosure trustee from bundling properties together for sale, instead of requiring each property to be bid upon separately, unless the deed of trust provides otherwise.
Creation of the California Department of Financial Protection: Effective January 1, 2021, the California Department of Business Oversight has been renamed to the Department of Financial Protection and Innovation (DFPI). This governmental reorganization does not affect real estate licensees who are regulated by the California Department of Real Estate (DRE). Also newly enacted is the California Consumer Financial Protection Law to strengthen consumer protections for certain financial products and services.
Resources: These new laws and other new laws that may affect your real estate practice are available at C.A.R.’s New Laws webpage (password-protected for C.A.R. members only). The full text of each new law is available at the California Legislature website.
-Best wishes to everyone for a great 2021 New Year!
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