Ten New Real Estate Laws in 2016

January 2016

By: David Fisher In 2016 Californians will see and be subject to many new laws that relate to real estate. The list of new laws is long, and some laws are simple minor revisions to or “clean up” existing laws; other laws implement broad new changes. If you find yourself renting a property, you’ll find it handy and more than likely a necessity to know of your California renters rights. The process of selecting only ten new laws to touch upon the myriad new laws is an arbitrary process. The author has selected laws that hopefully have a broad base of interest amongst the readers. 1. Short Term Rentals, Such as Vacation Rentals, Require Special Notice From Hosting Platforms. A “hosting platform” is a marketplace that is created to facilitate the rental of a residential unit offered for tourist or transient use for compensation to the offeror of that unit, and the operator of the hosting platform derives revenues, including booking fees or advertising revenues, from providing or maintaining that marketplace. VRBO and Airbnb are examples of such a platform. This law requires a “hosting platform” to provide notice to an occupant listing a residence for short-term rental that states:

“If you are a tenant who is listing a room, home, condominium, or apartment, please refer to your rental contract or lease, or contact your landlord, prior to listing the property to determine whether your lease or contract contains restrictions that would limit your ability to list your room, home, condominium, or apartment. Listing your room, home, condominium, or apartment may be a violation of your lease or contract, and could result in legal action against you by your landlord, including possible eviction.”

The notice must be in a particular font size and be provided immediately before the occupant lists each real property on the hosting platform’s Internet Web site in a manner that requires the occupant to interact with the hosting platform’s Internet Web site to affirmatively acknowledge he or she has read the notice. Senate Bill 761. Codified as Business and Professions Code §§22590, 22592 and 22594. Effective date is January 1, 2016. 2. Lender’s Credit Bids and Sham Bids Current law excepted “credit bids” from secured lienholders from the prohibition of “shill bids.” This law eliminates the exception for credit bids on behalf of the lien holder from the “no-shill” bidding law. In 2014, a law was enacted which, among other things, prohibited companies from using “shill bids” to drive up the price of the home being auctioned. Shill bids are bids where the person or entity making the bid has no intention of actually purchasing the home at the auction. However, that law contained an exception for “credit bids” made by a lien holder. That is, the lender bidding the amount of its note at the foreclosure sale was exempt from the “shill bid” prohibition if the property could result in a transfer of title. Under this new legislation, that exemption has been eliminated. An auctioneer is prohibited from stating an increased bid higher than that made by the last bidder when in fact no person has made such an increased bid, without any exemption for credit bids. Nonetheless, the law allows that a bid may be placed on the seller’s behalf during the auction even if the bid would not actually result in a sale as long as notice is given to all bidders and participants that 1) allowance for that type of bidding is reserved and will not result in a sale and 2) when such a bid is made it is announced that the bid was placed on behalf of the seller. This law does not affect the conduct of bidding at a trustee’s sale under a power of sale contained in a deed of trust or mortgage. For a trustee’s sale each and every bid made by a bidder is deemed an irrevocable offer by that bidder (Civil Code 2924h). Senate Bill 474. Codified as Civil Code §1812.610. Effective date is September 28, 2015. 3. Clotheslines, Drying Racks and Artificial Grass. Two conceptually related laws were enacted permitting clotheslines, drying racks and artifical grass in common interest developments (CID). The first law law permits owners and tenants in a homeowners association (HOA) to use clotheslines and drying racks. This law makes void and unenforceable any provision in HOA governing documents that effectively prohibits or unreasonably restricts an owner’s ability to use a clothesline or drying rack in the owner’s backyard. It specifies that the HOA may establish reasonable rules and restrictions governing clotheslines or drying racks. This law only applies to backyards that are designated for the exclusive use of the owner. It defines “clothesline” and “drying rack” to exclude a balcony, railing, awning, or other parts of a structure or building. Assembly Bill 1448. Codified as Civil Code §§1940.20 and 4750.10. Effective date is January 1, 2016. The second law makes void and unenforceable CID prohibitions against use of artificial grass. This law makes void and unenforceable any provision of a HOA’s governing documents or architectural or landscaping guidelines or policies that prohibits use of artificial turf or any other synthetic surface that resembles grass. Assembly Bill 349. Codified as Civil Code §4735. Effective date is September 4, 2015. 4. Americans With Disability Acts Lawsuits. This law requires an attorney who is sending a demand letter or complaint alleging a construction-related accessibility claim to provide additional information along with a new judicial counsel answer form. Current law requires an attorney to provide with each demand letter or complaint sent to or served upon a defendant or potential defendant alleging a construction-related accessibility claim a written advisory about the defendant’s legal rights. This new law requires more information to the advisory as follows: ADDITIONAL THINGS YOU SHOULD KNOW: ATTORNEY MISCONDUCT. Except for limited circumstances, state law generally requires that a prelitigation demand letter from an attorney MAY NOT MAKE A REQUEST OR DEMAND FOR MONEY OR AN OFFER OR AGREEMENT TO ACCEPT MONEY. Moreover, a demand letter from an attorney MUST INCLUDE THE ATTORNEY’S STATE BAR LICENSE NUMBER. If you believe the attorney who provided you with this notice and prelitigation demand letter is not complying with state law, you may send a copy of the demand letter you received from the attorney to the State Bar of California by facsimile transmission to 1-415-538-2171, or by mail to the State Bar of California, 180 Howard Street, San Francisco, CA, 94105, Attention: Professional Competence. REDUCING YOUR DAMAGES. If you are a small business owner and correct all of the construction-related violations that are the basis of the complaint against you within 30 days of being served with the complaint, you may qualify for reduced damages. You may wish to consult an attorney to obtain legal advice. You may also wish to contact the California Commission on Disability Access for additional information about the rights and obligations of business owners. COMMERCIAL TENANT. If you are a commercial tenant, you may not be responsible for ensuring that some or all portions of the premises you lease for your business, including common areas such as parking lots, are accessible to the public because those areas may be the responsibility of your landlord. You may want to refer to your lease agreement and consult with an attorney or contact your landlord, to determine if your landlord is responsible for maintaining and improving some or all of the areas you lease. This law additionally requires the creation of a standard defendant’s answer form which among other things must: Be written in plain language; allow the defendant to state any relevant information affecting the defendant’s liability or damages; allow the defendant to make specific denials of the allegations in the complaint; and allow the defendant to state potential affirmative defenses including an assertion that the defendant’s landlord is responsible for ensuring that some or all of the property leased by the defendant is accessible to the public, and a request to meet in person at the subject premises if the defendant qualifies for an early evaluation conference pursuant to Civil Code Section 55.54. This law also obliges the attorney to inform the California Commission on Disability Access of the progress of the suit and whether alleged violations were remedied. This law further creates additional requirements for “high-frequency” litigants, which is designed to address the practice of high-volume lawsuits motivated by quick settlement with business owners, rather than correction of ADA violations. The law defines a “high-frequency litigant” (HFL) as either a plaintiff who has filed 10 or more complaints alleging violations of construction-related accessibility standards in the past 12 months; or an attorney who has represented 10 or more such plaintiffs in the past year. For attorneys, claims that result in correction of violations do not count. The law imposes new procedural requirements on HFLs who file new claims: a) A higher filing fee; b) Special pleading requirements; and c) Certification by the attorney that, among other things, the complaint is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. Assembly Bill 1521. Codified as Civil Code §§ 55.3, 55.32, and 55.54; Code of Civil Procedures §§ 425.50 and 425.55; and Government Code §§ 68085.35 and 70616.5. Effective Date is January 1, 2016. 5. Mold and Landlords. New law specifies that a landlord is not obligated to repair certain conditions relating to mold 1) until he or she has notice of it or 2) if the tenant fails to keep the property clean and sanitary and thereby substantially contributes to the existence of the mold. For a building, or portion thereof, to be declared a substandard building by virtue of mold, it must be visible mold growth, as determined by a health officer or a code enforcement officer, which endangers the health of the occupants Currently a residential landlord is required to maintain its property habitable and repair conditions that render it untenantable. This new law provides that a lessor is not obligated to repair a dilapidation relating to mold, until he or she has notice of it or if the tenant is in substantial violation of the duty to keep the property clean and sanitary and thereby substantially contributes to the existence of the mold. Senate Bill 655. Codified as Civil Code § 1941.7, and Health and Safety Code §§ 17920 and 17920.3. Effective date is January 1,2016. 6. Landlords Who Use Pesticide Without a Licensed Pest Control Operator. New law requires that when a landlord uses a pesticide without hiring a licensed pest control operator like Adam’s Pest Control, Inc., the Landlord must post a statutory notice of pesticide use. The landlord must notify the tenant and tenants of adjacent units, with a statutory notice of the use of pesticides at the dwelling unit if the landlord or authorized agent applies any pesticide without a licensed pest control operator. “Adjacent units” are dwelling units that are directly beside, above, or below the subject dwelling unit. Tenants in adjacent units must be notified when the pesticide application is a “broadcast application” or when a total release fogger or aerosol spray is used, and any tenant in an adjacent dwelling unit could reasonably be impacted by the pesticide use This law also requires the posting of a similar notice at least 24 hours prior to application of any pesticide to a common area without a licensed pest control operator, unless the pest poses an immediate threat to health and safety, in which case the notice would be required to be posted as soon as practicable, but not later than one hour after the pesticide is applied. Alternatively, the landlord may want to get in touch with pest control experts who may be able to provide support and helpful advice on the right pesticides to rid the property of any pests. Senate Bill 328. Codified as Civil Code §1940.8.5. Effective date is January 1, 2016 7. Tenants, Domestic Violence or Sexual Assault, and Terminating Leases. Existing law authorizes a tenant to notify the landlord in writing that he or she or a household member was a victim of an act of domestic violence, sexual assault, stalking, elder abuse or human trafficking and that the tenant intends to terminate the tenancy. The tenant is required to attach to the notice to terminate the tenancy a copy of a temporary restraining order, protective order or police report. This law extends these provisions indefinitely and reduces the time limit for a tenant to give a notice of intent to vacate to the landlord under these provisions from 30 days to 14 days. Assembly Bill 418. Codified as Civil Code §1946.7. Effective date is January 1, 2016. 8. New Method to Transfer Title to Real Property. This law creates the revocable transfer on death (TOD) deed which allows a homeowner to transfer to a named beneficiary a 1-4 unit residential real property upon the owner’s death without aprobate proceeding. Existing law provides that a person may pass real property to a beneficiary at death by various methods including by will, intestate succession, trust, and titling the property in joint tenancy or community property with right of survivorship, among others. This law creates a new method to transfer title to real property – the revocable transfer on death deed which allows the transfer of real property on the death of its owner without a probate proceeding, according to specified rules. The deed has no effect until a person dies, and can be revoked at any time. This law applies only to: (a) Residential, one to four unit properties; (b) Condominium units; and (c) Single tract agricultural land (40 acres or less) improved with a single-family residence. The revocable TOD deed must be signed, dated and acknowledged before a notary public, and must be recorded within 60 days after execution. During the owner’s life, the deed does not affect his or her ownership rights and, specifically, is considered part of the owner’s estate for the purpose of Medi-Cal eligibility and reimbursement. There are three ways to revoke the TOD: (1) complete, have notarized and record a revocation form (the law creates a statutory form for this purpose); (2), create, have notarized, and record a new TOD; and (3) sell or give away the property, or transfer it to a trust, before death and record the deed. A TOD cannot be revoked by will. The law may void a revocable TOD deed if, at the time of the owner’s death, the property is titled in joint tenancy or as community property with right of survivorship. This law also establishes a process for contesting the transfer of real property by a revocable TOD deed. Assembly Bill 139. This law permits the creation of a TOD deed as of September 15, 2015, but will only be effective if the transferor dies after January 1, 2016. The law sunsets on January 1, 2021. Codified as Family Code §§ 2337 and 2040; and Probate Code §§ 69, 250, 267, 279, 2580, 5000, 5302, 5600 et seq., 13111, 13206, and 13562. 9. Medical Marijuana and Land Use/Zoning Requirements The new Medical Marijuana Regulation and Safety Act (MMRSA) establishes a new agency, the Bureau of Medical Marijuana Regulation, to oversee the licensing rules for medical marijuana cultivators, the makers of cannabis products and retailers. It addresses the practice of issuing medical marijuana card permits to patients who lack valid health needs. And it establishes guidelines and regulations for the cultivation of medical marijuana. Various state agencies are assigned responsibilities under the MMRSA to carry out its directives. The MMRSA comprises three separate bills which together create the structure to license, tax and regulate medical marijuana, along with mechanisms to fund its implementation. Assembly Bill 266. This law enacts the Medical Marijuana Regulation and Safety Act for the licensure and regulation of medical marijuana and establishes within the Department of Consumer Affairs, the Bureau of Medical Marijuana Regulation, under the supervision and control of the Director of Consumer Affairs. This law also requires the Board of Equalization to adopt a system for reporting the movement of commercial cannabis and cannabis products. Existing law permits persons with identification cards to legally or cooperatively for medical purposes. This law repeals these provisions upon the issuance of licenses by licensing authorities pursuant to the MMRSA and instead provides that actions of licensees with relevant local permits, in accordance with the act and applicable local ordinances, are not offenses subject to arrest, prosecution, or other sanction under state law. (Codified as Business and Professions Code § 205.1 and Chapter 3.5, Labor Code § 147.5, and Revenue and Taxation Code § 31020). Senate Bill 643. This law sets forth standards for a physician and surgeon prescribing medical cannabis and requires the Medical Board of California to prioritize its investigative and prosecutorial resources to identify and discipline physicians and surgeons that have repeatedly recommended excessive cannabis to patients for medical purposes or repeatedly recommended cannabis to patients for medical purposes without a good faith examination. The Bureau of Medical Marijuana must require an applicant to furnish a full set of fingerprints for the purposes of conducting criminal history record checks. A physician and surgeon who recommends cannabis to a patient for a medical purpose is prohibited from accepting, soliciting, or offering any form of remuneration from a facility licensed under the MMRSA. Violation of this prohibition is a misdemeanor. The Governor is required to appoint, subject to confirmation by the Senate, a chief of the Bureau of Medical Marijuana Regulation. The Department of Consumer Affairs has the sole authority to create, issue, renew, discipline, suspend, or revoke licenses for the transportation and storage, unrelated to manufacturing, of medical marijuana, and may collect fees for its regulatory activities. The Department of Food and Agriculture is required to administer the provisions of the act related to, and associated with, the cultivation, and transportation of, medical cannabis. The act requires the State Department of Public Health to administer the provisions of the act related to, and associated with, the manufacturing and testing of medical cannabis. (Codified as Business and Professions Code §§ 19302.1, 19319, 19320, 19322, 19323, 19324, 19325, Article 25, 6, 7.5, 8, and 11). Assembly Bill 243. This law requires various state agencies to promulgate regulations or standards relating to medical marijuana and its cultivation. They are required to take actions to mitigate the impact that marijuana cultivation has on the environment. Cities, counties, and their local law enforcement agencies are required to coordinate with state agencies to enforce laws addressing the environmental impacts of medical marijuana cultivation. Medical marijuana is now subject to the Sherman Antitrust Act, a federal law which prohibits uncompetitive business practices. This law requires a state licensing authority to charge each licensee under the act a licensure and renewal fee, as applicable, and would further require the deposit of those collected fees into an account specific to that licensing authority in the MMRSA Fund, which this law establishes. Fines and civil penalties are imposed for violations of the MMRSA, and the money collected must be deposited into the Medical Cannabis Fines and Penalties Account, which this law establishes within the fund. (Codified as Business and Professions Code Article 6, 13, and 17; Fish and Game Code § 12029; Health and Safety Code §§ 11362.769 and 11362.777; and Water Code § 13276). The effective date is January 1, 2016. However, a facility or entity that is operating in compliance with local zoning ordinances and other state and local requirements on or before January 1, 2018, may continue its operations until its application for licensure is approved or denied pursuant to this chapter. In issuing licenses, the licensing authority shall prioritize any facility or entity that can demonstrate to the authority’s satisfaction that it was in operation and in good standing with the local jurisdiction by January 1, 2016. 10. New Education Requirement for Real Estate Brokers. New law requires that broker licensees complete upon their first renewal as a broker, a three-hour continuing education course in the management of real estate offices and supervision of real estate activities. Moreover, salesperson and broker licensees must complete an eight-hour continuing education survey course for subsequent renewals that includes topics in ethics, agency, trust fund handling, fair housing, risk management and management and supervision. Assembly Bill 345, , amending Section 10170.5 of the California Business and Professions Code. Effective date is January 1, 2016.

Please Note: This article is necessarily general in nature and is not a substitute for legal advice with respect to any particular case. Readers should consult with an attorney before taking any action affecting their interests.