Transfers of a Primary Residence: Proposition 19 was passed by voters on November 3, 2020. Pursuant to the Proposition, an owner of a primary residence who is over 55 years of age, severely disabled, or a victim of a wildfire or natural disaster may transfer the taxable value of their primary residence to a replacement primary residence located anywhere in this state, regardless of the location or value of the replacement primary residence, that is purchased or newly constructed as that person’s principal residence within two years of the sale of the original primary residence. However, the Proposition eliminated the ability for many families to transfer their properties to their children or grandchildren to avoid reassessment of the property for property tax purposes unless the children or grandchildren continue to live on the property as their primary residence and claim the homeowner’s exemption within one year of the transfer. The additional taxes generated are to be used for fire protection services and reimbursement of local governments for taxation-related changes.
Tenant Relief Act: On September 1, 2020, California’s enacted the Tenant Relief Act of 2020 as part of AB 3088. It essentially protects tenants from eviction for nonpayment of any money between March 1, 2020 and January 31, 2021. It does not stop other kinds of evictions unless they are an attempt to circumvent these protections. Money due March to September 2020 is to be handled by Small Claims Court, not eviction. Money due for September through January 2021 requires a 25% lump sum payment by January 31, 2021. Defaults in rent during these periods will not support an eviction unless the tenant fails to provide the landlord with a request for relief and documentation of the necessity of such relief due to COVID-19 or civil orders for some high income tenants. Commercial evictions are limited by County and City Ordinances and vary from County to County and even Cities within a County.
Mortgages: Chapter 2 of AB 3088 addresses mortgage relief. During the COVID-19 emergency the servicer of a federally backed loan must review the borrower for forbearance and post-forbearance options that apply to the loan. The options include those under the CARES Act and the guidelines of the appropriate federal agency (GSE, FHA, RHS, VA). For a non-federally backed loan the servicer must offer eligible borrowers options that are consistent with its contractual duties and within the guidelines for federally backed loans. For all loans, compliance with the CARES Act and with the forbearance and post-forbearance guidelines for federally-backed loans is a safe harbor. A servicer must provide notices with specified content when it denies a request for forbearance. Required content includes the ground for denial and the means to cure any application deficiency. A borrower who was harmed by a material violation of the law may bring an action for injunctive relief, restitution, and damages. The borrower may also sue to enjoin a foreclosure proceeding contrary to the present applicable law. The availability of “any other remedy to redress the violation” appears to also include the setting aside of a completed foreclosure sale in appropriate cases. Borrowers who prevail in an action to enforce the law may recover attorney’s fees.
Disclosures re: Home Hardening: As of January 1, 2020, if a seller, after completion of construction, obtained a final inspection report regarding compliance with, among other things, home hardening laws (Government Code sections 51182 and 51189), the seller shall provide to the buyer a copy of that report or information on where a copy of the report may be obtained. Beginning January 1, 2021, this law requires for properties located in high or very high fire hazard severity zones for homes built before 2010, delivery of a notice to include the following three items:
- A statutory disclosure that includes information on how to fire harden homes as follows:
“This home is located in a high or very high fire hazard severity zone and this home was built before the implementation of the Wildfire Urban Interface building codes which help to fire harden a home. To better protect your home from wildfire, you might need to consider improvements. Information on fire hardening, including current building standards and information on minimum annual vegetation management standards to protect homes from wildfires, can be obtained on the internet website: http://www.readyforwildfire.org.”
- Disclosure of a list of features that may make the home vulnerable to wildfire and flying embers if the seller is aware. The list includes, among other things, untreated wood shingles, combustible landscaping within five feet of the home, and single pane glass windows.
- On or after July 1, 2025, a list of low-cost retrofits re home hardening (listed pursuant to Section 51189 of the Government Code). The notice shall disclose which listed retrofits, if any, that have been completed during the time that the seller has owned the property.
Beginning July 1, 2021 sellers of property in high or very high fire hazard zones shall provide documentation to the buyer stating that the property is in compliance with laws pertaining to state law defensible spaces (Public Resources Code section 4291) or local vegetation management ordinances, or in certain cases the buyer and seller will agree that the buyer is to obtain the documentation after close as follows:
- If there is a local ordinance requiring the seller to comply with state law governing defensible spaces (PRC 4291**) or a local vegetation management ordinance, the seller shall provide the buyer with: 1) a copy of the documentation of such compliance, and 2) information on the local agency from which a copy of that documentation may be obtained.
- But If no such local ordinance exists, and the seller has obtained an inspection from a state, local or other government agency or qualified nonprofit which provides an inspection with documentation for the property, the seller shall provide the buyer with: 1) the documentation of the inspection if obtained within six months prior to entering into a transaction to sell the real property and 2) information on the local agency from which a copy of that documentation may be obtained.
- If seller has not obtained documentation of compliance per 1 or 2 above, then the seller and buyer shall enter into a written agreement stating that the buyer agrees to: 1) obtain documentation of compliance per the local ordinance or 2) if there is no such local ordinance, the buyer shall, within one year, obtain documentation of compliance as long as there is a state, local or other government agency or qualified nonprofit which provides an inspection with documentation of compliance for the property.
This law also requires the California Office of Emergency Services (Cal OES) to enter into a joint powers agreement with the Department of Forestry and Fire Protection (Cal FIRE) to administer a comprehensive wildfire mitigation and assistance program to encourage cost-effective structure hardening and facilitate vegetation management, contingent upon appropriation by the Legislature.
Homestead Exemption: AB 1885 will become effective January 1, 2021. It increases the California homestead to an amount that would keep most homes from creditor. The statutory homestead exemption will become the greater of $300,000 or median sales price in the county where the single-family home is located in the prior year, though this cannot exceed $600,000. Using this formula, the following are projections for a few of California’s major metropolitan areas.
Los Angeles County: $600,000 (Estimated $664,500 Median)
Riverside County: $400,500
San Bernardino County: $370,215
Orange County: $600,000 (Estimated $765,497 Median)
San Diego County: $600,000 (Estimated $628,500 Median)
San Francisco County: $600,000 (Estimated $1,444,000 Median)
The homestead exemption protects a part of the equity of a homeowner’s home in the event the debtor files a consumer or business bankruptcy, or if a creditor requests that the house be sold to pay a judgment. This means that, if the bankruptcy trustee wants to sell a debtor’s home, they would normally figure out whether it will derive any value for the bankruptcy estate after payment of the mortgage, taxes, homeowner’s association dues, and, of course, payment to the debtor for their homestead exemption. Since many homeowners do not have equity in their house that exceeds the median sales price in their county, capped at $600,000, chances are that the home will not be sold in a Chapter 7 bankruptcy
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
Leave a Reply