No record retention requirement for text messages and tweets – C.A.R. sponsored legislation

Under existing law, an experienced criminal law attorneys team must retain for three years copies of all documents executed by him or her or obtained by him or her in connection with any transactions for which a real estate broker license is required. This new law, sponsored by C.A.R., excludes from this record retention requirement electronic messages of an “ephemeral nature” such as text messages, instant messages, and tweets (unless designed to be retained or to create a permanent record). The new law, however, does not clearly exclude emails from record retention requirements. Therefore, per CalBRE’s instructions from the Real Estate Bulletin – Spring 2013, emails sent and received in connection with a transaction should still be retained. AB 2136 (codified as Business and Professions Code §10148 and Civil Code §1624) (effective January, 2015).

Agency disclosure expanded

Existing law requires listing and selling agents to provide the seller and buyer in a residential one to four real property transaction, including a lease of more than one year, with a prescribed disclosure form containing general information on real estate agency relationships. Existing law also requires the listing or selling agent to confirm their agency relationship by disclosing to the buyer and seller whether he or she is acting as the buyer’s agent exclusively, the seller’s agent exclusively, or as a dual agent representing both the buyer and the seller. This law extends these disclosure requirements to include transactions involving the sale or lease for more than one year of commercial real property. Commercial property as defined includes vacant land, industrial property or any residential property, even if containing more than four dwelling units.

SB 1171 (codified as Civil Code §2079.13) (effective January 1, 2015).

Email address collection by CalBRE – C.A.R. sponsored legislation

This C.A.R. sponsored law allows CalBRE to communicate with licensees in a cost-effective and efficient manner by requiring real estate brokers and agents to provide the commissioner with his or her current office or mailing address, current telephone number, and current electronic mail address that he or she uses to perform any activity that requires a real estate license, at which the bureau may contact the licensee. The broker or agent must keep the information current and update it no later than 30 days after making a change. The law also exempts a violation of this requirement from criminal penalties.

This law provides that CalBRE is not required to post or publish electronic mail addresses or telephone numbers collected pursuant to the above provisions, and if this information is released by CalBRE, would require that the information be released in a way that discourages its use in unauthorized or unsolicited commercial electronic mail advertisement programs.

AB 2540 (codified as Business and Professions Code §§10150, 10151, 10162 and 10165.1) (effective January 1, 2105).

Document bundling is prohibited by HOAs as part of required common interest development disclosures. Seller to pay HOA fees This C.A.R. sponsored law prohibits the practice of “document bundling” in the sale of units in a common interest development. (“Document bundling” means requiring the purchase of a package of documents together with the legally mandated disclosures.)

Current law requires delivery of various common interest disclosure documents (“mandated CID disclosures”). These disclosures include the CC&Rs, Bylaws, Operating Rules, rental and age restrictions, budget reports, regular and special assessments, etc. Under the new law the fees for these mandated CID disclosures must be individually itemized for each document. Additionally, the fees for all mandated CID disclosures must be separately stated and separately billed from all other fees, fines, or assessments. Only mandated disclosures may appear on the statutory form. Once a written request for the mandated CID disclosures is made, the HOA must estimate the cost of the mandated CID disclosures prior to processing the request. Where there is no hard copy delivery of documents, the HOA may not charge an additional fee for electronic delivery in lieu of the hard copy. The statutory form has been modified to reflect these changes.

This law would also require a seller to provide a prospective purchaser with all mandated CID documents that the seller possesses — free of charge. If a seller confirms in writing that the document is a current document then the HOA may not bill for it. The association may collect a reasonable fee based upon the association’s actual cost for the procurement, preparation, reproduction, and delivery of the documents – but only from the seller. It is the responsibility of the seller to pay the association, person, or entity that provides the mandated CID disclosures. As a result of this law, C.A.R. will modify its standard purchase agreements to require that the seller alone will pay for the mandated CID disclosures, but the cost for other contractual disclosures will remain negotiable. Additionally, C.A.R. form HOA will be modified to reflect the required changes by dividing it into three forms: one to request from the HOA the common interest disclosures; one for mandated CID disclosures (per the revised statutory form); and one for additional contractual disclosures as required under the C.A.R. standard purchase agreements.

AB 2430 (codified as Civil Code §§4528 and 4530) (effective January 1, 2015).

Exclusions from taxation of mortgage debt forgiveness – state law conformed to federal through the end of 2013

This measure extends California’s exclusions of taxation of mortgage debt forgiveness for qualified principal residence indebtedness but only through the end of 2013 in partial conformity with the federal Mortgage Forgiveness Debt Relief Act of 2007 (which sunset at the end of 2013 as well). Qualified principal residence indebtedness is limited to $800,000 ($400,000 for taxpayers filing separately). Forgiven debt will not be treated as cancellation of debt income, but will instead be capital gains. Taxpayers may exclude from capital gains up to $500,000 ($250,000 for taxpayers filing separate) of qualified mortgage debt forgiven.

For information regarding taxation of forgiven mortgage debt for sales after 2013 see C.A.R.’s Realegals® from December 5, 2013 and May 23, 2014, and C.A.R’s Q&A “Taxation of Foreclosures and Short Sales.”

AB 1393 (codified as Revenue and Taxation Code §17144.5) (effective on July 21, 2014).

Affordable Care Act for small employers delayed until 2016.

Internal Revenue Service bulletin confirms real estate sales agent’s non-employee status This law allows small employers to continue to offer their current health plans to employees through December 31, 2015, essentially conforming state law to the federal extension of the Patient Protection and Affordable Care Act (ACA) until January 1, 2016.

Additionally, the Internal Revenue Service issued regulations in February of 2014 clarifying that real estate sales agents are not treated as employees for purposes of the ACA. Accordingly many, if not most real estate brokerage offices, may never reach the number of employees to trigger the employer obligations under the ACA. Because real estate sales agents will not be counted as employees for ACA, the extension for employer compliance may be a nonissue for most REALTORS®. Nonetheless, REALTORS® are reminded that their membership allows them access to several health plan options as members of the CALIFORNIA ASSOCIATION OF REALTORS®.

SB 1446 (codified as Health and Safety Code §1367.012 and Insurance Code §10112.300) (effective July 7, 2014). Internal Revenue Bulletin: 2014-9 (TD 9655, “Shared Responsibility for Employer Regarding Health Coverage”) (effective February 12, 2014).

Documentary transfer tax – Purchase price cannot be kept secret This law repeals the right of a principal to demand that the transfer tax be shown on a separate document. Previously, a seller or buyer of real property could demand from the county that the documentary transfer tax (the DTT) be stated apart from the recorded document. This enabled some principals to effectively keep the purchase price secret, since the amount of the transfer tax can be reliably used to deduce the purchase price. (Although the information could be obtained through a California Public Records Act request.) Now every document subject to the DTT when it is submitted for recordation must show on its face the amount of the tax due. These rules have little impact on listings input into an MLS since MLS Model Rules require the reporting of the selling price within two days after the final closing. AB 1888 (codified as Revenue and Tax Code §§11932 and 11933) (effective January 1, 2015). Property tax exclusion for construction or addition of active solar energy system is extended This law extends a solar tax exemption for new active solar energy systems until 2025. An existing law, set to expire in 2017, bars property tax increases based upon the construction or addition of a solar system. (Without this exemption, such an improvement would add value to the property and thus result in an increase in the property taxes assessed.) SB 871 (codified as Revenue and Tax Code §73) (effective June 20, 2014). The California Legislature expresses opposition to any reduction in conforming loan limits and urges the President to join in opposition The Federal Housing Finance Agency has requested comments on a proposal to decrease national conforming loan limits. C.A.R. sponsored this joint resolution declaring the California State Legislature’s support to preserve existing federal loan limits. This law expresses the Legislature’s opposition to any reduction in the current national and high-cost conforming loan limits for Fannie Mae and Freddie Mac by the Federal Housing Finance Agency (FHFA) and urges the FHFA to continue to resist implementation of any such reductions. It also urges the President and Congress of the United States to join California in opposing any reduction of the national and high-cost conforming loan limits. SJR 19 filed with Secretary of State August 18, 2014. New 2015 Laws Affecting Realtors® Part Two in October In September many bills are sent to the Governor, who has until October to act on them. Look for the Realegal®, New 2015 Laws Affecting Realtors® Part Two, in mid October for more new laws. However, you will most likely need to turn in some type of essay assignment if you wish to graduate from your program. This means you will have to make a choice – if you are not a great writer, do you turn in a paper and risk getting a bad grade? If you do not have time, do you skip other, potentially more important activities, and write your paper instead?