2018 New Laws: The Essential Guide to New California Laws That Impact Real Estate & Lending by Brewer Offord & Pedersen LLP

About the Authors........................3

Topics MARIJUANA LEGALIZATION

[Article] Recreational Pot In 2018: High-Times or a Buzz-Kill for Real Estate?.........................4

AFFORDABLE HOUSING..........................................................................................8—10 CONTRACTORS & DEVELOPERS...................................................................11—15 EMPLOYERS & EMPLOYMENT.........................................................................16—18 HOMEOWNERS ASSOCIATIONS................................................................19—21 LANDLORDS & TENANTS.................................................................................................22 IMMIGRATION

[Article] The Immigrant Tenant Protection Act of 2017...................................................................23

REALTORS® & BROKERS.......................................................................................26—30 SOLAR & RENEWABLE ENERGY...................................................................31—33 MORTGAGE & LENDING..................................................................................................34 INDEX......................................................................................................................................................36

ABOUT OUR BOUTIQUE

REAL ESTATE LAW FIRM The Law Offices of Peter N. Brewer is a boutique real estate and lending law firm located in Palo Alto, California. With over 90 years of combined experience, the firm’s five attorneys offer legal services for real estate investors, home owners, lenders, small business owners, property managers, contractors, mortgage brokers, developers, REALTORS®, and other real estate professionals and their clients. The firm focuses on real estate and lending law matters, which include purchase disputes, non-disclosure of defect claims, HOA disputes, partition actions, property transactions, lease disputes, construction defects, mechanic’s liens, deposit disputes, creditor-side bankruptcies, collection actions, evictions, and For Sale By Owners (FSBO) transactions, among many other issues. Every attorney at the firm possesses a unique skill set, so the firm is well-equipped to handle a variety of real estate matters, of both a transactional and litigation nature. Our attorneys have jury trial experience and are licensed as real estate brokers by the California Bureau of Real Estate (CalBRE). The attorneys have published extensively in journals, magazines, newspapers, trade publications, and conference proceedings. As a result, members of the firm are frequently sought out as guest lecturers, speakers, editors, authors, and expert witnesses. The Law Offices of Peter N. Brewer celebrated its 20th anniversary in 2015, serving the Bay Area’s real estate legal needs since1995.

ABOUT THE

AUTHORS SIMON

ADAM L .

Real Estate Attorney

OFFORD

PEDERSEN

Simon Offord is a senior real estate attorney at the Law Offices of Peter N. Brewer. Attorney Offord primarily focuses his practice on commercial real estate matters, HOA disputes, boundary disputes, fence, tree, & neighbor issues, and easements. He is a frequent publisher for the Community Associations Institute - Bay Area chapter, and a regular speaker for the Santa Clara County Association of REALTORS® and the Silicon Valley Association of REALTORS®.

Adam Pedersen is a real estate attorney at the Law Offices of Peter N. Brewer. In addition to being a licensed real estate broker, Adam has extensive experience practicing real estate law. He frequently speaks about risk management for agents, non-disclosure disputes, broker employment issues, and disputes that arise during real estate transactions. Adam is the 2018 co-chair of the Palo Alto Area Bar Association Real Estate Section.

ASHLEE D.

CLAYTON

Real Estate Attorney

Director of Marketing

Ashlee D. Adkins is an attorney at the Law Offices of Peter N. Brewer. Attorney Adkins’ practice focuses on commercial & residential landlord-tenant matters, commercial unlawful detainers, partition actions, and leasing. She is the 2018 co-chair of the Palo Alto Area Bar Association Real Estate Section, and has been a featured speaker for the San Mateo County Association of REALTORS®.

Clayton Dodds is the director of marketing for the Law Offices of Peter N. Brewer. He previously worked as a legislative analyst intern in the Oklahoma House of Representatives for Rep. Doug Cox, M.D. Clayton also worked at the legal publishing company Nolo. He sits on the Board of Directors for the Santa Clara County Association of REALTORS® Foundation.

ADKINS

DODDS

WEED IS LEGAL IN 2018 by Adam Pedersen, Esq.

On November 8th, 2016, Californians voted in favor of Proposition 64, known as the California Marijuana Legalization Initiative. The measure received nearly 8 million votes, earning a 57% â&#x20AC;&#x201D; 42% majority. The electoral victory resulted in a new law that allows the recreational use of marijuana. The collection of laws and regulations, known as the Adult Use of Marijuana Act, went into effect on January 1st, 2018. Adults who are at least 21 years old may now possess up to 1 ounce of cannabis, and up to 6 marijuana plants. Consumers are charged a 15% tax, plus any city or local taxes. While marijuana is now legal in California, it is still illegal under Federal law. Learn more about the impact of this new law.

limit, if not prohibit, the use of local land for the cultivation or sale of recreational marijuana. These regulations, and the legalization of cannabis in general, stand to have a great impact on the rights and obligations of property owners, landlords, real estate professionals and many others.

CALIFORNIA

IS SET TO ROLL

out new guidelines implementing the voter-mandated legalization of recreational marijuana use and production in January of 2018. At the same time, cities and counties are scrambling to implement their own regulations before the state rules take effect. The Adult Use of Marijuana Act, approved by voters in 2016, gives local jurisdictions almost unlimited authority to regulate the commercial sale and cultivation of recreational cannabis. However, if local authorities don’t have rules in place when the state begins issuing permits in 2018, they risk losing some of that control. To avoid this, many cities and counties immediately banned the production or sale of all commercial cannabis. To date, local regulations have largely been concerned — not with the now-legal use of recreational cannabis — but with regulating how property can be used in connection with the cannabis industry. Specifically, most local regulations aim to

The concerns of property owners vary widely and depend, in part, upon social, economic, or political views regarding the legalization of recreational cannabis. Some farmers, ranchers and residents of rural agricultural areas fear the cultivation of cannabis will bring with it security concerns, given the industry’s sometimes shadowy past. Others also fear that the industry will squeeze out traditional agricultural uses, such as grazing, in favor of higher-value cash crop. In urban areas, residents share similar safety and security concerns. Many Bay Area cities and counties have reacted by placing limitations on the number and location of dispensaries, keeping them away from schools and other sensitive areas. On the other hand, many property owners have shown excitement at being either directly or indirectly involved in the industry. Relatively easy to grow and with a high value per square foot of growing space, cannabis is an attractive crop for agricultural and/or industrial landowners who have otherwise fallen on hard times. For example, space once used for the cut-flower industry on the Peninsula and for berries in Monterey County (space now fallow due to cheap overseas imports) is well suited for marijuana growing. Rents for greenhouse space in some of these areas has tripled due to the anticipated demand for cannabis growing space. This has understandably generated interest amongst struggling property owners looking for a new stream of income. However, social and environmental concerns aside, the drive to repurpose land for use in cannabis cultivation can present thorny legal issues. Local regulations vary widely. Moreover, a state license may be meaningless absent compliance with local laws. A landlord may be in for a rude awakening, and some missed rent payments, when a tenant’s operations are shut down for failure to adhere to complex local laws. Property

owners must contemplate legal compliance, and the result of non-compliance, in any agreement related to cannabis cultivation or sale. Finally, given the continued nationwide illegality of the industry, property owners continue to risk legal consequences at the Federal level. Lastly, just like rent-control, historic preservation or other local controls, the new regulations present an area of law that real estate professionals need to be prepared to discuss with their clients. This is especially true for those representing potential buyers or lessees. If an agent knows her prospective buyer or commercial tenant is interested in a property for use in the industry, the agent should at least be sufficiently knowledgeable to direct the client to the appropriate professionals and/or local authorities. As another example, knowing which jurisdictions absolutely bar — versus conditionally allow — any such activity will help that client locate the right property.

What’s the Takeaway? Regardless of where you stand on the moral or social issues presented by recreational cannabis, it is clear that savvy landowners, investors and professionals need to know how local regulations impact their property. Whether that means assessing the potential negative impacts of nearby cannabis operations or the viability of putting a given property to work in the industry requires analysis on a case-by-case basis. The key is to pay attention the industry’s impact, stay updated on changes to local regulations, and to not assume that, just because something was permissible in one locale, it will be allowed in another - even just one city down the road. Importantly, getting a qualified legal opinion regarding relevant land-use restrictions and regulations at the outset of a transaction or venture will go a long way toward reducing costly surprises down the road.

Important Nugs of Information • FEDERAL LAW

Despite the fact that medical marijuana is permitted in some shape or form in 46 states, marijuana is still illegal under Federal law. The Controlled Substance Act (21 U.S.C § 811) regulates the manufacture, possession, use, and distribution of certain substances. The Federal government uses schedules to rank substances based on their medicinal value and potential for abuse. As of publication date, cannabis is still listed as a Schedule 1 substance, which is the most severe ranking a substance can receive. Additionally, the Federal government does not recognize the difference between medical and recreational use.

•LANDLORD/TENANT ISSUES

Contrary to popular belief, a landlord can prevent a tenant from smoking cannabis in the unit — even for medicinal purposes — through lease addendums or house rules. If a commercial landlord is going to allow commercial cannabis on the premises, the landlord needs to ensure that the tenant is in compliance with local law.

•LAND USE ISSUES

While recreational use is legal in California, cities and counties were given the ability to regulate zoning ordinances in regards to cultivation, retail use (opening a shop in a particular area), and distribution in general. Retail operations need permits from state and local agencies, but most Bay Area cities are delaying this from happening. At the time of publication, many Bay Area jurisdictions have severely limited, if not prohibited, commercial cannabis activity - including cultivation, distribution, and sale.

•BROKER & REALTOR® AGENCY ISSUES

Buyer-side agents need to be aware if their clients intend to use the property for marijuana-related purposes. Agents should be able to spot potential issues for clients regarding their ability to cultivate, sell, and distribute cannabis on the property. Prudent agents will contact city or county agencies to ascertain permit requirements, to better advise their clients.

•EMPLOYMENT ISSUES

Based on current case law, employers can still require current and prospective employees to pass drug screenings, and may deny employment to those testing positive for marijuana use. This includes cannabis use for both recreational and medical purposes.

AFFORDABLE HOUSING SB540 DEVELOPERS CAN STREAMLINE THE PERMIT PROCESS IN WORKFORCE HOUSING OPPORTUNITY ZONES

ASHLEE D. ADKINS The rapid population growth in many parts of California is causing a significant housing shortage. Home values and rent prices have skyrocketed, making it difficult for many Californians to afford housing. To address the shortage, the state legislature has passed many new laws encouraging affordable housing developments. Developers already face many hurdles to building new housing, and one big hurdle is the requirement that, under the California Environmental Quality Act, an environmental impact report (EIR) must be prepared before obtaining planning approval by a local government. This new law makes it easier for developers by allowing cities or counties to create a “Workforce Housing Opportunity Zone”. The law creates rules for what constitutes a WHOZ, provides guidance on how developers can build in a WHOZ, outlines what cities must do to create a WHOZ, and establishes affordable housing requirements. The city prepares one EIR for the entire zone, and when developers want to build in that zone, they do not have to obtain a separate EIR, so long as certain conditions are met. This streamlined process helps cities and developers work together – cities can identify their housing needs, and developers can meet those needs by taking advantage of a streamlined permitting process.

AB571 MODIFIES ELIGIBILITY REQUIREMENTS FOR FARMWORKER HOUSING TAX CREDIT; FLEXIBILITY IMPROVES LIHTC PROGRAM

ASHLEE D. ADKINS Developing affordable housing is increasingly challenging in California. The price of land continues to rise, available lots are in short supply, and the costs of construction and obtaining permits are substantial. To make affordable housing more of an attractive investment for builders, California has in place the Low Income Housing Tax Credit Program (LIHTC). This program allows affordable housing developers to raise private capital by selling their tax benefits to investors. Here’s how it works: a developer would be able to deduct 9% and 4% credits from their annual tax liability over the period of 10 years by completing a qualifying project. Developers sell those credits to private investors, and use the funds received to invest in the affordable housing project. However, some burdens have caused these types of investments to wane. This law creates incentives and changes parts of the program for farmworker housing developments, to make it more feasible for developers to receive and sell the tax credits. For one, the new law reduces the occupancy requirements from 100% farmworkers and families to just 50%, which adds flexibility to the types of projects that qualify for credits. Additionally, projects that are in qualified census tracts (QCT) or designated development areas (DDA) are now also eligible to receive state LIHTC credits. The law also makes additional changes around advance payments and occupancy rules, intending to make it easier for these projects to qualify for the tax credit.

AB1515 REASONABLE PERSON STANDARD USED IN ENFORCING HOUSING ACCOUNTABILITY ACT FOR DEVELOPMENTS

ASHLEE D. ADKINS California is suffering from a housing crisis, spurred by a shortage in housing supply. Rising housing costs are making it virtually impossible to buy or rent in California for many low-income residents, which limits advancement opportunities and compounds inequality. New housing developments add more units to the housing supply, and thus are a popular method of addressing the housing crisis. Under current law, local agencies approve the plans for new developments. The Housing Accountability Act (HAA) states that local governments cannot reject a housing development project that otherwise complies with local zoning and planning rules, unless there are significant health and safety impacts that cannot be mitigated. This bill, AB1515, creates a “reasonable person” standard for determining whether a plan is in conformity with local laws. If substantial evidence exists that would lead a ‘reasonable person’ to conclude that the plan is in conformity with local planning rules, then the development can be considered as conforming to local laws. By codifying this standard, the courts have been given clear rules for interpreting the HAA. This move helps local governments be more reasonable and prevents them from denying, downsizing, or rendering infeasible plans for housing development projects and emergency shelters. Without evidence of significant health and safety impacts, development plans that conform to local planning rules cannot be denied by local governments, or pressured by “not-in-my-backyard” (NIMBY) opposition.

AB1505 LOCAL GOVERNMENTS MAY USE INCLUSIONARY HOUSING ORDINANCES AS CONDITION FOR APPROVAL

ASHLEE D. ADKINS Local governments have many tools to address affordable housing and create incentives for development. One type of policy is called inclusionary housing. Local governments use inclusionary housing policies to require that developers of residential rental units include a certain percentage of affordable rental units as a condition of approval for the building permit. Inclusionary policies have been used by local governments for decades. However, a recent appellate court decision in California challenged an inclusionary housing policy ordinance. The developer successfully argued that the inclusionary policy prevented them from setting their own rent levels. The inclusionary policy forced the developer to provide affordable housing units at certain rent levels, in order to receive planning approval. Under the Costa-Hawkins Rental Housing Act, rental housing owners have the right to set initial rent levels. If the developer were to receive approval via the inclusionary policy ordinance, they wouldn’t get to set the rental level they wanted. This decision created uncertainty about the relationship between rent control ordinances, which are governed by the Costa-Hawkins Rental Housing Act, and local affordable housing ordinances. This new law merely clarifies that a local government may establish inclusionary housing requirements as a condition for developing residential rental units within the local planning and zoning rules. Further, the new law allows the Department of Housing and Community Development to review these ordinances for local governments that have failed to meet at least 75% of its regional housing needs allocation number (RHNA), as well as other regulations and oversight.

Affordable Housing (continued)

AB1598 LOCAL GOVERNMENTS CAN APPOINT INVESTMENT AUTHORITIES TO COMBAT AFFORDABLE HOUSING SHORTAGE

ASHLEE D. ADKINS Many different strategies have been implemented to combat the affordable housing crisis in California. Several programs at the state level already attempt to encourage development, but the real impact will be made at the local and regional level. However, over the past 6 years, cities and counties have lost close to 70% of funding from state and Federal programs intended for affordable housing. It is expected that further cuts to the Federal Department of Housing and Urban Development (HUD) will contribute to the over 1.5 million home shortfall of affordable homes. One type of agency that helps spur affordable housing developments are community revitalization and investment authorities, or CRIAs. These local agencies traditionally use increases in property taxes to finance affordable housing development projects. The CRIA will freeze property taxes for a period of time, so that any additional property taxes (from reassessments or new developments) go directly towards affordable housing. Among other powers, a CRIA can invest these tax increments into disadvantaged communities, and have more flexibility than redevelopment agencies, who must first conduct blight studies before using eminent domain. This new law allows local governments to create a CRIA for the purpose of providing low- to moderate-income housing. The law creates rules and processes for creating a CRIA, and limitations on which types of entities can participate.

AB1521 CERTIFIED HUD ORGANIZATIONS GET FIRST RIGHT OF REFUSAL TO BUY AFFORDABLE UNITS BEFORE CONVERSION

ASHLEE D. ADKINS Rental properties in California can be designated as “affordable” through several means, such as by way of receiving low-income housing tax credits or by receiving financing through the Department of Housing and Urban Development (HUD). The law requires owners to maintain rents at an affordable level for a certain period of time, so that the property can be used in subsidy programs such as Section 8 Housing. After the designated length of time, owners can then “convert” their affordable unit to a market rate, after providing 12-month notice to tenants, local governments, and potential preservation purchasers. Over 25,000 affordable units were converted to market rate over the past few years, and nearly 32,000 are projected to be lost to market rate over the next 5 years. Under the existing Preservation Notice Law, potential buyers who would keep the property as an affordable rental property must receive notice, effectively giving these preservation purchasers a limited priority to purchase. This new law strengthens the Preservation Notice Law by giving HUD-certified housing organizations a first right of refusal to purchase properties at risk of converting from affordable housing to market rate. Sellers must now accept and execute a purchase agreement within 90 days of receiving a bona fide offer. The new law also outlines methods of appraising the property, rules for qualifying housing organizations, and requirements for compliance reporting.

DEVELOPERS & CONTRACTORS SB486 CONTRACTORS CAN BE DISCIPLINED BY LETTER OF ADMONISHMENT FROM CSLB FOR NON-SEVERE VIOLATIONS

ADAM PEDERSEN In California, the Contractors State License Board (CSLB) is the authority for issuing licenses for contractors to practice in California. CSLB issues 44 different license classifications and two different certifications, and these licenses are required for any business or individual who constructs or alters any building, road, railroad, or highway in California. Existing law outlines the discipline authority of the CSLB, which includes issuing citations and revoking licenses when a contractor violates the rules. Under the current law, the CSLB can only discipline contractors by issuing citations and revoking licenses. This new law allows the CSLB to issue letters of admonishment to contractors for violations that do not involve financial harm or serious injury. A contractor that receives a letter of admonishment must disclose the violation for one year. The new law creates standards for issuing a letter of admonishment and outlines certain circumstances where a letter of admonishment cannot be issued, such as if the licensee was unlicensed at the time of the violation, or if the victim is an elder.

SB35 STREAMLINED APPROVAL PROCESS FOR INFILL PROJECTS IN LOCALITIES THAT HAVE NOT MET RHNA

ASHLEE D. ADKINS Every city and county in California must adopt a general plan for their jurisdiction, that sets out guidelines for how the community will grow. When someone wants to build a residential or commercial building within the jurisdiction, the developer or architect must submit plans to the local government to receive approval for permits. Before approving the plans, the local government will evaluate the plans within the scope of the general plan. Because of the housing shortage in California, local governments must submit their general plans to the California Office of Planning & Research and the California Department of Housing and Community Development. Every local government must have plans for meeting their regional housing needs allocation (RHNA), which is a specified number of new units the local government must build in order to accommodate population growth in the region. Local governments that havenâ&#x20AC;&#x2122;t met their RHNA number want to do everything they can to encourage development. This new law allows cities and counties that havenâ&#x20AC;&#x2122;t met their RHNA number to create a streamlined approval process for infill projects. This process allows permits to be approved after just an administrative review, instead of the normal public hearing process. There are several requirements that plans must meet in order to qualify for the streamlined process, such as creating two or more residential units and including some level of affordable housing.

Developers & Contractors (continued)

AB879 CHARTER CITIES MUST REPORT HOUSING ELEMENT TO HCD, LOCAL GOVERNMENT MUST EVALUATE PERMIT FEES

ASHLEE D. ADKINS Local governments are tasked with planning out the future of their communities through the general plan. This general plan gives a framework for making decisions regarding commercial and residential development. Every general plan must have a housing element, which discusses housing needs and how the local government plans to address those needs. Developers rely on these guidelines and ordinances when making decisions about whether to develop in a certain area or not. To combat the housing shortage in California, local governments are seeking ways to make it easier for developers. This new law makes several changes to existing law, specifically requiring local governments to evaluate the non-governmental constraints to building new housing in their jurisdictions. The housing element of a general plan must analyze governmental and non-governmental restraints to developing housing for all income levels, including evaluating whether or not the fees are reasonable. This new law also requires charter cities to submit their general plans to the Department of Housing and Community Development (HCD), including the number of housing development applications received and the number of units that were approved and disapproved in the prior year.

AB678 HOUSING ACCOUNTABILITY ACT MODIFIED TO INCREASE FINES, COMPLIANCE STANDARDS, AND BURDEN OF PROOF

SIMON OFFORD Local governments are charged with approving new housing developments in their jurisdictions. A developer will apply for building and planning approval, and the planning commission will issue a decision, usually after a technical review and a period of public comment. Sometimes, these plans are rejected – not because they violate ordinances or they don’t fit the general plan, but because the community simply doesn’t want it. The Housing Accountability Act (HAA) is an existing law that limits the ability of local agencies to reject housing developments without thorough analysis of the economic, social, and environmental impacts. Developers under the HAA have a judicial remedy, where they can sue and have a judge issue an order that compels the city to approve the plans. This new law makes changes to strengthen the HAA, in response to the housing crisis. Specifically, the new law increases the burden of proof that a local government must meet before denying a development plan. It also increases minimum fines for violating the HAA, eliminates zoning changes as a reason for denying a permit, and mandates that developers use objective standards and criteria for qualifying for protection under the HAA.

AB73 LOCAL GOVERNMENTS CAN ESTABLISH HOUSING SUSTAINABILITY DISTRICTS TO STREAMLINE HIGH-DENSITY DEVELOPMENT

SIMON OFFORD Transportation in many parts of California is almost as tragic as the housing crisis. Home and rent prices in high-density areas are out of reach for many people that work in the area, and so commuting is usually the only option for workers to live in more affordable areas. The dire state of traffic congestion around cities in California, especially the Bay Area, have made public transportation a common mode of transportation for people to get to and from work. To encourage housing developments around public transportation, the state legislature has come up with a creative solution that addresses several developmental hurdles. This bill allows a local government to designate a “housing sustainability district”, where zoning and environmental reviews for the district are completed upfront. Locations must meet certain requirements to be designated as a sustainability district, such as that it must be zoned for residential use and must accommodate at least 10 units per acre. The new law specifies the process for a local government to designate a sustainability district, as well as the qualifications for projects that are eligible to be built within the district. These districts must be near existing infrastructure and on land zoned for higher densities. In exchange, the local government will prepare the environmental impact report (EIR) upfront. Projects that are approved must meet certain requirements for housing affordability, among other ordinances. In exchange for setting up these districts, the local government will receive a zoning incentive payment, the first half of which is provided after preliminary approval of the environmental impact report (EIR) and the rest issued within 10 days of receiving proof of building permits that were issued. This new law seeks to streamline the development process for high-density housing near public transportation, by completing an EIR for the district and allowing developers to skip the project-specific environmental review.

AB1278 CONTRACTORS CAN’T DISASSOCIATE FROM FINAL JUDGMENTS BY TRANSFERRING LICENSES DURING APPEAL TIMEFRAME

ADAM PEDERSEN Contractors in California must have a license from the Contractors State License Board for all projects where labor and material costs exceed $500. Licenses are only issued to business entities, but a contractor that is a sole proprietor can also receive a license. A license issued to a contractor will list a designated officer, or official of record, that serves as the personnel contact for the license. If a contractor is sued in court and a judgment is issued, the contractor must either pay the judgment in full or file a bond in an amount at least equal to the unsatisfied judgment. Under existing law, a contractor with an unpaid judgment cannot serve as the licensed officer for another project. Since most contractor business entities have multiple members, some contractors will transfer their license to another entity during the appeal process, before a final judgment is issued against them. This way, they disassociate themselves from the judgment and continue working under a new license. This new law seeks to crack down on unscrupulous contractors by clarifying who is affected by the judgment. The new law specifies that the licensee who is involved in the activity on which a final judgment is based — not the licensee at the time of final judgment — cannot serve on another license until the judgment is settled.

Developers & Contractors (continued)

AB1701 CONTRACTORS AND SUBCONTRACTORS NOW JOINTLY LIABLE FOR UNPAID WAGES, BUT NOT LIQUIDATED DAMAGES

ADAM PEDERSEN Wage theft is a serious, perpetual issue in California, and the legislature has passed many bills addressing the problem. One area where wage theft runs rampant is with subcontractors, especially non-unionized workers. Often, when construction is performed in California, the contract is awarded to a general contractor, who will then subcontract with more specialized companies. For example, a general contractor for a home remodel may subcontract a company to do the flooring, another subcontractor for windows, and a different subcontractor for the electric work. Under current law, when a subcontracted worker has a wage issue, they must first pursue the subcontractor for the unpaid wages before they can go after the general contractor. This new law makes the general contractor jointly liable – meaning the worker can pursue the general contractor without having to exhaust other options first, such as securing a judgment against the subcontractor or using a third party to collect. To avoid undue burdens for contractors, the law adds certain limitations, such as limiting the number of parties and the types of eligible payments.

AB494 SMALL CHANGES MADE TO ENCOURAGE ACCESSORY DWELLING UNITS, ADDRESS TANDEM PARKING

SIMON OFFORD With the shortage of affordable housing units in California, one popular method for increasing the supply of housing has been accessory dwelling units (ADUs). These are small living quarters that are built on single-family lots, usually separated from the main home. Often called “granny” or “mother-in-law” units, these small homes offer permanent provisions for sleeping, eating, cooking, and living — just in a smaller space. Many homeowners in California have considered building an ADU on their property for use a rental unit and for generating passive income. The California legislature has passed several laws over the past few years to encourage ADUs. This new law seeks to clarify existing law by making changes to the process of reviewing and approving ADUs. The law states that the ADU may be rented but cannot be sold or conveyed from the primary residence. Additionally, the new law states that parking cannot exceed one parking space per unit, and addresses a local government’s ability to address “tandem parking”. The law makes several other technical changes intended to clarify existing law and to encourage ADU utilization.

SB330 BUILDING PERMIT FEES CAN BE WAIVED FOR CONSTRUCTING ACCOMMODATIONS FOR DISABLED VETERANS

CLAYTON DODDS Homeowners in California that wish to make improvements to their home must first obtain permits from their local city or county. These permits are approved by a planning commission based on whether or not the construction plans for the improvement are in line with local zoning regulations and building codes. Between the cost of architecture plans, permit fees, and material & labor costs, home improvement projects can become very expensive. Under existing law, a veteran with a disability would have to pay for all the permitting fees for remodeling the home to accommodate her disability. This new law gives local agencies the ability to waive or reduce all building permit fees associated with a home improvement plan that is intended to accommodate a veteran with a qualifying disability. While the plans would still require a permit, the cost of obtaining that permit – which varies depending on the local agency – can be reduced or waived entirely.

SB167 NEW ENFORCEMENT AND FINES ADDED TO THE HOUSING ACCOUNTABILITY ACT

CLAYTON One of the most significant barriers to building affordable housing DODDS is the local permitting process. When developers want to build new housing, they have to go through local planning and building departments to get permits. However, many new developments in California are rejected or severely restricted by local planning departments. Often, developments are rejected because the community simply doesn’t want the development in their backyard (NIMBY), despite the fact that the plan otherwise complies with local planning rules. The Housing Accountability Act (HAA) aims to prevent local agencies from disapproving housing projects unless there are substantial public health or safety impacts. This new law makes changes to strengthen the HAA, such as requiring local jurisdictions to provide documentation for rejected plans, and to prove by “a preponderance of the evidence” why a housing development project should be disapproved. The new law also creates new rules, fines, and enforcement tools.

AB1397 LOCAL GOVERNMENTS SUBJECT TO STRICTER RULES FOR INVENTORY OF SITES AVAILABLE FOR DEVELOPMENT

CLAYTON DODDS To accommodate for future population growth, every local government in California must include housing projections in their general plan. They must project a number of new housing units that will be available in the next planning period, and they must address housing needs at all income levels. This number is called the Regional Housing Needs Allocation (RHNA), and includes an inventory of sites zoned for housing development. In this plan, if the local government does not have enough sites to accommodate their RHNA projection, they must rezone land to accommodate. However, many local governments have “cheated” on this rule, by zoning sites for housing development that aren’t actually feasible for development. This way, they meet the required number of sites, but their numbers are padded by sites aren’t actually adequate. This bill tightens the standards for what constitutes an adequate inventory of land zoned for meeting regional housing needs. Among many other things, the inventory must include a listing of properties by assessor parcel number, and must indicate if the property can accommodate lower-income housing.

EMPLOYERS & EMPLOYMENT SB63 EMPLOYERS WITH MORE THAN 20 EMPLOYEES MUST PROVIDE 12-WEEK PARENTAL LEAVE

ADAM PEDERSEN Existing law governs how much leave time a business must give employees. These rules depend upon several factors, such as the size of the employer, the eligibility requirements for employees to receive protection, the reason for leave, the length of leave, and the amount an employee must be paid, if any. However, many of the protections for parental leave only apply to businesses with 50 or more employees. 16% of the California workforce works for a business with 20-49 employees. This law enacts the New Parent Leave Act, which makes it an unlawful employment practice for employers with more than 20 employees to prevent qualified employees from taking up to 12 weeks of parental leave. The employer must guarantee employment for the employee in the same or comparable position upon return. Additionally, the employer cannot fire an employee from taking parental leave, and must continue paying for the employeeâ&#x20AC;&#x2122;s group health coverage. Additional rules are included in the law, which is intended to address gender and social inequality in the workplace.

SB396 EMPLOYERS MUST INCLUDE TRANSGENDER ISSUES IN SEXUAL HARASSMENT TRAINING

ADAM PEDERSEN In the workplace, there are protections for employees that belong to certain classes based on race, religion, gender, disability, and national origin, among many others. Unfortunately, harassment in the workplace is all too common, and often the harassment is rooted in discriminatory views against a person. One area that has been surging in recent years is harassment and discrimination against people who identify as LGBT or transgender. Existing law states that employers cannot harass or discriminate against someone based on their gender identity or expression, and employers with more than 50 employees must provide at least 2 hours of sexual harassment training to supervising employees. This new law requires employers with more than 50 employees to train supervising employees about harassment based on gender identity and sexual expression. It also requires employers to display a poster created by the Department of Fair Employment and Housing regarding transgender rights.

AB1008 EMPLOYERS CANNOT ASK ABOUT CONVICTION HISTORY ON JOB APPLICATIONS, MUST ALLOW REBUTTAL

ADAM PEDERSEN When publishing job applications, California employers will often require candidates to provide professional and personal information about themselves. This information is supposed to be used to determine if the candidate is eligible for the job, and would be a good fit for the company. However, this information unfortunately can also be used for discriminatory purposes. As a result, several laws over the past few years have addressed what employers can ask of prospective employees. Under existing law, companies can ask candidates about their criminal conviction history, but candidates do not have to disclose information about arrests or detentions that never resulted in conviction. If an applicant does have a criminal conviction, this often automatically disqualifies the applicant from the position, without explanation. This new law prohibits an employer from asking about a candidateâ&#x20AC;&#x2122;s conviction history prior to providing a conditional offer of employment. The law applies to employers of 5 or more employees, and makes it an unlawful employment practice to ask about criminal conviction history on any application for employment. Employers can still perform a background check after extending a conditional offer; if conviction history is a reason for denying employment, the company must provide written notification specifying the reason, and must give the applicant 5 business days to respond or to dispute the accuracy of the information.

AB168 EMPLOYERS CANNOT ASK CANDIDATES ABOUT PRIOR SALARY HISTORY

ADAM PEDERSEN Gender pay disparity has been extensively researched over the past 5 decades, and, while the science may be imperfect as to the exact amount of disparity, it is universally accepted that a gender pay gap does exist. This gap in wages creates perpetual income inequality for women, as well as other members of protected groups that suffer from wage discrimination. The impact of this inequality extends far into the future, as lower wages result in lesser retirement benefits, among other impacts. One way that gender pay inequality is perpetuated is by employers that ask prospective employees about past salary history. If a woman was paid less in her old job than her male counterparts, the new company may feel justified in paying her less just based on historical precedence, instead of providing compensation that matches her experience, education, and potential for success. Current law prevents companies from justifying pay disparity based only on prior salary. This law prohibits employers from asking potential employees about salary history, and requires employers to provide a pay scale for a position upon request. If the candidate provides salary history voluntarily, then the prior salary information cannot be used as a factor when deciding to extend an offer to the candidate.

Employers & Employment (continued)

SB340 COURT-APPOINTED REPRESENTATIVE CAN SIGN CERTIFICATE OF DISSOLUTION IN CHAPTER 11 BANKRUPTCY

ADAM PEDERSEN When a company files for Chapter 11 bankruptcy, a representative is selected to act on behalf of the board of directors to execute a liquidation or reorganization plan. This designee is usually a court-appointed trustee, liquidating agent, or responsible agent, and answers to a bankruptcy court. Sometimes, part of the Chapter 11 plan that is approved by a bankruptcy court includes a provision to dissolve the corporation. Under current law, a corporation is dissolved once a certificate of dissolution is signed and verified by a majority of the board of directors or by a majority of shareholders. This lengthy process often results in “corporate shells,” which are bankrupt companies that remain “on the books” of California state agencies, despite being defunct. This new law allows the designated representative in Chapter 11 to sign and verify a certificate for dissolution, as part of a court-approved reorganization plan.

SB384 NEW TIERS AND CATEGORIES LIMIT REQUIREMENTS FOR SEX OFFENDER REGISTRATION

ADAM PEDERSEN In California, if a person is convicted of certain sex-related crimes, that person must register with the state as a sex offender. This registration is for life, which means it remains on the person’s record even after a prison sentence or probation term is completed. Under current law, registration as a sex offender is the same for all sex crimes, regardless of severity. Most employers will complete a background check of prospective employees, and often that background check involves checking the sex offender registry, which is on a public website (Megan’s Law). This new law creates three tiers of sex offender registration, and outlines which types of offenses require a 10-year, 20-year, or lifetime registration as a sex offender. The new law also spells out procedures for removing people from the registry after the registration term has expired, and classifies crimes based on risk of violence, sexual reoffense, and type of victim. Previously-registered sex offenders may no longer appear on public websites, which is important to keep in mind when hiring new employees.

HOMEOWNERS ASSOCIATIONS AB534 NEW RULES FOR MECHANIC’S LIENS ON PROPERTIES GOVERNED BY AN HOA

SIMON OFFORD When construction work is performed, the contractor will often place a mechanic’s lien on the property. This lien is an encumbrance on the property, and is used to ensure that the contractor, mechanic, or material supplier is paid for the service. The lien can prevent an owner from selling the property, and can even be used to foreclose on a property. Under existing law, it is very complicated to obtain a mechanic’s lien, and even more complicated to clear a mechanic’s lien, for work performed in a common interest development (governed by an HOA). This new law makes three changes to ease the complications. First, a mechanic’s lien can be authorized by the HOA alone, instead of all the owners, for work performed in a common area. Second, instead of giving notice to all homeowners about a mechanic’s lien, a notice given to the HOA is sufficient to constitute legal notice. Finally, if a mechanic’s lien is placed on multiple properties in a development, an individual homeowner can remove the lien on their individual property by securing a lien removal bond, in the amount of 125% of their pro rata share of the total amount claimed.

SB407 HOAs CANNOT PREVENT HOMEOWNERS FROM EXERCISING FREE SPEECH IN COMMON AREAS

SIMON OFFORD In California, the Davis-Stirling Common Interest Development Act regulates how developments are managed. Common interest developments are managed by homeowners associations, which are like a board of directors for a development, comprised of residents that live in the development. The HOA governs the rules and activities of the development, according to the covenants, conditions, and restrictions (CC&Rs). This includes regulating what activities are permitted in common areas, such as courtyards, parks, or clubhouses. Under existing law, an HOA could prevent homeowners from holding political meetings. This new law makes it explicitly unlawful for HOAs to have operating rules or CC&Rs that restrict homeowners from exercising free speech. This means that the HOA cannot stop homeowners from holding meetings, inviting political candidates to the property, engaging in door-to-door canvassing, or distributing materials of a political concern. The HOA can establish reasonable parameters for the activity, but it cannot require liability insurance, collect a fee, or require a deposit.

Homeowners Association (continued)

AB1412 HOAs MUST SEND NOTICES TO LAST ADDRESS ON FILE, NOT AUTOMATICALLY TO ADDRESS OF UNIT IN DEVELOPMENT

SIMON OFFORD Many developments in California are governed by a homeowners association, or HOA. The HOA has several reasons they need to contact individual homeowners – whether it is communicating community updates or providing notice about upcoming assessments. Every year, homeowners are supposed to provide information to the HOA, which includes an address where notices should be delivered. Under existing law, if no address is listed, then the default address is the address of the unit in the development. However, for investors who buy into an HOA and rent out their unit, this means that they would not receive important notices, unless the tenants provide it. This law makes a small change, to where the default address used for notices is the last address on file, instead of the address of the unit in the development. Additionally, this law limits the liability of HOA board members in mixed-use developments, where previously only exclusively residential developments were granted such immunity.

AB634 LAW CLARIFIES WHAT REASONABLE RESTRICTIONS AN HOA MAY PLACE ON SOLAR ENERGY SYSTEMS

SIMON OFFORD Renewable energy has long been a priority for the state of California. Several laws over the past few decades have been passed to promote solar energy systems, and the ability for homeowners and developers to install them. For homeowners that live in a common interest development (CID), the covenants, conditions, and restrictions (CC&Rs) outline the rules for the development. Existing law allows the CC&Rs to impose only reasonable restrictions on the installation or use of solar energy systems. If the rules prohibit or restrict installation of solar energy systems, the rules are void and unenforceable. However, it is unclear under current law what constitutes a “reasonable” restriction. This new law provides clarification about what types of restrictions on solar energy systems are considered “reasonable”. This new law prohibits HOAs from passing rules that prevent homeowners from installing solar energy systems on the roof of the building in which the owner resides, a garage, or adjacent carport. Additionally, the HOA cannot require the approval of all members in the development before an individual homeowner can install a solar system, and cannot require 67% votes of approval for partial systems on shared roofs. The new law adds new requirements that an HOA must follow when it receives a request to install a solar energy system on a multifamily common area roof, and outlines what would constitute a reasonable restriction. For example, it is reasonable for an HOA to require an applicant to submit a solar suitability survey prepared by a licensed contractor, in order to determine equitable allocation of the usable solar roof area. Additionally, HOAs can require individual homeowners to be responsible for certain costs, such as any maintenance costs or costs of damage caused by installing a solar energy system. This law equips HOAs with a more clear understanding of what kinds of restrictions on solar energy systems are allowed — and more importantly, which types of restrictions are specifically prohibited.

AB690 THIRD-PARTY HOA MANAGERS MUST DISCLOSE DOCUMENT FEES AND CONFLICTS OF INTEREST

SIMON OFFORD In California, many homes are part of a development that is governed by a homeowners association (HOA). The HOA is in charge of administering the rules of the development, and those rules are established by the covenants, conditions, & restrictions (CC&Rs) for the development. Because of the substantial managerial responsibilities that an HOA has, many HOAs will contract with a third-party company to manage the development. These professional management companies charge fees to the HOAs, which are passed down to the individual homeowners within the development. While these management companies have to disclose certain information under current law, they have not previously had to disclose whether the management company receives a referral fee for using certain companies for document transfer. This new law requires that all community interest development managers must disclose potential conflicts of interest and monetary interests to the HOA board before entering into a management agreement. As part of the annual budget, HOAs must provide to individual owners a disclosure form that shows the documents fees that the CID manager charges when providing documents related to the sale of homes within the development.

LANDLORDS & TENANTS AB646 LANDLORDS MUST DISCLOSE IF PROPERTY IS LOCATED IN FLOOD ZONE

ASHLEE D. ADKINS California is home to some of the largest and most beautiful bodies of waters in the country. Hundreds of thousands of miles of rivers and creeks run through the state, and millions of tourists every year visit the over 3,000 lakes in California. However, with temperamental weather patterns and diverse altitudes and geographies, many areas in California can be prone to flooding. The Federal Emergency Management Agency (FEMA) publishes maps that show different flood hazard areas, called Flood Insurance Rate Maps (FIRMs). Existing law requires that, if a home is located in a flood hazard area, it must be disclosed to potential buyers or potential transferees. However, tenants who live in a flood hazard area currently would not know they are living in a flood zone, unless they figured it out on their own. This new law, which goes into effect on July 1st, 2018, requires landlords to disclose in a lease or rental agreement that the property is located in a flood zone. This law requires landlords to provide the disclosure, so long as the landlord has actual knowledge of the property being in a flood zone. The notice must direct tenants to resources to find out about hazards, and must inform the tenant that she or he should consider purchasing flood or renter’s insurance.

AB299 NO PUBLIC AGENCY MAY COMPEL LANDLORDS TO TAKE ACTION BASED ON IMMIGRATION STATUS OF TENANTS

ASHLEE D. ADKINS The current political atmosphere around immigration is quite tense. Immigration is a hotly debated issue, with California staunchly opposed to the current administration. As the Federal immigration agencies seek to scale up enforcement and deportation of illegal immigrants, they have sought cooperation with cities, counties, and states — and California has protected undocumented peoples through several means. Federal immigration enforcement officers, that try to compel cities and counties to give them information on how to identify and find undocumented immigrants in their jurisdictions, are often met with challenges. Under existing law, landlords cannot collect information about the citizenship or immigration status from their tenants. While landlords can have information necessary for financial qualifications and for background checks, they cannot possess citizenship or immigration information. Cities and counties are also prohibited by existing law from requiring landlords to collect or report immigration information about their tenants. This new law expands this prohibition to include state agencies and public entities. Under the new law, no state office, department, division, bureau, or any public entity may make a rule that compels landlords to take action based on the immigration or citizenship status of tenants or prospective tenants. Federal law states that a state or local government cannot stop or restrict a government official from sending or receiving information from the Federal Immigration and Naturalization Service. This new law does not violate Federal law, because it only restricts the state from compelling landlords – who are non-governmental entities – to provide tenant immigration information.

IMMIGRANT TENANT PROTECTION ACT

WHAT DOES IT MEAN TO BE AMERICAN? The United States of America is unlike any other country on Earth. Almost all other countries are culturally homogenous, where all of the country’s citizens share some kind of cultural, religious, or ethnic similarity. The United States of America, however, is a melting pot of cultures, religions, and ethnicities. The country was founded by immigrants, who came to the Americas seeking freedom from religious persecution, and found refuge by occupying the lands of Native American tribes. Over the course of centuries, waves of immigrants have come to America seeking to make a better life for themselves and their families – Irish immigrants flocked to the United States to escape famine in the 1800s, German Jews escaped from persecution by the Nazis in the mid-1900s, and Chinese laborers migrated to America in the late 1800s because of the promise of jobs. In response to each wave or increase in immigrants throughout history, there has always been a political backlash. Public attitude towards immigration has never been particularly favorable, despite the fact that immigrants bring new ideas, skills, and practices that enrich the fabric of our diverse culture. Throughout history, Federal laws have been passed (and subsequently repealed) that sought to stop immigrants from coming into the country, from the earliest Alien & Sedition Acts in 1798 to the 1882 Chinese Exclusion Act. Anti-immigrant sentiment has historically fueled the creation of secret societies and even entire political parties, causing many — often violent — conflicts. Citizens who consider themselves natural-born citizens don’t want foreign peoples to come and disrupt their communities, take their jobs, or engage in activities that they feel corrupt their culture, heritage, and status quo. In 2018, America is once again embroiled in another divisive immigration controversy. The debate around immigration has been one of the

hottest political topics in recent years. The issue tends to divide people down partisan lines, with Democrats seeking to protect immigrants regardless of their citizenship status and Republicans wanting to secure the border and deport undocumented peoples. The current administration has made it known that it is opposed to illegal immigrants, and is committed to cracking down on undocumented peoples in the country. The popular Deferred Action for Childhood Arrivals program, or DACA, has been challenged as unconstitutional by the current administration, and was brought to an abrupt end in 2017. However, at the time of writing, the Supreme Court had rejected the current administration’s appeal of a lower court ruling blocking the move; which, for the time being, allows those already enrolled in the program (known as “dreamers”) to renew their work permits after the now-defunct March 5th deadline. The current administration also issued a January 25th order to crack down on undocumented immigrants in the country that have criminal records. As a result, sweeping raids by Immigration & Customs Enforcement, or ICE, have been conducted across the country. In response to the threat of deportation, many states and cities have challenged the current administration’s policies. Some cities have declared themselves “sanctuary cities”. While every sanctuary city is different in how they function, generally a sanctuary city means that the local government will protect illegal immigrants by not using municipal funds or resources to help enforce Federal immigration laws. For example, a police force in sanctuary city won’t detain an undocumented suspect until ICE can come to take the suspect — they will give the suspect due process rights and release them after they post bail, complete jail time, or are cleared of charges. In California, there are several sanctuary cities, including San Francisco, Berkeley, Los Angeles, and Watsonville, to name a few. However, as ICE scales up their enforcement efforts, many states and cities are looking for additional ways to protect undocumented immigrants.

Existing law prohibits landlords from asking tenants or prospective tenants about their citizenship status. However, they are allowed to request the necessary information or documentation for verifying the prospect’s identity and financial qualifications. While this information is obtained legally under current law, unscrupulous landlords could use that information to threaten the tenant. Some landlords have influenced tenants to move out by threatening to turn them over to Federal authorities, and others have retaliated against tenants who make otherwise valid habitability claims. Existing law provides protection against harassment and discrimination, but these protections are inadequate and ineffective in the intensely competitive rental market in California.

THE IMMIGRANT TENANT PROTECTION ACT OF 2017 In 2017, Governor Jerry Brown signed AB 291, which enacted the Immigrant Tenant Protection Act of 2017. This new law seeks to create protections and safeguards against landlords who threaten to report the immigration status of their tenants to Federal immigration authorities. First, the law makes it illegal for a landlord to disclose information about a tenant’s citizenship or immigration status for the purpose of influencing them to vacate the property. This protection is extended to tenants as well as occupants known to be associated with the tenant (such as family members and friends). Additionally, landlords cannot disclose information about a tenant or prospective tenant’s immigration or citizenship status for the purposes of: 1) Harassing or intimidating the tenant 2) Retaliating against the tenant for exercising his or her housing rights 3) Influencing a tenant to vacate the property 4) Recovering possession of the property

DAMAGES & DEFENSES This law does not prevent landlords from legally complying with requests from Federal authorities, including responding to a subpoena or warrant. However, it does prohibit disclosing information to immigration authorities or local agencies for the purposes stated above. The law allows a nonprofit organization to bring action on behalf of a tenant. If a landlord is found in violation of this new law, the landlord must pay statutory damages of 6-12x the monthly rent charged. Additionally, the district attorney is notified of the violation, and the court will issue injunctive relief to prevent the landlord from doing it again with other tenants, current and prospective. The law states that it is a prohibited form of retaliation for a landlord to report or threaten to report citizenship information after a tenant makes a complaint about the habitability of the property, or if the tenant has participated in a tenant’s rights organization or association. Additionally, tenants may defend against an unlawful detainer action (eviction) by claiming that the action is being taken because of the immigration or citizenship status of the tenant. This new law codifies this type of retaliation as an affirmative defense to unlawful detainer actions. However, landlords can successfully rebut the defense if they approved the tenant to take possession before filing the UD action or include evidence that the tenant failed to provide identifying information. Additionally, if the landlord is filing an unlawful detainer action to comply with Federal government rental assistance or rent-control programs, then the tenant may not raise the affirmative defense. Immigration has always been a divisive issue, because it hits at the heart of what it means to be an American. This new law is one of thousands across the country and throughout history. We can only hope that someday, our country can find a peaceful and agreeable stance on immigration.

REALTORS & BROKERS ®

AB1357 ROOFING REPAIRS CAN BE MADE BY SAME COMPANY THAT COMPLETED ROOFING INSPECTION

ADAM PEDERSEN Home inspections are critical for homeowners and potential buyers to identify issues with their home, especially during the real estate purchase process. There is no statutory licensing or certification requirement for home inspectors; however, existing law outlines a standard of care for home inspectors to follow and recognizes the standards and practices of several home inspection associations. It is currently an unfair business practice for a company that completes a home inspection to be the same company that performs repairs on the structure. This way, the home inspection is more likely to be honest and untainted by the company’s interest to get repair work or receive kickbacks from referrals. The restriction applies to all types of home inspectors, including roofing contractors. However, roofing contractors are required to be licensed, and often are consulted as part of a home inspection. Under existing law, the homeowner would be forced to use a different roofing contractor to fix roofing issues identified by the first roofing professional during the home inspection process. This new law adds an exemption for roofing contractors, that allows licensed roofing contractors to perform work on a property that was inspected and identified by their same company, so long as certain circumstances are met. This new law creates a statutory “roof certification” to be provided by a licensed C-39 roofing contractor, that can be issued once a licensed roofer has inspected a roof and made necessary repairs.

SB542 MOBILE HOME SELLERS CAN RELEASE THEIR LIABILITY FOR PREVIOUS OWNER’S LIENS AND UNPAID TAXES

ADAM PEDERSEN Buyers of mobile homes must obtain a tax clearance certificate (TCC) from the county tax collector, to demonstrate that all property taxes have been paid. However, mobile homes sold prior to 1980 weren’t subject to property taxes. Instead, these structures were subject to vehicle license fees (VLF). When a VLF isn’t paid, it creates an automatic lien on the property and restricts the Department of Housing and Community Development (HCD) from providing title to the home. Many mobile homes are sold informally. Under current law, mobile home buyers would know about unpaid taxes, but not unpaid VLFs. These buyers would have no idea that a VLF lien is on the home until they completed the purchase and tried to transfer title. Without being able to prove ownership, the buyers and other future owners would be helplessly exposed to risk of eviction. Thousands of mobile homeowners in California do not have a valid title, and HCD doesn’t know who the true owners of these properties are. Last year, a new law was passed to protect buyers in this process. This new law helps sellers, who may not have known that they don’t have title to the mobile home. Sellers may now sign a release of liability when selling a mobile home, so long as they provide an endorsed certificate of title to the buyer and a completed notice of sale/transfer to HCD.

SB764 BROKERS CAN USE INSURANCE TO COVER UNLICENSED EMPLOYEES WHO WITHDRAW FUNDS FROM TRUST

ADAM PEDERSEN Real estate brokers owe their clients a fiduciary duty, especially when it comes to trust fund accounts. Many brokers hire assistants and office staff to help them conduct business, and often, these staff members are not licensed by the California Bureau of Real Estate. These staff members perform a range of tasks for the brokers; however, if the staff are to withdraw money for a trust fund account, existing law requires that the broker have fidelity bond coverage that is at least equal to the maximum amount of funds accessible to the staff person. While this protection is important, many brokers have packaged insurance policies that cover many different activities. This law allows real estate brokers to use their insurance coverage, in lieu of obtaining a separate fidelity bond, to protect unlicensed employees that withdraw money from the trust fund account.

SB2 NEW $75 FEE ON REAL ESTATE TRANSACTION DOCUMENTS WILL FUND BUILDING HOMES AND JOBS TRUST FUND

ASHLEE D. ADKINS Housing affordability has reached crisis levels in California. The state ranks 49th in housing units per capita. Because of the lack of affordable housing, 50% of moderateincome families and 100% of low-income families struggle with the cost of housing. That results in a loss of $140 billion per year in output, or 6% of the stateâ&#x20AC;&#x2122;s GDP. The pressure for housing is extremely tight â&#x20AC;&#x201C; in 2016, it was discovered that 2.2 million people were competing for only 664,000 affordable rental units. To address the shortage in housing, the state of California has instituted several programs to help finance affordable housing developments and to help homeowners find housing. Many of these programs are funded through bonds, but have been cut in recent years. This new law, titled the 2018 Building Homes and Jobs Act, creates a trust fund for financing affordable housing initiatives. Beginning January 1st, every real estate instrument or notice that is required for a real estate transaction will be assessed a $75 fee. This includes grant deeds, quit claim deeds, abstracts of judgment, notices of default, and CC&Rs, but does not include documents associated with the sale of commercial or residential real estate. In the first year, half of the money collected by the fund must be used for helping local governments to expedite the planning and building permit processes. The other half must be used to help individuals at risk of homelessness, such as rental assistance, navigation centers, transitional housing, and rapid rehousing programs. Starting in 2019, 30% of the funds will be used by the state for workforce housing and affordable housing initiatives, while 70% will be distributed to local governments.

REALTORSÂŽ & Brokers (continued)

SB329 MOBILE HOMES NOW INCLUDED IN FEDERAL AND STATE HOME OWNERSHIP PROGRAMS AS LOW-INCOME HOUSING

ASHLEE D. ADKINS The housing crisis in California has reached critical levels. In response, many state and Federal programs have been designed to promote affordable housing, administered by the Department of Housing and Community Development and the California Housing Finance Agency. These various programs provide assistance through tax credits, down payment assistance, subsidies for affordable housing development, and government loans. Currently, many low- to moderate-income people in California live in manufactured homes, because mobile homes are affordable. Seniors, immigrants, and fixed-income individuals are the most common groups that live in mobile home parks. However, mobile homes are not considered affordable housing under existing law. In areas where affordable single-family homes are not available, low-income prospective homeowners may be excluded from the area because they canâ&#x20AC;&#x2122;t use incentives and programs to purchase mobile homes. New technology and regulations have improved the quality of manufactured homes, making them more desirable. This new law requires that all state and local home affordability programs include manufactured housing. Now, down-payment assistance and tax credit programs that promote home ownership in California can be used to purchase manufactured housing.

SB173 CALBRE IS NOW THE DRE (AGAIN) WITHIN THE BUSINESS, CONSUMER SERVICES, AND HOUSING AGENCY

ADAM PEDERSEN In 2012, the California state government was reorganized by Governor Jerry Brown. During that reorganization, the department of real estate became a bureau under the Department of Consumer Affairs (DCA) and was renamed the CalBRE. However, as a bureau under the DCA, there have been administrative issues. CalBRE was not receiving sufficient human resources support and management direction, and there were significant delays in purchase orders, reimbursements, and IT order fulfillments. The disorganization reached its peak frustration in 2015 when the CalBRE had not paid their utility bills on time, and the electricity was shut off at a license examination center in San Diego. This new law changes the name of CalBRE back to the Department of Real Estate, and places the department within the Business, Consumer Services, and Housing Agency (BCSH).

AB294 MOBILE HOME PARK MANAGERS MUST PROVIDE PARK OWNER INFORMATION WITHIN 10 DAYS AFTER REQUEST

ASHLEE D. ADKINS Mobile homes are often located within a mobile home park, and these parks have rules and restrictions that homeowners must follow. Much like an HOA, a park manager will enforce the rules of the park, as well as accept fees, screen potential tenants, process applications, and handle disputes. Homeowners in a mobile home park do not own the land, they only own the home on the land. When homeowners have a dispute with the park management, the disputes can escalate to legal action against the mobile-home park owner. Existing law requires that a park manager provide a homeowner with the name, business phone number, and business address of the park owner; however, there is no time frame in which this information must be provided. As a result, some managers will delay providing the information, which could cause a dispute to fester. This new law adds a 10-day period in which a park manager must provide the park ownerâ&#x20AC;&#x2122;s information, after receiving a written request from a mobile-home owner.

AB1137 PUBLIC HOUSING DEVELOPMENTS MUST ALLOW RESIDENTS TO OWN A PET

ASHLEE D. ADKINS Millions of people in California own pets, and hundreds of companies across the state even allow their employees to bring their pets to work. Having a pet offers tremendous mental, social, emotional, and physical benefits to individuals and families, but there are challenges to owning a pet â&#x20AC;&#x201D; especially for lower-income families, and people who rent instead of own. Many affordable housing options do not allow residents to own pets; with many landlords preventing pets in the unit, lower-income families who have a pet are often left with few housing options. These families have to make the painful decision of abandoning their pet, which puts strain on local animal shelters. To address this issue, this new law requires developments that are financed through the California Department of Housing and Community Development (HCD) to allow residents to own at least one pet. This law increases the housing options for low-income families who own pets, helping to promote happier and healthier families while at the same time reducing the burden on local animal shelters.

REALTORS® & Brokers (continued)

AB1148 MORE NARROW DEFINITION FOR COMMERCIAL PROPERTY TYPES THAT MUST DISCLOSE DISABILITY CERTIFICATION

ADAM PEDERSEN Last year, California passed AB2093, which currently requires commercial property owners and lessors to disclose whether or not the property has been inspected by a Certified Access Specialist. The goal of the new law was to encourage compliance with disability access laws, and allow the public and prospective tenants to be aware of potential non-compliance. However, the bill did not define commercial property, and the resulting blanket rule applied to types of commercial property where disability access doesn’t make sense – such as selfstorage units. This bill clarifies commercial property to mean space that is offered for rent or lease to those operating or intending to operate a place of public accommodation or a facility where the general public is invited. Owners of these types of commercial property must disclose whether the property has been inspected by a Certified Access Specialist.

AB1139 NEW NOTICE REQUIREMENT FOR HOMEOWNERS ABOUT PRIVATE TRANSFER FEES

ADAM PEDERSEN Many fees and taxes are involved when purchasing a home in California. All fees, whether they are public transfer taxes or private HOA fees, are required by law to be disclosed on provided forms. Many of the fees, like escrow fees, title insurance premiums, liens, and commissions, are paid out of escrow and are based on the price of the home. Some private transfer fees are imposed by the developer of the property, and require the primary buyer and all subsequent buyers of the property to pay the fee. These funds sometimes go towards affordable housing initiatives or environmental funds, but some just go to the developer as profit. Certain Federal mortgage programs, like Freddie Mac and Fannie Mae, require that all funds collected via private transfer fees must be used to benefit the property. However, home buyers may not be aware of this restriction, and could have difficultly obtaining financing through FHFA or FHA programs if the property has such a fee. This new law creates a new notice requirement, where potential homebuyers must be provided a notice about the Federal restrictions on private transfer fees.

SOLAR & RENEWABLE ENERGY SB563 WOODSMOKE REDUCTION PROGRAM TO PROVIDE INCENTIVES FOR REPLACING WOOD-BURNING STOVES

ASHLEE D. ADKINS In California, over 217,000 residences still rely on wood stove heating as the primary source of heat, and it is estimated that an additional 3.6 million residences have a wood stove. Smoke that emanates from wood stoves gives off toxic air pollutants that cause significant health concerns, such as chronic bronchitis, asthma attacks, lung disease, and respiratory infections. In addition, burning wood gives off carbon gases that contribute to global warming. This new law creates the Woodsmoke Reduction Program that provides homeowners with incentives to voluntarily replace wood-burning stoves with cleaner, more energy-efficient alternatives. The law authorizes money from the Greenhouse Gas Reduction Fund (GGRF) to be distributed by the California Air Resources Board (ARB), in coordination with local air quality management districts.

AB1284 NEW LENDING-RELATED CONSUMER PROTECTIONS AND REGULATORY OVERSIGHT OF PACE PROGRAM

ASHLEE D. ADKINS Over the past few years, the P.A.C.E program – Property Assessed Clean Energy – has provided a way for homeowners to finance solar energy systems. Under the PACE program, local cities or counties can provide the upfront cost for energy-efficient improvements, which is repaid through special assessments or property taxes. The program has evolved to where a private third-party is contracted by local governments to administer the program. However, since 2016, PACE assessment delinquencies have increased by nearly 450%. To improve consumer protections, this bill adds financial qualifications that must be met before a PACE contract can be funded and recorded – essentially, treating PACE contracts similar to loans. As a result, the new law also adds licensing regulations and regulatory oversight for PACE program administrators and salespeople, mostly focusing on lendingspecific requirements.

REALTORS® & Brokers (continued)

AB1070 CONTRACTS FOR RESIDENTIAL SOLAR ENERGY SYSTEMS MUST INCLUDE NEW DISCLOSURE DOCUMENT

ASHLEE D. ADKINS Solar energy systems have grown in popularity over the past few years, given the cost savings on energy bills. However, the widespread adoption of solar power installations has been throttled by the complicated financing and leasing options used for covering the cost of such installations. As a result, consumer complaints have increased. This law requires that, by July 1st, every contract for a solar energy system must be accompanied by a “solar energy system disclosure document”. This disclosure document must provide information about the total cost and payments for the system, the method for submitting complaints, the details about financing costs, and the consumer’s right to a three-day cooling off period. The new disclosure only applies to solar energy devices to be installed on residential buildings, and does not apply to standard feature systems on new construction.

SB242 PACE ADMINISTRATORS MUST RECEIVE ORAL CONFIRMATION, PROVIDE DISCLOSURES

ASHLEE D. ADKINS Nationwide, there has been a strong push for PACE financing of residential solar energy systems, where local governments offer loans to cover the upfront cost of energy-efficient installations. The growing interest in PACE financing has encouraged third-party companies to administer the programs, in service to local governments. However, because the financial characteristics of the program can be confusing, the legislature has sought to increase consumer protections. This bill adds an oral confirmation requirement, where a program administrator must receive oral confirmation — and record such confirmation — that the property owner has all of the correct forms and disclosures. These documents must cover the terms of the financing, anticipated costs, lien details, and tax implications, as well as other details. The law also adds regulations intended to prevent kickbacks, and makes it illegal for contractors to start a home improvement contract if the owner believed the cost would be covered by the PACE program, but backs out within the 3-day statutory grace period.

AB352 LOCAL GOVERNMENTS CANNOT PROHIBIT EFFICIENCY UNITS IN AREAS NEAR PUBLIC TRANSIT OR STATE UNIVERSITIES

SIMON OFFORD California has taken numerous steps to combat the shortage of affordable housing. One step the state has taken allows a city or county to issue permits to small living units, called “efficiency units.” These units can be occupied by no more than 2 people, and have a minimum floor area of 150 square feet. Efficiency units are popular because they are an affordable and economical use of physical space. In large cities across the country, efficiency units offer rents that are 20 – 30% lower than conventional units. While these types of units are popular, especially near public transit hubs, some communities have fought against their development because of concerns of overcrowding and high-density. In response to this opposition, some local governments have passed local ordinances prohibiting efficiency units in certain areas of their city or county. This new law prohibits cities and counties from limiting the number of efficiency units in areas that are within onehalf mile of public transit, areas that are within one mile of a University of California or California State University campus, or that are within one block of a car share vehicle hub.

AB367 HOMES DESTROYED BY FIRE QUALIFY AS EXCEPTIONS TO SAFE DRINKING WATER ACT

CLAYTON DODDS The Safe Drinking Water Act and the California Safe Drinking Water Act regulate public water systems in California. For residential construction, existing law forbids local governments from issuing a building permit for a residential development where a source of water supply is water transported from a water hauler. Basically, in rural areas, homes have water storage tanks that are filled with water, often monthly, from a truck retrieving water from somewhere else. Because these systems are not connected to a public water system, they are at a high risk of contamination. One exception to the current law allows building permits for rebuilding homes destroyed by natural disasters, despite the fact the residence relies on hauled water. However, after the historic wildfires in California, it was unclear if the exception applied, because the root cause of many fires is human error, and thus not a natural disaster. This law clarifies existing law, stating that homes destroyed by fire can receive a construction permit to rebuild, regardless if a source of water is hauled water.

MORTGAGE & LENDING SB479 MAXIMUM FEE TRUSTEE CAN EARN IN FORECLOSURE SALE RAISED BY $50

CLAYTON DODDS During a non-judicial foreclosure, a third-party trustee has the authority to foreclose and sell the property. The trustee owes a fiduciary responsibility to the lender and the borrower, beginning the foreclosure process when notified by the lender that the loan is in default. In exchange for performing the foreclosure service, the trustee may collect fees from the sale of the property. These fees are regulated by statute, and under current law, the maximum amount a trustee can receive from a foreclosure sale is $425 or 1% of the unpaid principal sum secured, whichever is greater. This law increases the maximum to $475 or 1% of the unpaid principal. Last year, SB93 raised the base rates for calculating foreclosure fees by $50, but this fee was inadvertently overlooked, and so this law was passed to correct the discrepancy.

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By Bill Number Assembly Bills AB 73..........................................13

AB 168.......................................17

AB 291.......................................23 AB 294......................................29

AB 299.......................................22

AB 352......................................33

AB 367.......................................33 AB 494.......................................14

AB 534.......................................19

AB 571...........................................8

AB 1148.....................................30 AB 1278.....................................13

AB 1284.....................................31

AB 1357.....................................26

AB 1397......................................15

AB 1412.....................................20

AB 1505........................................9 AB 1515.........................................9

AB 1521......................................10

AB 1598.....................................10

AB 1701......................................14

AB 634......................................20

Senate Bills SB 2............................................27

SB 35...........................................11

SB 63..........................................16 SB 167........................................15

SB 173.......................................28

SB 242.......................................32

SB 329.......................................28 SB 330.......................................15

SB 340........................................18 SB 384.......................................18

SB 396.......................................16

AB 646......................................22

SB 407........................................19

AB 690.......................................21

SB 486........................................11

AB 678.......................................12

SB 479.......................................34

AB 879........................................12

SB 540...........................................8

AB 1070.....................................32

SB 563........................................31

AB 1008.....................................17

SB 542.......................................26

AB 1137......................................29

SB 764.......................................27

AB 1139......................................30

By Audience Homeowners

Agents & Brokers Lenders & Investors 16 Units SB(AB 571........................................... Junior Accessory 2406)............10 8 Topics SB 63.......................................... AB 1701.....................................14 SB 396....................................... 16 AB 1598..................................... New Parcel Tax Notice (AB 2476)............11 10 AB 494.......................................14 MARIJUANA LEGALIZATION AB 1008....................................17 AB 1521......................................10 SB 330.......................................15 [Article] Recreational Pot in 2018: High-Times or a AB 168....................................... 18& BROKERS SB 35...........................................11 REALTORS® SB 340........................................18 Buzz-Kill for California RealSBEstate? ....4 384....................................... 73........................................ Greenway18 EasementsAB(AB 2651).............11 13 AB 534.......................................19 AB 534....................................... 19 ActAB(AB 494....................................... PACE Preservation 2693).............11 14 SB 407........................................19 AFFORDABLE HOUSING................... 8-10 Eviction Court AB 634...................................... 20Records SB(AB 330....................................... 2819).............12 15 AB 1412.....................................20 HIV Disclosures (AB 73)..........................7 AB 690.......................................21 SB 167........................................15 AB 634......................................20 CONTRACTORS DEVELOPERS Real Estate “Salespersons” (AB 685) AB...........7 646...................................... 22 &AB 1397......................................15 AB 690.......................................21 2819).............12 18 Mortgage Guaranty Insurance (ABAB 1645) .....7 Eviction Court 299....................................... 22Records SB (AB 340........................................ AB 299.......................................22 Broker Advertising (AB 1650)...................8 AB 1357.....................................26 SB 2............................................27 LANDLORDS & TENANTS AB 1357.....................................26 SB 542.......................................26 AB 1284.....................................31 Eviction Court Records (AB 2819).............12 SB 542.......................................26 SOLAR & RENEWABLE ENERGYSB 764.......................................27 AB 352......................................33 SB 2............................................27 Environmental Hazards (AB 1750)SB ..............8 2............................................27 SB 479.......................................34 Water Submetering (SB 7)......................12 SB 329.......................................28 Transfer on Death Deed (AB 1779)SB ..............8 329.......................................28 CRMLA Licenses (SB 657).....................12 AB 294......................................29 Contractor “Good Faith” Defense (AB 1793)...9 SB 173....................................... 28 Commercial Owners Real Estate Team Names (SB 710)............13 AB 1139......................................30 AB 294......................................29 SB 63..........................................16 Excessive Water Use Policy (SB 814)..........13 AB 1139......................................30 EMPLOYER & EMPLOYMENT ISSUES AB 1137......................................29 SB 396.......................................16 HOA Annual Notice (SB 918).................13 SB 563........................................31 Agent Discipline Online (AB 1807)AB .............9 1139......................................30 AB 1008....................................17 Fees for Foreclosure Trustees (SB 983)........14 AB 1284.....................................31 Commercial Accessibility (AB 2093) SB............9 563........................................31 AB 168.......................................17 Accessory Dwelling Units (SB 1069)..........14 AB 1070.....................................32 Accessory Dwelling Units (AB 2299) AB.........10 1284.....................................31 SB 340........................................18 SB 242.......................................32 Associate Licensee Status (AB 2330) ........10 AB 1070..................................... 32 SB 384.......................................18 AB 367......................................33 SB 242.......................................32 AB 646......................................22 Index....................16 HOA LAW AB 1148.....................................30

Developers SB 540...........................................8 SB 571...........................................8

AB 1515.........................................9

AB 1505........................................9

AB 1598........................................9

SB 35...........................................11

AB 879........................................12 AB 678.......................................12

AB 73..........................................13 AB 494.......................................14

SB 330.......................................15

SB 167........................................15

AB 1397......................................15

AB 1137......................................29 AB 352......................................33

Buyer/Seller

HOA

AB 534.......................................19

AB 1357.....................................26

SB 407........................................19

SB 2............................................27

AB 634......................................20

SB 542.......................................26 SB 329.......................................28 AB 294......................................29

AB 1137......................................29 AB 1148.....................................30

AB 1139......................................30 SB 563........................................31 AB 1284.....................................31

AB 1070.....................................32 SB 242.......................................32

AB 1412.....................................20

AB 690.......................................21

Contractors

SB 486........................................11 AB 1278.....................................13 AB 1701.....................................14

AB 534.......................................19

AB 1357.....................................26

Landlords/Tenants SB 407........................................19 AB 646......................................22 AB 299.......................................22 AB 1137......................................29

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