Legal Update: New Year Yields Multiple New Real Estate Law

Every new year typically comes with the implementation of a raft of new laws impacting every player and every sector of residential real estate.

2009 is no different as the following sampling of lawmakers' handiwork illustrates.

• Debt Relief Income Exempt From State Income Tax The federal income tax exemption for debt forgiven on a home loan — implemented as of Sept. 25, 2008 — now applies to state income taxes, to a limited extent. Federal law provides a tax exemption for debt forgiveness on a loan incurred for acquiring, constructing, or substantially improving a principal residence up to $2 million if the debt is discharged from 2007 through 2012. Under the new California law, the maximum qualifying debt is only $800,000, not $2 million, and the maximum exclusion is $250,000. Moreover, the California law only applies to a debt discharged in 2007 or 2008. (California Revenue & Taxation Code section 17144.5.)

• Pool Drains Must Be Properly Covered As a red alert for apartment and condo managers, all U.S. “public pools and spas” as defined must have been equipped with anti-entrapment drain covers as of Dec. 19, 2008. The suction from pool and spa drains can be so strong as to entrap children, and cause injuries or drowning deaths. Under the new federal Virginia Graeme Baker Pool and Spa Safety Act, a “public pool or spa” includes pools and spas open to the public, as well as those open exclusively to residents of multi-unit apartment buildings or multi-family residential areas (such as condominiums). For more information, visit the Web site of the U.S. Consumer Product Safety Commission at www.cpsc.gov. The CPSC Web site includes a list of manufacturers, given the uncertainty as to whether the supply of compliant drain covers will meet demand under the new law.

• DRE License Number Must Be On First-contact Materials Effective July 1, 2009, California’s real estate agents must disclose their Department of Real Estate license numbers on all solicitation materials intended to be the first point of contact with consumers. Examples include business cards, stationery, advertising flyers, and other materials designed to solicit the creation of a professional relationship between a licensee and consumer. Excluded from the law, however, are advertisements in print or electronic media, “for sale” signs, and classified rental ads reciting the address or phone number of the rental property. The DRE may adopt regulations to clarify the first-contact materials covered under this new requirement. This bill also requires agents’ license numbers on real property purchase agreements, which the California Association of Realtors has already incorporated into the standard form purchase agreements. (California Business & Professions Code section 10140.6.)

• Duty To Disclose Agent Is Arranging Financing A new California law requires real estate agents to disclose that they have undertaken to arrange financing. Effective Jan. 1, 2009, a listing or selling agent who undertakes to arrange financing for the sale, lease or exchange of real property (or an agent arranging financing who undertakes to act as the listing or selling agent) must, within 24 hours, provide a written disclosure of that role and any related loan transactions to all parties to the sale, lease, or exchange. (California Business & Professions Code section 10177.6.) Other New Laws include:

• Tenant’s right to 30-day notice to terminate due to domestic violence (Assembly Bill 2052)

• Duty for landlords and REO lenders to take charge of abandoned animals (Assembly Bill 2949)

• Smoke detector and water heater bracing for manufactured homes (Assembly Bill 2050)

• Amendments to the 3 1/3 percent California withholding requirement for installment sales and non-California partnerships and corporations (Assembly Bill 3078)

• Prohibition against text messaging while driving (Senate Bill 28)

• Liquidated damages rules for high-rise condominiums over $1 million (Assembly Bill 2020)

• And, an increase in the fine for acting as a licensee without a license from $10,000 to $20,000 (Senate Bill 1448).