New California Real Estate Laws that Could Impact You in 2021

The last legislative session ended with the passage of several new laws concerning California property. Many of these real estate-related statutory amendments and additions will have significant implications for several groups, including homeowner associations, landlords, tenants, property owners, and home buyers. Here are some of the new California real estate laws that could impact you in 2021:

Foreclosure Properties

SB 1079

Under SB 1079, effective January 1, 2021, “Eligible Tenant Buyers” and “Eligible Bidders” are now permitted to bid on foreclosed properties containing 1 to 4 single-family residences after a property’s foreclosure sale.

Before this change, foreclosed properties typically went to auction and were sold to the highest bidder. Now, if an auction buyer doesn’t plan to live in a property, an eligible tenant buyer or bidder may be able to get it back from the buyer by submitting a qualifying bid after the sale.

Under SB 1079:

  1. Trustees can no longer bundle these properties for sale unless the deed of trust or mortgage provides otherwise.
  2. Tenants must be provided with notice regarding their potential right to purchase a property.
  3. A tenant buyer will have 15 days after the sale to deliver written notice to the trustee of their intent to bid on the foreclosed property. The tenant buyer’s bid must match the last and highest auction price to outbid the auction buyer.
  4. Eligible bidders can follow the same steps, except members of this group must exceed the last and highest auction bid.
  5. The outbidding party must pay for or use a mortgage to secure the foreclosure property no later than the 45th day after the trustee’s sale.

According to the bill, an eligible bidder can be: an eligible tenant buyer, a prospective owner-occupant, certain types of non-profit organizations or groups, a community land trust, a limited-equity housing cooperative, the state, the Regents of the University of California, a county, city, district, public authority, or public agency, and any other political subdivision or public corporation in the state.  These provisions in SB 1079 are set to end on January 1, 2026.

SB 1079 also requires that property owners maintain foreclosure properties and increases the penalties for failing to do so. Effective January 1, 2021, owners who fail to maintain these properties can be fined up to $2000 per day for the first 30 days and up to $5000 per day for each day thereafter.

Rental Availability

Affordable housing was one of the dominant themes during last year’s session. While many lawmakers devoted time and attention to COVID-19 relief efforts and the eviction moratorium, rental housing availability also entered the discussion. With the passage of Assembly Bill 3182 (AB 3182) homeowner association (HOA) laws must now allow at least 25 percent of common interest developments (CIDs) to lease out their units.

AB 3182

According to the bill’s analysis, approximately one-third of Californians live in CIDs, and the state has over 52,000 CIDs that range in size from three to 27,000 units. These properties include planned unit developments, condominiums, community apartment projects, and housing cooperatives. In many cases, HOAs regulate the properties within CIDs. Before the change in the law, HOAs could restrict CID rentals as much as they chose.

AB 3182 prohibits a CID, and in effect an HOA, from adopting or enforcing a provision that restricts the rental or lease of less than 25 percent of the separate interests in a CID development. The new law does not restrict HOAs to only allowing 25 percent rentals. Further, HOAs are still entitled to prohibit short-term rentals or those under 30 days.

HOAs have until December 31, 2021, to amend their governing documents to reflect these changes. The failure to amend could result in the imposition of a $1,000.00 civil penalty.

Homestead Exemption

AB 1885

Assembly Bill 1885 (AB 1885) amended Section 704.730 of the California Code of Civil Procedure. Before the amendment, if a creditor forced the sale of a debtor’s home to satisfy a judgment, the maximum a homeowner could exempt from their property was either $75,000, $100,000, or $175,000. A homeowner’s additional equity in their property was inconsequential. The amounts also applied to Chapter 7 and Chapter 13 bankruptcy exemptions. These exemption values were established decades ago and failed to account for California’s increased home values.

AB 1885 raised the amount of the homestead exemption to $300,000 or the countywide median sale price of a single-family home in the calendar year prior to the year in which the judgment debtor claims the exemption, up to a maximum of $600,000. The new law also provides that amounts can be adjusted annually for inflation. In addition, the amendment allows Chapter 7 debtors to protect more of the equity in their primary residences and for Chapter 13 debtors to exempt more equity when calculating their creditor payments.

Assessment Values

Proposition 19

Proposition 19 (Prop 19) amended the California Constitution to allow people aged 55 and older, those whose homes were destroyed by wildfire or certain other natural disasters, and individuals with qualifying disabilities to carry their home’s assessed property tax value to a replacement home of any value.

The Prop 19 amendment means that an individual can purchase a more expensive home and blend their new property’s taxable value with that of their former residence. By combining the rates, the property’s taxable value is far lower than if the new home were to be reassessed at fair market value.

One of the most significant changes created by Prop 19 is for parents wanting to leave real property to their children. Before the amendment, a child could inherit their parent’s primary residence and assessed value. Now, a child who inherits a parental home must reside in the property to realize any tax savings. Further, they will only be able to exclude up to $1 million of the reassessed value from the new property tax basis. If the inheriting child makes any other use of the residence, they will lose the $1 million tax exclusion and have to pay the full increased tax rate for the property.

Contact the Law Office of Raffy Boulgourjian

Attorney Raffy Boulgourjian is a California real estate attorney with over twenty years of experience representing clients in residential and commercial real estate cases. He has the knowledge and expertise to protect your real estate interests. Contact Mr. Boulgourjian today to schedule a free legal consultation to discuss your California real estate legal needs.


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