Legal News

PREPARED BY CALIFORNIA ASSOCIATION OF REALTORS

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 (DRE) 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 C.A.R. has already incorporated into our standard form purchase agreements. (California Business & Professions Code section 10140.6.)

Debt Relief Income Exempt From State Income Tax - As of September 25, 2008, the federal income tax exemption for debt forgiven on a home loan 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.)

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 January 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.)

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 be equipped with anti-entrapment drain covers by December 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). The new law requires, among other things, that drain covers for pools and spas conform to the performance standard of ASME/ANSI A112.19.8-2007 and that single main drains be equipped with anti-entrapment devices as specified. For more information, visit the Web site of the U.S. Consumer Product Safety Commission (CPSC) 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.

Title Company's Promotional Items and Marketing Reps Regulated - A new law restricts title companies from paying for advertisements, food, beverages, or entertainment expenses. Starting January 1, 2009, a title company is prohibited from, directly or indirectly, paying for someone else's ads in newspapers, newsletters, magazines, or other publications. Also beginning January 1, 2009, a title company cannot pay for someone else's food, beverage, or entertainment expenses. A title company may, however, give out $10 promotional items with a permanently-affixed company logo (but not gift certificates or gift card) or provide education and educational materials related to title insurance (but not continuing education credits). This law also requires a title marketing representative who solicits or sells title insurance to have a valid certificate of registration from the Department of Insurance. A certificate of registration is not required if a person's primary duty is to issue a title policy or perform escrow services. (California Insurance Code sections 12404 and 12418 et seq.)

Other New Laws For 2009 Affecting REALTORS® - With the close of the 2007-08 legislative session, other new California laws have been enacted that may affect REALTORS®. To view the full text of these laws, go to www.leginfo. ca.gov. Some of the new laws that may affect REALTORS® are as follows: DRE disciplinary action for inflating BPOs (Senate Bill 1737); 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); bonding, insurance, and other requirements for 1031 exchange facilitators (Senate Bill 1007); 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).