2018 Legislative Highlights

• Publication year: 2019
• Author: Robert M. McCormick and Michael Maurer

2018 Legislative Highlights

Robert M. McCormick and Michael Maurer

Robert M. McCormick is Of Counsel at Downey Brand LLP in Sacramento and a member of its Corporate, Real Estate, Securities and Tax Group. He is also currently an Advisor to the Real Property Law Section of the California Lawyers Association. His practice is focused on commercial real estate transactions, including office and retail leasing, acquisitions, real estate secured financing, and the formation of common interest developments.

Michael J. Maurer is a partner at Best Best Krieger's Los Angeles office and a member of its municipal law practice group. He serves as City Attorney to the cities of San Jacinto and L Habra Heights. His practice focuses on land use, infrastructure, and community economic development.

I. INTRODUCTION

The 2018 California legislative session included many starts and stops, particularly after the Democrats lost their supermajority early in the year when three lawmakers facing sexual harassment accusations stepped down. While several key policy priorities failed to advance, there was significant advancement on several fronts including a comprehensive bill to address the increasing problem of wildfires (AB 2911), a comprehensive data privacy bill (AB 375), as well as at least 20 bills introduced to respond to the wave of sexual harassment scandals. In total the Legislature approved over 1,200 bills this year and the Governor signed 1,016 of those bills and vetoed 201. Among those bills signed by the Governor that were of particular interest for real estate practitioners were a pair of bills which set forth a comprehensive update and code cleanup of the laws governing the licensure and regulation of real estate brokers and sales persons (AB 2884 and AB 1289). There were also enacted a large number of new laws intended to address the affordable housing crisis, which continues despite the Legislature's prior efforts. These new laws can be found in the Housing section below. Equally important is the new law (SB 818) which reenacts and supplements the expiring California Homeowners Bill of Rights, and confirms that the Legislature is still not done reacting to the trauma of the great recession.

This legislative review selectively focuses on new laws enacted in 2018 that the authors believe are the most significant for real property law practitioners. It does not, therefore, cover every real-property-related law enacted in 2018, and in particular, does not cover new laws that affect only a specific locality or which are primarily revenue raising or funding measures. This article also provides only summary references to the text of the bills selected for comment. Practitioners should always review the actual chaptered versions including specific references to the statutory provisions that have been modified, deleted, or added instead of relying solely on the summaries in this article. The State Legislature's website provides copies of these bills at http://leginfo.legislature.ca.gov, under Bill Information for Session Year: 2017-2018. Unless otherwise noted in this article, all bills covered in this review became operative on January 1, 2019.

II. APPRAISERS

A. SB 70, Bates. Real Estate: Uniform Standards of Professional Appraisal Practice. Amends section 11319 of the Business and Professions Code.

SB 70 is intended to give consumers of real estate appraisals a lower cost product option in the form of a "restricted appraisal report." These reports contain limited information about a property being appraised and do not comply with the Uniform Standards of Professional Appraisal Practice ("USPAP"), which are the minimal standards of conduct and performance for appraisers under prior California law.

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In particular, SB 70 temporarily exempts a licensed real estate appraiser, until January 1, 2020, from compliance with that provision under existing California law which requires appraisals to comply with the federal standards for appraisals which place a limitation on the issuance of "restricted appraisal reports" to intended users other than the client. The SB 70 exemption applies only if both of the following conditions are met:

1. The licensee obtains the consent of the client in advance; and,
2. The report the licensee prepares is not related to any of the following:
1. A federally related real estate transaction;
2. The purchase or refinance of a residential dwelling of one to four units; or,
3. A transaction subject to specified requirements in the real estate act related to broker investment transactions (i.e., Business and Professions Code section 10232.5).

This narrow exemption is intended to sunset on January 1, 2020 in order to avoid a potential conflict with the next edition of USPAP. We can anticipate the issue of restricted appraisal reports will be revisited after this occurs.

III. BROKERS

A. AB 2884, Irwin. Real Estate Broker Law: Omnibus Update. Amends sections 10001, 10016, 10027, 10050, 10131, 10133.1, 10133.2, 10137, 10140.6, 10142, 10143.5, 10144, 10158, 10159, 10159.6, 10159.7, 10164, 10176, 10177, 10178, 10179, 10186.2, 10232.3, 10238, 10243, 10509, 10561, 11212, and 11267 of, adds sections 10010.5, 10015.1, 10015.2, 10015.3, 10015.4, 10015.5, 10018.01, 10018.02, 10018.03, 10018.04, 10018.05, 10018.06, 10018.07, 10018.08, 10018.09, 10018.10, 10018.11, 10018.13, 10018.14, 10018.15, 10018.16, and 10018.17 to, repeal sections 10132 and 10160 of, and repeal and add section 10161.8 of, the Business and Professions Code.

AB 2884 was sponsored by the California Association of Realtors and along with its companion legislation AB 1289, is intended to be a non-controversial wholesale update of the underlying statutes that govern the licensure and regulation of real estate brokers and sales persons by the Real Estate Commissioner under the Department of Real Estate ("DRE"). As such it eliminates antiquated terminology and requirements in the existing law; defines a number of terms that have become commonly used in the real estate sector; and provides technical cleanup, such as the adjustment of some gender pronouns from the masculine to "his or her." Additionally AB 2884 recognizes the use of online record keeping and allows the transmission of licenses or contracts via electronic means. There are also a number of changes to mandatory reporting requirements. Most notably, AB 2884 clarifies the type of criminal complaints that must be reported and requires licensees to report indictments, criminal complaints, or information charging a felony against the licensee. AB 2884 also clarifies a number of other mandatory notifications to the Real Estate Commissioner, including whenever a licensee joins or leaves a brokerage, and if the sole designated broker-officer of a corporation dies. AB 2884 accomplishes other technical and clarifying changes by moving definitions to compile relevant definitions in the same section, and by changing terms to more consumer friendly language. In particular AB 2884 among other things does the following:

1. Redefines "salesperson" as a person retained by a licensed real estate broker and defines "retained" as the relationship between a broker and the real estate licensee who is an independent contractor affiliated with, or an employee of, a broker to perform real estate activities subject to a broker's supervision.
2. Provides definitions for "seller," "listing licensee," "seller's licensee," "buyer," "buyer's licensee," "real property," "residential property," commercial real property," "sell, sale, or sold," "dual broker," "dual licensee," "appraiser," "promotional listing," "exclusive rights to sell listing," and "open listing."
3. Authorizes a corporation, in the event of the death or incapacity of a sole designated broker officer, to operate continuously under its existing license if notice and an application are provided to the DRE within 10 days.
4. Requires a real estate licensee to immediately notify the Real Estate Commissioner whenever a licensee affiliates or is retained by a real estate broker, if that agreement is terminated, or if the licensee acquires a new business address.
5. Requires that the copy of any contract pertaining to services or transactions must be delivered either in print or electronic record to the person signing it, as soon as practicable after obtaining the signature.
6. Eliminates the requirement that the real estate broker maintain paper licenses for salespersons and allows for electronic record keeping.
7. Authorizes a licensee to enter into an agreement with another licensee to share compensation provided that the compensation is paid through the responsible broker as defined.
8. Authorizes the Real Estate Commissioner to suspend or revoke a license that was issued in error or by mistake.

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AB 2884 also makes other technical changes and includes code cleanup provisions not covered here. Although purporting not to modify a broker's duty to supervise and oversee the licensed activities of his or her sales persons and broker-associates, AB 2884 includes, nonetheless, significant provisions regarding licensing and compliance which should be incorporated into broker practices. It is, therefore, highly recommended that practitioners who represent licensees carefully review this new legislation.

B. AB 1289, Arambula. Real Property Transfer and Disclosure Requirements: Omnibus Update. Amends sections 1086, 1087, 1088, 1102, 1102.1, 1102.2, 1102.3, 1102.4, 1102.5, 1102.6a, 1102.6b, 1102.6c, 1102.9, 1102.155, 1103, 1103.1, 1103.2, 1103.3, 1103.4, 1103.5, 1103.8, 1103.9, 2079, 2079.6, 2079.7, 2079.8, 2079.9, 2079.10, 2079.10.5, 2079.10a, 2079.13, 2079.14, 2079.15, 2079.16, 2079.17, 2079.21, and 2079.22 of, adds sections 1102.18, 1103.15, and 2079.25 to, repeals sections 1090, 1102.14, 1103.14, and 2079.18 of, and repeals and adds section 1089 of, the Civil Code.

AB 1289, like AB 2884 discussed above, was sponsored by the California Association of Realtors and in conjunction with AB 2884 was intended...