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Brad Gill's Blog

By Bradley Gill | Broker in 95120

Important new laws affecting real estate in 2011

There are many new laws recently passed that have gone or will be going into effect this year. These laws vary as to their impact on the real estate industry, from stopping lenders from seeking deficiency judgments after short sales to requiring an operational carbon monoxide detector in each home at time of sale, so to help you get a quick feel for these important new laws here is a quick summary:

 

 

No Short Sale Deficiencies Allowed for 1st Trust Deed Holders

 

Probably the most exciting law effective this year requires that a seller's first trust deed lender cannot obtain a deficiency judgment against the seller after a short sale. 

 

Starting January 1, 2011, providing written consent to a short sale shall obligate the first trust deed lender to accept the sales proceeds as full payment and discharge of the remaining amount owed on the loan.  This law applies to first trust deeds secured by one-to-four residential units, but if the owner commits either fraud with respect to the short sale, or waste with respect to the secured real property, then the lender may seek damages and use existing rights and remedies against the owner or any third party for fraud or waste.

 

Note that this law doesn't apply if the trustor or mortgagor is a corporation or political sudivision of the state, and junior lien holders are not subject to this law.

 

 

New tax filing requirements for property managers and landlords

 

Starting Jan. 1, 2011, any person who receives rental income must provide a Form 1099 for all payments of $600 or more made to service providers such as plumbers, carpenters, yard services and repair people. As part of the recently passed Small Business legislation (HR 5297), this new revenue provision will create additional burdens for anyone who receives rental income from either residential or commercial property.

 

Basically, ANY person who receives rental income (no longer limited to property managers) will be required to report all expenditures of more than $600 to anyone (or to any business) from whom they purchased services. Thus, “mom and pop” investors and those who invest in real estate for their personal portfolios are now subject to the new reporting requirement. But, only aggregate annual payments of $600 or more for services (but not goods) will be required to be reported.

 

This means that if you own investment property and are renting it out without the help of a licensed property manager, then for any services purchased for the maintenance of the property (such as services provided by plumbers, carpenters, yard or garden workers, electricians or any other service providers), you will be required to file an IRS Form 1099 any time the total expenditures/payments to a particular vendor in one year exceed $600.


For more information please see the IRS website: http://www.irs.gov/

 

 

The Carbon Monoxide Poisoning Prevention Act of 2010

 

By July 1, 2011 every owner of a “dwelling unit intended for human occupancy” must install an approved carbon monoxide device in each existing dwelling unit having a fossil fuel burning heater or appliance, fireplace, or an attached garage. Regarding rental properties, the law gives a landlord authority to enter the dwelling unit for the purpose of installing, repairing, testing, and maintaining carbon monoxide devices “pursuant to the authority and requirements of Section 1954 of the Civil Code [entry by landlord].” And a carbon monoxide device must be operable at the time that a tenant or buyer takes possession of the property. 

 

Under the law, a carbon monoxide device is “designed to detect carbon monoxide and produce a distinct audible alarm.”  It can be battery powered, a plug-in device with battery backup, or a device installed as recommended by Standard 720 of the National Fire Protection Association that is either wired into the alternating current power line of the dwelling unit with a secondary battery backup or connected to a system via a panel.

This new law requires the owner to install the devices in a manner consistent with building standards applicable to new construction for the relevant type of occupancy or with the manufacturer’s instructions, if it is technically feasible to do so. CA State specific building code states that a device shall be “installed outside of each separate sleeping area in the immediate vicinity of the bedroom(s) in dwelling units and on every level including basements within which fuel-fired appliances are installed and in dwelling units that have attached garages.”

 

 

Energy Audit in Home Inspection Report

 

In California, new homes must be built to comply with the latest Building Energy Efficiency Standards (Standards) and since a majority of our existing homes were built before the first Standards were established in 1978 with limited energy efficiency measures, beginning January 1, 2011, a new state law requires the home seller or broker to inform the buyer about the existence of California Home Energy Rating Program by delivering a Home Energy Rating System (HERS) booklet.

 

Recently released by the California Energy Commission, the booklet is designed to educate homeowners, home buyers, and home sellers about Whole-House Home Energy Rating services and their benefits, opportunity to invest in energy efficiency improvements at the time-of-sale, and available financing options. Additionally, a home inspection and inspection report may, upon a client's request, include an audit of the energy efficiency of a home, according to the standards of the Home Energy Rating Systems (HERS). 

 

More can be found at http://www.energy.ca.gov/HERS/index.html

 

 

Lead-Based Paint Renovation Rule

 

The Lead-Based Paint Renovation Rule (Lead Renovation Rule), which implements the Toxic Substances Control Act (TSCA found at15 U.S.C. 2601 et seq.), is a rule affecting construction contractors, residential landlords, property managers and others who perform renovation for compensation in housing that may contain lead-based paint--housing built before 1978.  Renovation includes most repair, remodeling and maintenance activities that disturb painted surfaces.

No more than 60 days prior to commencing the renovation, renovators must give to the owner or occupant of the dwelling the EPA pamphlet, "Renovate Right: Important Lead Hazard Information for Families, Child Care Providers and Schools," found at http://www.epa.gov/lead/pubs/renovaterightbrochure.pdf.  The renovator must obtain written acknowledgment that the owner or occupant has received the pamphlet

 

The rule also establishes requirements for training renovators, other renovation workers, and dust sampling technicians; for certifying renovators (and others); for accrediting providers of renovation training; for renovation work practices; and for recordkeeping.

 

The term renovation includes (but is not limited to): the removal, modification or repair of painted surfaces or painted components--such as sanding or scraping doors, window frames, walls, ceilings, etc. 

 

The term "renovation: does not include minor repair and maintenance activities.  Minor repair and maintenance activities include minor heating, ventilation or air conditioning work, electrical work, and plumbing, that disrupt 6 square feet or less of painted surface per room for interior activities or 20 square feet or less of painted surface for exterior activities where none of the work practices prohibited or restricted by Section 745.85(a)(3) are used and where the work does not involve window replacement or demolition of painted surface areas.

 

For additional information, go to EPA Web page on Renovation, Repair and Painting (RRP) at http://www.epa.gov/lead/pubs/renovation.htm. 

Comments

By james rich,  Mon Jun 27 2011, 03:19
The Important new laws affecting real estate in 2011 are explained wonderfully here. I must follow these things while dealing in any property. Well, I was looking for Los Angeles property inspection company. Please provide me some options for it.

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http://www.equityinspection.com

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