2024 Law Updates (Real Property)

This article provides a quick summary of some of the important 2024 law updates concerning real property.

New Disclosure Rules for “Flippers” – Effective July 1, 2024
California Civil Code § 1102.6h

For any seller who sells a residential 1-4 unit property within 18 months of purchasing it, and repairs or renovations were performed by a contractor hired by the seller, the seller is deemed to be “Flipper” and must make additional disclosures to the buyer concerning all of the following: (1) any room additions, (2) structural modifications, (3) other alterations, (4) repairs, (5) a copy of permits if obtained. If the cost of labor and materials was more than $500, the seller is also required to disclose (a) the name of each contractor, (b) contact information of each contractor. These disclosures are in addition to the statutory seller disclosures required by law.

Very High Fire Zone Disclosure Requirement – Effective Jan. 1, 2024
Civil Code § 1103.2

The Natural Hazard Disclosure Statement (NHD) has been modified to include “High” and “Very High” Fire Hazard Severity Zones (FHSZ). The seller will be required to provide the buyer with the Defensible Space and Fire Hardening Disclosures and fire hardening disclosure questionnaire if the property is located in any of these zones, or if the property was built before 2010.  For properties built before 2010, the fire hardening disclosure and questionnaire would also be required when the yes box is checked. 

Sale of ADU Separate From Primary Residence – Effective Jan. 1, 2024
Government Code §§ 75852.2 and 75852.25

This law enables cities and counties in CA to adopt ordinances which would allow the separate conveyance of an Accessory Dwelling Unit (ADU) from the primary residence as a condominium.  This means the ADU and the primary residence would be converted into condominiums which would be subject to compliance with the Davis-Stirling Common Interest Development Act and the Subdivision Map Act. This means a condominium plan will need to be prepared and recorded.  Any existing mortgage lenders would have to approve this condominium conversion in writing, as would any HOAs that govern the property.  If an ADU is established as a condominium, the city or county must require the homeowner to notify all utility providers of the condominium conversion and separate conveyance.

**Attorney comment:  If cities or counties enact these laws, there will be a variety of legal issues the property owner will face and should be aware of before proceeding. For example, converting a single family home into a condominium will likely reduce the value of the home.  The condominium conversion process is costly and time consuming and requires a condo plan prepared by a licensed surveyor, the creation of an HOA and HOA documents, and different insurance requirements, just to name a few. It will be imperative that owners consult with an attorney before proceeding with this process. 

Owner Occupancy of Property Containing ADU Not Required – Effective Jan 1, 2024
Government Code §65852.2

Cities and counties are now prohibited from requiring owner-occupancy on a parcel containing an Accessory Dwelling Unit (ADU).  However, cities and counties can require that if the ADU is rented it must be rented for 30 days or longer.

Right of Disabled Tenant to Relocate to First Floor Unit – Effective Jan. 1, 2024
Civil Code 1954.53

For any residential properties that are subject to local rent control laws, a city or county may require an owner of a rent-controlled unit to allow a tenant with a permanent physical disability to relocate to an available comparable or smaller unit located on an accessible floor of the property and retain their same rental rate. This would only apply to tenants in rent-controlled units who (1) have permanent physical mobility-related disabilities, (2) live in units that are not served by an operational elevator, (3) are not subject to eviction for nonpayment, and (4) where the jurisdiction has opted into AB 1620.

The tenant would have to make a request for reasonable accommodation and engage in the interactive process negotiation established by 2 CCR § 12177 with their landlord and would have to provide a written request for a unit swap to an accessible unit. The tenant would need to show that the move to an accessible unit is necessary to accommodate the tenant’s physical disability.  A unit would have to be available that is a comparable or smaller unit located on an accessible floor of the same building, or a comparable accessible unit owned by the same landlord on the same parcel (with at least four other units).  The local rent board or body with oversight of the rent control ordinance must determine that the owner will continue to receive a fair rate of return for the new unit.  The tenant’s original security deposit would be handled in accordance with existing law governing security deposits, meaning the landlord would be able to take out any legally permissible reimbursements for costs associated with cleaning or repairing the unit – exclusive of ordinary wear and tear – before returning the balance to the tenant, and the tenant would provide a new security deposit for the new unit.

The statute defines “comparable or smaller unit” as a dwelling or unit that has the same or less than the number of bedrooms and bathrooms, square footage, and parking spaces as the unit being vacated.  If an accessible unit becomes available that the owner intends to move into or intends to move an immediate family member into, that unit would not be considered “available” under the bill’s provisions.

Security Deposit Limited to 1 Month’s Rent – Effective July 1, 2024
Civil Code 1950.5

Starting July 1, 2024, Landlords cannot collect more than one month’s rent for either furnished or unfurnished units as a refundable security deposit. Note that “small landlords” are exempt from this rule and may collect a security deposit of up to two month’s rent, whether or not the unit is furnished, if the landlord (1) is a natural person or a limited liability company in which all members are natural persons and (2) owns no more than 2 residential rental properties that collectively include no more than 4 dwelling units offered for rent. The exception for small landlords includes family trusts.

Keep in mind that this small landlord exception regarding the security deposit will not apply if the prospective tenant is a service member.

For existing leases entered into prior to July 1, 2024 where the landlord holds a security deposit in excess of one month’s rent, the landlord may continue to hold that security deposit even if it is more than one month’s rent.

24 Month Cap on Exclusive Listing Agreement – Effective Jan 1, 2024
Civil Code 1670.12 and Government Code 27280.6

Brokers and Real Estate Agents cannot enter into exclusive listing agreements on residential 1 to 4 unit properties (including condos and manufactured homes) with individuals: (a) with a term longer than 24 months from the date the agreement was made; (b) include a renewal of an  exclusive listing agreement for longer than 12 months from the date the renewal was made; (c) allow for automatic extensions on of exclusive listings on any type of residential property and (d) record or file an exclusive listing agreement for residential property of any duration.

Note that this rule does not apply to exclusive listing agreements entered into between a real estate broker and a corporation, limited liability company, or partnership.

CA Notaries Can Notarize Remotely – Effective Jan. 1, 2024
Civil Code §§ 1181.1, 1182 and 1183, and Government Code §§ 8207.1, 8214.1 and 8231 through 8231.19 and 8232 through 8232.4

Once the CA Secretary of State certifies the technology project, California licensed notaries will be authorized to perform remote online notarizations (expected to occur before January 1, 2030). The Online Notarization Act (the Act) authorizes California notaries to perform notarial transactions through the use of audio-visual communication, and online notarization platforms to provide platform services.

Notaries who perform Remote Online Notarization (RON) in California will be required to use at least two forms of “identity proofing” process and validation by a live third party that affirms the identification credential of the principal. Identity proofing must be performed at least at Identity Assurance Level 2 as established by the National Institutes of Standards and Technology (NIST).

California currently recognizes out of state notaries if performed in accordance with the laws of that jurisdiction on the basis of two laws that were passed in 1990 (and amended in 2015, CC 1189(b)) and 1872 (CC 1182). These laws do not reference online notarization. However, SB 696 states concretely that a “notarial act” may be performed with respect to an electronic record by a notary under the laws of another state or even a foreign state. (Gov Code 8232).

Short Term Rental – Posting of All Fees – Effective July 1, 2024
Business and Professions Code § 17568.6

Beginning July 1, 2024, a short-term rental advertisement for rent must include all fees or charges required to stay at the short-term lodging, (except government-imposed taxes and fees).  This includes a rental posting on hosting platforms like Airbnb, VRBO, Home Away, an internet website, application, or other similar centralized platform, or from any other person.   Short term rentals are defined as a rental of a residential property, or part of a residential property, for 30 consecutive days or less.  Violations are subject to a specified civil penalty not to exceed $10,000 and enforcement may be brought by a city attorney, district attorney, county counsel, or the Attorney General.

Short Term Rental Booking Cancellation – Effective Jan 1, 2024
Civil Code §§ 1748.40 and 1780.80 et seq

Short-term rental owners, and short-term rental hosting platforms or third party booking services must allow a guest to cancel a reservation within 24 hours without penalty if made at least 72 hours or more before the time of check-in and to have any funds paid by the guest refunded to the original form of payment.  “Short-term rental” means a residential dwelling, or any portion of a residential dwelling, that is rented to a person or persons for 30 consecutive days or less. 

If an enforcement action is brought, the court is required to assess a civil penalty of up to $10,000 for each violation based on various factors, including the extent and severity of the violator’s conduct. Each day in violation constitutes a separate violation.

CA Tenant Protection Act Updates – Effective April 1, 2024
Civil Code §§ 1946.2 and 1947.12

Termination of tenancy based on owner move-in (no fault just cause):

  1. The eviction notice must state the name and relationship to the owner of the intended occupant and include notification that the tenant may request proof that the intended occupant is actually an owner or related to the owner.
  2. The owner or their family member would have to move in within 90 days after the tenant vacates and then occupy the unit for at least one year
  3. The owner or their family member could not already occupy a unit and there could not be another vacant unit at the property.
  4. If the intended occupant does not actually move in within 90 days or use the unit as their primary residence for at least a year, the owner must offer the unit back to the tenant who was evicted at the same rent and lease terms in effect at the time they vacated and reimburse the tenant for reasonable moving expenses incurred in excess of the required relocation assistance payment that may have been made in connection with the eviction.
  5. If the former tenant does not move back in, and the owner subsequently identifies a new tenant still within the yearlong period after the eviction, the unit must continue to be offered at the lawful rent in effect at the time the eviction occurred and
  6. The owner has to be a natural person holding at least a 25% ownership interest in the property (in order to prevent someone who holds a very small share of the property from evicting a tenant), a natural person who co-owns the property entirely with family members either outright or via a family trust, or a natural person who meets the 25% ownership threshold and whose recorded interest in the property is owned through an LLC or partnership.

Termination based on intent to demolish or to substantially remodel the residential real property:

For substantial remodel, the work must require the tenant to vacate for 30 consecutive days or more, and cannot be accomplished while the tenant is still occupying the property.  The termination notice must include all of the following:

  1. A statement informing tenants of the intent to demolish or substantially remodel the unit,
  2. The following statement verbatim:  “If the substantial remodel of your unit or demolition of the property as described in this notice of termination is not commenced or completed, the owner must offer you the opportunity to re-rent your unit with a rental agreement containing the same terms as your most recent rental agreement with the owner at the rental rate that was in effect at the time you vacated. You must notify the owner within 30 days of receipt of the offer to re-rent of your acceptance or rejection of the offer, and, if accepted, you must reoccupy the unit within 30 days of notifying the owner of your acceptance of the offer”,
  3. A description of the substantial remodel to be completed, the approximate expected duration of the substantial remodel, or, if the property is to be demolished, the expected date by which the property will be demolished,
  4. A copy of the permit or permits required to undertake the substantial remodel. However, if the renovation is to abate hazardous materials then no permit need be given unless legally required.
  5. A notification that if the tenant is interested in reoccupying the rental unit following the substantial remodel, the tenant must inform the owner of their interest and provide to the owner their address, telephone number, and email address.

Damages and enforcement mechanisms: 

An owner who attempts to recover possession of a rental unit in material violation of the just cause provisions will be liable for actual damages, reasonable attorney’s fees and costs, up to 3x the actual damages in the event of malice or fraud by the landlord, and punitive damages.

An owner who demands, accepts, receives, or retains any payment of rent in excess of the maximum rent shall be liable in a civil action for all of the following: injunctive relief, damages for the amount of unlawful rent collected, reasonable attorney’s fees and costs, up to 3x the amount of rent that exceeds the maximum allowance.

This article is intended for informational purposes only and does not constitute legal advice. It is specific to the laws of the State of California. For specific questions related to this article, please contact the Law Office of Ashley M. Peterson.