Main Content

What to know about new Real Estate Laws

There are several new California laws aimed at protecting buyers and expanding rental supply

There are a host of new laws in 2021 for all areas of real estate that will likely concern landlords, potential buyers and renters.

Many of the new rules are aimed at increasing rentals, such as in homeowner associations, as well as protecting future buyers. California still has statewide eviction protections for those affected by COVID-19 going until the end of June, but there are plenty of other laws for agents and landlords to worry about.

Here are some of the main laws he said would most affect real estate this year.

Homeowner association rentals (AB 3182)

Homeowner association laws must now allow at least 25 percent of their properties to be rented. In the past, an HOA could prevent any rentals or limit them to, say, 10 percent. The new law is aimed at creating more availability of rentals in California.

The law does not limit rentals to 25 percent, meaning the HOA could allow all properties to be rented in a condo building, townhouse development or single-family home community governed by an HOA. Hutchinson said some of the law might be left open to interpretation, such as if an HOA only has three homes and renting one unit would be more than 25 percent. He said his reading of the law would likely mean one unit could be rented out.

Another thing to keep in mind is the law also prevents HOAs from having rules that say an owner needs to live there more than a year to rent out a unit. Also, HOAs can still block short-term rentals.

Fire notice for new buyers (AB 38)

This law says buyers must be told if they live in a high-risk fire area. For buyers and real estate agents, it basically just means a one-page document needs to be signed at closing.

The seller must list things that could be vulnerable to a wildfire, such as roof coverings, rain gutters, vents that are not fire-resistant and any combustible landscaping.

The law is focused on homes built before 2010, before stricter building standards were adopted to protect from fire damage. The form gives buyers advice on preparing their home for a fire — called “fire hardening” in legal and real estate circles.

Real estate agents will need to determine if a property is in a high-risk fire area. Hutchinson said the easiest way to do that is to consult with companies that produce California Natural Hazard Disclosure reports.


Homestead Exemption (AB 1885)

Everyone who owns a home in California is eligible for a homestead exemption, which protects against losing your property if you file for bankruptcy or to other creditors. The amount of the exemption, though, has not changed in decades nor has it kept pace with the state’s rising housing prices. But, the law gets a big boost this year.

Starting this year, $300,000 to $600,000 of a home’s equity can’t be touched by judgment creditors. This change is designed to make it more likely for a person to extinguish their debts and keep their homes.

For a lien to be put on a property, the judgment must be high enough to pay median home price, at a maximum of $600,000.

Before this law, the lien was allowed — which could mean an eventual foreclosure — on a home as long as the judgment was $75,000 for an individual, or $100,000 if more than one person is in the house.

Of course, judgments could always lead to garnished wages or financial stress that mean the homeowner has to sell anyway. But, at least it will probably not lead to a foreclosure, and most likely a traditional sale.


This law allows Californians 55 years old and older to sell their existing house, buy another house and take their property tax with them. Typically, homes after purchase have values reassessed and tax rates go up. This change allows older Californians to have a much lower, blended tax rate if they move.

Under Prop. 19, a person can move three times and still get tax benefits anywhere in California. The law also applies to people with severe disabilities or those who lost their homes in a natural disaster.

People who take advantage of Prop. 19 can buy a more expensive home and blend the taxable value of their house with whatever they had. This will create a lower tax bill than if they bought a new home and had it reassessed at fair market value.

This is how law and legal analysis firm JD Supra described it: If a senior couple sold their home with an assessed value of $250,000 for $2 million and bought a new home for $3 million, the new home’s assessed value would be $1.25 million, which is the $250,000 assessed value, plus the $1 million increase in home value.

Of growing concern to parents, Prop. 19 eliminates or reduces tax benefits for transferring property to children. If a child gets a home and decides to live in it full-time, then the tax rate will stay the same. However, this only applies if the home is not more than $1 million, whereas the previous law of the land had no cap.

If a child does not want to live in the house as a primary residence, they lose all tax benefits. Instead, the home’s tax rate will be based on the assessed fair market value.

The idea behind the law was getting older folks to move and free up supply for young families.