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What you need to know

What you need to know about new real estate laws in 2021

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.

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.

Foreclosure: Right of first refusal (SB 1079)

This law is aimed at stopping a repeat of the Great Recession when investors snapped up a large amount of foreclosed properties. Early in the pandemic, many lawmakers were concerned the same thing would happen again.

This legislation creates new ways an investor could lose a property even after winning it at auction.

Under the new law, if a buyer purchases a home at auction, and does not plan to live in it, a renter in the property can try to get the property themselves. The tenant could submit to buy the property in the next 15 days after the auction.

If they come up with the money (through a mortgage is fine) in 45 days, then the person who won the auction has lost the home. The amount of money paid by the tenant must match the price the auctioneer paid.

There is also an additional way the investor could lose the home over the next 45 days. If the renter doesn’t want to put in an offer, anyone who would want to live there as a primary residence can bid on the property — as long as their offer is more than what the investor paid. The same thing goes for a nonprofit that would like to use the home as subsidized housing.

This second scenario might be rare because the potential rival buyer or organization could have just gone to the auction.

The bill’s author, state Sen. Nancy Skinner, D-Berkeley, described the legislation this way: “SB 1079 sends a clear message to Wall Street: California homes are not yours to gobble up; we won’t tolerate another corporate takeover of housing.”

A scenario similar to the Great Recession where foreclosed properties were bought en masse has not happened. First, there are protections against foreclosure if missed mortgage payments are tied to job or health costs related to COVID-19. Second, foreclosures are unlikely in the current environment as people behind on bills could sell the home as prices rapidly rise.

One other factor of the law aimed at stopping investors is preventing numerous homes from being bundled together at auction and instead requires each to be sold individually. The theory is this would give potential homebuyers a better chance at winning the home over an investor.