In recent years, a few states have created laws regarding pay transparency in an effort to reduce discriminatory wage gaps. Colorado was the first to introduce a statewide law in 2019, though it didn’t take effect until 2021. New York City’s law will soon expand to all of New York. A new law just took effect in Washington as well as our own state, California, on January 1st. California’s law requires that companies with at least 15 employees post pay ranges in their job listings, as well as requiring that current employees have access to the pay range for their current position. The penalty for violating this requirement is between $100 and $10,000 per violation. The first violation only gets a warning as long as the information is added. Some companies also don’t currently have pay bands — the new law requires them. Companies with at least 100 employees will need to provide more detailed information.
Unfortunately, the new law may have to contend with some resistance. In New York City, employers chose to display incredibly wide price ranges. This doesn’t help prospective employees at all to figure out how much they would actually be getting. In one extreme example, Citigroup claimed a range of $0-$2 million, though they later said this was a computer glitch and changed it to something more reasonable. In Colorado, employers created remote job openings — with the stipulation that they could not be in Colorado, so the state requirement didn’t apply to that listing. Colorado’s method probably wouldn’t work in California, since California has such a large population that employers would miss out on a huge segment of potential employees. But New York City’s method is actually already in use in California, even without a requirement to list pay ranges at all. This is because prospective employees tend to disregard a listing entirely if there’s no pay range provided.
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The country’s longest-lasting eviction protections are due to end February 1, 2023, at least in Los Angeles, as confirmed by the City Council. The protections have been in place since March 2020, as a response to COVID-19. Despite federal and many local protections ending much earlier, the city’s tenant protections have remained in place the entire time.
The eviction moratorium was certainly financially beneficial for many people who were unable to work during lockdowns, but might otherwise have been expected to continue to pay rent. However, the actual reason for that particular moratorium was fear of the spread of the virus. The economically-motivated tenant protection is currently slated to remain in place until February 2024. This is the prohibition on raising rent for rent-controlled units, of which there are over 650,000 in Los Angeles. Some things are still in a bit of a limbo, though. There are still eviction proceedings going on as tenants are, in fact, still expected to pay at least a portion of their rent, despite the eviction moratorium. Some landlords don’t even want tenants anymore, but can’t find a legal reason to evict them, as their tenants haven’t done anything wrong. The end of the moratorium will erase some confusion. Some City Councilmembers are looking to re-implement some specific protections, but haven’t come to a consensus.
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With the current economic climate affecting tenants’ ability to pay rent on time, as well as increasing rent prices pushing away some prospective tenants, some landlords may want to accept partial rent payments in order to retain their tenant rather than risk vacancy. This is, in fact, something landlords are allowed to do, and there are specific laws around it. If the regulations are followed, it doesn’t need to cause a legal mess down the line when the landlord wants to recover the unpaid portion of the rent.
The mere act of accepting partial rent doesn’t actually require a form at all. Since it benefits the tenant and it’s the landlord that must agree to it, it’s not a conflict unless the landlord wants to recover the rest of it. If the landlord is feeling generous, or desperately wants to keep their tenant, they could simply accept partial rent and take no further action. But there certainly are legal avenues for the landlord to recover it. The landlord could issue a partial payment agreement which states the amount received, balance due, due date of deferred balance, the tenant’s promise to pay the deferred amount, and an explanation of the consequences of nonpayment.
If the landlord doesn’t want to use this form, the rules for any nonpayment can apply. The rules vary by property type, but regardless of property type, the landlord would issue a three-day notice. This could be a notice to pay, a notice to perform followed by a notice to quit, or a notice to pay or quit, depending on the type of property. It’s also important to note that in the case of partial payment for residential property, the landlord cannot reclaim repeated partial payments if they are using the three-day notice. If the landlord has already accepted a partial payment, then accepts another partial payment for the same rent period during the notice period, the notice is no longer valid.
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Six new laws affecting real estate are coming next year, and two more in 2024. The six coming next year go into effect January 1, 2023. SB 1495, going into effect January 1, 2024, modifies real estate licensing requirements. AB 2503, with a compliance date of December 31, 2024, requires a revision of the terminology used in real estate contract law to ensure consistency. In addition, SB 1005 and SB 1017 both clarify existing law, SB 1005 regarding probate code and SB 1017 regarding tenant protections against domestic violence.
AB 1410 requires homeowner’s associations (HOAs) to allow members and residents to discuss their common interest development (CID) on social media, as well as allow them to rent out a portion of owner-occupied space. HOAs also may not pursue enforcement for violations during an emergency if it is unsafe to fix it. AB 1837 and AB 2170 both modify existing laws regarding eligible bidders for foreclosed properties, making it easier for tenants, owner occupants, nonprofits, and governmental organizations to win a bid. AB 2559 defines a reusable tenant screening report, which landlords may choose to use, and which they must allow tenants free access to if they choose to use it. AB 2745 requires that experience used for a real estate broker exam be within the prior five years. AB 2960 states that disclosure requirements are set at the date of the contract, even if disclosure requirements change.
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Landlords tend to have a lot of leeway in determining what kinds of pets their tenants can have. Many don’t allow pets at all, and those that do often have breed restrictions and/or additional fees. This has led many pet-owning low-income earners to give up their pets in order to secure housing. In order to combat this issue, California has decided to standardize some pet restrictions for low-income rentals.
What landlords will no longer be able to do is ban pets outright, prohibit certain breeds, impose pet weight limitations, or collect additional monthly fees for pets. Landlords can still require a security deposit for pet owners or ban specific individual pets that are vicious or dangerous. The new law also sets forth a list of some reasonable restrictions. These include policies regarding nuisance behavior, leashing, liability insurance, and number of pets. The latter should be based on the unit’s size and not personal factors.
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The Internal Revenue Service (IRS) has announced its new income tax brackets for 2023. There are some shifts designed to address the issue of bracket creep, which is when people move into a higher tax bracket despite no increase in income after accounting for inflation. The new tax brackets won’t completely solve the problem, and don’t address root causes of heavy inflation, but can provide some relief.
The IRS has done away with the 37% bracket entirely, so the most you’ll pay is 35%. For that, you’ll need a joint income of over $462,500, which is about 6.5 times the median household income in the US. Not only that, the minimum threshold has increased for every bracket, except the lowest 10% bracket which always has a minimum of $0.
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For the new tax brackets plus additional information, see here: https://journal.firsttuesday.us/will-high-inflation-help-you-pay-less-tax-for-2023/
You can also compare to 2022’s tax brackets here: https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets
Because of rising housing costs, even starter homes are becoming more and more inaccessible. Recent legislation aimed at streamlining processes for accessory dwelling units (ADUs) has turned ADUs into the new starter home. ADUs typically need to be permanent structures to qualify. Some cities and counties are trying to change that.
Mobile homes are often put into the category of tiny homes rather than ADUs. There is no restriction on whether or not tiny homes need to be permanent, or whether anything else needs to be on the lot. They just need to be 400 square feet or less. However, the definition of a tiny home varies, so they can be considered ADUs in some jurisdictions. And now, seven cities and three counties have decided that any tiny home that is on wheels is considered a permanent dwelling, and therefore can also qualify as an ADU. These seven cities are Fresno, San Luis Obispo, California City, Los Angeles, Richmond, San Diego, and San Jose. The three counties are Placer County, Humboldt County, and Santa Clara County.
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The Rent Stabilization Ordinance (RSO) is a section of the municipal code for the City of Los Angeles and regulates a few different aspects of renting out properties. In addition to setting the maximum allowable rent increase per year, it also requires landlords to submit proper documentation to collect rent, provides just cause evictions, and provides relocation assistance for no-fault evictions. RSO doesn’t apply to all properties. The property must have been built prior to 10/1/1978, or 7/16/2007 if it’s a replacement under the Ellis Act. If you don’t know for sure, you can enter the property’s address at www.zimas.lacity.org. There will be an RSO field under the Housing tab, which will say Yes or No. You can also text “RSO” to 855-880-7368.
Note that RSO applies exclusively to the City of Los Angeles and does not apply to commercial properties. There are a couple easy ways to tell if your property is legally within the City of Los Angeles. If your water and power company is the Los Angeles Department of Water & Power (LADWP), you are in the City of Los Angeles. If it’s a different company, you are not. If your area is served by the Los Angeles Police Department (LAPD), you are in the City of Los Angeles. If you’re still unsure, you can look up the property at neighborhoodinfo.lacity.org. If your property is not found, it’s not in the City of Los Angeles. For properties not in the City of Los Angeles but in Los Angeles County, you can visit rent.lacounty.gov, email email@example.com, or call 833-233-RENT.
Once you’ve confirmed that your property falls under RSO, your regulations are currently governed by Covid-19 protections, until February 1, 2024. Rent increases are not allowed until that date for RSO units, nor are retroactive rent increases allowed. If your tenant was negatively impacted by Covid-19, you also can’t charge interest or late fees on missed payments. After this date, the allowable increase is expected to be 7%, but this could change. In order to collect rent, you will need to complete a Rent Registry Form and pay your Annual Bill. The form is sent out in January of each year and is due by February 28th. Your Annual Bill consists of an RSO fee of $38.75 per unit and and a SCEP fee of $67.94 per unit. Part of this cost can be surcharged to your tenants, at a rate of $1.61 per month for the RSO fee and $2.83 per month for the SCEP fee. This comes out to 50% of the annual cost of each fee over 12 months.
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Two more bills aimed at increasing multi-family construction go into effect July 1, 2023 after Governor Newsom signed them into law in September. These are AB 2011, called the Affordable Housing and High Road Jobs Act of 2022, and SB 6, the Middle Class Housing Act of 2022. Both laws sunset nine and a half years later, on January 1, 2033.
AB 2011 adds a secondary review pathway for some multi-family construction projects. If the project meets affordability standards and site criteria, the review will not take into account conditional use permits or environmental impact reports. The site must be primarily commercial, and unless it’s a commercial corridor, 100% of the units must be below market rate. Even if it is on a commercial corridor, 15% of the units must be below market rate. AB 2011 also includes provisions for fair pay and additional training for construction workers. SB 6 expands the types of buildings that can be constructed in areas zoned for office, retail or parking. These buildings may be residential if they meet certain other criteria, many of which are similar to the requirements set forth in AB 2011.
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The State of California sets housing goals for every city in the state. Many cities, particularly more affluent ones, frequently decide to simply not meet these goals, as it doesn’t really benefit them to do so. Their only incentive to follow through has been what is termed the “builder’s remedy, ” which requires cities with no plan submitted, or that fail to meet their goal, to permit any and all housing as long as at least 20% of it is affordable housing.
This law has actually been in place for about a decade, but it hasn’t been easily enforceable. Recent changes have made it more enforceable, so now cities have to start thinking about it. Not all cities have the same deadline for submitting plans, but there are already 124 cities in Southern California that are out of compliance. Northern California has until January to submit plans.
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Much of the danger to tenants is being unable to pay rent, as both rental prices and cost of living continue to increase while the job market is still in recovery. However, that isn’t the only way tenants can get evicted. There are even a few ways landlords can legally evict tenants that haven’t done anything wrong. That isn’t enough for some landlords though, who are actually resorting to illegal methods of eviction instead of notifying the tenant and potentially going through the court process.
Though both are legal, the court process distinguishes at-fault and no-fault evictions. At-fault evictions are the category where failure to pay rent lies, and this category also includes various contract violations and criminal activity while on the premises. The no-fault category includes landlord’s intent to occupy the property, withdrawal from the rental market, property being deemed unfit for habitation, or landlord’s intent to demolish or substantially renovate the property. Some of these can be used misleadingly as the landlord can simply change their mind later, but the real problem is unlawful evictions. The Office of the Attorney General (OAG) is particularly concerned with the type known as self-help evictions. This includes the landlord shutting off utilities, changing locks, or removing the tenant’s personal belongings in order to force them out of the property. Landlords initiating a self-help eviction can get charged with a misdemeanor, and the sentence is either a fine or a jail term of a maximum of one year.
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Last month saw four new legislative changes in the field of real estate. Two bills were enrolled, AB 1738 and AB 2817. AB 1738 goes into effect in 2025, and will require builders to install electric vehicle chargers in some types of buildings. This includes multi-family dwellings, hotels and motels, and some nonresidential parking facilities. AB 2817 establishes a rental aid grant program that will provide grants directly to homeless people as well as participating landlords. SB 1126 was passed in the Senate, requiring employers to set up a retirement program or CalSavers payroll deposit savings program by the end of 2025. There was an amendment to SB 897, which increases the maximum height of an ADU from 16 feet to 25 feet.
In addition, three bills were just enrolled first day of September, AB 2221, AB 2053, and SB 869. AB 2221 includes various changes to make ADUs easier to get approved. AB 2053 requires annual regional housing reports indicating progress on meeting housing needs. SB 869 requires at least 18 hours of training for managers and assistant managers of mobile home parks.
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The Biden administration recognizes that the best way out of the current housing crisis is to bolster supply through additional construction. In order to meet this goal, the new Housing Supply Action Plan was recently unveiled in a White House press release. The five-part plan is expected to solve the crisis within five years, and mostly addresses issues of financing.
The first part of the plan is aimed at directly assisting builders with increased resources and new programs. The plan also modifies federal grant prioritizations based on a new system of scoring for zoning and land use reform. Additional financing options will be provided for manufactured housing, ADUs, and smaller multifamily properties. In addition to new financing options, the plan expands existing Fannie Mae financing programs. The last part of the plan is unrelated to financing or construction; it prevents institutional investors from purchasing REO properties in favor of allowing them to be purchased by owners intending to occupy the property.
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With high interest rates, more and more buyers are beginning to realize they can no longer afford to buy, or would prefer to buy something less expensive. Sometimes this moment of realization hits them after they’ve already signed a purchase agreement, and now they want to back out. This is entirely legal, but does come with some potential costs.
When prices are increasing, breach of contract isn’t a huge deal, but can annoy sellers who have to delay their home’s sale. But when prices are decreasing, as is beginning to happen now, sellers have more to lose. Which is why they have a few different options to remedy the situation: they can enforce the purchase agreement, relist their property, or just withdraw the listing and wait for a better time. If the seller chooses to relist, they may be entitled to compensation from the buyer who breached contract. If the profit from the sale after relisting is less than what it would be given the original contract amount, the amount of the buyer’s deposit that would be returned to them is decreased by the amount of the seller’s losses. There may be cases in which there was an agreed-upon limit to this amount, in which case the agreed-upon limit is used, plus an interest rate of 10%.
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A certain element of the homebuying process that sometimes crops up, especially in competitive markets, is the homebuyer love letter. This isn’t actually a declaration of love, except possibly for the home they’re trying to buy. A love letter is simply a personalized note included with an offer in an attempt to connect to the seller on an emotional level. Sellers respond to this variously, and may simply ignore them if they’re receiving them constantly.
But the major issue with love letters isn’t the question of their effectiveness. The problem is why they have the ability to be effective. If a seller has a reaction to a love letter — whether positive or negative — and uses this in their decision of which offer to select, it means they’re biased based on some personal detail of the buyer. Most of the information a buyer would provide doesn’t have protected status, but if it does, the seller could be sued for discrimination. Of course, it’s very difficult to prove exactly why the seller accepted one offer over another, so this rarely actually happens even if the buyer suspects discrimination. But this is exactly why some states have banned love letters, or, in the case of Oregon, are trying to ban them.
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Accessory Dwelling Units (ADUs) have been contentious for a while, but SB 9 has passed recently, ostensibly making them easier to construct in California. Unfortunately, this hasn’t panned out as well as expected, as local governments aren’t entirely on board. They’re trying to sidestep the requirements by introducing zoning ordinances that effectively, but not explicitly, ban ADUs. Zoning restrictions have always been the largest obstacle to ADUs.
What clearly isn’t much of an obstacle is popular support. Particularly in California, major cities are seeing support of over 70%, even up to 80% in San Jose. But California isn’t the only state. Nationwide support is at 69%, with the remaining 31% split between opposing and indifferent. It’s no surprise that more renters than homeowners support it, since they’re more likely to be searching for housing. But both groups show strong support — 76% of renters and 66% of homeowners.
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Fannie Mae was sued back in 2016 under allegations of fair housing violations, and the organization decided to settle in February of this year. The settlement amount was $53 million. Fannie Mae had acquired a large number of properties in the wake of the subprime mortgage crisis, and thus became responsible for their maintenance until they were sold. But fair housing organizations started to notice a trend: only the ones in predominantly white neighborhoods were being adequately maintained.
The settlement agreement was the first to determine that foreclosed properties, like the ones Fannie Mae holds, are also subject to fair housing laws. This was not officially determined prior. Also, it’s possible that they were in worse conditions to begin with, but that doesn’t absolve Fannie Mae of their responsibilities. Their argument was that their intentions were not discriminatory. Perhaps they simply were not able to maintain the homes as well since they were in worse shape. But they were unable to reject the claim that regardless of their intentions, the impact was obvious. This is what led to Fannie Mae needing to settle.
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Under California’s Regional Housing Needs Allocation (RHNA) laws, each local government is required to work with the state government to establish what is called a housing element. The housing element identifies sites that can be redeveloped to meet regional housing needs, within an eight year timeframe. If the city can’t find a usable site under their current zoning laws, the zoning laws need to be modified. In Southern California, the housing element deadline was October 15, 2021. The deadline for Northern California is later this year.
Five cities — Bradbury, La Habra Heights, Laguna Hills, South Pasadena, and Vernon — failed to submit a housing element altogether prior to the deadline, and a sixth, Manhattan Beach, submitted a plan that indicated a site that could not be redeveloped in a reasonable timeframe. The site indicated was the Manhattan Country Club, which was purchased in 2017 and the City of Manhattan Beach cannot guarantee its availability by 2029. Without the 149 units provided by this redevelopment, Manhattan Beach fails to meet its regional housing needs. In response, the nonprofit organization Californians for Homeownership has sued all six of these cities.
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A California law allowing duplexes to be built on lots zoned for single-family residences, SB 9, passed in 2021. However, the law doesn’t have much in the way of enforcement. Cities are finding it relatively easy to avoid this with local ordinances that make it effectively impossible, since they can’t legally ban it. The same sort of thing happened with the struggles with building ADUs, which actually became legal nationwide in 1982, but weren’t feasible in most states prior to 2016.
One example is the town of Woodside claiming that the entire town is a mountain lion habitat, and is therefore excluded from the requirement because it’s a habitat for a protected species. Once this reached the news, Attorney General Rob Bonta got on their case and forced them to reverse the decision. All the AG’s office needs is proof that municipalities are attempting to skirt the requirement, and then they can take action. Without an enforcement agency, though, they’re reliant on the spread of information through media, including social media.
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Property management is a practical field to enter if you are worried about economic stability. It’s incredibly recession proof, as housing is a necessity and therefore people will be renting properties regardless of the economic conditions. But you can’t just decide on a whim to be a property manager — it has legal requirements and best practices.
In the vast majority of cases, being a property manager requires a broker’s license. There are certain cases in which it doesn’t, but they would not apply for rental properties, which are the bulk of managed properties. If you don’t want to get a broker’s license, though, you can consider managing commercial properties, but there would still be many restrictions.
First Tuesday, a real estate journal, has assembled a Property Management 101 infographic, complete with links to articles and PDFs for additional explication. This contains more specific details about the legal requirements, other applicable laws, and market information. You can find the infographic here: https://journal.firsttuesday.us/property-management-101/82682/
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