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REimagine! 2019

A new, all about connections and interactions, California REALTOR® event.

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Tax Reform FAQ

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C.A.R. publishes eight magazine issues and various newsletters throughout the year.

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Don’t Fall Victim to Groundless Independent Contractor Litigation
We recently learned that some members have received solicitations from lawyers regarding the independent contractor status in real estate. These lawyers are attempting to instigate groundless litigation and creating a false impression that just following the licensing law – such as required supervision and salespersons only working for one broker – creates an employment status. 

 Here’s the messaging we would love for you to share with your agents:
• These messages are uninformed and are from lawyers trying to create litigation. 
• For over half a century, salespersons have overwhelmingly chosen the legal option of being independent contractors and running their business under California's real estate licensing law. This has been specifically in the licensing law for decades. 
• Moreover, the real estate licensing law specifically reiterated the validity of real estate licensees as independent contractors with amendments that went into effect January 1, 2019. These statutes specifically reiterate the independent contractor as a lawful choice between a broker and salesperson. 
• C.A.R. is in support of AB 5, which is currently working its way through the legislature, refers to existing code sections making clear that existing law supports the independent contractor business model. The licensing law and other laws require independent contractors to have certain protocols including some specific contractual language such as that included in the C.A.R. Independent Contractor agreements and it is important to follow those practices. 

Buyer loses $40,000 in Earnest Money Deposit Scam
In March we reported that a wave of earnest money deposit scams had reappeared and warned brokers and buyers to be vigilant. Here in June, these same scams are still occurring, and the perpetrators are absconding with even larger deposits.  

This type of scam does not involve cybercrime, email phishing or identity theft. It’s an old-fashioned scam that appears to follow the same basic format.  An agent claims to have a listing for a short sale (or probate or other distressed property), but the property cannot be shown. After acceptance of an offer, the buyer makes an initial deposit usually in the $5,000 to $10,000 range, but as high as $40,000, into the listing broker’s non-independent broker escrow.

As with most short sale or probate properties, the process can take several months, and the buyer’s agent is assured that the listing agent is working towards lender approval – it is just taking more time.  Then the communication slows down, the selling agent begins to get concerned and calls the listing broker’s escrow.  There is no answer, no return call, no other number to contact, and the earnest money deposit is gone.  

This scam is nearly the same as a series of scams that appeared in the Los Angeles area about two years ago. The Los Angeles County sheriff eventually arrested the wrongdoers but only after millions of dollars had been lost.

How to Avoid Earnest Money Deposit Scams:
1. Check to see what type of escrow it is, such as broker-owned, independent or controlled through a title company.
2. Depending on the type of escrow, check the license status of the escrow on the government agency website responsible for licensing that escrow for fraud or other violations. If independent, check the status of the company on the Department of Business Oversight website. If controlled through a title company, check the status on the California Department of Insurance website. And if a broker-owned escrow, check the status of the broker through the Department of Real Estate website.
3. Be especially wary of properties offered for sale which are unavailable for actual investigation or access.
4. Check this “Potential Fraud Warning” that C.A.R. put out in May for details of a particular broker who is currently under investigation by DRE.
5. Be cautious of short sales, probate or other distressed properties.

Make Sure Your Continuing Education Course Provider is Approved by the DRE
The California Association of Realtors has received reports of continuing education course providers who have not been approved by the Department of Real Estate. Unfortunately, an agent might only find this out after having paid for and completed a 45-hour course. At that point the DRE will explain to the agent that the course provider was not approved, and that the agent is ineligible to receive any credit.
How to ensure that the course provider is approved by the DRE:
Before signing up to take any class for the purposes of receiving CE credit always check with the DRE first. You can input the course provider’s name on the DRE site here. Make sure to check that the course provider is not only approved but also approved for the specific course that you are taking.

State of Emergency Protections Against Price Gouging extended to December 31, 2019 for Specific Counties
In late May Governor Newsom signed an executive order extending the state’s prohibition on price gouging for counties recovering from numerous fires until December 31, 2019. The affected counties are:
Santa Barbara

An emergency declaration signed by Governor Brown last year will be in effect until November 8, 2019 covering the following counties:

Los Angeles

California law generally prohibits charging a price that exceeds, by more than 10 percent, the price of an item before a state or local declaration of emergency. This law applies to rental housing, among other services. Importantly, the prohibition is not limited to the counties in which the states of emergency were declared but could apply anywhere affected by the disaster  Violators of the price gouging statute are subject to criminal prosecution that can result in a one-year imprisonment in county jail and/or a fine of up to $10,000.

Violators are also subject to civil enforcement actions including civil penalties of up to $5,000 per violation, injunctive relief and mandatory restitution. The Attorney General and local district attorneys can enforce the statute.

Battery Backup Law for Garage Doors with Automatic Openers Does NOT Create a Point-Of-Sale Requirement
Last year Senate Bill 969 was signed into law.  This legislation requires newly sold, installed or replaced garage doors with automatic openers in residential applications to have a battery backup. 

Here are the key SB 969 Facts:
The law goes into effect July 1, 2019.
The law applies to all new and replacement residential garage doors and garage door opener installations with automatic openers.
Homeowners must install a battery backup when a new door is installed or when they replace their existing door regardless of the date of manufacture of the door opener.
Existing openers in use will not have to be replaced with battery backup openers unless the door is being replaced.
This law does not create a point-of-sale requirement. The obligation to install a battery backup is dependent exclusively upon the installation of a new or replacement garage door with an automatic garage door opener irrespective of whether the property is being transferred.
On or after July 1, 2019, no person, corporation, or entity shall manufacture for sale in this state, sell, offer for sale at retail or wholesale, or install in the state of California a residential automatic garage door opener that does not a have battery backup function that is designed to operate when activated because of an electrical outage.
Failure to follow this law may result in a civil penalty of $1000 per opener installed and operational.

Sexual Harassment Training Required for Employees by 2020! 
What are the requirements for employees? 
If you have five or more employees or even five or more salespersons or brokers even if independent contractors, then by January 1, 2020, all employees must take the one-hour Sexual Harassment training. 

What are the requirements for independent contractors?
Presently, they are not required to take the training. But proposed regulations which could be adopted this year may expand the requirement to include independent contractors.  In any event, since a different law expands sexual harassment liability for real estate agents in a professional relationship with their clients, it is recommended that sales agents, too, take the training even if retained as independent contractors.

What are the requirements for supervisor training?
If you have five or more employees or even five or more independent contractors (sales persons or broker associates), then by January 1, 2020, all “supervisory employees” must have taken the two-hour supervisor training. Please note that many supervisor/office managers are employees, and if so, they would be required to take the training.  As a risk management precaution, we strongly recommend that the responsible broker take the supervisory training along with all other persons who supervise agents or employees. This will include anyone who is in a position to hire, fire, reward or discipline an employee or independent contractor licensee, or who has the responsibility of directing an employee or independent contractor licensee. This recommendation applies regardless of how many employees or independent contractors have been retained.

To meet your training requirements for employees or independent contractors purchase the online course today. The Supervisor Sexual Harassment course is also now available.  For more details on these laws, please see the Realegal from October 19, 2018; and the 2019 New Laws under the headings of “Civil Liability: Liability of real estate agents for sexual harassment expanded” and “Employment: Sexual harassment training requirements.”  Please note, there is no CE Credit for the Sexual Harassment Prevention Training Course.

National Flood Insurance Program Reauthorized through September 30th
On June 6, 2019, the President signed legislation passed by Congress that extends the National Flood Insurance Program’s (NFIP’s) authorization to September 30, 2019.

Congress must now reauthorize the NFIP by no later than 11:59 pm on September 30th, 2019. 

Even though FEMA and Congress have never failed to honor the flood insurance contracts in place with NFIP policyholders, Congress must periodically renew the NFIP’s statutory authority to operate. Since 2017, Congress has approved 11 short-term extensions of the NFIP creating uncertainty for policy holders across the country in a never-ending series of stopgap measures. This latest extension is yet another one. See this article for more information.

Should the NFIP’s authorization lapse, FEMA would still have authority to ensure the payment of valid claims with available funds. However, FEMA would stop selling and renewing policies for millions of properties in communities across the nation. Nationwide, the National Association of Realtors estimates that a lapse might impact approximately 40,000 home sale closings per month.

NFIP reauthorization is an opportunity for Congress to take bold steps to reduce the complexity of the program and strengthen the NFIP’s financial framework so that the program can continue helping individuals and communities take the critical step of securing flood insurance.

The level of damage from recent catastrophic storms makes it clear that FEMA needs a holistic plan to ready the Nation for managing the cost of catastrophic flooding under the NFIP.
Flood insurance – whether purchased from the NFIP or through private carriers – is the best way for homeowners, renters, business, and communities to financially protect themselves from losses caused by floods.

Housing Scarce, Cities Erase Single-Family Lots
Single-family zoning is practically gospel in America, embraced by homeowners and local governments to protect neighborhoods of tidy houses from denser development nearby.

But a number of officials across the country are starting to make seemingly heretical moves. The Oregon legislature this month will consider a law that would end zoning exclusively for single-family homes in most of the state. California lawmakers have drafted a bill that would effectively do the same. In December, the Minneapolis City Council voted to end single-family zoning citywide. The Democratic presidential candidates Elizabeth Warren, Cory Booker and Julián Castro have taken up the cause, too.

A reckoning with single-family zoning is necessary, they say, amid mounting crises over housing affordability, racial inequality and climate change. But take these laws away, many homeowners fear, and their property values and quality of life will suffer. The changes, opponents in Minneapolis have warned, amount to nothing less than an effort to “bulldoze” their neighborhoods. (Read the full New York Times Article here).

Section 8 Anti-Discrimination Laws Adopted by Cities and Counties, and Under Consideration by the State
Source of Income and Section 8 Vouchers: California Fair Housing Law prohibits a landlord from discriminating based on an applicant’s or resident’s source of income. Section 8 vouchers are not currently considered a source of income under state law.  

While Section 8 is a protected classification in a dozen other states, it is not currently protected in California (under state law). However, there is ongoing pressure from advocacy groups and through court cases to require landlords to accept Section 8 vouchers as a source of income.

On July 30, 2018, the San Diego City Council passed an ordinance that will require landlords to participate in the Section 8 Housing Voucher Choice Program and other rental assistance programs. Enforcement of the ordinance will begin on August 1, 2019. Other cities with similar laws include Corte Madera, East Palo Alto, Marin County, San Francisco, and Santa Monica.  (Source: Kimball, Tirey & St. John at www.kts-law.com) LA City and LA County recently adopted similar local restrictions.

Please see recent developments below:  
Proposed state law -
Proposed bill by Sen. Holly Mitchell, D-Los Angeles, would make it illegal to deny a tenancy based on the applicant’s participation in the federal Housing Choice voucher program. (Source: California Apartment Association)
Under current law, it is illegal to discriminate against a prospective tenant based on the applicant’s source of income. At present, however, Section 8 housing vouchers do not legally meet the source-of-income standard. SB 329 would change that by expanding the definition of source of income to include housing subsidies paid by the government directly to landlords.

Bill text (proposed)

Local developments:
Both the city and county of Los Angeles this week advanced policies that will require landlords to consider applicants who would use Section 8 to help pay their rent.  

The ordinances – one for the city of L.A., the other for the county’s unincorporated areas – will prohibit landlords from rejecting applicants based on their use of housing vouchers and other government assistance. Further, the laws will prohibit landlords from advertising that Section 8 is not accepted at their properties.
While the city ordinance is expected to take effect in January 2020, the county has not yet determined an effective date for its law.  (Source: California Apartment Association)

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