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Roundup of 2020 New Laws for Brokers and Agents

October 13 was the last day for Governor Newsom to sign bills into law and conclude this year’s legislative session. Here are some of the significant laws that were passed impacting brokers and agents:

Agent Independent Contractor Status Reaffirmed

Real Estate Licensees can continue their half century practice as independent contractors. AB 5 clarifies that existing law is not displaced by the Dynamex decision, a case that changed the way independent contractor status is analyzed in California. Although media coverage of AB 5 has focused attention on the sweeping changes to employment law generally, contained within AB 5 is a clear reconfirmation of the right of real estate agents to be treated as independent contractors.

The new law recognizes and reinforces Business and Professions Code § 10032 which allows real estate licensees to be independent contractors for “statutory purposes” as long as they meet three conditions:

1) They hold a real estate license;

2) Substantially all of their remuneration is directly related to sales or other output rather than to the number of hours worked; and

3) The parties have a written contract stating that the individual will not be treated as an employee with respect to those services for state tax purposes.  

This three-part test follows the federal tax code as well.  

AB 5 also indicates that if the classification in the B&P Code is not applicable then question of independent contractor status would be governed by “the Borello test,” which is based on factors of control, instead of those established by Dynamex.   However, even if the Borello test does apply, the duties of broker supervision and control under the real estate licensing law cannot be considered as factors.

This puts to rest some plaintiffs’ assertions that obeying the real estate law of broker supervision and the requirement that a salesperson must work under only one broker results in an employee status, which was never the case. In this regard, as part of C.A.R.’s real estate clean-up legislation, which was signed into law last year, all references to “employing broker” and “employee” were removed from the B&P Code.

Finally, AB 5 states definitively that the Dynamex decision does not apply to real estate licensees and adds that the law relating to real estate licensees applies retroactively to existing claims and actions to the maximum extent permitted by law.

 

Statewide Rent Control and Just Cause Eviction

A statewide rent control and just cause eviction bill, AB 1482, was signed into law this week. Its major provisions include:

  • Rent Cap. A cap on annual rent increases set at 5% plus inflation, up to a maximum of 10% per year. This cap applies retroactively to all rent increases since March 15, 2019. Any rent increases initiated on or after that date will count toward the rent cap, and if over the maximum, will have to be rolled back effective January 1, 2020.

  • Just Cause. A prohibition on evictions without “just cause.” Landlords can no longer terminate month-to-month tenancies at will and may now only evict tenants for one of 15 specific reasons. The permissible reasons are divided into two categories: “at fault” and “no fault.”
  • “At fault” termination is generally allowed when tenants have breached their lease and does not require the payment of relocation assistance. “At fault” reasons include non-payment of rent, nuisance, illegal use of the property, refusal to allow entry, and breach of a material term of the lease.
  • “No fault” termination is allowed even when the tenant has not breached the lease and will require the landlord to pay one month’s rent in relocation assistance. “No fault” reasons include an owner or family member intending to occupy the property, withdrawal from the rental market, substantial remodeling and compliance with a government order to vacate the property,
  • Exemptions. The law’s just cause eviction provisions only protect tenants who have been in possession for a year or more.  Certain types of housing are exempt including:
  • Single family homes and condos if:

      1. Tenants have received notice of the exemption and,
      2. The owner is not a REIT, corporation, or LLC owned wholly or in part by a corporation

     

  • Homes built within the last 15 years
  • Owner-occupied duplexes
  • Owner-occupied single-family homes where two or fewer rooms are rented out (exempt from just cause but not rent cap)

Please see our “Rent Cap and Just Cause Eviction” Q&A for more details

 

Landlords Cannot Refuse Section 8 Tenants Outright

Mandatory Section 8: Under Senate Bill 329 landlords may no longer refuse to rent to a tenant solely on the basis of a tenant’s participation in a housing voucher program such as Section 8. Doing so would constitute illegal “source of income” discrimination.

However, landlords remain free to reject prospective tenants, provided they do so on otherwise lawful grounds that are not based on a tenant’s receipt of a housing subsidy. Landlords also remain free to charge rents as allowed under law and are not be required to reduce rents even if chosen rent levels would make a unit too expensive for a voucher holder to afford it. Further, landlords can continue to use appropriate financial and income standards in making rental decisions, like verifying income levels or checking creditworthiness. But landlords no longer have the option to forgo participation in housing subsidy programs when presented with a prospective tenant who is qualified to rent from them in all other respects.

 

Beginning 2021 New Disclosures re Fire Home Hardening and Defensible Spaces

Although not required until 2021, AB 38 mandates new disclosure obligations for residential 1 to 4 property sales located in a high or very high fire hazard severity zones. There are two parts to the new disclosure law.

First, for properties built before 2010, sellers will be required to disclose, based upon a seller’s actual knowledge, the absence of home hardening features that may make the home vulnerable to wildfire and flying embers including non-fire resistant eaves, untreated wood shingles or shakes on the roof, combustible landscaping within five feet of the home, single pane or non-tempered glass windows, loose or missing bird stopping, and rain gutters without metal gutter covers. A statutory notice is also required advising a buyer that the property is located in a fire hazard zone and that home hardening retro-fits can better protect the home.

Secondly, the seller will be obliged to present evidence of compliance with any local law that requires documentation regarding “defensible spaces.” These are laws that require an owner to maintain a space around their home which is cleared of fire hazards, like dead wood and brush. If there is no local law requiring such documentation, the seller and buyer “must agree” that the buyer will comply with state law requirements after closing, if the seller hasn’t already done so.

 

Rent Increases Above 10% Require 90-Day Notice

Assembly Bill 1110 extends the notice period for increasing rent above 10% in any 12-month period to 90 days. Previously, it was 60 days. In calculating if a proposed rent increase is greater than 10%, the owner must combine it with all other rent increases within the prior 12 months before the effective date of the rent increase. The notice period for rent increases of 10% or less (combining all prior rent increases within 12-months before effective date of the increase) remains 30 days. 

Keep in mind that with the passage of AB 1482 capping rents statewide, an increase of more than 10% within any 12-month period will only be permitted for housing that is exempt from the statewide rent cap law. But even if exempt, landlords should be cognizant of the anti-price gouging law based upon declared states of emergency which will restrict rent increases to no more than 10% for properties located in counties affected by declared states of emergency. 

 

Lower Security Deposits for Active Military

Under Senate Bill 644 a landlord may only collect one month security for an unfurnished unit, or two months for furnished units, from a service member who resides on the property. A landlord may not refuse to enter into a rental agreement with a prospective tenant who is a service member on the basis that the landlord is demanding, but is prohibited from collecting, a greater amount of security.

Under this law “Service member” means a member of an active or reserve component of the Armed Forces who is ordered into active duty pursuant to federal law, or a member of the militia called or ordered into active state or federal service.

 

Budget Allocates $20 million for Eviction Defense

Signed into law in June, Assembly Bill 74, the “Budget Act of 2019,” allocates $20 million to qualified legal service projects and support centers to provide eviction defense or other tenant defense assistance in landlord-tenant rental disputes, including pre-eviction and eviction legal services, counseling, advice and consultation, mediation, training, renter education, and representation, and legal services for improving habitability, increasing affordable housing, ensuring receipt of eligible income or benefits to improve housing stability, and homelessness prevention.

 

Mobilehome Park Sales: Application Process Must Be More Transparent, Fairer and Timely

Lease approval of a buyer is necessary to consummate a sale of a mobilehome that will remain in the park; and dealing with the park management can sometimes prove frustrating. AB 274 attempts to move the application process along in a transparent, fair and timely manner.

Upon receipt of notice, management must within 15 days provide a selling homeowner or prospective purchaser with the standards that management customarily utilizes to approve a tenancy application and a list of all documentation needed to determine if the prospective purchaser will qualify for tenancy in the park. Management is prohibited from withholding approval from a prospective purchaser of a mobilehome unless management reasonably determines that the purchaser will not comply with the rules and regulations of the park, the purchaser does not have the financial ability to pay the rent, estimated utilities, and other charges of the park, or the purchaser commits fraud, deceit, or concealment of material facts during the application process. If denied, the purchaser is entitled to provide, and park management is required to consider, evidence of additional financial assets

For the complete list, Please see our “2020 New Laws Affecting REALTORS” 

 

Court Requires Business Website to Conform to WCAG 2.0

In a 33-page published decision, the California Court of Appeal affirmed the California Superior Court’s summary judgment ruling that a restaurant (“Midvale”) violated the California Unruh Civil Rights Act by having a restaurant website that could not be used by a blind person with a screen reader.  The Court of Appeal also affirmed the trial court’s injunction mandating that Midvale make the restaurant website comply with the Web Content Accessibility Guidelines (WCAG) 2.0 Level AA. Because the plaintiff’s Unruh Act claim was based on a violation of Title III of the ADA, the court’s analysis focused on whether Midvale violated the ADA by having an inaccessible website.

In January of 2018, Broker Insights reported a similar case also involving a restaurant. Here is the excerpt offering advice to brokerages:

What approach should a business take?

First, as a stop-gap measure before you get your web site up to speed, add a statement to your website that provides contact information and a phone number for anyone having difficulty accessing it (see NAR’s statement at nar.realtor/accessibility). Although it’s no guarantee that you won’t become the target of an ADA noncompliance or Unruh law suit, offering some accommodation for disabled users on your site makes you a less likely target.

Secondly, and more importantly, you should talk to your website provider about implementing a plan for making your site compliant with WCAG 2.0 AA. This should be done as soon as possible. The Whisperer Lounge trial court decision mentioned above ordered compliance with WCAG Level 2.0 AA. In fact, this Level 2.0 AA is a moving target because the World Wide Web Consortium (which developed the guidelines) has now adopted WCAG 2.1. No one can say if this will eventually supersede WCAG 2.0 to become a new base line standard. (See the article “Is Your Website Compliant and Should It Be?”).  (See NAR’s topic “Complying with the Americans With Disabilities Act (ADA)” for a variety of resources and references).






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