CA Property Tax Reassessment Can Be Avoided When Transferring Between Parent and Child

property tax

CA Property Tax Reassessment can be avoided when transferring property and title between parent and child.

There are ways of avoiding CA property tax reassessments that every homeowner should know about and consider.

California property taxesThe property tax rate imposed on California homeowners is equal to 1% to 1.25% of the property’s assessed value at the time of purchase.  The assessed value is equal to the current market value of the property as of the date there is a change in ownership, plus a yearly increase in value based on inflation.

Proposition 13 mandates that the yearly increase does not exceed 2% of the prior year’s assessed value.

However, that assessed value may also increase upon completion of new construction and that is why building permits trigger the tax assessor’s interest.

The key to avoiding property tax increases is to avoid a change in ownership and assessment.

If you must transfer ownership or sell the property, make sure your transfer or sale qualifies for one of the exclusions from reassessment.

If you are inheriting a home from your parent, you want to make sure you take full advantage of certain exclusions to retain your parent’s low property tax basis.

California Proposition 58 – Transfer between Parent and Child

It is common that a deceased parent might have bought a home 30 years ago for $100,000 then, 30 years later, when the parent dies the child receives a $1,000,000 home.

Does the child pay the property tax based on the original $100,000 assessment or on the current value of $1,000,000?

Proposition 58 allows the child to retain the old property tax basis of $100,000!  This is of real importance and represents thousands of dollars in savings in property taxes each year.

These are the important requirements of Proposition 58:

The person doing the transfer, who can only be the parent or the child, must own the home.  Either the parent owns the home and is giving it to the child or the child owns the home and is giving it to the parent.

Proposition 58 only applies to a transfer between parent and child.  The person receiving the home must be the parent or the child.  Under Proposition 58, a “child” may be a son, daughter, son-in-law, daughter-in-law, stepchild, or child adopted before the age of 18.

The exclusion is not automatic, and the claimant must complete a “Claim for Reassessment Exclusion for Transfer between Parent to Child” form within 3 years of the transfer.  There is no dollar limitation on the original owner’s principal residence.  The parent’s home could be worth 5 million dollars at the date of transfer, but if the parent bought the home for $100,000 then the child’s property tax basis will be $100,000.

There is a $1 million base-year cumulative value limit on the transfer of non-principal residences.  Multiple non-principal properties may be transferred without property tax reassessment only up to this limit.

By Harrison K. Long, Professional real estate representative, Realtor and real estate broker.  CALBRE 01410855.  Also an attorney member of the California State Bar Assiociaion, member 69137.  949-701-2515 (cell or text).  HKLong@cox.net.  

This is for information only about “Avoid CA Property Tax Reassessment When Transferring Between Parent and Child” and is not the providing of legal services.  If you have questions about this and your situation, you should contact an experienced real estate attorney.

Posted in California laws, California property tax, California real estate, California real estate laws, California taxes | Tagged , , , , , , , , , , | Leave a comment

CA Court of Appeal Held Listing Agent on a Home Sale Owed Fiduciary Duties to the Buyer

California real estate lawA California Court of Appeal held in Horiike v. Coldwell Banker, et. al., the California Court of Appeal (2nd appellate district, division 5) that the Agent on a Home Sale Owed Fiduciary Duties to the Buyer.

Question is whether a listing agent who is associated with the same brokerage as the buyer’s agent (dual agency in California) on a purchase and sale transaction has the same fiduciary duties to the buyer as he/she does to the seller.

CA laws and Real EstateThis established new court-made law that where a listing agent and a buyer’s agent are both licensed with the same broker (in this case dual agents with Coldwell Banker Residential Brokerage), they each owe the same fiduciary duties to both parties to the real estate purchase and sale transaction.

The owners of a luxury residence in Malibu in 2006 hired a listing agent to sell their home, and he was licensed under Coldwell Banker Residential Brokerage Company. This agent listed the property on the MLS as “approximately 15,000 square feet of living areas” and prepared a flyer accordingly. A buyer (Mr. Horiike) with his own buyer’s agent (from a different Coldwell Banker office) presented an offer and asked the listing agent for verification of size square footage. The listing agent provided a letter from the architect stating that the living area was approximately 15,000 square feet.

Mr. Horiike (the buyer) did not have the property measured for size and bought the property. It was later determined that the square footage size of the home was significantly less than 15,000 square feet. He filed a lawsuit against the listing agent and Coldwell Banker (but not against his own buyer’s agent) and alleged misrepresentation and breach of fiduciary duty. The trial court granted the motion by defendants for non-suit and held that the listing agent did not represent the buyer and owed no fiduciary duty to the buyer.

The Court of Appeal reversed and said that “a broker’s fiduciary duty to his client requires the highest good faith and undivided service and loyalty” and that the dual agency relationship had been created where the listing agent and buyer’s agent were licensed under the same broker (Coldwell Banker Residential Brokerage) representing the buyer and seller, and that each salesperson owed fiduciary duties not only his or her own client, but also owes those same duties to the other agent’s client.  This court of appeal decision has been appealed to the CA Supreme Court (case #S218734) and is now pending.

By Harrison K. Long – attorney, CAL State Bar Association member #69137 – 949-701-2515 cell/text.  California real estate broker – CAL BRE #01410855.

“CA Court of Appeal Held that Listing Agent on a Home Sale Owed Fiduciary Duties to the Buyer”

Posted in California laws, California real estate, California real estate laws, Dual agency | Tagged , , , , , , , , , , | Leave a comment

CA Homeowners Should Be Careful With Solar Panel Lease Decisions

Solar panel leasingWhy it’s important that homeowners in CA be careful with solar panel lease situations and know the facts before making decisions – (Part One)

Posted in California laws, California real estate, California real estate laws, Solar Energy for Homes, Solar energy systems | Tagged , , , , , , , , , , , , , , , | Leave a comment

Estate Planning Needed to Prepare for When a Co-Borrower on Title Dies

Whether you own your home with a spouse, significant other, family member, a friend or by yourself, you need to arrange for financial cushion to replace the loss of income when a co-borrower on the loan passes away.

What happens to the mortgage if a borrower on real estate title dies?  Do you have to get a new loan? Does the lender call the loan through a due-on-sale clause?

Law at the 1982 Garn-St. Germain Act has nine exemptions preventing a lender from calling a mortgage due on properties with four units or less.

You can take over the existing loan if you meet one of the exemptions.  Once you do take over the loan you should figure out if it’s a good loan that is a “keeper” or if you can refinance under a better rate and terms.

What about property taxes?  Does the property get reassessed for a higher property tax basis?  California law has the following rules:

1. The property will not be reassessed if it passes to the surviving spouse pursuant to a will or trust, whether the spouse is a joint tenant or has community property rights of survivorship.

2. Your property taxes on your primary residence, plus $1 million of assessed value of other properties, will pass to your children without reassessment.

3. Property passing to anyone other than a spouse or child, through joint tenancy, a will or a trust, will trigger a property tax reassessment.

4. Tenants-in-common interest will get reassessed unless it passes to the spouse or a child (provided the portion passing to the child does not exceed the $1 million assessed value limitation).

And how will your heirs be able to avoid probate court, fees and income taxes on the estate?

People who own property with another person should work with an experienced estate planning attorney or income tax professional to devise an estate plan and review and update that on an annual basis.

By Harrison K. Long – Realtor and professional real estate representative, broker associate, Evergreen Realty HomeSmart at Orange County CA – 949-854-7747 (direct) or 949-701-2515 (cell or text) – CAL BRE 01410855.  Also an attorney member of the CA State Bar Association #69137.  This is for information only and is not the providing of legal services.  

Posted in California estate planning, Estate planning | Tagged , , , , , , , , , , , , , , | Leave a comment

California Court of Appeal Rules in Favor of HOA on its Short-Term Rental Rules

Homeowners associations in California don’t like it when a homeowner violates its rules and rents out a home on a short term basis.

An HOA adopted a rule that homeowners who rented out their homes could not do so for periods of less than seven days and imposed an annual fee on owners who rent out their homes. The purpose of the fee was to defray, at least partially, the extra costs to the HOA that were caused by renters.

gavel, 2011The HOA can do this according to California’s Second Appellate District Court of Appeal (Oak Shores Community Association v. Burlison, Second Appellate District, March 24, 2015).

The Oak Shores Community Association (HOA) is the governing body of Oak Shores, which has 660 parcels developed with single-family homes.  Some homes are occupied by full-time residents, and about 66 percent are absentee owners who rent their homes to short-term vacation renters.

The HOA adopted a set of rules including minimal rental period of seven days and a $325 annual fee imposed on owners who rented their homes. Two owners sued the HOA challenging these rules under California Civil Code 1366.1 (since renumbered), which said that “An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”

The trial court found in favor of the HOA, and the plaintiffs appealed.  The court of appeal found in favor of the HOA and quoted from an earlier California Supreme Court decision (Lamden v. La Jolla Shores Clubdominium Homeowners Assn.) saying, “Generally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with the public policy.”

The court of appeal also said “short-term renters cost the Association more than long-term renters or permanent residents is not only supported by the evidence but experience and common sense places the matter beyond debate.”

The court of appeal referenced other court case decisions (Laguna Royale Owners Assn. v Darger) that had upheld the rights of the HOA to impose minimum rental periods.

Question of attorney fees was resolved in favor of the HOA.  The court of appeal upheld the trial court’s decision in favor of the HOA, which had awarded attorney fees in the amount of $1,180,646.50 for the HOA.

In many areas of California, HOAs and communities are trying to figure out impact on owners and property valeus of short-term rentals brought about by organizations such as Airbnb.  This court ruling in Oak Shores will provide some guidence.  It will be interesting to see whether this court of appeal decision will eventually be determined by the CA Supreme Court.

By Harrison K. Long, Realtor and professional real estate representative, Evergreen Realty HomeSmart at Orange County CA – 949-854-7747 (direct) or 949-701-2515 (cell or text) – CAL BRE 01410855.  Also an attorney member of the CA State Bar Association #69137.  This is for information only and is not the providing of legal services.  Source of some information here is recent article by Bob Hunt at RealtyTimes.

Posted in California laws, Homeower Associations, Homeowners associations, Real estate guide, Real estate laws | Tagged , , , , , , , , , | Leave a comment

Landlord Liability for a Tenant’s Pets in California

California Law re Landlord Liability for a Tenant’s Pets

Can the landlord be liable if the tenant’s dog bites or otherwise harms someone?

Posted in California laws, Real estate guide, Real estate laws | Tagged , , , , , , , , , | Leave a comment

New CA Law on Real Estate Transaction Prices Transparency

CA laws and Real Estate

Some home buyers liked to keep secret how much money they paid for their homes.

This fog over correctness of public records on property sold prices was lifted with California AB 1888: New California Law on Real estate transaction transparency.

This was signed into law by Governor Brown in June 2014 and eliminates the option for parties to avoid disclosing in public records the amount of documentary transfer tax payable at closing of real estate transactions.

Purpose of this law is to make the value of each transaction readily apparent, which some buyers and sellers had wanted to avoid.

Counties and cities in CA are authorized to levy documentary transfer tax upon the recordation of documents transferring interests in real property.

CA Revenue and Taxation Code Section 11932 previously said that a document submitted for recordation must show the amount of documentary transfer tax due either on its face, or in a separate statement that is not recorded.

With the tax shown on the face of the recorded document, determining the purchase price in a transaction should be easy since the county/city tax used to determine the documentary transfer tax is known.

Parties wanting this kept secret were previously allowed the ability to submit a separate, nonrecorded statement, and that has stopped.

AB 1888 amended Section 11932 of the Taxation Code – purpose of this law was to provide for transparency in the administration of California’s documentary transfer tax law, to resolve issue relating to availability of transfer tax information under the California Public Records Act (CPRA), and to ensure that real estate appraisers have access to transfer tax information in order to accurately appraise real property.

This new law is effective as of January 1, 2015, and should make pricing of homes information easier to determine.

By Harrison K. Long, professional real estate representative, Realtor, real estate broker, and professional real estate representative at Orange County CA.  Source of some information is article by Stroock & Stroock & Lavan LLP, Los Angeles law firm.

Coldwell Banker residential brokerage

We provide professional real estate agent and broker representation – help for property owners, home sellers, private trust estate representatives, estate administrators, executors and heirs, probate and trust attorneys, estate planners, income tax professionals, public guardians, fiduciaries, investor group managers, bankers, and individuals, with listing and sale of properties at Orange County, CA. Contact us at 949-854-7747 with your questions about home prices and values at Orange County CA cities and areas with Home Selling and Real Estate market updates.

This post about California law is for information only and is not the providing of legal services.  If you have questions about legal issues with your real estate transaction, you should contact an experienced real estate attorney.

Posted in California homes, California laws, California real estate laws | Tagged , , , , , , , , , , , , , , , | Leave a comment

Millennials in California Value Home Ownership

Millennials in California value home ownership.  A new survey by the CALIFORNIA ASSOCIATION OF REALTORS® was designed to evaluate the millennial generation’s attitude toward home ownership.

MillennialsLookingTowardHomeownership, 11-19-2014Respondents were asked questions about different things from effect of the recession on their attitude toward home buying to what they look for in a home, and their biggest concerns about home buying.  This online survey polled 1,000 CA residents aged 18 to 34, and here are some of the findings:

  • Though nearly two in 5 millennials (49%) live with parents, 93% plan to buy a home.
  • More than half gave home ownership an importance rating of of 8 or higher on a scale of 1 to 10 – with 1 being not at all important and 10 being extremely important.
  • Millennials don’t tie home ownership to a life event, but instead to years; they plan to buy in 5 yeas rather than when they marry or have children.
  • More than half (59%) said the housing crisis didn’t affect their attitude toward home ownership being a good investment.
  • Majority of those surveyed were uncertain or doubtful they could obtain a mortgage now; 45 percent said they were not sure, while 33 percent said they would not be able to do so.
  • 67 percent rent because they cannot afford to buy a home.
  • 45 percent cited high home prices and affordability as their main concerns about home ownership.
  • Millennial’s top reasons for home buying are freedom to do what they want with their property, privacy, and satisfaction of ownership.
  • 57 percent think that location in home buying is most important, above the neighborhood, home features, and walkability, among other things.
  • 67 percent plan to purchase a single-family detached home.
  • 42 percent want a lot of land, and 41 percent want to live in the suburbs.
  • The young group aged 18 to 26 find privacy important, while older millennials aged 27 to 34 find equity important and see home ownership as an investment.
  • Of those currently renting, 36 percent would be motivated by affordable home prices to buy now.
  • 16 percent said they would be motivated to buy by having the down payment necessary to purchase.

Millennials want home ownership

By Harrison K. Long, real estate broker, Realtor, professional real estate representative and attorney at Orange County CA.  Source of information is the CALIFORNIA ASSOCIATION OF REALTORS® magazine, February 2015. 

Coldwell Banker residential brokerage

 

 

We provide professional real estate agent and broker representation – help for property owners, home sellers, private trust estate representatives, estate administrators, executors and heirs, probate and trust attorneys, estate planners, income tax professionals, public guardians, fiduciaries, investor group managers, bankers, and individuals, with listing and sale of properties at Orange County, CA.  Contact us at 949-854-7747 with your questions about home prices and the home selling and/or buying process at Orange County CA cities and areas.  ~  “Millennials in California value home ownership”.

Posted in California Association of Reators, California homes, California property tax, California real estate | Tagged , , , , , , , , , , , , , , | Leave a comment

17 Important New Provisions of the CA Residential Purchase Agreement

house_ie6Professional real estate representatives in California must study, be prepared to discuss with their buyers and sellers, and utilize the CA Residential Purchase Agreement form.

This new RPA-CA was revised and published by the CALIFORNIA ASSOCIATION OF REALTORS®  on November 25, 2014.

California real estate

This contract form has grown in size and scope to include statutory clauses and incorporate evolving needs of real estate professionals.

Residential purchase agreementThe RPA-CA is a most-trusted contract form used by Realtors and professional real estate representatives in California.

Here are 17 of the most important new provisions that real estate professionals and their clients will consider about the new RPA-CA:

1.   This form now takes a unified approach to inspections and repairs.  Wood-destroying pests and organisms inspection, and all other inspections, are treated equally (see paragraph 7.A).

2.   The time to remove the buyer loan contingency has been extended from 17 to 21 days by default on this form (However, this amount time is negotiable between the parties). Coinciding with this change is removal of an optional paragraph allowing the loan contingency to remain until the loan is funded.

3.   A new paragraph has been added to explicitly address the issue of items included in the sale that may not be owned by the seller or that may, by virtue of their presence, cause a lien to be recorded against the property (such as installed solar panels and equipment).

4.   The paragraph concerning what is included in the sale now specifically mentions what is being call “home automation systems”.  These devices allow a home owners to remotely control certain home functions, such as turning on the water, lights, or appliances, or setting the alarm, and adjusting the thermostat on the HVAC system (see paragraph 7.B.8).   Items excluded from the sale (see paragraph 7.B.8.C.).

5.   The default method for the buyer’s obligation to bring a deposit directly to escrow has been changed to an electronic deposit rather than a check (see paragraph 3.A.(1).

6.   No longer will the removal of the loan contingency automatically be deemed a removal of the appraisal contingency (see paragraph 3.J.2).  These two separate important terms are to be independent.  And if the appraisal contingency is removed and the buyer’s chosen lender refuses to loan because the appraisal is too low, the buyer cannot rely on the lender’s appraisal as a reason to cancel the contract without penalty.

7.   Who pays for government requirements and retrofit (see paragraph 7.B)

8.   Agent Visual Inspection disclosure impact (see paragraph 10.2)

9.   Buyer’s right of inspection (see paragraph 12.A.)

10.  Preliminary title report to buyer (see paragraph 13.A).

11.  Time periods and removal of contingencies (see paragraph 14.A. and B)

12.  Effect of Cancellation of Contract (see paragraph 14.G.)

13.  Repairs by seller (see paragraph 16)

14.  Scope of duty of brokers (see paragraph 18.B.)

15.  Representative capacity for signing of documents (see paragraph 19)

16.  Assignment of contract rights (see paragraph 26).

17.  Mediation and arbitration provisions preserved (see paragraph 22.C.)

By Harrison K. Long.  Professional REALTOR® agent and broker representation for property owners, home sellers, private trust estate representatives, estate administrators, executors and heirs, probate and trust attorneys, estate planners, income tax professionals, public guardians, fiduciaries, investor group managers, bankers, and individuals, with listing and sale of properties at Orange County, CA.  Contact us at 949-854-7747 with your questions about market information  and home prices and values at Orange County CA cities and areas.  Thank you. 

Coldwell Banker residential brokerage

 

 

17 Important New Provisions of the CA Residential Purchase Agreement

Posted in California laws, California real estate, California real estate laws, Home buying guide, Home buying strategy, Home selling guide, Residential purchase agreement | Tagged , , , , , , , , , , , , , , , , , | Leave a comment

California Court Holds Lender Waived Right to Deficiency Judgment

California Court Holds Lender Waived Right to Deficiency Judgment

In First California Bank v. McDonald, a California court of appeal recently held that a lender waived its right to a deficiency judgment where it permitted the sale of real property outside of the judicial foreclosure without the borrower’s consent.

CA laws and Real EstateIn this case – First California Bank v. McDonald – a husband and wife signed a promissory note secured by a deed of trust against certain real property in California.  They also provided additional security in the form of a deed of trust against a different property.  The wife subsequently sold the second property with the bank’s agreement that it would receive the proceeds from that property. There was no release as to the borrowers.  The bank’s note went into default after the husband died.

The bank subsequently filed a complaint for judicial foreclosure and sought a deficiency judgment against the wife and children. The trial court granted summary adjudication as to the bank’s claim for judicial foreclosure ordering the sale of the property.  The court found that the wife and estate representatives were subject to a deficiency judgment for the unpaid amount.

The wife and estate appealed, contending that their arrangement with the bank released its deed of trust as to the second property and that the bank had therefore waived any right to a deficiency judgment under Code of Civil Procedure §726(a).

The court of appeals agreed and reversed.  The appellate court found that the bank failed to follow the requirements of §726 and did not get the wife’s nor children’s consent or waiver that the property was being sold outside of judicial foreclosure.  There was no evidence that the bank obtained their consent to the release of the secured interest in the property and there was no evidence as to how the proceeds of the sale were actually applied. As such, the bank waived its right to a judicial foreclosure.

Source of information is article by Shannon B. Jones, California real estate attorney  –  See court of appeal decision – http://www.courts.ca.gov/opinions/documents/F067812.PDF

By Harrison K. Long, real estate broker, Realtor, professional real estate representative and attorney at Orange County CA.

Coldwell Banker residential brokerage

 

 

We provide professional real estate agent and broker representation – help for property owners, home sellers, private trust estate representatives, estate administrators, executors and heirs, probate and trust attorneys, estate planners, income tax professionals, public guardians, fiduciaries, investor group managers, bankers, and individuals, with listing and sale of properties at Orange County, CA.  Contact us at 949-854-7747 with your questions about home prices and values at Orange County CA cities and areas with Home Selling and Real Estate market updates.  

This post about California law is for information only and is not the providing of legal services.  If you have questions about legal issues with your real estate situation or transaction, you should contact an experienced real estate attorney. 

Posted in California laws, California real estate laws, Real estate guide, Real estate laws | Tagged , , , , , , , , , , , , , | Leave a comment