This past year was a much better year for real estate (at least in San Francisco) than we have seen in a long time. Office rental rates are up, construction cranes are everywhere, and properties are trading. As we turn the calendar for another busy real estate year, let’s take a look at some of the new laws that will impact real estate in 2013.
Gross Receipts Tax (San Francisco Measure E)
San Francisco voters approved the measure that eliminates the existing payroll tax and replaces it with a tax on gross receipts. The new tax will be phased in over five years, starting in tax year 2014. The change will directly impact the real estate community, since most property owners have few employees. The tax rate for real estate ranges from 0.285% to 0.3%. Business registration fees will increase significantly beginning July 1, 2014.
Anti-Deficiency Protection (SB 1069)
Homeowners that refinance their homes will be subject to protection from deficiency judgments (balance of loan remaining after foreclosure sale) for loans entered into after January 1, 2013. Previously, if an owner refinanced, they would lose this protection. If an owner “cashes out” and takes cash out of the equity, then this protection will not apply.
“Obamacare” Tax on Real Estate Deals
While not a direct tax on real estate transactions, the sale of property will trigger a 3.8% tax on the gain for certain sales. The tax will apply only to those earners that haven an adjusted gross income over $200,000 for individuals, and $250,000 for couples. The 3.8% is calculated on the lesser of (i) the investment income received, or (ii) the excess of adjusted gross income over the threshold described above. Investment income includes capital gains in real estate. This is a complicated income tax issue, so you should consult with your tax advisor about the impact of this tax. The National Association of Realtors has put out a helpful pamphlet summarizing the tax. (www.realtor.org)
Residential Mortgage Renegotiation (AB 278)
As part of the Legislature’s efforts to protect homeowners from foreclosure, AB 278 imposes a number of protections for borrower’s that are working to prevent a foreclosure, including (i) mandating a single point of contact required for certain mortgage servicers, (ii) precludes recordation of a notice of default when foreclosure prevention measures have been approved, (iii) requires mortgage servicers (not just the lender) to contact borrower’s to explore foreclosure options, and (iv) allows borrowers to seek injunctions and damages for certain violations.
Eviction after Foreclosure (AB 2610)
For residential properties that are foreclosed upon, tenants will be entitled to 90 days notice of termination , rather than 60 days. Also, fixed term leases are recognized even if the loan was recorded first, with some exceptions. The foreclosing owner must notify the tenant that the lease must be honored unless he/she intends to occupy the premises as a primary residence.
Disclosure of Hazardous Materials (AB 1511)
Just in case you thought you could avoid disclosing the existence of gas and hazardous materials pipelines when selling residential property, the law now makes this a specific requirement.
Easements (AB 1927)
Allows parties to an easement to pursue a claim against joint easement holders for proportionate allocation of maintenance costs, in the absence of a written agreement.
Notaries (AB 2326)
Those annoying finger prints are now required for the recordation of any document that affects real property – so just about every document that is notarized. (Previously just applied to deeds and deeds of trust).
New LLC Law (SB 323)
Effective January 1, 2014, the California LLC law will be revised based on the national Uniform LLC Act. Look for future updates on this topic in 2014. This will affect many real estate owners since LLCs are often used as the entity to hold real estate.
Landlord/Tenant – Animals (SB 1229)
For you pet lovers out there – Landlords that accept pets cannot require tenants to declaw or devocalize their animal as a condition to rental.
The above is just a brief overview, if you have questions about the details, please give Kevin Rose a call.
West SOMA Update – Historic Controls Expanded
After a week of efforts by local stakeholders, the Planning Commission agreed to expand the universe of historic buildings eligible for relaxed use controls. The Planning Commission voted to permit all uses, regardless of the underlying zoning, in the following types of historic buildings:
1. Article 10 individual landmarks
2. Article 11 buildings with a rating of I, II, III, or IV
3. Buildings individually eligible for the California or National Registers
The Commission refused to expand the controls to buildings that are eligible for the California or National Registers as contributors to eligible historic districts. While this excludes a significant number of buildings in West SoMa that have been identified as historic resources by the Planning Department, it represents a major expansion of eligibility for the controls than what the Department was originally proposing.
The full West SoMa plan was approved last night 7-0 at the Planning Commission. It now heads to the Board of Supervisors where additional changes are likely to be made before final passage. We will continue to keep you posted on its progress.
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.
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