HOME OWNER ASSOCIATION – RULES FOR INCREASING DUES
“Regular” assessments are “monthly dues” used for day-to-day expenses and reserves for repair/replacement of major components (i.e. roof, parking lot and other common area improvements).
“Special” assessment are for one-time costs to repair/replace major components due to either an unanticipated loss (fire, flood or casualty) or underfunded reserve for a major component.
1. “Regular” Assessment Increases Exceeding 20% Require Homeowner Approval.
Monthly Dues cannot be increased without approval of the Board for the Association. See Civil Code §5605.
The Board cannot increase fees without first complying with requirements of Civil Code §5300, which are as follows:
– provide a statement showing annual estimated revenue and expenses;
– provide a summary of the reserve funding plan adopted by the board;
– provide a statement stating whether they are deferring the repair/replacement of any
major components and justification for the deferral;
– provide a statement stating whether a special assessment is anticipated to restore, replace or repair any major components;
– a general statement showing the procedure used to calculate and establish reserves for future replacement or repair of any major components.
If the Board complies with the requirements of Civil Code §5300, then they can only increase monthly dues by 20% or less. If the Board fails to provide statements and summaries as listed above, then the assessment is improper and can be challenged by the homeowner.
The Board cannot increase monthly dues by more than 20% without (1) approval of a majority of the homeowners and (2) a regular membership meeting. Civil Code §5605(b).
2. “Special” Assessment Exceeding 5% of the Annual Budget Require Homeowner Approval.
The Board can impose “small” special assessments without Homeowner Approval. The Board can impose payment schedules without Homeowner Approval. A “small” assessment is defined as an assessment less than 5% of the total annual budget for the HOA.
The Board cannot assess a special assessment of 5% or more of the total annual budget without (1) approval of a majority of the homeowners and (2) a regular membership meeting. Civil Code §5605(b).
Additionally, the Board must notify each homeowner of a new or increased special assessment (1) by certified mail at least (2) 30 days before the assessment is due.
3. Homeowners can Challenge “Regular” and “Special” Assessments.
Disputes $10,000 or Less.
Go to small claims court for any dispute in the amount of $10,000 or less. Civil Code §5658 allows a homeowner to (1) pay a disputed assessment “under protest” and (2) challenge the disputed assessment in small claims court.
This means that a homeowner can challenge any regular assessment, special assessment, fine, penalty, late fee or collection cost in small claims court. However, remember that you must first pay the disputed amount or the HOA can continue to assess fees, interest and penalties.
Disputes Over $10,000.
Do not rush to file a lawsuit against your HOA because the law allows the HOA to recover all attorney fees and costs from you if you lose. Instead follow the following three step dispute resolution procedure.
1. REQUEST FOR INTERNAL DISPUTE RESOLUTION PROCEDURES. Send a written request to HOA for a copy of the Internal Dispute Resolution (“IDR”) procedures as required by law. Give the HOA a 15 day deadline for response.
2. REQUEST FOR MEET AND CONFER. If no IDR, then send written demand for Meet & Confer to the HOA. The written demand must state the nature of your dispute in reasonable detail. HOA is required to participate in a Meet & Confer by appointing a director to meet with you personally within a “reasonable” time after demand is made. Give the HOA a 30 day deadline for response.
3. REQUEST FOR RESOLUTION. If the dispute is not resolved by Meet & Confer, then send a written Request for Resolution demanding Mediation and/or Arbitration (i.e. Alternative Dispute Resolution also known as “ADR”). HOA is required to respond in writing within 30 days. Each party to ADR is responsible for its own costs. You must have an attorney to participate in ADR.
Neither party is required to participate in ADR, but courts often deny attorney fees to the HOA if ADR is refused (see Civil Code §5960). This is a great strategy to control your potential liability for HOA attorney fees.
It has been my experience that once the HOA receives written notices for IDR, Meet and
Confer and Mediation and/or Arbitration, they are more likely to come to the table and resolve the dispute.
Keep in mind that both the CC&R’s and California law were drafted for the HOA, not the homeowner, and generally favor the HOA at every turn.
FOREIGN SELLERS – BUYERS OWE THE IRS TAX
Congress enacted the Foreign Investment in Real Property Tax Act (“FIRPTA”) in 1980.
It is a little known IRS rule that buyer’s owe the seller’s income and/or capital gain tax when purchasing California property from a “Non-Resident Alien.”
For example, assume that you are purchasing a single family residence for $1,000,000 for investment purposes from a Non-Resident Alien seller living in China. The IRS requires you, as buyer, to remit 15% of the gross sales price to IRS at close of escrow.
This means that you, as buyer, must instruct escrow to pay IRS $150,000 of seller’s proceeds (15% x $1,000,000) to the IRS. If you, as buyer, fail to instruct escrow to pay IRS $150,000 of seller’s proceeds at close, then IRS will look solely to you for payment if the seller fails to pay the tax.
Who is a “Non-Resident Alien?” A “Non-Resident Alien” is any non-citizen seller who does not pass the (1) green card test or (2) substantial presence test.
Green Card Test: If a non-citizen has a current green card, then he is not a
Substantial Presence Test: If the non-citizen has resided in the U.S. for 183 days during the last 3 years and resided in the U.S. for at least 31 days this year, then he is not a “Non-Resident Alien.”
All other sellers are subject to mandatory IRS withholding. Surprisingly, it is the buyer’s obligation to demand withholding of seller’s proceeds at close.
If buyer fails to withholding of seller’s proceeds at close, then the IRS will look to the buyer for payment. Incredible but true.
Exemptions for Withholding?
This IRS rule requiring buyers to withhold sellers’ tax is the general rule subject to only two exemptions.
Exception #1: The transaction is exempt from IRS withholding if buyer purchases the property as his/her primary residence. The primary residence exception only applies if buyer can prove that he/she occupied the residence 50% of the time during the 24 month period immediately after close of escrow.
Exception #2: The transaction is except from IRS withholding if seller completes a 1031 exchange when both of the following conditions are met:
1. The Non-Resident Alien completes a simultaneous exchange (i.e. closes the 1031 on the same day as buyer’s purchase); and
2. The Non-Resident Alien receives no cash at close.
In all other 1031 exchanges where seller does not close simultaneously, the buyer must withhold 15% of gross proceeds from seller’s proceeds.
If you represent a buyer, and the seller is a Non-Resident Alien (i.e. does not pass either the green card or substantial presence tests), then advise your buyer to consult CPA prior to close of escrow to determine the amount of tax to withhold from seller’s proceeds.
If you represent a Non-Resident Alien seller, then advise seller to consult with his CPA as he may qualify for a Withholding Certificate, which would allow him to avoid the mandatory withholding.
Sellers desiring to avoid the mandatory withholding must first complete the Application for Withholding Certificate which generally takes the IRS 90 days to either grant or deny. Your seller will certainly need a CPA for this process.
Although agents should never give legal or tax advice, it is important that agents are aware that buyers have this tax obligation.
DISCLOSING SEPTIC OR SEWER
Listing Agent Liability.
Listing Agents and Sellers should be careful when disclosing whether a property is on “septic system” or “public sewer”.
I receive at least ten disputes every year where a buyer is threatening to sue the Listing Agent/Broker because the MLS states “public sewer” when he/she discovers after close that the property was actually on a “septic system”.
Simply put, Listing Agents generally don’t know whether a property is serviced by “public sewer” or “septic system.” If you state in the MLS “public sewer,” then make sure that you source who told you it was on “public sewer”.
If seller told you that the property was connected to “public sewer,” then put in private remarks:
“public sewer per seller, buyer to confirm:”
– If some public source indicates that the property was connected to “public sewer,” then state in private remarks:
“public sewer per public records, buyer to confirm:”
– If you reasonably believe that a property is connected to “public sewer,” but have no source, then state in private remarks:
“agent has not confirmed whether or not the property is connected to public sewer, buyer is advised to confirm:”
– If you really don’t know, then don’t select either option and leave it blank.
If you state “public sewer,” and fail to disclose the source for the opinion, then you could be liable to buyer for: (1) the cost to connect the property to “public sewer” or; (2) the cost to repair any defects with the “septic system” discovered by buyer after close.
In one case, the Listing Agent was asked to pay $52,000 as the cost to connect the property to “public sewer” when the agent’s MLS stated “public sewer” and buyer later discovered that the property was actually hooked-up to a defective “septic system”.
In another case, the Listing Agent was asked to pay $27,000 as the cost to replace an existing, defective “septic system” at a property where the Listing Agent’s MLS advertised “public sewer”.
The Listing Agent needs to exercise caution.
The seller also has liability for misleading a buyer to believe a property is connected to “public sewer.”
Both the Transfer Disclosure Statement and the Seller Property Questionnaire request that seller confirm whether the property is on “public sewer” or “septic system”.
Paragraph V(C) of the Seller Property Questionnaire asks:
ARE YOU SELLER AWARE OF . . .
1. Defects in any of the following (including past defects that have been repaired): heating, air conditioning, electrical, plumbing (including the presence of polybutylene pipes), water, sewer, waste disposal, or septic system, sump pumps, well, roof, gutters, chimney, fireplace, foundation, crawl space, attic, soil, grading, drainage, retaining walls, interior or exterior doors, windows, walls, ceilings, floors or appliances.
2. The leasing of any of the following on or serving the Property: solar system, water softener system, water purifier system, alarm system, or propane tank(s).
3. An alternative septic system on or serving the Property.
Paragraph IIA of the Transfer Disclosure Statement asks:
THE SUBJECT PROPERTY HAS THE ITEMS CHECKED BELOW:
n Public Sewer System
n Septic Tank.
The Listing Agent should ask the seller when listing the property whether the property is on “public sewer” or “septic system.” The Listing Agent should also advise seller of his/her/their obligation to disclose “public sewer” or “septic system” on the SPQ and TDS forms.
This is an important disclosure. Many properties located in unincorporated areas of Los Angeles, San Bernardino and Riverside Counties are on “septic systems.” Many properties within city boundaries are surprisingly on “septic systems”.
A property that is on a “septic system” is not necessarily a less desirable property, but simply needs to be disclosed in order to give buyers an opportunity to inspect it’s condition prior to removing contingencies.
TRANSFER OF BASE YEAR VALUE FOR PERSONS AGE 55 AND OVER
Base Year Transfers?
California law allows a homeowner 55 years or older a one-time option to transfer the Base Year Value of the original property to a replacement property of “equal or lesser” value.
What are Propositions 60 and 90?
Propositions 60 and 90 only apply to a “primary residence.” You cannot transfer Base Year Value to any other class of real property including, but not limited to, vacation homes, rental homes or commercial properties.
Proposition 60 allows a person 55 years or older to transfer the Base Year Value “within the same county.” This is referred to as an “Intracounty Transfer” because the buy and sell occur in the same county.
Proposition 90 allows a person 55 years or older to transfer the Base Year Value from “one county to another county.” This is referred to as an “Intercounty Transfer” because the buy and sell occur in different counties.
Unfortunately, only 11 counties in California accept an “Intercounty Transfer” from another county. Those participant counties are:
By example, if you sell your home in San Bernardino County and purchase a replacement in Orange County, then you should be able to transfer your Base Year and keep the lower property tax rate so long as the replacement property is “equal to or lower” in value.
However, if you sell your property in San Bernardino and purchase a replacement property in, say, San Francisco County, you would not be able to transfer your Base Year and would pay property taxes based upon the full price of the replacement property.
If either you or your spouse is 55 years or older at the “time of sale,” then you can transfer your Base Year value under Propositions 60 and 90. “Time of sale” for purposes of age qualification means that you must be 55 years when you sign the purchase agreement.
Two Year Limit to Purchase Replacement Property.
You only have two years from the “date of sale” of your original property to either (1) purchase a replacement property or (3) complete new construction. “Date of sale” means the date that the Deed is recorded at the County Recorder.
This means that if you closed escrow to sell your property on January 1, 2018, you would need to purchase a replacement by December 31, 2019.
If you fail to either purchase a replacement or complete new construction within two years, then you lose the exemption. If you lose the exemption, then you will pay property taxes on the full value of the replacement property
Valuation of Replacement Property.
The replacement property value can be 105% of the original property sale price if the replacement property is purchased within one year.
The replacement property value can be 110% of the original property sale price if the replacement property is purchased within the second year.
When To File for the Base Year Transfer?
You have up to three years after acquisition of the replacement property to apply for the transfer of the Base Year Value.
This means that if your replacement is on January 1, 2018, then you have until December 31, 2020, to apply for the transfer of the Base Year Value.
You apply for the Base Year transfer by completing the following form and filing it with the County Assessor’s Office where the replacement property is located:
Claim of Persons at Least 55 Years of Age for Transfer of Base Year Value to Replacement Dwelling (form DOE-60-AH)
You can obtain the form either on-line or directly from the Assessor’s Office.
One Time Benefit.
Although Base Year transfers are a “one time” benefit, there is one exemption. If a person becomes disabled after using the “one time” benefit, then the same person may transfer the Base Year value a second time because of the disability. This is the only exception to the “one time” benefit rule.
Destruction of Original Property
If the original property is destroyed, then you can still transfer your Base Year Value. The Base Year Value will then be based upon “appraised” value of the original property immediately prior to its destruction. In other words, if your home was destroyed by the recent fires, you can still transfer the Base Year Value and transfer your Base to a new property.
Improvements to the Replacement Property
It is also possible to exempt improvements to the replacement property so long as the total amount of the purchase price and improvements does not exceed the value of the original property at the time of sale.
This means that if the original property sold for $1,000,000, and the replacement property was purchased for $750,000, then you could exempt up to $250,000 in improvements from reassessment under Propositions 60 and 90. This benefit it often overlooked.
CAN AGENT’S CORPORATION RECEIVE COMMISSION
I have received many recent calls from agents asking if the broker can pay their commission to their corporation or limited liability company (“LLC”).
Historically, a broker could not pay commission to the agent’s corporation or LLC. Business & Professions Code section 10137 required brokers to pay commission only to “licensed persons.”
Since agents cannot obtain a “corporate license,” and since BRE has never recognized an LLC as an entity that is eligible for a “corporate license,” brokers could only pay the agent directly.
Recent BRE opinions now allow an agent to be paid commission to his/her corporation or LLC. However, there are conditions that first must be respected for that payment to be deemed “lawful.”
1. First, the corporation/limited liability company cannot do anything that requires a license or engage in any activities for which a license is required. In other words, the buyer and seller should deal with the agent individually without any reference to the corporation or LLC.
2. Second, all transaction documents must be in the name of the agent and/or broker. The Purchase Agreement, Agency Disclosures, Escrow Documents and every other transaction document cannot have any reference to the unlicensed corporate or LLC entity. Once commission is received by the broker, then it can be paid to the agent’s corporation or LLC per a separate notarized instruction from the agent to the broker as set forth next-below.
3. Third, the broker must receive a notarized instruction from the agent stating:
a. that the agent is duly licensed and affiliated with the broker;
b. that the agent owns all stock in the corporation (or membership interest in the LLC;
c. that the corporation (or LLC) is properly registered with Secretary of State and in Good Standing;
d. that the corporation (or LLC) is not licensed by BRE and will not engage in any licensed activities; and
e. an instruction to the broker to pay all future commission directly to the agent’s corporation or LLC.
4. Fourth, the commission cannot be paid from escrow and can only be paid from the broker after close of escrow.
If the agent satisfies these four simple conditions, then the broker can lawfully pay the agent’s commission to his/her corporation (or LLC) upon close of escrow.
The theory allowing payment to the corporation (or LLC) is that the agent has already earned his/her commission, and the notarized instruction to the broker operates as an “assignment” of commission to the agent’s entity.
Below is a sample Request to Pay Commission for the agent and broker to use which satisfies all three requirements.
This clarifies how an agent can receive commission to his/her corporation or LLC.
Request to Pay Commission to Salesperson’s Corporation or Limited Liability Compar1v
Agent/Broker Name (AGENT)
Corporation/LLC Name (CORP)
, being duly sworn, deposes and says:
1. I am a duly licensed real estate salesperson or broker affiliated with REeBroker Group.
2. I am an owner, partner and/or stock holder of CORP.
3. CORP is a legal entity authorized to do business in the State of California, is properly registered and in good standing.
4. CORP is not licensed as a Real Estate Broker or Agent and will not engage in any activity that requires a real estate license.
5. I request that all future commissions payable to me, earned in my capacity as a salesperson with REeBroker Group be paid to CORP.
AGENT ADVERTISING DISCLOSURE RULES:
I have received many recent calls concerning Advertising Disclosure Rules, Team Names and Fictitious Business Names.
In 2016, California Association of Realtors® sponsored AB1650, which clarified advertising disclosure requirements. Those requirements became law in 2017 and are summarized as follows:
Definition. The term “Solicitation Material” means first point of contact material such as business cards, stationary, flyers, advertising (print, radio or internet) and signs.
Definition. The term “Responsible Broker Identity” means the company name registered with BRE (i.e. ACME Realty, Century Real Estate). Responsible Broker Identity means company name and not the broker’s name.
Agent Disclosures required for “Solicitation Materials”.
Agent’s name required
Agent’s license number required
. Responsible Broker’s Identity must be on all “Solicitation Material.”
(Broker’s license number is optional but not required)
Agent-Owned DBA Disclosures required for “Solicitation Materials.”
Agent’s name required
Agent’s license number required
Fictitious Business Name approved by BRE required
Responsible Broker’s Identity must be on all “Solicitation Material.”
(Broker’s license number is optional but not required)
Team Disclosures required for “Solicitation Materials.”
Team name required
Agent’s name required
Agent’s license number required
Responsible broker’s identity must be on all “Solicitation Material.”
(Broker’s license number is optional but not required)
Sign Exceptions. Neither Agent’s name nor license number is required on “for sale,” “for lease,” “open house” and “directional” signs if there is either (1) Responsible Broker’s Identity on the sign or (2) there is no identification on the sign at all:
– Open House by ACME Realty or
– Open House (without reference to any licencee or broker) or
– Directional Arrow (without reference to any licencee or broker).
TEAM NAMES RULES:
“Team Names” are a professional identity used by a salesperson or broker associate. A “Team Name” is not considered a fictitious business name and does not need to be filed with the County or BRE if the following conditions are met:
1. The name is used by two or more agents;
2. The name includes (1) the surname of one of the agents and (2) is used in conjunction with the term “associates,” “group” or “team.” For example, the Jones & Smith Associates, the Jones Group or Jones Team; and
3. The name does not include terms that imply that the team operates as an independent company. For example, you cannot use Jones Realty Group, Jones Real Estate Services or Jones Brokerage.
If these conditions are met, then the agent can use the Team Name without filing a Fictitious Business Name Statement with the County and without BRE approval.
FICTITIOUS BUSINESS NAME RULES:
All names that do not quality as a “Team Name” will need to be approved by BRE as a Fictitious Business Name (i.e. DBA) and must comply with the following rules:
1. Agent must file an application with the County for a Fictitious Business Name and publish in a newspaper of general circulation as required by the County;
2. Agent must send to BRE an application for a Fictitious Business Name signed by the supervising broker requesting BRE approval to use the name.
The agent cannot use the Fictitious Business Name until he/she has filed form RE-247 and has received written confirmation by the BRE approving the name. The BRE has discretion to either approve or disapprove any proposed name.
AVID (AGENT VISUAL INSPECTION DISCLOSURE) TIPS
1. RESIDENTIAL PROPERTIES: The AVID is required for all residential properties consisting of 1-4 dwellings. If a Property is mixed use, such as a commercial property with a home in the back, then the AVID is required for the “Residential” portion only.
2. INSPECTION OBLIGATION: An agent has a duty to conduct a reasonably competent “visual” inspection of each “Residential” property and disclose any “defects” that affect:
a. Market value or
Think “Red Flag”, which are conditions indicating a potential defect (see examples below).
3. SCOPE OF INSPECTION: The agent’s “visual” inspection should include inspection of the following areas:
a. INSIDE: inspect all rooms, guest houses and garages.
b. OUTSIDE: inspect yard, fences, landscaping, missing tiles, stucco and driveways.
c. NEIGHBORHOOD: inspect for nuisances, aircraft/train noise, smells.
USE ALL OF YOUR SENSES:
a. Eyes: Report what you see.
b. Ears: Report what you hear.
c. Nose: Report what you smell.
The inspection begins from the moment you pull up to the property.
4. RED FLAGS: Defects that the agent is obligated to disclose are often referred to as Red Flags. Standard of care requires disclosure of anything that would bother you if you were the buyer. It is a good rule of thumb that if you are considering calling me, then the condition is obviously bothering you and you should disclose. The following are examples of AVID disclosures:
– leaks (active) – interior/exterior stains – teenage band on block
– missing roof tiles – abnormal smells inside/outside – noisy dogs next door
– low water pressure – interior/exterior strange smells – aircraft/train noise
– leaning walls – overgrown landscaping – any abnormalities
– concrete cracks (generally over 1/4″ wide).
– agent’s knowledge of prior insurance claim (5 years or newer).
5. AVID: Agent Visual Inspection Disclosure – Required for all “Residential” transactions.
a. Complete the entire form as to all rooms.
– If a room has nothing wrong, then state “NOTHING NOTED.”
b. Only report your observations: only what you see, hear or smell.
– Mold: report “black substance.” Algae: report “green substance.”
c. Do not use adjectives or make conclusions
– Do not say “small stain” or “insignificant crack” or “minimal leak.”
d. Disclose INACCESSIBLE areas of the property.
– boxes in 3′ bedroom prevents inspection
– furniture against south wall in dining room prevents inspection
– large throw rug over wood floor in living room prevents inspection
– boxes in garage prevents inspection
– large painting on south wall in dining room prevents inspection.
e. Make no representations about permits, zoning or code compliance.
f. Avoid unverified factual representation.
6. AMENDED DISCLOSURES: If seller discovers and/or discloses a defect after removal of buyer’s contingencies, then buyer has FIVE (5) DAYS to cancel based upon that late disclosure (See RPA 14B(3)).
Example. You represent a seller in a pending transaction with a 30 day escrow. Five days prior to close, you visit your seller at the property and see a black stain behind a large painting that seller just removed in preparation for close. You now must send an “amendment” to the AVID disclosing the new Red Flag condition. Buyer now has five extra days to cancel meaning that buyer can theoretically cancel on the closing date and get his/her deposit back.
7. FIDUCIARY DUTIES: If your client expresses purchase criteria, then you owe a duty to (1) advise client in writing that seller’s information and disclosure could be wrong and (2) advise client in writing to confirm that information to him/herself is accurate prior to removing contingencies.
– Salahutdin Case. client tells you they need at least 1 acre that can be subdivided. Even though the MILS and seller state that the property is over 1 acre, you need to advise client that (1) seller’s information could be wrong and (2) to confirm the information with the city or county prior to removing contingencies.
– Fields Case. if buyer asks you questions about title report (easements) and whether or not the location of easement prevent him from building a pool in the backyard, you need to advise buyer in writing to confirm the existence and/or location of easements with the title officer him/herself prior to removing contingencies.
Follow these relatively simple guidelines and you will minimize your exposure.
PERSONAL ASSISTANTS: WHAT CAN THEY DO?
Many agents hire personal assistants to help them with secretarial and/or organizational tasks. If the personal assistant is not licensed by the BRE, then that assistant cannot do anything that requires a California salesperson license. Business & Professions Code §10132
A personal assistant cannot be paid a commission. A personal assistant should not have company business cards and should be paid either hourly or salary.
A personal assistant may only perform duties of a secretarial nature. A personal assistant may not call any owner or buyer for the purpose of soliciting a listing, sale, lease or exchange of real property.
A personal assistant may call owners to schedule showings, closings or inspections. The scope of these discussions should be limited to scheduling. The personal assistant may not prospect, may not call “for sale by owners” and may not call on expired listings.
The following is a quick summary of do’s and don’ts for the unlicensed personal assistant:
1. Don’t hold open houses
2. Don’t negotiate terms of any transaction
3. Don’t draft, explain or interpret CAR FORMS for buyers or sellers
4. Don’t solicit buyers or sellers for the agent/broker
5. Don’t prospect for listings, sale, lease or exchange of real property
6. Don’t ask or answer questions from any buyer or seller concerning any property such as asking price, number of bedrooms, number bathrooms or other qualities of the property.
1. Schedule appointments for the agent/broker
2. Call buyers or sellers to schedule showings, inspections and closings
3. Compile listing packages
4. Deliver documents such as Offers, Counter Offers and Disclosures
5. Create flyers and brochures, and place advertising for the agent/broker
6. Take pictures for the agent/broker
7. Map properties for showing to buyers
8. Calendar important dates: contingencies, inspections, loan approval, closing
9. Order and/or maintain For Sale, Open House, Pending and Sold signs
10. Coordinate closing.
If the unlicensed personal assistant engages in any conduct for which a license is required, then both the agent and broker could be subject to discipline by the Bureau of Real Estate. Business & Professions Code §10137.
The unlicensed personal assistant should be considered a secretary or office manager. Their conduct must continually be supervised by the agent.
Each windy season I receive calls from homeowners whose fences/walls were damaged by wind and want to know if the neighbor is responsible for half of repair or replacement cost.
California law requires adjacent homeowners to share equally in the cost of repair or replacement of common fences. Civil Code §840(a) states:
(a) Adjoining landowners shall share equally in the responsibility for maintaining the boundaries and monuments between them.
(b)(1) Adjoining landowners are presumed to share an equal benefit from any fence dividing their properties.
There are some limitations. For example, say that your home has a wood fence that was destroyed last week by high winds. You want to replace the wood fence with a block wall and ask your neighbor to split the cost 50-50.
Your neighbor is not legally required to pay for the block wall, but is required to split the “reasonable” cost to replace the wood fence. If the block wall estimate is $10,000, and the wood fence replacement is $2,000, then your neighbor is only required to contribute $1,000 towards your block wall.
30-Day Written Notice
How do homeowners enforce these rights? Civil Code §841(b)(2) requires you to send your neighbor Written Notice at least 30-days prior to date of the proposed fence repair or replacement that states as follows:
1. A description of the problem (i.e. damaged, destroyed or unusable fence);
2. Estimates for repair;
3. Timeline to complete the repairs; and
4. A statement that both owners are equally responsible for the reasonable repair/replacement costs under California law.
The neighbor is then required to pay their share of the repair or replacement cost unless he/she has a legally justifiable reason for not paying as discussed below.
Neighbors Who Refuse to Contribute
If your neighbor either ignores your 30- day Written Notice, or simply refuses to contribute anything towards the repair or replacement of the fence, then you can sue your neighbor in small claims court without an attorney for up to $10,000.
However, prior to suing your neighbor, which will certainly destroy the possibility of a peaceful relationship with your neighbor, I recommend simply speaking to them in hopes of working out some form of compromise. Perhaps they will agree to reimburse you over a 12 or 24 month period.
Assuming that it is impossible to work with your neighbor, then you will have no option but to sue your neighbor. The code provides a limited remedy for any neighbor who disputes payment as set forth below.
In order to avoid paying their share of fence repair or replacement, your neighbor will need to prove by a preponderance of evidence (i.e. more likely than not true) that (1) he is “indigent” and has no money to contribute, (2) the repair costs are “unreasonable” or (3) the repair disproportionately benefits the neighboring property owner.
If the neighbor cannot prove (1), (2) or (3), then the court will issue judgment against the neighbor for their share of the fence.
Many neighbors who refuse to contribute to a common fence then complain that the adjacent property owner built an unsightly fence, which they refer to as a “spite fence.”
The vast majority of these unsightly fences do not qualify as a “spite fence” under California law. Civil Code section 841.4 defines a spite fence as a:
“Fence or other structure in the nature of a fence unnecessarily exceeding 10 feet in height maliciously erected or maintained for the purpose of annoying the owner or occupant of adjoining property.”
A “spite fence” not only includes fences or walls exceeding 10 feet in height, but can also include trees and shrubs planted on the property line that exceed 10 feet and unreasonably interfere with light and/or use of the neighboring property.
If a court determines that there is a “spite fence,” then the court can order the fence removed or modified. This determination can only be made by a Superior Court judge and would require the parties to retain attorneys.
DISCLOSURE OF SOBER-LIVING FACILITIES
What is a Sober-Living Facility?
A Sober-Living Facility is a group home for recovering alcoholic and/or drug users. These facilities are generally operated in residential areas by owners who purchase the homes with the intent to profit from the operation of these facilities.
Under California Health and Safety Code section 11834.22, Sober-Living Facilities which serve six or fewer persons are lawful and do not require disclosure unless they constitute a “nuisance” as described below.
Regardless of the technical disclosure requirements, I believe that the Agent must make a disclosure any time he/she is aware of a Sober-Living Facility located near the subject property to avoid litigation by unhappy buyers who discover the facility after moving in.
The technical disclosure rules along with recommended disclosure language are set forth below.
Agents Do Not have an Affirmative Duty to Disclose the Location of a Sober-Living Facility.
Civil Code section 2079 requires an Agent to disclose any “material facts” that affect market value or desirability.
The question is whether the State of California considers a Sober-Living Facility to be a “material fact?” Assuming that there are six or fewer residents, the use is considered “lawful” under current Health and Safety Code and does not require disclosure by the Agent.
In addition, the California Attorney General similarly advised in opinion 89-902 that the Agent does not need to disclose the existence of a Sober-Living Facility and states in pertinent part:
“the location of a licensed care facility is not a “material fact” required to be disclosed under California law.”
The general rule is that the Agent does not have an affirmative duty to disclose the existence of a Sober-Living Facility near the property being sold.
It gets worse, some courts have implied that it is discriminatory for the agent to disclose the location of such a facility in connection with a residential sale.
Regardless of the technical rule, and contrary to the Attorney General’s opinion, I recommend that the Agent always disclose the existence of a facility, but do it creatively by simply stating on your AVID:
“Seller reports possible commercial use of neighboring property.”
Agents MUST Disclose a “Nuisance” Created by a Sober-Living Facility.
While Agents do not have an affirmative duty to disclosure the location of a Sober-Living Facility, the Agent does have an affirmative duty to disclose any “nuisance” created by that facility.
A “nuisance” is generally defined as anything which interferes “with the comfortable enjoyment of life or property.” California Civil Code section 3479. The following are examples of a “nuisance” under California law:
1. Loud noise;
2. Obnoxious odors; or
3. Excessive traffic.
In addition, if the Sober-Living Facility houses more than six people, then it is not a lawful use of residential property (i.e. the Health and Safety Code only allows “six or fewer residents) and should also be disclosed.
Assuming that you observe a “nuisance,” then I recommend that the Agent make the following additional disclosure on the AVID:
“Seller advises of loud noise from house next door.”
“Seller advises of obnoxious odor from house next door.”
“Seller advises of excessive traffic from house next door.”
If you represent the Seller, then regardless of the technical rule, I recommend that the Agent always disclose the existence of a facility, but do it creatively by simply stating on your AVID “Seller reports possible commercial use of neighboring property.”
If you represent the Buyer, then I recommend that you ask the Seller directly in writing whether he/she is aware of any Sober-Living Facilities near the property, and whether he/she are aware of any “nuisances” created by that facility.
These facilities are becoming very common in many communities located in Orange, Los Angeles and San Diego Counties.