Bulletin: CA2023012

Dear Associates:

The following are brief summaries of chaptered bills in the 2023 legislative session which have some impact on matters related to real estate and/or title insurance and would be of interest to our industry. Unless otherwise specified, the chaptered bills discussed in this bulletin go into effect on January 1, 2024. If you would like to read the complete text of any of the chaptered bills summarized below, you may access this website.

Chapter 62 (AB288) Revocable Transfer on Death Deeds

This Act amends sections of the Probate Code relating to revocable transfer on death deeds and authorizes the transfer of real property by revocable TOD deed even if ownership is not typically evidenced or transferred by use of a deed. The Act also authorizes the transfer of an interest in a stock cooperative by revocable TOD deed subject to any limitation on the transferor’s interest. If a stock cooperative exercises an option to purchase property transferred by revocable TOD deed on the transferor’s death, then the property is transferred to the stock cooperative and the purchase price is paid to the beneficiary, as specified.

The operative effect of a revocable TOD deed and another instrument purporting to dispose of the same property was revised to remove the previous 120-day recording requirements (primarily to accommodate the potential exercise of a stock cooperative’s option rights), and instead specifies that if the other instrument is revocable, the later executed instrument is operative, and that the other instrument is operative if it is irrevocable.

Note: The revisions to Probate Code Section 5610 do not affect the application of the 120-days discussed in Probate Code Section 5652(b).

Chapter 95 (AB 968) Seller Disclosures: improvements

This Act adds a section to the Civil Code relating to real property that requires a seller of a single-family residential property who accepts an offer for the sale of this property within 18 months from acquisition by seller to disclose certain things to the buyer. Specifically, the seller must disclose and provide specific information, in connection with any room additions, structural modifications, other alterations, or repairs made to the property since title to the property was transferred to the seller, if they were performed by a contractor. The seller must also provide the name of each contractor with whom the seller contracted with and would alternatively authorize a seller to satisfy these obligations by providing a list of room additions, structural modifications, other alterations, or repairs performed by, and provided by, the contractor with whom the seller contracted for such work.

This act also requires the seller to provide the buyer with a copy of any permits obtained for this work or, if the seller contracted with a third party and was not provided with a copy of the permits, by informing the buyer that information on permits may be obtained from a third party and providing the third party’s contact information.

The Act specifies that these provisions apply to the sale of a single-family residential property where the seller accepts an offer from a buyer to purchase the property on or after July 1, 2024.

Chapter 291 (SB 696) Online Notarization Act (RON)

This Act adds and amends sections to both the Civil Code and Government Code relating to notaries public.

Though the Act has an effective date of January 1, 2024, many of its provisions, including the commissioning and authorizing of California notaries to perform remote online notarization services, have a delayed implementation tied to the completion of a technology project by the Secretary of State’s office that is necessary to oversee a RON program. As of now, the Secretary of State has at the latest, until January 1, 2030, to complete the necessary technology project and create rules and regulations to implement statutes related to online notarization. However, the bill does immediately provide, commensurate with its effective date of January 1, 2024, for the recognition of remote notarial acts duly performed by notaries in other states where their commissions permit RON, and of which shall be afforded the same legal effect under the law of this state as if performed by a notarial officer within this state. There are other provisions in the Act that have delayed implementation, such as RON software companies will be required to meet certain specified requirements.

For additional information please refer to underwriting Bulletin CA2023011 - Remote Online Notarization in California.

Chapter 337 (AB 631) Oil and Gas: site security state tax lien

This Act added a new section to the Public Resources Code which provides that, after making a determination based upon a site inspection that an oil or gas well poses a risk to life, health, property, or natural resources, the State Oil and Gas Supervisor may order an operator, owner, or property owner to secure a well site when certain conditions apply to that site, as specified.

If the Geologic Energy Management Division in the Department of Conservation undertakes work to secure a site pursuant to this section, an accurate account of the expenditures shall be kept, and any amount expended shall constitute a perfected and enforceable state tax lien pursuant to Section 3423 against real or personal property of the operator, owner, or property owner ordered to do the work.

Chapter 577 (AB 1345) Public Records: Residential Exclusive Listing Agreements Act

This Act added a new section to both the Civil Code and the Government Code and shall be known as the Residential Exclusive Listing Agreements Act. This Act primarily addresses predatory listing agreements also known as NTRAPS (Non-Titled Recorded Agreements for Personal Service).

This Act makes it unlawful for an exclusive listing agreement, as defined, to:

1. Be written for more than 24 months from the date the agreement was made, with the exception of one entered into between a real estate broker and a corporation, limited liability company, or partnership.
2. Renew automatically; any renewal must be in writing and be dated and signed by all parties to the agreement. No renewal will last longer than 12 months from the date the renewal is made.
3. Be recorded or filed or otherwise attempted to be recorded or filed with a county recorder, regardless of the duration, including any memoranda or notice of such an agreement.
4. Enforce or attempt to enforce a recorded or filed agreement in violation of this Act.

An agreement that is made or that is presented for recording or filing in violation of this Act is void and unenforceable and a homeowner who entered into any such agreement may retain any consideration received thereunder. A violation of this Act’s provisions by a licensed person will constitute a violation of the person’s licensing law.

Chapter 710 (SB 365) Court Proceedings: automatic stays

Under the Code of Civil Procedure, a party is authorized to appeal an order dismissing or denying a petition to compel arbitration and generally stays proceedings in the trial court on the judgment or order appealed from when the appeal is perfected, subject to specified exceptions.

This Act provides that trial court proceedings would not be automatically stayed during the pendency of an appeal of an order dismissing or denying a petition to compel arbitration.

Chapter 721 (SB 801) Trusts and Estates: California Uniform Directed Trust Act

This Act adds a new chapter (commencing with Section 16600) to Part 4 of Division 9 of the Probate Code relating to trusts.

The California Uniform Directed Trust Act provides a method for regulating trusts where a person who is not a trustee has been given a role in directing the trust and requires the prior consent of any public administrator, public guardian, or public conservator appointed to act as a trust director or directed trustee.

The Act sets forth the duties and responsibilities of the trust director and the duties and responsibilities of the directed trustee, including specifying what powers may be given to a trust director and the information required to be exchanged by the trust director and the directed trustee. The Act also requires a directed trustee to take reasonable action to comply with a trust director’s exercise or non-exercise of a power of direction but is not required to comply with such direction to the extent that, by complying, the trustee would engage in willful misconduct.

The Act exempts from duties and liabilities a trust director who is licensed, certified, or otherwise authorized or permitted by law to provide health care in the ordinary course of the trust director’s business or practice of a profession, to the extent the trust director acts in that capacity.

Chapter 750 (AB 911) Unlawful Restrictive Covenants: notice and recording

This Act amends Civil Code Section 714.6 relating to unlawful restrictive covenants. A person who holds or is acquiring an ownership interest of record in property that the person believes is the subject of an unlawfully restrictive covenant based on, among other things, the number of persons or families who may reside on the property, is permitted to record a restrictive covenant modification. As part of this process, the county counsel is required to determine, among other things, if the property qualifies as an affordable housing development and if a modification document may be recorded.

This Act requires the county recorder to notify the owner or submitting party of the county counsel’s determination without delay, so that notice may be given by the owner regarding the authorization to record the modification document and would permit the owner, upon receipt of that notification, to mail copies of the modification documents and related materials by certified mail to anyone who the owner knows has an interest in the property or the restrictive covenant. This Act also establishes a process by which notice by the owner to the intended recipient would be deemed given and further provides that notice by the owner is optional and failure to provide notice does not invalidate a recorded restrictive covenant modification document.

This Act additionally prohibits the owner from recording the modification document if the owner of the property is not yet its record title owner but is instead a beneficial owner, as specified, until the owner closes escrow on the property and becomes its record title owner. For purposes of this provision, “owner” is defined in the Act to mean any record title owner of the property, beneficial owner of the property, or individual controlling the property for purposes of developing an affordable housing project, as specified.

Chapter 783 (SB 684) Subdivisions: mapping

This Act added new sections to the Government Code and some provisions are operative on July 1, 2024.

This Act requires a local agency to ministerially consider, without discretionary review or a hearing, a parcel map or a tentative and final map for a housing development project that meets specified requirements. In this regard, this Act requires the proposed subdivision to result in 10 or fewer parcels and the housing development project to, among other things, consist of 10 or fewer residential units, meet certain minimum parcel size and density requirements, and be located on a lot zoned for multifamily residential development that is no larger than 5 acres and is substantially surrounded by qualified urban uses. This would then exempt the housing development project from certain requirements relating to minimum parcel size and dimensions and the formation of a homeowners’ association, except as specified.

This Act imposes streamlining requirements with regard to consideration of an application for a parcel map or a tentative and final map, as specified, and requires a local agency to approve or deny a completed application submitted to a local agency pursuant to the Act’s provisions, within 60 days from the date the local agency receives it; if the local agency does not approve or deny the application within 60 days, the application would be deemed approved.

Except as specified, this Act requires a local agency to issue a building permit for one or more residential units that are part of a housing development project consisting of 10 or fewer units on a lot proposed to be subdivided as part of a subdivision if the applicant meets certain requirements. In this regard, the Act requires the applicant to have received a tentative map approval or parcel map approval for the subdivision and to have submitted a building permit application that the local agency deemed complete pursuant to a provision governing local agency review of post entitlement phase permit applications. A local agency is also authorized under this Act to condition the issuance of the building permit on the applicant submitting a recorded covenant and agreement that conditions the issuance of a certificate of occupancy or equivalent final approval for the building on the recording of the final map, as specified. Notwithstanding the above, a local agency may deny issuance of a building permit if the building official makes a written finding, based upon a preponderance of the evidence, that construction of the proposed structure or structures before recordation of the final map would have a specific, adverse impact, as specified, upon public health and safety and for which there is no feasible method to satisfactorily mitigate or avoid the specific, adverse impact.

Legislation Related to Accessory Dwelling Units

Chapter 746 (AB 671) Accessory Dwelling Units: CalHome Program

This Act amends a section of the Health and Safety Code relating to housing. The CalHome Program, administered by the Department of Housing and Community Development, supports existing homeownership programs aimed at lower and very low-income households, among other purposes, and authorizes the department to make grants to local agencies or nonprofit corporations to construct accessory dwelling units and to repair, reconstruct, or rehabilitate, in whole or in part, accessory dwelling units and junior accessory dwelling units.

This Act specifies that, for home ownership development projects that include construction of accessory dwelling units or junior accessory dwelling units, neither the CalHome Program nor any administrative rule or guideline implementing the CalHome Program, preclude those dwelling units from being separately conveyed to separate lower income households on separate parcels created pursuant to specified law under the Subdivision Map Act.

This Act also requires units within home ownership development projects that receive CalHome Program funds to initially be sold to, and occupied by, a lower income household and be subject to a recorded covenant, with a term of at least 30 years, which contains one or more specified provisions, including a resale restriction.

Chapter 752 (AB 1033) Accessory Dwelling Units: owner-occupancy requirements; sale or conveyance

This Act amends sections of the Government Code relating to housing. A local agency is authorized to require an accessory dwelling unit to be used for rentals of terms longer than 30 days. This Act, instead, authorizes a local agency to require terms that are 30 days or longer.

Beginning January 1, 2025, a local agency is authorized to impose an owner-occupancy requirement on an accessory dwelling unit, provided that the accessory dwelling unit was not permitted between January 1, 2020, and January 1, 2025. This Act, instead, prohibits a local agency from imposing an owner-occupancy requirement on any accessory dwelling unit.

This Act also amends sections of the Government Code relating to housing, authorizing a local agency to adopt a local ordinance to allow the separate conveyance of a primary dwelling unit and accessory dwelling unit(s) as condominiums pursuant to the Davis-Stirling Common Interest Development Act and the Subdivision Map Act, as specified.

Chapter 759 (AB 1332) Accessory Dwelling Units: approval

This Act added a new section to the Government Code. Planning and Zoning Law authorizes a local agency, by ordinance or ministerial approval, to provide for the creation of accessory dwelling units in areas zoned for residential use, as specified, and authorizes a local agency to impose standards on accessory dwelling units that include, but are not limited to, parking, height, setback, landscape, architectural review, and maximum size of a unit.

This Act requires each local agency, by January 1, 2025, to develop a program for the preapproval of accessory dwelling unit plans, whereby the local agency accepts accessory dwelling unit plan submissions for preapproval and approves or denies the preapproval applications, within 30 days of application, as specified.

This Act also authorizes a local agency to charge a fee to an applicant for the preapproval of an accessory dwelling unit plan and would require the local agency to post preapproved accessory dwelling unit plans and the contact information of the applicant on the local agency’s internet website.

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