2024 California Real Estate Law Update: What REALTORS® Need to Know

John Giardinelli, Attorney at Law & Bradley Greenman, Attorney At Law

January 25, 2024

2024 Real Estate Law Changes

Note: information about the changes noted in this newsletter comes directly from C.A.R.

1. Disclosures: Homeowner’s Environmental Hazards Booklet Update

Three new chapters will be added to the state’s Homeowner’s Guide to Environmental Hazards booklet at a to-be-determined date in the future. These new chapters will highlight new information related to risks presented by wildfires, climate change, and sea level rise. These updates are dependent upon the state’s current resources funding the updates, and at this time, there is no prescribed or set deadline for the updates to be included.

2. Disclosures: “Flippers” Duty To Disclose Recent Repairs And Renovations

For those readers who own, rent, or sell residential properties, effective July 1, 2024, individuals who “flip” 1 to 4 properties have additional duties to disclose related to recent repairs and renovations to properties that are re-sold within 18-months of closing. In addition to the new disclosures applying to “flippers” who are selling 1–4 residential properties within 18-months of closing on the property, the renovations or repairs at issue need to have been performed by a contractor with whom the seller entered into a contract. The disclosure applies to room additions, modifications to the structure, general alterations, repairs, and requires disclosure of copies of the permits if any were issued. Where the cost of labor or materials of such repairs or renovations exceeded $500.00 or more, the seller shall disclose the name and contact information of each contractor used. Importantly, this change falls under the Transfer Disclosure Statement (“TDS”) laws already codified. Because of this, the new “flipper” disclosure laws discussed herein are subject to the same exemptions and cancellation rights as other TDS disclosures found in the Civil Code, section 1102 et seq. The new law has been codified in the Civil Code as section 1102.6h.

3. ADUs: ADUs Can Be Sold Separately From The Primary Unit

Interestingly, 2024 seems to be the year of the Accessory Dwelling Unit (“ADU”), with multiple changes to the law impacting owners of ADUs and the use of ADUs. First, Assembly Bill (referred to hereinafter as “AB”) 1033 allows local governments to permit ADUs to be sold as a separate conveyance from the primary residence as a condominium. Under these changes codified in Government Code, sections 75852.2 & 75852.25, local agencies may now adopt ordinances to allow the separate conveyance of an ADU apart from the primary residence to which it is affixed. While selling ADUs separate from the primary residence is now permitted, it is at the discretion of local authorities and agencies to adopt regulations and policies that allow it. Further, there are a number of requirements that must be met if a jurisdiction chooses to adopt policies that allow for the separate sale of ADUs. For example, if an ordinance is passed that allows the separate conveyance of an ADU from the primary residence, the ordinance must ensure the process to establish the condominium is compliant with the Davis-Stirling Common Interest Development Act. Additionally, any lienholders against the primary residence must give written consent to establishing the condominium and such consent must be recorded. Further, where the primary residence is subject to a Home Owner’s Association (“HOA”), the individual seeking to establish the condominium must be given approval by the HOA. Under the new law, local agencies will also be required to give certain notices to applicants seeking to sell an ADU separate from the primary residence.

4. ADUs: The Current Ban On Local Governments Requiring Owner Occupancy On A Parcel Containing An ADU Is Now Permanent

Since 2019, local governments have been prohibited from requiring owner-occupancy of a parcel containing an ADU. This prohibition was set to sunset in 2025 but now under Government Code, section 65852.2, it is being made permanent. Practically, it means local governments cannot require that either the ADU or primary residence be owner occupied.  

5. Landlord/Tenant: Disabled Tenants In Locally Rent-Controlled Property May Have The Right To Move To A First Floor Unit At Same Rental Rate

Multiple changes in the law are happening in the Landlord/Tenant realm. For example, in locally rent-controlled jurisdictions, AB 1620 creates the possibility for jurisdictions to give disabled tenants the right to move into a first floor unit of a multi-floor property at the same rental rate as their less accessible current unit. Importantly, local jurisdictions must opt into AB 1620, it is not mandatory at this point. Further, to facilitate a tenant’s move to a more accessible unit, there are a few pre-requisites that must be met. Regarding prerequisites, the prospective tenant must be in a rent -controlled unit and also possess a permanent mobility-related disability; live in a property that is not serviced by an operational elevator; is not subject to eviction for non-payment; and live in a Jurisdiction that has adopted AB 1620. Further, the new law also establishes a defined process for initiating a transfer from a less accessible unit to the first floor. Tenants would have to make a request for a reasonable accommodation and engage in the interactive process with the landlord as outlined in the California Code of Regulations, title 2, section 12177. During the interactive process, the negotiation would need to identify that moving to a more accessible unit is necessary to accommodate the physical disability of the tenant. Additionally, there would need to be an available comparable or smaller unit in the same building or on the same parcel that does not require renovation to comply with existing Health and Safety Code requirements. To guard the interests of the landlord, the local rent board would then have to make a determination that the landlord is continuing to receive a fair rate of return on the new unit. Finally, when it comes to the security deposit made related to the tenants original unit, existing law on security deposits would apply.

6. Landlord/Tenant: In Lieu Of Reliance On Credit History, Landlords Must Offer “Ability To Pay” As An Alternative To Reliance On Credit History and Credit Reports When Assessing Rental Applications From Prospective Tenants Receiving Section 8 Rental Vouchers

A significant change is occurring in Landlord/Tenant law when it comes to the application and screening process in 2024. Starting on January 1, 2024, when prospective tenants are receiving government rent subsidies, landlords must consider “ability to pay” in lieu of reliance on credit history, credit scores, and credit reports. Procedurally, the landlord must offer the applicant the opportunity/choice to provide evidence of reasonable ability to pay the portion of the rent the tenant will be responsible for. If the tenant elects to prove their reasonable ability to pay, the landlord must allow a reasonable amount of time for the tenant to do so and reasonably consider the tenants evidence of their ability to pay in lieu of considering the applicant’s credit history. This change does not limit the landlord’s ability to request information or documentation to verify employment, to request landlord references, or to verify the identity of the applicant.

7. Landlord/Tenant: Landlords And Tenants Can Now Agree To Provide Receipts For Tenant Screening Fees By Email

In a more minor yet practical change to the screening process, landlords can provide email receipts for tenant screening fees when both the landlord and tenant agree to using the email receipt. While not substantially significant, this change may have the most day-to-day impact of any of the changes in 2024. Landlords and tenants may opt in to email receipts of screening fees starting January 1, 2024.

8. Landlord/Tenant: Tenants May Keep Their e-bikes and other “micro-mobility” Devices Inside Their Rental Units

Starting on January 1, 2024, landlords will not be able to prevent tenants from storing and charging one “micromobility device” in their dwelling unit per person occupying the unit. A “micromobility device” includes traditional bicycles, skateboards, and scooters. This new law, however, is aimed at accommodating electric bicycles, electric scooters, and other individual electric means of transportation that have become more commonplace on the streets of Southern California. Landlord/Tenant law is accommodating these “e-devises” by prohibiting landlords from banning ownership, storage, and recharging of these devises within the dwelling unit. To be protected by the prohibition, the micromobility device must either not be powered by an electric motor; or, it must comply with certain safety standards if it is powered by an electric motor; or, if it fails to comply with such safety standards, the tenant must have insurance covering the storage of the device within the unit. In terms of safety standards, all e-bikes must comply with either the United States Consumer Product Safety Commission, UL 2849 standard, or the European Standard, EN 15194. Both of these provisions provide industry standards for safety requirements which includes the design, construction, performance, and safety of the e-bikes/devices. In lieu of having to allow tenants to store their devices inside the dwelling unit, landlords also have the option to provide exterior storage that is “secure” and “long term.” (Civ. Code, § 1940.41(a)(2).) The Civil Code goes on to define secure long term storage as storage that is: “limited to residents of the same housing complex. . . . is located on the premises. . . . is reasonably protected against precipitation. . . . has a minimum of one standard electrical connection for each personal micromobility device that will be stored and recharged in that location. . . . [and t]enants are not charged for its use.” (Civ. Code § 1940.41(a)(2)(A)-(E).) Nothing in this law requires the landlord to modify the interior of the dwelling unit to accommodate micromobility devices.

9. Landlord/Tenant: Local Governments Cannot Enact “crime free” Housing Programs and Ordinances

Effective on January 1, 2024, local governments are not allowed to pass “crime free” housing ordinances. In the past, crime free housing ordinances were used to discourage landlords from renting to prospective tenants with criminal backgrounds or other factors that might suggest the prospective tenant would be a risk to the rental property or other tenants. Under the new law, local governments are restrained from enacting policies, rules, or regulations that require landlords to institute crime free housing policies. Landlords, however, may still perform criminal background checks and consider such factors as far as state and federal law permit.

10. Landlord/Tenant: Security Deposits Are Now Limited To One Month’s Rent

Civil Code, section 1950.5, now limits security deposits for rental properties to no more than one month’s rent starting on July 1, 2024. An important exception is baked in for “small landlords” who are defined as: “a natural person or a limited liability company [(“LLC”)] in which all members are natural persons and owns no more than 2 residential rental properties that collectively include no more than 4 dwelling units offered for rent. (Civ. Code, § 1950.5(c)(4)(A)(i)-(ii).)

11. Landlord/Tenant: Changes Are Being Made To The Tenant Protection Act (“TPA”) To Strengthen Requirements For No Fault Evictions In Favor of Tenants

Rounding out the changes in Landlord/Tenant law in 2024 are the tweaks to the TPA for no-fault evictions based upon owner move-in or substantial remodeling. Landlords need to be particularly careful here, as the changes to the law make penalties for improper no-fault evictions stricter. For example, under the changes, if an owner violates the just cause provisions of the no-fault eviction requirements, the owner can be liable for actual damages, reasonable attorney’s fees and costs, and up to three times the actual damages awarded at the discretion of the judge if the owner is found to have acted willfully, with oppression, or with malice.

12. Listing Agreements: Exclusive Listing Agreements Cannot Last Longer Than Two-Years

There are several changes to the law this year which will impact agreements between owners and listing brokers and agents. Particularly, beginning on January 1, 2024, Civil Code, section 1670.12 and Government Code, section 27280.6, will take effect. Together, the provisions of these codes prohibit exclusive listing agreements that are longer than two-years, prohibits renewing an exclusive listing agreement for longer than 12-months from the time the renewal was made, and prohibits recording or filing an exclusive listing agreement of any duration. These prohibitions will apply to listing agreements for residential 1 to 4 properties, condos, and manufactured homes. One important exclusion to note here, is that the prohibitions do not apply to exclusive listing agreements between a broker and a corporation, LLC, or partnership.

13. Non-Compete Agreements Are Illegal And Non-Enforceable (Regardless of Where They Are Executed) No Matter How Narrowly Tailored They Are And Employers May Be Subject To Liability For Attempting To Enforce Them

This change is relevant to anyone who is employed by a brokerage and/or owns a brokerage. California law has historically treated non-competition agreements with suspicion. (See Bus. & Prof. Code, § 16600(a)-(b)(1) [“[E]very contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void. . . . This section shall be read broadly, in accordance with Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored. . . .”].) Practically speaking, courts in California almost never enforce non-compete agreements (with very limited exceptions). Business and Professions Code, section 16600.5 further strengthens California’s policies against non-compete agreements. Under the new changes, the law clarifies that it does not matter if the non-compete agreement was executed in California or not. If such an agreement runs afoul of restraining trade, it is void and unenforceable in California. Going further, the law makes it illegal for an employer to try and enforce a non-compete clause while also making it illegal for employers to enter into employment agreements that violate California’s trade restraint laws. To enable enforcement of the new changes, an employer who violates these prohibitions will be liable for civil violations and penalties.  

14. Notaries: California Notaries Can Now Perform Remote (“Online”) Notarization And Out-Of-State Notaries Are Now Recognized

Post the COVID-19 Pandemic, remote work, remote conferencing, and remote technology has infiltrated nearly all (if not all) areas of the real estate industry. Under SB 696, licensed California notaries will be able to conduct remote online notarizations (“RON”). Importantly, the State is still approving the technology platforms and processes that will be used to facilitate RON, so there is not a definitive start date yet. However, the law provides that the Secretary of State must certify the technological aspects of the process no later than January 1, 2030.

15. Vacation Rentals: All Mandatory Fees Must Be Disclosed And There is An Automatic Right To Cancel Within 24-Hours

For any readers who own properties they use as vacation rentals, there are two new changes to the law you will need to know about. First, all mandatory fees that are not government imposed must be disclosed in advertising. This requirement applies to websites, applications, or any advertising a person does related to the vacation rental. Under the law, vacation rentals or “short term lodging” is defined as: “any hotel, motel, bed and breakfast inn, or other transient lodging. [It] also includes a short-term rental, or a residential property that is rented to a visitor for 30 consecutive days or less . . . .” (Bus. & Prof. Code, § 17568.6(b).)Additionally, a change has been made to the Civil Code that requires vacation rental owners (and/or the websites and platforms that promote them) to provide a full refund if the reservation is cancelled within 24-hours if that reservation is made more than 72-hours in advance of the booking. (Civ. Code, §§ 1748.40 and 1780.80 et seq.)

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