California: Real Estate Principles

Chapter 27: California Law Updates

1 . Chapter Overview

Both federal and state laws are continually being updated

to keep current with the ever-changing needs of its
community. The real estate law in California is no
exception to this rule. In fact, as we mentioned at the onset
of this course, the California Bureau of Real Estate, which
administers and enforces the real estate laws in California,
is recognized as a trendsetter in the real estate industry.
Other state real estate departments have modeled their
own laws after the California real estate laws.
As a candidate for a California real estate license, it is your job to make sure you are always
current with the latest law and regulation updates. The same will be true after you earn your
California real estate license: You cannot assume that what you learn this year will remain
the same next year.
The law is fluid, with changes occurring not just annually but also throughout the course of a
single year. As a real estate student and examinee, you will always be tested on the most
current law at the time of the examination.
End of Page
2 . Finance Code - Covered Loan Amendments

Under Assembly Bill 901, there have been some amendments made to Finance Code Section
4970. The law, in its pre-amended form, had set forth restrictions under certain consumer
loans known as "covered loans." These restrictions included the prohibition of a "covered
loan" that would include a prepayment fee or penalty after the first 36 months after the date
of the loan. The restrictions also mandated that a specific disclosure be made to the consumer
before a "covered loan" could be made to that person. Under the amended version of this law,
those requirements have been changed, as you will see shortly.
In addition, a "covered loan" under the previous legislation was defined as "A consumer loan
in which the original principal balance of the loan is NOT greater than $250,000.00, in the
case of a mortgage or deed of trust where certain conditions were met." In the newly
amended Finance Code, the term "covered loan" has been redefined, as have the loan limits
for such loans.

Real estate fraud crimes and the Real Estate Prosecution Trust Funds are set forth under the
amended Government Code Section 27388. Because we have not yet discussed these topics
within this course, we'll explore this topic briefly on the following screens.
On the following screen, we will begin reading these laws.
End of Page
3 . Section 4970

Section 4970 of the Financial Code is amended to read:

4970. For purposes of this division:
(a) "Annual percentage rate" means the annual percentage rate for the loan calculated
according to the provisions of the federal Truth in Lending Act and the regulations adopted
thereunder by the Federal Reserve Board.
(b) "Covered loan" means a consumer loan in which the original principal balance of the
loan does not exceed the most current conforming loan limit for a single-family first
mortgage loan established by the Federal National Mortgage Association in the case of a
mortgage or deed of trust, and where one of the following conditions are met:
(1) For a mortgage or deed of trust, the annual percentage rate at consummation of the
transaction will exceed by more than eight percentage points the yield on Treasury
securities having comparable periods of maturity on the 15th day of the month
immediately preceding the month in which the application for the extension of credit is
received by the creditor.
(2) The total points and fees payable by the consumer at or before closing for a mortgage
or deed of trust will exceed 6 percent of the total loan amount.
Did you notice the difference in the original definition of covered loans, as we discussed on
the previous screen, as compared to the updated version above? We will discuss this on the
following screen.
End of Page
4 . Covered Loans

Covered Loans (amended) are consumer loans in which:

1. The ORIGINAL principal loan balance does NOT EXCEED the MOST CURRENT
conforming loan limit for a single-family first mortgage loan as established by the
Federal National Mortgage Association, or "Fannie Mae," in the case of either a
mortgage OR a deed of trust; AND
2. ONE of the following conditions are met:

a. Regarding a mortgage/deed of trust, the APR at the

transaction consummation must be more than 8%
over the yield on Treasury securities with
comparable periods of maturity on the 15th day of
the month that immediately precedes the month in
which the application for the extension of credit is
received by the creditor; OR
b. The total points and fees payable by the consumer
at or before closing for a mortgage or deed of trust
must be higher than 6% of the total loan
amount.
Let's move on to look at the remainder of Section 4970, before
we read the related laws under the Government Code.
End of Page
5 . Definitions Under the Finance Code

Under Finance Code Section 4970, the following definitions have been set forth. Remember
these definitions so that when we discuss the law itself, you will have a grasp on the topics
about which you'll learn.
Points and fees: This definition includes the following:
a. All items required to be disclosed as finance charges under the Code of Federal
Regulations, not including interest.
b. All compensation/fees paid to mortgage brokers in connection with the loan
transaction.
c. All items listed in Section 226.4(c)(7) of Title 12 of the Code of Federal Regulations,
only if the person originating the covered loan receives direct compensation in
connection with the charge.
Consumer Loan: A consumer credit transaction that is secured by real property located in
California, which is used, or intended to be used or occupied, as the principal dwelling of
the consumer that is improved by a one-to-four residential unit. (Note that this term does
NOT refer to any of the following: a reverse mortgage; an open line of credit as defined
under Regulation Z; a consumer credit transaction that is secured by rental property or
second homes; or a bridge loan. As defined in this section of the Code, a "bridge loan" is any
temporary loan with the maturity of one year or less, which is utilized to acquire or construct
a dwelling intended to become the consumer's principal place of residence.)
Original Principal Balance: The total initial amount the consumer is obligated to repay on
the loan.
Licensing Agency:
For licensed real estate brokers, this refers to the Bureau of Real Estate;
For licensed residential mortgage lenders and licensed finance lenders and brokers, this

refers to the Department of Corporations;

For commercial and industrial banks and savings associations and credit unions
organized in California, this term refers to the Department of Financial Institutions.
We'll continue with a few more definitions on the following screen.
End of Page
6 . Finance Code Terms

Under Finance Code Section 4970, the following definitions have been set forth:
Licensed person: A real estate broker licensed under the Real Estate Law, a finance lender or
broker licensed under the California Finance Lenders Law, a residential mortgage lender
licensed under the California Residential Mortgage Lending Act, a commercial or industrial
bank organized under the Banking Law, a savings association organized under the Savings
Association Law, and a credit union organized under the California Credit Union Law. (Note:
A licensed person also includes any person engaged in the practice of consumer lending for
which a license is required under any other provision of law, but whose license is invalid,
suspended, or revoked, or where no license has been obtained, under Finance Code Section
4970.)
Originate: To arrange, negotiate, or make a consumer loan.
Now that you've had the opportunity to familiarize yourself with these terms and read
through the text of Finance Code Section 4970, let's move on to read the Government Code
that relates to this information and has recently been amended, beginning on the following
screen.
End of Page
7 . Real Estate Fraud Prosecution Trust Fund

Under Section 27388 of the Government Code, the following requirements have been set
forth:
1. Any California county board of supervisors has the authority to adopt a resolution to
add a fee of up to $2.00 (in addition to any other recording fees already collected) to
the recording fee of EVERY real estate instrument*, paper, or notice that is required or
permitted by law to be recorded within that specific county.
2. This excludes any document expressly exempted from the payment of recording fees.
3. These fees, AFTER any actual and necessary administrative costs to the county in
carrying out this law are paid to the county, are to be paid quarterly to the County
Auditor or the Director of Finance, to be placed in the Real Estate Fraud Prosecution
Trust Fund.
4. The actual and necessary administrative costs of the county may NOT be greater
than 10% of the fees paid under this section.

* Under this section of law, a real estate instrument is defined as INCLUDING THE
FOLLOWING:
A deed of trust;
An assignment of deed of trust;
A reconveyance;
A request for notice; or
A notice of default.
Note that the following documents are NOT considered real estate instruments under this
section: any deed, instrument, or writing subject to the imposition of a documentary transfer
tax, nor any document required to facilitate the transfer subject to the documentary transfer
tax.
End of Page

8 . Real Estate Fraud Prosecution Trust Fund

Lets take a look now at how the moneys of the Real Estate Fraud Prosecution Trust Fund
moneys are utilized. The moneys collected in the Real Estate Fraud Prosecution Trust Fund
are used to fund those programs that serve to enhance the capacity of local police and
prosecutors to deter, investigate, and prosecute REAL ESTATE FRAUD CRIMES.
Once the administrative costs have been deducted as described on the previous screen, the
distribution for the moneys collected is as follows:
60% of the funds distributed to district attorneys subject to review as specified under
this section of the Code, and
40% of the funds distributed to local law enforcement agencies within the county as
specified within this section of the law.
NOTE: In those counties where the investigation of real estate fraud is conducted
exclusively by the district attorney, after deduction of the actual and necessary
administrative costs, 100% of the funds are distributed to the district attorney,
subject to review under this law.
The funds distributed MUST ONLY be used for the EXCLUSIVE purpose of
deterring, investigating, and prosecuting real estate fraud crimes.
In each county, that county auditor or director of finance distributes the funds in the Real
Estate Fraud Prosecution Trust Fund to eligible law enforcement agencies within the county
as outlined above. This is where the Real Estate Fraud Prosecution Trust Fund Committee
comes into play; its function is to determine which law enforcement agencies are eligible to
receive this special funding. (All agencies must, of course, first fulfill the requirements as
outlined above). Lets move on to the following screen to continue our discussion of this
committee.
End of Page

9 . The Real Estate Fraud Prosecution Trust Fund Committee

The Real Estate Fraud Prosecution Trust Fund Committee is

composed of the district attorney, the county chief administrative
officer, the chief officer responsible for consumer protection within
the county, and the chief law enforcement officer of one law
enforcement agency receiving funding from the Real Estate Fraud
Prosecution Trust Fund, the latter being selected by a majority of
the other three members of the committee.
The chief law enforcement officer is a NON-VOTING member of
the committee and serves a one-year term, which may be renewed.
These members are authorized to appoint representatives of their
respective offices to serve on the committee.
In the event that a county does not have a chief officer who is specifically responsible for
consumer protection, then that county's board of supervisors is given the authority to appoint
an appropriate representative to serve on the committee.
Each county's Real Estate Fraud Prosecution Trust Fund Committee must establish AND
publish both the deadlines and written procedures for local law enforcement agencies within
the county to apply for the use of funds. Once the committee receives the applications, these
applications will be reviewed and determinations made by a majority vote regarding the
award of funds.
Let's move on to the following screen to look at the criteria used by a county Real Estate
Fraud Prosecution Trust Fund Committee in making such a determination.
End of Page
10 . Determination of Agency Funding

The following criteria is used by the Real Estate Fraud Prosecution Trust Fund Committee to
make a determination regarding a local law enforcement agency's receipt of monies from this
special fund:
1. Each law enforcement agency that seeks funds must submit a written application to the
committee setting forth a DETAILED proposal of the agency's proposed use of these
funds.
2. In order to qualify for receipt of funds, each law enforcement agency submitting an
application MUST provide written evidence that the agency either:
Has a unit, division, or section ALREADY devoted to the investigation and/or
prosecution of real estate fraud, AND that this unit, division, or section has been
in existence for A MINIMUM OF ONE YEAR prior to the application date; OR
Has, ON A REGULAR BASIS, during the 3 years immediately preceding the
application date, accepted for investigation or prosecution, or both, AND

assigned to specific persons, employed by the agency, cases of suspected real

estate fraud, and actively investigated and prosecuted those cases.
3. The committee's determination to award funds to a law enforcement agency MUST BE
based on, but not limited to:
The number of real estate fraud cases filed in the prior year;
The number of real estate fraud cases investigated in the prior year;
The number of victims involved in the cases filed; and
The total aggregated monetary loss suffered by victims. These victims include
not only individuals, but also associations, institutions, or corporations, as a
result of the real estate fraud cases filed, and those under active investigation by
that law enforcement agency.
We will continue this discussion on the following screen.
End of Page
11 . Determination of Funds Awards

The following regulations have also been set forth for the determination of the award of these
funds.
For each law enforcement agency that has already been awarded funds in the previous year,
such agency must file a reapplication for funds to the committee in each successive year. In
addition to the other information required, this agency must ALSO submit a FULL and
detailed accounting of the funds received in the previous year, and how those funds were
expended. This includes the AMOUNT of funds received and expended; the ways in which
those funds were utilized, including the payment of salaries, expenses, equipment and supply
purchases; and other expenditures categorized according to "type." This accounting must also
detail the number of filed complaints, investigations, arrests, and convictions, and any other
relevant information the committee reasonably requires.
The county board of supervisors must annually review the effectiveness of the district
attorney in deterring, investigating, and prosecuting real estate fraud crimes. This review is to
be based on information provided by the district attorney in an annual report that is submitted
to the board and to the Legislative Analyst's Office, which must compile these results and
report them to the Legislature. (The bold-faced text above is a new requirement that was
recently added to Government Code Section 27388 (d).)
We will detail this required report on the following screen.
End of Page
12 . Annual Report

The report must detail the following:

1. Facts, based upon, but not limited to:

a. The number of real estate fraud cases filed in
the prior year;
b. The number of real estate fraud cases
investigated in the prior year;
c. The number of victims involved in the cases
filed;
d. The number of convictions obtained in the
prior year; and
e. The total aggregated monetary loss suffered by victims, including individuals,
associations, institutions, corporations, and other relevant public entities,
according to the number of cases filed, investigations, prosecutions, and
convictions obtained;
AND
2. An accounting of funds received and expended in the prior year, including:
a. The amount of funds received and expended;
b. The uses to which those funds were put, including payment of salaries and
expenses, purchase of equipment and supplies, and other expenditures by type;
c. The number of filed complaints, investigations, prosecutions, and convictions
that resulted from the expenditure of funds; AND
d. Other relevant information provided at the district attorneys discretion.
We will conclude this law on the following screen.
End of Page
13 . Real Estate Fraud Protection Trust Fund Final Notes

Keep in mind that the Legislatures intent in setting forth so many rules through its enactment
of this section is to have an impact on real estate fraud involving the largest number of
victims. Under this section, it has further been set forth that to the extent possible, an
emphasis should be placed on fraud against those individuals whose residences are in
foreclosure, OR are in danger of foreclosure. Case filing decisions continue to be at the
discretion of the prosecutor.
The Government Code also notes that a district attorney's office or a local enforcement
agency that has undertaken investigations and prosecutions that will continue into the
FOLLOWING program year is allowed to receive those funds from the previous fiscal
year that were not previously spent. This is provided AFTER the annual report of
information detailing the accounting of funds received and expended in the prior year has
been submitted.
Under this law, NONE of the monies collected under this section may be used in ANY WAY
to offset a reduction in ANY OTHER SOURCE of funds. Real Estate Fraud Prosecution
Trust Fund monies MUST ONLY BE USED in connection with criminal investigations
or prosecutions involving recorded real estate documents.

Many counties in California have already enacted laws within their county providing for the
Real Estate Fraud Protection Trust Fund. You can find out if your county of real estate
practice is one of those with a Real Estate Fraud Protection Trust Fund by checking with the
county government or recorded legislation, or by searching online.
End of Page

14 . Civil Code Changes: The Unruh Civil Rights Act

Under the Civil Code, there have been several amendments to existing statutes. The first set
of these changes concerns the Unruh Civil Rights Act. Previously, the Unruh Civil Rights
Act protected people from being discriminated against because of their sex, race, color,
religion, ancestry, national origin, disability, or medical condition. However, recent changes
have added "marital status" and "sexual orientation" to the other classes protected under this
legislation in California. Here is the updated version of this law, under the Civil Code:
(a) This section shall be known, and may be cited, as the Unruh Civil Rights Act.
(b) All persons within the jurisdiction of this state are free and equal, and no matter
what their sex, race, color, religion, ancestry, national origin, disability, medical
condition, marital status, or sexual orientation are entitled to the full and equal
accommodations, advantages, facilities, privileges, or services in all business
establishments of every kind whatsoever.
(c) This section shall not be construed to confer any right or privilege on a person that
is conditioned or limited by law or that is applicable alike to persons of every sex, color,
race, religion, ancestry, national origin, disability, medical condition, marital status, or
sexual orientation.
(d) Nothing in this section shall be construed to require any construction, alteration,
repair, structural or otherwise, or modification of any sort whatsoever, beyond that
construction, alteration, repair, or modification that is otherwise required by other
provisions of law, to any new or existing establishment, facility, building, improvement,
or any other structure, nor shall anything in this section be construed to augment,
restrict, or alter in any way the authority of the State Architect to require construction,
alteration, repair, or modifications that the State Architect otherwise possesses pursuant
to other laws."
This law has been altered to prohibit as a basis for discrimination either marital status, OR
sexual orientation. Any text within this Civil Code section that prohibits discrimination based
on the following reasons: sex, race, color, religion, ancestry, national origin, disability, or
medical condition, will now have "marital status" and "sexual orientation" added to that list.
On the following screen, we will continue our look at the changes to this section of law,
including the legal definitions for the above-named protected classes; so let's move on to that
now.
End of Page

15 . Unruh Civil Rights Act Amendments and Additions

Under this section of the Civil Code, these terms pertinent to the Unruh Civil Rights Act
have been defined as follows:
(1) "Disability" means any mental or physical disability as defined in Sections 12926
and 12926.1 of the Government Code.
(2) "Medical condition" has the same meaning as defined in subdivision (h) of Section
12926 of the Government Code.
(3) "Religion" includes all aspects of religious belief, observance, and practice.
(4) "Sex" has the same meaning as defined in subdivision (p) of Section 12926 of
the Government Code.
(5) "Sex, race, color, religion, ancestry, national origin, disability, medical condition,
marital status, or sexual orientation" includes a perception that the person has any
particular characteristic or characteristics within the listed categories or that the
person is associated with a person who has, or is perceived to have, any particular
characteristic or characteristics within the listed categories.
(6) "Sexual orientation" has the same meaning as defined in subdivision (q) of
Section 12926 of the Government Code. *
(f) A violation of the right of any individual under the Americans with Disabilities Act
of 1990 (Public Law 101-336) shall also constitute a violation of this section.
* Note that Section 12926 of the Government Code defines sexual orientation as
heterosexuality, homosexuality, and bisexuality. The same definition applies herein.
We will sum up these changes on the following screen.
End of Page
16 . The Civil Rights Act and Added Categories

You were already aware of the Unruh Civil Rights Act, which prohibits discrimination based
on a person's specific characteristics with regard to sex, race, color, religion, ancestry,
national origin, disability, and medical condition. In addition to those categories, the recent
amendments to the Unruh Civil Rights act have added the following two categories:
1. Marital status and
2. Sexual orientation (regarding a person's heterosexuality, homosexuality, or
bisexuality).

This brings the total number of protected classes under the California Unruh Civil
Rights Act to TEN. These are listed in full as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Sex;
Race;
Color;
Religion;
Ancestry;
National origin;
Disability;
Medical condition;
Marital status; or
Sexual orientation.

Under Assembly Bill 1400, regarding the Unruh Civil Rights Act, keep in mind that an
amendment to this act states that the items on the preceding list are not the ONLY bases
on which discrimination may occur, since the California law does not allow any
arbitrary discrimination. AB 1400 states clearly that, "It is the intent of the Legislature
that these enumerated bases shall continue to be construed as illustrative rather than
restrictive."
Let's take a look at the next Civil Code amendments.
End of Page
17 . Amendments of Civil Code Section 53

Civil Code Section 53 has been amended as a result of the

aforementioned changes to the Unruh Civil Rights Act, with
the additions of marital status and sexual orientation to
the list of those personal characteristics on which
discrimination may NOT be based in California. Under
Section 53, the specifics of written contracts or other
agreements are the focus, including any written instrument
OR any portion of any instrument, that is somehow used to
discriminate against any of the parties protected by the
Unruh Civil Rights Act - sex, race, color, religion, ancestry,
national origin, disability, medical condition, marital status,
or sexual orientation.
Here is the amended law in its most current form. The portions in bold font are those that
have been added as of the most recent update.
53. (a) Every provision in a written instrument relating to real property that purports to
forbid or restrict the conveyance, encumbrance, leasing, or mortgaging of that real property
to any person because of any characteristic listed or defined in subdivision (b) or (e) of
Section 51 is void, and every restriction or prohibition as to the use or occupation of real
property because of any characteristic listed or defined in subdivision (b) or (e) of Section 51
is void.

(b) Every restriction or prohibition, whether by way of covenant, condition upon use or
occupation, or upon transfer of title to real property, which restriction or prohibition directly
or indirectly limits the acquisition, use or occupation of that property because of any
characteristic listed or defined in subdivision (b) or (e) of Section 51 is void.
(c) In any action to declare that a restriction or prohibition specified in subdivision (a) or (b)
is void, the court shall take judicial notice of the recorded instrument or instruments
containing the prohibitions or restrictions in the same manner that it takes judicial notice of
the matters listed in Section 452 of the Evidence Code.
The laws set forth in this section state, in essence, that any provision, restriction, prohibition,
or other covenant that is placed within a contract, OR in any other manner, that takes any of
the following actions based on the fact that a person is a certain sex, race, color, religion,
ancestry, national origin, disability, and medical condition, is VOID because of this basis for
discrimination. Such a restriction might include anything from an encumbrance, mortgage,
lease, conveyance, or other acquisition of a property, and it might be placed through a
conditional use restriction, a covenant, or with the transfer of title.
End of Page

18 . The Modification of Unlawful Restrictive Covenants

A related update has been set forth under the California Government Code Section 12956.2.
Regarding the Conditions, Covenants, and Restrictions, or CC&Rs, this law allows a
property owner to record a Restrictive Covenant Modification document IF the county
counsel makes the determination that a previously recorded covenant contains an illegal
restriction.
The process begins with an individual who holds an ownership interest of record in a
property, and who believes he or she is the subject of an ILLEGALLY restrictive covenant
that violates the following law. Under Government code, Section 12955 (l), it is unlawful to
discriminate against another person, through either public OR private land use practices,
other authorizations, or decisions, IF that discrimination is based on any of the following:
Race
Color
Religion
Sex
Sexual orientation
Familial status
Marital status
National origin
Disability
Ancestry
Source of income
Pay attention to the last item on this list: "source of income." This is one basis for
discrimination that we have not covered yet, as it does not apply to the Federal Fair

Housing laws, or even the California Unruh Civil Rights Act, as previously discussed.
However, within this portion of the law, it IS illegal to discriminate against another
person based on where that person gets his or her income.
Discrimination under Section 12955(l) includes, but is not limited to, any of the following
actions placed on a person based on the characteristics outlined above: restrictive
covenants, zoning laws, denials of use permits, and other actions that are authorized under
the Government Code, beginning with Section 65000, otherwise known as the Planning and
Zoning Law. Even the existence of a restrictive covenant based on any of the conditions
listed above, REGARDLESS of whether there is a statement added to the covenant or other
restriction noting that the restriction is void or has been repealed, is considered to be
discrimination under this section. For this reason, it is important to file the aforementioned
Restrictive Covenant Modification document.
End of Page
19 . The Modification of Unlawful Restrictive Covenants, Continued

If a person believes that her property has been placed under an unlawful restriction as
outlined on the previous screen, then she can record the Restrictive Covenant Modification
document. This must include a complete copy of the original document containing the illegal
restrictions, with the illegal restrictive language "stricken," under the Government Code.
Before the county recorder records the modification document, he must submit both the
modification document and the original document (with the restrictive language) to the
county counsel. It is the responsibility of the county counsel to determine if, in fact, an illegal
restriction and illegally restrictive language DO exist. Once he makes this determination, he
returns the documents to the recorder with his assessment. In a situation in which the county
counsel does NOT find restrictive language, the modification document is NOT recorded.
The following requirements are also set forth under GC Section 12956.2:
1. The modification document must be indexed in the same way as the original document.
2. The effective date of the modification document will be the same as the original
document's effective date.
3. The Restrictive Covenant Modification forms are available to the public from the
county recorder.
Let's move on to the following screen.
End of Page
20 . Property Tax Addition to Civil and Business and Professions Codes

Under Assembly Bill 459, Section 11010 of the Business and Professions Code has had one
brief addition, which provides for the property tax disclosure set forth under Section 1102.6c

of the Civil Code, also a new addition to the California

law. Both amendments focus on the disclosures mandated
with the transfer of real property. Well look at a segment
of this law now, and then discuss it.
The previous law had required that certain disclosures be
made upon the transfer of residential property, and had
set forth the manner and form of the disclosures. While
these disclosures are still necessary under the amended,
current laws, there has been one addition to this set of
disclosures.
We will look at this law mandated under this code in full, and then discuss the amended
requirements. After weve completed these discussions, we will review the new law
(referenced in the Business and Professions Code) adopted under the Civil Code as Section
1102.6c.
Lets move on to the following screen to take a look at the Subdivided Lands Public Report.
End of Page
21 . Amendments to the Subdivided Lands Public Report

Under Business and Professions Code Section 11010, any person who intends to offer
subdivided lands for sale or lease within California MUST FILE an application for a public
report. This public report must be filed with the Bureau of Real Estate and consist of a notice
of intention and a completed questionnaire on a form prepared by the bureau.
The aforementioned notice of intention for a subdivided lands public report MUST now
contain all of the information listed under Section 11010, subdivision (b), (1) through (17).
These are briefly outlined as follows. Keep in mind that the full content and conditions of the
information required to be submitted regarding subdivided lands and the proposed offering
are NOT included herein. These may be found within the text of the Business and
Professions Code.
The subdivision Notice of Intention must include true statements of all of the following:
1.
2.
3.
4.

The owners name and address;

The subdividers name and address;
The legal description and area of lands;
The condition of the title to the land, especially concerning ALL encumbrances to
this title;
5. The terms and conditions on which the person(s) intends to dispose of the land,
ALONG WITH copies of any contracts intended to be used.
6. Any provisions that have already been made for public utilities in the proposed
subdivision, including water, electricity, gas, telephone, and sewerage facilities.
Note that for those subdivisions referred to under the Government Code Section
66473.7(b), this statement of provisions is satisfied by submitting a copy of the written
verification of the available water supply required under GC Section 66473.7.

7. The use(s) for which the proposed subdivision is to be offered.

8. Any provision(s) that have been made to limit the use or occupancy of the parcels in
the subdivision.
9. The amount of indebtedness that is a lien upon the subdivision or any part of the
subdivision, which was incurred to pay for the construction of any onsite or offsite
improvement, or any community or recreational facility.
We will continue this list on the following screen.
End of Page
22 . Subdivided Lands Public Report Notice of Intention

10. A true statement or reasonable estimate, if applicable, of the amount of any

indebtedness which has been incurred by, OR is proposed to be incurred by, any of the
following items:
a. An existing or proposed special district;
b. An existing or proposed entity;
c. An existing or proposed taxing area;
d. An existing or proposed assessment district;
e. An existing or proposed community facilities district within the boundaries of
which the subdivision, or any part of the subdivision, is located;
AND that is to pay for the construction or installation of any improvement
or to furnish community or recreational facilities to that subdivision, AND
which amounts are to be obtained by ad valorem tax or assessment, or by a
special assessment or tax upon the subdivision, or any part thereof.
11. A notice pursuant to Section 1102.6c of the Civil Code. (Note that this is the only
additional requirement mandated under the newest changes to this section of the B & P
Code. It will be explained in detail once we've completed explaining the additional
disclosures mandated under this Notice of Intention.)
12. Regarding each school district that serves the subdivision, a statement from the
appropriate district that indicates the location of each high school, junior high school,
and elementary school serving the subdivision, or documentation that a statement to
that effect has been requested from the appropriate school district.

End of Page
23 . Notice of Intention - Airport in Vicinity and Other Mandates

13. The location of all existing airports, and of all proposed airports shown on the general
plan of any city or county, located within two statute miles of the subdivision. Note
that if the property is located within an airport influence area, the Notice of Intention
must include the following statement: "NOTICE OF AIRPORT IN VICINITY This
property is presently located in the vicinity of an airport, within what is known as
an airport influence area. For that reason, the property may be subject to some of
the annoyances or inconveniences associated with proximity to airport operations
(for example: noise, vibration, or odors). Individual sensitivities to those
annoyances can vary from person to person. You may wish to consider what
airport annoyances, if any, are associated with the property before you complete
your purchase and determine whether they are acceptable to you." (Note that an
"airport influence area," or "airport referral area," as it is also known, is the area in
which current or future airport-related noise, overflight, safety, or airspace protection
factors may significantly affect land uses or necessitate restrictions on those uses as
determined by an airport land use commission."
14. References to any soils and/or geologic report(s) that were prepared specifically for
that subdivision, if applicable.
15. A statement regarding whether or not fill is used, or proposed to be used, within the
subdivision, including a statement with the name and location of the public agency
where the subdivision's soil condition information is available.
We will conclude this list on the following screen.
End of Page
24 . Subdivided Lands Public Report Notice of Intention

The subdivided lands public report Notice of Intent must, finally,

include the following two final true statements:
16. A statement about any property located within the jurisdiction
of the San Francisco Bay Conservation and Development
Commission, which says that the property is so located. This
must also include the following notice:
NOTICE OF SAN FRANCISCO BAY CONSERVATION
AND DEVELOPMENT COMMISSION JURISDICTION
This property is located within the jurisdiction of the San
Francisco Bay Conservation and Development Commission. Use and development
of property within the commission's jurisdiction may be subject to special
regulations, restrictions, and permit requirements. You may wish to investigate
and determine whether they are acceptable to you and your intended use of the
property before you complete your transaction.
17. Any other information that the owner, his or her agent, or the subdivider may desire to
present.

On the following screen, we will take a look at the notice pursuant to Section 1102.6c of the
Civil Code that has been added to the Business and Professions Code 11010, as noted in the
previous listing.
End of Page

25 . Property Tax Notice Added to Civil Code

Property Taxes
California law requires a seller or his or her agent to deliver to the prospective
purchaser a disclosure notice that includes both of the following:
1102.6c. (a) In addition to any other disclosure required pursuant to this article, it shall be
the sole responsibility of the seller of any real property subject to this article, or his or her
agent, to deliver to the prospective purchaser a disclosure notice that includes both of the
following:
1. A notice, in at least 12-point type or a contrasting color, as follows:
"California property tax law requires the Assessor to revalue real property at the time
the ownership of the property changes. Because of this law, you may receive one or two
supplemental tax bills, depending on when your loan closes.
The supplemental tax bills are not mailed to your lender. If you have arranged for your
property tax payments to be paid through an impound account, the supplemental tax
bills will not be paid by your lender. It is your responsibility to pay these supplemental
bills directly to the Tax Collector.
If you have any question concerning this matter, please call your local Tax Collector's
Office."
1. A title, in at least 14-point type or a contrasting color, that reads as follows: "Notice
of Your 'Supplemental' Property Tax Bill."
Keep in mind that including the required information in the Mello-Roos disclosure may
satisfy the disclosure notice requirements of this section. Supplemental taxes may be
assessed whether a new loan is obtained or an existing loan is assumed to accomplish the
purchase of the property, or whether the property is purchased without financing.
End of Page
26 . Federal Bankruptcy Abuse Prevention and Consumer Act

Let's take a quick look at the new Bankruptcy Abuse Prevention and Consumer Act of 2005

("BAPCPA"), 11 U.S.C. 101 et seq., as it affects real estate professionals. The multitude of
procedural changes set forth in the BAPCPA is considered to represent the most sweeping
changes to the federal insolvency system in more than 25 years. This law legislation has
resulted in myriad changes that affect not only creditors and debtors, but also bankruptcy
court, clerks, trustees, and other parties in interest. While the changes brought about by the
Bankruptcy Abuse Prevention and Consumer Act of 2005 are numerous, we will limit our
focus to those laws that you, the real estate agent-to-be, should know. Keep in mind that most
of the provisions under this act have gone into effect as of October 17, 2005.
Under the Bankruptcy Abuse Prevention and Consumer Act of 2005, residential landlords
should be aware of the change in the law regarding the "automatic stay," under 11 U.S.C.
Section 362(b).
In residential lease situations, there are 2 new exceptions to the automatic stay rule, which
states that the automatic stay is NOT in effect, and therefore will NOT prevent or otherwise
stop a detainer action, in general. These exceptions are as follows:
1. Under the U. S. Code Section 362(b)(22): The automatic stay does not apply in
unlawful detainer actions and the Act allows the continued prosecution of any eviction
proceeding in which the landlord obtained a judgment of possession prior to the filing
of the bankruptcy petition.
2. Section 362(b)(23): With respect to evictions based on "endangerment" of the rented
property or "illegal use of controlled substances" on the property, the Act excludes the
eviction proceeding from the automatic stay if it was commenced before the filing of
the bankruptcy case and the endangerment or illegal use occurred within the 30 days
before the bankruptcy filing.
We'll explain these two exceptions on the following screen.
End of Page

27 . Exceptions to Automatic Stay Rule

As we discussed on the previous screen, the new law under the Bankruptcy Abuse Prevention
and Consumer Act of 2005 sets forth two important exceptions from the "automatic stay"
law, offering residential landlords some protection against bankruptcy claims filed by their
debtors/lessees.
Explained simply, the first of these two exceptions occurs when the lessor, or landlord, has
filed an eviction, illegal detainer action, or other similar action against the tenant/debtor. As
long as the lessor took the action and obtained a judgment to obtain possession of the
property BEFORE the date the lessee/debtor's bankruptcy petition was filed, the
previously-filed eviction, illegal detainer action, or other proceeding taken by the lessor
will remain in effect.
The second of these exceptions addresses the legality of the landlord's retaking possession of
the property based on some type of endangerment on the property OR based on the illegal
use of controlled substances on the property. Under the new law, the landlord in such a case

MAY LEGALLY EVICT the lessee and take possession of the property, provided that the
lessor files a certification, under penalty of perjury, stating:
1. That the landlord must file and serve on the debtor a certification that such eviction
action has been filed, OR
2. That in the preceding 30-day period (before the date of the certification filing), has
somehow endangered the property, OR has illegally used himself, OR has allowed
another person/persons to use a controlled substance on the property.
While there are many other changes noted under this law, the above amendments are of the
most importance to you at this time.
Beginning on the next screen, we will discuss the current Davis-Stirling Common Interest
Development Act, including its most recent additions and amendments.
End of Page
28 . Davis-Stirling Common Interest Development Act

In California, the Davis-Stirling Common Interest Development Act creates and regulates
common interest developments. The common interest development laws have undergone
several changes through recent legislation. Its important that real estate licensees be aware of
the Act itself, as well as these amendments and additions. Therefore, we will discuss the most
current version of the Davis-Stirling Common Interest Development Act in this chapter.
Lets begin by reviewing the definition of the term common interest development, as set
forth in Civil Code Section 1351. A common interest development means any of the
following:
1.
2.
3.
4.

A condominium project;
A community apartment project;
A stock cooperative (more commonly known as a co-op); or
A planned development.

Under the Civil Code, these terms are defined as follows:

1. Condominium project: A development consisting of condominiums. A
condominium consists of an undivided interest in common in a portion of real property
coupled with a separate interest in space called a unit, the boundaries of which are
described on a recorded final map, parcel map, or condominium plan in sufficient
detail to locate all boundaries thereof. The area within these boundaries may be filled
with air, earth, or water, or any combination thereof, and need not be physically
attached to land except by easements for access and, if necessary, support. The
description of the Chapter may refer to (1) boundaries described in the recorded final
map, parcel map, or condominium plan, (2) physical boundaries, either in existence, or
to be constructed, such as walls, floors, and ceilings of a structure or any portion
thereof, (3) an entire structure containing one or more units, or (4) any combination
thereof. The portion or portions of the real property held in undivided interest may be
all of the real property, except for the separate interests, or may include a particular

three-dimensional portion thereof, the boundaries of which are described on a recorded

final map, parcel map, or condominium plan. The area within these boundaries may be
filled with air, earth, or water, or any combination thereof, and need not be physically
attached to land except by easements for access and, if necessary, support. An
individual condominium within a condominium project may include, in addition, a
separate interest in other portions of the real property.
We will continue this on the following screen.
End of Page
29 . Davis-Stirling Common Interest Development Act

2. Community
apartment
project:
"A
development in which an undivided interest in
land is coupled with the right of exclusive
occupancy of any apartment located thereon."
3. Stock Cooperative: "A development in which a
corporation is formed or availed of, primarily for
the purpose of holding title to, either in fee
simple or for a term of years, improved real
property, and all or substantially all of the
shareholders of the corporation receive a right of
exclusive occupancy in a portion of the real
property, title to which is held by the corporation.
The owners' interest in the corporation, whether
evidenced by a share of stock, a certificate of membership, or otherwise, shall be
deemed to be an interest in a common interest development and a real estate
development for purposes of subdivision (f) of Section 25100 of the Corporations
Code. A "stock cooperative" includes a limited equity housing cooperative which is a
stock cooperative that meets the criteria of Section 33007.5 of the Health and Safety
Code."
4. A Planned Development: "A development (other than a community apartment project,
a condominium project, or a stock cooperative) having either or both of the following
features:
The common area is owned either by an association or in common by the owners
of the separate interests who possess appurtenant rights to the beneficial use and
enjoyment of the common area.
A power exists in the association to enforce an obligation of an owner of a
separate interest with respect to the beneficial use and enjoyment of the common
area by means of an assessment which may become a lien upon the separate
interests in accordance with Section 1367 or 1367.1."
The Davis-Stirling Common Interest Development Act, beginning with Civil Code Section
1350, requires that common interest developments have a recorded declaration that includes
specified information, and permits the developments to levy assessments when necessary.
Further, this act sets forth voting requirements for such things as declaration amendments and
the levying of assessments. Under this act, every common interest development must be

managed by an association, which is commonly known as a community association, or

homeowners' association (HOA). This nonprofit association may be incorporated or not
incorporated.
End of Page
30 . Common Interest Development Amendments

With the newly chaptered Assembly Bill 1098, many new requirements have been set forth
under the topic of "Common Interest Developments," which have amended the previous laws
in this realm. One such amendment requires the homeowner association (HOA) of a common
interest development (as well as any affiliated community service organizations) to make
ALL association records, as opposed to just accounting books and records and meeting
minutes, available to ANY owner who belongs to the HOA. Under this law, a homeowner
association that does NOT provide these books and records as specified will face
INCREASED civil penalties - up to $500.00 for EACH violation of this provision - as a
result of this non-compliance.
The current requirement means that the HOA must allow the applicable records for the
inspection AND COPYING, by either a member of the association, or that member's
representative. Civil Code Section 1365.2 has been revised under these new laws, and it
defines "association records" and "enhanced association records" to avoid any
misinterpretation of these terms. Keep in mind that this section of the Civil Code became
effective July 1, 2006.
We'll read through these definitions on the following screen.
End of Page
31 . CID Association Records

Under Section 1365.2, the term "Association records" refers to ALL of the following:
A. Any financial document required to be provided to a member, as set forth under Civil
Code Section 1365. These documents include but are not limited to a pro forma
budget, a review of the association's financial statement, a statement of the
association's policies and practices in enforcing lien rights or other default remedies,
and a summary of the types of property, general liability, earthquake, flood and fidelity
insurance policies.
B. Any financial document or statement required to be provided under Civil Code Section
1368.
C. Interim unaudited financial statements, periodic or as compiled, containing any of the
following:
i. Balance sheet.
ii. Income and expense statement.
iii. Budget comparison.

D.
E.
F.
G.
H.

iv. General ledger - a report that shows all transactions that occurred in an
association account over a specified period of time.
Executed contracts not otherwise privileged under law.
Written board approval of vendor or contractor proposals or invoices.
State and federal tax returns.
Reserve account balances and records of payments made from reserve accounts.
Agendas and minutes of meetings of the members, the board of directors and any
committees appointed by the board of directors; excluding, however, agendas, minutes,
and other information from executive sessions of the board of directors (this is
described in full under Civil Code Section 1363.05).

We will conclude this list on the following screen.

End of Page
32 . CID Association Records

Under Section 1365.2, the term "Association records" also refers to the following:
I. Membership lists, including name, property address, and mailing address, if the
conditions set forth herein are met and except as otherwise provided. Keep in mind that
the member requesting the list MUST state the purpose for which the list is requested,
and this purpose must be considered "reasonably related" to the requester's interest as a
member. (Note that under this section, if the association has reason to REASONABLY
believe that the information in the list will be used for some other reason other than the
one given by the member, it is within the association's authority to deny that request.
Should the request be denied, in any subsequent action brought by the member under
this section, it is the ASSOCIATION that will bear the burden of proof that the
member would have allowed the requested information to be used in the wrong way.
Any member of the association has the authority to opt out of the sharing of his name,
property address, and mailing address by notifying the association in writing that he
prefers to be contacted via an alternative process, and this opt-out condition will
remain in effect until the member himself changes it. (For specifics of the "alternative
process" of contact, check out subdivision (c) of Section 8330 of the Corporations
Code); AND
J. Check registers.
There is another related term set forth under Civil Code Section 1365.2, concerning records.
This term is "Enhanced association records," and is defined as "invoices, receipts and
canceled checks for payments made by the association, purchase orders approved by the
association, credit card statements for credit cards issued in the name of the association,
statements for services rendered, and reimbursement requests submitted to the association,
provided that the person submitting the reimbursement request shall be solely responsible for
removing all personal identification information from the request."
On the following screen, we will look at another requirement set forth under this same bill,
regarding the granting of exclusive use of a common interest development to one or more
homeowners.

End of Page
33 . Common Interest Development Association Record Requirements

In addition to those mandates discussed on the previous screens, keep in mind that the DavisStirling Common Interest Development Act also sets forth the following requirements in
regard to the association records:
1. The association must make available to members the association records from not only
the CURRENT fiscal year, but also from the previous 2 fiscal years, as outlined
previously in this section.
2. The current association records must be made available within 10 business days of
receipt of the members request.
3. Association records from the previous 2 fiscal years must be made available within 30
calendar days of receipt of the members request.
4. Minutes of member AND board meetings must be made PERMANENTLY
available.
5. These provisions apply to any community service organization or similar entity that is
related to the common interest development association.
6. Members are authorized to bring about legal action in a small claims court, if
necessary, to enforce this right to view and/or copy these association records, provided
that the amount demanded does not exceed the jurisdiction of that small claims court.
7. The court has the authority to assess a maximum civil penalty of $500.00 for the denial
of EACH separate written request.
Lets move on to the following screen to continue our discussion of common interest
development regulations.
End of Page

34 . More CID Amendments

Another requirement set forth in the same bill requires that in order to grant the exclusive use
of a common area to one or more owner, there must be a passing affirmative vote of 67% of
the owners in a common interest development to grant this right of exclusive use to the
member. (If the HOA of the common interest development requires a different percentage,
then that percentage is acceptable under the law.) Note that there are some exceptions to this
rule.
Under Senate Bill 61, homeowner associations (HOA) are required to hold elections for
specific matters by use of a secret ballot. The secret ballot is to be used in the cases of
elections regarding assessments, selection of members of the association board of directors,
amendments to the governing documents, or the grant of exclusive use of common area
property. This regulation prohibits the use of any funds of the HOA for the personal
campaign mailings of any association official. The bill also prohibits any mass mailing, as

defined, by an association official or candidate for campaign purposes within 60 days of any
election of association officials. Senate Bill 61 requires that homeowner associations utilize
an independent third party or parties as "inspector of elections." The number of inspectors of
election may either be one or three. Under this law, an independent third party includes,
but is not limited to, a volunteer poll worker with the county registrar of voters, a licensee of
the California Board of Accountancy, or a notary public. This independent third party may be
a member of the association, but MAY NOT be any of the following:
1.
2.
3.
4.

A member of the board of directors;

A candidate for the board of directors;
Related to a member of the board of directors;
A person who is currently employed by or under contract to the common interest
development association, as required by specific rules of the association.

On the following screens, we will look at the issue of common interest development
association assessments.
End of Page
35 . CID Assessments

Civil Code Section 1365.1 states that the homeowner association must distribute a written
notice entitled, "NOTICE ASSESSMENTS AND FORECLOSURE" to EACH member of
the common interest development association, and this must be distributed during the 60-day
period IMMEDIATELY preceding the beginning of the association's fiscal year. The notice
must be printed in at least 12-point font, and read exactly as follows. (A portion of this notice
text will continue onto the following screen.)
"NOTICE ASSESSMENTS AND FORECLOSURE
This notice outlines some of the rights and responsibilities of owners of property in common
interest developments and the associations that manage them. Please refer to the sections of
the Civil Code indicated for further information. A portion of the information in this notice
applies only to liens recorded on or after January 1, 2003. You may wish to consult a lawyer
if you dispute an assessment.
ASSESSMENTS AND FORECLOSURE
Assessments become delinquent 15 days after they are due, unless the governing documents
provide for a longer time. The failure to pay association assessments may result in the loss of
an owner's property through foreclosure. Foreclosure may occur either as a result of a court
action, known as judicial foreclosure or without court action, often referred to as nonjudicial
foreclosure. For liens recorded on and after January 1, 2006, an association may not use
judicial or nonjudicial foreclosure to enforce that lien if the amount of the delinquent
assessments or dues, exclusive of any accelerated assessments, late charges, fees, attorney's
fees, interest, and costs of collection, is less than one thousand eight hundred dollars
($1,800). For delinquent assessments or dues in excess of one thousand eight hundred
dollars ($1,800) or more than 12 months delinquent, an association may use judicial or
nonjudicial foreclosure subject to the conditions set forth in Section 1367.4 of the Civil Code.

When using judicial or nonjudicial foreclosure, the association records a lien on the owner's
property. The owner's property may be sold to satisfy the lien if the amounts secured by the
lien are not paid. (Sections 1366, 1367.1, and 1367.4 of the Civil Code) In a judicial or
nonjudicial foreclosure, the association may recover assessments, reasonable costs of
collection, reasonable attorney's fees, late charges, and interest. The association may not use
nonjudicial foreclosure to collect fines or penalties, except for costs to repair common areas
damaged by a member or a member's guests, if the governing documents provide for this.
(Sections 1366 and 1367.1 of the Civil Code)"
We will continue with the text of this notice on the following screen.
End of Page
36 . Notice Assessments and Foreclosure

This continues the text from the previous screen:

The association must comply with the requirements of Section 1367.1 of the Civil Code
when collecting delinquent assessments. If the association fails to follow these requirements,
it may not record a lien on the owner's property until it has satisfied those requirements. Any
additional costs that result from satisfying the requirements are the responsibility of the
association. (Section 1367.1 of the Civil Code) At least 30 days prior to recording a lien on
an owner's separate interest, the association must provide the owner of record with certain
documents by certified mail, including a description of its collection and lien enforcement
procedures and the method of calculating the amount. It must also provide an itemized
statement of the charges owed by the owner. An owner has a right to review the association's
records to verify the debt. (Section 1367.1 of the Civil Code) If a lien is recorded against an
owner's property in error, the person who recorded the lien is required to record a lien
release within 21 days, and to provide an owner certain documents in this regard. (Section
1367.1 of the Civil Code) The collection practices of the association may be governed by
state and federal laws regarding fair debt collection. Penalties can be imposed for debt
collection practices that violate these laws.
PAYMENTS
When an owner makes a payment, he or she may request a receipt, and the association is
required to provide it. On the receipt, the association must indicate the date of payment and
the person who received it. The association must inform owners of a mailing address for
overnight payments. (Section 1367.1 of the Civil Code) An owner may dispute an assessment
debt by submitting a written request for dispute resolution to the association as set forth in
Article 5 (commencing with Section 1368.810) of Chapter 4 of Title 6 of Division 2 of the
Civil Code. In addition, an association may not initiate a foreclosure without participating in
alternative dispute resolution with a neutral third party as set forth in Article 2 (commencing
with Section 1369.510) of Chapter 7 of Title 6 of Division 2 of the Civil Code, if so requested
by the owner. Binding arbitration shall not be available if the association intends to initiate a
judicial foreclosure. An owner is not liable for charges, interest, and costs of collection, if it
is established that the assessment was paid properly on time. (Section 1367.1 of the Civil
Code)

MEETINGS AND PAYMENT PLANS

An owner of a separate interest that is not a timeshare may request the association to
consider a payment plan to satisfy a delinquent assessment. The association must inform
owners of the standards for payment plans, if any exist. (Section 1367.1 of the Civil Code)
The board of directors must meet with an owner who makes a proper written request for a
meeting to discuss a payment plan when the owner has received a notice of a delinquent
assessment. These payment plans must conform to the payment plan standards of the
association, if they exist. (Section 1367.1 of the Civil Code)"
End of Page

37 . Fiscal Responsibilities of the CID Association's Board of Directors

Civil Code Section 1365.5 sets forth the law regarding the fiscal responsibilities of the
common interest development associations board of directors, which includes reviewing
each of the following statements or reports:
1. On at least a quarterly basis, a current reconciliation of the associations operating
accounts.
2. On at least a quarterly basis, the current year's actual reserve revenues and expenses
compared to the current year budget.
3. On at least a quarterly basis, an income and expense statement for the CID
associations operating and reserve accounts.
4. The latest account statements prepared by the financial institutions where the
association has its operating and reserve accounts.
In order to withdraw money from the associations reserve accounts, the signatures of a
minimum of 2 people are necessary. These 2 people must be EITHER association board of
director members, OR, one must be a member of the association board of directors, and the
other must be an officer who is NOT a member of the board of directors.
Under this section of the Civil Code, reserve accounts are defined as:
(1) Moneys that the association's board of directors has identified for use to defray the
future repair or replacement of, or additions to, those major components which the
association is obligated to maintain; OR
(2) The funds received and not yet expended or disposed from either a compensatory
damage award or settlement to an association from any person or entity for injuries to
property, real or personal, arising from any construction or design defects. These funds
shall be separately itemized from funds described in paragraph (1).
Lets continue this discussion on the following screen.
End of Page
38 . Temporary Transfer or Special Assessment?

Under this section of the Civil Code, the board must NOT expend ANY FUNDS that have
been designated as "reserve funds" UNLESS they are used for the repair, restoration,
replacement, or maintenance of the major components that the association is responsible to
repair, restore, replace, or maintain, as these items are the reason for the establishment of
such a reserve fund.
However, in the case of a temporary transfer from the reserve fund, the board IS permitted to
authorize this temporary transfer from the reserve fund into the general operating fund of the
association, IF necessary to meet short-term cash flow needs or other expenses. In such a
situation, the board must provide a notice of intent to consider the transfer. This notice must
include the following:
Why the transfer is necessary;
The repayment options; and
Whether a special assessment might be considered for this need.
Transferred funds as described herein must be restored to the reserve account within one
year of the date of the initial transfer, unless the board provides written notice and
documentation showing that a delay in replacing these moneys would be in the best interest
of the common interest development.
The board must take seriously its duty to exercise wise financial management in the
maintenance of this reserve account. If necessary, the board has the authority to levy a
special assessment, which is subject to those limitations in Section 1366. The board may, at
its discretion, extend the date the payment on the special assessment is due. (However, keep
in mind that even if the board does choose to extend the payment due date, this does NOT
affect or prevent the board from pursuing any legal remedy to enforce the collection of that
unpaid special assessment.)
Let's move on to the following screen.
End of Page
39 . Special Assessments and the Board of Directors

As set forth under Civil Code Section 1365, at least once every 3 years, the board of
directors must have a "reasonably competent and diligent visual inspection" conducted. This
inspection must focus on the accessible areas of the major components that the association is
obligated to repair, replace, restore, or maintain as part of a study of the reserve account
requirements of the common interest development, if the current replacement value of the
major components is equal to or greater than of the gross budget of the association
(excluding the association's reserve account for that period).
Once this inspection is completed, the board will either review this study itself, or have it
reviewed annually. At this time, the board must take into consideration any necessary
adjustments to the board's analysis of the reserve account requirements as a result of that
review, and then implement such adjustments if necessary.

This study must, at a minimum:

(1) Identify the major components that the association is obligated to repair, replace, restore,
or maintain that (as of the study date) have a remaining useful life of less than 30 years;
(2) Identify the probable remaining useful life of the aforementioned components as of
the date of the study;
(3) Estimate the cost of repair, replacement, restoration, or maintenance of these components;
AND
(4) Estimate the total annual contribution necessary to defray the cost to repair, replace,
restore, or maintain these components during AND at the end of their useful life, after
subtracting total reserve funds as of the date of the study.
Note: This section does not apply to an association that does not have a common area.
On the following screen, we will take a look at the definitions of terms used above.
End of Page

40 . Disclosure Terms Defined

Civil Code Section 1365.2.5 addresses the Assessment and Reserve Funding and Disclosure
Form, which is required in regard to an association or a property to disclose the value,
additional assessments, reserve fund, and other financial representations. This disclosure
form section has been recently amended to apply to all reports and disclosures made after
July 1, 2005.
Under Section 1365.2.5, the terms used on the previous screen are defined. These are as
follows:
Estimated Remaining Useful Life: The time reasonably calculated to remain before a major
component will require replacement.
Major Component: Components with an estimated remaining useful life of more than 30
years may be included in a study as a capital asset or disregarded from the reserve
calculation, so long as the decision is revealed in the reserve study report and reported in the
Assessment and Reserve Funding Disclosure Summary.
End of Page
41 . Regular and Special Assessments

The association has the authority to levy regular and special assessments that are sufficient to
perform its obligations. Specific regulations do exist for these assessments.

1. Annual increases in regular assessments for any

fiscal year may NOT be imposed unless the
board has complied with specific provisions as
set forth under this act, OR has received a
quorum (more than 50% of the association
owners) approval of the owners.
2. The board must not impose a regular assessment
that is more than 20% of the regular assessment
for the association's preceding fiscal year.
3. The board must not impose special assessments
that will be more than 5% of the budgeted gross
expenses of the association for that fiscal year,
unless there is a quorum affirmative vote of the owners.
Keep in mind that the board DOES NOT limit assessment increases that are necessary for
emergency situations, as in any of the following situations:
1. A court-ordered extraordinary expense;
2. If a threat to personal safety is discovered on the property, an extraordinary expense
deemed necessary to repair or maintain all or part of the common interest development
for which the association is considered responsible; OR
3. An extraordinary expense deemed necessary to repair or maintain all or part of the
common interest development for which the association is responsible, when such an
expense could not have been reasonably foreseen by the board when it prepared the pro
forma operating budget
Before an assessment may be imposed or collected, however, the board must first pass a
resolution stating their written findings regarding necessity of the extraordinary expense, and
why this expense was not/could not have been reasonably foreseen in the budgeting process,
and this resolution must be provided to the members along with the notice of assessment.
Let's move on to the following screen.
End of Page

42 . More Assessments

Any regular assessments that are imposed and collected to meet the association's obligation
are exempt from execution by the association's judgment creditor only to the extent
necessary for the association to perform essential services, such as paying for utilities
and insurance. This exemption does NOT apply to any consensual pledges, liens, or
encumbrances that have been approved by the owners of an association, OR to any lien for
labor or materials supplied to the common area.
The following regulations also apply to the assessments:
The association must notify the owners of separate interests, between 30 and 60 days
before the increased assessment is due (no more or no less), of this increased

assessment by first-class mail.

Regular and special assessments are delinquent 15 days after they become due,
unless the declaration provides a longer time period, in which case the longer time
period shall apply. If an assessment is delinquent the association may recover all of the
following:
a. Reasonable costs incurred in collecting the delinquent assessment, including
reasonable attorney's fees.
b. A late charge not exceeding 10% of the delinquent assessment or $10.00,
whichever is greater, with some exceptions.
c. Interest on all sums imposed under this section of the Civil Code, which include
delinquent assessments, reasonable fees, collection costs, and reasonable
attorney's fees, at an annual interest rate of not more than 12%, which begins 30
days after the assessment becomes due, unless the declaration specifically notes
the interest recovery rate at a lower rate, in which case the lesser of the two
amounts will apply.
Let's continue this discussion on the following screen.
End of Page
43 . Levying the Assessment

Should the board meet the requirements and levy an assessment, it then becomes the owner's
responsibility to pay this assessment. Under the Davis-Stirling Common Interest
Development Act, the following are considered to be the debt of the owner of the specific
interest at the time the assessment or other amounts are levied:
Regular or special assessments of the association;
Late charges;
Reasonable collection costs;
Reasonable attorney's fees; and
Interest, as specified.
Should the owner not pay these debts, then the association will record a notice of delinquent
assessment, and the debts will become a lien on the owner's separate interest. The DavisStirling Common Interest Development Act authorizes the common interest development
association to enforce such a lien in any legal manner. This might include turning to a
nonjudicial foreclosure, also known as a sale by a trustee.
Note that an owner of a separate interest in a common interest development should pay the
assessment "in full under protest" even if that assessment is under DISPUTE. Under the
current law, the right of redemption allows a judgment debtor to redeem his or her property
after a judicial foreclosure only if the decree of foreclosure finds that a deficiency judgment
may be ordered against that debtor.
End of Page
44 . Common Interest Developments and Delinquent Assessments

Senate Bill 137 has expanded the required use of alternative dispute resolutions (ADR) for
disputes involving delinquent assessments. This law is set forth under Civil Code Section
1367.1. This means that before initiating a foreclosure on an owner's separate interest, a
homeowner association must offer the owner (and if the owner requests this) the option of
participating in a dispute resolution, under the association's "meet and confer" program, OR
alternative dispute resolution. The choice of which of these two avenues is to be taken rests
with the owner, except for a situation wherein the association plans to initiate a foreclosure,
in which case binding arbitration will not be a viable option.
The HOA's board of directors is the sole decision-maker when it comes to whether or not a
lien foreclosure will be initiated. Under no circumstance may this decision be delegated to
another party, such as an agent of the association. If the board approves the decision to
initiate foreclosure, which must be made by the majority vote, this vote to approve the lien
foreclosure MUST be completed a minimum of 30 days before any public sale.
The Civil Code Section 1367.1 provides for a secondary address for an owner to receive
collection notices. As set forth under Civil Code Section 1367.1 (k), if the owner submits a
written request identifying a second address for the purposes of collection notices, then the
association must send additional copies to the provided secondary address where
correspondence/notices from the homeowner association must also be sent.
Reminder: Civil Code Section 1367.1 ONLY applies to liens recorded AFTER JULY 1,
2003.
Let's move on to the next screen to continue our discussion of Civil Code Section 1367.1.
End of Page

45 . Notice of Lien

If a common interest development association determines that a lien is to be recorded against

the separate interest of an owner who has NOT paid the mandated regular or special
assessment, then the association must notify the owner of this. The owner must be notified in
writing, via certified mail, at least 30 days before such a lien is recorded. This notice must
include the following:
1. A general description of the collection and lien enforcement procedures of the
association, as well as how the amount was collected.
2. A statement that this owner does have the legal right to inspect the association records.
3. The following statement in 14-point boldface type, if the notice is printed, or in
capital letters, if the notice is typed:
"IMPORTANT NOTICE:
IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE
YOU ARE
BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT
ACTION. "

4. An itemized statement of the charges owed by the owner. (This statement must include
those items on the statement that show the amount of any delinquent assessments, the
fees and reasonable costs of collection, reasonable attorney's fees, any late charges, and
interest, if any.)
5. A statement that the owner will NOT be held liable to pay the charges, interest, and
costs of collection, if it is found that the assessment WAS actually paid on time.
We will continue this discussion on the next screen.

End of Page
46 . Notice of Lien, Continued

In addition to those specifics set forth on the previous screen, a lien notice must include the
following:
6. The right to request a meeting with the board as specified in this subdivision of the
California Civil Code.
7. The right to dispute the assessment debt by submitting a written request for dispute
resolution to the association under the association's "meet and confer" program, as
previously discussed herein.
8. The right to request alternative dispute resolution with a neutral third party BEFORE
the association may initiate foreclosure against the owner's separate interest, as
previously discussed.
Under this section of the Civil Code, any payments made against this debt, by the owner of a
separate interest, must be paid in a certain order. First, the payment must be applied toward
the assessments owed. Once this assessment is paid in full, the payments will be applied to
the fees, collection costs, attorney's fees, late charges, and interest. If an owner does make
such a payment, the association must provide a receipt for the payment at the owner's
request. This receipt must state the date of the payment, as well as the person who received
the payment.
The common interest development association must provide a mailing address for members
who wish to make an overnight payment of these assessments.
A designated member of the association must sign the notice of delinquent assets. A copy of
the recorded notice of delinquent assessment must be sent via certified mail to every person
whose name is shown as an owner of the separate interest in the association's records. Such
notice must be mailed no later than 10 calendar days after the notice is recorded.
Within 21 days of the payment in full of the sums, specified in the notice of delinquent
assessment, the association must record in the office of the county recorder in which the
notice of delinquent assessment has been recorded a lien release OR notice of rescission.
The association must then provide the owner with a copy of the lien release or the notice that
the delinquent assessment has been satisfied.

End of Page
47 . Collection of Delinquent Assessments

Civil Code Section 1367.4 - a new addition to the Civil Code - became operative on
January 1, 2006.
Under Senate Bill 137, which is, in part, set forth under this section of the Civil Code, the
procedures used for collecting delinquent assessments for certain debts - IF those debts
come about ON OR AFTER July 1, 2006 - have been revised. The new law sets forth these
amendments. The law states that when an association of a common interest development
seeks to collect delinquent assessments that are LESS THAN $1,800.00, it may not
foreclose on the lien unless it meets the set conditions. (Note that these "delinquent
assessments" do not, under Civil Code Section 1367.4, include any of the following changes:
accelerated assessments, late charges, fees, and costs of collection, attorney's fees, or
interest.) Then the association must take one of two actions:
1. File a civil action in small claims court OR
2. Record a lien.
However, an association is NOT PERMITTED to foreclose on this lien UNTIL the
amount equals or exceeds $1,800.00, OR UNTIL the assessments are more than 12
months delinquent.
We will continue this discussion on the following screen.
End of Page
48 . Provisions for Physical Changes to a CID Home or Common Area

As you know, the Davis-Stirling Common Interest Development Act defines and regulates
common interest developments (CID). Existing law requires that the governing documents
for a common interest development require the associations approval before an owner is
allowed to make a physical change to his or her home or to the common area. Before
approving such changes, the association must satisfy specified provisions. Among these
provisions is the requirement that a decision on a proposed change be consistent with any
governing provision of law, including the Fair Employment and Housing Act. Additional
provisions are set forth under Civil Code Section 1376, as follows:
The association must set forth a fair, reasonable, and expeditious procedure for making
its decision, and this procedure, including prompt deadlines, must be included in the
governing documents of the association.
A decision on a proposed change must be made in good faith, and may NOT be
unreasonable, capricious, or arbitrary.
Any decision on a proposed change must not violate ANY provision of the law,
including but NOT limited to: the Fair Employment and Housing Act, a building code,

or other applicable law that governs land use or public safety.

The decision must be given in writing; if the change is NOT approved, this written
decision must include WHY it was not approved, and how to go about getting the
board of directors to reconsider the decision.
As stated above, if the association disapproves a proposed change, the applicant is
entitled to have this decision reconsidered by the associations board of directors that
made the decision. Such a reconsideration must be held at an open meeting of the
board.
Note that this type of reconsideration by the board does not constitute dispute
resolution as set forth under Civil Code Section 1363.820.
Keep in mind that nothing under this law authorizes any type of physical change to the
common area, if that change is inconsistent with the association's governing documents,
unless the change is required by law.
On an annual basis, an association must provide its members with notice of any
requirements for association approval of physical changes to property.
End of Page
49 . More CID Amendments and Additions

There are a few additional sections of the Civil Code that address topics under Common
Interest Developments. However, these are lengthy laws that are not something on which you
will be tested on the salesperson licensing examination. Therefore, while we have discussed
some of these laws in full - especially in the cases of large portions of new text - we also do
not want to bog you down with unnecessary information.
As we said earlier, don't let yourself get overwhelmed by the sheer volume of these laws. As
a salesperson, you simply need to know that these exist and the basics of their applicability.
You won't be expected to have these laws memorized; we simply want you to be aware that
these additions have been made.
It is not necessary that you memorize this law, but merely that you are familiar with its
existence, definitions, and basics. Keep this in mind as you read through this text. Should you
decide to specialize in CID brokerage in the future, you will have the opportunity to take an
entire broker-level course entitled, "Common Interest Developments," in which you will
learn the myriad regulations that govern this segment of California real estate law.
Let's take a look at a few more changes to the California laws.
End of Page
50 . Miscellaneous Law Amendments

Assembly Bill 1729 requires, among other things, that a real estate broker who

arranges the purchase of a fractionalized interest in a trust deed must record this
fractionalized interest in the trust deed within 10 days of the purchase. Under this bill,
the requirement for the recording of an investor's interest in a note is consistent with
that requirement for the recording of whole notes.
Senate Bill 833 has passed a law that governs "junk faxes." Effective January 1,
2006, this law prohibits the sending of unsolicited advertising faxes either FROM
someone in California OR TO someone in California. The damages for violations of
this law are a minimum of $500.00 per violation.
Regarding landlords and tenants, beginning January 1, 2006, landlords are
authorized to give a 30-day notice if they want to terminate their month-to-month
tenants. Remember that the previous law had mandated that this notice be a 60-day
notice, but that law EXPIRED as of December 31, 2005.
Operative as of October 1, 2005, the Building Energy Efficiency Standards (under
Title 24) requires that air conditioning ducts and heating ducts must be tested for leaks
whenever a central air conditioner or a furnace is installed or replaced. The current
standards state that if these ducts show a 15% or higher leakage, then they MUST
BE REPAIRED.
We'll continue with the current amendments on the following screen.
End of Page
51 . Density Bonus Amendments and Lower Income Housing Units

The California Planning and Zoning Law requires that when a housing developer proposes a
housing development within the jurisdiction of the local government, the city, county, or
city and county provide the developer with a density bonus and other incentives or
concessions for the production of lower income housing units OR the donation of land
within the development if the developer meets certain requirements. These include a mandate
that the developer construct a certain percentage of the total units to be designed
ESPECIALLY for specified income households or qualifying residents.
Under Senate Bill 435, the state's density bonus law, which was previously implemented,
must NOW be set forth in a manner that makes the law more easily understandable, so that it
is more easily implemented and functional by applying the density bonus law to all forms of
common interest developments.
Senate Bill 435 has amended these eligibility requirements to include the following:
The construction of a mobile home park that limits residency based on age
requirements for housing for older persons; AND
The construction of a community apartment project and a stock cooperative for those
people and families that have what is considered to be "moderate income."
The local administrative requirements imposed by these amendments impose a statemandated local program.
The California Constitution requires the state to reimburse local agencies and school districts
for certain costs mandated by the state, and set forth the manner in which that reimbursement

is to be made. For more details about the density bonuses and other incentives, check out the
California Government Code, Section 65915.
End of Page
52 . Addressing the Need for Housing in California

The Planning and Zoning Law states that a local agency must
NOT DISAPPROVE any housing development project,
including farmworker housing, for very low, low-, or moderateincome households. Under this law, the local agency is also
prohibited from making its approval conditional through the
utilization of design review standards, in such a way that it makes
the project infeasible for development for those households.
The Planning and Zoning Law also requires that in any action to
enforce these provisions, if a court finds that the local agency
disapproved the project or conditioned its approval without making
the required findings or without making sufficient findings supported
by substantial evidence, the court WILL issue an order or judgment
that compels such compliance within 60 days. Under the most current set of amendments, the
conditions upon which a disapproval or a conditional approval of the housing development
project is based are revised. We will discuss these conditions on an upcoming screen.
Government Code Section 65589.5 sets forth the critical problem of lack of housing in
California. This problem is considered critical in that it threatens the economic,
environmental, and social quality of life in California. Housing in California has become
THE most expensive in the United States, and the excessive cost of the state's housing
supply is partially caused by activities and policies of many local governments. Many of
these local governments limit the approval of housing, increase the cost of land for housing,
and require that producers of housing pay high fees and exactions.
Unfortunately, the results of these activities and policies include the following:
1.
2.
3.
4.
5.
6.
7.

Discrimination against low-income and minority households;

Lack of housing to support employment growth;
Imbalance in jobs and housing;
Reduced mobility;
Urban sprawl;
Excessive commuting; and
Deterioration of the air quality.

We will continue this discussion on the following screen.

End of Page
53 . Housing Problems in California

Under Government Code Section 65589.5, the Legislature states that there are many local
governments that do not give adequate attention to the economic, environmental, and
social costs of decisions that result in disapproval of housing projects, reduction in
density of housing projects, and excessive standards for housing projects.
This law states that it is the California State policy that local governments not reject or
make infeasible those housing developments that contribute to meeting the housing need
determined within this section of law, without a THOROUGH ANALYSIS of the full
economic, social, and environmental effects of the action and without complying with the
other requirements set forth in this law.
Another point made by the Legislature is that it also recognizes that premature and
unnecessary development of agricultural lands for urban uses continues to have negative
effects on the availability of those lands for food and fiber production, as well as negative
effects on the California economy. Therefore, the state policy states that development should
be guided away from prime agricultural lands. To implement this section of the law, the
Legislature says that local jurisdictions should encourage, within reason, filling existing
urban areas.
As noted earlier, under the most current set of amendments, the conditions upon which a
disapproval or a conditional approval of the housing development project is based have been
revised.
We will look at the revised law on the following screen.
End of Page
54 . Housing Development Disapproval

The current version of Government Code Section 65589.5 requires that a local agency
must NOT disapprove a housing development, including farmworker housing, for very
low-, low-, or moderate-income households or condition approval, including through
the use of design review standards, in a manner that renders the project infeasible for
development for the use of very low-, low-, or moderate-income households unless it
makes written findings (that must be based on substantial evidence in the record) as to
one of the following:
1. The jurisdiction has adopted a housing element under this section that is in substantial
compliance with this article, AND that jurisdiction has already met OR exceeded its
share of the regional housing need allocation for the planned period, FOR that specific
income category, as has been proposed for the housing development project, BUT
ONLY IF any disapproval or conditional approval is NOT based on any of the
reasons prohibited by Title 7, Section 65008, of the Government Code, which is
entitled, "Planning and Land Use." These reasons include the following: race, sex,
color, religion, ethnicity, national origin, ancestry, lawful occupation, familial
status, disability, or the age of the individuals OR group of individuals. (Note: If
the housing development project includes a mix of income categories, and the
jurisdiction has not met or exceeded its share of the regional housing need for one or

more of those categories, then this paragraph may NOT be used to either disapprove or
conditionally approve the project. The share of regional housing need met is to be
calculated in accordance with the forms and definitions that may be adopted by the
Department of Housing and Community Development.)
2. The development project as it has been proposed would have a specific, adverse
impact upon the public health or safety, if there is no feasible way to mitigate that
specific impact in a manner that is both satisfactory AND will not cost so much to
mitigate that it renders the development too expensive to serve as housing for low- and
moderate-income households. (As used herein, a "specific, adverse impact" is defined
under this section as a "significant, quantifiable, direct, and unavoidable impact, based
on objective, identified written public health or safety standards, policies, or conditions
as they existed on the date the application was deemed complete." Note that
inconsistency with the zoning ordinance OR general plan land use designation does
NOT qualify as having a "specific, adverse impact upon the public health or safety.)
We will continue this list on the following screen.
End of Page

55 . Permitted Disapproval of a Housing Development

Remember that, as stated on the previous screen, a local agency must NOT disapprove a
housing development for very low, low-, or moderate-income households or condition the
approval of such development in a manner that makes the project infeasible for its
development for the use of very low-, low-, or moderate-income households unless it makes
written findings (that must be based on substantial evidence in the record), as to one of
the following:
3. That the denial of the project or imposition of conditions is required, because the
project must comply with specific state or federal law, and such compliance will be too
costly, rendering that development unaffordable to low- and moderate-income
households.
4. That the development project has been proposed on a land that has been zoned for
agriculture or resource preservation, IF:
That land is surrounded on at least 2 sides by land already being used for these
same purposes (agricultural or resource preservation); OR
That land does not have the necessary adequate water or wastewater facilities to
serve the development project.
5. That the development project is shown to be inconsistent with both the jurisdiction's
zoning ordinance and general plan land use designation, which is specified in an
element of the general plan as it existed on the date the application was deemed
complete, IF this jurisdiction has, SINCE THAT DATE, adopted a revised housing
element.
Let's move on to the following screen.
End of Page

56 . More Housing Development Projects

Note that the regulations we've discussed herein must NOT be

used as a means of disapproving OR conditionally approving a
housing development project if the development project is
proposed on a site that is identified as suitable or available for
very low-, low-, or moderate-income households in the
jurisdiction's housing element, and consistent with the density
specified in the housing element, even though it is inconsistent
with both the jurisdiction's zoning ordinance and general plan
land use designation.
If the local agency has failed to identify in its land any sites that
can be developed for housing within the planning period AND
that are sufficient to provide for the jurisdiction's share of the regional housing need for all
income levels, then this law may NOT to be used to disapprove or conditionally approve a
housing development project. This applies in the case of a housing project proposed for a site
that has been designated in any element of the general plan for residential uses or designated
in any element of the general plan for commercial uses if residential uses are permitted or
conditionally permitted within commercial designations. Regarding any court action, the
local agency bears the burden of proof to SHOW that its housing element does identify
adequate sites with appropriate zoning and development standards and with services and
facilities to accommodate the local agency's share of the regional housing need for the very
low- and low-income categories.
This section of law must not be construed to relieve a local agency from complying with the
Congestion Management Program or the California Environmental Quality Act. Nor does
this section in any way prohibit a local agency from requiring that the development project
comply with objective, quantifiable, written development standards, conditions and policies
appropriate to, and consistent with, meeting the jurisdiction's share of the regional housing
need.
Note that this section of the Government Code applies to charter cities (in addition to other
established areas), because of the Legislature's determination that the lack of housing is a
"critical statewide problem."
We will continue this discussion on the following screen.
End of Page
57 . Housing Development Terms Defined

Under this section, the following definitions have been set forth for the terms used herein:
Feasible: "Capable of being accomplished in a successful manner within a reasonable period
of time, taking into account economic, environmental, social, and technological factors."

Housing Development Project: "A use consisting of either of the following:

Residential units only OR
Mixed-use developments consisting of residential and nonresidential uses in which
nonresidential uses are limited to neighborhood commercial uses and to the first floor
of buildings that are two or more stories. As used in this paragraph, "neighborhood
commercial" means small-scale general or specialty stores that furnish goods and
services primarily to residents of the neighborhood."
Housing for Very Low-, Low-, or Moderate-Income Households: "Either (A) at least 20
percent of the total units shall be sold or rented to lower income households, as defined in
Section 50079.5 of the Health and Safety Code, OR (B) 100 percent of the units shall be sold
or rented to moderate-income households as defined in Section 50093 of the Health and
Safety Code, or middle-income households, as defined in Section 65008 of this code.
Housing units targeted for lower income households shall be made available at a monthly
housing cost that does not exceed 30% to 60% of area median income with adjustments for
household size made in accordance with the adjustment factors on which the lower income
eligibility limits are based. Housing units targeted for persons and families of moderate
income shall be made available at a monthly housing cost that does not exceed 30% of 100%
of area median income with adjustments for household size made in accordance with the
adjustment factors on which the moderate income eligibility limits are based."
Area Median Income: "Area median income as periodically established by the Department
of Housing and Community Development pursuant to Section 50093 of the Health and
Safety Code. The developer shall provide sufficient legal commitments to ensure continued
availability of units for very low- or low-income households in accordance with the
provisions of this subdivision for 30 years."
Neighborhood: "A planning area commonly identified in a community's planning
documents, and identified as a neighborhood by the individuals residing and working within
the neighborhood."
End of Page

58 . Eligibility for Court Action

The current version of Government Code Section 65589.5, as amended under Senate Bill
575, expressly authorizes the applicant for the housing development project OR any person
who would be eligible to apply for residency in that project to bring an action in court
pursuant to specified provisions and would also authorize the court to vacate the decision of
the local agency, as specified, deem the application complete, and impose fines pursuant to
specified procedures if the court finds that the local agency acted in bad faith and failed to
carry out the court's order or judgment within the 60-day period. The bill would also specify
procedures for appeal of the court's order.
Under Senate Bill 326, the previous law set forth under "Rental Housing and Government
Code" stated that low and moderate rental housing developments that consisted of 100 units

OR LESS could NOT be denied a permit, provided that these housing developments
followed the regulations set forth under local government development standards. In
addition, the housing development was required to receive either a negative declaration, OR
a mitigated declaration, as set forth under the California Environmental Quality Act.
The newest amendment to this law, which became effective January 1, 2006, has expanded
the coverage of this law, as you read on the preceding screens. Currently, this law also applies
to duplexes, triplexes and fourplexes, and it expands the law to charter cities, as well.
End of Page
59 . Real Property Sale Foreclosures

Beginning with Civil Code Section 2924, the topic of nonjudicial foreclosure sales for
mortgages is set forth. The following sections regulate the various aspect of such nonjudicial
foreclosure sales under either mortgages and Under Civil Code Section 2924 (b), the law is
set forth regarding mortgages - and in particular, the topics of notice of default or sale. This
law requires a person recording a notice of default OR a notice of sale, under any deed of
trust or mortgage, with power of sale, to perform specified actions. Under Assembly Bill
885, this law has been modified to include an amended definition of the term, "last known
address" under this provision.
Let's take a look at this particular portion of Civil Code Section 2924 (b), as follows:
2924b. (a) Any person desiring a copy of any notice of default and of any notice of sale
under any deed of trust or mortgage with power of sale upon real property or an estate
for years therein, as to which deed of trust or mortgage the power of sale cannot be
exercised until these notices are given for the time and in the manner provided in
Section 2924 may, at any time subsequent to recordation of the deed of trust or
mortgage and prior to recordation of notice of default thereunder, cause to be filed for
record in the office of the recorder of any county in which any part or parcel of the real
property is situated, a duly acknowledged request for a copy of the notice of default
and of sale. This request shall be signed and acknowledged by the person making the
request, specifying the name and address of the person to whom the notice is to be
mailed, shall identify the deed of trust or mortgage by stating the names of the parties
thereto, the date of recordation thereof, and the book and page where the deed of trust
or mortgage is recorded or the recorder's number, and shall be in substantially the
following form:
"In accordance with Section 2924b, Civil Code, request is hereby made that a copy of
any notice of default and a copy of any notice of sale under the deed of trust (or
mortgage) recorded ______, ____, in Book_____ page ____ records of ____ County,
(or filed for record with recorder's serial number ____, _______County) California,
executed by ____ as trustor (or mortgagor) in which ________ is named as beneficiary
(or mortgagee) and ______________ as trustee be mailed to _________________ at
____________________________. ( Name, Address)
NOTICE: A copy of any notice of default and of any notice of sale will be sent only to
the address contained in this recorded request. If your address changes, a new request

must be recorded.
Signature _________________"
Upon the filing for record of the request, the recorder shall index in the general index
of grantors the names of the trustors (or mortgagor) recited therein and the names of
persons requesting copies.
Let's move on to the following screen, in which we will read the requirements for recording
the notice of default or the notice of sale:
End of Page

60 . Recording a Notice of Default or a Notice of Sale

The mortgagee, trustee, or other person who is authorized to record a notice of default
or notice of sale must perform each of the following tasks:
1. Within 10 business days following the aforementioned recording, either deposit or
cause to be deposited in the United States mail an envelope to be sent via registered or
certified mail with the postage prepaid. This envelope must include the following:
a. A copy of the notice with the recording date shown, addressed to each person
whose name and address are set forth in a duly recorded request and sent to the
address that has been designated in the request AND to each trustor or
mortgagor at his or her last known address if that last known address is
different than the address specified in the deed of trust or mortgage with power
of sale.
b. At least 20 days before the date of sale, deposit or cause to be deposited in the
United States mail an envelope, sent by registered or certified mail with postage
prepaid, containing a copy of the notice of the time and place of sale, addressed
to each person whose name and address are set forth in a duly recorded request
for such, and directed to the address designated in the request and to each trustor
or mortgagor at his or her last known address if different than the address
specified in the deed of trust or mortgage with power of sale.
Now, here is where the latest amendment under Assembly Bill 885 comes into play,
regarding the above term, "last known address," which has since been revised. According to
the current version of Civil Code Section 2924b, the "last known address" of each trustor or
mortgagor is defined to mean "the last business or residence physical address actually known
by the mortgagee, beneficiary, trustee, or other person authorized to record the notice of
default. For the purposes of this subdivision, an address is "actually known" if it is contained
in the original deed of trust or mortgage, or in any subsequent written notification of a change
of physical address from the trustor or mortgagor pursuant to the deed of trust or mortgage.
For the purposes of this subdivision, "physical address" does not include an e-mail or any
form of electronic address for a trustor or mortgagor. The beneficiary shall inform the trustee
of the trustor's last address actually known by the beneficiary. However, the trustee shall
incur no liability for failing to send any notice to the last address unless the trustee has actual
knowledge of it."

Now, let's move ahead to Civil Code Section 2924g, wherein additional amendments have
been made.
End of Page

61 . Real Property Trustee Sale Foreclosure Amendments

Now let's look at the amendments that have been made to the Civil Code 2924g, under
Assembly Bill 885. Under the former version of this law, it was set forth that all sales of
property under the power of sale contained in any deed of trust or mortgage must begin at a
time and location that were specified in the notice of sale. It also required that any
postponement of this sale be announced at THAT specific time and location, OR that it be
announced at ANY time before the sale completion, to be determined at the discretion of the
trustee, or if the trustee's beneficiary instructed that the sale proceedings be postponed. The
previous law in this regard set forth a limit on the number of postponements allowed, at a
maximum of 3 postponements.
The previous law also required a new notice of sale to be given before any further sale
proceedings were scheduled. Further, the former version of Civil Code Section 2924g set
forth a requirement that the trustee was to postpone the sale upon the order of any court of
competent jurisdiction, or where stayed by operation of law, or by the mutual agreement of
any trustor and any beneficiary or any mortgagor and any mortgagee. However, according to
this former requirement, it was noted that such a postponement did NOT COUNT in
determining the maximum number of postponements permitted without giving a new notice
of sale.
Under the amended version of this Civil Code section, the aforementioned requirements have
been changed.
End of Page
62 . Amendments to Trustee Sale Foreclosure Laws

Assembly Bill 885 has set forth new requirements for the postponement of the sale
proceedings about which we've been reading. These new requirements can be found under
the California Civil Code Section 2924g. Let's take a quick look at the most current version
of this section now.
The most up-to-date requirements are as follows:
The law now permits any number of postponements of the sale proceedings at any
time prior to the completion of the sale, for any period of time that may not exceed
a total of 365 days from the date which was set forth in the notice of sale;
The trustee in such a matter must postpone such a sale in accordance with any of the
following matters:
a. Upon the order of any court of competent jurisdiction;

b. If stayed by operation of law;

c. By the mutual oral or written agreement of EITHER any trustor and any
beneficiary OR any mortgagor and any mortgagee;
d. At the discretion of the trustee; OR
e. Upon instruction by the beneficiary to the trustee that the sale proceedings be
postponed.
Any postponements beyond the 365-day period would require a new notice of sale to be
given before any further sale proceedings may be scheduled. The new fees brought about by
the new notice of sale must not exceed reasonable costs, or the amounts set forth in Sections
2924c and 2924d.
Let's move on to learn about the most recent amendments to the California Finance Lenders
Law.
End of Page
63 . California Finance Lenders Law

The California Finance Lenders Law sets forth the requirements for the licensing and the
regulation of finance lenders by the Commissioner of Corporations.
Finance Code Sections 22102, 22103, 22109, and 22153, which address the finance lender
application requirements and the denial of such applications, have been amended by
Assembly Bill 1419, which became effective January 1, 2006. The current regulations that
have been enacted include the following:
1. Any licensee under this law who wishes to operate at an additional location may file a
short form license application. This law authorizes such licensee to operate at that new
location 10 days after the date of mailing the application.
2. The Commissioner is required to investigate any person responsible for the conduct of
the lending activities of a licensure applicant; the law also authorizes the
Commissioner to deny an application based on the unlawful activities of that
person.
3. Since the bill specifies additional requirements under the California Finance Lenders
Law - the violation of which is a CRIME -- then a state-mandated local program is to
be imposed.
Senate Bill 36 (SB 36), which was signed into law in October 2009, was enacted in order to
bring California into compliance with the federal Secure and Fair Enforcement Mortgage
License Act (SAFE Act) of the Housing and Economic Recovery Act of 2008 (Public Law
110-289). Since December 31, 2009, new SB 36 requirements for those intending to engage
in mortgage loan activities have been in effect.
Pursuant to SB 36, B&P Section 10166.02, Real estate brokers who make, arrange, or service
loans secured by real property and any salespersons who act in a similar capacity under the
supervision of a broker must submit a report, Mortgage Loan Activity Notification (RE 866),
to the Department by January 31, 2010 or within 30 days of commencing the activity,

whichever is later. The report must be completed on-line after January 1, 2010. This means
that each licensed broker, licensed real estate corporation and licensed salesperson who
conducts mortgage loan activities as described below must submit a report.
Licensees will provide identifying information, including their name and real estate license
number. If the licensee is a real estate corporation, then the name and license number of the
designated officer will also be provided. The notification will identify the mortgage loan
activities being performed as well as any mortgage loan originator activities.
Penalty fees apply for failure to submit this required notification. Penalties are fifty dollars
($50) per day for the first 30 days the report is not filed and one hundred dollars ($100) per
day for every day thereafter for a maximum of $10,000.
Let's move on to the next screen to read an amendment to the mortgage loan disclosure
statement law.
End of Page
64 . Mortgage Loan Disclosure Statement Amendments

Under Assembly Bill 1729, the California Business and Professions Code Sections 10232.4,
10233, and 19238 have been amended.
B & P Code Section 10232.4 requires a real estate broker who is performing certain acts in
negotiating a loan to be secured by a lien on real property, or performing certain acts in
negotiating the purchase of a real property sales contract or a note secured by a deed of trust,
to provide the prospective lender or the prospective purchaser, depending on the situation,
with a specified disclosure statement. Under Assembly Bill 1729, the exemptions to the
requirement of providing a mortgage loan disclosure statement have been amended
somewhat.
Assembly Bill 1729 also amends B & P Code 10233, which deals with the requirements of
real estate licensees who service promissory notes, either directly or collaterally by a lien on
real property OR by a real property sales contract. The amendment to this section exempts
specific provisions that formerly required the trust accounts of the broker or other person who
was to become the servicing agent of those notes/interests to be inspected by an independent
certified public accountant.
Business and Professions Code 19238 requires a real estate broker to file certain information
with the commissioner relative to the conducting of a transaction that involves the sale of or
offer to sell a series of notes secured directly by an interest in real property, or the sale of
undivided interests in a note secured directly by real property equivalent to a series
transaction, among other requirements. The amended law, under Assembly Bill 1729, sets
forth the recording procedures to be followed in regard to such information.
End of Page
65 . Mobilehome Residency Law Addition

Senate Bill 237 has added a new section, Civil Code Section 798.19.5, to the Mobilehome
Residency Law. This section reads as follows:
"A rental agreement entered into or renewed on and after January 1, 2006, shall not include a
clause, rule, regulation, or any other provision that grants to management the right of first
refusal to purchase a homeowner's mobilehome that is in the park and offered for sale to a
third party pursuant to Article 7 (commencing with Section 798.70). This section does not
preclude a separate agreement for separate consideration granting the park owner or
management a right of the first refusal to purchase the homeowner's mobilehome that is in
the park and offered for sale."
The basics of this addition to the Mobilehome Residency Law are as follows:
This regulation is valid for any rental agreement that occurs on OR after January 1,
2006.
A rental agreement must NOT include any provision that offers the management of
a mobile home park the first right of refusal with in regard to purchasing a mobile
home that is already in this mobile home park, if that owner is offering said mobile
home for sale to a "third party."
Under Section 798.70, as referenced in the above-quoted law, the person selling the
mobilehome would have received this home after the death of its original owner, who
would be one of the following: a homeowner, heir, joint tenant, or personal
representative of the estate of the original owner, OR the agent of any of the
aforementioned individuals.
This law does allow for a separate agreement for SEPARATE consideration between
the mobile home owner and the park owner/management, in which the current owner
WOULD grant the park management the right of first refusal to purchase this mobile
home for sale.
Let's move on to the following screen to read about another amendment.
End of Page

66 . Residential Insurance Amendment

Insurance Code 10103.5 sets forth the California Residential Property Insurance Bill of
Rights, which must accompany the California Residential Property Insurance Disclosure
when the insurer provides the latter. This law sets forth the regulations concerning the
manner in which insurers maintain the information related to adverse underwriting decisions.
Under Assembly Bill 1640, this section of the Insurance Code - 10103.5 - has been amended.
As another result of Assembly Bill 1640, Insurance Code Section 791.28 has been added to
the Insurance Code. Both changes are operative on July 1, 2006. Insurance Code Section
791.28 states that any insurer under a personal lines residential property insurance policy, if it
reports the claims history or loss experience of insureds under those policies to an insurance-

support organization, must provide a specific disclosure to the insured party at the time that it
provides the disclosure required under Section 790.034 (b) (1). This additional disclosure is
set forth as follows:
"This insurer reports claim information to one or more claims information databases. The
claim information is used to furnish loss history reports to insurers. If you are interested in
obtaining a report from a claims information database, you may do so by contacting:
(Insert the name, toll-free telephone number, and, if applicable, Internet Web site address
of each claims information database to which the insurer reports the information covered
by this section.)"
The disclosure added under Section 791.28, by Assembly Bill 1640 requires the amendment
to Section 10103.5 that we discussed above. Therefore, the amended version of Section
10103.5, as of July 1, 2006, includes this disclosure (with nearly identical text as the law
above) under subsection (b)(2), as such:
"(2) (A) If the insurer under a personal lines residential property insurance policy reports
claims history or loss experience of insureds under those policies to an insurance-support
organization, the insurer shall include the following disclosure in the California
Residential Property Insurance Bill of Rights:
"This insurer reports claim information to one or more claims information databases. The
claim information is used to furnish loss history reports to insurers. If you are interested in
obtaining a report from a claims information database, you may do so by contacting:
(Insert the name, toll-free telephone number, and, if applicable, Internet Web site address
of each claims information database to which the insurer reports the information covered
by this section.)"
Let's move on to the next screen to discuss another recent law amendment.
End of Page
67 . Small Claims Court Jurisdictional Amounts

Senate Bill 422, which became effective as of January 1, 2006, has amended Sections
116.240, 116.610, and 116.940 of the Code of Civil Procedure, as well as ADDED two new
sections, 116.221 and 116.222, to this Code. These amendments and additions all relate to
small claims court. We aren't going to delve into each of these sections, but rather, we'll take
a quick look at the overall changes that apply here.
Previously, small claims courts would hear various actions, but these actions, with very few
exceptions, could NOT surpass the jurisdictional amount of $5,000.00. However, the
amendments to these regulations now allow the small claims court jurisdictional amount to
$7,500.00. As with the earlier amount limit, the $7,500.00 limit also holds some exceptions
to this requirement. This jurisdictional increase does not apply to legal entities that are not
natural persons, including the following:
Corporations;

Unincorporated Associations;
Partnerships; or
Government Entities.
These changes also require that, on or after July 1, 2006, before an individual may serve as
a temporary judge in small claims court, AND again at least every 3 years thereafter,
EACH temporary judge MUST take the course of study offered by the courts on ethics
and substantive law under rules adopted by the Judicial Council. This course must include
(but is not limited to) the following topics: state and federal consumer laws, landlord-tenant
law along with any applicable county specific rent deposit law, the state and federal Fair Debt
Collection Practices Acts, the federal Truth in Lending Act, the federal Fair Credit Billing
Act, the federal Electronic Fund Transfer Act, tort law, and contract law, including defenses
to contracts and defenses to debts.
Let's move on to the following screen to read about another law amendment.
End of Page
68 . Amendment to Labor Code

Senate Bill 101, which took effect in 2005, was presented to amend Section 226 of the Labor
Code, which relates to employee compensation. This law does not exclusively relate to real
estate, but does INCLUDE the real estate industry. The Labor Code Section 226 sets forth
requirements for ALL employers to implement in paying their employees. The amended law
requires that BY JANUARY 1, 2008, ALL EMPLOYERS must ONLY furnish the last four
digits of the social security number, OR use an existing employee identification number
(that is NOT the employee's social security number), ON ANY check, draft, or voucher
paying the employee's wages, OR ON ANY itemized statement that would accompany
said check, draft, or voucher.
This bill and the resulting law amendments would clarify this law to require that this mandate
be imposed on ALL employers, including all state, or any city, county, city and county,
district, or any other governmental entity.
Although this bill took effect immediately as an "urgency statute" when it was imposed in
2005, the law states that the deadline for the imposition of the above requirements was
January 1, 2008. Remember that a violation of these requirements is considered a
misdemeanor.
End of Page
69 . Tax Break for Registered Domestic Partners

Before we address the specific changes to the California property tax laws, let's take a look at
the Legislature's findings that precede these laws, as found under the Revenue and Taxation
Code, to understand why these changes have been necessitated.

The Legislature's intent in enacting Section 62 of the Revenue and Taxation Code is "to
guarantee equality for all Californians, regardless of gender or sexual orientation, and to
further the state's interests in protecting Californians from the potentially severe economic
and social consequences of abandonment, separation, the death of a partner, and other life
crises."
To achieve its intent of equality for ALL, the Legislature has ruled to enact various related
statutes, in an attempt to move California closer to fulfilling the promise of inalienable rights,
liberty, and equality that are pledged to ALL people in the California Constitution.
The Legislature has acknowledged that many lesbian, gay, and bisexual Californians have
continued to deal with economic discrimination based on their sexual orientation, despite
forming lasting, committed, and caring relationships with persons of the same sex under the
California laws. As with heterosexual spouses, these lesbian, gay or bisexual couples build
lives together, as do spouses, through the purchase of property and the creation and operation
of family businesses. According to the Legislature, expanding the rights of registered
domestic partners with respect to property ownership would further California's interests in
promoting family relationships and protecting family members during life crises, and would
reduce discrimination on the bases of sex and sexual orientation in a manner consistent with
the California Constitution.
Senate Bill 565, which took effect immediately in 2005 as a tax levy, has amended Section
62 of the Revenue and Taxation Code. Under this amended law, and beginning the lien date
for the 2006-2007 fiscal year, registered domestic partners are allowed to transfer
property to each other without having to have the property reassessed and taxed at the
current market value.
We will continue this discussion on the following screen.
End of Page
70 . More Change in Ownership Tax Amendments

As we said on the previous screen, under the Revenue and Taxation Code, the law addresses
those transactions that are excluded from the "Change in Ownership" stipulations of the law.
According to the amended law, "change in ownership" DOES NOT INCLUDE those
exceptions listed, including subsection (p), as follows:
"(p) Commencing with the lien date for the 2006-07 fiscal year, any transfer between
registered domestic partners, as defined in Section 297 of the Family Code,
including, but not limited to:
(1) Transfers to a trustee for the beneficial use of a registered domestic partner, or
the surviving registered domestic partner of a deceased transferor, or by a trustee of
such a trust to the registered domestic partner of the trustor.
(2) Transfers that take effect upon the death of a registered domestic partner.
(3) Transfers to a registered domestic partner or former registered domestic partner

in connection with a property settlement agreement or decree of dissolution of a

registered domestic partnership or legal separation.
(4) The creation, transfer, or termination, solely between registered domestic
partners, of any co-owner's interest.
(5) The distribution of a legal entity's property to a registered domestic partner or
former registered domestic partner in exchange for the interest of the registered
domestic partner in the legal entity in connection with a property settlement
agreement or a decree of dissolution of a registered domestic partnership or legal
separation."
In other words, Senate Bill 565 states that, under California property tax laws,
registered domestic partners will be treated THE SAME AS SPOUSES.
Now, let's move on to the following screen to look at another tax-related amendment.
End of Page
71 . Property Tax on New Subdivisions

Under Assembly Bill 1099, the amended Revenue and Taxation Code, Section 73, excludes
property for a property tax reassessment for the construction OR the addition of an active
solar energy system. This law is valid RETROACTIVELY from the 1999-2000 fiscal year
forward to the 2008-2009 fiscal year. Under the California Constitution, the laws generally
limit ad valorem taxes on real property to 1% of the full cash value of that property. Under
this limitation, the term full cash value" is defined as the assessor's valuation of real
property as shown on the 1975-76 tax bill under full cash value or, thereafter, the appraised
value of that real property when purchased, newly constructed, or a change in ownership has
occurred.
Note the definitions of the terms as used in this Section of the Code:
Active solar energy system: A system that uses solar devices, which are thermally isolated
from living space or any other area where the energy is used, to provide for the collection,
storage, or distribution of solar energy. This does NOT include solar swimming pool heaters
OR hot tub heaters.
Under the scope of this law, an active solar system may be used for any of the following:
(A) Domestic, recreational, therapeutic, or service water heating.
(B) Space conditioning.
(C) Production of electricity.
(D) Process heat.
(E) Solar mechanical energy.

End of Page
72 . New Subdivision Property Tax

Assembly Bill 14 has amended Revenue and Taxation Code Sections 2188.7 and 2823 and
added Section 327.5 to the Revenue and Taxation Code. These existing laws (2188.7 and
2823) authorize an assessors office to be created in EACH county. The new assessors office
within each county is required to determine the new base year value for the newlyconstructed taxable real property.
The primary change under Assembly Bill 14 is in the creation of the new Section 327.5,
which prohibits a county tax assessor from assigning parcel numbers OR preparing a separate
assessment or separate valuation to divide any existing residential structure into a
subdivision, UNTIL a subdivision final map or parcel map, as specified, has been
recorded as required by law. Lets read this new law in full, and then define those terms
within this section that refer to other codes. First, here is the full text of this new law:
327.5. Notwithstanding any other provision of law, the assessor shall not assign any
parcel numbers or prepare a separate assessment or separate valuation to divide any
existing residential structure into a subdivision, as defined in Section 66424 of the
Government Code, until a subdivision final map or parcel map, as described in
Sections 66434 and 66445, respectively, of the Government Code has been recorded
as required by law. If the requirement for a parcel map is waived pursuant to
subdivision (b) of Section 66428 of the Government Code, then the assessor shall not
assign any parcel numbers or prepare a separate assessment or separate valuation,
unless the applicant provides a copy of the finding made by the legislative body or
advisory agency, as required by that subdivision.
Note that the term subdivision is defined under Government Code Section 66424 (the
Subdivision Map Act), as referenced above, to mean the division, by any subdivider, of any
unit or units of improved or unimproved land, or any portion thereof, shown on the latest
equalized county assessment roll as a Chapter or as contiguous units, for the purpose of sale,
lease or financing, whether immediate or future. Property shall be considered as contiguous
units, even if it is separated by roads, streets, utility easement or railroad rights-of-way.
Under this definition, the term subdivision includes all of the following: A condominium
project, a community apartment project, or the conversion of five or more existing dwelling
units to a stock cooperative.
End of Page
73 . Chapter 27 Conclusion

This concludes Chapter 27. Below is a brief summary which you can
review before you take your chapter quiz.

Covered Loans (amended):

The ORIGINAL principal loan balance does NOT EXCEED the
MOST CURRENT loan limit for a single-family first mortgage
1. Mortgage/deed of trust - the APR must be more than 8%
over the yield on Treasury securities with comparable periods
of maturity.
2. The total points and fees payable by the consumer must be
higher than 6% of the total loan amount.
Finance Code Section 4970:
Points and fees: items required to be disclosed as finance charges,
not including interest; all compensation paid to mortgage brokers in
connection with the loan transaction.
Consumer Loan: consumer credit transaction secured by real
property located in California, which is used as the principal
dwelling of the consumer.
Original Principal Balance: The total initial amount the consumer
is obligated to repay on the loan.
Real Estate Fraud Prosecution Trust Fund money MUST ONLY BE
USED in connection with investigations involving recorded real estate
documents.
The Unruh Civil Rights Act protects people from being discriminated
against because of their sex, race, color, religion, ancestry, national origin,
disability, medical condition, marital status and sexual orientation.
It is illegal to discriminate against another person based on where that
person gets her income.
If a person believes that her property has been placed under an unlawful
restriction, then she can record the Restrictive Covenant
Modification document.
Amendments to the Subdivided Lands Public Report
Notice of Intention must include:
1. The owners and subdividers name and address;
2. The legal description and area of lands; copies of contracts to
be used;
3. Any provisions that have already been made for public utilities
in the proposed subdivision.
4. The location of all existing airports located within two statute miles
of the subdivision.

Bankruptcy Abuse Prevention and Consumer Act. Exceptions from the

"automatic stay" law:
If the lessor took the action to obtain possession of the
property BEFORE the date the lessee/debtor's bankruptcy petition
was filed, the previously-filed proceeding taken by the lessor
will remain in effect.
The landlord MAY LEGALLY EVICT the lessee and take possession
of the property (provided that the lessor files a certification, under
penalty of perjury), based on some type of endangerment on the
property or on the illegal use of controlled substances on the
property.
Davis-Stirling Common Interest Development Act:
1. Condominium project: A condominium consists of an undivided
interest in common in a portion of real property coupled with a
separate interest in space called a unit.
2. Community apartment project:"A development in which an
undivided interest in land is coupled with the right of exclusive
occupancy of any apartment located thereon."
3. Stock Cooperative:"A development in which a corporation is
formed for the purpose of holding title to real property, and the
shareholders receive a right of occupancy in a portion of the real
property.
4. Planned Development: the common area is owned either by an
association or in common by the owners of the separate interests,
and/or a power exists in the association to enforce an obligation of
an owner of a separate interest, by means of an assessment which
may become a lien upon the separate interests.
The homeowner association (HOA) of a common interest development
must make ALL association records available to ANY owner who
belongs to the HOA.
Requirements:
Make available to members records from the previous 2 fiscal
years.
The current association recordsmust be made available within 10
business days of receipt of the members request.
Minutes of member AND board meetings must be made
PERMANENTLY available.
CID Amendments
In order to grant the exclusive use of a common area to an owner, there

must be a passing affirmative vote of 67% of the owners in a common

interest development.
Elections are inspected by an independent third party, which MAY
NOT be a candidate for OR a member (or related to one) of the board of
directors; a person employed to the common interest development
association.
CID associations board of directors
Fiscal responsibilities:
A current reconciliation of the associations operating accounts, the
current year's actual reserve revenues and expenses compared to
the current year budget, an income and expense statement for the
CID associations operating and reserve accounts, all in at least
a quarterly basis.
The latest account statements prepared by the financial institutions
where the association has its accounts.
In order to withdraw money from the associations reserve accounts,
the signatures of a minimum of 2 peopleare necessary.
May temporary transfer funds (must be restored within one year of
the date of the initial transfer) from the reserve fund into the
general operating fund of the association, if necessary to meet
short-term cash flow needs or other expenses
Authority to levy a special assessment.
At least once every 3 years, the board of directors must have an
inspection conducted, which must Identify and estimate the cost of the
major components that the association is obligated to maintain that have a
remaining useful life of less than 30 years.
Estimated Remaining Useful Life: The time reasonably calculated to
remain before a major component will require replacement.
Major Component: Components with an estimated remaining useful life of
more than 30 years may be included in a study as a capital asset or
disregarded from the reserve calculation.
Assessments
Regulations for assessments:
1. Annual increases in regular assessments may NOT be imposed
(except with specific provision or a quorum);
2. The board must notimpose a regular assessment that is more than
20% of preceding one.
3. The board mustnot impose special assessments that will be more

than 5% of the budgeted expenses, unless there is a quorum

affirmative vote of the owners.
The board DOES NOT limit assessment increases that are necessary
for emergency situations.
Any regular assessments imposed to meet the association's obligation
are exempt from execution only to the extent necessary for the
association to perform essential services.
Should the board levy
responsibility to pay it.

an assessment, it becomes the owner's

Regular or special assessments of the association; late charges;

reasonable collection costs/ attorney's fees and interest are
considered debt of the owner.
If the board approves the decision to initiate foreclosure, made by the
majority vote, this vote to approve the lien foreclosure MUST be completed
a minimum of 30 days before any public sale.
Delinquent assessments
1. When an association of a CID seeks to collect delinquent
assessments that are LESS THAN $1,800.00, it may not foreclose
on the lien.
2. However, an association is NOT PERMITTED to foreclose on this
lien UNTIL the amount equals or exceeds $1,800.00, OR UNTIL the
assessments are more than 12 months delinquent.
Notice of Lien: The owner must be notified in writing, via certified
mail, at least 30 days before a lien is recorded.
Physical Changes
Proposed physical changes must be consistent with any
governing provision of law, including the Fair Employment and
Housing Act.
Nothing under thes law authorizes any type of physical change to
the common area, if that change is inconsistent with the
association's governing documents, unless the change is required
by law.
Miscellaneous Law Amendments:
A real estate broker who arranges the purchase of a
fractionalized interest in a trust deed must record it within 10
days of the purchase.

The sending of unsolicited advertising faxes FROM OR TO

someone in California is prohibited.
Landlords are authorized to give a 30-day notice if they want to
terminate their month-to-month tenants.
If air conditioning or heating ducts show a 15% or higher leakage,
then they MUST BE REPAIRED.
The local government shall provide the housing developer with a density
bonus and other incentives for the production of lower income housing
units.
Housing in California
Regulations must NOT be used as a means of disapproving a
housing development project if it is proposed on a site identified
as suitable or available for very low-, low-, or moderate-income
households
in
the
jurisdiction's
housing
element,
and consistent with the density specified in the housing
element, even though it is inconsistent with both the jurisdiction's
zoning ordinance and general plan land use designation.
Feasible: "Capable of being accomplished in a successful manner
within a reasonable period of time, taking into account economic,
environmental, social, and technological factors."
Neighborhood: "A planning area commonly identified in a
community's planning documents, and identified as a neighborhood
by the individuals residing and working within the neighborhood."
The person authorized to record a notice of default or notice of sale
must, within 10 business days, deposit in the US mail an envelope to be
sent with the postage prepaid.
The law now permits ANY number of postponements of the sale
proceedings at ANY time to the completion of the sale, for any period of
time that may not exceed a total of 365 days from the date which was set
forth in the notice of sale.
Mobilehome Residency Law:
A rental agreement must NOT include any provision that offers
the management of a mobile home park the first right of refusal.
The person selling the mobilehome would have received this
home after the deathof its original owner.
Registered domestic partners (treated the same as spouses) are
allowed to transfer property to each other without having to have the
property reassessed and taxed at the current market value.

The laws generally limit ad valorem taxes on real property to 1% of the

full cash value of that property.
Active solar energy system: A system that uses solar devices to provide
for the distribution of solar energy.
A county tax assessor is prohibited from assigning parcel numbers OR
preparing a separate assessment or separate valuation to divide any
existing residential structure into a subdivision, UNTIL a subdivision final
or parcel map has been recorded as required by law.
If there is one constant within the world of California real estate law, it is
that you can count on the laws being forever fluid. Remember what we
said earlier in this chapter. The laws and regulations MUST continue to
change in order to accommodate the community for which they are
intended. After all, you wouldn't expect to see laws governing the
treatment of cavemen, for example, would you? Or, on the other side,
wouldn't you be shocked if the real estate laws did not address the world
of electronic communications? Few real estate licensees can remember
their lives before the Internet; yet, without specific laws and requirements
to address electronic communications, that aspect of the real estate
business could run amok.
Remember to always keep current with the laws, even if it means spending
a couple of extra hours a week studying the newest proposed changes and
Assembly or Senate bills. Doing your homework - and getting a little extra
credit in the way of providing your clients and customers with the most upto-the-minute information - will reward you in more ways than one.
Good luck on your Chapter 27 quiz!
Click here if you would like to open this summary as a pdf, which you can
then print or save to your device: Chapter 27 Summary
End of Page
74 . Chapter 27 Quiz