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4 New Laws Agents and Their Clients Need to Know for 2014

Many laws are passed each year which potentially impact buyers and sellers. Four are particularly noteworthy this year.

1. Shared Fences: Civil Code §841 has been amended to create a presumption that neighbors share equally in the benefits of a boundary fence. Before one neighbor can seek contribution from the other for repairs or replacement the one seeking reimbursement must give a 30 day written notice to the other. The notice must identify the problem, the estimate to fix it, the % share that the neighbor is asking the other to pay and the timeline for making the repair. A court can overturn the presumption of shared responsibility if evidence is presented showing, among other things, financial hardship, or that the costs exceed the benefits, or that the repair is done for aesthetic or personal reasons.

2. Relief of Debt Income after a Short Sale: California Code of Civil Procedure § 580(e)had previously been enacted to establish that a lender cannot obtain or collect a deficiency from an individual borrower following an approved short sale where the loan was secured by residential property with 1-4 dwelling units. However, the amount of debt forgiven on the short sale could be considered ordinary income under federal and state tax rules governing the relief of debt. The IRS issued a letter dated 9/9/13 indicating that since California has anti-deficiency laws covering short sales, the forgiven debt would be treated as non-recourse debt already not subject to ordinary income in the event of a foreclosure. The California Franchise Tax Board issued a letter dated 12/4/13 indicating it would conform to the rule as enunciated in the IRS letter.

3. Smoke Alarms: Health and Safety Code §§ 13113.7 and 13114 provide that beginning July 1, 2014 the only battery operated smoke alarms that will comply with State Fire Marshall regulations are those that have a 10-year battery life with batteries that are non-replaceable and non-removable. Existing stock of more standard battery operated smoke alarms may be used until July 1, 2015. Note: existing operable smoke alarms are not required to be replaced commencing July 1, 2014. But any new installation has to comply with current law.

4. Broker or Agent Record Tampering: Business and Professions Code § 10148 requires real estate licensees to maintain for at least 3 years real estate records. The law has been modified to additionally and specifically make it a disciplinary offense to destroy, alter, mutilate, conceal or falsify such records.

By Neil Kalin, Assistant General Counsel for the California Association of REALTORS®. Because the law is always changing, one must not rely solely on static representations such as these -- they are no substitute for the legal counsel of an Attorney.