More than 1,400 ADUs have been built in San José over the past five years, and thanks to a new law, they can now be sold as separate condo units. Spotlight explores how this new law could change the definition of “starter home.”
Something for your radar if you’re thinking about buying or selling in Sunnyvale: 63% of city voters supported a potential property transfer tax in a recent poll. This means the tax could be headed to the November ballot. San José Spotlight has more details.
In November 2020, California voters narrowly passed Proposition 19, changing the way property taxes are assessed to provide more portability for seniors, people with disabilities, and those who lose their homes in wildfires and other disasters. But the new law also came with consequences for family transfers…
Under Prop 19, there are new limits on property tax exemptions in transfers to family members. The transfer must be to a child or grandchild, that family member must make the home their primary residence within one year of the transfer, and the exemption is limited to the first $1 million of assessed value over the original base assessment. And no, gifting your property to your child would not qualify for an exemption!
Another Prop 19 quirk is that the same property owner can take their base property tax assessment with them to 3 different properties anywhere in California, provided the original and replacement homes are of moderately equal value. I don’t think this will lead to a flurry of seniors on the move, but it seems a bit antithetical to the original intent of Prop 13, which was to allow Californians to age gracefully in place.
Let’s take a deeper dive into state legislation coming on the books this year that will impact the real estate industry.
Thanks to AB 968, which takes effect July 1, if you sell a property with one to four dwellings within 18 months of acquiring the title, you’ll need to disclose information about any repairs or renovations you’ve had done, in addition to contact info for your contractors and any permits you obtained. Most of this is already covered under existing disclosures in the Seller Property Questionnaire (SPQ), which may be updated to add specific disclosures for flippers.
AB 1033 allows for ADUs (aka Accessory Dwelling Units or “Granny Flats”) to be transferred as stand-alone properties, separate from the main dwelling. The property must be classified as a condo, and each lienholder must consent to establishing the condominium. Making matters more complicated, if the property lies in an HOA, the HOA must also approve the condo classification. Fwiw, experts don’t expect this law to be used too often.
At a recent economic seminar with the Silicon Valley Association of Realtors (SILVAR), we learned about changes to real estate law beginning January 1st. We’ll have a full update next week, but in the meantime, let’s focus on four new policies…
Under current law, you’re allowed to build an ADU (aka Accessory Dwelling Unit) based on your lot size and zoning regulations in your particular city. Starting in the coming year, you’ll be able to sell an ADU with your lender’s consent and other additional restrictions. Even better, the limit for small real estate claims will jump from $10,000 to $12,050!
Starting next year, the environmental hazard information you receive from realtors will have new additions about sea level rise, wildfires, and climate change. Also, if a home has been owned for less than 18 months and has a major renovation, the seller not only has to disclose the changes they made and contacts of subcontractors but also the status of all permits.
