CLIENT ALERT: 2019 California Law Changes Impacting Commercial Real Estate

Set forth below is a list of new laws that impact commercial real estate in 2019 with very brief summaries regarding each.  This article is based in large part on information developed by the California Association of Realtors.

  1. Building Permits: Expiration period extended:  A building permit remains valid despite changes in the building code as long as work is commenced within 12 months after issuance, unless the permittee has abandoned the work authorized by the permit. The law also authorizes a permittee to request and the building official to grant, in writing, one or more extensions of time for periods of not more than 180 days per extension.  (Health and Safety Code § 17958.12. Effective January 1, 2019.)
  2. C.A.R. Sponsored “Clean Up” Legislation.  The California Association of Realtors sponsored “clean-up” legislation to address a number of substantive issues in real estate law and have those laws “conform” more closely to current practice.  The most important provision of this legislation specifically reiterates that existing law permits salespersons and brokers to establish their relationship as one of either independent contractor or employment.  This change was in response to a recent case, Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018), which called into question the ability of real estate licensed salespersons and brokers to elect an independent contractor relationship.  Brokers should consult with their in-house counsel regarding the impact of the various provisions of this legislation, which in some cases modify the required disclosure forms.
  3. CC&R’s:  New Private Transfer Fees Outlawed:  Prohibits developers from creating new property covenants, conditions, or restrictions that force subsequent owners to pay specially designated fees every time the property is transferred, unless the fee provides a “direct benefit” to the property, as defined in federal law. (Civil Code § 1098.6. Effective January 1, 2019.)
  4. Civil Liability: Liability of real estate agents for sexual harassment expanded:  Even if a business, service, or professional “relationship” does not presently exist, a real estate agent (and “investor” among other persons) may be liable for sexual harassment when he or she holds himself or herself out as being able to help the plaintiff establish a business, service, or professional relationship with the defendant or a third party. This law eliminates the element that the plaintiff prove there is an inability by the plaintiff to easily terminate the relationship.  (Civil Code § 51.9, and Government Code §§ 12930 and 12948. Effective January 1, 2019.)
  5. Landlord Tenant: Commercial Property Abandonment:  Allows a commercial landlord to serve Notice of Belief of Abandonment after the rent is unpaid for three days (or any longer period required under the terms of the lease for a monetary default), as opposed to 14 days under prior law, and allows delivery of that notice by overnight courier. (Civil Code § 1951.35 and as an amendment to Civil Code §§ 1946 and 1951.3. Effective January 1, 2019.)
  6. Landlord Tenant: Commercial Property  – Disposal of Tenant’s Personal Property:  Increases the calculation of the total resale value of the personal property from $750 (or $1 per square foot, whichever is lesser) to either $2,500 or an amount equal to one month’s rent for the premises the tenant occupied, whichever is greater.  (Civil Code §§ 1993.04 and 1993.07. Effective January 1, 2019.)
  7. Landlord Tenant: Evictions – Three Days’ Notice Excludes Holidays and Weekends:  In counting a three days’ notice to pay rent or quit or a three days’ notice to perform covenant or quit, or in responding to a complaint for unlawful detainer, Saturdays, Sundays and judicial holidays are excluded.  (Code of Civil Procedure §§ 1161 and 1167.  Effective September 1, 2019.)
  8. Landlord Tenant: Inspection of Decks, Balconies, Stairways and Walkways:  This law requires that buildings with 3 or more multifamily dwelling units with decks, balconies, stairways and walkways must be inspected by a properly licensed person by 2025, and a subsequent inspection must be done every 6 years. The owner would have to make repairs if the inspector found that the decks or balconies were in need of repair.  (Civil Code § 1954 and Health and Safety Code §§ 17973 et seq. Effective January 1, 2019.)
  9. Landlord Tenant: Service Member Protections:  Existing law provides that a service member during the term of the lease who enters a period of military service, or while in a period of military service, executes the lease and then receives military orders for deployment for a period of not less than 90 days may terminate a lease. The termination of the lease under subdivision is effective 30 days after the first date on which the next rental payment is due and payable.  This applies to a lease of premises occupied, or intended to be occupied, by a service member or a service member’s dependents for a residential, professional, business, agricultural, or similar purpose.  The new law additionally requires “any person,” such as a landlord or even potentially a property manager, who receives a good faith request from a service member and who believes the request is incomplete, not legally sufficient or that the service member is not entitled to the relief requested, to, within 30 days of the request, provide the service member with a written response acknowledging the request and setting forth the objections. If the person fails to make such a response the person waives any objection to the request, and the service member shall be entitled to the relief requested.
  10. Licensing: Applicant for a Real Estate license cannot be required to disclose citizenship or immigration status:  This law prohibits a licensing board, including the DRE, from requiring an individual to disclose either citizenship status or immigration status for purposes of licensure, or from denying licensure to an otherwise qualified and eligible individual based solely on his or her citizenship status or immigration status.  (Business and Professions Code §§ 30 and 1247.6; Education Code §§ 44339.5; Family Code §§ 4014, 17506, and 17520; and Health and Safety Code §§ 1337.2, 1736.1, 1797.170, 1797.171, 1797.172, 106995 and 114870. Effective January 1, 2019.)
  11. Licensing: Criminal convictions:  This law institutes a seven year look back period for a board, including the DRE, to consider a criminal conviction in denying a license, and only if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the application is made. However, there are exceptions such as convictions for serious crimes and sex offenders, and a specific exception for the DRE, among other boards, in regard to financially related crimes. In any case, a board may not deny a license to a rehabilitated applicant or one whose criminal record has been expunged.  (Business and Professions Code §§ 7.5, 480, 480.2, 481, 482, 488, 493, and 11345.2. Effective July 1, 2020.)

Please review your form documents to make sure they reflect the above new laws.  The above list is a general summary and may not reflect all of the laws that impact a specific sector or sectors of your industry.  Specifically, there are a number of employment laws that take effect as of January 1, 2019 that are not all summarized above.

DISCLAIMER:  This article does not constitute legal advice.  Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented.

BIOGRAPHY:  Winnie Ward is a named partner of Stewart Ward & Josephson LLP.  She specializes in office, retail and industrial commercial leasing, as well as real property acquisition and divestment.  wward@swjllp.com; 916-569-8161.