CALIFORNIA REAL ESTATE
UPDATE #14

CHANGES FROM DRE

We keep telling you and your associates to get sales and broker licenses now before the State DRE makes the requirement more stringent and change the test. There are a couple new changes that will be effective July 1, 2003.

Originally, DRE live classes did not require exams. When a Real Estate Commissioner James Edmond visited a classroom in 1983, students were reading newspapers, playing cards, sleeping, watching small television sets, etc. With his support a regulation was passed that required exams after most live classes.

Some years later Real Estate Commissioner James Antt, Jr. promulgated a removal of the exam requirement. Now there is a change going back to requiring exams on some courses. Effective July 1, 2003, exams will be required in the live "mandated" courses of Agency, Ethics, Trust Funds and Fair Housing.

If someone wants to get a regular real estate salespersons license, they must complete three college level courses (one of which is Real Estate Principles) before taking the State exam. An applicant can take the exam with only the Principles course completed. However, when the exam is passed, the new licensee receives a Conditional License They have 18 months to complete the other two college level courses to convert the Conditional License to a Regular License.

The change effective July 1, 2003 is that one of the three courses now must be Real Estate Practice. This is a good change in my opinion and I think the other course should be Real Estate Law. Also, I think applicants should have to pass all three course before taking the exams. Other States, for example, Texas and Florida require substantially more education before a license is granted.

We have our licenses. I would like to see it made tougher for someone to get one now. More courses required, higher passing scores, education standards, etc. How about completing a marathon or 400 hours of community service, etc.

TRAINING EXAM: NEW LANDLORD-TENANT LAWS FOR 2003

The following questions are designed to illustrate the new complicated law changes concerning Landlords and Tenants. Check your knowledge of the changes and read the answers that follow the questions for further information.

There is one change that I wish the State Legislature would make. The word "landlord" should be removed. It is a Middle Ages term and conjugates a scene of lords and peasants, etc. Landlords, let's unite and get our name changed in Civil Codes. In some codes we are owners, hirers, leasors and other terms. I like "provider and tenant". I have been a "landlord" since I graduated from college and due to basis problems, I will be one till I die. However, from now I will be signing my leases "benefactor" or "provider of housing for citizens who can't or don't want to buy a home".

1. The new laws concerning "Landlords and Tenants" are effective:
   
   
   1. January 1, 2002.
   2. July 1, 2003.
   3. January 1, 2003.
   4. January 1, 2006.
2. Where are these new changes listed?
   
   
   1. Business and Profession Codes.
   2. California Civil Codes.
   3. Landlord and Tenants Manifesto.
   4. Federal Fair Housing Regulations.
3. Tenants must be now given 60 days notice to move except for:
   
   
   1. tenants with less than 1 year of occupancy.
   2. tenants with fixed-term leases.
   3. tenants of owners with a contract of sale who meet several conditions.
   4. all of the above.
4. Owners selling a property can give 30 days notice if several conditions are met including:
   
   
   1. buyer is a corporation.
   2. notice is given within 180 days of opening escrow.
   3. buyer intends to rent the unit.
   4. owner has established an escrow.
5. One major change to the Owner's Right to Entry is:
   
   
   1. notice must now be written.
   2. notice can't be mailed.
   3. an emergency no longer gives a Right to Enter.
   4. owner can enter if property is abandoned.
6. Some other facets of Notice of Entry are:
   
   
   1. notices can't be left at the unit.
   2. notice must be reasonable and during normal business hours unless tenant consents.
   3. notice can never be oral.
   4. owners should never leave evidence of entry to alarm tenants.
7. Changes to Move-Out Inspection Rights are:
   
   
   1. tenants now have an opportunity to correct deficiencies.
   2. a 48-hour notice is required unless otherwise agreed.
   3. inspection can be no earlier than 2-weeks before the end of the tenancy.
   4. all of the above.
8. Based on the inspection, the landlord shall give the tenant an itemized statement:
   
   
   1. including specific repairs or cleaning to be deducted from any security deposit.
   2. that is given to the tenant or left inside the unit.
   3. include the text of C.C. 1950.5(l)1-4 and C.C. 1950.5(d).
   4. all of the above.
9. The new definition of a security deposit:
   
   
   1. includes any charge imposed at the beginning of a tenancy.
   2. allows an owner to collect a deposit equal to 4 months rent on certain month-to-month rentals.
   3. waterbeds are not a reason for a deposit increase.
   4. the new limits apply to commercial properties.
10. The new Cleanliness Standard states cleaning costs can be deducted only as:
    
    
    1. for cleaning of the premises upon termination.
    2. to the standards of the Property Owners.
    3. necessary to return the unit to the same level of cleanliness it was in at acceptance of the tenancy.
    4. meet Martha Stewart's Standards.
11. Tenants must give:
    
    
    1. a 60-day notice in all cases.
    2. a 30-day notice when unit is in escrow.
    3. no notice
    4. a 30-day notice or a period as long as the term of tenancy.
12. This new termination notice was contained in:
    
    
    1. California Senate Bill 1946.
    2. California Senate Bill 1403 (Kuehl).
    3. California Association of Realtor's Decision 2002.
    4. none of the above.
13. If a lessee remains in possession after "expiration of the hiring" and the lessor accepts rent from him or her:
    
    
    1. the owner can start an eviction at any time.
    2. the hiring is preserved for 2 years maximum.
    3. the hiring is presumed to be renewed on the same terms.
    4. all of the above.
14. If within a reasonable time of notice of untenability of the unit, the notice is neglected:
    
    
    1. tenant may repair spending up to 1 month's rent or vacate.
    2. remedy not available more than twice in any one month period.
    3. tenant may not use the remedy if they caused the damage.
    4. all of the above.
15. An exception to the written notice requirement is that a telephone message is legal:
    
    
    1. to show prospective or actual purchasers.
    2. if the landlord has notified the tenant within 120 days of the notice.
    3. if the owner or agent leaves a business card inside the unit.
    4. all of the above.
16. The legislative intent of the 60-day Termination Notice is because:
    
    
    1. owners are dishonest.
    2. of a tight rental market.
    3. tenants have too many options.
    4. none of the above.
17. California Associations of Realtor's Forms to be considered include:
    
    
    1. Notice of Inspection Prior to Termination of Tenancy.
    2. Statement of Inspection Prior to Termination of Tenancy.
    3. Notice of Termination of Tenancy.
    4. all of the above.
18. The requirement of serving the Inspection Notice in C.C. 1950.5(b) provides:
    
    
    1. specific methods of service.
    2. mailing must be registered mail.
    3. no personal delivery.
    4. incorporated into C.C. 1954.
19. If an owner retains a security deposit in "bad faith" he or she could be:
    
    
    1. subject to no claim for actual damages.
    2. subject to statutory damages of up to $600.
    3. subject to damages up to twice the deposit plus actual damages.
    4. a and b above.
20. It is recommended that a prudent owner:
    
    
    1. read the pertinent Civil Code Section and ask questions.
    2. purchase proper forms and use them.
    3. follow the intent of the law.
    4. all of the above

ANSWERS TO THE LANDLORD-TENANT EXAM

1. C.  Statement of fact which means they are in effect as you read these answers. Remember these changes apply to residential property. Three cities (Santa Monica, West Hollywood and Los Angeles) have had the 60-day Termination Notice Requirement since January 1, 2002. Also, the 60 day Notice Requirement sunsets as of January 1, 2006. This is a trial run and for it to continue another law would have to be passed.

2. B.  In my 20+ years as a Certified Property Manager I have read these Civil Codes hundreds of times. If you ever intend to own rental property or ever intend to act as an agent for rental property or ever intend to be a tenant learn these rules. These important new changes and many other important regulations are contained in Civil Code Sections 1940-1954.1. I recommend calling West Publishing at 800-344-5009 or visit www.WestGroup.com and buy a copy of the Civil Code Book. It contains Regulations about Foreclosures and Trust Sales, Lending, Agency and Real Estate Transfers, Mobile Homes, etc.

3. See Answer to Question 4.

4. D.  Conditions to be met include:
   
   

   1. The owner has entered into a contract to sell the dwelling or unit to a bona fide purchaser for value.
   2. The buyer is a natural person(s).
   3. The buyer in good faith intends to live in the property for at least one year after termination of the tenancy.
   4. The termination notice is given 120 days of opening escrow.
   5. The owner has established an escrow with a licensed escrow officer or a licensed real estate broker.
   6. The dwelling or unit is alienable separate from the title to any other dwelling unit.

5. A.  Before this law change, the Right of the Owner to Enter in lieu of an emergency or abandonment required a reasonable notice to tenants but it did not require a written notice. A reasonable notice was considered to be 24 hours.

6. B.  The other answers are all wrong. A landlord may enter in the following situations:
   
   

   1. In case of emergency.
   2. To make necessary or agreed repairs, decorations, alterations, or improvements, supply necessary or agreed services, or exhibit the dwelling unit to prospective or actual purchasers, mortgagees, tenants, workmen, or contractors.  Effective January 1, 2003, the landlord may also enter the premises to conduct a move-out inspection as discussed in Answer 7.
   3. When the tenant has abandoned or surrendered the premises.
   4. Pursuant to court orders.

Twenty-hours notice is presumed reasonable absent evidence to the contrary.  The written notice may be any of the following ways:



1. personal delivery to the tenant.
2. Left with someone of suitable age and discretion at the premises.
3. Left on, near, or under the usual entry door in a manner that a reasonable person would discover the notice.
4. Mailed to the tenant. A notice mailed at least six days before an intended entry is presumed reasonable notice absent evidence to the contrary.

To be prudent, a landlord should serve the entry notice in one of four methods prescribed above. However, these four methods are all described in the statue as permissible methods of service, and so, a court could arguably interpret the statutory language as allowing other reasonable methods of service as well.

As an exception to the written notice requirement, a landlord selling his or her property can give the notice of entry orally, in person, or by telephone, if all of the following conditions are met:



1. The purpose of entry is to show the dwelling unit to prospective or actual purchasers.
2. The landlord or his or her agent has notified the tenant in writing within 120 days of the oral notice that the property is for sale and that the landlord or agent may be contacting the tenant orally to show to prospective or actual purchasers. Twenty-four hour notice is presumed reasonable absent evidence to the contrary.
3. At the time of entry, the landlord or agent leaves written evidence of the entry inside the unit, such as his or her business card.

7. D.  The new procedures for the move-out inspection are as follows:
   
   

   1. Providing Notice of Inspection Rights. Within a reasonable time after either the landlord or tenant gives notice to terminate the tenancy, or before the end of a fixed-lease term, the landlord must give the tenant written notice that the tenant may request an initial inspection, and may be present at that inspection.
   2. Scheduling the Inspection. If the tenant requests an inspection, the parties must try to schedule a mutually acceptable date and time. If the tenant does not request an inspection, the landlord's duties regarding the inspection are discharged.
   3. Providing 48-Hour Notice of Inspection. For a tenant requesting an inspection, the landlord must give at least 48 hours prior written notice of the date and time of the inspection, whether the parties agreed to a mutual time, or could not schedule a mutually acceptable time.
   4. Conducting the Inspection. The landlord or landlord's agent must conduct the inspection at a reasonable time no earlier than two weeks before the termination of the tenancy or the end of the lease. The landlord must proceed with the inspection whether the tenant is present or not, unless the tenant withdraws the request for inspection.
   5. Preparing the Inspection Statement. Based on the inspection, the landlord must prepared an itemized statement of repairs or cleaning that are proposed to be the basis of any deductions from the security deposit. This statement must include the statutory language in California Civil Code sections 1950.5(b) and (d) which set forth, among other things, the items that may be properly deducted from the security deposit, including the following:
      
      
      1. Defaults in the payment of rent.
      2. Repairing damages, other than ordinary wear and tear, caused by the tenant or the tenant's guest or licensee.
      3. Cleaning costs.
      4. Future defaults by the tenant to restore, replace, or return personal property as authorized by the rental agreement.
      
      
      
      5. Delivering the Inspection Statement. The landlord must give the inspection statement to the tenant if the tenant is present for the inspection, or leave it inside the premises.
      6. Providing an Opportunity to Correct. The tenant must be given an opportunity to avoid deductions from the security deposit by remedying any identified deficiencies in a manner consistent with the rental agreement.

8. D.  Check answer C. You might want to get some advice on what needs to be included in any statement. Buy a form from CAR or your local Apartment Association.

9. A.  A landlord cannot try to collect more than the allowable security deposit by labeling the funds as for something else, such as move-in fee, pet fee, cleaning fee, or last month's rent. There are, however, five exceptions to the rules limiting the amount of a security deposit:
   
   

   1. Application screening fees for actual, out-of-pocket costs for obtaining information about a rental application, such as credit reports and reference checks. However, the screening fee cannot exceed $30 per applicant, plus annual CPI-adjustments after January 1, 1998.
   2. Advance payments of not less than six months of rent for residential leases with a term of six months or more.
   3. Separate fee agreement between the landlord and tenant for structural, decorative, furnishing, or other similar alterations, but not for cleaning or repairs.
   4. For waterbeds, an additional one-half of one month's rent as a security deposit, plus a reasonable administrative fee.
   5. These security deposit limitations do not apply to commercial properties.

10. C.  Statement of fact. By the way, this rule only applies to tenancies starting after January 1, 2003.

11. D.  Tenants still have the same rules as before January 1, 2003.

12. B.  Just a statement of fact. The names of Senator Kuehl and Senator Migden seem to appear on most tenant friendly law proposals.

13. C.  Statement of fact.

14. D.  Answers say it all. 30 days is a reasonable time unless evidence indicates a shorter notice is necessary.

15. D.  Answers says it all. See answer number 6.

16. B.  Tenants need more time to find suitable quarters.

17. D.  Check out these forms at your local Association or call CAR at (213) 739 - 8200.

18. D.  Statement of fact. Section 1950.5(f) does not provide any specific methods of serving the required notices. However, because section 1950.5(f) has been incorporated into section 1954, a prudent landlord should deliver the inspection notice as per the Right of Entry Notice. See answer number 6.

19. C.  See Civil Code Section 1950.8(l).

20. D.  Statement of fact. Remember and keep telling yourself that real estate is still the best investment in our world. Don't let the 10% bad tenants wear you down. Good luck.

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