New Real Estate Laws
1. Penalties for Contractors without Proper License
Lee v Cardiff highlights the extreme penalties available to property owners who hire contractors who violate Contractor’s License Law by misclassifying workers as independent contractors and thereby failing to provide Worker’s Compensation Insurance.
Lee hired contractors to build a pool and hardscapes for $230,000. Pool guy walks off job before completion. Lawsuit filed.
After trial, judge finds for pool contractor on the construction/contract claims but for owner Lee on violation of state contractor license laws. Contractor did not want to pay for Worker’s Compensation Insurance and employment taxes, so he paid workers as independent contractors and claimed no employees. Bad move. Result is the harsh requirement of disgorgement of all money received from owner.
Comment: That is right. Contractor has judgment against him for $230,000 in favor of owner and owner gets to enjoy a free pool and hardscapes.
2. AB 130 Now Limits HOAs Fines that Board can Impose on Owners to $100. Also Requires Warning Letter Prior to Fines
Certainly exemptions apply if conduct affects safety or health to common areas. This started July 1, 2025.
3. Eshagian v Cepeda Decided 6/26/2025, Changes Three-Day Notices to Pay Rent or Quit
Now it requires the dates the notice commences clearly stated in the Three-Day Notice as well as the date that the notice ends.
4. State Farm Received Approval to Raise Homeowner’s Premiums by 17% and Renter’s Insurance by 15% Starting June 15, 2025
5. New Law for Flipping Houses
AB 968 requires flippers of residential properties up to four units to disclose all recent repairs and renovations in addition to all other existing disclosures. The Bill applies to properties resold within 18 months of initial closing.
6. AB 130 Became Law in June 30, 2025
This passed along party lines. Called Zombie Mortgage Law. Prevents foreclosures on subordinate mortgages under certain circumstances, particularly when homeowners are hit with unexpected demands for payment. The law prohibits mortgage holders from foreclosing if they fail to notify borrower their loan had been sold, or if three years had passed without any communication with the borrower.
7. Court Narrows Fiduciary Duty/Disclosure Duties of a Real Estate Broker
In the case of Larry Wade v Windstar Investments, LLC, the superior court granted summary judgment to Sotheby’s International Realty dismissing negligence and fiduciary duty claims brought by Wade regarding his $3.4 million Malibu home which is uninhabitable due to unpermitted construction. The court was reluctant to expand real estate broker’s duties beyond disclosure requirements. The judge found that Sotheby’s met its obligations by disclosing permitting issues and code compliance in multiple documents, leaving it up to the buyer (Wade). Wade negotiated a $150,000 escrow holdback for permitting clearance in order to conduct further investigation regarding what was necessary to obtain after the fact permits for unpermitted work and code compliance at the home.
The property lacked a certificate of occupancy and resolving the permit problems would require tearing open walls, floors and ceilings at a cost of hundreds of thousands of dollars. Wade sued everyone, accusing them of negligence and breach of fiduciary duty and constructive fraud. Sotheby’s agents replied that they warned him at least eight times to verify building permits and code compliance.
The court held that brokers must disclose material facts – not investigate their significance or provide legal advice.
The court cited Pagano v Krohn and that agents are not required to disclose their opinions about how disclosed facts might affect the value.
Any assurances about permit resolution relayed from seller through agents were “obviously unverified and speculative” rather than by independent verification.
Comment: The bottom line is that once you disclose the permit issues or lack thereof, they buyer owns the investigation unless you unwisely volunteer to engage in investigation activity which, in my opinion, would be extremely unwise.
About the Author
Disclaimer:
Scott Souders is a real estate attorney who has practiced real estate law in excess of 45 years in Southern California. The Real Estate Law Update cites cases or statutes which are summarized and should not be relied upon without fully reading the cases or statute in the advance sheets and shepardizing the same and consulting with your own attorney.
About the Author
Disclaimer:
Scott Souders is a real estate attorney who has practiced real estate law in excess of 45 years in Southern California. The Real Estate Law Update cites cases or statutes which are summarized and should not be relied upon without fully reading the cases or statute in the advance sheets and shepardizing the same and consulting with your own attorney.
