NEW!
Audio CDs (3) of the Real Estate Principles Textbook - $29.95 may be purchased through the American Schools ONLINE Catalog at: http://americanschoolsonline.com Listen to sample audios at: http://americanschoolsonline.com/audio
Playable on all computer and on most modern DVD, portable or car-stereo CD players, accepting MP3-format audio-files. Make sure your player accepts MP3-format audio-files, before buying. All CD sales are final. Defective CDs will be replaced within 15 days of purchase. No refunds for CDs.

SHORT INTRODUCTION TO CALIFORNIA REAL ESTATE PRINCIPLES,

1994 by Home Study, Inc.   dba American Schools


Click on link to go to:
Table of Contents; Chapter I: Real Property; Chapter II: Legal Ownership; Chapter III: Agency & Ethics; Chapter IV: Contracts; Chapter V: Real Estate Mathematics; Chapter VI: Financing; Chapter VII: Mortgage Insurance; Chapter VIII: Appraisal; Chapter IX: Transfers of Real Estate; Chapter X: Property Management; Chapter XI: Land Control; Chapter XII: Taxation; Chapter XIII: Fair Housing Laws; Chapter XIV: Macroeconomics; Chapter XV: Legal Professional Requirements; Chapter XVI: Notarial Law; Chapter XVII: Selling Real Estate; Chapter XVIII: Trust Funds Handling; Glossary; Index.

Chapter XI: Land Control By Government

Educational Objectives: Learn about Subdivision Map Act, Planning and Zoning, Environmental Impact Report, Superfund, National Environmental Policy Act, Clean Air Act, Solid Waste Disposal Act, Federal Water Pollution Act, Coastal Zone Management Act, Earthquake danger disclosure requirement, Interstate Land Sales Full Disclosure Act, R.   E.   TERMS GLOSSARY, INDEX. 

PUBLIC LAND USE CONTROL

Property continues to be limited by government powers including the power of taxation, police power, the right of eminent domain and escheat.  The right of eminent domain and escheat relate to involuntary transfer of property.   Police power is the right of the public to control and limit an owner's use of private property.   

Police power is the constitutional authority and inherent power of government to adopt and enforce laws and regulations to promote and support the public health, safety, morals, and general welfare.   It is in essence, policy power, controlling such functions as zoning, city planning, subdividing, building codes and environmental protection.   

Zoning authority is the power of government officials to specify the types of uses to which properties may be put in specific areas.   Zoning generally divides land use into the four broad categories of residential, commercial, industrial and agricultural.   In addition to specifying the land use, zoning laws may impose additional restrictions, such as size of structure, minimum square feet, height limits and set back requirements.   

Zoning was first used primarily to promote fire safety.   However, as with so many other useful tools, its use has expanded over the years.   It is used to:

1.   preserve the integrity of residential areas,

2.   ensure a healthful environment by providing adequate light, air and space,

3.       prevent congestion and overcrowding, preserve natural resources,

4.       assist the community in establishing and preserving pleasant and efficient urban areas, and

5.   influence the quality, quantity and pace of development.   

Zoning is basically a mapping process whereby all the land in a community is labeled with respect to the general nature of permissible development.   

The general categories of zoning designations are agricultural, residential, commercial and industrial.  There are several subcategories which are called "districts" but are also commonly referred to as "zones.  "

Each Zone contains specific regulations delineating such items as minimum lot size, height of structures, bulk and placement of buildings, yard areas and open space.   

Zoning laws are enforced by requiring a building permit from an appropriate governmental authority.  Nonconforming use is permitted when that use was previously lawfully established and maintained.   In case of substantial destruction by fire or other means, the zoning statutes probably will prohibit reconstruction for nonconforming use caused by a change in zoning.  New usage not conforming to established zoning regulations will require a variance or any amendment to the ordinance.   

A variance from the terms, standards and criteria that pertain to an allowed use category within a zoning district as authorized by the zoning ordinance may be granted, in whole, in part, or upon reasonable conditions, only upon a finding that:

1.       The application of the ordinance to the particular piece of property would create an unnecessary hardship;

2.       Such conditions are peculiar to the particular piece of property involved;

3.       Relief, if granted, would not cause substantial detriment to the public good, or impair the purposes and intent of the ordinance or the "master" plan; and

4.       The variance, if granted, would be the minimum necessary to alleviate the unnecessary hardship.   

City planning is an attempt to regulate in a general way the long-range physical geography of the city.   These plans will incorporate such items as land use, flood control, sewage disposal, streets, recreation, and solid waste disposal into a comprehensive plan which will guide the city as it is required to make specific decisions about proposed projects, population growth, and other matters affecting the public welfare.   Private actions which may contravene a city "master or comprehensive" plan will be prohibited by a planning commission unless those initiating such action can carry the burden of showing that the action is in substantial compliance with the plan.   

Private development or subdividing of land may be regulated at the federal, state or local level.   State and local governments have powers to control development of land in subdivisions by requiring developers to conform to city master plans, to provide adequate public utilities, to obtain subdivision permits, and to provide property for public recreation, etc.   Zoning laws also serve to control development of subdivisions by controlling the use of various areas located within municipal boundaries.   

Municipal regulations as to buildings, structures and land are made in accordance with a comprehensive plan and are mostly designed to accomplish any of the following objectives:

1.   To lessen congestion in the streets;

2.   To secure safety from fire, panic and other dangers;

3.   To promote health and the general welfare;

4.   To provide adequate light and air;

5.   To prevent the overcrowding of the land;

6.   To promote historical preservation;

7.   To avoid undue concentration of population; or

8.       To facilitate the adequate provision of transportation, water, sewerage, schools, parks and other public requirements.   

Building codes are designated to provide minimum standards to safeguard the health, safety, and welfare of the public by regulating and controlling the design, construction, quality, use and occupancy, location and building line, and maintenance of all buildings and structures.  Rules established by local governments for building restrictions are not always uniform and may vary widely from community to community.   

Violations of building codes may render a property unmarketable.   Proposed construction must conform to local zoning and building codes, and must generally be inspected and approved before completion and occupancy.  Upon satisfactory completion, an occupancy certificate may be issued.   Nonconformance to building codes can result in forced demolition.   

Conditional Use Permits.   Zoning ordinances often list special land uses that are authorized in a zone subject to the granting of a conditional use permit or special use permit.   Land uses requiring such permits are usually potentially incompatible with other activities existing in the zone.   The proposed land use can create spillover effects such as noise, traffic congestion or air pollution that adversely affect the public's health, safety, or welfare.  Conditional use permits may authorize the use as long as the project proponents agree to abide by conditions that alleviate the spillover effects.   

(The following is reprinted by permission from the CalBRE Reference Book, p.  523-544, 703-704)

Subdivision Map Act

The Subdivision Map Act requires that every city and every county must adopt a subdivision ordinance to regulate subdivisions for which a tentative and final map, or a parcel map, is required.  In addition the Map Act permits cities and counties to adopt ordinances for subdivisions for which no map is required.   A diagram showing typical steps in subdivision procedure under the Map Act is shown below.   

Subdivided Lands Law

The Subdivided Lands Law is statewide in its operation and is directly administered by the Real Estate Commissioner.   Its objective is to protect purchasers of property in new subdivisions (subdivided lands) from fraud, misrepresentation, or deceit in the marketing of subdivided lots, parcels, units and undivided interests in the State of California.   

The public report is not issued until the commissioner is satisfied that the subdivider has met all statutory requirements with particular emphasis on the establishment of financial arrangements to assure completion and maintenance of improvements and facilities included in the offering and a showing that the lots or parcels can be used for the purpose for which they are being offered.   

Standard Subdivision

In general, it may be said that a subdivision is a standard subdivision when the land is divided and there are no common or mutual interests or rights of ownership or use among the owners of the lots or parcels created by the land division.   

Redevelopment

Community Redevelopment Law authorizes a local government to adopt an ordinance subject to referendum to establish a redevelopment agency for the purpose of correcting blighted conditions in a project area within its territorial jurisdiction.  A project area for redevelopment is not restricted to buildings, improvements, or lands which are detrimental to the public health, safety, or welfare, but may also consist of an entire area in which such conditions predominate and injuriously affect the whole area.   

A project may also include lands, buildings, or improvements which are not detrimental to the public health, safety or welfare, but whose inclusion is found necessary for the effective redevelopment.   

Community Apartment Project.   

Community apartment projects, having five or more apartments are within the definition of a subdivision.   Operation, maintenance and control are usually exercised by a governing board elected by the owners of the fractional interests.   

In a community apartment project, defined in Business and Professions Code Sections 11004 and 11004.  5, the purchaser receives an undivided interest in the land together with the right of exclusive occupancy of an apartment located thereon.   

Purchasers generally receive a leasehold interest in the apartment, while in a condominium the purchaser customarily receives a fee interest in his unit in space.   

Condominium Project

A "condominium project" means a common interest development consisting of condominiums.   A condominium consists of an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map, or condominium plan in sufficient detail to locate all boundaries thereof.   The area within these boundaries may be filled with air, earth, or water, or any combination thereof, and need not be physically attached to land except by easements for access and, if necessary, support.  The description of the unit may refer to (i) boundaries described in the recorded final map, parcel map, or condominium plan, (ii) physical boundaries, either in existence, or to be constructed, such as walls, floors, and ceilings of a structure or any portion thereof, (iii) an entire structure containing one or more units, or (iv) any combination thereof.   

In effect this provides that an owner of a condominium owns in fee simple the air space in which the owner's particular unit is situated, has a deed thereto, gets a separate tax assessment, may apply for and acquire a title insurance policy on the property, may indeed deal with it just as the buyer of any type of real property does.   In addition to this the owner has an undivided interest in common in certain other defined portions of the whole property involved.  Here again an elected governing board performs the management function.   

Stock Cooperative Project

A "stock cooperative" is a corporation which is formed or availed of primarily for the purpose of holding title to improved real property, either in fee simple or for a term of years.   An essential element is that all or substantially all of the shareholders of such corporation receive a right of exclusive occupancy of a portion of the real property, title to which is held by the corporation, which right of occupancy is transferable only concurrently with the transfer of the share or shares of stock in the corporation held by the person having such right of occupancy.   

Limited Equity Housing Cooperative

A Limited Equity Housing Cooperative is a special type of stock cooperative financed in whole or in part by federal, state or local government for the benefit of low and moderate income families.   

Time-Sharing Projects

Stated as simply as possible, a time-sharing program involves long-term rights to use and occupy real property for short-term use periods into which the property has been divided (for example, the right to use a dwelling unit for two weeks of each year for the next 10 years).   In some cases, a time-share purchaser acquires an undivided interest in the real property (a time-share estate) as well as the periodic use right.   In others, the purchaser acquires only a right to use (time-share use).   In either case, the right to use may be specified, for example, the first two full weeks in July each year or it may be on a first reserved, first served basis.   

Time-share offerings in apartments and hotel or motel rooms are covered.   So are time-share estate offerings in real property that is not a structural dwelling place, for example, campgrounds and recreational vehicle parks.   

Land Project

Developments in some subdivisions located in sparsely populated areas of the state contain 50 or more parcels are referred sometime as "Land Projects".  Buyers of such parcels have a right within a certain time period to rescind their purchase and receive a full refund.   

SUBDIVIDER / DEVELOPER

Many real estate brokers decide to become active in the specialized field of "subdividing.  "

When selling subdivided property, the broker must make sure that two important requirements of the subdivision law are observed.   First, the broker must furnish the prospective buyer with a copy of the Commissioner's Subdivision Public Report and give the prospective buyer an opportunity to read it before the prospect signs up to purchase, as evidenced by a signed receipt from the prospective buyer.   Secondly, the broker must handle the deposit or purchase money in accordance with the law.  Moreover, since out-of-state subdivision offerings are treated as real property securities under the provisions of Sections 10249, 10249.  1, 10249.  2, and 10249.  3 of the Business and Professions Code the licensee should pay special attention to the requirements imposed before agreeing to act as an agent to handle such properties.   

In the development process these large suppliers customarily:

(a) Carry a large inventory of raw, semi-finished, and finished products, usually for lengthy periods and for several ongoing projects, which may be widely separated as to physical location;

(b)     Must finance the project through use of their own funds or negotiate loans from financial institutions, for development, construction, and permanent loans;

(c)     Take title to the land to be developed in their own name or in that of a trustee; and

(d)     Assume large risks for any misjudging of the market which may result in costly delays in selling the inventory and great losses due to interest payments, carrying charges, overhead, possible local government delays in processing, as well as hidden costs constantly eating into projected profits.   

Environmental Impact Reports

Environmental Impact Reports may be required by local government prior to approval of the map for the subdivision.   

The California Environmental Quality Act of 1970 (CEQA) plays a major role in planning.   A primary purpose of CEQA is to provide a means of informing government decision-makers and the public of the environmental consequences of alternative development schemes not covered under the General Plan.  The state has adopted the CEQA Guidelines to implement the CEQA process.   

Alquist-Priolo Special Studies Zones Act is a zoning act designed to control development in the vicinity of hazardous earthquake faults for the benefit of public safety.   The act is directed solely at the problem of surface fault rupture.  Although seismic shaking effects are more damaging than fault rupture, the act is not directed at the other earthquake hazards.   

(End of the CalBRE Reference Book excerpt)

With regard to cleanliness and pollution, local and state health departments control commercial ventures such as restaurants, heavy industry, and transportation.   State and federal environmental protection laws and regulations have been passed to control both public and private pollution.   The primary regulating body at the federal level is the Environmental Protection Agency.  This agency has the power to regulate and enforce such laws as the Clean Air Act, the Water Pollution Control Act, the Solid-Waste Disposal Act, and others.   If private development is such that environmental factors are endangered or conservation of natural resources is jeopardized, the EPA will most likely have jurisdiction to oversee and regulate such development.   

At the state level, the departments regulating health and water pollution are the primary agencies charged with regulation of environmental matters.  These agencies have the power to regulate actions, especially purely intrastate actions, that may have an impact on the environment.   Municipalities may also play a role in environmental control through ordinances and zoning.   

Superfund

The 1980 Comprehensive Environmental Response, Compensation and Liability Act, sometimes called "Superfund" or "CERCLA," indicates that lack of negligence or fault is not a defense in environmental issues.   Owners, lessors, and even those who transport hazardous materials have been held liable.   

Under the provisions of CERCLA present owners and operators, past owners and operators, those who transport hazardous substances and those who generate hazardous substances are financially liable for waste cleanup.   

Sara

The Superfund Amendments and Reauthorization Act of 1986 (SARA) defines who is liable to pay for the cleanup of environmentally impacted properties.   

SARA amended CERCLA by creating the "innocent purchaser" as a defense of responsibility.   To prove innocence the owner must demonstrate that when the property was being acquired there was "no reason to know" the property was contaminated and that "all good commercial or customary practice" was done to detect the potential of contamination.   In addition the landowner must show there was a diligent inquiry into the prior uses of the property to detect the potential for contamination.   So far, however, the Environmental Protection Agency has never released anyone under the innocent purchaser provisions.   

FEDERAL LAWS REGARDING LAND AND THE ENVIRONMENT

These laws primarily affect large development but could have implications for even a single residential transaction.   No longer can real estate practitioners concern themselves with local rules and regulations only.   Today, land-use decisions must conform with applicable state and federal environmental standards and other federal and state public controls.   Below are listed some of the major federal laws and a brief description of their intent.   

1.   National Environmental Policy Act: 42 USC 4321

The purposes of the National Environmental Policy Act 18 (NEPA) are:

          to encourage productive and enjoyable harmony between people and their environment;

          to promote efforts to prevent or eliminate damage to the environment and biosphere and to stimulate the health and welfare of people;

          to enrich the understanding of the ecological systems and natural resources important to the nation;

          to establish a Council on Environmental Quality for land use planning.   

NEPA created the Environmental Protection Agency (EPA) to set and enforce federal environmental standards.   Under NEPA, certain large developments are required to file an Environmental Impact Study (EIS) which is an investigation and analysis of the long-run effects of the development, or land use, on its surroundings.  In addition, the EIS must discuss the long-run economic and social effects on other people who are not directly related to the development.   The EIS must contain at least five elements:

a) Positive effects of the project.   

b) Negative effects of the project.   

c) Alternatives to the project.   

d)      Short-term uses of the resources involved versus the long-term productivity of these resources.   

e) Potential irreversible commitment of resources.   

2) Clean Air Act: 42 USC 1857

The purposes of the Clean Air Act are:

a.       to protect and enhance the quality of the nation's air; to promote the public health and welfare and the productive resources capacity of its population;

b.       to initiate and accelerate national research and development programs to achieve the prevention and control of air pollution;

c.       to provide technical and financial assistance to state and local governments in connection with the development and execution of their air pollution prevention and control programs; and

d.       to encourage and assist the development and operation of regional air pollution control programs.   

This Act is just one of many federal laws designed to regulate air pollution.   The 1970 legislation, however, considerably broadens federal authority over the emission of pollutants into the air.   The Act focuses primarily on air pollution as it affects human health and secondarily on the effects of air pollution on the environment, vegetation, visibility, climate, property, and personal comfort and well being of all citizens.   Note: Developers considering the construction of industrial or certain commercial facilities must be very careful that the design of these improvements conforms with federal air pollution guidelines.   

3.   Solid Waste Disposal Act: 42 USC 6902

Incorporated into the Resource Conservation and Recovery Act (RCRA) of 1976, and amended in 1988, the Solid Waste Disposal Act deals primarily with the disposal of hazardous solid waste.   The specific objectives of this law are to:

a.       Provide technical and financial assistance to state and local governments and interstate agencies for the development of solid waste management plans (including resource recovery and resource conservation systems) which will promote improved solid waste management techniques (including more effective organizational arrangements), new and improved methods of collection, separation, and recovery of solid waste, and the environmentally safe disposal of nonrecoverable residues;

b.       Provide training grants in occupations involving the design, operation, and maintenance of solid waste disposal systems;

c.       Prohibit future open dumping on the land, and require the conversion of existing open dumps to facilities that pose no danger to health or the environment;

d.       Ensure that hazardous waste management practices are conducted so as to protect human health and the environment;

e.       Require that hazardous waste be properly managed at first, thereby reducing the need for corrective action in the future;

f.       Minimize the generation of hazardous waste and the land disposal of hazardous waste by encouraging process substitution, materials recovery, properly conducted recycling and reuse, and treatment;

g.       Establish a viable federal-state partnership to carry out the purposes of this chapter;

h.       Provide for stated guidelines for solid waste collection, transport, separation, recovery, and disposal practices and systems;

i.        Promote a national research and development program for improved solid waste management and resource conservation techniques, more effective organizational arrangements, and new and improved methods of collection, separation, and recovery, and recycling of solid wastes and environmentally safe disposal of nonrecoverable residue;

j.        Promote the demonstration, construction, and application of solid waste management, resource recovery and resource conservation systems that preserve and enhance the quality of air, water, and land resources;

k.       Establish a cooperative effort among the federal, state, and local governments and private enterprise to recover valuable materials and energy from solid waste.   

Recognizing the serious consequences of careless disposal of hazardous wastes, the RCRA calls for severe civil and criminal penalties in the event of noncompliance.  The courts may impose a civil fine of up to $25,000 per day of violation.   Criminal violations of the Act can result in fines up to $25,000 per day and prison time up to one year.   A person who knowingly engages in the transportation, treatment, storage, or disposal of hazardous waste without the required permits may be fined up to $50,000 per day of violations and up to two years in prison.   Congress allows for even more serious punishment.   If the court finds the violator knew that his/her actions placed another person in imminent danger of death or serious injury, and that the action shows an unjustified and inexcusable disregard for human life, a fine of up to $250,000 may be levied and a jail term of up to two years imposed.   In certain instances, the violator may serve up to five years in prison.  Organizations can be fined up to $1,000,000 per day of violation.   

Note: Any licensee engaged in business dealings that directly or indirectly involve hazardous waste should seek competent legal counsel to ensure strict compliance with all applicable rules and regulations.   

4.   Federal Water Pollution Control Act: 33 USC 1251

This Act established a comprehensive plan for making waters safe for swimming and fishing by 1983 and for eliminating pollution from navigable waters by 1985.   Water pollution is divided into two categories: point source and non-point source pollution.   Point source pollution results from such things as industrial and municipal discharges into streams, rivers, lakes, and oceans.   Agricultural and urban runoff are classified as non-point sources of pollution.   

Congress states its policy to prohibit the discharge of toxic pollutants in toxic amounts; to provide federal financial assistance to construct publicly owned waste treatment works; to develop and implement area-wide waste treatment management planning processes to assure adequate control of sources of pollutants in each state; to encourage major research to develop technology necessary to eliminate the discharge of pollutants into the navigable waters, waters of the contiguous zone, and the oceans.   

Further, Congress supports the states' efforts to prevent, reduce, and eliminate pollution, and supports research relating to prevention and elimination of pollution by providing aid from federal agencies.   Congress also encourages the President and Secretary of State to do whatever necessary to ensure that all foreign countries prevent, reduce, and eliminate pollution in their waters and in international waters to at least the same extent as the United States does under its laws.   To administer this Act, Congress provides an Administrator of the Environmental Protection Agency; and the Congress encourages and supports public participation in the development, revision, and enforcement of any regulation, standard, effluent limitation, plan or program established by the Administrator or any state under this Act.   

Note: Licensees involved in development that results in the discharge of pollutants into state or private waters need be aware of the requirements of this Act.   Failure to adhere to the rules and regulations of the Clean Water Act may result in civil or criminal penalties.   

5.   Coastal Zone Management Act: 15 USC 1452

The foundation of this Act can be stated as follows: The Congress finds and declares that national policy is to:

a.       Preserve, protect, develop, and where possible, to restore or enhance, the resources of the nation's coastal zone for this and succeeding generations;

b.       Encourage and assist the states to exercise their responsibilities in the coastal zone through the development and implementation of management program to achieve wise use of the land and water resources of the coastal zone, giving full consideration to ecological, cultural, historic, and aesthetic values as well as to needs for economic development;

c.       Encourage the participation of public, of federal, state, and local governments, and of regional agencies in the development of coastal zone management programs; and

d.       For all federal agencies engaged in programs affecting the coastal zone to cooperate and participate with state and local governments and regional agencies in carrying out the purposes of this law.   

To help implement such management programs, the national policy is to encourage cooperation among the various state and regional agencies, including establishment of interstate and regional agreements, cooperative procedures, and joint action particularly regarding environmental problems.   

Note: Licensees whose business requires them to deal with property on or adjacent to beaches should be very familiar with the federal rules and regulations governing the coastal zone.   

SOME SOURCES OF ENVIRONMENTAL PROBLEMS

Hazardous Waste: may be any one of a number of chemicals or biological or even radioactive materials.  These substances may contaminate soil, surface or ground water and pose great health and/or safety risks to people, plants and animals.   

Though these are most frequently thought of in connection with commercial and industrial activities there are many residential properties where commercial activities have been conducted.   Some of these may have created hazardous waste.   

In addition, properties within one-half mile of dumps, land fills, waste sites, petroleum storage or delivery facilities and other possible pollution sources may cause even residential properties to become a risk for buyers, sellers and brokers.   

The Environmental Protection Agency maintains a list of locations that are known hazardous sites.  Properties within one half mile of one of the sites is cause for concern.   

Asbestos: is any one of a number of fibrous materials which is extremely durable and fire resistant.  Asbestos fibers, when inhaled, may cause cancer or asbestosis, a degenerative disease of the lungs.  Asbestos was used in many kinds of buildings, including residences, until the early 1970's.   

Asbestos was used in vinyl floor tiles and linoleum, on siding, in shingles and felts, in ceiling tiles, fuse boxes, as insulation for water pipes and boilers, and even in air duct lining.   

Water Supplies: especially on rural properties may be potential sources of problems.   Water from municipal water supplies is usually safe.   However, water from a well, even one that is filtered, may not be.   

Lead solder in a home water system may be a problem in some homes.   Lead solder is a metallic gray material that appears around water supply tubes.   Copper tubing with lead soldered joints were commonly placed in all construction until 1986.   

Lead based paint has recently become one of the hottest issues concerning environmental hazards.   Some finance-related institutions such as FHA have recently mandated a lead based paint disclosure.   

Radon: is a naturally occurring gas, the molecules of which may attach to dust particles.   These particles may be inhaled, attach to the linings of the lungs and emit radioactive particles.   

PCBs (Polychlorinated Biphenyls): were commonly used as insulating material in electrical equipment such as transformers and the ballasts in florescent light fixtures until 1979.   Leaking electrical equipment may allow PCB's to contaminate soil, water and food.   While PCB's are a known carcinogen, it is believed they do not constitute a great threat to humans unless ingested.   

Common interest development dispute resolution

Effective 1994, the California Civil Code, Section 1354, was amended to enact "Alternative Dispute Resolution" (ADR) procedures.  The law requires that before a common interest development or an individual owner in such association file a lawsuit against the other, for any declaratory or injunctive relief in connection with a claim of money under $5,000 (other than association assessments), or for enforcing association governing documents rules, the filing party has to attempt to submit the dispute to mediation, negotiation, and binding or non-binding arbitration (an alternative dispute resolution).   

This is initiated by serving an ADR form upon the other party according to Small Claims Court service procedures.   The form describes the dispute, a request for ADR, a notice that response must be received within 30 days or request will be deemed rejected, and a copy of Civil Code Section 1354.   The ADR must be completed within 90 days.   If a lawsuit is started, the party filing the complaint must submit to the court a Certificate of Compliance with Civil Code Section 1354.   

Licensees should warn prospective buyers of common interest development units of these new legal limitations imposed upon eventual claims.  Failure to comply with the new law may result in the loss of the rights to a lawsuit in case of a dispute.   Unless parties agree to the disclosure, evidence and documents presented in the ADR procedure are not admissible in a later civil action.   

Possible earthquake danger disclosure requirement

After January 1st, 1993, the transferor of any residential dwelling built prior to January 1, 1960, with one-to-four living units of conventional light-frame construction, as defined in Chapter 25 of the 1991 edition of the Uniform Building Code of the ICBO, has to deliver to the buyer-transferee a copy of the "Homeowner's Guide to Earthquake Safety” published per Section 10149 of the Business and Professional Code and complete in writing an earthquake hazards disclosures.   These disclosure deal mainly with:

1.       Whether the structure was bolted, anchored or strapped according to Code to the foundation.   

2.       The existence of perimeter cripple walls, or any other first-story walls that are not braced with plywood or diagonal metal or wood braces.   

3.       The existence of a perimeter foundation composed of unreinforced masonry.   

4.   The existence of unreinforced masonry dwelling walls.   

5.       The existence of a water heater which is not anchored, strapped or braced.   

6.       The existence of any corrective measures that were taken regarding above and of which the transferor is aware.   

The duty imposed by the statute upon real estate licensees is limited in providing the seller with a copy of the Homeowner's Guide to the Earthquake Safety for delivery to the transferee.   

If the property is located in a specially designated seismic hazard zone, licensees have also the obligation to disclose such in writing.   Usually this will be done in the real estate contract and receipt for deposit.   

Interstate Land Sales Full Disclosure Act: 15 USC 1701

The purpose of full disclosure is to deter or prohibit the sale of land by the mails or other channels of interstate commerce through misrepresentation of material facts relating to the property.   The Secretary of Housing and Urban Development (HUD) and the Office of the Interstate Land Sales Registration administer this law.  This Act requires the developer to file a statement of record with HUD accurately disclosing relevant information about any development of 100 or more lots.   Lots larger than five acres are not covered by the Act.   In addition, the developer also must deliver a property report to purchasers of the property containing essential information about the property, such as distance to the nearest paved road, number of homes currently built and occupied, type of title the buyer will receive and the type of liens, if any, in existence.   

Brokers and agents should understand that if a buyer feels he/she has been misled by advertising falling under the guidelines of the Act, the buyer may sue the seller for civil damages under federal law.   Note: Failure to comply with the Act may subject a developer or licensee to criminal penalties of up to five years in prison and a $10,000 fine for every violation.