Tag: legislation

Contrary to popular belief, there is no governmental license designated as a “property management” license. The Institute of Real Estate Management (IREM) does have a Certified Property Manager (CPM) designation; however, the IREM is a private company and not a regulatory organization. There are also other third party certifications. It may be useful to have these certifications, because it could increase your credibility, but it’s not a legal requirement. That said, there is a government license that is required for some activities of a property manager: a real estate broker’s license.

Not all of a property manager’s activities require a broker’s license, and not all activities requiring a license are performed by all property managers, even if they are licensed. Two common property management services that do require a license are managing the operations of income property and collecting rent. Other things requiring a license are less commonly done by property managers: listing and marketing the property for lease or rent, locating income property, listing prospective tenants, and trading in leasehold interests. A property manager with a broker’s license could also designate an employee to perform these tasks, but the employee must have a brokers-associate license or a sales agent license.

There are still some things you can do as an unlicensed property manager, if you are managing an apartment or vacation rental. You can show available units and facilities, provide information about listed rates and provisions, provide application forms and answer questions about them, and accept screening fees, signed agreements, and rent and security deposits. Note that while a license is required to collect rent for an income property, it is not required to collect rent on apartments or vacation rentals. In addition, no license is required to act as a property manager if the income property owner has given you “attorney in fact” under a power of attorney as a result of temporary inability.

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More: https://journal.firsttuesday.us/brokerage-reminder-property-management-licensing-keeping-employees-compliant/53718/

President Biden is due to release his 2022 budget plan in the fall of this year. Though nothing is set in stone yet, we have some ideas about proposed changes Biden plans to make to federal income taxes as well as estate and gift taxes. If any of these come true, it’s likely that the effective date will be January 1st, 2022, though it could be earlier. Here are some of the key proposals that may significantly shake up tax laws.

There are proposed increases to individual income tax rates, capital gains rates, and corporate income tax rates. Under these changes, the maximum individual income tax rate and maximum capital gains rate would likely become equal, both at 39.6%. A major change expected is the repeal of 1031 exchanges, which allow property owners to defer, sometimes perpetually, taxes on property sales when the proceeds are reinvested into real estate. There will probably also be changes to state and local income tax deductions. In the realm of estate and gift taxes, Biden is expected to drastically reduce the exemption amount and increase the tax rate.

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Many people may say that a particular property is owned by a trust, or in the name of a trust. Such statements may be pragmatically useful for conveying the idea, but it can lead to confusions. Not everyone is aware that trusts can’t actually own property. Instead, property is in the name of a trustee of a trust, and is held in trust, not by a trust. In addition, trusts for which the grantor is sole trustee are not separate taxable entities. When a property held in trust being titled, the titling should include the name of the trustee plus “trustee” or “as trustee,” as well as the name and date of the trust.

When establishing a trust, your Declaration of Trust is called a trust instrument. The name of your trust instrument must provide the name of the trust in addition to the instrument. Information about the property should be provided in the form of a separate Property Schedule attached to the trust instrument. When providing copies of your trust instrument, such as to banks, many will have their own certification of trust forms for you to fill out instead of copying the entire document. If they don’t, your state may be able to provide such a form. If you can’t find such a form, the relevant pages banks need is generally a page with the grantor’s name, a page appointing the trustee, a page listing the trustee’s powers, and signature pages.

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More: https://www.livingtrustnetwork.com/estate-planning-center/revocable-living-trust/how-to-fund-a-living-trust/titling-property-in-a-living-trust.html

Part of the COVID relief package included a change to tax deductions for business meals. Until December 31, 2022, businesses can write off 100% of their food and beverage spending at restaurants. This provision does not include grocery stores, office cafeterias, or similar. It was designed to assist restaurants, which have been greatly affected by the pandemic, by encouraging business spending. It does include writeoffs by freelancers who are considered to own their own business.

There are some requirements. The business owner or an employee must be present, so it doesn’t apply to situations such as contactless pickup or delivery directly to a client. You need to keep your receipts and provide an explanation of when, where, why, and with whom the meal was shared. The meal must reasonably be considered business related, such as between coworkers or an agent and client, though it’s not necessary that the meeting be successful.

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More: https://blog.freelancersunion.org/2021/04/13/covid-era-business-meal-deductions-and-freelance-taxes-2021/

Under normal circumstances, unemployment benefits are considered taxable income. However, the current circumstances aren’t normal. The American Rescue Plan brought with it a provision that the first $10,200 — or $20,400 if married and filing jointly — of your unemployment payments will not be taxed for 2020. The estimated tax break is around $1000 to $2000.

While the IRS will automatically adjust your tax refund amount, it may be helpful to send in an amended return, because tax credits are not automatically adjusted. The Earned Income Tax Credit (EITC) is a frequently unclaimed tax credit that can net you up to $6600 in additional credits, based on filing status, income, and number of children. Because a large portion of your unemployment benefits can be dropped off your income amount, it may cause you to become eligible for EITC if you were not already. Given how frequently it’s unclaimed, it’s also entirely possible that you were already eligible and didn’t bother to claim it, and you can still do so in an amended return. However, be aware that filing an amended return can cost money, and may not actually benefit you depending on the amount of additional tax credits you are eligible for.

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More: https://www.marketwatch.com/story/expecting-another-refund-after-the-irs-calculates-the-10-200-unemployment-tax-break-why-you-might-want-to-do-more-than-just-wait-11617794140

Common interest development (CID) is a broad term referring to condominiums, community apartments, planned developments, and stock cooperatives. CIDs often have a homeowner’s association (HOA), which has been the governing force for how units within the CID are rented out, as CIDs have not been subject to government rental laws. California changed this in January, requiring CIDs to allow at least 25% of the owners to rent out the units. They also may not prohibit rentals of accessory dwelling units (ADUs). CIDs can still prohibit short-term rentals.

The law came into effect on January 1st, 2021. CID documents may not immediately reflect this change, but they still must abide the new law and are required to amend their documents by December 31st, 2021. Violation can result in a fine of up to $1000.

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Assembly Bill 1885 went into effect January 1st of this year, increasing the debt exemption amount on a property when the owner’s spouse dies. Prior law set the amount at either $75,000, $100,000, or $175,000 depending on factors related to the residents. New law instead bases the amount on the countywide median sales price. The exemption amount is equal to this amount if the countywide median sales price is greater than $300,000, up to a maximum exemption of $600,000. Otherwise, the exemption amount is the minimum of $300,000.

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Back in November 2019, the California Law Revision Commission (CLRC) recommended some changes to the laws surrounding the Revocable Transfer on Death Deed (RTDD). RTDD simplifies the process of transferring properties upon death. CLRC also suggested a 10 year extension, but noted that further study would be required. RTDD was set to expire on January 1, 2021, but the pandemic has made review difficult. To give more time for review, it has now been extended an additional year, to January 2022.

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President Biden has proposed a $15,000 tax credit for first-time homebuyers, perhaps aimed at allowing renters who were getting ready to make the jump to homeownership before the pandemic to realize their plans. Not all renters have homeownership in the near future, but it’s possible that the tax credit could help quite a few people. Assuming a down payment of 3.5% for a 30-year loan at 3% interest rate, it could be a boon to renters in 40 of the 50 largest US metros.

Since it’s a flat amount and not a percentage, the tax credit would be especially useful in less expensive metro areas. Areas like Pittsburgh, Cincinnati, Cleveland, and St. Louis could see somewhere around 40% of renters being able to afford a mortgage on the median property with the tax credit. More expensive regions, such as California, aren’t going to benefit as much. It’s more likely that the number of people aided would be only in the thousands. However, these are all probably high estimates, since they are based on the minimum down payment of 3.5% for an FHA loan, which is not ideal.

The proposal does have one major flaw. Currently, demand is quite high and supply is incredibly low. The supply of available properties is already struggling to support the number of prospective buyers. If first-time homebuyers start trying to take advantage of their tax credit, it’s probable they’ll be entirely out of luck. Competition is fierce with multiple offers per property, and those attempting to use tax credits to scrape together money to buy aren’t likely to be providing the best offer.

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More: https://www.housingwire.com/articles/renters-and-bidens-15000-homebuyer-tax-credit/

If you’re in need of rental assistance, now is the time. California opened the window for COVID-19 rent relief applications a few days ago, on March 15th, 2021. There are state, county, and city programs — be sure to look at all the possibilities, because they do have some differences. Also be aware of the application windows. Some close as early as March 31st.

Information about the California state program is available at  www.housing.ca.gov, and you can get a personalized report from https://ucilaw.neotalogic.com/a/Cal-Covid-Info-App-for-Tenants-and-Landlords. If you are a landlord, you can also participate in the state program by waiving 20% of the rent in order to get reimbursed for 80% of the unpaid rent. Tenants whose landlords don’t wish to participate are given 25% of their unpaid rent. The state program also pays 25% of prospective rent and provides assistance with utility payments.

The protections for tenants and homeowners under AB 3088 were set to expire a few days ago, on January 31, 2021. However, SB 91 extends these through June 30, 2021, giving tenants more time without fear of eviction as long as their application is proper and they pay at least 25% of their rent. SB 91 is not merely an extension of AB 3088, though. It also creates new tenant protections and establishes a rent relief program.

The rental assistance program is available regardless of citizenship status, but only for those with an income below 80% of area median income (AMI). The program prioritizes households below 50% AMI or who have been unemployed the full 90 days prior to applying. Assistance is given for rental arrears first, before new rent and utility arrears.

The new tenant protections mostly prevent landlords from attempting to squeeze money out of tenants in ways separate from the normal rent payments. Landlords won’t be able to apply the security deposit to debt, charge late fees, or factor in debt when determining rent prices. Landlords also can’t assign or sell debt until June 30, 2021, or at all if the tenant qualifies for the new rental assistance program. Landlords may not take legal action to recover debt until July 1, 2021, at which point they still need to provide documentation of good faith efforts to cooperate with qualifying tenants. Courts are allowed to limit attorney’s fees for rental debt cases, and if the landlord refuses to participate in the rental assistance program, the court can also reduce the amount of damages.

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Proposition 19 has now passed in California, and with it brought changes to how property tax is reassessed for some purchases, effective April 1, 2021. The new law replaces Prop 60 and Prop 90, affecting replacement property by homeowners who are over 55, severely disabled, or whose home has been substantially damaged by wildfires or natural disaster. It allows the homeowners to transfer their original home’s taxable value to a replacement property. It’s unclear as of yet how properties sold prior to April 1 will be treated if the replacement purchase occurs after this date. Regardless, the replacement purchase must occur within two years of the original property’s sale.

Under prior law, this type of reassessment could only be applied if the purchase was made in the same county as the prior residence or in specific counties. Under new law, it applies throughout California. Additionally, prior law required the replacement home to have equal or lesser value than the original home. Prop 19 has provisions for an adjusted rate in a circumstance where the value is greater. The adjusted rate is calculated as the original home’s taxable value plus the difference between the replacement home’s purchase price and the original home’s sale price. This reassessment can be applied up to three times, or indefinitely any time that it is applied under the provisions for substantial property damage.

With Prop 19 also came a change to intergenerational transfers. Previously, a child or grandchild could inherit a property with no change to the property tax amount. Effective February 16, 2021, that exemption from reassessment applies only while the heir is using the property as their primary residence, and only if the heir claims a homeowner’s or disabled veteran’s exemption within one year of the transfer. The new law also requires that the property continue to be used as the child or grandchild’s primary residence. Once the property is no longer their primary residence, the property will be reassessed.

If the value of the inherited property is more than one million dollars greater than the original purchase value, there will be a partial reassessment. Essentially, the heir is allowed to use the original purchase value, plus one million dollars as the baseline property value. Above that, normal property taxes are applied.

In addition, family farms are now also included in properties that can retain their taxable value when transferred. Farms are not subject to the primary residence test, however all other qualifications and exemptions apply.

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On Jan. 19th, the Long Beach City Council voted unanimously for preliminary approval of two ordinances designed to increase affordable housing. The policy is still subject to objections prior to final approval, but if it continues as written, 11% of rental developments and 10% of housing developments will need to be set aside for affordable housing, else be subject to a fee. This would apply only to developments of 9 or more units in certain areas of Long Beach.

The City doesn’t want this to be a temporary solution, so ideally the policy will be the best it can be. However, it’s already been the focus of some criticism, ironically that some aspects end after a certain number of years and the policy therefore looks a lot like a temporary solution. There were also objections to the long phase-in schedule and the rather lenient option of developers replacing nearby properties with affordable housing if they don’t want to include them in the development itself.

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More: https://lbpost.com/news/long-beach-gives-preliminary-approval-to-policy-mandating-more-affordable-housing

Many attempts have been made, and are still being made, to help lower income people to acquire affordable housing. We haven’t been worried about higher-income housing; those who can even consider affording it don’t particularly need the help. But there’s a group we’ve mostly been forgetting about: the dwindling middle class. The income gap has increased dramatically, but there are still those few who earn too much to get subsidies, yet too little to afford higher priced housing.

To this end, California lawmakers have passed AB 725, which modifies California zoning laws to allow for more moderate-density housing in metropolitan and suburban areas. 25% of the Regional Housing Needs Allocation must be for moderate income housing zoned for 4 or more units. Interestingly, a further 25% must be for above-moderate income housing, also zoned for 4 or more units. This is potentially because there could be significant backlash from a major drop in home values in areas that are already primarily high income neighborhoods.

AB 725 definitely has its flaws, though. Of course, it does little to nothing to further affordable housing, only increasing the density of housing, but that wasn’t the objective. The more pressing issue is that there are no provisions to improve infrastructure for higher densities, fund new constructions, or guarantee that new constructions will qualify for the required income range. Essentially, California lawmakers are saying “You better do this,” without providing any assistance in making it feasible.

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More: https://journal.firsttuesday.us/sacramentos-plans-to-house-californias-missing-middle/75582/