New Legislation Proposes to Take Wall Street Out of the Housing Market
A bill introduced in the House and Senate would prevent hedge funds from owning single-family houses in the United States.
The bill would require hedge funds, defined as corporations, partnerships or real estate investment trusts that manage funds pooled from investors, to sell off all the single-family homes they own over a 10-year period, and eventually prohibit such companies from owning any single-family homes at all. During the decade-long phaseout period, the bill would impose stiff tax penalties, with the proceeds reserved for down-payment assistance for individuals looking to buy homes from corporate owners.
An important new federal law, the Corporate Transparency Act, requires certain entities to report beneficial owner information beginning January 1, 2024.
The Corporate Transparency Act will require most privately held companies to report identifying information about their beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”) of the United States Department of Treasury. Companies already in existence before January 1, 2024 will have until January 1, 2025 to report. Companies formed on or after January 1, 2024 and before January 1, 2025 will have 90 days after formation to report. There are significant potential civil and criminal penalties for non-compliance.
CALIFORNIA
AB 12 – Security deposits limited to one month’s rent. (Effective July 1, 2024)
Landlords may collect no more than one month’s rent for either furnished or unfurnished units in addition to the first month’s rent. There is an exception for small landlords, defined as a landlord who is a natural person or LLC, and owns no more than two residential rental properties with no more than a total of four units offered for rent.
AB 12, beginning July 1, 2024, prohibits a landlord from demanding or receiving security for a rental agreement for residential property in an amount or value in excess of an amount equal to one month’s rent, regardless of whether the residential property is unfurnished or furnished, in addition to any rent for the first month paid on or before initial occupancy.
Exception for small landlords: A small landlord may demand or receive a deposit in an amount or value not in excess of two month’s rent, whether or not the unit is furnished, in addition to any rent for the first month, if the landlord (1) is a natural person or a limited liability corporation in which all members are natural persons and (2) owns no more than two residential rental properties that collectively include no more than four dwelling units offered for rent. The exception for small landlords includes family trusts.
This small landlord exception does not apply if the prospective tenant is a service member.
Landlords who currently hold a security deposit or demand or collect a security deposit in excess of one month’s rent prior to July 1, 2024, may continue to retain the security even if it is more than one month’s rent.
Assembly Bill 537 – Vacation Rentals: disclosure of all mandatory fees – (Effective July 1, 2024)
AB 537 prohibits a place of short-term lodging, as defined, from advertising, displaying, or offering a room rate that does not include all fees or charges required to stay at the short-term lodging, except government-imposed taxes and fees.
Violations: Violations of provisions are subject to a specified civil penalty not to exceed $10,000 and would authorize an action to enforce those provisions may be brought by a city attorney, district attorney, county counsel, or the Attorney General.
AB 1418 – Criminal Background Checks: Prohibition on local government “crime free” housing programs and ordinances. Prohibits local ordinances that penalize tenants and landlords for various types of law enforcement contacts, i.e., local “crime free” rental housing programs and ordinances. (Effective January 1, 2024)
This law prohibits cities and counties from enacting local policies that:
1) Require landlords to use criminal background checks. Make alleged criminal behavior, without a felony conviction, a basis to evict a tenant.
2) Require landlords to evict an entire household when a household member is convicted of a felony.
3) Define nuisance behavior to include police contact, police service calls, or anything else outside the scope of the existing state definition of a nuisance.
4) Require landlords to include lease provisions that provide a basis for eviction beyond those in existing state law.
The law also prohibits a local government from promulgating, enforcing or implementing an ordinance, rule, policy, program, or regulation affecting tenancy, that does any of the following:
Imposes or threatens to impose a penalty against a resident, owner, tenant, landlord, or other person solely as a consequence of contact with a law enforcement agency.
Requires or encourages a landlord to do, or imposes a penalty, on a landlord for the failure to do, the following:
Evict or penalize a tenant because of the tenant’s association with another tenant or household member who has had contact with a law enforcement agency or has a criminal conviction.
Evict or penalize a tenant because of the tenant’s alleged unlawful conduct or arrest.
Include a provision in a lease or rental agreement that provides a ground for eviction not provided by, or that is in conflict with, state or federal law.
Perform a criminal background check of a tenant or a prospective tenant.
Defines as a nuisance, contact with a law enforcement agency, request for emergency assistance, or an act or omission that does not constitute a nuisance under California law.
Requires a tenant to obtain a certificate of occupancy as a condition of tenancy.
Establishes, maintains, or promotes a registry of tenants for the purposes of discouraging a landlord from renting to a tenant on the registry or excluding a tenant on the registry from rental housing within the local government’s jurisdiction.
Comment: The prohibitions in this law are prohibitions against a local ordinance, rule, policy or program. They are not prohibitions against landlords themselves. For example, this law does not prevent a landlord from performing a criminal background check within the parameters of existing state and federal law. Nor does it prevent a landlord from evicting all tenants based on nuisance or the criminal activity of a single tenant.
PENNSYLVANIA
REMOVING RACIST LANGUAGE IN DEEDS: A new law targets 'restrictive deed covenants,' which were "a tool of systemic racism that was written into deeds, barring the sale of properties to people of a particular race, ethnicity, or religious group."
The new law allows a property owner or homeowner association to file a form with their county's Recorder of Deeds office to strike a restrictive covenant from their deed without having to pay a fee. The legislation also provides reimbursement for the cost incurred by county recorders.
EXPANSION OF PROPERTY TAX/RENT REBATE PROGRAM: The Property Tax/Rent Rebate Program was expanded to nearly 175,000 more Pennsylvania seniors and doubles rebates for many of the 400,000 Pennsylvanians who already qualify.
The expansion of the property tax/rent rebate program raises the maximum rebate for seniors from $650 to $1,000, increases the income cap for renters and homeowners to $45,000 a year, and ties the cap to increases in the cost of living.
NEW YORK
The Newly Enacted Amendments of the PCDSA
The Removal of the $500 “Opt-Out” Credit
One significant change to the act is the elimination of the provision, which provided that if a seller of a one-to-four family residential real property did not deliver a completed Property Condition Disclosure Statement (PCDS) to a purchaser prior to entering into contract, the seller would be required to provide the purchaser with a $500 credit at closing. This is a significant change in real estate transactions, particularly in downstate New York where almost no seller ever provides the PCDS.
Section 465 of the RPL was also amended. The title of Section 465 was changed from “Remedy” to “Liability,” and the identical language referred to above relating to the $500-credit was deleted entirely and replaced with the following: “Nothing contained in this article shall be construed as limiting any existing legal cause of action or remedy at law, in statute or in equity.” It is important to note that the preceding language was the same language contained in Section 467 (which is being deleted and moved to Section 465 with this newly enacted amendment). Again, this change is notable because there is no longer a reference to a “remedy” (i.e., the $500 credit) that was available to a purchaser for a seller’s failure to provide the PCDS.
The shifting of the definition of “liability” in itself does not seem to have a significant effect on the state of a seller’s potential liability under the new amended PCDSA. The PCDS, with the deletion of the $500-credit language, now simply provides that if a seller “…makes a knowingly false or incomplete statement on [the] form [it] may subject the seller to claims by the buyer prior to or after the transfer of title.” Existing case law and prior judicial interpretations relating to the PCDSA would still be applicable and will be discussed in more detail below.
New York Additional Disclosure Requirement
New York’s Legislature has passed a piece of legislation that would, if signed by the governor, publicly disclose the names of every real estate or other investor who plays a substantial role in any limited liability company that does business in New York. The Legislature took inspiration from the federal Corporate Transparency Act passed a few years ago, which required filing the same information and more with a federal agency. There, it is all supposed to remain confidential, except as needed for law enforcement. The federal filing requirement starts in January 2024 unless postponed, which seems likely.
New York’s lawmakers decided the federal system wasn’t enough. Their new law would create a whole second system of its own. It would differ from the federal system in a few ways. As the most important difference, New York’s proposed system would not maintain confidentiality of the business address of each LLC and the names of LLC owners who have “substantial control” of the LLC as defined in the federal law. That information would become publicly available to anyone with an Internet connection. Perhaps concerningly, the new system would also disclose whatever else the New York Secretary of State decides should be disclosed.
NYC Short Term Rental Restriction
New York City Administrative Code defines a short-term rental as a rental of a dwelling unit or a part of it or housing accommodations within a building for occupancy of fewer than 30 consecutive days. As per the New York State Multiple Dwelling Law, renting out an apartment in a “Class A” multiple dwelling, which refers to a building with three or more permanent residential units, is not allowed for less than 30 consecutive days.
In NYC it is prohibited to rent out an entire apartment or home on a short-term basis, so non-owner occupied short-term rentals are not workable. Hosts must be present throughout short term guest stays and can host only two paying guests at a time. Every guest needs to have free, unobstructed access to every room and every exit within the apartment. Internal doors cannot have key locks as they can create barriers in case of emergency.
New York City short-term rental properties need to be maintained in a safe and code-compliant condition.
NEW JERSEY
Flood info for homeowners and renters
Sellers of real estate and landlords must disclose knowledge of a property’s history of flooding, flood risk, and location in a flood zone or area. Additionally, the law requires landlords to notify tenants of the availability of insurance for renters through the National Flood Insurance program. ILLINOIS
Starting next year, new homes in Illinois will be required to support electric vehicle charging stations under a new law signed by Gov. J.B. Pritzker on June 9.Passed by the legislature in May, the Electric Vehicle Charging Act requires any house or multiunit building completed after Jan. 1, 2024, to have "at least one EV-capable parking space for each residential unit that has dedicated parking." (The law also applies to existing multifamily residential buildings that are being renovated.)
TEXAS
HB 614 requires the authorized board of a property owners’ association to levy a fine to adopt an enforcement policy related to levying fines.
ALBERTA, CANADA
LANDLORDS TO PAY INTEREST ON SECURITY DEPOSITS
As of Jan. 1, Alberta landlords will need to pay tenants annual interest on security deposits. Since 2009, the interest rate on security deposits has been zero. But now, under the Residential Tenancies Act and Mobile Home Sites Tenancies Act, the interest rate is 1.6 per cent.
According to the government’s online calculator, a tenant who paid a $1,000 damage deposit will be entitled to $16 from their landlord by the end of 2024.
Comments