California is the hub of real estate investments owing to its favorable climate, huge population, and diverse economy. However, the state is renowned for the complex legal steps around this industry.
As a result, most investors hesitate to purchase real estate in this state. However, that doesn’t imply you must abandon profitable business endeavors. Instead, explore California’s key legal considerations, understand their impact, and take mindful steps!
Zoning laws and landlord regulations
Zoning laws state how you can use your land in different localities. California has strict zoning regulations, which vary according to the city and locality.
Before buying a real estate property, you must verify all zoning and land use laws. Make sure that you can use the property as intended.
Otherwise, you might buy a property to build a multi-unit apartment complex but find the land is zoned for single-family houses only. Without proper research on these laws, you may incur serious losses.
San Francisco and Los Angeles, particularly, have certain ordinances that affect development. Some localities are also subjected to environmental laws restricting land use.
Further, if you buy property governed by a Homeowners’ Association (HOA), you must also be aware of property maintenance, modification, and tenant-type laws. These limit your renovation or renting freedom.
To understand these laws better, seek a reputable and experienced real estate attorney california from the specific locality. A lawyer from a specific locality will be well-versed in the real estate world and changing laws.
They’ll explain all legal implications regarding the property, share whether it’s a good investment, and ensure that you’re well aware of every little detail.
Tenant rights, eviction laws, and rent control laws
California has comprehensive tenant protection laws. For instance, The California Tenant Protection Act of 2019 (AB 1482) states that you can annually raise the rent of residential properties up to 5% and the local inflation rate or 10% overall—whichever is less.
The law also bars landlords from evicting tenants without justified reasons. This is specifically applicable when properties are over 15 years old. However, there are certain exceptions for condominiums and single-family houses.
According to the law, you can evict tenants only based on rent non-payment, lease agreement violation, or your intention to move into your property. You can also demand them to relocate for property renovation purposes temporarily.
Further, there are separate rent control ordinances for San Francisco, Los Angeles, and Oakland. They enforce even more stringent tenant and rent control laws.
So, before renting out properties, ensure you comply with these laws. Otherwise, you might attract legal penalties and tenant lawsuits.
Property tax and propositions
Another significant consideration includes the property tax of your California-based real estate.
For instance, Proposition 13 states that property tax can increase only up to 1% of its assessed value and annual increases capped at 2%.
This is specifically applicable to properties held for extended periods. It saves the taxes of investors who want to maintain the property long-term.
On the other hand, if you sell a property, its current market value is reassessed, leading to major property taxes for new buyers.
However, there are still attempts at changing Proposition 13 for commercial estates. So, it’s best to stay updated about it.
Environmental regulations
If you plan to invest in rural, commercial, or industrial real estate properties, you must know about the environmental regulations and liabilities, including hazardous materials, land contamination, and closeness to protected zones and wetlands.
According to The California Environmental Quality Act, you must undertake an environmental review before construction or development. This can delay your project and even lead to more expenses. You have to perform environmental due diligence to uncover all hidden liabilities.
If you fail to address any of them, you might get legal penalties, remediation costs, and other legal actions.
Real estate syndication and security laws
Pooling funds with other real estate investors to buy large properties is called real estate syndications.
If you participate in such investments, you must be aware of federal and California state securities laws.
For instance, California law states that any investment offering deemed a security must be registered under the California Department of Financial Protection and Innovation.
All investors in real estate syndications must consult a single real estate or securities attorney. This will ensure that everyone complies with the securities laws and deter legal consequences, such as investor lawsuits.
Conclusion
Whether you want to invest in California’s residential, commercial, or industrial real estate, these legal considerations are extremely significant. So, consult a reputable legal expert, understand all the details, and make a wise purchase!
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
