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Calendar This Date For Confusion: January 1, 2018

Mike Belote

By Mike Belote, California Advocates, UTA California Lobbyist

By now it is likely that most UTA members are aware of the enactment of SB 2, imposing a $75 surcharge on recording real estate documents, effective on January 1st of the new year.  What is not known is how fifty-eight different county recorders, the vast majority of them independently elected, will resolve the various ambiguities in the bill.  Some degree of confusion, and certainly a lack of uniformity, is inevitable when the new requirement kicks in.

Along with a host of other real estate groups, UTA was opposed to SB 2, not because of insensitivity to the obvious reality of the affordable housing shortage, but because of a number of policy reasons.  Among them: the wisdom of creating disincentives to recording documents, many of which are not required to be recorded; the idea of burdening a ministerial function like recording with fees to address a general societal problem; the inevitable temptation to raise the amount of the surcharge or extend it to other worthwhile purposes; equity issues with exempting purchases of multimillion dollar homes while applying the fee to those facing foreclosure or trying to refinance; lack of clarity on key provisions of the bill, and more.

In any event, both houses of the legislature approved SB 2 by the bare number of votes necessary to achieve the required two-thirds vote, and on September 29 Governor Brown signed the bill.  The mainstream media routinely mischaracterized the bill as a new tax on real estate transactions, and the legislature expressed pride in having created a “permanent funding source” for affordable housing.

The operative portion of the surcharge is contained in new Section 27388.1 of the Government Code.  Significantly, the surcharge is clearly delineated as an additional recording fee:  “In addition to any other recording fees specified in this code, a fee of seventy-five dollars ($75) shall be paid…” The surcharge applies to “every real estate instrument, paper or notice required or permitted to be recorded”, unless expressly exempt, “per each single transaction per parcel of real property”.

The statute contains a non-exclusive list of documents subject to the additional fee, using the classic “including but not limited to” language.  For trustee purposes, the list expressly mentions trustee’s deeds, reconveyances, requests for notices of default, notices of default and notices of sale, among many others.  But the scope of the requirement beyond the enumerated documents is not at all clear, since many hundreds of document type are statutorily eligible for recordation, and which instruments, papers or notices “relate to real property” is open to considerable interpretation.

Similarly unclear is how to aggregate documents for purposes of the $225 maximum contained in the bill.  Most recorders apparently will interpret the “per transaction” language to mean documents recorded concurrently, but this issue is currently being discussed.  The “per parcel” language will also need interpretation: if a homeowner’s association records a request for notice of default in a CID with 500 condominium units, is the fee assessed once or 500 times?

Exempt from the additional fee are documents recorded “in connection with” a transfer subject to the imposition of a documentary transfer tax, and documents recorded “in connection with” a transfer of a residential dwelling to an owner-occupier.

County recorders are presently working feverishly (and collaboratively) to develop consensus positions on the various ambiguities in the new statute, recognizing that no consensus can bind an individual recorder, or prevent changes in interpretations as the additional fee rolls out.

There is always the possibility of clean-up legislation to resolve ambiguities, although the better approach might be to wait for a time to assess the various issues.  Additionally, AB 166 has been amended to somehow provide for refunds of surcharges when paid by low-income individuals, and this bill may still receive attention when the legislature returns in January.

It probably goes without saying that UTA members should be preparing now to implement the new fee on January 1.  Happy New Year!


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