Episode Transcript
[00:00:00] Speaker A: Welcome to AllView360 all things real Estate Podcast. With your hosts Daniel Gutierrez and Shannon Dempsey, we explore real estate from every angle, giving you insights, tools and confidence to make smart decisions that support your future. It's time for a new perspective on property. Welcome to AllView360.
Hello, Daniel.
[00:00:20] Speaker B: Hello. How are you?
[00:00:22] Speaker A: I'm doing so good. How are you?
[00:00:23] Speaker B: I'm good. It's been a hectic week, as you know, moving offices in Newport beach for our headquarters, but it's been an awesome week.
[00:00:31] Speaker A: I've never seen you this flustered with your surroundings.
[00:00:34] Speaker B: Well, that's the issue, is our surroundings are a total mess. So we moved into a much larger office, kind of better. Fits our needs in our growth. But with that, everything's everywhere. The environment is beautiful but a complete disaster and is definitely making the day to day work a bit more difficult. It's like not. It feels like I'm not at peace. Like there's no Zen or feng shui with our office right now. It's a mess.
[00:01:00] Speaker A: I know the amount of times you brought up trash as an actual company issue in the leadership meeting. Is the trash gone?
[00:01:08] Speaker B: The majority of the trash is gone. I mean, it was like an obstacle course in here. There was trash boxes, like there was so much stuff everywhere.
[00:01:15] Speaker A: I talked to a couple other people. I'm like, how's it going? And everyone would be like, there's a lot of trash everywhere. And I just pictured like, I'll just come visit in a month or so.
[00:01:24] Speaker B: Perfect.
[00:01:25] Speaker A: Yeah, let's solve that anytime soon. Okay, well, I appreciate you locking this in during your time of turmoil.
[00:01:32] Speaker B: Always, always.
[00:01:34] Speaker A: What are we going to talk about today?
[00:01:36] Speaker B: So today we're talking about five big laws that are affecting the real estate industry, affecting brokerage, affecting insurance, affecting property management, affecting investing, affecting really the entire industry.
[00:01:48] Speaker A: Yes. And we picked five, but there's many. But these are kind of the broader five that or almost, you know, having immediate impacts on things.
[00:01:57] Speaker B: Yeah, absolutely.
[00:01:58] Speaker A: Do you want to just kick it off with number one?
[00:02:01] Speaker B: So number one is all you, but it's digitally altered real estate images and the disclosure, something that I'm sure a lot of people don't even realize is a law, but it's an important one because it's been both helping and hurting a lot of people for a while with essentially fake images. Especially now with how easy it is to make fake images.
[00:02:23] Speaker A: Yes. So, and then the new actual law was in Bill 7:2:3. The law says if any real estate agent, broker, or someone acting on their behalf uses digitally altered images. That material materially changes how the property appears. That alteration has to be disclosed.
[00:02:41] Speaker B: Duh.
[00:02:42] Speaker A: This has been something that.
They've done different variations of this over the years.
And when. When I think virtual staging or digitally altered photos, I think of them placing furniture in the room. Right. You guys do that a lot on the marketing for the rentals? Yeah, agents will do that a lot when their listings are vacant and they don't want to pony up to stage it or the seller doesn't want to stage it. But as I thought deeper into this, this is more probably geared towards the people that Photoshop out power lines or Photoshop in a nice lush green lawn when that's not actually happening and it's a weed field.
[00:03:20] Speaker B: It's way beyond that, too.
Like, you could digitally remodel an entire home and present it as if it were looking like that too. So it goes way beyond that. And we've had clients over the years are like, oh, just Photoshop that out or do this or do that. And, you know, sometimes it's okay, we disclose it, but we say, hey, we're going to Photoshop this out because we're doing the work. It's just going to take a little bit longer and we want to get on market. So we're going to Photoshop that out. Or now AI it out when we. But we're going to disclose it and that work is being done to actually make it look like the way that we're.
We're showing that it does.
[00:03:56] Speaker A: And I feel like now that they're getting really strict with it, they probably started on this way before AI has done what it's done in the last year, but brilliant, because now you can change an entire property's image in seconds and it won't even look the same. Yeah. So it includes virtual staging, removing furniture, adding furniture, landscape flooring. Like, why would you change the flooring and pretend that's what it is?
Paint color, removing utility poles, neighboring structures. That's a big one. Views you just alter in an ocean view when it's an apartment building. And then any AI generated modifications. Yeah, but as far as normal photo editing, that's still allowed. I don't know. The whole concept just seems crazy to me that someone would be doing that anyways.
[00:04:43] Speaker B: But it seems crazy, but there are people doing it, and I think the government has to pay paint. A kind of a broad stroke with this law and saying, hey, like anything that's really gonna fundamentally or materially change the appearance of the home the property, whatever it is, like, you can't do it, or if you do, you have to disclose it.
And you and I are kind of in the same mindset where it's like, disclose, disclose, disclose. Just, you know, be upfront, be honest, disclose everything.
But not everyone's that way. And even across the board, within other aspects of real estate, there's always been that leaning towards disclosure. I think the government is really focusing on that across the board and everything right now. Especially as AI makes it so easy to really manipulate and change everything in our environment.
[00:05:29] Speaker A: I know it's sad. But necessary.
[00:05:31] Speaker B: But necessary.
[00:05:32] Speaker A: You can't. You can't catfish your listings anymore. Yeah, I wonder. I'm going to talk to the different media companies that I use. I wonder how much this is impacting what they do. Because, like, I'll do a virtual Twilight. If a Twilight shoot doesn't fit into the schedule, is that allowed? Or when there's an ocean view and you brighten up the ocean, like, things might be happening or altered on the back end, but without me even realizing it.
So I would imagine that they are also up to date on all of this. On what's allowed and not allowed.
[00:06:04] Speaker B: Well, yeah, the big ones. You'll never even notice it.
So that's huge.
I think there's going to be a new law as well for, like, Tinder and Bumble and things like that, where people can't.
[00:06:16] Speaker A: Is that real or.
[00:06:17] Speaker B: Totally kidding.
[00:06:18] Speaker A: Oh, cannot catfish your listings and you can still catfish yourself.
[00:06:25] Speaker B: Yeah, you can still catfish yourself, but you can't catfish the general market. At least the real estate market.
[00:06:30] Speaker A: Yeah. Okay, that makes sense. And trust me, there's some power lines that I would have loved to edit out, but it never crossed my mind to actually do it.
[00:06:38] Speaker B: So on. On the more practical approach, how do you recommend that agents comply with these
[00:06:44] Speaker A: laws, know the laws, and don't make any adjustments to things that aren't accurate?
[00:06:50] Speaker B: And if you do.
[00:06:51] Speaker A: If you do what I'm seeing, I'm seeing two different versions of it. One, you do the actual altered image followed by the true image and label them both, or just label the altered image that it's been altered. And with our agents on, like, their flyers and things like that, there's a couple that have been doing fixers and they're saying, here's what the home could look like. And I'm like, nice and bold.
[00:07:16] Speaker B: Yeah, absolutely.
[00:07:16] Speaker A: This image is AI generated.
Even though it's very obvious, you still need to put that text on there and make it very clear.
[00:07:23] Speaker B: Yeah. And I know a lot of developers do that with, like, vacant land and when they're trying to sell it before they fully develop it and saying, hey, this rendering is what it will look like. But you do see the people. I mean, we get it all the time. It's like, oh, check out this, you know, oceanfront listing. It's only $2 million. It's like, oh, no. Because that's just the land.
[00:07:41] Speaker A: Yeah.
[00:07:42] Speaker B: And the picture of the rendering is what it could look like. It's very, very different.
[00:07:46] Speaker A: Yeah. It needs to be clear.
[00:07:47] Speaker B: Yeah, absolutely. And just disclose. So put it in. And it can't be in the private remarks. If you're talking mls, it can't be in the private remarks. It needs to be disclosed to everyone, which means it needs to be in the listing description.
[00:07:59] Speaker A: And this isn't a law, but I think it should just be a common practice. Or what I would share with our agents is don't alter something out that can't actually be changed. Yeah. Don't add in a view that's not there. Don't remove something that cannot be removed. Be, you know, as transparent as possible, especially when marketing at home.
[00:08:17] Speaker B: Yep. Absolutely. Love it.
[00:08:19] Speaker A: Okay, so topic number two, fire insurance. This isn't necessarily one specific law that has changed. It's been an ongoing thing over the years, but it is now becoming more and more prominent. I don't know about what you're seeing, but for me, just in the actual real estate transaction, it's being treated not only in the high fire severity zones or high fire zones, which is most of Southern California, if we're being honest, not only for those homes, but just the actual obtaining insurance process has now become, from my experience, a contingency equivalent to your loan contingency, your appraisal contingency, your inspection contingency.
[00:08:59] Speaker B: 100%. And it's not just on the transactions. It's everything. It's. Well, buying it makes it a bit more difficult because if you can't get it, the deal's dead. But even owning, whether it's your primary residence and keeping.
Keeping an insured and seeing your premium skyrocket, or even on the investment side, we're seeing a lot of investment real estate, whether it's multifamily or commercial, the. The premiums are skyrocketing or they're just straight denying, whether it's fire insurance or just regular property casualty.
It's. It's crazy and we're having to go out and shop around, but it's even. It's A different conversation because we're going shopping for these policies and we're telling clients it's no longer a situation where we're getting the, the best value.
Sometimes now we're just finding any insurer that's willing to write a policy and sometimes we have no options.
[00:09:48] Speaker A: Yeah, I, what I'm doing with listings now ahead of time is getting a fire insurance policy current to the date to that specific property prior to even showing it.
[00:09:59] Speaker B: Yeah.
[00:09:59] Speaker A: So a. We know if it's obtainable and we can. In California there's fair plans. So it is to some extent. But we can say, hey, here is what an insurance policy for this property is going to look like for the new owner.
[00:10:11] Speaker B: Well, and you're, you're great at that stuff, but not everyone is. And they, they should be doing these things.
[00:10:16] Speaker A: They should be doing that.
[00:10:17] Speaker B: Another component to all of this is insurance now covers I think a lot less for a lot more money. And really reading your policy and knowing what it covers, it's longer situation where you just bind the policy and don't worry about it. You really have to know what you're covered for and not covered for. And having an insurance broker agent that really understands your risk profile, your portfolio and how to provide you the right coverages and policies for that property or any others.
[00:10:49] Speaker A: And I don't see the insurance or fire insurance. I don't see it getting any looser over the years. I only see it getting stricter.
[00:10:57] Speaker B: Correct. Yeah.
[00:10:58] Speaker A: They're kind of a newer thing is that wildfire mitigation discounts are required for insurance companies. And my community that I live in, they've been working to become like there's a whole fire safety committee to be a firewise community.
And I don't know the ins and outs of that. But. But it's a certain amount of. It's a certain percentage of the homes within the community that qualify for a B and C or have done a B and C. And then overall we would get a discount for our insurance once we get that official designation.
So I do think we're going to start seeing a lot of things like that. Incentives for people to actually do the defensible space or make sure that their home is as protected as it can be.
[00:11:39] Speaker B: Yeah.
One of the properties that we own, it's a hotel in Colorado. That's actually been one of the biggest hindrances of being able to sell the asset. Then buyer policies now are literally like four times what we've been paying historically. But because it's a new or would be a new owner and new insurer. The rates have skyrocketed and it's making it really difficult for it to make sense to buyers going forward.
[00:12:04] Speaker A: The other big part of transactions is that defensible space disclosure and process.
Earlier on when all of that getting that AB38, do you guys have that in Orange county, the AB38 clearance?
[00:12:15] Speaker B: No.
[00:12:16] Speaker A: So in San Diego, and I'm sure there's different versions of it in different states that have high fire severity zones, you have to do the AB38 clearance. The seller has to have that compliance when they're selling their home. When I walk with, it's either Cal Fire or San Diego City. Whoever is designated for that area. There was no actual recourse is what the fire inspector said, if the home is not in compliance. Interesting on their end. So I hope that has changed or I hope that will change. I would imagine it will. But they are slowly putting all of that responsibility during the escrow process of having your home check whatever boxes they need checked.
[00:12:57] Speaker B: Yeah. And something beyond the transaction as well that we've discussed is actually owning the property. But on an hoa, it gets. It's a whole different level. You see some of the townhome or condo communities that are near high fire zones that they straight up just can't even get insurance. And one of two things are happening. The insurance skyrockets and your HOA dues go from 400 to 800 from one month to the next.
[00:13:22] Speaker A: Or you get slapped with a special assessment because they don't have the reserves to cover.
Is that what you were going to say?
[00:13:27] Speaker B: Well, yeah, you get slapped with special assessment. All of a sudden now your HOA dues double, triple, whatever it is, you get slapped with a special assessment for that one time catch up. Or the HOA just turns around and says, hey, we're no longer insured for fire.
You know, get your own policies or whatever it is. But it's a huge, huge issue. We see that in a lot of developments, especially as specifically in California as it's getting built out further into away from the metros and into more of like the like farmland or mountains and things like that around San Diego, Orange County, Louisiana, it's super high fire zones. And these new developments generally have higher HOA fees to begin with. And then they find out that their fire policy is going to triple their HOA fees or they have no policy at all.
[00:14:17] Speaker A: It's not good.
[00:14:17] Speaker B: Yeah. And then if they have no HOA fire policy, then sometimes they can't even get their own homeowner's policy. For condo policy, it's. Yeah, it's a domino effect.
[00:14:27] Speaker A: Then you're having to sell to cash buyers and your property values go down. Just not good.
[00:14:31] Speaker B: Exactly.
[00:14:31] Speaker A: And then we have Fair Plan, which California Fair Plan, because the state was required to provide some version of insurance to every single property. And there's been a lot of changes happening within Fair Plan. I'd love to have Cord on here to talk about it, but they've expanded. It used to just be fair. California Fair Plan was covering those high fire severity properties that big box or big box insurance company wasn't going to cover. So you'd have to go through Fair Plan. It was really expensive. They keep changing it. So now Fair Plan covers not just high fire severity. And so that broadens their scope, allows for more income on their end to reduce the cost of it. For the high fire ones, they're adding in different things that can be insured, not just the fire insurance, but, you know, other things can be added to the policy. So in general, that California Fair Plan is getting better and better. It used to be like, you'd be like, dang, this can only go Fair Plan. And that was not good.
But I think the stigma slowing or the negative stigma slowing on that. Yeah, we should have Court on here to talk ins and outs of all of that.
[00:15:38] Speaker B: Let's do it.
[00:15:39] Speaker A: Cord is an insurance broker, so all of the insurance changes, and that is something that changes every year. If you're a real estate professional, you need to stay on top of all of it because sometimes insurance can kill your deal.
[00:15:52] Speaker B: Well, it's being that true advisor. If you're an agent, you're being that true advisor consultant to your clients, letting them know what's going to happen at the transaction and then going forward and what their potential risks may be.
And then if you're an investor, developer, whatever it is, you have to know that if you are a real estate investor and a lot of people buy condos first because they have a lower entry point, they could do so with a lot less money. And, you know, they buy their condo, they do the math. If you've bought anything recently, you're barely having any cash flow, if at all. Sometimes you're lucky to break even. And then the HOA fees double. Now you're underwater and there's nothing you could do about it.
[00:16:32] Speaker A: No, I've only had one deal. And it wasn't even a deal. It was a client that was very, very interested in a property. They felt like it Was priced really well, you know, and we were trying to figure out what's. What's going on with this property. Went to it. It was great. And then I looked around and realized we were on a hill with no other properties around us. And immediately shot in that request for an insurance quote. And I think the property was 121 3, probably a 1718 house, but priced really low. And the insurance policy for fire insurance, Al, that was going to be. I think the best number we got was 28,000 a year.
[00:17:08] Speaker B: I believe that.
[00:17:09] Speaker A: So in that price point, to add on 28,000 additional cost a year is significant.
[00:17:14] Speaker B: Yeah. One of our clients bought a, I think it was like $11 million mansion in Malibu right after the Malibu fires. And it was a rental that we were managing.
We were paying, I think, 120,000 a year in fire insurance.
[00:17:31] Speaker A: Dang.
[00:17:31] Speaker B: Yeah.
[00:17:32] Speaker A: I don't like that. Yeah. Who was explaining to me, I need to. I'll send it. But it was. Other states are also struggling with insurance across the board. But California, even though we feel like the fire insurance is totally crazy, it's not the worst possible scenario as far as natural disaster insurance that we could be dealing with because there are preventative measures versus a hurricane or.
[00:17:55] Speaker B: Well, there's a few other components there, like, yeah, you have the hurricanes and things like that. But insurance prices go into the pricing of homes. So while California has had a massive appreciation in the value of real estate over the last, well, many decades, part of that is because insurance prices have been relatively low to the rest of the country now, while home values have continued to go up. Now from one day to the next, your Insurance goes from 2,000 a year to 10,000 a year.
Home prices haven't adjusted accordingly. And it's kind of a multiple shock to the system, and it hurts.
[00:18:35] Speaker A: I just paid my insurance.
[00:18:37] Speaker B: What happened? Did it go up a lot?
[00:18:39] Speaker A: I cried a little. No, we just pay it annually. And I always forget when it's coming up. And then my girl calls me and says, you have to, you know, your insurance bills in.
[00:18:48] Speaker B: Yeah.
[00:18:49] Speaker A: And then I say, no, but it does fluctuate.
[00:18:51] Speaker B: Yeah.
[00:18:52] Speaker A: Every year it's different. And it's annoying when you actually look
[00:18:55] Speaker B: at the policies, too. There's another unique factor, and I kind of learned this the hard way. I was looking at the policy for my home for background. We built our home, the ground, from the ground up. So the insurance company was valuing it as if it were the original home that I tore down.
And then I got a policy to cover the Value of the new home as it was built, but the replacement cost was still of the old home. And when I realized that, like a year or two in, I'm like, hey, I'm paying.
[00:19:26] Speaker A: If your house burnt down, you could not rebuild it.
[00:19:29] Speaker B: Exactly. I'm paying for a policy at X amount, but they're actually only insuring half of X. And I'm like, what am I paying for? They're like, sorry, that's just what it is. And I'm like, no, this is ridiculous. So I had to shop around and find an insurance company that would actually insure it for the real amount and then have a replacement value for the real amount, not just some arbitrary number that the prior insurance company came up with.
[00:19:52] Speaker A: Yeah, people don't. They don't pay attention to that part. They pay attention to the actual cost.
But, yeah, pay attention to what it's covering. Because when you need it.
[00:20:00] Speaker B: Yeah, exactly.
[00:20:01] Speaker A: You're going to want it.
[00:20:01] Speaker B: Yeah.
[00:20:02] Speaker A: Anything else on fire insurance?
[00:20:04] Speaker B: Got a good broker and really understand what you're doing.
[00:20:06] Speaker A: Get a good broker. I'm going to beg Cord to come on. Cool. He's all things Insurance.
[00:20:12] Speaker B: Perfect.
[00:20:12] Speaker A: Okay. SB79. Transit Oriented Development.
Planning and Zoning. Transit Oriented Development.
[00:20:21] Speaker B: This has been a unique one that's kind of been in the works for a long time. Some cities have had their own version of this, but now ultimately, the state of California is rolling out through the entire state. And essentially what it does is allows developers to build higher density around areas of public transit, whether it's a rail line, buses, or any other form of public transit.
So now you have higher density allotments on the build. You have to have reduced or you get reduced parking requirements, which anyone who's ever tried to build knows parking is generally your Achilles heel. It's the number one limiting factor. It's your bottleneck. You have to have a certain amount of parking for whatever you're building, and it generally limits you on what you could do. So now that the parking requirements reduced, you're able to build higher buildings, higher density.
And also too, you're able to build residential where residential wasn't previous, obviously zoned. And the state is overriding local municipalities in those zoning laws for what was able to be built prior. So let's say a city says, you know, this is only industrial, but it's within that, within that sphere for the public transit. Now the state is saying, it doesn't matter if it's within this distance now, they could build residential, they could build higher, they could build more. It doesn't have to have enough parking. And the thought there is, is if you're near public transit, people shouldn't need cars and you're able to build more. The reality is, as we know, that really doesn't happen.
But this is one of the state's ways of trying to address the affordability crisis and the housing need and allowing developers to do this. Now will it actually work? I think yes. It's going to allow developers to build more housing and housing where it previously wasn't. I don't know if it's going to be meaningful enough to make any dent in California. But at the end of the day, these developments are still astronomically expensive to build and you need to either sell them or rent them for a super high number for it to make sense for any developers. And developers generally aren't dummies. They're not going to do things that you know is going to lose the money or no one's going to fund it if they don't think it's going to work out at the end of the day.
[00:22:34] Speaker A: Well. And realistically, our public transportation is not equivalent to other states.
[00:22:40] Speaker B: Oh, it's pretty bad.
[00:22:41] Speaker A: I wasn't gonna say that, but just
[00:22:43] Speaker B: being honest, I don't know.
[00:22:43] Speaker A: I don't wanna be the public transportation guy.
[00:22:47] Speaker B: When was the last time you took a public bus or train or tram or anything?
[00:22:53] Speaker A: With my 6 year old for fun.
[00:22:54] Speaker B: Oh, so you have.
[00:22:55] Speaker A: So she could experience what a train was. Yeah. Okay, cool. I did used to have a job that I actually took the train to every day. Cool. The coastliner. But very uncommon. Yeah, it's like a kitschy, fun thing to do. It's not necessarily everyone's daily routine.
[00:23:10] Speaker B: Yeah, absolutely.
[00:23:12] Speaker A: We do have, right outside of our office, a huge bus transit center. And they did build there. There's a whole Google campus going in. So I don't know if Google did it, but they did build right along the freeway right next to that bus stop. Have you seen it yet?
[00:23:27] Speaker B: May have driven by. I don't know if I noticed it.
[00:23:29] Speaker A: I mean it was like a slope between the freeway and the Northrop Grumman building. And now all of a sudden there's like probably a 11 story building.
[00:23:37] Speaker B: Oh, wow. Okay, cool.
[00:23:38] Speaker A: Yeah, yeah. So this officially goes into effect though in July.
[00:23:43] Speaker B: Yeah. And across the board the state's trying to make it easier to develop, to build. Now how that actually plays out in real life, it's yet to be seen. Cities are still super difficult to build in getting permits, so on and so Forth, but they're trying to make it easier. It's just, it's never going to be easy per se. They're just trying to remove some of the red tape.
[00:24:05] Speaker A: Okay, number four, AB14, security deposit modernization that went into effect in January.
[00:24:13] Speaker B: Yeah. So that one's been on the books for a long time and there's been various different laws proposed. This one actually passed and it's not groundbreaking or anything, but it just makes it a little bit easier for both the landlord and the tenant to figure out the security deposits. So now you could return security deposits electronically if rents were being paid electronically or deposit was made electronically. There's a rule stating that you have to return electronically unless agreed upon otherwise. One of the big ones that I do like that actually has added a lot of clarity for the industry is if there's multiple adults in one home on the security deposit return, the security deposit needs to be made out to all of them. And in the past that's been difficult because let's say you have a roommate situation.
Joe lives with five of his buddies. Joe pays a security deposit. When you're returning it, who do we give it to? Do we give it to only Joe? Do we get to everyone? Now the law requires, unless agreed upon otherwise in writing, that the refund be distributed to everyone equally. So that just makes it a lot easier and provides a lot more clarity there, but something that landlord, investors, property managers need to know. Otherwise you could get in trouble. As with everything, the state of California, the federal government, the FTC really protects consumers. And if you go against these laws, there's a lot of penalties.
And it's one of those things where it's almost, yeah, it's almost guilty until proven innocent.
So really knowing and understanding the laws also on the security deposit disposition form or the statement as to what was charged back against the security deposit or that could be both mailed or mailed first class mail or done electronically. It still has to be within the 21 days, but you now have both options. Electronic form is really helpful because of the other new law that requires photos. Photo photographic evidence of any chargeback item needs to be provided of the item before being in good shape, the item after being damaged and then the item after being repaired. So now you're sometime times putting in, you know, books worth of photos.
[00:26:27] Speaker A: Here's your novel with your. Exactly.
[00:26:29] Speaker B: And you're, you're sending it a little envelope. Now you could send that electronically which just makes it so, so much easier. And then also too sometimes when people are moving you have their last known address, which is generally where they're renting from you and you don't know where they're going forward. You can now send electronically because you do have their email. Just that makes it easier there.
[00:26:46] Speaker A: So it really is a more modern version of security deposits. I'm surprised a lot of that wasn't part of it before.
[00:26:53] Speaker B: Yeah, well, I think it takes the state a while to keep up with the time, so. Yeah, it took a while.
[00:26:59] Speaker A: Discover electronic payment.
[00:27:00] Speaker B: Yeah. Or an email for instance.
[00:27:02] Speaker A: Yeah, or any email.
[00:27:04] Speaker B: Yeah.
[00:27:04] Speaker A: Okay. Yeah, I have our last one. And this impacts again property management went into effect in January AB628. Habitability, appliance requirements.
[00:27:16] Speaker B: Yeah. So this one's an interesting one.
The big issue for primarily here is the requirement to provide refrigerator to all rental units. The other aspect of cooking, which is generally a range. Hardly ever do we have we ever come across a rental property that does not come with a stove or a range. But it's far uncommon for them to come with a refrigerator. That used to be kind of a marketing point. It's like, hey, this comes with a fridge, you don't need to bring your own.
But now, legally in the state of California, you have to provide a refrigerator with any rental unit. There's still some nuances in regards to the size of the fridge, you know, mini fridge. Yeah. I've seen people posting online, it's like, oh well, what if it's a mini fridge? It has to be commensurate with the unit. If you have a five bedroom house and you're providing a mini fridge. Not a chance. If you're doing, you know, a studio, 200 square foot studio and you provide a mini fridge. Yeah. You know, you could probably get away with it being commensurate and probably that that may be all that fits anyway. But it has to be commensurate with the actual home that those residents are renting, then you have to keep it up as well. So if it breaks, whether it's the range or the fridge, it's the responsibility of the landlord to fix it and be financially responsible for it. Unless it's found that the issues or the damage is caused by the negligence or misuse of the tenant. And generally proving that can be hard. If the condenser breaks, you know, the landlord's paying for it. If you show up and the doors ripped off the refrigerator, then yeah, you know, your tenant probably did that. That's uncommon.
Yeah.
[00:28:55] Speaker A: Big old washer dryer still personal.
[00:28:58] Speaker B: Washer dryer still personal. Yeah, that's optional. That's not a requirement.
[00:29:01] Speaker A: Okay, how are you dealing? So you have a large property management portfolio. Are you going. Are you notifying everyone that you know doesn't have a owner fridge in it that when this tenant moves out, we're going to have to put a refrigerator in there?
[00:29:16] Speaker B: So all we tries to be very proactive and we notify clients as laws come up and we let them know, hey, this is the law. This is what it means. This is what we're doing for you. This is how it changes things. So all of our clients have been notified, and yes, if there's a turnover, then at that point we tell the client, hey, we need to put a refrigerator in here. Or if the tenant lives there already and their fridge breaks, the tenants can request that we replace the.
Their fridge with a fridge owned by the landlord of the property.
And, you know, we have to do it. There's no way around it. Now, mind you, it doesn't need to be like a sub zero, you know, high end fridge. It could just be a normal standard fridge. It just has to be commensurate with the size of the property and what
[00:29:59] Speaker A: you're going to be dealing with.
Tenants that are going to want to, in certain properties, going to want to bring in their own refrigerator if the one there is not up to par.
[00:30:08] Speaker B: Mm.
[00:30:08] Speaker A: You're going to be dealing with all sorts of things probably with this.
[00:30:12] Speaker B: Yeah. I mean, it creates some, some complexities, but generally, for instance, if we're renting out a, you know, $10,000 a month home, we're not going to put a, you know, $700 white basic fridge in there. There's going to be a nice.
[00:30:27] Speaker A: You wouldn't.
[00:30:27] Speaker B: But some owners, some owners may push, but we're gonna, we're gonna push back and we're gonna say, hey, you know, someone's paying a lot of money to be here. You need to have a fridge that makes sense for the space.
And most people are very reasonable. We're not seeing people intentionally try to hurt the performance of their own assets by putting in a fridge. It's just completely ridiculous.
[00:30:50] Speaker A: Yeah. And I, to me, it sounds not revolutionary that a tenant would get a fridge with the property that they're renting. But it is very common or has been pretty common for there to not be appliances in the home.
[00:31:02] Speaker B: Yeah, absolutely.
[00:31:02] Speaker A: So this doesn't seem too crazy to me. This makes sense.
[00:31:05] Speaker B: Yeah. It's just a little frustrating because it just adds another layer of variability to the income stream from a rental property. Because any Given time, you could be, you know, hit with a seven to twenty five hundred dollar bill for a new fridge.
[00:31:21] Speaker A: I mean that was five, five laws that are impacted.
[00:31:24] Speaker B: And then the big other thing too is just on the operations side for rental, if that fridge goes down, as with everything else, you have 48 hours to fix it. And if it's 48 hours.
Yeah, yeah. If it's not fixed in 48 hours, the home is technically not habitable. So it's, it makes that, that is a higher level of complexity because if a condenser goes out, it's very unlikely that you're replacing it in 48 hours. There's multiple parts that, you know, people just need to order they don't have, they may not have immediately or just getting someone there immediately is sometimes difficult, depending on the fridge. So that becomes a whole different level of inhabitability. Now I will, I'll go off on a tangent here. For the owners and investors who want to buy a home warranty, thinking that they're going to buy the home warranty for the year, it's going to cover their fridge, it's going to cover their H Vac, whatever it is, and they're going to be all, they're going to be good because when it breaks, they have the home warranty. Like you are so mistaken, you're so wrong. That home warranty. You're going to say, you're going to, tenant's going to call you and say, hey, my fridge broke. You're going to say, no problem, I have a home warranty, they're going to fix it. You're going to call the home warranty, they're going to say, okay, got it, we'll send, we'll dispatch a vendor out there to take a look. The vendor is going to call you in three or four days. They're going to schedule something. A week later they're going to show up, they need to be provide a report to the home warranty company saying this is what's wrong with it. And then from there the home warranty company will either cover it or not. If they cover it, then it goes back to the vendor and saying, okay, this is approved, you can fix it. And then they're going to show up another week or two later to fix it.
[00:33:04] Speaker A: I was going to say this is weeks.
[00:33:06] Speaker B: Yeah. And everyone thinks that we're exaggerating. That's ridiculous. 95% of the time. This is exactly how it happens. Home warranties, as with any other insurance company, they make money when they don't pay out on policies and they make it so difficult to actually get your items covered that more often than not you just give up and you move on. You just pay for it yourself. Because you can't live without a fridge for three weeks. We see it with fridges, with water heaters, with furnaces, air conditioners. We see it with everything. Unless it's something that you don't actually need, your home warranty is hardly ever going to act quickly enough for it to be used. And also too, if you live in the home and you're saying, okay, I'm going to go without my heater or without my water heater for a few days while they maybe fix it, that's your prerogative. But if you have a tenant in there, then the home all of a sudden becomes uninhabitable and you have a whole different legal complexity that you have to deal with. So home warranties, complete waste of money. Don't do it.
[00:34:02] Speaker A: That's your personal opinion.
[00:34:04] Speaker B: Personal opinion, yeah. And you talk to a lot of people in industry the same thing. Cause you're gonna say, okay, you're paying whatever 800 bucks for a home warranty, you're gonna have a deductible. So let's say you need to replace the fridge, you're gonna have a deductible of a few hundred bucks. And then your takes a week or two to fix every single day. After 48 hours at that home, that fridge is not running. You can't charge rent. So that's, you know, hundreds of dollars a day adding up and rent that you can't charge.
[00:34:33] Speaker A: Are there refrigerator rental companies?
[00:34:35] Speaker B: There are, absolutely. Yeah.
[00:34:37] Speaker A: They're probably going to start seeing a little uptick.
[00:34:39] Speaker B: Yeah. And that's going to get super expensive because the rental isn't the cheap or isn't the expensive part is the delivery and removal. That's super expensive.
[00:34:47] Speaker A: So in theory, with these five that we discussed, you cannot edit out a power line or edit in an ocean view on your properties.
[00:34:54] Speaker B: You can't make a property in Nebraska an oceanfront property.
[00:34:57] Speaker A: Yeah, you can't. Exactly. You can, but you have to say this is fake.
[00:35:01] Speaker B: Yeah, exactly. And if you do really edit anything, you gotta disclose it.
[00:35:05] Speaker A: Yes. You need to pay attention to your fire insurance, especially when you're selling or if you're living in a condo complex.
Know your policy.
California now allows emails and electronic payment with security deposits, which seems like that should be 2010.
[00:35:21] Speaker B: Yes.
[00:35:21] Speaker A: You need to get fridges. If you don't have a refrigerator and you're A property owner that's renting out your property.
And there's going to be buildings by trains and bus stations.
[00:35:30] Speaker B: A lot more of them, in theory.
[00:35:32] Speaker A: A lot more of them. Tall ones.
[00:35:34] Speaker B: Tall ones. A lot of density.
[00:35:35] Speaker A: No parking lot of density.
[00:35:38] Speaker B: The other component of that too is they've made something similar with ADUs. If an ADU is nearby, any public transit, you don't need to provide parking. Parking for that adu, which pissed a lot of cities off. But it's allowing a lot of homeowners to build ADUs on their properties.
[00:35:51] Speaker A: Yeah. I would be bummed if I lived by a bus transit center. And now there's a big building that goes up because that's going to impact the parking for everyone.
[00:36:01] Speaker B: Absolutely.
[00:36:01] Speaker A: They're still going to have cars. Okay. I feel like we just scratched the surface.
[00:36:05] Speaker B: We really did. But these are five really important ones to know.
[00:36:08] Speaker A: Yeah. I need Cord to talk about insurance more. I'm going to start begging them.
[00:36:12] Speaker B: Perfect.
[00:36:12] Speaker A: Okay. Anything else you want to mention? I feel like your life is all laws and new laws and staying on top of them.
[00:36:18] Speaker B: Yeah. As the broker, I think I have to, but it's difficult. We pay for a lot of subscriptions to different associations and law firms that just update us as different laws come out. And generally I get them on Friday afternoons, which generally ruins my weekend.
[00:36:33] Speaker A: I was going to say, what a day to end the week.
[00:36:35] Speaker B: Yeah.
But I get them and it's like, okay, let's see what's going on. And it breaks it down by every city in the state. It breaks down by counties.
It just. It never ends. California, it's more and more difficult to be a homeowner, landlord, investor, developer, property manager, builder, whatever it is. It's more and more and more difficult.
[00:36:56] Speaker A: Keep me updated, let me know what you're reading.
[00:36:58] Speaker B: Your little emails on large multifamily owners. Something that we do recommend is if you have an extra garage or storage, throw a refrigerator in there.
If one goes out for property, you could quickly swap it out and don't have to worry about a bad inhabitability issue.
[00:37:14] Speaker A: If you're listening, can you like and subscribe and do all of the things?
[00:37:17] Speaker B: Comment, tell us what you want to hear.
[00:37:19] Speaker A: Yeah, unless it's still just our moms, we'll find out. Okay, so next we'll talk insurance. We'll make that happen.
[00:37:27] Speaker B: Nadus is one of the upcoming Nadus.
[00:37:30] Speaker A: Oh, that's right. And good luck with your office organization. I hope you get your life together over there. Yeah.
[00:37:35] Speaker B: Well, you come over, visit and help after.
[00:37:38] Speaker A: I'll see you in two months.
[00:37:39] Speaker B: Perfect.
[00:37:40] Speaker A: Okay, Bye.
[00:37:41] Speaker B: Bye.
[00:37:42] Speaker A: That's a wrap on this episode of AllView360 all things real estate. If you found this helpful, don't forget to subscribe, leave a review and share it with someone navigating their own real estate journey. Connect with us anytime on Instagram @AllView360 and on LinkedIn @AllView Real Estate. Until next time, stay curious and keep your perspective. 360.
