The California Legislature, late in 2017, enacted the Building Homes and Jobs Act. The stated purpose of this law is to establish permanent and ongoing source of funding for affordable housing developments. Part of the law that affects those doing estate planning is a $75 recording fee that must “be paid at the time of recording of every real estate instrument, paper, or notice required or permitted by law to be recorded . . ..” There are many fine details in that new statute (Government Code §27388.1) including provisions that exempt some transactions from the new fee. However, many terms in the statute are undefined or ambiguous, and each county is struggling to figure out what documents are included under the new fee, and when the exemptions can be applied.
The exemptions include real property transactions subject to a documentary transfer tax or “on any real estate instrument, paper, or notice recorded in connection with a transfer of real property [emphasis added] that is a residential dwelling to an owner-occupier.” One issue the county recorders are still struggling with is what is or is not a transfer of real property under the code.
In estate planning, property transfers for our clients are accomplished using various forms of deeds (grant deeds, trust transfer deeds, quit claim deeds) into a trust. It appears that the initial transfer of a client’s residence to a trust is within the exemption for a residential dwelling to an owner-occupier, but it is uncertain if that exemption still applies if the trustee is not the settlor of the trust. The exemption apparently will not apply to other types of real property transferred to a trust, such as rental property or residential property not occupied by the owner. Additionally, it is unclear how each county will address vacation property that is not a rental. Is such a property a residential dwelling that is owner-occupied, if the owner does not live in the property year-round but is the only person to occupy the dwelling through the year?
A common practice in estate law is to record an Affidavit Death of Trustee with the county early in the process of trust administration following a trustee’s death, or to record an Affidavit Change of Trustee when a trustee loses capacity to act. There is debate on whether such an affidavit would qualify for any exemption to the $75 fee, because the recording of such affidavits is not subject to documentary transfer tax but may not be considered transfer of a residential dwelling under the statute.
Similarly, the new statute limits the fees imposed to $225 “per each single transaction per parcel of real property.” Each County appears to be determining for themselves what is a single transaction and what is included in a parcel. This ambiguity could result in high fees being paid for property held in one county and little or no fees paid for a similar type property in a different county.
Estate law attorneys and real estate attorneys are left to get clarification from each county for each document we record related to real property. There have been documents issued by some counties to address some of the ambiguities, such as cover sheets listing potential exemptions, that are required to be used when recording documents. However, our recent conversations with local recorder’s offices indicate that even these documents do not yet clear up the confusion. One local office recently held up the recording of affidavits in order to meet with county counsel to clarify the issues. Following the meeting, the guidance to our office was to suggest we send in documents to be recorded with “what exemption you think might apply” and it will be reviewed.
Clearly there is more work to be done at the county level. Until further guidance is provided by the county recorders, we will make our best effort to inform our clients on what costs they might expect to pay when recording documents related to any real property they own.