"Flipping", the buying and re-selling of residential property after making improvements, is a major part of the California real estate market with specific rules regarding disclosures under California Civil Code, Article 1.5, sections 1102, et seq.
Article 1.5 applies to any transfer by sale, exchange, real property sales contract as defined in Civil Code section 2985, lease with an option to purchase, any other option to purchase, or ground lease coupled with improvements of any single-family residential property.
Newly enacted Civil Code section 1102.6h, is effective for all transactions where the seller accepts an offer on or after July 1, 2024.
It requires that "Flippers" of residential, 1 to 4 unit, properties must disclose recent repairs and renovations to the property in addition to all other existing disclosures.
The law applies to properties that are resold within 18 months of closing (i.e., "from the date that title for the single-family residential property was transferred" to the seller/flipper). Typically, a residential property will be improved and re-sold within 12 months, unless problems develop, and compliance with the new law should be routine and added to any progress checklist.
The law only applies if the renovations and/or repairs were performed by a licensed contractor with whom the seller/flipper entered into a contract.
The standard transfer disclosure statement categories, exemptions and cancellation rights will continue to apply.
The law requires a seller/flipper to disclose to the buyer any room additions, structural modifications, other alterations, repairs, and a copy of any permits that are obtained. These disclosures may alternatively be disclosed as a list as given by the contractor to the seller/flipper.
If the seller/flipper contracted with a third party and was not provided with a copy of any permits, the seller/flipper may inform the buyer that the permits may be obtained through the third party and provide their contact information.
Additionally, where the aggregate contract price for labor, material, and all other items for the project or undertaking cost of labor and materials was $500 or greater, the seller/flipper must disclose the name of each contractor, and the contact information of each contractor (as provided to the seller/flipper).
The law is effective January 1, 2024, and it applies to the sale of a residential 1 to 4 unit property where the seller accepts an offer from a buyer to purchase the property on or after July 1, 2024.
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