California Real Estate Practices

Attorney Involvement

Please describe any requirements under applicable state law for attorney, abstractor or other special professional involvement, for example, in the search, examination, opinion of title, signing, closing, disbursement, recording, preparation of documents, and/or policy-issuance.

Only licensed underwritten title companies and licensed title insurance companies can issue title insurance. There is no state requirement for the involvement of an attorney, abstractor or other special professional. “Professionals” may be retained to provide information to underwritten title companies or title insurance companies but cannot issue title insurance.

Title and escrow companies are permitted to prepare “form” documents but otherwise legal documents must be prepared by an attorney.

Cancellation/Commitment Fee

Does your state permit or require a cancellation fee or commitment fee upon cancellation?

Cancellation fees are permitted, but seldom collected absent unusual circumstances, such as a great deal of work having been provided. 

Certificate of Release (of Mortgage)

If anyone other than the lender (such as a title agent, settlement agent, underwriter or attorney) has the authority to release the security instrument, please describe.

Title insurance companies can issue a Release of Obligation pursuant to statutory requirements of Civil Code Section 2941 and can issue a reconveyance of a deed of trust (as a trustee or substituted trustee) pursuant to Civil Code Section 2941.7.

Deeds

Please describe the kinds of deeds that are customary for commercial and residential transactions.  Please describe the kinds of deeds that are generally not insurable.

Grant Deeds are customarily used; Quitclaim deeds are occasionally used but generally are not insurable without underwriter approval.

Joinder of Spouses

If a non-title holding spouse is required to join in the execution of a deed or a security instrument, please describe.  Any analogous rights, such as those in a civil union or equivalent, should also be addressed. 

A non-title holding spouse or domestic partner is required to join in the execution of a deed or deed of trust unless title is properly held by the vested spouse or domestic partner as his or her sole and separate property.  CA has a domestic partnership statute (See CA Family Code Section 297) but does not currently recognize civil unions or marriage other than between a man and a woman.

Mortgage Tax

Is there a mortgage tax in your state?  If yes, is it uniform across the state or does it vary?  If it is uniform, please describe.  

There is no mortgage tax in the State of California.

Payment Customs

Who customarily pays for:

(a) Owner’s Policy?
(b) Transfer Tax & Recording Fee?
(c) Survey Charges?
(d) Closing/Settlement Fees?

(a) custom varies from county to county from seller paid to buyer paid to split 50/50;
(b) county transfer tax is generally paid by the seller; as to city transfer tax either the seller pays or split 50/50; seller generally pays for recording the deed and buyer for the deed of trust;
(c) survey is paid by party that needs/requests it;
(d) closing/settlement/escrow fees as to most counties, but not all, are paid by buyer or split 50/50.

 Please contact your local underwriter for specific county information.

Policy Countersignatures

Please describe any statutory or regulatory requirements for countersignatures in order to issue the policy (for example, residency requirements).

Policies are countersigned by the issuing agent, and facsimile signatures are authorized.

Real Estate Taxes

Please describe the general tax year, due dates, and delinquency dates, including lien dates and payment cycle.

Taxes are assessed as of January 1 and tax bills are mailed before Nov 1.  Taxes are due in two equal installments, the first is due on Nov 1 (becomes delinquent on Dec 10) and the second is due on Feb 1 (becomes delinquent on April 10). If delinquent taxes, with penalties and costs, are not paid within 5 years, the property may be sold.

Property that has been conveyed to new owner, or on which there is new construction, is subject to supplemental assessments.

In addition there are various local taxes.

Please consult a local underwriter for information relating to real estate taxes on the subject property.

Search and Examination Fees

Is it permissible and/or customary to charge a separate search and/or examination fee, and under what circumstances?  If your jurisdiction is all-inclusive, please state that.

Premium includes search and examination so no separate fee is permitted for these items.

Search Requirements

Is there a minimum period of time for a title search required: (a) by state law, (b) pursuant to marketable record title acts, or (c) by any other applicable title examination standards (e.g., state bar association)?  Please respond to each category.  If a minimum search period exists for any category, please state it.

Minimum periods of time for a title search –
            State law – no
            Marketable Record Title Acts – no
            Other applicable standards – STG requirement mandated by Bulletins and practices.

Security Instruments (Deed of Trust vs. Mortgage)

Please describe the customary and permissible form(s) of security instruments used in your state. 

Who can be listed as the trustee on the Deed of Trust (e.g., residency and/or natural person requirements, etc.)? Can an underwriter or title agent be designated as the trustee, and, if so, is it customary?

Deeds of Trust. The Trustee can be a natural person or legal entity.  There is no residency requirement.

Standard Exceptions and Requirements

Please identify the standard exceptions and requirements that are customarily used in your state.

Standard Exceptions:

1.  (a) Taxes or assessments that are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the Public Records; (b) proceedings by a public agency that may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records or such agency or by the Public Records.
2.  Any facts, rights, interests, or claims that are not shown by Public Records but that could be ascertained by an inspection of the Land or that may be asserted by persons in possession of the Land.
3.  Easement, liens or encumbrances or claims thereof, not shown by the Public Records.
4.  Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land and not shown by the Public Records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b), or (c) are shown by the Public Records.
6. Any lien or right to a lien for services, labor or material not shown by the Public Records.

State-specific Policy Variations

If there are state-specific changes to the provisions in the ALTA policies (e.g., Arbitration, Minerals), please describe.

ALTA Policies are used unchanged. The CLTA Policy is also available.

Title Insurance Form and Filing Regulations

Please describe the form and/or rate filing requirements, if any, related to policies and endorsements.  Please describe any applicable rating bureau. 

Title forms and rates must be filed with the California Department of Insurance (www.insurance.ca.gov).

Transfer Taxes

Is there a transfer tax in your state? If yes, is it uniform across the state or does it vary?  If it is uniform, please describe.

County Transfer Tax - $1.10 per $1,000 of the purchase price less liens and encumbrances at time of sale.

City Transfer Taxes – varies by specific cities that have transfer taxes. Please consult a local underwriter for information relating to city transfer taxes.

Usury

Is usury coverage available?

Coverage may be available by endorsement dependent on the type of loan, type of lender, amount and purpose of the loan.   The general usury limits are found in the CA Constitution Art. 15 and Cal. Civ. Code Section 1916.2-1, et seq. but many variations and exemptions are found in other sections of the CA Code, including Civil, Corporations, Financial, Government and Commercial Codes.  Please consult a local underwriter for information relating to usury insurance.

Withholding Taxes

What are your state’s requirements, if any, with regard to withholding proceeds from a sale, similar to but not including FIRPTA?

CALFIRPTA requires withholding of three and one/third percent of the sales price.

Witness Requirements

Are witnesses required on a deed or security instrument?  If so, please describe.

Witnesses are not required on deeds or deeds of trust except in rare circumstances.