Realtors keep up to date on the new laws by attending meetings and through alerts and information obtained from local, state and national Realtor associations. According to Realtor Susan Tilling of Coldwell Banker, many Realtors attend Silicon Valley Association of Realtors district meetings to learn the details of the new laws and legislative issues so they can communicate with their clients.

Realtor John Leslie of Alain Pinel Realtors said, "One of the most significant changes to the real estate game involves 1031 tax exchanges. The change will impact a large number of rental property owners and their plans this coming year."

Leslie said the new legislation was signed into law in Oct. 22, 2004, and provides for a new five-year holding period before an investor can take advantage of the tax exemption of Section 121.

"The old rules let investors move into their rental for two years and sell it off as a personal residence and not pay capital gains up to $250,000 for an individual or $500,000 for a couple. The IRS decided that investors acquiring rental property should be required to hold it five years before they can make it their personal residence," Leslie said.

According to Leslie, 1031 exchanges are more common than before. He says the whole process is not cut and dried and requires someone with the knowledge to handle the transaction. His advice is to seek the guidance of an experienced agent when planning a purchase or sale of rental property during the coming year.

Realtor Therese Swan of Alain Pinel Realtors echoes Leslie's concerns about the new tax law. Referring to the Internal Revenue Service website, Swan said the change applies to taxpayers who convert rental property to a principal residence.

"They need to know that a tax law change may limit their ability to exclude gain on the sale of the residence if they obtained the property through a like-kind exchange," Swan said.

The change will have a definite impact on at least one of Swan's clients who received a note from Swan about the new law.

"One of my clients who purchased a home via a 1031 exchange in 2003 and moved into it in early 2005, just discovered that she will have to either live in the home at least an extra year or pay $100,000 in capital gains. After I gave her the heads up about the new law, she checked with her accountant. This is really going to impact some folks' retirement plans," Swan said.

While tax consequences may be bad news for some homeowners, new legislation affecting disclosures is a bit more positive since it will make more information available to Realtors and consumers alike.

AB 920 will provide updates to real estate disclosure forms to: 1) reflect recent change regarding the disclosure of nearby airports; 2) clarify disclosure requirements regarding nearby industrial use; and 3) provide for use of a consultant's reports for natural hazard disclosures and indicate the source of the information provided.

Another disclosure law that could affect the real estate industry will go into effect on July 1, 2005. Commonly known as Megan's Law, AB 488 requires the Department of Justice to make specific information about certain sex offenders available to the public via an Internet website and to update that information on an ongoing basis.

The website is to include all of the information currently available to the public via CD-ROM and would also include the home address of specified offenders. With regard to certain offenders whose residence addresses are to go on the Internet only under specified circumstances relating to their criminal histories, the department would be required to put that address information on the website on or before July 1, 2006. The law also provides penalties for misuse of this information.

A new law, AB 578 Electronic Recording Authorization, is designed to make the escrow process easier. Currently the transfer of ownership of almost all California properties is recorded by having someone from the title or escrow company physically deliver the transfer of title documents to the county recorder's office. Those involved in the process consider this method to be antiquated and inefficient, as well as costly. In 2002, California's Attorney General issued an opinion that country recorders cannot engage in electronic recording, unless they have additional authorization under the statute. This opinion discouraged the use of electronic recording. AB 578, sponsored by the California Association of Realtors, gives that authorization to county recorders and encourages the use of electronic recording.

Several new pieces of legislation affect Common Interest Developments and outline some new requirements for homeowner's associations. AB 2718 sponsored by the California Association of Realtors, makes several improvements to the way homeowners' associations inform their members of required financial information.

The law alerts homeowners about possible assessment increases and revises the requirements for associations to notify their members about their reserve funds intended to cover future repairs or replacements of major components. This bill also requires community service organizations, which are nonprofit organizations separate from, but affiliated with, the homeowners association to provide a financial statement to the association and homeowners to help assess reserves. This bill also requires homeowners' associations to provide a statement as part of the reserve study given to members once every three years that would clearly delineate, in plain language, the health of the associations' reserves.

For detailed information about new laws in affect for 2005, it's wise to consult a real estate, tax or legal professional. They can provide the knowledge and expertise that applies to individual or specific situations.