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CA Flips the Script on Home Flips: Here’s How CA AB 968 Aims to Protect Your Investment

House flipping has become a prevalent trend across California, with investors capitalizing on quick turnarounds and lucrative profits. However, this rapid-fire approach often is precipitated by subpar renovations conducted by unlicensed contractors or without the necessary building permits. For buyers and sellers alike, this poses significant risks, ranging from poor quality work to potential legal and financial liabilities.

Current laws lack robust disclosure requirements, leaving buyers vulnerable to purchasing flipped properties with hidden issues. Recognizing these challenges, California has introduced Assembly Bill 968 (AB 968), aimed at addressing the common pitfalls associated with unpermitted renovations and unlicensed contracting in the house flipping industry. This newly added layer of disclosures required for single-family residential property sales will take effect on July 1, 2024.

Key Provisions of AB 968:

  • Disclosure Obligations: Sellers of single-family residential properties within 18 months of purchase must disclose all renovations completed by contractors, including room additions, structural modifications, alterations, or repairs, during the seller’s ownership. This comprehensive disclosure empowers buyers to make informed decisions about their investment.
  • Contractor Accountability: AB 968 mandates sellers to provide the name and contact information of contractors responsible for the renovations. This transparency fosters accountability and ensures buyers have recourse in case of issues or disputes. 
  • Permit Verification: Sellers must furnish copies of permits obtained for renovations. If permits are unavailable, sellers must provide the contractor’s information for buyers to verify permit status independently. This requirement enhances due diligence and minimizes risks associated with unpermitted work. Moreover, this permit verification requirement coincides with yet another sunken nail into legal framework brought by the State’s hammering efforts to deter unlicensed contracting.

Related Post: New Construction Case in California Should Give General Contractors Pause When Hiring Unlicensed Subcontractors to Perform Work.

How AB 968 Benefits Buyers and Sellers:

  • Buyer Protection: AB 968 safeguards buyers from purchasing properties with undisclosed or substandard renovations, reducing the likelihood of post-purchase complications and expenses.
  • Seller Compliance: Sellers benefit from clear guidelines on disclosure and permit requirements, mitigating legal risks and promoting transparency in property transactions.
  • Market Integrity: AB 968 contributes to a more transparent and trustworthy real estate market, fostering confidence among buyers, sellers, and industry stakeholders.

Related Post: Navigating Home Improvement Contracts in California

CA AB 968 represents a significant step towards improving residential property transactions in California. By promoting transparency, accountability, and prioritizing quality, the law benefits both consumers and the real estate industry. As the implementation of this law unfolds, it is expected to contribute to a more trustworthy and sustainable home purchasing market, ultimately benefiting homeowners and buyers across the state.

At Putterman Law, we understand the complexities of real estate transactions and the importance of legal compliance for both buyers and sellers. Please contact us for comprehensive real estate and construction legal guidance to ensure your interests are protected throughout the buying or selling process. To book a consultation, fill out the form below.

This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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