Increased Recording Charges and Charges on New Types of Instruments Are Now Allowed
On July 13, 2012 Senate Bill (SB) 1342 was signed into law, allowing counties to increase fees imposed for filing specified real estate instruments and expanded the documents included within the definition of “real estate instrument.” These funds are earmarked for programs related to real estate fraud prevention.
Prior to the amendment, the board of supervisors in each county was authorized to adopt, by resolution, a fee of up to $3 for each recording of a real estate instrument. Real estate instruments included a deed of trust, assignment of trust, reconveyance, request for notice, notice of default, substitution of trustee, notice of trustee sale, and notice of rescission of declaration of default.
SB 1342 increased the highest fee that may be charged for recording to $10 – an increase of more than 200%. SB 1342 also expanded the definition of real estate instruments to include an amended deed of trust, an abstract of judgment, an affidavit, an assignment of rents, an assignment of a lease, a construction trust deed, covenants, conditions, and restrictions, a declaration of homestead, an easement, a lease, a lien, a lot line adjustment, a mechanics lien, a modification for deed of trust, a notice of completion, a quitclaim deed, a subordination agreement, a release, a trustee's deed upon sale, and any Uniform Commercial Code amendment, assignment, continuation, statement, or termination.
Nonetheless, the legislature made clear that in order to promote home ownership opportunities and to avoid increasing associated transaction costs, the recording fee imposed will not apply to any recordings made in connection with a sale of real property.
Notably, the question of whether the “fee” imposed under SB 1342 may be classified as a tax under California’s Proposition 26 remains open. It is unclear whether the collection of county fees on recorded real estate documents for the purpose of funding real estate fraud prevention and prosecution programs may qualify under any of the Proposition 26 exceptions. Furthermore, the Legislative Counsel has previously classified state-imposed charges on recorded real estate documents as state taxes under Proposition 26 in the case of SB 1220 (DeSaulnier, 2012).
In the event that the “fees” imposed under SB 1342 are considered to be taxes, a two-thirds vote is required to pass constitutional muster under Proposition 26. Because SB 1342 was passed with less than a two-thirds vote in the Senate, it may be subject to a constitutional challenge at some point in the future. In the meantime, however, people should be aware of the increased recording fees and additional real estate instruments subject to such fees.
If you have any questions regarding the contents of this newsletter, please contact the following attorneys in the firm’s State and Local Tax Practice Group.
| Chicago (312) 558-5600 | San Francisco (415) 591-1000 |
| Robert F. Denvir | Charles J. Moll III |
| Alan Lindquist | Troy M. Van Dongen |
| Bradley R. Marsh | |
| Jocelyn M. Wang | |
| Jasmine I. Tollette |