By Ernest “Ernie” Dronenburg Jr.
You may have noticed a major increase in recording fees for your law firm and clients. In 2017, the California Legislature passed Senate Bill 2 (SB-2), authored by Senator Atkins, that went into effect on January 1, 2018. SB-2 added an additional $75 recording fee for each recorded instrument with a cap of $225 of the SB-2 fees per each real estate transaction.
Exempt from the SB-2 recording fee are transfers of real estate to an owner occupier of a residential dwelling, also exempt are home purchases and sales where documentary transfer tax is paid. Before SB-2 was implemented your recording cost was $15 for the first page and $3 for each additional page with certain documents requiring a $3 real estate fraud fee. Now, you pay the original recording fees plus an additional $75 per instrument up to $225 per transaction.
The new recording fee has had a broad impact raising costs on everyone. SB-2 impacts all companies and individuals who use real property to secure debts and establish property rights. For example, clients filing a lis pendens during the course of litigation, family law attorneys filing a Family Law Real Property Lien (FARPL) to allow a client to afford legal representation, utility companies recording an easement, or a service providers mechanic’s lien for unpaid work, all record instruments to secure that their fees will be paid. Under SB-2 all of these persons and companies will have to pay the increased $75 – $225 recording fees.
To ease the implementation process, my Recording Office established a grace period to assist and educate taxpayers on how to correctly record their instruments without error.
We also established a 17-page fee grid to determine possible scenarios industry can reference to determine whether or not they need to pay the recording fee. Most importantly, my team and I met with industry to educate them on the changes.
Thanks to Renee Linton and the San Diego County Bar Association Estate Planning and Probate Law Section, I recently had the pleasure of presenting an overview of the new SB-2 recording fee and exemptions.
Here are five takeaways to help your firm and clients navigate the new recording fee:
- When in doubt call my team County Recorder’s Office before you record. We want to make it easier for you. You can contact my team directly at (619) 531-5007 for quick assistance with SB-2 questions.
- SB-2 rules and exemptions are not uniform amongst all of California’s 58 Counties. The legislation was written ambiguously and all 58 counties don’t have unified implementation. The information below is for San Diego County.
- San Diego County applies the $225 recording fee cap for all instruments that are part of the same real estate transaction recorded and all trailing documents connected with the transaction recorded within 60 days.
The County Recorder’s office has strictly interpreted the legislation and found nine of the most common exemptions to the legislation so taxpayers do not incorrectly pay more than is due.
The main issue leading to ambiguity in the legislative language is from the $225 cap and whether or not it’s applied to transactions “in connection with” each other. Many counties only apply the $225 maximum SB-2 fee cap to instruments part of the same real estate transaction filed at the same time. My office interpreted the language in SB-2 to mean the $225 maximum fee cap will apply to all instruments that are recorded within 60 days of the initial recording as long as these multiple instruments are part of the same real estate transaction. - Use the San Diego County optional cover sheet to make it easier for you to record. The Cover Sheet outlines the available reasons for an exemption from the $75 recording fees.
My Recording team created a coversheet to take the guess work out of the recording process. This coversheet is provided as a courtesy in person and online at www.sdarcc.com. Go to the section for Forms/Recording Forms titled “Cover Page for Recording Documents with SB-2 Atkins Exemptions”. - San Diego County has nine exemptions to the SB-2 recording fee.
Reminder: Not every county offers exemptions and this applies only to San Diego County.
Here are the nine exemptions from the SB-2 recording fee authorized under GC27388.1:
- Recording an instrument in connection with concurrent transfer that is subject to the imposition of documentary transfer tax.
- Recording an instrument in connection with concurrent transfer that is subject to the imposition of documentary transfer tax on a previously recorded document.
- Recording an instrument as part of a real estate transaction that has already paid the $225 maximum fee cap.
- Recording an instrument that is “in connection with” other prior recorded instruments part of the same real estate transaction and the $225 maximum fee cap had been already paid.
- Exempt due to the instrument transfers real estate that is a residential dwelling to an owner-occupier.
- Exempt due the instrument recorded being is in connection with concurrent transfer that is a residential dwelling to an owner-occupier.
- Exempt due to the recorded instrument being recorded in connection with a transfer of real property that is a residential dwelling to an owner-occupier.
- Recording is not related to real property.
- Catchall Exempt from the fee for a reason not listed above.
To best implement SB-2, my office worked with industry professionals through our T.E.A.M. (Title, Escrow, Appraisal, and Mortgage) quarterly meetings where we hashed out issues, found solutions, and agreed on items such as the length of the grace period to return errors. These valued partners may not have anticipated all the unforeseen circumstances from the challenging legislation. My office needs your input, feedback, and partnership in assisting the legal community and your clients with any issues that have arisen from implementing SB-2.
We are still seeing changes to the SB-2 legislation. For instance, cleanup legislation, Assembly Bill 110, was passed in record time to exempt some Federal, and all State, County, City, and quasi-governmental agencies from paying the additional SB-2 recording fees. We at the California Recorders Association are advancing more cleanup legislation and need your help identifying issues to fix from the unforeseen impacts.
If you have questions, you can reach my Recorder Supervisor team at (619) 531-5007 or email me directly at ernest.dronenburg@sdcounty.ca.gov. Thank you for the opportunity to serve you.
Ernest “Ernie” Dronenburg Jr. is the Assessor/Recorder/County Clerk for San Diego County.
This article originally appeared in the March/April 2018 issue of San Diego Lawyer.