Publication Date: Friday, June 17, 2005
Changes to Megan's Law reporting
Changes to Megan's Law reporting
(June 17, 2005) Do you really want to know who your neighbors are?
by J. Robert Taylor, J.D.
Q: I understand there have been some changes in the required Megan's Law disclosures. How does this impact the disclosures I have to give when I sell my home?
A: The California Attorney General has posted a Web site on the Internet at http://caag.state.ca.us/megan/ where any member of the public can view those who are deemed registered sex offenders. On previous databases the information did not include the exact address of the registered sex offender. Now names, addresses and exact crimes are detailed on the Internet.
You can search by name, city, school site, park sites, county and zip code. The law exempts certain registered sex offenders from being on the Web site, so what you can view is about 75 percent of the actual number of registered sex offenders.
As of the date I am writing there are 21 registered sex offenders in Palo Alto on the Web site. All of Palo Alto's zip codes are represented. Menlo Park has 23 registered sex offenders on the list, Los Altos 7, Mountain View has 67 and Redwood City 140. Even small wealthy towns such as Woodside and Portola Valley have registered sex offenders listed on the site. Since 25 percent of the registered sex offenders are not on the database the actual number of sex offenders in your neighborhood is likely to be significantly higher.
The law requires you to let the buyer know the database exists so they can have access to the information. Information about the Web site should be in all real estate sales contracts. If you have specific knowledge about someone who is a registered sex offender in your immediate neighborhood it would be wise to disclose that information in the Transfer Disclosure Statement given to the buyer in conjunction with signing the purchase contract.
One could argue that a seller should not look at the Web site, because if you found information about someone in your neighborhood you would then be obligated to disclose that specific information rather than just telling the buyer that the Megan's Law Web site exists. Ignorance is bliss, well maybe sometimes, but would your supervision of your children be any different if you knew there were a couple of registered sex offenders living along the street where your children walk to school?
Q: I understand that the law has changed on 1031 tax-deferred exchanges; can you explain how?
A: You are right. The law has changed. An IRC Section 1031 tax-deferred exchange of real property is a way to defer the payment of capital gains tax when you sell real estate. In order to defer the entire gain you must sell a property that has been used for investment or business purposes and exchange the property for another property of equal or greater value. The property purchased must also be used as an investment or business-related property. There are other rules related to exchanges I won't go into. I always suggest you talk to an expert in tax-deferred exchanges prior to any sale of investment property.
Previously you could convert an investment property received in a IRC Section 1031 exchange into a personal residence and live in it for just two years and exempt $250,000 (or $500,000 if it is a married couple) from capital gain when the property sold per IRC Section121. However, as of October 2004, Congress has revised the law so that you must have owned the investment property for at least five years prior to the sale, as well as used and owned it as your personal residence for at least two of those years.
The law was changed to prevent an owner of an expensive piece of property from exchanging the property into many less expensive homes and then moving into a new home every two years and selling so that they could claim the $250,000 (or $500,000) in capital gains relief over and over, thus avoiding almost all of the gain on each exchange property. However, it seems like you could still be successful in doing this as long as you are willing to wait five years to sell the first home; the others you had exchanged into could then become your personal residence and as long as you moved every two years you could have the benefit of the IRC Section 121 capital gains relief. Any serial movers out there?
J. Robert Taylor, J. D., a real estate attorney and broker for more than 20 years, is Palo Alto Realtor of the Year for 2004-05. He has served as an expert witness and mediator and is on the judicial arbitration panel for Santa Clara County Superior Court. Send questions to Taylor c/o Palo Alto Weekly, P.O. Box 1610, Palo Alto, CA, or via e-mail at btaylor@taylorproperties.com.
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