LA Wildfires Client Resources

Allen Matkins takes great pride in our California roots and strong ties to the Los Angeles community, and we are profoundly saddened by the devastation caused by the wildfires in our state. We are deeply committed to supporting our clients and friends during these challenging times.

We have prepared this alert outlining a non-exhaustive list of key legal issues and considerations clients may face. Areas of focus include permitting/entitlement and regulatory matters, real property and income taxes, insurance recovery, landlord/tenant concerns, lender/borrower issues, price gouging regulations, and government relief and aid programs. Over the coming weeks and months, we will provide in-depth analysis through alerts and webinars on these topics and other emerging issues.

We understand that our clients and friends will face numerous legal challenges and other difficulties and we are here to provide guidance at no charge, and we welcome the opportunity to discuss these matters with you. Please don’t hesitate to reach out to us.

Entitlement/Permit and Regulatory Issues – We will analyze the following issues in detail in a future alert.

• Rebuilding efforts will face significant challenges, possibly including CEQA and Coastal Commission regulations, litigation, and disputes over property lines. We will analyze the effects and impacts of all regulatory and entitlement issues, including Governor Newsom’s Executive Order N-4-25, and Mayor Bass’ Emergency Executive Order No 1.
• Rebuilding of some homes along PCH may face challenges because those lots may potentially be acquired by the state or city for multifamily development.
• Coastal land issues and litigation will arise, particularly with the Coastal Commission viewing some burned-down properties as public land.
• Environmental concerns, such as soil contamination from lithium batteries in Teslas will be a central topic of concern.

Real Property and Income Tax – We will analyze the following issues in detail in a future alert.

• Los Angeles County will provide property tax relief for property that has been damaged or destroyed as a result of the fire.
• The Federal and California State Governments have provided income tax relief from tax deadlines that were set to occur on or after January 7, 2025, and before October 15, 2025. Los Angeles County residents (and certain other taxpayers affected by the fires) will have until October 15, 2025, to file income tax returns, payroll and excise tax returns, and make tax payments (including estimated tax payments). In addition, certain other tax deadlines for affected taxpayers, like the 45-day identification and 180-day acquisition deadline for 1031 exchanges have been extended if they were set to expire on or after January 7, 2025.
• Taxpayers may be able to take income tax losses as a result of the damage or destruction to property to the extent the loss is not covered by insurance.
• There may be ways to defer income tax recognition both for taxpayers who choose to rebuild and those who choose to sell their property. For property tax purposes, there are exemptions from new construction assessments (for those who choose to rebuild) and an ability to transfer base year value (for those who choose to sell).
• We are aware of efforts to place a moratorium on the so-called “Mansion Tax” and we will continue to monitor any further tax relief announcements.

Insurance Recovery – We will analyze the following issues in detail in a future alert.

• We have a deep team that is well-equipped to address insurance recovery issues and provide guidance and general advice for clients and friends. This includes informing your insurance broker in an appropriate manner, gathering information regarding the damage, keeping records of your expenses, and coverage for “Additional Living Expenses”.
• Many Palisades and Altadena residents are likely underinsured, facing challenges from rising construction costs, contractor shortages, and lingering COVID-related supply issues, with potential losses per home probably ranging from $2–5 million.
• We are closely monitoring the California FAIR Plan, which offers basic fire insurance coverage for high-risk properties when traditional insurers decline coverage. There are questions whether and how long funds will last.

Real Estate/Landlord/Tenant – We will analyze the following issues in detail in a future alert.

• These efforts will include addressing tenant protections and landlord restrictions, as well as performing lease evaluations, such as situations where residential landlords wish to terminate leases to reclaim their properties as primary residences.
• We are monitoring proposed legislation at both the local and state level. The Los Angeles City Council has directed the City Attorney to draft an ordinance that would prevent evictions for having extra occupants or unauthorized pets that were “necessitated” by the fires for one year. The Los Angeles City Council is also evaluating further expansions of eviction protections and potential rent freezes.

Lender/Borrower – We will analyze the following issues in detail in a future alert.

• Prompt and open communications with lenders is essential. Take advantage of forbearance opportunities presently being offered or propose one to address what one would expect to be a long process for the insured and insurers to come to an agreement on a payout.
• Many borrowers/property owners may recover insufficient insurance proceeds for rebuilding because FAIR Plan and private insurers may be looking at paying out for Total Losses and presumably, that will limit payouts to Policy Limits (which could easily be less than the cost to rebuild and other insurable expenses.)
• “Demonstrating That Lender is not Impacted Analysis” will be required to address whether lenders can claim insurance proceeds first or if homeowners can retain favorable loan terms (e.g., a 3% rate) during rebuilding. Borrowers wishing to rebuild will want to develop a plan to demonstrate that the lender’s collateral interest is not impaired – reasonable equivalent value for reconstruction.

Regulatory Issues – We will analyze the following issues in detail in a future alert.

Price Gouging

• Section 396 of the California Penal Code prohibits price gouging under this statute with various categories of price gouging covered.
• There are limited exceptions in the statute if a person can prove the price increase is due to higher costs. Governor Newsom has issued an executive order (N-4-25) which extends the time periods related to the statute.

Real Estate Speculation

• Governor Newsom has issued an executive order (N-7-25) stating that:
  • • Unsolicited undervalued offers to purchase property from property owners in specified zip codes of Los Angeles County are unlawful for a period of three months from the date of the Order.
    • The Department of Real Estate, along with other state agencies, are directed to provide notice to the public of their rights under the law, resources for more information, and contact information for law enforcement agencies, such as the Attorney General’s Office and District Attorney, with the power to enforce the prohibition.

Government Aid Programs

• President Biden has issued a Major Disaster Proclamation making federal funding available to affected individuals in Los Angeles County. Assistance can include grants for temporary housing and home repairs, low-cost loans to cover uninsured property losses, and other programs to help individuals and business owners recover from the effects of the disaster. Residents and business owners who sustained losses in the designated areas can begin applying for assistance at www.DisasterAssistance.gov, by calling 800-621-FEMA (3362), or by using the FEMA App.
• The California Department of Social Services (CDSS), Disaster Services Branch (DSB), can provide grant assistance through two programs: The State Supplemental Grant Program (SSGP) and the Disaster Case Management Program (DCMP).

Allen Matkins Is Here For You

We will continue to navigate this unprecedented time alongside you, and we are dedicated to providing the latest updates and guidance to support your recovery efforts. With deep expertise in California and real estate, we stand with, and support, our clients and friends, and we will work together to rebuild what has been lost. Please be on the lookout going forward for our frequent and in depth analyses and advice regarding the issues outlined above and other issues that come into focus as we move forward. In the meantime, for any questions or assistance, please reach out to any of our offices or your Allen Matkins relationship attorney.