Articles Posted in property law

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In California real estate law, there are situations where the boundary lines as observed on the ground do not match the deed description. Disputes arise when someone has a survey completed, and does not like where the fence or other marker is located, and contact a real estate attorney. There are several legal theories which may resolve the matter, such as adverse possession, prescriptive easement, practical location and agreed boundary. Little known is the relationship between the last two and how they had evolved.

sacramento-real-estate-boundary-agreement-attorney A practical location of a boundary line is simply an actual designation on the ground, by the parties, of the bounds called for in the conveyances. It has also been said that when an uncertain boundary line is fixed by practical location it is binding. (91 A.L.R. 6th, 1, ‘2.) It shares traits with the doctrine of agreed boundary, and the early Supreme Court decision in of Martin v. Lopes in ruling for the defendant, stated “[m]anifestly, the elements of agreed boundary, or practical location, as it is sometimes designated, were not present.” (Martin v. Lopes (1946)) In 1959 the court again used similar language in Ernie v. Trinity: “It may be inferred that there was an uncertainty as to the true line at the time the structures were erected, which uncertainty was settled by practical location on the ground at that time and was agreed to by the then coterminous owners.”

Sacramento-fence-line-lawyer In Nebel v. Guyer, the Third District reviewed a decision in which the parties marked off a boundary on a town lot by notching a fence on one end, and setting a pin on the other. The court found that the boundary line fixed as the west line of plaintiffs’ land controls over the description in the conveyance, since markings were made establishing the west boundary. Likewise, In Arnold, iron stakes installed by an owner of the parcel were accepted as marking the boundary of the lots. (Arnold v. Hanson (1949))

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<big>In commercial real estate transactions, disclosures and representations are often heavily negotiated terms.  Sacramento real estate attorneys work with the Buyers and Sellers where the Buyer/Investor seeking complete disclosure and subsequent liability of the Seller, while the Seller seeks the opposite. In a recent decision, some investors were buying tenancy-in-common interests in an office complex and were provided with a Private Placement Memorandum that explained how expensive and risky the investment would be. But they claimed that they relied on representations of the selling agents instead.

sacramento commercial real estate investment attorneyIn WA Southwest 2, LLC v. First American Title Insurance Company et al., The plaintiffs had sold an investment property and needed to complete a 1031 exchange to defer capital gains. They did so by making a tenancy-in-common investment in an office building in Tempe, Arizona. Involved in the investments were the defendants- a title company, a tax attorney, and the real estate broker. The property failed and was lost to foreclosure, and plaintiffs filed this suit. They claimed that they were misled by defendants’ misrepresentations regarding the sales load and risks of the investment (sales load being the fees, expenses, and commissions paid). Plaintiffs claimed that they would not have invested in the Property had they known that the total sales load percentage actually exceeded the 15 percent capital gains tax they had sought to defer.

At issue in this case was the statute of limitations– they made the investment in 2006, and filed suit in 2012. However, plaintiffs argued that the court should apply the delayed discovery rule. This rule delays starting the time running when until the plaintiff discovered, or had reason to discovery, the claim. In making this argument, the plaintiffs must show that they were reasonably diligent, but still could not have discovered it sooner.

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Reported in the Sacramento Bee by Nathaniel Miller is the issuance of criminal complaints against five people related to Diversified Management Consultants, Inc. for running a Ponzi scheme (Ponzi is capitalized because it is named after the first such schemer). This author, as I am sure other regional attorneys and victims, have been expecting this result.

First off, a Ponzi scheme is when you promise Mr. A huge returns on an investment. You then find Miss B, promise a huge return, and when Ms. B makes an investment, you use her cash to pay the interest or profit to Mr. A. It requires continually recruiting new money to keep paying off new investors in the Ponzi scheme.

In this case I know of two techniques these defendants made to clients- paying high rates of interest for loans supposedly secured by real estate, and shares of stock in corporations with supposed interests in real estate. These claims where made in a time of high real estate appreciation and speculation.

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The California Civil Code has an extensive pre-lawsuit set of procedures for a homeowner to follow to have their homebuilder make repairs. The builder can opt-out and provide his own pre-suit procedures; a recent court decision shows how risky that can be.

First the procedures- starting at Civil Code section 910, they provide that the owner must make a written claim of violation of construction standards on the builder, who has 30 days to respond. The builder can inspect the property, and offer in writing to repair. The owner can accept or not accept the offer to repair, and demand a mediation. If this process is not successful, or if the builder does not respond within the time limits in the code, the homeowner may file a lawsuit. The goal is to provide a non adversarial framework to resolve the problems before people get too emotionally entrenched in the dispute, so it can only be resolved by a judge.

1338556_construction_4.jpgIn Anders v Meritage Homes, the Stanislaus County plaintiffs sued the builder for construction defects. In the sales contract the builder had taken advantage of a provision in the civil code section 914 that allows them to opt-out of the statutory procedure, and use their own selected procedure. At the time of sale, this election is binding on the builder. However, the court found that the builder’s own procedures were unenforceable- they could not require the owners to follow them. So, the builder said, we must then use the statutory procedure. Looks like the builder wanted to avoid court. It was not clear from the opinion why the builder’s procedures were unenforceable, but to this real estate attorney it looks like the builder created a procedure to fit its customer service program, rather that allow their program to fit into the statutory procedure.

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Wong was an investor in San Francisco real estate. He frequently worked with Chan, a contractor, who would repair & renovate properties for Wong, and they would share in the profit on resale. For this particular property, Chan was to get 20% of the profit. Wong died shortly after the purchase, and his widow wanted to sell the property. Chan created an LLC with other investors, and the LLC contracted with the widow to buy the property. The widow changed her mind, wanted more money, and refused to close escrow. The LLC sued. At trial, the LLC was awarded lost profits as an element of damages; the widow appealed.

Civil Code section 3306, regarding damages for breach of a real estate contract , provides that the measure of damages for plaintiff is the difference between the contract price and the fair market value of the property at the time of the breach plus consequential damages. The code was amended in 1983 to add “consequential damages,” in order to conform this provision to to the general contract measure of damages which is specified in Civil Code 3300.

Consequential damages are those which, in view of all facts known by the parties at the time of the making of the contract, may reasonably be supposed to have been considered as a likely consequence of a breach in the ordinary course of events. Before this decision no reported decision has held that ‘lost profits’ are available as consequential damages to a real estate buyer. Here, the court reasoned that the intent of the legislature was to make available consequential damages as they were available in any type of contract dispute. So, in certain circumstances, lost damages are available in real estate contract disputes.

However, the court of appeals found there was insufficient evidence of lost profits in this case, so overturned the award. What does it take to get lost profits? First, all the parties must be aware of the plan of the buyer to resell for profit. However, damages for prospective profits that might otherwise have been made from its operation are often not recoverable because their occurrence is uncertain, contingent and speculative. They are allowed where their nature and occurrence can be shown by evidence of reasonable reliability. Here, there was insufficient evidence that either Chan or the LLC had any history of developing properties for profitable resale. The LLC never obtained a construction loan nor was there evidence that it could obtain one. There was no testimony as to the cost of the renovation. This decision provides a roadmap for proving lost profits, or finding that there is insufficient evidence of them, in a real estate contract lawsuit.

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A California condo owner sued his association for repair costs In plaintiff’s suit against the homeowner association for repair costs to his condo aused by a leaky sewer pipe beneath the concrete slab underlying plaintiff’s condominium. The association argued that the sewer pipes were exclusive use common areas, so the owner was responsible for repairs.

The Davis-Stirling Act (sec. 1351) defines “exclusive use common area” as a portion of the common areas for the exclusive use of one or more, but fewer than all, of the owners of the separate interests and which is or will be appurtenant to the separate interest or interests. This includes fixtures designed to serve a single separate interest, but located outside the boundaries of the separate interest.

The court held that interconnected sewer pipes couldn’t really be said to be the “fixtures” of any particular unit. A sewer system is a series of interconnected pipes which ultimately feed into one common line. Differentiating parts of that interconnected system is unreasonable. The portion of piping coming from one unit is no more affixed to that unit than it is to the sewer system and other pipes or piping within that system. The court affirmed the award of about $17,000 is affirmed as, under a natural reading of the CC&R’s, the sewer pipe was a genuine common area to be maintained and repaired by the association.

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Prescriptive easement law evolved from the problems locating property lines in rural areas. Traditional real estate law provided the concept was that, if you used your neighbors land, by running livestock across it, building a road on the neighbors side of the property line, or so other use, the victimized neighbor has five years to do something about it or the trespassing neighbor has established a legal right to continue that use.

Something different happens when the trespasser uses the land in exclusive way, such as by building a structure on it, or fencing it in. Courts are less likely to find establishment of an “exclusive” easement, in which the original owner no longer has rights in the land. By putting a fence five feet over the actual line, the trespasser could establish an exclusive right to use that five feet, even though he does not own the underling land.

The issue is a big problem in residential neighborhoods. It problem starts when a homeowner, for whatever reason, has their property surveyed and discovers that one of their fences is not on the line, but instead is set inside their side, reducing the size of the backyard. Has the trespassing neighbor established a right to keep the fence in its location, enlarging his yard? California courts say no -the concept of an exclusive prescriptive easement “has no application to a simple backyard dispute.” Based on this, the trespasser can be forced to move the fence back across the line.

However, it is common for both neighbors to move in with the fence already in place, and both live in peace ignorant of the problem. Improvements such as drainage, structures, perennial plants or trees may have been installed.
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