Articles Posted in real estate law

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When the same debt is secured by liens on both real property and personal property, the lender has options as to how they are allowed to enforce their security interest. They can enforce against the real property under real property law, against personal property under the Commercial Code, or both. There are specifics under both areas of law which must be observed, or the lender may lose their security, and a party in this situation may want to consult with a business and real estate attorney. Otherwise, they may run into the problem faced by a lender recently when they failed to adequately describe the personal property in the deed of trust. The Court of Appeals found that the deed of trust did not successfully describe personal property as additional security, and thus any further recourse for the lender would be contrary to the purpose of the antideficiency laws.

mixed collateral attorney sm.jpgIn Thoryk v. San Diego Gas and Electric Company, the owner of an avocado ranch in San Diego County wanted to subdivide it into two-acre homesites. The owner borrowed $1 and ½ million from Highland for this purpose. There was a wildfire which did extensive damage to the property, and the project stopped. Highland foreclosed and obtained title to the property. The owner believed that San Diego Gas and Electric was at fault and sued for damages. Highland joined the suit, claiming that its deed of trust was secured by more than just the property, and extended to any of the owner’s recovery of damages caused to the property; i.e. it was also secured by personal property. Highland argued that it was entitled to a judicially imposed lien under the terms of its deed of trust and related note.

The owner argued that he was protected by the antideficiency laws, which prohibits collecting money from the owner after a trustee’s sale. However, where there are liens established upon both personal and real property in the subject transaction, a foreclosing lienholder using the power of sale may continue to pursue remedies against the former property owner/borrower. The creditor is not seeking a personal judgment for the unpaid balance of a loan, but instead seeks to enforce additional security secondarily liable for the principal loan.

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Judicial reference, unlike arbitration, works within the court system. A lawsuit is filed, and the judge appoints a referee to assist in the case, or decide it on their own. Parties can agree, in their contracts, that disputes are to be determined by a general judicial reference. This means the entire dispute is to be resolved by a referee. An advantage of judicial reference over other forms of dispute resolution (read ‘binding arbitration’) is that a referee’s decision is treated like a judge’s decision for purposes of appeal. On the other hand, an arbitrator’s decision cannot be appealed for errors of fact or law, as I have railed about several times in this blog. But as some parties found out in a 2011 decision, a judicial reference provision is not a guaranty that the dispute will be decided by a referee, and parties interested in reference should consult with a Sacramento business and real estate attorney as to what is possible. In this case the California Supreme Court concluded that a judge could decline to appoint a referee if there is a possibility of conflicting rulings on a common issue of law or fact.

Sacramento judicial reference attorney.jpgIn Tarrant Bell Property, LLC v. The Superior Court, 120 residents of a mobile home park in Alameda County sued the park owners complaining that they had not maintained the common areas of the park and subjected residents to substandard living conditions. Of those residents, 100 residents’ leases had a provision that provided that disputes were to be resolved, first, by arbitration, or should the arbitration provision be found to be unenforceable, by general judicial reference. Key here is that the remaining 20 residents, 17% of the total, had leases that did not require arbitration and reference.

The plaintiffs asked the judge to order arbitration or reference, the park owners opposed either. The trail court judge refused to order arbitration or reference. The opinion does not describe why the court denied arbitration, but focuses instead on denial of reference.

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Homeowners Insurance is not limited to fires, fallen trees, and general mayhem. When a homeowner is sued by a neighbor, the homeowner should routinely ‘tender’ the claim to the carrier (present the lawsuit to the insurance company, asking the insurer to provide your defense in the lawsuit). The question then becomes whether or not the lawsuit will be covered under the terms of the policy. Standard insurance policies cover an “occurrence”, which is usually defined as an accident. If you are sued over a neighbor issue, you should consult a Sacramento real estate attorney regarding whether there may be insurance coverage. Over the years the California courts have set out guidelines for determining what could be considered an “accident” for these purposes. One homeowner, after an earthquake, rebuilt their residence encroaching onto their neighbor’s property “by accident.” The neighbor sued, and the homeowner tendered the suit to their insurance carrier. The homeowner was disappointed when the court found that, even though they had a good faith but mistaken belief that they were legally entitled to build where they did, it did not qualify under the policy and the insurer did not have to cover the defense. The bottom line – mistakenly believing that you have a right to do something, and then doing it, does not result in an accident.

sacramento homeowners insurance attorney.jpgIn Fire Insurance Exchange v. the Superior Court, the property was in Big Bear. When the owner tendered the claim to their insurer, the insurer denied the claim, so the homeowner sued the insurer. The insurer argued that the owners intentionally built their house over the property line, so it was not an accident. The owners countered that they were mistaken, believing that they owned the property where they built, so the construction was an accident.

The court first looked at the language of the insurance policy: it covered –

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A creditor who is awarded a money judgment in California must still collect the money that they are owed. The two most common steps they take are to garnish wages (if possible) and to record an ‘abstract of judgment’ in any county where the debtor owns real estate. The abstract then creates a lien against the property. If the owner seeks to sell, or refinance, the judgment must be paid off to clear title. The judgment creditor could also foreclose the judgment lien, if there is sufficient equity in the property.

However, what if a senior lien forecloses? In a decision out of Costa Mesa, the judgment creditor was disappointed to learn that recording the abstract was not enough. As explained below, the foreclosing trustee was not required to search the record for abstracts. The creditor is required to also record a request for notice under Civil Code section 2924b(a). However, that does not work if a notice of default had been already recorded – in that case the creditor must monitor the foreclosure, and make a demand on the trustee immediately after the sale, before surplus funds have been distributed. Unsure creditors should consult with a Yolo and Sacramento real estate attorney.

Yolo real estate attorney 3.jpg In Banc of America Leasing & Capital, LLC v. 3 Arch Trustee Services, the creditor obtained a judgment against the real property owner. It recorded an abstract of judgment. Unfortunately for the creditor, the notice of default and notice of sale had already been recorded. The sale occurred, and, the borrower having equity in the property, there was a surplus of almost $115,000 left after paying the senior lien. The trustee paid this money to former owner, who also had the judgment against him. He made out ok.

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Figure this – you are in the process of buying a commercial real property and you see service vehicles (such as FedEx, UPS, and other companies) from the neighboring business crossing over the property to access their business, and some of the other property employees parking in the soon-to-be your parking spaces. What do you do? Ask the owner of the neighboring property about it? That is what the disappointed buyer in today’s post. Your Sacramento real estate lawyer might advise you to get representations from your Seller, as a condition to your contract. Also, some title insurance policies will cover prescriptive rights, but our buyer just brought it up with his future neighbor eight months before escrow closed. He told him that he did not want their vehicles crossing the property line. The neighbor replied ‘no problem. We’ll take care of it.’ But they did not take care of it -in fact, the neighbor already believed that he had a prescriptive easement. The sale closed escrow, the trespass continued, and the buyer sued the trespassing neighbor.

sacramento real estate attorneys.jpgIn Steven Hoffman v. 162 North Wolfe LLC, The buyer, who was a commercial real estate broker, sued the Sunnyvale neighbor, claiming that the neighbor defrauded them by falsely advising that they had no claims or interest with respect to the property. (Here’s the google street view of the two properties) The Hoffmans alleged two fraud claims–concealment/suppression of facts, and intentional misrepresentation. After the conversation discussed above, the buyer did not bring the matter up with his seller, nor did he again discuss it with the neighbor. He claims that he thought it was taken care of.

concealment/suppression of facts- No legal relationship

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When a California real estate agent lists a property for sale with his broker, it is not unusual for another agent from the same brokerage to assist the buyer. When the same broker represents both parties in the transaction, that broker is a “dual agent,” and owes fiduciary duties to both parties. A fiduciary is required to give diligent and faithful service act toward the principal in the highest good faith and undivided service and loyalty, and must disclose to the principal all information that may affect the principals’ affairs or decisions. This is much greater than an arm’s length business transaction. But what sometimes confuses the agent/salesperson is that when his broker is a dual agent, he is too, and has the same fiduciary duties. Salespersons wondering what that fiduciary duty implies should consult with a real estate attorney because, in a recent decision the salesperson was surprised to learn that he was a dual agent, and that meant that he did not have to deliberately mislead a buyer to be found liable for fraud.

Sacramento real estate broker attorney.jpgIn Horiike v. Coldwell Banker Residential Brokerage Company, a salesperson listed a house in Malibu for sale. There was a first buyer who asked the salesperson, Cortazzo, what the square footage was. His listing stated that it had 15,000 square feet of living area. The first buyer asked for verification of the square footage. He advised them to hire a specialist to accurately determine the size. He also included this in the real estate transfer disclosure statement, and changed the MLS listing to read “0” square feet, and other comments.

The first buyer backed out and along came the plaintiff Horiike, (see him here) who was represented by another salesperson from the same brokerage. Cortazzo gave him the old flyer that stated the property was 15,000 square feet.. Escrow was opened, and they all signed the agency confirmation statement, indicating that Coldwell Banker was agent for both buyer and seller. Unfortunately for him, Cortazzo did not advise the buyers to hire an expert to measure the square footage of the living area. The sale closed, the buyer wanted to have work done on the house, found that it was only 11,964 square feet, and sued everybody.

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In less urban areas, property boundary lines and their corner markers are often lost. Trees fall or are logged, slopes give way, streams erode banks, and all of nature conspires to make marks on the ground disappear. California real estate disputes often hinge on locating a property line on the ground through rugged terrain. Real Estate and property attorneys advise their clients that a survey will be required -and it is best for the parties to share the cost of the survey. However, if the value is high enough, there may be competing surveys with different results. Such was the situation in a recent decision out of Santa Cruz, where the parties disputed who owned some redwood trees.

Sacramento boundary dispute attorney.jpgIn Jacques Bloxham v. Todd Salinger, the parties owned adjoin parcels with a common boundary line in Soquel Creek. Neither surveyor was able to locate the North and South Corners of the common property line. They reviewed the field notes of the original survey, which took place 150 years ago. They did locate a “witness tree” stump (the tree had been logged). A witness tree is one which has been blazed, is near a corner, it is located at a specific distance and bearing from the corner. If you know the distance and bearing, you can locate where the corner was by measuring from the witness tree. They also find “line trees” -trees directly on the line, indicated by blazes.

FOLLOWING THE FOOTSTEPS OF THE ORIGINAL SURVEYOR

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Let’s get this out of the way – the only essential terms for a real estate sale contract are the identities of the buyer and seller, the property in question, and the purchase price. Essentially, that is the law in California. Of course, the courts have found ways around the rule, but the trend of the law favors carrying out the parties’ intent once the court has determined that the parties had intended to make a contract. The courts will hear evidence of the parties’ intent to explain essential terms. (Okun v. Morton, 203 Cal. App. 3d 805) Sacramento real estate attorneys are occasionally asked about contracts in which all the standard details are left out, and asked how to enforce, or deny, the contract. When there is no time for payment specified, I always advise the “a reasonable time” is inferred, whatever that means in the circumstances. Such a situation was addressed by the Supreme Court when a tenant wanted to enforce a purchase option that was included in the lease.

sacramento real estate purchase attorney.jpgIn Patel v. Liebermensch, the tenants leased a condo in San Diego. The lease included the following purchase and sale option:

“Through the end of the year 2003, the selling price is $290,000. The selling price increases by 3% through the end of the year 2004 and cancels with expiration of your occupancy. Should this option to buy be exercised, $1,200.00 shall be refunded to you.”

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California commercial leases often include options for renewal of the lease beyond the initial term. Option terms can provide the duration of the renewal, and describe the future rent, or provide a mechanism for calculating the rent to be paid. But, frequently commercial lease attorneys encounter leases that are not so specific. They can describe the procedure for exercising the option, and the future term or terms, but only provide that the rent was to be as agreed upon. Lessors and landlords do this to provide some assurance to the potential tenant that they may be able to stay in the location for another tenant without committing themselves to rent terms, or even that this tenant. The tenant who has not consulted a real estate attorney enters the lease with the false comfort that they have the right to stay if they want. Such was the case in a Supreme Court decision where the tenant, who had made significant improvements to the property, learned that they did not have a right to stay.

ElDorado real estate and leasing attorney.jpgIn Ablett v. Clausen the Lease provided these option terms:

the lessees ‘shall have the first right and a prior option to secure a lease upon said premises before the same are offered to any other person, firm or corporation for lease or rental and that said option shall contemplate a lease for a period of five (5) years upon terms to be then agreed upon.’

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Sometimes possible real estate buyers do want to close the deal unless they can obtain certain benefits, such as a zoning change, or lot split. To lock up the property and make their investment worthwhile, they enter an option contract. An option is a unilateral contract under which a property owner, for consideration, agrees to sell its property to another (optionee) if, within a specified time period, the optionee elects to exercise the right to purchase. The owner has made an irrevocable offer to sell at the specified terms in return for the consideration. To be enforceable, the option contract must have consideration paid by the optionee, and sufficiently describe the purchase terms – parties considering such a deal may want to consult with a Sacramento real estate attorney to ensure its enforceability.

The optionee is not required to buy, but if they follow the terms for exercising the option, it becomes a simple purchase contract. Otherwise, it expires. In one court decision, the question arose of whether there was adequate consideration, or just an illusory promise that was not legally binding. the buyer had an escape clause that did not require him to do anything. The plaintiff who then decided not to sell was disappointed to learn that the buyer’s part performance made the promise binding.

Sacramento option contract attorney.jpgIn Steiner v. Thaxton, Steiner entered a contract to buy 10 acres of bare land. However, the agreement provided that Steiner could cancel the deal at any time at his sole discretion. It states:

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