Articles Posted in real estate law

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Parties often hold title to California real estate as joint tenants. On the death of one, the other succeeds to 100% of the title to the property. Thus joint tenancy is often used as a will substitute. When married couples holding property as joint tenants split up, they usually seek to sever the joint tenancy, so that if a party dies ex-spouse does not get their interest. In a recent Partition action the court addressed a conflict in the statutes: the Civil Code requires that a document severing a joint tenancy be recorded before the death of the severing tenant; while the Family Code requires, on dissolution, notice of the severance must be filed and served on the other owner before it is effective. The Partition court concluded that a party in dissolution must obey each statute, but they may be satisfied in any order, and the severance occurs when the last step is taken.

Partition-attorney-SacramentoIn Raney v Cerkueira, a married couple held the title as joint tenants. They split up, and the wife filed for dissolution. The summons in the action had the standard language prohibiting parties from transferring property provided by the Family Code. She then executed a transfer Deed severing the joint tenancy, transferring her interest to her trust with her son as trustee. Her son then, as trustee, filed a Partition action. The trial court found that the wife violated the Family Code provision in transferring 50% of the property to her trust. This appeal followed.

The two involved statutes (set out below in further detail) are:

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A “holdover tenant” is a tenant who remains on the premises after the end of the term of the lease. In most commercial real estate leases there is a holdover provision, which states that the leasehold continues on a month-to-month basis. The lease usually provides that the month to month occupancy is under the same terms as specified in the lease, though there is a provision for increased monthly rent. But what exactly are the “same terms”… is everything included? In a recent decision from Southern California, the original Lease contained a right of first refusal. The holdover commercial tenant sought to exercise it, but the court said, the right of first refusal was not an essential terms of the lease, so it did not carry over into the holdover tenancy.

right-of-first-refusal-attorney-sacramentoIn Smyth v. Berman, plaintiff Smyth operated Awesome Audio, an audio recording company. Since the mid-1990s, Smyth has leased 5725 Cahuenga Boulevard in North Hollywood for the business (Google Street View). The 2011 Lease provided: “If the Tenant remains in possession after this lease ends, the continuing tenancy will be from month to month.” The lease had expired but the plaintiff continued to possess the premises and pay rent. He sought to exercise the right of first refusal, but the landlord declined, and this lawsuit was the result.

right-of-first-refusal-lawyer-sacramentoThe court first looked at the relationship of the parties. When a lease expires but the tenant remains in possession, the relationship of the landlord and tenant changes. The “lessor-lessee relationship” based on “ ‘privity of contract’ ” ends, and a new “landlord”-“tenant” relationship based on “ ‘privity of estate’ ” springs into being by the operation of law. (Civ. Code, § 1945.) This new “hold-over” tenancy is presumed to continue under the same terms contained in the now-expired lease except as those terms may have been modified by the landlord and tenant. (Civ. Code, § 1945.) Thus the issue in this case – If the expired lease contained a right of first refusal, is that right one of the terms that presumptively carries forward into the holdover tenancy?

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Generally speaking, whenever California real property is transferred, the County Assessor may reassess the property to establish base value for property tax purposes. There are limits as to how much the value may increase every year due to changes in the market. However, when the property is sold, it may be reassessed at full market value. This makes a big difference if a property had the same owner for many years, and benefits from a low base valuation. Buyers want to avoid a big increase in taxes.

There is an exception that applies to a residence owned by any person over the age of 55 years, or any severely and permanently disabled person. The base-year value of that property may be transferred to any replacement dwelling of equal or lesser value that is located within the same county and is purchased or newly constructed by that person as his or her principal residence within two years of the sale by that person of the original property, provided that the base-year value of the original property may not be transferred to the replacement dwelling until the original property is sold. (R & T section 69.5)

In a recent decision, the county rejected the taxpayer’s claim of exemption. That taxpayer was required by the lender to form an LLC to obtain the construction loan for the new residence, and the county said that the LLC is not a person, so the exception does not apply. The county was overruled.

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When a landowner grants someone permission to use her land, the owner is granting a license. A license may be created by express permission or by acquiescence. The owner generally retains the right to revoke that license at any time. The landowner may nevertheless be estopped from revoking that license—and the license will accordingly become an irrevocable license for “so long a time as the nature of it calls for”—if the person using the land has “expended money or its equivalent in labor” improving the land in the execution of the license. Critically, however, the expenditure of money or labor can make a license irrevocable only if that expenditure is “ ‘substantial,’ ” “considerable” or “great.”

Sacramento-license-permission-to-use-property-attorneyIn Lilli Shoen v Juliet Zacharias, two neighbors live at the base of a hill, their backyards running up the steep hillside. Part way up there was a flat spot on either side of the property line. The defendant Zacarias thought the flat spot was entirely on her property, and made some improvements:

(1) brought in contractors to grade the patch to make it flatter,

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When parties are co-owners of property and cannot agree on what to do with it, one of them often files a lawsuit for Partition. If the property cannot be physically divided between the owners the court may order sale. Upon partition a cotenant that has paid a disproportionate share of the purchase price is entitled to reimbursement of the portion disproportionately paid. As joint tenants, the presumption is that the parties own the property in equal shares. (Civ. Code§ 683.) But “[O]nce a court in a partition action has determined that a true joint tenancy exists, it may not order reimbursement or contribution on account of differences in the amounts the parties have paid toward the initial acquisition of the property.” (Milian v. De Leon @ 1195.) Them money would be split equally. However, if one joint tenant has advanced funds on behalf of the other and there is an agreement between them for reimbursement in the event of the sale of the property, that agreement can be enforced by the court.

Sacramento-partition-action-attorneyWhile a joint tenancy deed is not conclusive as to the character of the property at issue, it creates a rebuttable presumption that it is held in joint tenancy. The presumption of the deed “cannot be overcome by testimony of the hidden intentions of one of the parties, but only by evidence tending to prove a common understanding or an agreement that the character of the property was to be other than joint tenancy.” (Donovan v. Donovan (1963) 223 Cal.App.2d 691, 698.) Likewise, the presumption cannot be rebutted merely by showing the source of the funds used to acquire the property. (Beck v. Beck (1 966) 242 Cal.App.2d 396, 408.)

The court may consider the fact the parties have contributed different amounts to the purchase price in determining whether a true joint tenancy was intended. If a tenancy in common rather than a joint tenancy is found, the court may either order reimbursement or determine the ownership interests in the property in proportion to the amounts contributed. This does not work for true joint tenancies, however, where by definition ownership of the property is equal.

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The requirements to the establishment of a prescriptive easement in California are well settled. The party claiming such an easement must show the use of the property which has been open, notorious, continuous and adverse for an uninterrupted period of five years. However, there is a statute in California that applies to the use of land by the public for recreational purposes. If the subject qualifies under the statute, prescriptive rights can never be established – this is to encourage public use for recreational purposes. In a recent decision out of Mendocino County, a party claimed a right to an easement to access some coastal sand dunes, something the public would appreciate. The court found that this claimed use was for the benefit of the claimant and his property, and not the public. A prescriptive easement had been established.

sacramento-easement-attorneyIn Ditzian v. Unger, the parties owned neighboring parcels in Mendocino County. The scenic sand dunes of MacKerricher State Park are behind the parcels, and Ditzian historically accessed the dunes via a path that runs along the parties’ property line, then crosses appellant’s property, and then crosses the parcel of another neighbor. The prior owners used the same access at least as early as 1998.

In July 2015 Ditzian started renting the property to vacation renters through Airbnb; Ditzian testified that in September or October 2015, while he and his wife were on their honeymoon, Unger built a fence that blocked the path providing access to the dunes from respondents’ parcel. Never before had there been any obstructions to using that path to the dunes, nor “no trespassing” signs and Ditzian had never been told he could not use the path. You can see what happened – once they started renting to vacationers, the neighbor got tired of the strangers. The Trial court determined that Ditzian had established a prescriptive easement.

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Generally, one who is unjustly enriched at the expense of another is required to make restitution. The law has created this remedy d to restore the aggrieved party to his or her former position by the return of the thing or its equivalent in money. However, if the benefits are conferred on another by unjustified interference in the other’s affairs, the interferer is not entitled to restitution. It must ordinarily appear that the benefits were conferred by mistake, fraud, coercion, or request; otherwise, though there is enrichment, it is not unjust. In a recent decision, a party who was aware of a benefit conferred on a property owner acquired the property in foreclosure but acted surprised when the plaintiff sought restitution.

Sacramento-unjust-enrichment-attorneyIn Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc, the plaintiff (“Tax Appeal”) pursued property tax refunds on behalf of commercial property owners, on a contingency fee basis. If it is successful, it is entitled to a percentage of the property taxes saved. Plaintiff entered a contract with Victory Glen to reduce its taxes property on Victory Blvd in Los Angeles. They were successful, reducing taxes over $140,000, and were owed over $41,000. But Victory Glen went into default and the property was foreclosed.

Defendant obtained title to the property, paid the delinquent taxes, and benefited from the reduced property tax. Before they did that, they investigated the property, were aware of the past due taxes and the obtained records indicating that the tax valuations had been challenged by the property owner.

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An easement in California is a right to use someone’s property which right is something less than a full right of ownership. The right of use is restricted to that in the original grant of easement, though parties often consult Sacramento real estate attorneys regarding what that right really is. In the case of a grant of a “general” easement the courts may look to the parties’ original intent, plus the historic use of the easement. However, in a recent decision, the plaintiff discovered that the easement he had granted was not general; instead, the language was clear enough to interpret, and in addition the court recognized that it could allow for the normal future development of the property.

Sacramento-easement-lawyerIn James Zissler v. Patrick Saville, a property owner in Montecito granted an easement to a neighbor for access to the rear of neighbor’s property. The grantor claims that he intended the easement be used sparingly and infrequently, and not for construction access. He also intended that no “‘heavy vehicles’ ” would be allowed on the easement. By “heavy,” he meant “‘anything much bigger than a pickup truck.’ ” It was only used for the gardener’s access to maintain the property. Both parties sold their lots, and the plaintiff bought from the grantor. The defendant paid $4.7 million, and intended to develop the property, which required paving the easement and construction access. Plaintiff filed this action claiming that defendant had a General Easement, and as such its use was limited by the intent of the parties and its actual historic use.

LANGUAGE OF EASEMENT

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Most Settlement Agreements require parties to dismiss existing lawsuits with prejudice. Ending litigation is the goal of settlement. The agreements also include provisions to recover attorney fees in the event someone has to go to court to enforce the settlement. Lastly, they include provision for the court to retain jurisdiction to enforce the agreement (by a CCP § 664.6 motion), which allows making a motion in the original action to enforce it. Another approach to enforcement would be to file an entirely new action, and seek attorney fees as damages. I am unaware of the benefit of such approach over the CCP 664.6 motion. In a recent case the plaintiff filed a new action and sought attorney fees as damages. The court might have awarded such damages, but the plaintiff never proved that he had incurred them.

Sacramento-Settlement-AttorneyIn Copenbarger v. Morris Cerullo World Evangelism (“MCWE”), MCWE had a ground lease on property in Newport Beach. MCWE subleased the property and sold the improvements on the property. To finance the deal, the new tenant obtained a $3 million dollar loan from the Plaintiff, secured by a 1st deed of trust against the Sublease and Improvements. The tenant borrowed an additional $1 million from Plaza, secured by a second. The subtenant defaulted, and MCWE started an unlawful detainer. Plaintiff intervened, on the grounds that, if the Subtenant was evicted and the Sublease terminated, plaintiff would lose its security.

The parties entered a settlement agreement resolving the dispute. It included an attorney fee provision for any action to enforce the agreement. Importantly, it required MCWE to dismiss the unlawful detainer.

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Partition is the right of any co-owner to require a court-ordered split of real estate, or its sale and a split of the money. A right of first refusal is a contractual right that, in this context, gives the co-owner the right to buy out his co-tenant before the cotenant can sell to a third party. It has been argued that the right of first refusal implies a waiver of the right to partition. The courts have concluded that it does at first, but if the owner who is not selling is offered the right buy out their partner and declines, the other owner has done all that was required and may seek partition. That was the case in a decision involving a property in Carnelian Bay, on the shore of Lake Tahoe. A belligerent co-owner refused to buy out their partner, the third-party buyer backed out, and the seller filed for partition.

Partition-attorney-sacramentoIn LEG Investments v. Boxer, LEG was the selling co-tenant who was fed up with the other owner. The Plaintiff claimed that The Boxlers or their guests often failed to clean the Property and the Boxlers refused to pay for reasonable and necessary landscaping, maintenance, cleaning and repairs. In 2003, LEG offered to sell its interest in the Property or purchase the Boxlers’ interest for $750,000. The Boxlers declined both offers.

Next, C.R. Gibb, a real estate investor with many years of experience in the Lake Tahoe real estate market, offered to buy LEG’s interest in the Property for $1.4 million, subject to his approval of the Boxlers as co-owners. As required by paragraph 6.1 of the TIC agreement, LEG transmitted Gibb’s offer to the Boxlers and offered them a right of first refusal to purchase LEG’s interest on the same terms. The Boxlers declined. The critical language: “We will not be exercising our right of first refusal for your bona fide offer of $1,400,000.00.” Gibb figured out that these people were not good roommates, did not approve them, and the deal collapsed. LEG filed for partition.

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