Articles Posted in real estate law

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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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A condition in a contract is a fact, the happening or nonhappening of which creates or extinguishes a duty on the part of the promisor. If the promisor makes an absolute or unconditional promise, he must perform when the time arrives. But if the promisor makes a conditional promise, he must perform only if the condition precedent occurs. The promise may be dependent upon the performance of another condition, in which case they would be dependant and concurrent conditions. In this case neither party is in default until one party performs or tenders performance. In the typical real estate contract seen by Sacramento real estate attorneys, delivery of the deed and payment of the purchase price are dependent and concurrent conditions. There must be performance or tender thereof by one party to put the other in default. In a recent decision, the court agreed with the swindled would-be buyer, who argued that return of their $3 million dollar deposit was an independent condition

Sacramento real estate contract attorney.jpgIn Rutherford Holdings, LLC v. Plaza Del Rey, Rutherford contracted to buy a mobile home park from Plaza, and provided a deposit of $3 million dollars. The agreement provided that the deposit was nonrefundable unless Plaza materially breached the purchase agreement or failed or refused to close.

Prior to the closing date, Plaza told the buyer that Plaza could reduce its property tax bill for the year if it was not in this contract for sale. The contract would increase the value that the tax was based on. If they did not close by the closing date, the tax would be based on a lesser value. Plaza promised the buyer that they would sell the property after the closing date, and after Plaza filed it tax returns. The buyer agreed! The closing date came and went and neither party performed; Plaza never tendered the deed to Rutherford, and Rutherford never tendered the full purchase price to Plaza. Plaza paid less in taxes, then said they would not sell the property to Rutherford, plus they were keeping the deposit, ha ha! This suit followed.

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I have written in the past about Sham Guaranties – this is a guaranty of a loan where the guarantor has such a close identity with the borrower that they are in effect providing a guaranty of their own loan. Such a sham guaranty is not enforceable. A typical scenario would be with a limited partnership. The general partner is fully liable for the debts of the limited partnership. If all the principals of the general partner sign the guaranty, the question arises of whether anything has been added by the guaranty. This is a sham especially when the lender takes a role in encouraging the formation of the entity, and only investigates the financial wherewithal of the individual guarantors. Business and real estate attorneys for lenders usually pay special attention to make sure they really will have an effective guaranty. In a recent decision. the guarantors were unhappy to learn that they were liable on the guaranty – there was too much separation between themselves and the borrowers, which they did on purpose so that they would not occur direct liability on the loan.

Sacramento real estate loan sham guaranty attorney.jpg In California Bank & Trust v. Lawlor, the bank loaned millions to Heritage Partners, secured by numerous real estate projects. Smith and Lawlor owned and controlled Covenant Management, which owned and controlled Heritage Capital, which was the general partner of the Heritage partnerships. They really tried to isolate themselves from the borrower to avoid personal liability. The lender required Smith and Lawlor to sign continuing guaranties. The borrower went into default, the lender foreclosed, and had a deficiency of $15 million dollars. California Bank and Trust brought this action to collect on the loan guaranties. Smith and Lawlor argued that the guaranties were sham guaranties and therefore they were actually the primary obligors on the loans, not true guarantors. As primary obligors, Smith and Lawlor claimed that they were entitled to the protection of California’s antideficiency statutes. This should prohibit the lender from obtaining a judgment against them for the difference between the value of the security and the outstanding loan balances.

The antideficiency statutes strictly limit the right to recover deficiency judgments for the amount the debt exceeds the value of the security. The antideficiency laws promote several public policy objectives:

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