Articles Posted in real estate law

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California usury laws restrict charging of interest greater than that allowed under the law. The legislature sees fit to determine what the maximum amount of interest that may be charged for a loan. There are a number of exceptions and considerations to the law. One important exception, provided in the California Constitution, is for “any loans made or arranged by any person licensed as a real estate broker by the State of California and secured in whole or in part by liens on real property.” Determining if a transaction may be usurious and parties may want to consult a Sacramento and El Dorado real estate attorney to be sure whether their deal fits. In decision last week by the Third District Court of Appeal, a disappointed borrower got the bad news that his lender could charge what he wanted. The lender was a corporation; its sole shareholder was a broker, who arranged the usurious loan. The broker did not get a commission, but expecting profits from the corporation was enough to find that he expected to receive compensation.

usury sacramento real estate attorney.jpgThe case is Gregory W. Bock v. California Capital Loans, Inc. Bock, trustee of a trust, needed a loan, and he was put in contact with California Capital. Leo was the sole owner of California Capital, and was also a licensed real estate broker. They made the deal, and Bock borrowed $1.2 million dollars at 15% interest, secured by a deed of trust on real property. Leo did not receive a commission on the loan. There was a default, and California Capital Loans Inc. foreclosed, taking back the property at a trustee’s sale in 2010. Bock sued, claiming, among other things, that the loan was usurious, and therefore the trustee’s sale was void.

The applicable provisions of the California Constitution are implemented by Civil Code section 1916.1. What the code provides in this case is that, for the exception to apply, two things must happen: first is that the broker acts for another or others, not for himself. Secondly, he must receive or expect to receive compensation.

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California Courts sometimes reserve jurisdiction over parties or an action after the case has gone to final judgment, for various reasons. Jurisdiction is generally the power to hear and determine the claims of the parties. Some examples of court’s holding on to jurisdiction are to to enforce settlement in an action at the request of parties; or to determine the distribution of a fund of money deposited in court; and to make such other and further orders and decrees as might be deemed proper to carry out the judgment. In fact, there is a specific procedure to have the court reserve jurisdiction to enforce a settlement agreement. Where parties reach a settlement agreement that requires one or both parties to perform some acts that will not be complete within 45 days, they can file a “Notice of Conditional Settlement” per Rules of Court Rule 3.1385. In the Notice, they give the Court a date certain that the suit will be dismissed. Until then, the case becomes inactive, and off the court calendar, but still the court has jurisdiction to enforce the terms of the settlement agreement until the dismissal date.

sacramento real estate attorney option.jpgHowever, there is a limit to how long the court may keep jurisdiction over the parties. In Stump’s Market, Inc., v. Plaza De Santa Fe Limited, LLC, Stumps had rented space for a grocery store in a shopping center from Plaza. The relationship had lasted several years. They negotiated a modification granting Stump five additional five-year options. The rent included a calculation of the percentage of sales (percentage rent). There was some water damage in the parking garage below Stumps grocery store. Plaza said it was caused by condensation from Stump’s freezer. Stump disagreed, claiming that it was due to a leak that Stump had informed Plaza about.

They did not agree on what caused the damage, but they agreed that Stump would go ahead and repair the damage. They apparently did not agree (at least in writing) if, and how, they would split the cost. They got into a dispute as to paying for the repairs, calculating percentage rent, and Stump’s exercise of the next option. The lawsuit ensued.

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Homeowners associations in common interest developments have the ability to conduct a non-judicial foreclosure to collect delinquent assessment fees. However, the law places numerous restrictions on the association’s ability to foreclose to collect assessments. One of those restrictions is in provided the homeowner a right of redemption. I have written before about the right of redemption that exists with judicial foreclosure- a process in which the lender files a lawsuit for a court supervised foreclosure. In that situation, after the foreclosure sale, the borrower has a right for a period of time to redeem the property- pay the full amount of the debt owed, and get the property back. This right does not generally exist in nonjudicial sales, in which a trustee sells the property, usually outside the courthouse. However, in a common interested development, the foreclosed owner has a 90 day right of redemption. The owner can deposit the redemption price with the officer who conducted the foreclosure sale before the expiration of the redemption period. Owners in this situation should consult a Sacramento real estate and owners association attorney to be sure of their rights.

Yolo real estate attorney foreclosure.jpgCivil Code section 1367.4 prohibits a homeowners association from foreclosing to collect assessments totaling less that $1,800 (not including fees and costs). If it totals $1,800 or more, they can foreclose if they do the following:

1. Offer the owner to participate in alternative dispute resolution;

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It is well established that California real property owners have duties toward guests and people they invite to the property to let them know about concealed dangerous conditions. Even a foreclosing lender who takes possession of a house has a duty to disclose what they should know about, and the agent and owner are each deemed to know everything that the other knows. And, the owner’s broker has an equal duty of disclosure. Sacramento and El Dorado real estate attorneys, when asked what needs to be disclosed, usually say everything- if it was material enough for you to ask me, it was important to disclose. In a recent decision a lender who took the property after foreclosure, and their broker, were surprised to learn that, because they might have known about a possible danger, they might end up liable for a potential buyer’s injury.

broker duty disclose sacramento attorney.jpgIn Pindra Hall v. Aurora Loan Services LLC, Hall was a real estate agent showing a home for sale in Lafayette to a client. The house was owned by Aurora Loan Services, who took it back in a foreclosure. The property has a finished attic, which was accessed by pull-down stairway ladder. It was hinged; when it was raised, it folded, and went up into the attic opening as the opening was closed.

Aurora, the owner after foreclosure, had the house inspected by a contractor. The contractor provided a report listing more than 50 items under the heading “Health and Safety Required Repairs-Group 1.” Buried in that list was “Stair-Remove and replace attic stair.” The report was delivered to Aurora, and the listing agent read it. The report was left on the kitchen counter for visiting agents and potential buyers to review.

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It is a rule of California real estate that whenever a greater estate and a lesser estate in the same parcel of real property are held by the same person, without an intermediate interest or estate, the lesser estate generally merges into the greater estate and is extinguished. A greater estate is the greater interest in land. For example, for an easement, the real property that has the right of easement is greater; the property that the easement is subject to is the lesser. Also, a tenant holds a lesser estate; the landlord holds the greater estate. If the landlord transfer the property to the tenant, the lease is extinguished because the greater and the lesser are merged in one person. While merger is an ancient legal rule, Sacramento and Yolo real estate attorneys do not often encounter merger issues. However, in a recent decision from Southern California a plaintiff was disappointed that there was no merger.

sacramento real estate attorney merger.jpgIn Hamilton Court LLC v East Olympic L.P., a lot on a city block in Los Angeles was owned by East Olympic. However, East Olympic’s yard and encroached on the lot owned by Angelus. The parties reached an agreement in which Angelus granted an exclusive easement to East Olympic, which gave East Olympic the right to keep the yard and shed where they were. Angelus then sold its property to a partnership of A & B. East Olympic sold its property to a partnership of A and C. In the sale to A and C, East Olympic took back a deed of trust secured by the property PLUS the easement over the former Angelus property.

Partner C then conveyed its interest in the East Olympic property to B. That meant that A and B owned both lots simultaneously. A and B stopped making payments on the note to East Olympic. East Olympic then foreclosed the deed of trust, which was secured by the property plus the easement.

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California real estate transactions usually have provisions requiring that the parties arbitrate any dispute, rather than file a lawsuit. Sometimes they file suit anyway, and an opponent in the real estate contract dispute makes a motion to the court to order the parties to arbitrate, rather than litigate. The Code of Civil Procedure (1281.2) generally requires the court to order arbitration if there is a binding agreement to do so. However, there is an exception when:

“A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.”

sacramento real estate arbitration.jpgQuestions of conflicting rulings are occasionally seen by Sacramento & Yolo real estate attorneys. Some defendants in a real estate lawsuit in Southern California were surprised recently when the court refused to compel arbitration. In Gohar Barsegian v. Kessler & Kessler, Barsegian was the buyer of a $3.7 million dollar property. A dispute arose, and the buyer sued her attorney and the seller. In a switch from the usual facts, The buyer’s contact with the attorney contained an arbitration provision; the seller was not a party to that agreement. Apparently there was not such a provision in the real estate contract. The complaint claimed that the seller recommended the attorney to the buyer, and that the seller and attorney had a longstanding relationship, and the attorney was secretly representing the seller as well as the buyer.

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Tender

California law requires a plaintiff asking the court to set aside a foreclosure to offer to pay the full debt (called a “tender”). The general rule is that a plaintiff may not challenge the propriety of a foreclosure sale without offering to repay what they borrowed. The idea is that if the plaintiff could not had redeemed the property if the sale procedure had not been defective, any of the irregularities in the sale did not result in damage to the plaintiff. There are exceptions to the tender requirement–

a) being fraudulently induced into taking the loan;

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Many California real property owners have challenged lenders foreclosure proceedings based on state and federal laws enacted the past few years to help homeowners during the real estate collapse.. In most cases, the courts have found that the laws do not create new, enforceable rights, with a few exceptions. Mis-interpretation of requirements placed on lenders, through statutes and language of the deed of trust could be perilous, and interested parties should consult with an experienced Sacramento & Yolo real estate attorney. A recent decision out of Alameda County presents one such case, where the deed of trust required the lender to follow HUD servicing guidelines.

Foreclosure sacramento attorney.jpgIn Pfeifer v. Countrywide Homes, a mother and son obtained a $607,000 loan that was purchased by Countrywide. The mother was incompetent, and the son was her court appointed guardian ad litem. It was an FHA guaranteed loan. The standard FHA form Deed of Trust stated, in paragraph 9, which sets forth the “grounds for acceleration of debt.” It states:

“[l]ender may, except as limited by regulations issued by the Secretary, in the case of payment defaults, require immediate payment in full of all sums secured by this Security Instrument… that the “[l]ender shall, if permitted by applicable law … and with the prior approval of the Secretary, require immediate payment in full of all sums secured by this Security Instrument ….” In subdivision (d), under the heading of “Regulations of HUD Secretary,” the agreement reads as follows: “In many circumstances regulations issued by the Secretary will limit Lender’s rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary.”

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In February I published a blog about a California court that would not take judicial notice of a document on a Federal Agency website. It dealt with the FDIC sale of Washington Mutual mortgage loan accounts to JP Morgan Chase. JPMorgan was conveyed all the assets, but none of the liabilities. That means that JPMorgan could foreclose, but the borrower could not make any claims against JP Morgan that they had against WaMu. In a recent court decision, a different court did take judicial notice of that same document on the website. The difference was due both the difference in the courts’ approaches, plus the borrowers’ attorneys’ arguments. A borrower or lender with questions about the different approaches should contact an experienced Sacramento real estate and business attorney, to be sure they do not get the same surprise.

sacramento real estate attorney judicial notice .jpg “Judicial notice” is the court’s recognition of the existence of a matter of law or fact without the necessity of formal proof. It can be described as a substitute for (formal) proof, a judicial shortcut, doing away with the formal necessity for evidence. Judicial notice is limited to matters which are indisputably true. A request for judicial notice can be defeated by showing the matter is reasonably subject to dispute. In California state court, Judicial Notice is limited by the evidence code, indicating matters which the court must take notice of, and matters which the court may take notice of. Federal Courts have a broader discretion as to what they may take judicial notice of.

In Michael D. Scott v. JPMorgan Chase Bank (2013 WL 1098436), the borrower had a $975,000 construction loan. Washington Mutual acquired the loan, was taken over by the FDIC, and JPMorgan acquired the loan, and foreclosed. Scott filed suit, making several claims against JPMorgan. JP Morgan claimed that it had not acquired WaMu’s liabilities along with the assets, and sought judicial notice of the Purchase and Assumption Agreement, as posted on the FDIC web site.

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Generally, in California to prove a claim for fraud and deceit based on concealment, the plaintiff must prove five elements:

(1) the defendant must have concealed or suppressed a material fact,

(2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,

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