Articles Posted in real estate law

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Robbins was licensed both as a real estate broker and as an attorney. On January 23, 2001, he pled nolo contendere (no contest) and was convicted of three misdemeanor building code violations.

The DRE filed an action to revoke his license, based on this conviction plus a history of conviction for 50 prior violations. He also had been disciplined by the state bar. The broker argued that there was not showing of intent, and that the crimes did not involve moral turpitude.

Unfortunately for the broker, In 2008 the Legislature amended the statute to allow for revocation of a license without the need to prove moral turpitude. The court here pointed out that the law does not require a failure of honesty or truthfulness for the crime to be related to the broker’s fitness as a licensee. It also noted that the legislature found that a no-contest conviction is strong enough indicator of guilt to warrant discipline. His intent? It was to make money, and that was intent enough. His license was revoked.

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The commercial landlord is increasingly faced with non-paying tenants who file bankruptcy. The following is a simple outline of the procedure for getting paid and getting possession of the property.

1. The Automatic Stay. If the lease term is still running when the tenant files bankruptcy, the lease is part of the estate and all landlord actions are stayed. That means the landlord can take no action without an order from the court. To obtain “relief from stay”, the landlord must show that it is not “adequately protected” or that the property is not necessary for an effective reorganization. Adequate protection can include cash payments for the use of the property, a lien on other property, or the equivalent.

2. The Trustee Decides. The bankruptcy trustee has 120 days to assume or reject the lease. If the trustee assumes the lease, the lease continues, and the trustee is then obligated under its terms. The trustee must “cure” defaults under the lease, or provide “adequate protection.” Adequate protection can mean a cash deposit, pre-paid rent, a lien on other property, or anything else the judge agrees protects the landlord.

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The California state bar has weighed in on deposits in attorney trust accounts. Agreeing with my prior post, the state bar, in a question and answer format, provides it’s opinion:

“Is it a violation of Civil Code Section 2944.7(a)(1) to collect an advance fee, place that fee into a client trust account, and not draw against that fee until the services have been fully performed?
Yes. The statutory language of the prohibition uses the word “receive” and the plain meaning of that term is broad enough to encompass a lawyer’s receipt of advance fees into a trust account. “

There used to be many good intentioned attorneys providing a useful service in assisting clients deal with modifications. I doubt that there are many left.

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I have noted in a prior post how difficult it is to have a court review legal errors in an Arbitrator’s decision. A recent Federal Court Ninth Circuit decision nails the coffin closed under the Federal Arbitration Act.

The FAA provides that a court may vacate an award “where the arbitrators exceeded their powers.” Arbitrators exceed their powers when they express a “manifest disregard of law.” For this to be shown, court’s have concluded that it must be clear from the record that the arbitrator recognized the applicable law and then ignored it.’

In this case regarding a lawsuit between limited and general partners, the Arbitrator awarded the GP $1.5 million damages, plus $20 million in punitive damages.

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Mike Kelly of Sonoma recently reported in his blog that an unnamed executive with Bank of America told him that B of A will be using Equator (REOTrans) to manage their Short-Sale negotiations nationwide. This task oriented web portal means that they are getting serious about Short-Sales.

This move gives borrowers 24/7 access to a portal through which they can provide the necessary information to process a short sale and receive real-time status updates electronically. As reported in DSNews, it also automates decision making for the lender, handles approvals for faster turnaround, provides quick fulfillment, and assures full compliance with government programs.

This is a good thing. It’s no secret that Lenders have not been responding to short sale deals. Whether they chose to be understaffed or not, the workload has been an obvious problem. Automating the process, like their standard mortgage procedure, indicates the belief that short sales are no longer an aberration, but rather a new portfolio. The more lenders that take this approach, the better.

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Federal bank regulators issued guidelines allowing banks to keep loans on their books as “performing” even if the value of the underlying properties have fallen below the loan amount.

As reported in the Wall Street Journal, Regulators said that the rules were designed to encourage banks to restructure problem commercial mortgages with borrowers rather than foreclose on them. But the move has prompted criticism that regulators are simply prolonging the financial crisis by not forcing borrowers and lenders to confront, rather than delay, inevitable problems.

Banks have generally been avoiding commercial real-estate losses by extending these mortgages upon maturity, a practice, billed by many industry observers as “extending and pretending.”

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Jim Wasserman’s comments in the Sacramento Bee this week about the sobering outlook for the Sacramento office market are a local example of a nationwide problem.

Comptroller of the Currency John Dugan noted last Monday that the Nation’s banks may be in for a “very rough ride” due to their commercial real estate portfolios. Speaking at the annual convention of the American Bankers Association, reported by Reuters, he noted that Government agencies have some help on the way for the lenders facing these challenges. This week, the federal bank regulators will publish new advice on loan modifications for commercial mortgages. That’s right, Loan Modification guidelines for commercial borrowers. The regulators will be giving the banks guidelines.

As reported in the Philadelphia Enquirer, Capmark Financial Group Inc.’s (a major commercial mortgage lender) bankruptcy filing was no surprise, but was still a harsh reminder of the hard times ahead in the commercial real estate industry. “It’s not a turning point. The problems are only starting,” Dennis Yeskey, a senior adviser at AlixPartners L.L.P., a business-advisory firm in New York, said yesterday.

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A recent California decision pitted homeowners against the contractor who was supposed to build their retirement home. The job didn’t get done, and the contractor was in for a big surprise.

The homeowners contracted with the defendant corporation to construct the home for them. California law requires a corporation holding a contractor’s license to designate a “responsible managing officer” or “responsible managing employee”, either of which must be actively engaged in the work of the corporation. The contractor here was a corporation; the qualifying license holder, Diani, was an absentee owner, on a mission in Peru for three years, and had turned over all operations to Terry (who handled the homeowners’ project.). Diani testified that he did not own any stock in the corporation, that he had given it all to Terry. Diani did not receive any compensation or profits from the corporation.

There were numerous disputes between the homeowner and Terry, and work was stopped. Terry recorded a mechanic’s lien against the property, and the lawsuit began.

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On Sunday Gov. Schwarzenegger signed into law SB 94, effective immediately, which bans loan modification firms from being paid up-front, or even asking to be paid up-front. It also restricts attorneys from representing homeowners in trouble.

For some time the Department of Real Estate was already requiring licensed agents who received advance fees to have contracts approved by the Department. However, once the Notice of Default was recorded, no advance fees were permitted. Generally speaking, attorneys licensed in California were not subject to such prohibitions.

The new law requires that, under all circumstances, the loan modification firm must first fully perform all the services they contract to perform, or represent that they would perform, before being paid. Sounds simple- do the work first, and then get paid, what is wrong with that?

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On further review, I want to clarify my last post. (http://jfalconelaw.wordpress.com/2009/09/30/california-senate-bill-306-short-sales-easy-as-it-looks/trackback/)

It appears that the “short sale request” is actually the request for payment demand that the escrow officer sends to the lender.

The “short pay agreement” is the initial agreement with the lender,in which the lender approves a short sale. There is nothing in the statute that puts a deadline on the lender’s initial response to a request from an owner who has received an offer – that problem remains.