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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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I have written before about courts calling to account lenders who reneg on loan modifications after the borrower made numerous trial plan payments. Courts have ruled against lenders based on promissory estoppel, offer and acceptance creating a contract, for lack of a signed, written modification; and lack of a modification signed by the lender. Usually, when the property is about to be, or already has been, sold at a trustee’s sale, the borrower consults a Sacramento real estate attorney about such a situation. In a recent decision the lender was disappointed when the court found that the plaintiff properly alleged numerous claims against it.

Sacramento real estate loan attorney 2.jpgIn James Rufini v. CitiMortgage, Inc., the Sonoma homeowner sought a loan modification. In June 2009 CitiMortgage approved the loan modification, and told him he would receive a permanent modification in October after timely making three trial payments. He continued making the trial payments through December, in January the lender told him that his permanent loan modification agreement would be ready in three days. Three months later, since he had not received the written agreement, he rented out the house (and lived with his son) to offset expenses while waiting for the modification. The modification was then denied because the home was not “owner-occupied.” The lender then refused to accept his mortgage payments at the modified level. A notice of trustee’s sale was recorded, and the borrower got a 30-day postponement, while the lender was requesting additional information, like income information. Meanwhile, CitiMortgage transferred the loan to PennyMac. CitiMortgage kept discussing the modification, and the property was foreclosed. The borrower claimed that the lender’s contact said he had known all along the loan had been transferred to PennyMac.

BREACH OF CONTRACT

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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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A prescriptive easement is a right established in someone else’s property by using that property in a consistent way over a period of at lease five years. The easement holder starts out as a trespasser, If the true owner does not take action to stop the trespass, or establish that the use is permitted, they lose. A real estate Professor has pointed out that ‘historically, prescription has had the theoretical basis of a lost grant of property. Its continued use has been justified because of its functional utility in helping to cause prompt termination of controversies before the possible loss of evidence and in stabilizing long continued property uses.’ (Powell, The Law of Real Property). Sacramento real estate attorneys often see the lawsuit to establish a prescriptive easement instigated when the owner of the property blocks the prescriptive use, by building a fence, installing a locked gate, or the like. If the easement is established, the court can require the property owner to move the obstruction. But to what extent? The California Supreme Court made it clear – when the obstructor builds knowing of the claim of an easement, with litigation ongoing, the court need not show mercy – in one case, they required removal of a commercial warehouse.

sacramento prescriptive easement rights attorney.jpgIn Ernest E. Warsaw v. Chicago Metallic Ceilings, Inc., the plaintiff built a large commercial building with the loading docks on the north side of the building. There was room for a forty foot driveway along that Northern boundary of the parcel, but forty feet was never enough room for big trucks to turn and back in to the loading docks. They always encroached on the adjoining property. The defendant’s adjacent parcel to the North had been vacant land all this time. The parties had in the past discussed creating a granted easement, but nothing came of it. After more than seven years had passed, the defendant decided to build on the southern portion of its property. They graded a pad that blocked the plaintiff’s use of the area, and the plaintiff filed this lawsuit.

The Court decided three issues:

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When someone who owes a debt transfers property out of their name in order to prevent the creditor from collecting against that property, the transfer may be set aside under the Uniform Fraudulent Transfer Act (UFTA, California Civil Code section 3439.04 et seq.). AN important element of a fraudulent conveyance is that an injury must occur. Mere intent to delay or defraud is not enough. Thus, in the case of real property, a real estate attorney must determine whether, on seizing the real estate and selling it, would the creditor actually get anything after the liens are paid. In a recent decision, a creditor was surprised when the automatic homestead exemption (not a declared homestead) was applied to determine that there was no equity in the property.

sacramento fradulent conveyance attorney.jpgIn Fidelity National Title Insurance Company v. Schroeder, Fidelity screwed up when it allowed a property to be refinanced without paying an existing judgment lien. Fidelity, as title insurer, thus had to pay off the creditor, and then stepped into their shoes, hoping to get a judgment and record their own lien against the property. However, the property was owned by two people, and the one whom the judgment was against conveyed his interest to the other, to avoid attachment of Fidelity’s lien. This lawsuit ensued, and the trial court dismissed the action by Fidelity, finding that, if the property were sold, after paying the existing liens, the remaining equity was protected by the debtor’s undeclared homestead exemption. Fidelity appealed, arguing that, in the case of an automatic homestead exemption, the judgment lien still attaches to the property.

The appellate court first addressed the difference between the two types of homestead exemption:

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A public right of way, while it may be described as an easement, is much different from a private easement. The Supreme Court explained that ‘public ways, as applied to ways by land, are usually termed “highways” or “public roads,” and are such ways as every citizen has a right to use. A private way relates to those easements in which a particular person, or particular description or class of persons, have an interest or right as distinguished from the general public. A private easement ordinarily vests those use rights in the owner of a particular parcel of neighboring property, while the use rights of a public right-of-way are vested equally in each and every member of the public. Sacramento real estate attorneys often face issues concerning private easements – extent of use of the easement, interference with the easement, etc. but seldom need to address public right of way issues. In a recent decision, the court explained that using the language “for public road purposes” in the grant of easement between private parties does not create an easement for public use, but rather to allow access to a public road.

sacramento easement dispute attorney.jpgIn Schmidt v. Bank of America, N.A. the easement holder sold a portion of their property in La Mesa to Betty, reserving an easement, the language being:

“RESERVING to the grantor, her successors, assigns and/or heirs, the right of ingress and egress for public road purposes over, along and across the Easterly 40 feet thereof.”

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