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Often easement disputes revolve around the extent of the use, or interference with use. Usually an easement for road access purposes involves a dispute when the use increases dramatically- for example, a residential property becomes a heavy equipment yard. Or, the owner of the servient tenement (the land over which the easement runs) does something to interfere with use of the easement, such as put up a gate, or obstacles. Experienced Sacramento real estate lawyers see these problems frequently. In a recent Shasta County easement dispute, the trial court decided that the easement holder did not need all of an deeded easement, so reduced the size. The court of appeal said no, that cannot be done.

easement.jpgCottonwood Duplexes v. Barlow involved property alongside I-5. Parcels 1, 2 & 3 were adjacent to each other from West to East. They were burdened with a 60 foot easement running along their North boundary, which provided access to parcels to the North. Barlow had a property to the North, across from parcel 3. He was granted this easement for road and utility purposes. A developer acquired parcel three, and was subdividing. The developer needed to eliminate, or severely reduce, the easement in order to maximize the number of buildable lots. It got the owners of parcels 1 & 2 to give up, or reduce, their rights to the easement, but Barlow refused.

The trial court found that the county was unlikely to allow Barlow a primary access across the easement, that Barlow did not use the easement, and that Barlow’s utilities were accessed elsewhere. Therefore, Barlow did not require the full size and scope of the easement. The court reduced the easement both in width and length, essentially extinguishing part of the easement.

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“Unclean hands” is a defense used in courts, in which a party claims the other side in not able to obtain relief because he comes to court with unclean hands- he has acted in bad faith or unethically. [Technorati J64A92HRG74M] The rule is sometimes stated “those seeking equity must do equity” or “equity must come with clean hands”. It is a defense to equitable remedies- remedies that are other than the payment of money. Anyone with knowledge of a forged deed should consult with an experienced Sacramento and Placer real estate lawyer. In a recent California 3rd District Court of Appeal decision, it was used against a party who was not following the advice of his attorney when he tried to set aside a forged deed.

forged deed.jpg In Estates of Augustus Collins and Elijah Flowers v. Darcy, there were several characters with unclean hands. Collins and Flowers, who jointly owned their residence, had passed away. Elijah’s son Joseph forged their signatures on a deed granting the property to McIntyre. Andre, another son and Joseph’s half brother, then proceeded to seize control of the house, as follows:

1st- he recorded a mechanic’s lien for $75,000, though he was neither a contractor nor gave notice of the lien, making it defective;

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California law provides double damages for harm caused to timber, trees, and underwood. Civil Code section 3346. Recently a Court applied it to harm caused by trimming a neighbor’s tree. It also found that the statute awarding attorney fees against an unlicensed contractor who causes harm (CCP 1029.8) cannot be applied to the landowner who hired him. Anyone faced with the problem of damage cause to aneighbor’s tree, or cause to their tree by a neighbor, should consult an experienced Sacramento or Yolo real estate attorney.

unlicensed laborer.jpgRona v. Costa starts with Paolo, the new home buyer in Tiberon, who wants to install a backyard pizza oven. The neighbor’s Monterey Cypress had limbs growing over the fence, so Paolo hired a day laborer to trim the limbs that would be hanging over the chimney. He paid the laborer under $500, so there was no need for a contractors license. The laborer went overboard, and whacked off limbs that were not overhanging the fence, but where on the neighbor’s side. The tree now had one denuded side, and was odd looking, an expert said it was now a hazard and needed to be removed. The neighbor was outraged, this lawsuit was the result.

The trial court judge found that Paolo was vicariously liable (superior responsible for conduct of his agent) for the damage the laborer caused to the Cypress. He found the damage to be the diminution in value of the tree, plus an additional $15,000. The complicated calculation is described in the opinion. Then the court doubled the amount under Civil Code section 3346. Everyone appealed.

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california anti deficiency 580b.jpg With rates at an all time low, many in California are rushing to refinance their real property mortgage loans. Often, borrowers are not aware that they may expose themselves to personal liability if they refinance the loan they originally used to buy their residence.

California has a number of statutes that protect borrowers from personal liability (deficiency judgments) for the loan balance remaining after a foreclosure trustee’s sale. If the property is the borrower’s home, there is protection for the loan used to buy the property. Recent legislation provides for protection in a short sale. Also, if the lender who made the original purchase money loan refinanced the loan, there is protection. With enactment of SB 1069, beginning January 1, 2013, ANY lender who provides a refinance of the purchase money loan will also be prevented from obtaining a deficiency judgment against the borrower. Each borrower’s situation is different, and anyone in a default situation should consult an experienced Sacramento real estate lawyer to determine their risk of personal liability.

California refinance loan liability.jpgThe change makes sense in light of the historic purpose of Civil Procedure section 580b. In the event of a depression of land values, it is to prevent aggravating the downturn that would result if defaulting purchasers lost the land plus had personal liability. It is based on the premise that the lender is in the best position to determine the true value of the security for its loan, which is the property. If the lender overvalues the property, the lender should bear the risk of not obtaining the balance of the loan value in a foreclosure sale.

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For tax purposes, housing debt that is forgiven or written off is treated the same as income. The difference between the short sale price, or price at a trustee’s sale, and the loan balance may be forgiven debt. It can be considered income, which is reported by the lender on form 1099-C. The Mortgage Debt Forgiveness Act, which applies if the debt was forgiven in years 2007 through 2012. This requires that the debt was incurred to buy or substantially improve the taxpayer’s principal residence. This includes a refinance loan, to the extent that the principal balance of the old mortgage would have qualified. Taxpayers concerned with whether their forgiven debt qualifies should consult with an experienced Sacramento and El Dorado real estate attorney.

california short sale.jpgThe Mortgage Debt Forgiveness Act requires that the debt was incurred to buy or substantially improve the taxpayer’s principal residence. This includes a refinance loan, to the extent that the principal balance of the old mortgage would have qualified. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The amount of debt forgiven must be reported on your tax return. The act first extended such relief for three years, applying to debts discharged in calendar year 2007 through 2009; with the Emergency Economic Stabilization Act of 2008, this tax relief was extended another three years, covering debts discharged through calendar year 2012.

short sale.jpgThe forgiven debt may also be excluded from your income if:

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Most California residential real estate contracts (such as the C.A.R. form) have an arbitration provision providing for optional binding arbitration. If the parties all initial it, it becomes a requirement of contract. In arbitration the parties agree to have a supposedly unbiased third person decide the dispute. Arbitrator’s errors and mistakes cannot be reviewed by a court, so the parties are stuck with it. In a recent decision concerning beach front property in Venice, California, a judge refused to force the buyer to arbitrate their claim.

real estate arbitration.jpg In Lindemann v. Hume, Lee was building a $3 million dollar residence and a trust was the buyer. The trust’s beneficiary, actor Nicholas Cage, moved into the house, and immediately had problems with water intrusion and flooding. Cage told his agent to sell the place. The got an offer, and gave the buyer a disclosure stating that there was a problem with the drainage that the builder was addressing. Cage’s people hired an engineer, who reported that there was no quick fix , and any owner would need to accept the risk associated with the drainage. The buyers backed out.

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Often in an escrow for sale or financing of California real estate, money will be held back in escrow to take care of unresolved issues. This is done on agreement of the parties in the real estate purchase and sale contract, or the loan documents and escrow instructions. For example, there may be a lien or tax due with uncertain amount which cannot be determined until after the scheduled close of escrow. Parties with concerns regardin escrow hold backs shcould always consult an experienced Sacramento real estate lawyer. In a decision this summer Citibank was the secured creditor on commercial property who was denied the funds in the escrow hold back.

secured creditor.JPGIn Oxford St. Properties v Rehabilitation Services, Citibank made a refinance loan to a partnership between Oxford & Rehab; Rehab was to buy out Oxford’s partnership interest with most of the money. The Citibank loan was secured by the partnership real property, plus some personal property. Construction loans were paid off, Oxford was partially paid, and over $200,000 was held back in escrow pending clarification of some insurance issues; this money was never paid to Oxford.

A dispute resulted, and Oxford sought arbitration. The first arbitration ruling was that Rehab had to convey the project to Oxford. A second arbitration was held because Rehab neither conveyed the property nor the $200,000, but let the Citibank loan go into default, resulting in a judicial foreclosure and a deficiency judgment. The arbitrator awarded Oxford damages of over $15 million, plus the $200,000 in escrow. Oxford obtained a writ of possession for the money.

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When it comes to recording liens against California real estate, we follow the ‘first in time, first in right’ rule. (Civil § 2897) If your lien, or deed of trust, is recorded before mine, then yours is superior. If you foreclose, and I do not pay you off, my deed of trust is wiped out, and I am left with an unsecured debt. However, there are exceptions, one of them being equitable subordination, which applies where equity and fairness require a different result. Equitable subordination is a concept used to correct equitable wrongs in the strict priority of liens on real property. If fairness requires, a first lien can be subordinated, or reduced below, a second lien, swapping their positions. (Civ. Code, §§ 2876, 2903, 2904.) A recent decision saved a $3.2 million dollar mortgage from being subordinate because the title company did not pick up the prior recorded deed.

deed of trust recorded.jpg In JP Morgan Chase v. Banc of America Practice Solutions, the Siems applied to JP Morgan to refinance the 1st & 2nd loans against their Newport Beach house, for a loan of $3.2 million. Meanwhile Mr. Siems medical corporation got a $2 million dollar loan from Banc of America, primarily secured by the property of his medical practice. However, the Siems also personally guaranteed the business loan, and Banc recorded a deed of trust against the same house. Banc knew about the original 1st & 2nd, and expected its loan to be in third position.

Here’s the timing:

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Many older California homeowners associations are governed by CC&R’s (Conditions, covenants, and restrictions) and bylaws which require a supermajority vote to amend the documents. A supermajority is something greater than a majority, and in some documents it can be greater than two thirds. However, when the board wants to amend for the good of the community, it is difficult to get a supermajority. Voter apathy plays a roll- if a supermajority does not pay attention to the newsletters and ballots they receive, there can never be a supermajority vote.

The legislature came up with a remedy for this problem in Civil Code section 1356. This provides a procedure where a petition could be filed in Court asking the judge to allow amendment, subject to certain requirements, on the vote of at least 50% of the members. The statute was invoked in a recent decision concerning the Quail Lakes community in San Joaquin County, where the judge was not too concerned that the owners receive notice of the proceeding.

deadline - insufficient notice.JPGThe Association filed a petition, and the court set a hearing date. The judge required homeowners are to be given notice by mail Friday August 13, 2010, and any written opposition from homeowners be filed by the following Tuesday, August 17, only four days later. Usually in legal proceedings, five days are added for mailing. If ,on January 1, I mail to you a motion, it is not deemed received by you until January 5. (Civil Code section 1013) But that was not considered in this case.

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California construction and contractor law is pretty clear – you have to have a contractor’s license to get paid. If you don’t have a license and the owner does not pay, the courts will not help. The intent of the Contractor’s State License Law is to prohibit unlicensed contractors from being paid, thus discouraging those who have failed to comply with the law from providing unlicensed services for pay, protecting the public from incompetence and dishonesty. In the case of an entity, such as a corporation, it is the entity itself which is licensed. In a recent decision in San Francisco, the court went out of its way rescued one contractor that couldn’t decide if it was a limited partnership or a general partnership. Obviously this contractor had not consulted an experienced Sacramento and Bay Area business attorney.

unlicensed contractor.JPGIn Montgomery Sansome LP v Rezai, the building owner Rezai hired “Montgomery Sansome Ltd. Lp.” (That’s what the contract said.) After doing some work on their apartment building, Rezai fired the contractor. The contractor, calling itself “Montgomery Sansome Lp” (no “Ltd”) sued for $203,000. The owner said they were neither a party to the contract, nor a licensed contractor. Here is the crazy history of this contractor, in chronological order:

1. Montgomery Sansome LP filed a certificate of limited partnership.

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