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California recently enacted Assembly Bill 361, which allows formation of “Benefit Corporations.” Maryland was the first state to enact such a law, California is the sixth. The law allows formation of corporations that have goals other then maximizing profits. In the traditional form, corporation directors have a fiduciary duty to shareholders to maximize profits and promote the long-term value growth for shareholders. As experienced Sacramento Business Lawyers advise their clients, the business judgment rule rises as a presumption that the directors exercised good faith in pursuing the corporation’s interest; however it does not arise is there is no reasonable connection between the goal and their actions. In the benefit corporation however, the directors have a legal duty to take into account the public interest.

A benefit corporation must l have the purpose of “creating general public benefit” stated in its Articles. General public benefit means a material positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operations of a benefit corporation. -There’s the rub- the third party standard. There are a number of organizations who have established standards, and you can be qualified by them for an annual fee. The benefit corporation may also identify in its Articles one or more specific benefits that shall be the purpose or purposes of the benefit corporation.

pen_and_book.jpg Specific benefits can be:

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There are a number of steps troubled California home mortgage borrowers can take. The can negotiate with the lender or servicer of their loan. As I discussed last June in the California Real Estate Lawyers Blog, they can apply to the Keep Your Home California program HERE. One new step they can take is to file a complaint with the new federal Consumer Finance Protection Bureau. While a troubled borrower should always consult with an experienced Yolo and El Dorado County Real Estate Attorney, these other steps cost nothing and should be done simultaneously.

The CFPB was formed by the legislators who wanted to appear to be doing something in response to the 2008 financial crisis. Congress blocked appointment of a director for months, preventing the agency from taking much action. However, the agency staffed up and they have been busy. Last July they stated taking credit card complaints. The President recently made a sneak ‘interim’ appointment of a Director, and now they are taking mortgage complaints.

Gingerbread.jpgComplaints can be made by phone, mail, fax, or ONLINE. They can cover loan documents, servicing, and foreclosures. CFPB will review the complaint for completeness and forward the complaint to the relevant financial institution for review and resolution. The institution has 15 days to provide a response to the CFPB. Institutions are expected to resolve and close all but the most complicated complaints within 60 days. Throughout the process, the homeowner can check the status of their complaints on the CFPB’s website. If they are not happy with the result, they can dispute the resolution.

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Senate Bill 332, added to the Civil Code as Section 1947.5, allows landlords of residential property, to ban smoking tobacco products as of January 1, 2012. This applies to dwelling units, defined in section 1940 as a structure or the part of a structure that is used as a home, residence, or sleeping place by one person who maintains a household or by two or more persons who maintain a common household. Landlords have authority to put restrictions in new leases. Those wanting to modify existing agreements, the should contact an experienced Sacramento and Placer County Real Estate attorney.

Condo.jpgAny lease or rental agreement entered January 1 or later, where the tenant is just moving in, is required to specify the areas on the property where smoking is prohibited . The new law does not provide for automatically changing existing rental agreements; all existing laws would apply. If a lease was entered before January 1 and the landlord desires to ban smoking, it would be a change in the terms of the lease. In a month to month tenancy, 30 days written notice is required, as specified in Civil Code section 827.

If it is a longer term tenancy, the parties would need to enter a new agreement on expiration of the existing agreement, or have a written modification of the agreement. For a modification to be enforceable the landlord must provide some consideration- some benefit to the tenant, such as some free rent, an amenity, or anything else. It does not need to be large value benefit, but if no new consideration is provided, the tenant can revoke the agreement.

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The recent trend has been for pundits and politicians to cast the banks and investment houses as victims of the credit crisis and economic collapse, some in fact to say Fannie Mae and Freddie Mac are the source of the problem. This argument, described by Barry Ritholz as The Big Lie, is contrary to the facts. As California real estate has taken a big hit in the collapse, and Sacramento, Yolo, and Placer County real estate lawyers have since been trying to unravel the impacts on individual buyers throughout California, it is important not to be fooled.

The argument goes that Congress pressured policymakers & Fannie Mae and Freddie Mac (and other banks, through political pressure) to make loans to people who were on the edge of qualifying; as lending standards were forced downwards, the risk of default went up. This included the Community Reinvestment Act, which requires regulated banks and thrifts to provide credit nondiscriminatorily to low- and moderate-income borrowers. More and more people who were not qualified got loans, and, as a result, they starting a cascade of defaults which crashed the economy. However, this does nothing to explain the course of events:

dollar_army_4.jpga. Similar bubbles were created outside of residential housing, such as commercial real estate and consumer credit;

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Adverse Possession, like prescriptive easements, require a party to “possess” or use the property in a way that gives notice to the world of their intent. But co-owners -regardless of their percentage of ownership, or if they are tenants in common or joint tenants- all have an equal right to possession of the property. A recent Third District decision points out how difficult it is to adversely poses a co-owner, and why owners in this situation should consult with an experienced Sacramento, Yolo, or San Joaquin, Real Estate Lawyers.

In Hacienda Ranch Homes v. Sup. Court, the person claiming adverse possession (“the Possessor,” for short) had bought an undivided 25% interest in undeveloped property in San Joaquin County. Six years later they filed this action to establish their title to 100 percent based on adverse possession against the other owners. They based their claim on their conduct- they removed weeds and grasses by discing the property two to three times a year, posted a “for Sale” sign near (but not on) the property; and paid all the property taxes.

Empty field.jpg The court of appeal listed the requirements for showing adverse possession but then noted that, where adverse possession is asserted against a cotenant, additional principles apply. As each cotenant has a right to possess, and the possession of one is deemed the possession of all,, each may assume that a possessor IS possessing for all. Thus the Possessor must show an ouster of the cotenant- strong evidence that shows they brought home to the cotenant that he intends to oust the cotenant. The evidence must be of acts of ownership of the “most open, notorious and unequivocal character.” Whether ouster has been established is a question of law, not of fact, for the judge and not for a jury to decide.

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California real estate brokers occasionally face lawsuits from disgruntled clients for negligence is performing their duties. A recent California decision points out that, where breach of fiduciary duty is alleged, the client has four years to sue, not two as in the case of negligence. This is a reminder that concerned broker should consult with experienced Sacramento and Yolo real estate lawyers regarding their rights and potential liabilities.

In Thomson v Canyon Thomson, facing foreclosure, listed her property with Broker Canyon. An investor approached the owner and offered to salvage her property from foreclosure by buying it from her, paying off the liens, and then selling it back to her within six months in exchange for her paying to the investor the amount of the liens, plus $10,000 profit for him. She agreed, and they entered a contract for sale. Supposedly Thomson asked the Broker numerous times to document the requirement that the buyer deed the property back to her; the Broker assured her that he would take care of this. Of course, he never did. The investor took title to the property, and eventually sold to a third party for $140,000m more than he had paid for it.

1150487_property_for_sale_3.jpgThomson sued the investor, but the case was tossed because of the Parole Evidence Rule -she was attempting to introduce evidence of an oral agreement that was contrary to the written terms of the purchase contract. She next sued the Broker for breach of fiduciary duty and negligence.

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A right of first refusal is a preemptive right which gives the right-holder a contract right to buy the asset or real property if the owner decides to sell. It is different than an option because, under an option, the optionee/buyer can require the optionor/seller to sell the property. But the right of first refusal only gives the buyer a chance if the owner decides to sell. Occasionally the distinction is not no clear, and parties need to consult with experienced Sacramento, Yolo, and San Joaquin real estate attorneys.

The right of first refusal is commonly granted to a tenant in a commercial lease. The Right is part of the consideration for the tenant’s covenants under the lease. The Right is triggered when the events stated in the contract occur. Usually, the contract requires that the seller receive a bona fide offer from a third party. It also usually requires the holder of the Right to buy on the exact same terms and conditions offered by a third party. In the usual transaction, this can be done and must be enforced. However, the third party offer may include terms that the holder of the right could never satisfy; in this case the courts take a closer look at the offers.

In C. Robert Nattress & Associates v. Cidco the third party offer provided the seller with $270,000 cash from escrow. The tenant’s right of first refusal was to be “on the same terms and conditions so offered.” The tenant’s offer was a combination of cash plus credit against the seller’s note. While not on identical terms, the tenant’s offer provided that the seller “…was to receive the same amount from [buyers] as would have been received if the property were sold to plaintiffs.

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Tender of performance is a critical concept that only arises in the event of a dispute. The general rule is that to claim the other party is in breach of contract, you have to first tender performance.

1. Tender must be made at the proper time and place. If the agreement does not provide a specific time, then at a reasonable time.

2. Tender must be by the proper method. If the agreement requires a deposit in escrow, it must be deposited; if performance is required by certified mail, it must be so.

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Occasionally an owner conveys property without reserving an express or written easement to continue using the property for purposes related to an adjoining parcel. Most often the easement is for access to the adjoining property. In such cases, the courts determine if there should be an “implied easement.”

An implied easement requires the following conditions:

1. The owner conveys all or a portion of their property;

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California courts have generally provided for equitable easements, in cases in which three factors are present:

1. The party needing the easement is innocent , that is not willful or negligent.

2. where adverse possession and prescriptive easement rules do not apply; Adverse possession require unless the rights of the public would be harmed, the court will allow it if the party needing the easement would otherwise be irreparably harmed, regardless of the injury to the other party; and 3. The hardship to the party needed the easement must be greatly disproportionate to the hardship faced by the other party and this fact must clearly appear in the evidence.

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