Tag Archives: Real Estate

Real Estate

Court Determines Applicable Statute of Limitations for Quiet Title Action

Plaintiffs owned a commercial property and have used it for their own businesses and also have had tenants that have paid them rent. In January of 2005 a deed of trust,  and absolute assignment of rents which were signed in December of 2004, were recorded in the Kern County Recorders office. The deed of trust listed two parcels of real estate as collateral; the Brundage Property which is the property in question and another parcel located on California Avenue in Bakersfield.

The debt secured by the deed of trust was executed as a promissory note dated December 13, 2004 for $350,000 which was for the purchase of the California Avenue Property. Both documents were made by the Plaintiffs, but the Plaintiffs alleged that the names and signatures on the forms were forged, and Mr. Salazar believed the forging to have been done by their son Jaime Salazar.

Trial Court Decision

This appeal action brings up the question of if an application of the statute of limitations to a quiet title action that attempts to have a deed of trust declared void as a forgery would be correct. The trial court granted a summary judgment for the defendant beneficiaries for asserting the affirmative defenses of the statute of limitations, waiver of the forgery claim, unclean hands, ratification, and laches. It was granted on the three-year limitations period in Code of Civil Procedure section 338(d) but did not cover the affirmative defenses. The trial court came to the conclusion that the notices of default sent by lender to the plaintiffs in 2005 began the statute of limitations period and the limitations period had expired three years after and this was much before the quiet title action had been filed in early 2012.

Appeal Decision

On the appeal, the Plaintiffs rely on the rule that a statute of limitations does not bar an action to quiet title by an owner in undisturbed possession of their land and that basically, the fact that the deed of trust documents had forged signatures on them and that the notices of default basically relied on these forged documents which was the make them invalid. The notices of default under an invalid or forged deed of trust provide notice of a cloud on the plaintiffs’ property  title, but did not dispute or disturb the plaintiffs’ possession of the property and hence the statute of limitations does not bar their quiet title action. Secondly, in regards to the affirmative defenses of waiver, unclean hands, ratification, and laches, the separate statements for each defense do not set forth all of the material facts necessary and hence fail. In conclusion the trial courts decision was reversed.

This case raises important issues when determining statute of limitations. A statute of limitations provides the time frame for a person to bring an action. Once the statute of limitations expires, the person cannot file an action against another even if there is liability. Please contact Attorney Anthony Marinaccio at 818-839-5220 for more information.

Estate Planning

Holding Title as Joint Tenants

Joint Tenancy is a type of ownership of real estate by two or more persons in which each owns an undivided interest in the whole property. Joint tenancy is often touted as one method of estate planning; however, there are consequences you may not be aware of that could not make it the best option available.

When a joint tenant dies, the interest in the property is then vested into the interest of the surviving joint tenant or joint tenants. Simply put, if one of two joint tenants passes away, the second party of the joint tenancy gains all the percentage of interest of the party who passed away and has one hundred percent of the property.

In order for the property to pass the surviving joint tenant, the surviving joint tenant would be required to record an Affidavit of Death of Joint Tenant with a copy of the deceased joint tenant’s death certificate. It avoids probate and trust administration, and is a relatively short and easy process to acquire property after a death.

A joint tenant cannot pass on the property through a will or revocable living trust, so there are no other options as to who will receive the property except to the surviving joint tenants.

One of the main drawbacks in owning a property in joint tenancy is that any joint tenant can file a partition action to force the sale of the property. Further, if a joint tenant has a judgment against him or her, that judgment can attach to the property.

I generally do not recommend using joint tenancy as an estate planning tool but to draft a will and revocable living trust because ultimately it gives you control during your lifetime without relinquishing that control to another. Further, if there is a dispute between you and your joint tenants, any joint tenant can file a partition lawsuit and require that the property be sold, even if you live on the property.

Please contact Attorney Anthony Marinaccio at 818-839-5220 for more information regarding joint tenancy properties.

Estate Planning, Real Estate

Using Joint Tenancy as an Estate Planning Tool

I often hear from clients and potential clients that they want to add a relative’s name to a piece of real estate as “joint tenants” in order to avoid probate. Although this is probably the cheapest estate planning tool you can do in the short term, it is the least favorable for most circumstances for several reasons. This article highlights the disadvantages of using joint tenancy as an estate planning tool.

What is Joint Tenancy? 

Under joint tenancy, each co-owner of real estate owns an undivided equal interest in the real estate. Upon the death of one joint tenant, the deceased joint tenant’s interest passes on to the other surviving joint tenants. This is accomplished after a joint tenant’s death by recording an Affidavit of Death of Joint Tenant in order to remove the deceased joint tenant’s name from the real estate.

For several reasons, joint tenancy is not the best method to pass on property after your death.

Loss of Control and Creditor Protection

First and foremost, you lose control of the real estate because you will now own the property with co-owners.If a co-owner wants to sell, he can force the sale through a partition action. Relationships can change over years that could alter the relationship co-owners have with the real estate owned together.

Further, if the co-owner has judgments against him, a creditor can put a lien on the real estate. This can be extremely disadvantageous because even if you do not have judgments or liens, a creditor can attach a lien to the property because of a co-owner’s debt and potentially force a sale.

Tax Implications

A great estate planning tool is to take advantage of the “step up in basis” of real estate when it is within a trust or passed through probate. Generally, if real estate is inherited, the heirs receive a “step up in basis” meaning that their basis for the asset is the value of the property upon the death of the previous owner. For example, John purchases an apartment building in 1980 for $100,000. It is currently worth $1,000,000. If he sells it today, he will pay capital gains taxes on $900,000 (this is oversimplifying it because you also have to take into account depreciation). However, if he dies and his children inherit it and then sell it, they do not pay any capital gains taxes because the children’s basis is $1,000,000.

However, if you own real estate in joint tenancy, the surviving joint tenant assumes the deceased joint tenant’s basis. So in the example above if John owned the apartment building with his children as joint tenants and John’s children decide to sell upon his death, they would be liable for capital gains taxes on the $900,000 gain.

There is an also an issue of gift taxes when you “give” an asset away during your lifetime.

What to do instead?

By drafting a revocable living trust, there is still a way to avoid probate without adding co-owners to any real estate you own. If you are interested in learning more, please contact Attorney Anthony Marinaccio at (818) 839-5220 for more information.

 

Real Estate

What is a Lis Pendens?

A Lis Pendens, also known as a “Notice of Pendency of Action” can be recorded on real estate through the County Recorder’s office. The purpose of a Lis Pendens is to provide “constructive notice” to a subsequent buyer, claimant, or anyone who has encumbered the real estate that there is a legal action that may affect title or possession of the real estate.

A Lis Pendens should be recorded immediately after filing a lawsuit that affects the title or possession of real estate. Prior to recording the Lis Pendens, a proof of service must be attached that shows that that the plaintiff has served the Lis Pendens by registered or certified mail all known parties that have an adverse interest in the property along with the title owner of the property. If you are not an attorney, a judge must approve that you can record a lis pendens on a property.

How Does a Lis Pendens Affect Title?

If there is a Lis Pendens recorded on a property, a title insurance company will not be able to insure title. This could hold up a sale and basically make a property unmarketable. Ultimately, because a Lis Pendens shows that a property is subject to a lawsuit that may affect title or possession, a seller would not be able to sell with clear title until the underlying lawsuit is resolved. If a buyer purchases a property with a properly recorded lis pendens, the buyer has “constructive notice” which may mean that the buyer could lose the property through the lawsuit if a plaintiff is successful at gaining title or possession. Therefore, a property with a lis pendens is difficult, if not impossible, to sell.

What types of lawsuits use a Lis Pendens?

Lis Pendens are used in quiet title actions but can also be used in lawsuits where title or possession of a property is in question. For example, a buyer of a property can file a lawsuit for specific performance and record a lis pendens when a seller refuses to sell under a real estate contract.

You should speak with an attorney prior to filing any action that would require a lis pendens or any action that could affect property rights. California law requires strict procedural requirements to record a Lis Pendens and for service of a summons and complaint for actions that affect title to real estate. Please contact Attorney Anthony Marinaccio at (818) 839-5220 for more information.

Landlord & Tenant Law, Real Estate

Legal Issues with Short Term Rentals

The City of Glendale has recently enacted a noise ordinance that targets properties that require police responses due to loud music and other nuisances. Glendale’s ordinance creates a series of fines after the police respond to loud music or nuisance complaints. The Glendale News Press reports that the City of Glendale has already began to enforce this ordinance on a house that was rented through Airbnb.com. While being rented through Airbnb.com, renters who rented the property for a day or two threw large parties which caused neighbors to complain. The article, “Party Central” House Issued Police Warning provides more details on the background story regarding the rental.

Airbnb.com has caused a number of legal issues that must be addressed by local governments. Property owners may not be even be aware that they may not rent their property on a short term basis or that it creates additional landlord-tenant rights.

Many jurisdictions have prohibitions against short term rentals. California courts have upheld city ordinances that prohibit short term rentals in residential neighborhoods. In Ewing v. City of Carmel by the Sea, the California Court of Appeals found that the City of Carmel could prohibit rentals for less than 30 days in residential neighborhoods, basically prohibiting a home from being used as a bed and breakfast. A property owner should check with their local zoning code before renting their properties on a short term basis. Also, if a property is located in a homeowners’ association, there may be additional CC&Rs that would apply. Many homeowners’ associations prohibit short term rentals or even any rentals. 

Further, if a property owner rents through Airbnb.com enough, the property owner may need to obtain a business license and/or pay a business tax. Each jurisdiction has its own ordinance on when a business permit is required.

Some particular issues may also arise in cities with rent control, such as Los Angeles. Although single family homes are not subject to the Los Angeles Rent Stabilization Ordinance, if you rent your home by the bedroom, rent control could apply if residents live there for more than thirty days. This could have an unintended consequence that a landlord of a short term rental could not actually evict a tenant without cause.

Also, you should check your insurance policy to see what may or may not be covered when renting on a short term basis. Your insurance carrier may find that your home is not owner occupied or that you were running a business out of your home, in which case, your insurance policy would need to be modified.

In sum, there are many issues that may arise from using Airbnb.com. Before a property owners uses Airbnb.com, they should be aware of potential liability and whether or not it is a permitted use of their home. Call Attorney Anthony Marinaccio at (818) 839-5220 to learn more about your legal options.

Business

What the Sriracha Hot Sauce Controversy Can Teach Other Business Owners

I was recently interviewed by Don Simkovich for his website www.examiner.com regarding how business and property owners can learn how to protect themselves from controversies  similar to those facing Hong Fong Foods, the company who makes Sriracha. The article is What Business Owners Can Learn from the Sriracha Hot Sauce Controversy. 

Real Estate

Real Estate Salesperson Owes Same Duty to Buyer and Seller When Broker Represents Both

A recent California decision found that a real estate salesperson representing a buyer or seller has the same duty as the broker who represents both the buyer and seller. This could happen when a broker represents both the buyer and seller but two separate salespersons actually represent the buyer and seller. In this case, both salespersons would owe a duty to the other party even if they are not acting as a dual agent because their broker is acting as a dual agent. Horiike v. Coldwell Banker Residential Brokerage Company provides guidance for real estate salespersons, brokers, and parties to a real estate transaction when the same broker represents both the buyer and seller.

In 2006, the property owners of a home in Malibu, California hired Chris Cortazzo with Coldwell Banker Residential Brokerage Company to sell their property. Building permits for the property listed the square footage of the buildings at 11,050 square feet, including a single family residence at 9,224 square feet, a guest house at 746 square feet, a garage at 1,080 square feet, and a basement. Cortazzo listed the property and advertised as having 15,000 square feet of livable space. A couple made an offer on the property but wanted confirmation of the building square footage, which could not be provided because architectural plans could not be provided.

The plaintiff, represented by another real estate salesperson, Chizuko Namba, from Coldwell Banker Residential Brokerage Company, made an offer on the property. He was provided a flier stating that there was 15,000 square feet of living space and was also provided a copy of the building permits. The parties also signed a dual agency disclosure form required under Civil Code Section 2079.16.

The form described two types of relationships relevant here:

  • The seller’s agent acts as an agent for the seller only and has a fiduciary duty in dealings with the seller. The seller’s agent has obligations to both the buyer and the seller to exercise reasonable skill and care, as well as a duty of fair dealing and good faith, and a “duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties.”
  • “A real estate agent, either acting directly or through one or more associate licensees, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer.” An agent in a dual agency situation has a fiduciary duty to both the seller and the buyer, as well as the  duties to buyer and seller listed in the previous sections.

Soon after the transaction was completed, the Plaintiff filed a lawsuit against Coldwell Banker for intentional and negligent misrepresentation, breach of fiduciary duty, unfair business practices in violation of Business and Professions Code section 17200, and false advertising in violation of Business and Professions Code section 17500. He had discovered the total square footage of the building was different from building permits or what was advertised.

On appeal, the Court found that the Listing Agent owed a fiduciary duty to the Buyer because he was employed by the same broker as the one representing the Buyer. A broker who represents both parties to a real estate transaction owes both parties a fiduciary duty even when different salespersons represent each party. If the Listing Agent was aware of material facts, he should have provided them to the Buyer.

There is a common misconception that if two different real estate salespersons represent the buyer and seller, there is no issue of dual agency even when both salespersons work for the same broker. California law does not agree. This case has important implications for real estate salespersons and brokers who deal with the seller and buyer to a real estate transaction.

Real Estate

Right to Repair Act Requires Notice to Builder Prior to Repairs

A recent California court found that under the Right to Repair Act (Civil Code Section 895 et seq.), a homeowner must provide notice of the construction defects to the home builder prior to doing any repair work subject to the Right to Repair Act. KB Homes v. Superior Court of Los Angeles County provides further clarification on the Right to Repair Act.

Dipak Roy (“Homeowner”) purchased a home from KB Homes (“Home Builder”) in 2004. The Purchase Agreement included a clause addressing prelitigation procedures and listed a corporate office where notices of defects could be sent. The Purchase Agreement allowed for a telephone notice during an emergency, but a written notice would be required to follow-up the telephone call notice.

In 2010, a property manager discovered a water leak from a broken water pipe. The home was vacant at the time. The Homeowner contacted his insurance company, Allstate. A mitigation company was hired to clean-up the damage from the water leak. Allstate sent the Home Builder a notice of the damage and its intent to pursue the Home Builder for subrogation. In 2011, Allstated filed a lawsuit against the Home Builder for negligence, breach of implied warranty, and strict liability.

The trial court found that Allstate, as the insurance company, was not required to comply with the notice procedures found in the Right to Repair Act or in the Purchase Agreement.

On appeal, the Court was required to answer whether or not a homeowner must provide notice to a home builder of a defect in order for the homeowner’s insurance company to pursue a subrogation claim against the home builder.

The Right to Repair Act applies to the sale of new homes after January 1, 2003. The Right to Repair Act requires a homeowner to provide notice of a construction defect to a home builder. Then, the home builder must acknowledge receipt of the notice within 14 days and complete an initial inspection 14 days after providing receipt of notice. The homeowner may file a lawsuit if the home builder fails to acknowledge receipt or to inspect the property.

Here, the Court found that the Homeowner did not provide notice to the Home Builder and did not allow the Home Builder the opportunity to make repairs or pay damages to the Homeowner. In sum, as a result of not providing proper notice, the homeowner’s insurance company could not pursue the claim against the Home Builder.

This case is an important reminder for parties to a contract to review prelitigation procedures prior to filing a lawsuit because failing to follow such procedures may doom a plaintiff during litigation. In particular, under the Right to Repair Act, it is important for homeowners of new homes purchased after January 1, 2003 to be aware of the provisions in the Right to Repair Act and in the purchase agreement.

Real Estate

Transfer Disclosure Statement Required for Mixed Use Properties With Four or Fewer Residential Units

A recent California decision found that a Transfer Disclosure Statement that is required on all sales of properties with four or fewer residential units also applies to a mixed use property that has four or fewer residential units. Richman v. Hartley provides further guidance when a Transfer Disclosure Statement is required for the sale of real estate.

In 2007, Hartley entered into a written agreement with Richman to purchase Richman’s property, consisting of a residential duplex and a commercial building. A paragraph of the written agreement required that the seller make all disclosures required by law and that the property would be sold “as-is.” At the same time, Hartley leased the property from Richman for two years.

In 2009, escrow was scheduled to close, but Hartley failed to close escrow citing that Richman did not provide Hartley with a Transfer Disclosure Statement required by Civil Code Section 1102. Richman sued Hartley for breach of contract. Hartley moved for summary judgment because Richman failed to provide the Transfer Disclosure Statement. The trial court granted Hartley’s Motion for Summary Judgment, and Richman appealed.

The Court interpreted Section 1102 to require a Transfer Disclosure Statement for the sale of a mixed use property that contains four or fewer residential units because Section 1102(a) requires the Transfer Disclosure Statement for all sales of properties within four or fewer residential units, regardless of whether there are other non-residential structures on the property.

The Court found that other laws addressing residential real estate disclosures also contain the phrase “residential real property;” however Section 1102 requiring a Transfer Disclosure Statement does not make that distinction.

This case is important for real estate investors, brokers, real estate salespersons and others involved in a real estate transaction particularly those for mixed use properties when it is confusing whether or not the property is “residential” or “commercial.”

 

Real Estate

Homeowners’s Association is Required to Take Partial Payments to Reduce Delinquent Assessments

Recently, a California court determined that a homeowners’ association governed by the Davis-Stirling Act to accept and apply partial payments to reduce delinquent assessments owed but not other amounts due, such as late fees, attorneys’ fees, interest, and costs. This case is important since it is one of the first cases to decide whether or not a homeowner’s association can accept partial payments. A copy of Huntington Continental Town House Association, Inc. v. The JM Trust can be found here.

Homeowners owned real property within the Huntington Continental Town House Association (the “Homeowner’s Association”) in Huntington Beach, California. From 2003 to 2009, Defendants paid the monthly assessments issued by the Homeowner’s Association on time. Defendants failed to pay the monthly assessment on April 1, 2009 and started to stop paying the monthly assessment. On October 23, 2010, the Homeowner’s Association sent Defendants a notifying them that they were delinquent $3,864.96. The Homeowner’s Association received no response, and recorded a lien on the property.

The Homeowner’s Association then passed a resolution authorizing the Homeowner’s Association to foreclose on the delinquent assessment lien. After providing notice to the Homeowners, a Complaint was filed on April 13, 2011 to foreclose on the lien and for additional damages.

In May 2011, after receiving an itemized statement of damages, Defendant sent a check for $2,000 along with a request to stop the foreclosure. Homeowners agreed to a monthly payment to pay all damages and delinquent assessment. Homeowners made two additional payments of $1,500 each.

On October 17, 2011, Homeowners were notified that they failed to make two monthly payments and that the agreement to stop the foreclosure would be cancelled. In November and December 2011, Homeowners paid the regular monthly assessment of $188. The Homeowners’ Association returned the checks because it stated it was unable to receive partial payments for the amount due. In January 2012, Homeowners attempted to pay $3,500 to the Homeowner’s Association, but again the Homeowner’s Association refused saying it was not allowed to receive partial payments.

The trial court granted the foreclosure and damages of $5,715.93 against Homeowners. Homeowners appealed the decision.

On appeal, the Court found that there is nothing to bar a homeowner’s association from receiving partial payments. Civil Code Section 1367.1 provides a list of accounts to be paid first if a homeowner’s association receives a partial payment thus contemplating partial payments.

The Court broadened the language of Section 1367.1 to include the time after litigation has commenced. As a result, if a homeowner attempts to tender a partial payment to pay a delinquent assessment, a HOA must accept it.

This case provides guidance for homeowners that are delinquent on homeowners’ association dues and for HOAs looking to to foreclose on delinquent assessment liens.

On a personal note, I lived in the Huntington Continental Town Houses during law school. Great place to live.

If you have a dispute involving a HOA, please contact Attorney Anthony Marinaccio at (818) 839-5220 for a free initial consultation.