The answer is … maybe.  At one point the industry had some certainty on this issue when, in 2006, the Department of Labor (DOL) issued an opinion letter on September 8, of that year stating that loan officers qualify as exempt from overtime pay under the administrative exemption.  At that point the answer was clear to employers that loan officers were NOT entitled to overtime pay.

However, some years later, on March 24, 2010, the DOL issued an administrator’s interpretation withdrawing its 2006 opinion and instead opining that loan officers do NOT qualify for the administrative exemption and can be entitled to overtime pay.

This was such a critical issue for the industry that in 2011, the Mortgage Bankers Association (MBA) sued the DOL challenging the validity of the 2010 reversal. MBA prevailed and on July 2, 2013, the Washington DC Circuit Court of Appeals issued a decision in Mortgage Bankers Association v. Harris, invalidating the DOL’s 2010 interpretation.  However, the decision focused on a technicality of notice rather than the merits.  So the question still remained, was the 2006 opinion letter valid?

In June of 2014, the United States Supreme Court granted review so the briefs will be going forward in the next few months.  Until a decision from the Supreme Court, even the 2006 DOL opinion seems to be in limbo.

Generally California courts apply our own state law overtime exemption requirements as provided for in industry wage orders.  As with any type of compliance work, the safest course of action when trying to comply is to adhere to the most stringent or conservative  requirement, whether state or federal.  California’s wage laws are generally more strict than other jurisdictions. Regardless of how it turns out, it will continue to be a very fact-specific analysis, such as the independent contractor analysis.

If you or a friend is seeking real estate legal counsel regarding a California based property, don’t hesitate to contact our law firm at (650) 327-2900 x 10 or to learn more about our firm and read attorney bios, visit us on the web at www.BrewerFirm.com.

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Ceceilia Drumea (“Drumea”) was the resident property manager at an apartment building in Los Angeles for 18 years.  Prior to serving as the property manager, she was a tenant at the property for one year.  During that time, she was paying $850 per month in rent.  However, as the property manager, she paid no rent as she provided management services.  In 2011, the owners who had employed Drumea sold the unit to 1300 N. Curson Investors, LLC (“Investors”).  The day before the sale was completed, Drumea’s service as the property manager was terminated.  Upon taking possession of the property, the Investors notified that Drumea’s rent was being increased to $1,522.03 which was calculated as a 3% increase per year since Drumea last paid rent.  Drumea refused to pay the increased rent but instead offered to pay $850.  The Investors rejected the payment and moved to evict her.

Before the case was filed, the parties first sought clarification about the permissible rent increases from the Los Angeles Housing Department (“Department”).  There, the Department stated that permissible rent was 3 percent above the $850 level.  At the trial court level, the Investors moved for summary judgment stating that the proper amount of rent was $1,552.03.  The court denied the motion and the parties agreed to enter a judgment in favor of Drumea at the $850 price so that the case could be appealed.

THE DECISION:

The Second Appellate District overturned the trial court’s judgment and held in favor of the Investors.  In 1300 N. Curson Investors, LLC, v. Cecilia Drumea, the appellate court held that because Drumea paid no rent, her landlord was not required to notify her yearly of the rent increases in order to preserve those increases when she eventually started paying rent.  Unlike other property managers who pay some rent and are required to receive yearly notices of rent increases, property managers who pay no rent do not need the notices since there is no actual increase to their yearly payment.  Further, in reading the Los Angeles Rent Control Statutes, other areas specifically note that the increases can only be for the previous year.  The part of the statute relating to resident landlords has no such limitation.

WHY THIS DECISION IS IMPORTANT:

This case is one of the rare cases where there is an appellate decision in favor of the landlord on a rent control ordinance.  Unsurprisingly, given the nature of rent control ordinances, much of the law and the decisions lay in favor of protecting tenants.  Here, the court decided the other way and issued a well reasoned decision that was based on what seemed to be a relatively clear reading of the statute.  However, even given the numerous grounds for the decision stated by the appellate court, both the trial court and the Housing Department reached different conclusions that were both far more favorable to the tenant/property manager.  Given this decision and others like it, it is possible that more landlords will appeal unfavorable trial court decisions of rent control ordinances.

COMMENT:

This case was procedurally interesting because it seemed that the parties worked together to get this matter to the appellate court.  After the original summary judgment motion was denied, the parties reached a stipulation that the rent would be at the $850 amount until the appellate decision became final.  Also, the Investors agreed not to seek any damages if rent was paid on time, even though they could have been entitled to almost twice as much rent per month.  Finally, the parties and the appellate court noted that this decision would not lead to the eviction of Drumea as long as she paid the new rent once this decision was final.  While not necessarily the basis of the decision, it was clear that the Investors were strategic in reducing any equities argument by agreeing to not evict the tenant and agreeing to the lower rent amount pending the appeal.

As always, give us a call at (650) 327-2900 if you think you have a real estate matter and need legal representation or visit us on the web at www.BrewerFirm.com.

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Buying a new home can be an overwhelming process. The amount of paperwork is staggering. When buying property that is part of a homeowners’ association (HOA), the paper work is increased due to a statutorily-mandated set of additional disclosures regarding the HOA (Civil Code Sections 1365 – 1368 and 1375).  In this second installment in this blog series, I will discuss some of the more important issues to look out for in the HOA disclosures.

One of the vital elements of the HOA disclosures is the Covenants, Conditions, and Restrictions, commonly known as CC&Rs. The CC&Rs contain the rules that govern the HOA, and some of the things you might find the in CC&Rs could impact your decision to buy the property.  A previous blog discussed potential restrictions relating to improvements to your home.  However there are several other potential pitfalls to look out for when reviewing CC&Rs.

Restrictions on Use of the Property

Many CC&Rs include specific restrictions on the use of the property.  These restrictions frequently seek to limit use of the units for residential purposes only.  This oftentimes means that an owner cannot use his home as an office.

Additionally, many CC&Rs have specific rules regulating renting or leasing of the unit.  It is common to require all leases to be for a minimum term of one year, require the owner to ensure the tenant understands and follows the rules for the HOA, and to provide the HOA with a copy of the lease.  Some CC&Rs go as far as to prohibit leasing all together, or prohibit leasing for more than a few weeks in a year.

Some CC&Rs even require that units be used solely as a dwelling for a “single family.”  The case of Colony Hill v. Ghamaty deemed this to be an acceptable provision and determined that an owner who was renting his unit out to unrelated, short term tenants was in violation of the CC&Rs.  Please note, that with the emergence of “Airbnb,” many HOAs are looking into instituting restrictions to prevent owners from renting units on a nightly or short-term basis.

CC&Rs often regulate whether satellite dishes are permitted, and if so their size and location.  We’ve seen CC&Rs that prohibit parking in driveways, or that require garage doors to be closed at all times except when entering or exiting the garage.  CC&Rs often limit or prohibit storage of non-vehicle-related personal property in the garage.  The range of issues that are covered is endless.

Restrictions on Use of Common Areas

Another common restriction deals with use of common areas.  What comes as a surprise to many is that areas such as patios, porches or balconies can be considered common areas.  The CC&Rs may limit how owners can use those common areas, including by preventing them from having BBQs or other amenities and requiring the common areas be kept free of debris or other materials.

Further, most HOAs consider the space between units to be common area.  Therefore, the CC&Rs may limit the owners from installing in-wall or in-ceiling speakers or improving or changing the plumbing or wiring within the walls.

Restrictions Regarding Pets

As a pet lover, one important restriction I always look for are those dealing with pets.  Many CC&Rs limit the number, size, breed, and types of animals an owner is allowed to have.

Of course, the issues discussed above are among the concerns that clients have raised with us.  However, it is critical that a buyer carefully review the CC&Rs for themselves.  What may seem insignificant to one buyer may be a deal-breaker for another.  Therefore, the above items are not intended to be an all-inclusive list, but instead a guide as to some of the more common issues that have caused concerns.

The Law Offices of Peter N. Brewer review and advise on CC&Rs and HOA issues regularly, and are here to help.  If you have any questions about this issue, or any real estate legal issues, please contact us at (650) 327-2900, or on the web at www.BrewerFirm.com.

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What if you find the perfect house but the owner-seller is in bankruptcy?

Sometimes it can be challenging to navigate the bankruptcy system and understand who the decision-maker is in the transaction. If you want to make an offer on the home, here are a few things to consider:

1. What type of bankruptcy did the debtor/homeowner file?

In a Chapter 7 bankruptcy the property is the asset of the Chapter 7 estate and falls under the control of the Chapter 7 Trustee—who is NOT the owner of record, but is instead the person legally empowered to sell the property. The Chapter 7 Trustee is not likely to engage in an off-market transaction. Instead, to carry out his or her duties to all the creditors, and maximize the value of the asset, the trustee will likely list it with a broker and possibly have the property appraised as well.

This means that the property will follow a fairly traditional marketing model by the broker. But of course, the sale will be subject to Court approval (see more on that below).

However, in a Chapter 7, the debtor is usually entitled to the homestead exemption and if there is not enough equity above the liens plus the homestead exemption amount, the Trustee has no incentive to sell the property.

In a Chapter 13 or 11, the issue becomes more confusing. A Chapter 13 or 11 is a reorganization, and the purpose is for the debtor to restructure their debt by proposing a plan of how he, she, or it will pay all their creditors over a prolonged period of time (e.g. 3 or 5 years). The plan can include the sale of an asset and again, any sale would require court approval. In a Chapter 13, the property is an asset of the estate under the Chapter 13 Trustee’s dominion, but could re-vest in the debtor upon plan confirmation. That is a long way of saying that depending on how far along the bankruptcy is, the debtor may not have control over the property to list it or sell it until later, or at least until they have the consent of the Chapter 13 Trustee.

2. How long will the transaction take to close?

Once you have a signed contract in hand, the Court will have to approve the sale. This is usually a regularly noticed motion and can take up to a month to get on the calendar, depending on the type of motion brought and the court’s calendar. However, the sale is not a done deal because it is usually subject to overbid. That means that an auction takes place the day the sale order is supposed to be approved. Usually this is in the courtroom, but on occasion it can be informal and take place at the Trustee’s office.

Additionally, the transactions usually go through escrow and on occasion the title company/escrow officer will reject the Court Order and require an amended order with additional language that makes it possible to close escrow. That can add a couple of weeks to the transaction too.

TAKEAWAY 

A house that is an asset of the bankruptcy estate will likely be priced close to fair market value. However, the competition falls away only when one considers the pool of people willing to wait 60-120 days to close a sale and live with the uncertainty of having to pay even more in an open bidding session after the initial offer is accepted. In a rising market or for certain income producing properties, this can still be a deal with upside to the buyer who is willing to navigate these pitfalls.

If you or a friend is seeking real estate legal counsel regarding a California based property, don’t hesitate to contact our law firm at (650) 327-2900 x 10 or to learn more about our firm and read attorney bios, visit us on the web at www.BrewerFirm.com.

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Lakeesha Lyles (“Lyles”) was a tenant living in a rent controlled apartment in Los Angeles since 2003.  Her landlord, Denise Sengadeo-Patel (“Patel”), failed to send her a copy of a rental unit registration statement or the annual rental unit renewal statement as required by the rent control ordinances.  Due to Patel’s failure Lyles (after paying rent for almost a decade) sued her landlord for all of the rent that she had paid on the theory that the landlord was entitled to collect no rent because of her failure to comply with the rent control ordinance. The trial court found that Lyles failed to state a claim.  Although the court gave Lyles the chance to amend her complaint, she instead chose to appeal the decision.

HE DECISION:

The Second Appellate District affirmed the trial court’s judgment and held in favor of Patel.  In Lyles v. Sangadeo-Patel, the appellate court held that although Patel may have violated the rental ordinances, she was still entitled to collect rent.  The appellate court agreed that, technically, Patel failed to send the statements as required and therefore was in violation of the rental ordinances.  However, the appellate court found that the “idea that the failure of the landlord to serve a copy of a registration statement upon the tenant would lead to a forfeiture of all rent … would be an absurd and unreasonable consequence.”  Instead, the court held that the proper remedy for a landlord who failed to send the statements was to allow the tenant to withhold rent until the statements were sent.  Once the statements were sent, the tenant would then be responsible for paying all of the withheld rent.

WHY THIS DECISION IS IMPORTANT:

This case is one of several recent cases where there is an appellate decision in favor of the landlord involving a rent control ordinance violation.  The court noted that the interpretation of the statute offered by the tenant would lead to an absurd and inequitable result, even though there was a violation of the rent control ordinance.  In order to avoid that result, the court went out of its way to provide other, more limited, remedies for the tenant.  Given this decision, and another recent decision that was also in favor a landlord, it seems that courts have been limiting the potentially devastating impact of a landlord’s minor violation of rent control ordinances.

COMMENT:

One of the arguments raised by the tenant was that previous decisions had noted in dicta that where there was no legal rent, as she believe to be the case here, the maximum rent allowed was $0.  Here, the court acknowledged that Lyles made the argument, but essentially ignored it by stating that the statements were purely dicta and therefore were not binding.  It will be interesting to see if future cases attempt to decide whether a landlord has any right to rent if they are in violation of rent control ordinances.

As always, give us a call at (650) 327-2900 if you think you have a real estate matter and need legal representation or visit us on the web at www.BrewerFirm.com.

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We have previously stressed to real estate professionals, in our blog articles and in many of our speaking engagements, that dual agency is a very risky proposition for real estate brokers. The courts have consistently gone out of their way to find liability against dual agents. The recent case of Horiike v. Coldwell Banker Residential Brokerage Co. continues the courts’ pattern, again punishing a dual agent.

In Horiike, a buyer of residential real property alleged that the seller’s agent misstated the square footage of the home during the sale process. The seller and buyer were represented by different salespersons. However, both salespersons worked for the same broker. To understand the following, please recall that salespersons must lodge their real estate licenses with a broker and must work under the license of a broker. They cannot do work requiring a license without a broker affiliation.

The Court of Appeal held that the salesperson representing the seller owed a fiduciary duty to the buyer. Generally, a salesperson owes a fiduciary duty to his or her client, and owes only a duty of good faith and fair dealing to the other party to the transaction. As we are sure you are all aware, the fiduciary duty is a much higher standard that requires “the highest good faith and undivided service and loyalty” to the client.

The Court held that a broker whose agents represents both parties to a real estate transaction owes both parties a fiduciary duty even when different salespersons represent each party. If the seller’s agent was aware of material facts regarding the property, he had a duty to provide them to the buyer. The Court emphasized that an agent’s duty to disclose material information to the principal includes the duty to disclose reasonably obtainable material information. The Court further held that a fiduciary’s failure to share material information with the principal is constructive fraud, and noted that even a careless misstatement may constitute constructive fraud even if there was no fraudulent intent.

In this case, the seller’s agent was aware of potentially inconsistent square footage calculations. This information could be deemed material to the buyer. Therefore, the Court held that the seller’s agent should have investigated further and provided his findings to the buyer.

This case further illuminates the potential risks of entering into a dual agency. The court made clear that when two agents in the same brokerage are part of a transaction, each agent has a duty to disclose all material information to both parties.

The attorneys at the Law Offices of Peter N. Brewer regularly work with real estate agents and their clients in resolving issues related to real property transactions, mortgage financing, and disclosure issues. If you have any questions about disclosure issues, or any real estate legal issues, please contact us at (650) 327-2900, or on the web at www.brewerfirm.com. “Real Estate Law – From the Ground Up”®

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Neighbor Issues Blog Series


Camille Rogers

by Camille Rogers on June 9, 2014

in Neighbor Issues, Real Estate Law

The attorneys at the Law Offices of Peter N. Brewer have handled many disputes that arose between neighbors with respect to trees. In an effort to educate our network of California property owners, as well as our followers, we hope you will find this series of blogs written by our knowledgeable and seasoned attorneys helpful. If you think you may have a real estate legal matter and are seeking legal representation, don’t hesitate to contact our office at (650) 327- 2900 x 10 or on the web at www.BrewerFirm.com

 

By: Simon Offord, Esq. (Click image for bio)

Get Your Tree Out of My Yard! An Overview of Neighbor’s Rights Relating to Roots and Branches

In previous blog posts I have discussed some of the many areas of dispute that may arise between neighbors. This article touches upon another one of those areas of dispute: damage from neighboring trees.

If you share a property line with someone, chances are there are some overhanging branches or tree roots that cross into each others’ properties. In most circumstances, a few roots or branches will not cause a rift between neighbors. However…

Get Consent Before You Cut, or Pay!

In a previous blog, “Get Your Tree out of my Yard” I discussed the potential issues that may arise between adjoining landowners with respect to trees. In that article, I cautioned against resorting to self-help unless…

More Crazy Tree Damages

In an article of just a few months ago I discussed a recent California case, Kallis vs. Sones, that discussed the potential consequences of the wrongful cutting of a neighbor’s tree (SEE “Get Consent Before You Cut, or Pay.”). Since that time, yet another California Court has affirmed a significant damage award for injuring a neighbor’s tree, further emphasizing…

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$900K Judgment Against Supervising Broker Dischargeable in Bankruptcy Despite Agent’s Fraud.

by Julia Wei June 5, 2014 Bankruptcy

In a lengthy and well-reasoned opinion, the 9th Cir. Bankruptcy Appellate Panel concluded that where the broker was unaware of the agent’s fraud, the state court judgment against the broker was dischargeable and the broker was entitled to a “fresh start” after his bankruptcy. WHY THIS IS IMPORTANT: This is a significant victory for real [...]

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Court Helps Lender After Mistakes Are Made

by Henry Chuang May 27, 2014 Banking Issues

Over three years, Navjot LLC obtained three loans secured by the same piece of property.  The first was in 2005 from Washington Mutual.  The second was in 2006 from a group of investors led by MMB First Mortgage Fund, LP.  The third was in 2007 from Elbert Branscomb.  The loans were for $5.1 million, $1.1 [...]

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Court Clarifies Transfer Disclosure Law for Mixed-Use Property

by Simon Offord May 19, 2014 Breach of Contract

The recent appellate decision of Richman v. Hartley is critical for California real estate agents and sellers to know as it clarifies the mandatory disclosure requirements for property sales. Richman v. Hartley dealt with the sale of a mixed-use property in Ventura, California.  The property was improved with a residential duplex and a commercial building.  [...]

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