Bay Area Real Estate Lawyers — Palo Alto, San Jose Real Estate Attorneys

Recent Case Expands Broker’s Duty to Warn

by Simon Offord on May 20, 2013

The recent case of Hall v. Aurora Loan Services, LLC, 2013 DJDAR 5460 (April 26, 2013) has expanded the real estate broker’s duty of care to include an express disclosure and warning of matters included in a home inspection report to visitors of the property (ie agents and potential buyers).

The plaintiff in Hall is a real estate agent. While showing the property to her clients, Hall inspected a stairway ladder that led to a bonus room attic. Thinking it looked safe, she climbed the ladder to access the attic’s bonus room when and a hinge broke, causing the stairway ladder to fail, and Hall fell to the ground and broke her leg. Hall subsequently filed suit against the listing broker.

As part of preparing the property for sale, the listing agent obtained a garden-variety home inspection report. Like most inspection reports, the report contained a lengthy list of commingled cosmetic and minor repair items. Included in the “Health and Safety Required Repairs” section there was a recommendation to repair and replace the attic stair. The inspection report was provided to the listing broker, however the listing broker alleged to have had no actual knowledge of any dangerous conditions and did not discuss the report with the contractor who prepared the report.

The trial court dismissed the case because the listing broker and the owner had no actual notice or knowledge of a defect in the stairway ladder (notwithstanding the contractor’s inspection report). The Court of Appeal reversed, holding that there was sufficient evidence for a jury to conclude that based on the “remove and replace” reference in the inspection report, the listing agent had reason to know that the stairway ladder was potentially dangerous because it was in disrepair, and should have warned of the condition.

This ruling creates a very difficult standard for listing brokers to comply with as it will require them to go further than merely providing a copy of the inspection reports to other agents and visitors. Instead, the prudent broker will carefully review the inspection report, provide it to all visitors, discuss any concerns with the preparer of the report, and then specifically warn visitors of dangerous conditions.

It will be interesting to follow future cases and decisions in order to further define what is a dangerous condition and whether the courts will further broaden or define the broker’s duty to warn. We will be sure to update our readers of any such additional developments.

If you have any questions about a real estate broker’s duty to warn, or any real estate related legal issue, please give us a call at (650) 327-2900, or visit us on the web at www.brewerfirm.com.

{ 0 comments }

Non-Profits Need to be More Diligent to Prevent Adverse Possession Claims

by Charles Bronitsky on May 13, 2013

in Boundary Dispute, Litigation, Neighbor Issues

In California one can obtain title to someone else’s property through a process known as “adverse possession.” The requirements for adverse possession are (1) pay the property taxes on the subject property, (2) actual possession that is (3) open and notorious, (4) continuous and uninterrupted for five years, (5) hostile and adverse to the true owner’s title, and (6) under either color of title or claim of right.” California Maryland Funding, Inc. v. Lowe (1995) 37 Cal.App.4th 1798, 1803. Adverse possession often comes up in cases where there is a dispute over a fence line that was not on the property boundary. Typically, the problem with establishing a right by adverse possession is that the person claiming the right has not paid the property tax on the other party’s property and thus, the claim fails.

In the recent case of Hagman v. Meher Mount Corporation (2013) 215 Cal.App.4th 82, the Second District Court of Appeal held that where the property owner suffering the encroachment is a non-profit organization and therefore exempt from the payment of property tax, the party claiming title by adverse possession need not pay the property taxes in order to establish a claim of adverse possession.

In California, it is not legally possible to obtain title to property by adverse possession against the state or a public entity. California Civil Code § 1007. Thus, Meher Mount Corporation argued that because it was formed as a public benefit corporation, that it was an exempt public entity. The Court rejected that argument, holding that what distinguished public entities from non-public entities was the fact that a public entity “is vested with some degree of sovereignty.” “Public benefit corporations lack any element of sovereignty” and so public benefit corporation are not exempt from adverse possessions claims.

The Court then went on to decide that since Meher Mount Corporation had applied for, and been granted, a welfare exemption to the payment of property taxes, that Hagman was “not required to pay property taxes on that land” in order to establish a claim under adverse possession.

Meher Mount Corporation then argued that since it had been paying the Mosquito Control and Vector Borne Disease Prevention Assessment (“mosquito assessment”), its payment of the mosquito assessment was a defense to the adverse possession claim. The Court rejected that argument as well, holding that the mosquito assessment was not a tax and therefore payment was not required. Ultimately, the Court upheld the judgment in favor of Hagman and awarded Hagman title under a claim of adverse possession.

While this case does present fairly unique factual issues, it should be seen as a warning to non-profits in California, including many religious organizations that own land, that they should be more diligent about protecting the rights to their property and especially their diligent regarding their boundaries. Boundary issues can present complicated legal issues and it is always best to consult an attorney to know what your particular rights are and to choose that attorney based on their experience in that area.

If you have any questions about such matters or any other real estate related legal issues, please contact the Law Offices of Peter N. Brewer at (650) 327-2900 or on the web at www.BrewerFirm.com.

{ 0 comments }

Court Eviscerates Lender’s Ability to Resolve Pre-Foreclosure Cases Quickly

by Henry Chuang on May 6, 2013

in Foreclosure, Litigation, Real Estate Law

In a stunning blow to lenders, the California Court of Appeals eviscerated a lender’s ability to resolve a wrongful foreclosure lawsuit quickly. In Integan v. BAC Home Loans Servicing LP, the Court upheld a borrower’s claim that the lender had failed to contact her prior to foreclosure. In addition, the court held that the tender offer rule may not apply to an action where the lender had not completed the foreclosure

Facts of the Case

In 2006, Arden Intengan received a $695,000 loan from Countrywide Bank. In late 2010, Intengan defaulted on the loan and the trustee began foreclosure proceedings. The day before the foreclosure sale, Intengan filed suit to stop the foreclosure. The defendants successfully demurred to the complaint and the case was dismissed.

Holding

On appeal, the Court sustained the lower court’s decision on every cause of action except for one, wrongful foreclosure. On the wrongful foreclosure claim, the Appellate Court reversed the lower court and found that Integan potentially had a claim. The Court noted that because the defendants had filed a demurrer, courts are required to assume that everything the Plaintiff alleged was true (there are a few exceptions to this rule). Here, Integan alleged that BAC had failed to contact her as required by law. While BAC had recorded a declaration stating that it had complied with the notice requirements, given the competing factual assertions, the Court assumed Integan’s allegations were correct and therefore, it was possible for her to prevail on her claim.

Further, while many lenders had previously argued that a borrower is required to tender offer (offer to pay the full amount owed) before challenging the foreclosure sale, the Court agreed with a recent line of cases that the tender offer rule does not apply if the foreclosure sale had not yet occurred. With these two holdings, the Court has made it almost impossible for a lender to successfully dismiss a wrongful foreclosure suit without proceeding substantially through trial.

Takeaway

California courts have been steadily whittling away at the tender offer rule and have been allowing litigation against lenders to proceed. There has been a clear trend from the early days of the foreclosure crisis where the courts routinely dismissed these lawsuits at the early stages to the present day where the courts are allowing homeowners to proceed further with litigation. If a foreclosure sale has not occurred, the courts are much more generous in allowing borrowers to proceed with litigation. Accordingly, as a lender, the faster you can foreclose, the stronger your position.

If you have any questions about such matters or any other real estate related legal issues, please contact the Law Offices of Peter Brewer at (650) 327-2900 or on the web at www.BrewerFirm.com.

{ 0 comments }

More Risk for Junior Lienholders – Understanding Subordination Agreements

by Julia Wei on April 29, 2013

in Litigation, Negotiating Transactions, Real Estate Law

Junior Lienholders are by their very nature assuming greater risk because they are not in first position. In the case of R.E. Loans LLC v. Investors Warranty of America, Inc., the junior lenders were at even more risk because the senior loan was actually one of 3 loans cross-collateralized on multiple pieces of property.

The junior lienholders here had a $3M dollar loan that was originally a $6.5M in third position against “Jack’s Ranch” in San Luis Obispo County. The borrower, Martin Weyrich Winery, LLC, paid off the first and second position lenders, and then paid down R.E. Loans to $3M—leaving significant equity in the property. Later, the Winery brought in a new loan which would be $4M at first position if R.E. Loans agreed to subordinate. R.E. Loans agreed to the subordination and specifically stated that they were only subordinating to the $4M ahead of them. However, apparel R.E. Loans did not know that the Winery was actually taking out 3 total loans, secured or “cross-collateralized” against Jack’s Ranch as well as other properties.

It was clearly a problem that R.E. Loans did not seem to know about the other two loans but further, the loans were “cross-defaulted” as well – which simply means that a default on one loan would be considered a default on all the loans. (also sometimes referred to as “cross-acceleration”)

The Winery defaulted and the senior lender’s Notice of Default informed the borrower that $26,307,307.93 was required to cure the default. R.E. Loans did not cure the default and the property went to foreclosure sale, which wiped out R.E. Loans’ junior deed of trust. R.E. Loans sued for a declaration that it was not a soldout junior lienholder. R.E. Loans claimed senior lender Transamerica breached the subordination agreement by using its trust deed to secure three loans totaling $21,196,850. R.E. Loans won its motion for summary judgment but was overturned on appeal.

The appellate court concluded:

“To the extent Investors’ trust deed secured a note in the amount of $4,006,600, it was senior to RE’s trust deed. To the extent Investors’ trust deed secured other notes it is junior to RE’s trust deed. That would be the result had each note been secured by its own trust deed. There is no reason why a different result should pertain because the notes are secured by a single trust deed.”

What the appellate court is referring to is that the different order of priority that lenders enjoy is specific to the property that the deed of trust is recorded against. Here, Loan 1 was in 1^st possession on Jack’s Ranch and RE Loans was in 2^nd position. The court is simply noting that defaults on the other two loans would not affect RE Loans with regard to Jack’s Ranch.

As to the issue about curing the default on the Notice of Default, the Court noted, “The mandatory language of Civil Code section 2924c, subdivision (b)(1) is directed to the property owner, not the holder of a junior trust deed.”

Here’s the confusing part, the Notice of Default expressly said, “to cure the default you must pay all sums due…” Obviously, R.E. Loans did not want to pay $26,307, 307.93 to cure the default. But under the Court’s explanation, R.E. Loans was entitled to some kind of apportionment of that number such that they could cure for only the amount that was in default on Jack’s Ranch.

The Court indicated there was no evidence on the record that R.E. Loans had attempted to obtain or pay a lesser default amount. That is a strange distinction because the loans were cross-defaulted, therefore, the senior lender should have been entitled to foreclose due to a default on one of the other two loans, even if the amount to cure on Jack’s Ranch was zero. But, because the loan agreement was only between the borrower and the senior lender—the junior was not bound by the cross-default provision!

The cautionary tale here in the dicta is that had R.E. Loans attempted to cure only its portion, but the senior lender had taken the unreasonable position that all $26M was required to cure, then there might have been a different result, or at a minimum, grounds for an injunction to halt the trustee’s sale on Jack’s Ranch. [R.E. Loans, LLC v. Investors Warranty of America, Inc., 2013 DJDAR 1017]

Takeaway – the Notice of Default’s amount to cure is specific to the borrower—not the junior lienholder. Additionally, as a junior lienholder agreeing to subordinate to a larger loan, be aware of any language in that agreement that permits the lender and borrower to call a cross-default if it is a cross-collateralized loan. In the case of the senior lender, had it included the cross-default language in the subordination agreement, then potentially it could have bound the junior the full amount required to cure the default on all the loans.

If you have any further questions regarding this article, feel free to contact the Law Offices of Peter N. Brewer at (650) 327-2900. www.BrewerFirm.com

{ 0 comments }

Adverse Possession Awarded Without Paying Taxes

by Simon Offord on April 23, 2013

in Contract Disputes, Landowner Liability, Legal Update, Neighbor Issues, Real Estate Law

In past blog articles, we have discussed the doctrine of adverse possession, and some of the difficulties in prevailing on an adverse possession theory. In order to prevail on an adverse possession claim, the adverse possessor must prove each of these five elements:

Possession must be held under either a claim of right or color of title.
There must be actual, open, and notorious occupation of the premises in such a manner that constitutes reasonable notice to the record owner.
Occupation must be both exclusive and hostile to the title of the true owner.
There must be uninterrupted and continuous possession for at least five years.
The possessor must pay all of the taxes levied and assessed on the property during the five-year period.

The most difficult element to prove in an adverse possession case is the requirement that the adverse possessor pay the taxes on the land they seek to obtain title to. In the recent case of Hagman v. Meher Mount Corporation, the Court carved out an exception to when taxes need to be paid.

Facts

Larry Hagman owned a parcel of land in Ojai, California. As a result of a fence being built in the wrong place, Hagman occupied a portion of land owned by his neighbor, the Meher Mount Corp.

Meher Mount qualified for a welfare exemption as a religious organization using its property for educational purposes. Part of this exemption resulted in Meher Mount being exempt from taxation, including for property taxes.

In 2011, Hagman sued Meher Mount to quiet title to the disputed portion of land, arguing that he had acquired title by adversely possessing the parcel. The trial court agreed and quieted title in favor of Hagman. On appeal, Meher Mount argued that it was a public entity and thus, was immune from adverse possession (in California, the title of property owned by a public entity or public utility cannot be obtained by another through adverse possession). Meher Mount further argued that Hagman had failed to pay the taxes on the disputed land and thus could not prevail.

Decision

To obtain title, an adverse possessor is required to prove that he or she “timely paid all state, county, or municipal taxes that have been levied and assessed upon the land for [a] period of five years.” CCP 325(b). At trial, Hagman admitted he paid no taxes on the disputed land. However, the Court held that as no property taxes were ever levied or assessed on the property due to Meher Mount’s tax-exempt status, Hagman was not required to pay taxes to prevail on an adverse possession claim. This is an interesting decision, as it allowed the adverse possessor to avoid having to prove the most difficult element of an adverse possession claim.

The appellate court also found that a public benefit corporation, such as Meher Mount, is neither a public utility nor a public entity. “Public entities” are bodies that have been vested with some degree of sovereignty. On the other hand, “public benefit companies” lack any degree of sovereignty because they are not created by the government. Thus, Meher Mount was not immune from adverse possession and the trial court correctly quieted title in favor of Hagman.

This is an interesting decision as the Courts have generally limited the adverse possessor’s ability to obtain title, whereas this case is arguably an expansion of adverse possession in that it makes it easier to acquire title in specific situations. We will continue to monitor these adverse possession cases as they are published, and keep our readers informed of additional changes in the law.

If you have any questions about a potential adverse possession claim, or real estate related legal issues in general, please contact the Law Offices of Peter Brewer at (650) 327-2900 or on the web at www.BrewerFirm.com.

{ 1 comment }

Homeowners Association Related Blogs

by Camille Rogers on April 15, 2013

in HOA Litigation

Lately, the Law Offices of Peter N. Brewer has received calls regarding Homeowners Association matters. The attorneys at the Law Offices of Peter N. Brewer would like to share a few of their previously posted blogs pertaining to HOA matters. Our firm has handled many disputes dealing with such matters. If you need legal representation for an HOA related issue or any other real estate related matter, don’t hesitate to contact us at (650) 327 – 2900 or visit us at www.BrewerFirm.com.

Click the image for Julia’s Bio

3 Things to Look Out For When Buying Into an HOA

When a buyer is handed a thick stack of documents from the property management company and faced with just a few days to remove the inspection contingency, it’s tempting to avoid reading these poorly photocopied, blurry, text-dense pages. Don’t avoid reading these critical documents!

What are the CC&R’s? They stand for…

Click the image for Henry’s Bio

HOA Litigation: A How To Guide

Recently, there has been a rise in disputes between homeowners and their Homeowners’ Associations (“HOAs”). While many HOAs are willing to work with their members, others prove to be less accommodating. In these cases, the law has provided specific procedures to resolve disputes between HOAs and homeowners.

As a matter of law, HOAs are required to have an…

Click the image for Simon’s Bio

Can the City Restrict What Kind of Antenna I can Have?

As a general rule, the First Amendment protects one’s right to receive ‘suitable access’ to meaningful television broadcasts (seriously!). City ordinances restricting height, screening, and setback of satellite dishes that are content neutral are a valid regulation for health, safety, and aesthetics and do not violate the First Amendment. Regulations issued under the Federal Communications Act preempt local regulation of satellite dishes, unless the ordinance has…

{ 0 comments }

Cross-Complaints May Prohibit You From Collecting Attorney Fees

by Henry Chuang on April 8, 2013

in Contract Disputes, Legal Update, Real Estate Law

Recently, there have been a series of decisions in California that have limited the recovery of attorney fees. In my previous blog article titled, “Can you Really Get those Attorney Fees? ” I discussed the importance of complying with alternative dispute resolution provisions prior to filing suit. Now, the California Court of appeal has held that a defendant who prevailed in a lawsuit could be barred from recovering attorney fees because he also filed an unsuccessful cross-complaint in the same action.

Facts of the Case

In Zintel Holdings, LLC v. McLean, Zintel Holdings, LLC, the landlord, sued two tenants, Lilo McLean and Mark Huth, to reform a 50-year lease. In response, Lilo filed a cross-complaint for breach of the covenant of quiet enjoyment, elder abuse, and emotional distress. Mark Huth did not file a cross-complaint.

Eventually, the court granted motions for summary judgment finding that both the complaint and the cross-complaint lacked merit. After the dismissal of the complaint and cross-complaint, both tenants filed requests for attorney fees and were denied. However, the Court did award both tenants their costs of approximately $2,500.

Holding

The appellate court reversed the denial of attorney fees as to Mark Huth but affirmed the denial as to Lilo McLean. The Court found that McLean’s cross-complaint was an action on the contract so neither McLean nor Zintel were prevailing parties as neither achieved complete victory. On the other hand, since Huth did not file a cross-complaint, he had achieved complete victory by successfully defeating Plaintiff’s suit and was entitled to attorney fees.

Takeaway

This case demonstrates that although many people file cross-complaints as a tactic to aggressively defend the case, that strategy may come back to haunt a defendant. Before filing a cross-complaint, it is important to analyze if there is an attorney fee provision and the likelihood of success on the cross-complaint.

If you have any further questions regarding this article, feel free to contact the Law Offices of Peter N. Brewer at (650) 327-2900. www.BrewerFirm.com

{ 0 comments }

The Evolving Tender Offer Rule: A Review of the Recent Case Law

by Rachel Larrenaga April 1, 2013 Legal Update

When homeowners or borrowers seek to challenge foreclosures against them, California courts have long recognized the “full tender rule”, an equitable principle that requires the challenger to tender the amount owed as a prerequisite to making the challenge. The rule requires the homeowner to offer to pay the full amount owed when a foreclosure sale [...]

Read the full article →

What is a Deed-in-Lieu of Foreclosure?

by Julia Wei March 25, 2013 Banking Issues

As of March 1, 2013, Fannie Mae has implemented new deed-in-lieu guidelines, streamlining the process and allowing borrowers who are current with their loan to be eligible. Previously, only borrowers who were delinquent were eligible. Now, if borrowers who have stayed current with their loan payments experience either the death of a borrower or co-borrower, [...]

Read the full article →

California Court Reaffirms Line of Cases Regarding the Agreed Boundary Doctrine

by Simon Offord March 18, 2013 Boundary Dispute

Our office has seen an uptick in boundary disputes over the last several months. These disputes commonly arise after one homeowner begins to remodel. This is because, as part of the construction process, the City will oftentimes require the owner to obtain a survey, and sure enough, the survey shows that the current fence line [...]

Read the full article →

← Previous Entries