A recent case confirmed our oft-repeated advice to get it in writing.  In Westside Estate Agency, Inc. v. James Randall, a broker learned this rule the hard way.

California’s statute of frauds declares invalid any “agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate” unless that agreement is in writing and signed by the broker’s client .  (Civ. Code, § 1624, subd. (a)(4).)   This rule has very limited exceptions, and the Westside case did not contain any such exceptions.

In Westside, the broker agreed to assist a “friend” in purchasing a $40+ million dollar home in Bel Air.  The broker did not get an agreement in writing.  The broker prepared two offers for the purchase which were rejected.  However, the sellers remained interested.  A couple months later, the client (“buyer”)  hired an attorney to prepare a new, slightly higher offer which was ultimately accepted.  The attorney then received the $925,000.00 commission (those pesky attorneys!).

The broker filed suit against the buyer, claiming that it was owed the commission under a breach of an implied contract theory.  The attorney was also sued for intentional interference with an implied contract (which cause of action was ultimately dismissed by the broker).  The buyer demurred to the Complaint (which is a motion that is filed at the outset of the case, arguing that even if everything in the Complaint is true, there is no legal recourse), arguing that without a written agreement, buyer owed no duty to broker.  The Trial Court agreed and dismissed the action against the buyer.

The broker appealed the Trial Court’s decision.  The  Appellate Court  affirmed the Trial Court’s decision, concluding that there was no viable cause of action to overcome the statute of frauds as the complaint failed to allege that there was a written agreement (let alone one that “unequivocally” shows on its face that the broker was employed and seeking to recover a commission, which is what the law requires).

The Appellate Court examined the facts further, and rebutted the broker’s argument that the prior offers he wrote constituted a writing sufficient to entitle him to a commission.   Specifically, the Court held that even though the two unsuccessful offers contained language that stated that the broker would collect a commission, since the broker was not the procuring cause of the eventual purchase, he had no right to a commission.  The Court affirmed century-plus old law that states that “merely putting a prospective purchase on the track of property which is on the market will not suffice to entitle the broker to the commission contracted for, and even though a broker opens negotiations for the sale of the property, he will not be entitled to a commission if he finally fails in his efforts.”

The obvious take away from this case is GET IT IN WRITING!  Even if you are working with a client that you consider a friend, do not make the mistake of assuming they will make good on their word.  We realize that buyer representation agreements are uncommon, but if you are in the midst of making multiple offers on a $40 million dollar plus property, you should do everything you can to get an agreement in writing, or you could miss out on the commission of a lifetime.

{ 1 comment }

Post image for 5 Tips for Landlords This Winter

5 Tips for Landlords This Winter


Ashlee Adkins

by Ashlee Adkins on December 21, 2016

in Landlord/Tenant Disputes

A landlord’s duty to maintain a habitable unit can morph as the winter months approach here in California. What makes a unit habitable in the summer months can change with the seasons and the drop in temperature. In our recent California Landlord Basics webinar on December 16 (view replay here), we discussed the statutory requirements for a residential unit to be considered habitable (See Cal. Civ. Code § 1941.1).

As discussed in our webinar, habitability is determined based on “reasonableness”. A landlord has a duty to repair defects that make a unit uninhabitable (See Green v. Superior Court (1974) 10 Cal. 3d 616). Typically, a landlord has 30 days to repair a defect that affects habitability, but this is not a set requirement. The court has discretion to determine if the landlord acted reasonably, despite the 30 day repair standard.

While issues with a unit’s water heater or furnace in July wouldn’t necessarily warrant an emergency fix, a lack of heat and hot water in the bitter cold temperatures of December might. A broken water heater and furnace at this time of year would certainly require a shorter time-frame for repair. Also, defects in the roofing and windows of a unit can be particularly uncomfortable for a tenant in the winter. These defects specifically related to the winter months not only affect the tenant’s comfort, but could also cause health concerns. Proactive landlords should consider these 5 tips during the winter months to prevent headaches, excessive repairs costs, and legal fees later on:

  1. Minimum Temperature

The California Department of Housing requires existing residential units to be capable of maintaining a minimum room temperature of 70° F at a point three feet above the floor in all habitable rooms ( See 25 CCR § 34). Check in with your tenant to make sure the heater is working adequately. http://www.hcd.ca.gov/codes/state-housing-law/shlstatutes.htm

  1. Water Heater Repair

A water heater check-up may be wise to avoid an emergency repair situation during the colder months. As mentioned in our webinar, the required repair time for a water heater is much shorter than the typical 30 day standard (more like 1-3 days).

  1. Roof inspection

Winter usually means more severe weather, including rain and snow, depending on where in California you are located. Civil Code § 1941.1 requires the unit to have a weather-protected roof. Ensuring that the roof of your rental unit is in good condition by having it inspected could save thousands in future emergency repair costs.

  1. Weather Stripping Unit

Keep your tenants happy by keeping their energy bills down. Inspect windows and doors to make sure they are not allowing cold air inside. Weather stripping the unit helps keep the tenants costs down, and also makes the unit more eco-friendly.

  1. Travel and Frozen Pipes

Advise tenants to keep the heater on, even minimally, if they are travelling for the holidays. When temperatures drop below 30° F, and the heater is left completely off, pipes have the potential to freeze. Keeping the heat on, even on a low setting, could help prevent freezing. The American Red Cross recommends setting the thermostat while you are travelling at no lower than 55° F. (See http://www.redcross.org/get-help/prepare-for-emergencies/types-of-emergencies/winter-storm/frozen-pipes)

{ 0 comments }

In the recent case of Mendez v. Rancho Valencia Resort Partners, LLC, the appellate court analyzed whether certain noise constituted a nuisance.

The Mendezes (“Neighbor”) filed suit, claiming Rancho Valencia’s (“the Resort”) outdoor festivities constituted a private nuisance.  The Trial Court ruled in favor of the Resort, determining the noise levels were not “substantial and unreasonable.”  The Trial Court made a point to highlight the fact that the Neighbor did not make substantial efforts to resolve the issue either directly with the Resort or through the County administrative procedures, putting the Trial Court in a position to “draw a line in the sand” which can oftentimes be a less desirable result.

The Appellate Court affirmed the Trial Court’s decision.  The Appellate Court emphasized that the harm suffered by the Neighbor needed to be “substantial” and “unreasonable…of such nature, duration or amount as to constitute unreasonable interference with the use and enjoyment of the land.”

Thus, whether something constitutes a nuisance is clearly a heavily fact-based inquiry.  The Appellate Court went into a detailed review of the local zoning ordinances, but ultimately, the Appellate Court seemed to defer to the Trial Court’s findings based on its review of the facts and testimony at trial.

Ultimately, this case does not give us any new, bright-line standards.  Instead, it confirms that determining whether something is a nuisance is a heavily fact-dependent analysis that is difficult to forecast.  One judge one day could deem something to be a substantial interference and another judge another day could disagree.  This emphasizes the importance of trying to resolve these type of disputes informally, as some sort of compromised position is much more manageable than losing in an all-or-nothing decision.

{ 0 comments }

This November, Californians will vote on Proposition 64, the “Adult Use of Marijuana Act” which will effectively legalize the recreational use of marijuana to people over age 21.

California’s Marijuana Legalization Initiative enumerates extensive modifications to the state’s Business and Professions Code regarding the registration and licensing of retail marijuana businesses.

It has been a decade since California passed Proposition 215, legalizing the use of medical marijuana at the state level.  Since then, property owners have faced a host of concerns in leasing to medical marijuana businesses.  Marijuana remains illegal under federal law, and the specter of federal seizure remains even in jurisdictions where it is legal at the state level.  Very reasonably so, landlords did not want to run the risk of forfeiture by being tied to drug trafficking.

Additionally, given the high level of risk, marijuana dispensaries paid well above market rates (already expensive in California) to have space.  These businesses are also cash businesses, which meant not only increased security concerns at the property, but also that the landlord and vendors and employees would likely need to be paid in cash.   Banks also then had to file suspicious activity reports for anyone depositing such large sums of cash, which could include the landlord.

To work around these obstacles, marijuana enterprises often needed to buy a building outright and as they were not eligible to borrow from federally insured banks, the businesses often seek private money sources to finance the building.

Most standard form leases are not sufficiently specific to deal with marijuana businesses as tenants.  For one thing, the lease provisions usually do not state the rent payments can be made in cash.  More importantly however, the leases all have a provision that requires the tenant to be in compliance with the law.  This covenant needs to be drafted in such a way to mandate compliance with state law and non-related marijuana federal law.

Will any of these issues change under the passage of Proposition 64? It’s unclear.  The text of the bill is extremely long (full text here: https://www.oag.ca.gov/system/files/initiatives/pdfs/15-0103%20(Marijuana)_1.pdf? )

If passed, most of the bill’s provisions will go into effect in 2018.  One of the key things to watch is legislation at the city level. Section 3(d) of the Adult Use of Marijuana Act allows local governments to ban businesses that deal in the recreational pot business.

{ 1 comment }

Over four years ago, I wrote about the unpublished case of Jacobsen v. Aurora Loan Services (2012).  Jacobsen was a foreclosure investor who had been negotiating with borrower O’Brien.  O’Brien had borrowed $1.24M secured by a deed of trust against the property.  O’Brien’s payments to the lender and loan servicer became sporadic and eventually, O’Brien was in default.  The day before the Trustee’s Sale, O’Brien deeded the property to Jacbosen.

Jacobsen showed up at the foreclosure sale and bid $500.  His bid was not the highest.  Here’s where it gets problematic: as is customary, the loan servicer Aurora likely gave instructions to the foreclosing trustee to credit bid.  Accordingly, Aurora had the “winning” bid at over $1.5M.  However, for some reason, the Trustee’s Deed to Aurora noted a “cash bid”.  That became a disputed fact in the subsequent litigation between Jacobsen and Aurora.

Jacobsen and O’Brien ultimately sued Aurora Loan Services and Cal-Western (the foreclosing trustee) on a variety of theories to try to challenge the sale.  They sued to quiet title, to invalidate the loan documents, and for wrongful foreclosure.  At the trial court level in San Francisco, both sides brought motions for summary judgment.  A motion for summary judgment is essentially a trial on the pleadings and requires that there be no disputed material facts.

At that time, the Federal district court granted the defendants’ motions for summary judgment and to dismiss the case.

Plaintiffs appealed to the Ninth Circuit.  The Ninth Circuit affirmed the lower court’s ruling on the causes of action for quiet title, the loan validity, and cancellation of loan instruments.  However, the Ninth Circuit reversed on the claim of wrongful foreclosure, citing the elements as articulated in the Sciaratta case.  On appeal, the Ninth Circuit concluded that there was sufficient evidence on the record of a material dispute regarding the credit bid and whether the credit bid was proper.  Further, the Plaintiffs needed to prove that they suffered damage from any wrongful foreclosure and the lower court had not addressed this element in its opinion.  On those two grounds, the case was remanded.   Now the parties can continue to litigate at the trial court level on the propriety of Aurora’s credit bid and whether the plaintiffs were actually damaged by Cal-Western and Aurora’s foreclosure sale.

{ 0 comments }

Sholem Perl (“Perl”) owned a duplex in Los Angeles. Perl defaulted on his loan and the property was foreclosed on in 2013. At the foreclosure sale, Eden Place, LLC (“Eden Place”) purchased the property but Perl remained in possession of the property. After buying the house, Eden began the unlawful detainer process and on June 11, 2013, obtained a judgment for possession of the property. Eden Place then sent the Writ of Possession to the sheriff who posted a lockout notice. In an attempt to prevent the eviction, Perl asked the state court for a stay of the proceedings but then failed to comply with the requirements. After failing to obtain a stay from the state court, Perl filed for bankruptcy protection. In the bankruptcy court, Eden Place moved for relief from the automatic stay in order to proceed with the eviction. However, prior to the hearing, the sheriff locked out Perl and completed the eviction. Perl then made a motion to enforce the stay to allow him to stay the property. The court granted Perl’s motion finding that someone in possession of a property has sufficient interest in the property to be protected by the automatic stay. Eden Place then appealed the order to the Bankruptcy Appellate Panel (“BAP”). There, the BAP affirmed the bankruptcy court’s decision. Eden Place once again appealed the decision.

THE DECISION:

In Eden Place, LLC v. Perl (In re: Perl), the U.S. Court of Appeals for the Ninth Circuit reversed the BAP’S decision and held that serving the writ of possession did not violate the automatic stay. The Court held that under California law, a foreclosure terminates the previous owner’s legal interest in the property. More importantly, the Court found that after a judgment in an unlawful detainer proceeding is obtained, the court has adjudicated the rights to possession between the parties to that action. As such, once the owner or landlord obtains the judgment, the tenant no longer has any interest in the property, not even an equitable possessory interest. Without any interest in the property, the landlord does not violate the automatic stay by proceeding with the eviction and trying to regain possession of the property.

WHY THIS DECISION IS IMPORTANT:

This case reverses a number of prior cases that held the opposite. Those previous cases all held that by merely being in possession of the property was sufficient to give the tenant some right in the property that was protected by the automatic stay. The Court went out of its way to note that the previous cases, starting in 2005, came to the wrong conclusion and reversed them. It is also important to note that this case has been appealed to the United States Supreme Court and should be heard in the upcoming term.

{ 0 comments }

Multiple attempts have been made by California legislators in the past several years to limit the growing number of predatory Americans with Disabilities Act (“ADA”) lawsuits in California, whereby landlords and business owners are being sued for ADA accessibility violations. According to U.S. Congressman Ken Calvert, California has 40 percent of the nation’s ADA lawsuits, but only 12 percent of the country’s disabled population. California legislators’ task is difficult, given that they must walk a fine line between limiting the abuse of ADA accessibility claims and ensuring the disabled achieve equality under the law.

Earlier this month, Governor Jerry Brown approved Assembly Bill 2093 (“AB 2093”) in an effort to counter the growing number of suits. AB 2093 is an extension of Senate Bill 1186 (“SB 1186”), passed in 2012, which requires commercial landlords to disclose to prospective tenants whether their property has been inspected by a California Certified Access Specialist (“CASp”). SB 1186 was passed with the intent to initiate the ADA compliance conversation between landlords and prospective tenants.

AB 2093 bolsters SB 1186’s objective by expanding the disclosure requirements for construction-related accessibility. For leases or rental agreements executed after January 1, 2017, the commercial lessor will be required to disclose to a prospective tenant whether or not the property has been inspected by a CASp. Depending on the property’s accessibility inspection history and ADA construction-related compliance, the lessor’s disclosure requirements change.

If the commercial property has been inspected by a CASp, and meets current construction-related accessibility standards, the lessor must provide a copy of the current CASp certificate and inspection report to the prospective tenant. AB 2093 expands SB 1186, by allowing the prospective tenant to obtain a copy of the CASp certificate, rather than merely requiring the lessor to mention the existence of the certificate in the lease. This requirement will provide assurance to prospective tenants that the commercial property is in compliance, and lessen the likelihood of being upended by an ADA lawsuit.

In instances where the commercial property has been inspected by a CASp, but has not been altered or modified to meet ADA requirements, the landlord must provide a copy of the inspection report to the prospective tenant at least 48 hours before the execution of the lease. The 48 hour disclosure period will allow for the prospective tenant to decide whether or not they want to enter into the lease, and should they decide to, to negotiate with the landlord regarding the assignment of responsibility for any necessary repairs. AB 2093 establishes the presumption that repairs necessary due to non-compliance are deemed the responsibility of the landlord, unless contractually agreed to otherwise. This reform encourages commercial property owners and tenants to proactively handle compliance problems, instead of being forced to deal with them as the result of an ADA lawsuit. If the inspection report is not provided, the tenant will then have 72 hours from the date of execution to rescind the lease or rental agreement pursuant to the information contained in the CASp inspection report.

When the commercial property has not been inspected by a CASp to assess accessibility compliance, the lessor must state in the agreement or lease that, upon request by the prospective tenant, the commercial property owner cannot prevent an inspection. Additionally, if an inspection is requested by the prospective tenant, the parties must then mutually agree as to the time and manner of inspection, payment of applicable fees, and the cost of making required repairs.

Many property owners, business owners, and local residents are curious to see how effective this new bill will be. Given that ADA violations result in thousands of dollars in damages to landlords and business owners, the bill should create some incentive to property and business owners alike to proactively combat compliance issues. The bill appears to be effective and equitable on its face, given that it brings awareness to compliance without limiting access. Commercial property owners may also wish to consider a review of their current lease or rental agreement form pursuant to the passing of this bill.

{ 0 comments }

The Basics of Homeowners Association Disputes Part 1 – Mediation

by Simon Offord September 16, 2016 HOA Litigation
Thumbnail image for The Basics of Homeowners Association Disputes Part 1 – Mediation

HOA disputes are something that we see on a regular basis. Although in a perfect world, none of us would get in disputes with our neighbors, the reality is that disputes between neighbors, or the association and an owner, are exceedingly common. However, most HOA CC&Rs have provisions to try and resolve these disputes without […]

Read the full article →

How to Determine Your Primary Residence – Part 2, the Homestead Exemption

by Henry Chuang August 31, 2016 Bankruptcy
Thumbnail image for How to Determine Your Primary Residence – Part 2, the Homestead Exemption

In 2011, Andy Diaz (“Diaz”) lived in a property in Fullerton, CA (“Property”) with his then wife.  In 2011, Diaz suffered severe health problems.  Later in 2011, Diaz and wife divorced.  Due to his health problems, after several months of living in hospitals and therapy facilities, Diaz moved into his mother’s home as he could […]

Read the full article →

Rent-to-Buy Real Estate: Can a Seller File Unlawful Detainer After a Default?

by Ashlee Adkins August 17, 2016 Eviction
Thumbnail image for Rent-to-Buy Real Estate: Can a Seller File Unlawful Detainer After a Default?

The recent case of Taylor v. Nu Digital Marketing, Inc. discusses the issue of when it is appropriate for a seller to regain possession of a property from a buyer by filing an unlawful detainer action. In Taylor, the Plaintiffs (sellers) and Defendant (buyer) entered into an agreement entitled “Contract of Sale Residential Property” in […]

Read the full article →