REAL ESTATE LAW UPDATE: February 7, 2017

1. California New Employment Law.

Beginning March 1, 2017, any business or place of public accommodation must label any
single user bathroom as “all-gender” under Health and Safety Code 118600. You can no longer label a single user bathroom as “male” or “female”.

Comment: You have got to be kidding me. Can you imagine the cost of new signage for all bathrooms from male/female to all-gender.

2. Employment Contracts Venue and Choice of Law Clauses.

Labor Code Section 925 now voids any provision that requires a California based
employee to litigate or arbitrate his or her claim in the employer’s home state outside of
California. Any employment contract entered into, modified or extended after January 1, 2017, cannot include a venue or choice of law clause. Such provisions are voidable by the employee and if the employee is required to go to court to void those provisions then they are entitled to their attorneys fees. From now on employers are going to have to come to California to litigate or arbitrate employment claims under California law if the employee is based in California.

Comment: This should cut down on lawsuits by the employer against the employee as no employer wants to take the risk of suing an employee in California with the labor laws so tilted in favor of the employee.

3. No Property Taxes Paid Equals No Adverse Possession Claim.

In the case of Nellie Gail Owners Association vs. McMullin (2016) 4 Cal App. 5th 982,
the McMullins purchased a house in Nellie Gail Ranch. In 2008 they applied to make several proposed improvements including an instillation of a new retaining wall that the McMullins claimed bordered an HOA owned park. The HOA denied the application on two separate occasions because the submitted plans did not clearly identify the property lines with a survey between the McMullin’s property and the common area lot/park. Thereafter, the McMullins just submitted one new application that was limited to their pool improvements that included a sports court, a small retaining wall etc.

A year later the McMullins went to the HOA again with another application to install the
previously denied retaining wall allegedly along the boundary line with the HOA park/lot. An HOA employee wrongfully stated that the application for the new retaining wall had been previously approved. Based upon that statement the McMullins somehow obtained a building permit from the City without obtaining any written approval from the HOA that the project had been approved. This is another mistake in the process. This time the mistake was made by the City in issuing the building permit without obtaining written HOA approval.

After discovering the construction of the retaining wall the HOA sent a cease and desist
letter telling the McMullins to stop work on the wall. Unbelievably, the HOA board decided not to pursue the wall as a violation of the CC&Rs and instructed the McMullins to meet with the HOA architect to finalize a landscaping, irrigation and drainage plan to screen the wall that had already been built.

In this comedy of errors in 2010 the City sent a letter to both the McMullins and the
HOA to inform them both that the wall was built entirely on HOA property and not on the
property line as stated by the McMullins. Therefore, the wall did not comply with City code
requirements. The City, the HOA and the McMullins could not reach a resolution concerning the improvements after the HOA owners voted to not sell the captured property by the McMullins (approximately 6,200 sqft.) to the McMullins. This was not just capturing a small area of HOA park/land, but 6,200 sqft of land.

Everyone sued, naturally, and the McMullins sought to Quiet Title of the disputed
property they had taken claiming that they owned the property by adverse possession. The HOA sued the McMullins to Quiet Title on the disputed property and sought a mandatary injunction requiring them to tear down the wall. The trial court entered judgment for the HOA on all claims and granted the mandatary injunction requiring the wall and all other improvements on the HOA property be removed. The McMullins appealed claiming two theories:

1. Equitable Estoppel in relying upon the HOA employee’s statement that they had been
approved and relying upon the City issuing them a building permit.

2. Their fallback argument was that they acquired title by adverse possession.

The Fourth District Court of Appeal affirmed the judge’s decision. The appellate court stated that the McMullins had forfeited the equitable estoppel claims by failing to raise those issues at trial. Moreover, equitable estoppel requires a party asserting the defense to be ignorant of the true facts and to justifiably rely on the conduct or statements of a party who has knowledge of such facts. Here the HOA did not have knowledge of the pertinent facts namely the retaining wall had been built entirely on its property. Additionally, the HOA’s statements instructing the McMullins to consult with their architect occurred after the McMullins had built the wall without HOA approval. Therefore, the McMullins could not have justifiably relied on the HOA’s statements in installing the retaining wall.

The court of appeal also stated that the McMullins failed to establish an adverse
possession claim because they failed to pay property taxes on the disputed property.

Comment: This was an expensive lesson for the McMullins. Not only did they have to pay their attorney to try the case in state court and an appellate attorney to appeal the case, but now they are putting on the party by having to pay the HOA’s attorneys fees to the tune of approximately $190,000.00 plus over $10,000.00 in costs. That is just for the superior court trial. They will get a costs bill as the loser on the appeal as well and they will have to pay for those attorneys fees and costs for the appeal. Ouch!

Scott Souders is a real estate attorney who has practiced real estate law in excess of 40
years in Southern California.

Disclaimer: The Real Estate Law Update cites cases or statutes which are summarized
and should not be relied upon without fully reading the cases or statute in the advance sheets and shepardizing the same and consulting with your own attorney.


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