REAL ESTATE LAW UPDATE: Equitable Easements

From real estate attorney Scout Souders.

New Case Expands The Scope of Equitable Easements in California.

In the case of Hinrichs v. Melton, 2017 DJDAR 4168 (May 3, 2017). The Court of Appeal fashioned an equitable easement despite no preexisting use of the servient owner’s property. This is the first time a preexisting use of the servient owner’s property has been dispensed with. The court determined that because the neighbor’s property needed access and the owner of the servient tenement did not use this portion of his property an equitable easement was in order. [Read more…]

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.


Article courtesy of:

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Real Estate Law Update: New Laws for 2015

1. Security Deposit Electronic Communications.

Effective January 1, 2015, AB 2747 allows a landlord and tenant to agree to use email regarding general security deposit issues. This allows a landlord to use email for some of the requirements of the security deposit including the right to inspect the property prior to termination of Lease. However a security deposit itemization is not included in this provision. Delivery of the itemization must still be by personal service or first class mail. [Read more…]

Real Estate Law Update: 3 Day Notices to Pay Rent or Quit

3 Day Notices to Pay Rent or Quit Must Have Statutory Language to be Valid.

A 3 Day Notice to Pay Rent or Quit which states a person’s name and their phone number along with an email address to a rent payment service is invalid because it does not provide the physical address where the rent can be paid. In the case of Junnita Foster vs. Keith Williams 229 Cal App. 4th Supp 9, the appellate court held that the Judgment for Possession be reversed because the 3 Day Notice was invalid.

Comment: Remember that the 3 Day Notice is the cornerstone of your case. If it is to pay rent or quit only the rent that is past due can be listed the 3 Day Notice. Many times a landlord will incorrectly combine late charges and interest as part of the past due rent. This invalidates the 3 Day Notice. If you want to include late charges you should serve a separate 3 Day Notice to Perform Covenant or Quit regarding the late charges and the interest.

Update provided by Scott Souders, Attorney at Law

Scott Souders is a real estate attorney who has practiced real estate law in excess of 38 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.

Real Estate Law Update re: Co-Tenant Lawsuit Judgements

September 30, 2014 – REAL ESTATE LAW UPDATE

Judgment Against One Co-Tenant Bars Separate Lawsuit Against the Other Co-Tenants.

In the case of DKN Holdings LLC v. Faerber 225 Cal.App.4th 1115, a commercial landlord who owned a shopping center was sued by one of the co-tenants claiming that the landlord misrepresented certain issues regarding the shopping center and/or withheld material information concerning the leasehold premises. The landlord then cross-complained against the tenant who sued him as well as the other two co-tenants. However, before trial, the landlord dismissed the other two co-tenants from the lawsuit. At trial the landlord was awarded 2.8 million against the one co-tenant for breaching the lease.

[Read more…]

Attorney and Client Sanctioned $60,000.00 for Pursuing Frivolous Case

September 2, 2014 – REAL ESTATE LAW UPDATE

Attorney and His Client Were Sanctioned $60,000.00 for Pursuing Frivolous Case Against Seller’s Agent and Brokerage Company.

warning-sign200In the case of Peake vs. Underwood 227 Cal App 41h 428, the 4′ Appellate District (San Diego) decided that no reasonable attorney would have concluded that the purchaser of a residental real property possessed statutory and common law claims against the seller’s agent (Ferrell). Therefore, the plaintiff and plainiff s attorneys claims against the seller’s agent were factually and legally not supported by the evidence and law and warranted sanctions pursuant to CCP 128.7.

In the case, Peake purchased the home from Underwood. After the purchase Peake claimed that she, for the first time, learned that he sub-floor was rotted because her son’s foot went through the floor.

Peake sued the seller of the house (Underwood) and their real estate agent, Paul Ferrell, and Ferrell’s brokerage company claiming Ferrell owed her the affirmative duty to fully and completely disclose all known material defects, failures, and deficiencies. She further alleged that Ferrell failed in his duty to conduct a competent and diligent inspection and to disclose information about the true condition fo the residence including water damage that Ferrell knew or should have known.

The buyer dismissed the Underwoods after learning that Mr. Underwood, who was a professional football player in the NFL, was no longer solvent as he had lost his job and had no further assets.

The buyer then focused its lawsuit against Ferrell and the brokerage company he worked for. Ferrell’s attorney sent the buyer’s attorney several emails explaining that the buyer’s claims were legally and factually deficient because Ferrell, the seller’s agent, did not owe Peake an affirmative duty to disclose unseen defects. Ferrell’s counsel warned plaintiff’s attorney that Ferrell would seek sanctions pursuant to CCP 128.7 if Peake did not dismiss her claims. Despite these warnings, Peake continued on with the lawsuit and merely added new causes of action for fraud and negligent misrepresentation, rather than dismiss the case.

For those of you who are unaware of what CCP 1281 means, it is a code section that provides a trial court with discretionary authority to impose monetary sanctions when a party files a pleading that is factually or legally frivolous. The procedure is to serve the offending attorney and his client with a copy of the motion explaining the basis for imposing sanctions. The attorney then has 21 days to dismiss the case. If the attorney does not dismiss the case within the 21 days then the motion can be filed, which happened in this case.

The trial court and the appellate court determined that no reasonable attorney would have concluded that Peake’s statutory and common law claims against Ferrell were factually and legally supported. In particular, the facts admitted by Peake show that during escrow Ferrell provided Peake with photographs and an expert report disclosing problems with the residence’s sub-flooring, satisfying his legal obligations to the buyer. Having provided this information, Ferrell, who served only as the seller’s listing agent, did not owe the buyer any additional or statutory or common law duties and there is nothing in Ferrell’ s communications that would have misled a reasonable buyer.

Furthermore, the seller’s agent only owes a duty to disclose patent defects that are visible to ones eyes. A sub-floor is a latent defect and is not visible.

Scott Souders is a real estate attorney who has practiced real estate law in excess of 38 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.

ATT: Landlords/URGENT – Call your State Senator re: AB 2416

warning-sign200Assembly Bill 2416 authored by Assemblyman, Mark Stone, passed the Senate Appropriations Committee last week. This bill must be defeated. It would permit certain nonexempt employees to record liens against your real property for alleged unpaid wages from their employers.

For example, employees of any janitorial, security, landscaping, pool service or any other contractors could record liens against your property at which they provided labor and were not paid by the companies that employed them. AB 2416 will impose liability upon and generate litigation against commercial property owners including apartment owners who had no role in the hiring, supervising, or payment of their tenant’s contractor’s workers and who had no idea that the workers were not paid. In many cases, owners will have no way to defend themselves against the claim that someone else’s employee was not paid.

Notably, there is an exemption and AB 2416 is not applicable for labor performed under a collective bargaining agreement. Therefore, labor unions are pushing this law because it would encourage owners to hire companies that are pro-labor.

AB 2416 provides that an unpaid worker must bring an action to enforce his/her recorded lien against your property within 45 days. The bill would enable the property owner to release the lien by obtaining a surety bond. Without a surety release bond, the employee wage lien that is recorded against your property could prevent a sale, refinance, or any other transaction unless the lien is paid off or released.

The process of obtaining release bonds can be time consuming and expensive. Bonding companies usually require cash collateral for 100% of the amount of the bond.

Finally, the more important question is how does an owner defend against this type of case when the owner had no role in hiring, managing, or paying the tenant’s contractor’s employees. How would the owner know that the lien and the employees claim isn’t fraudulent. Particularly, if the “employer” has closed down its business or filed bankruptcy.

This could also cost tenants in commercial buildings and/or propertymanagement companies who manage apartment buildings because the owner could require the tenants in commercial buildings and property management companies for apartment buildings and/or homeowners associations to post additional security for potential unpaid wage claims.

Comment: If you own commercial property or apartment buildings or are a member of a board of directors for a homeowners association that employs a property management company, you should be concerned for the potential ramifications if this bill passes. I would urge all of you in that situation to contact their local Senator and/or Assemblyman and let them know how you feel about this one further attempt to erode property owner’s rights in California.

This law could also be a breeding ground for fraudulent claims used as a shakedown of property owners. Sometimes it is less expensive to pay a bogus claim that is relatively small than to hire a lawyer, post the bond, and litigate a claim for wages in an amount that makes it financially unfeasible to contest. Just another cottage industry to have to worry about.

Scott Souders is a real estate attorney who has practiced real estate law in excess of 38 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.


Real Estate Law Updates: Normal Business Hours / Tenant Insurance Liability

Real estate law update from J. Scott Souders, P.C., Attorney at Law:

For your review are brief summaries of new cases:

1.    Definition of Normal Business Hours Includes Weekend Open Houses

In the case of Dromy vs. Lukovsky 219 Cal App 4th 278, the Appellate Court affirmed a Declaratory Judgment of the trial judge that the definition of “normal business hours” contained within the Residential Lease Agreement and Residential Real Estate Sales Agreement includes necessary weekend open house appointments.

In this case, the tenant was able to tie up the landlord/owner for three years from showing the property for sale on weekends. The tenant lives in Santa Monica [of course he does]. The tenant claimed that he would not allow the landlord’s listing agent to show the house on weekends and would only allow private showings by appointment only. The tenant maintained that Civil Code Section 1954(b) only permitted the landlord to enter the property to show it to purchasers during normal business hours. The tenant, therefore, contended that normal business hours does not include Sundays as defined in state holidays under state law. The landlord filed a Complaint for Declaratory Relief asking the court to declare that in real estate business “normal business hours” includes Saturdays and Sundays. After three years of litigation the appeals court affirmed the trial judge’s ruling that the landlord could have two open houses per month on weekend days between 1:00 p.m. to 4:30 p.m. upon ten days advanced email notice.

Comment: How would you like this tenant? If you are a real estate salesperson and an owner it pays to screen prospective tenants to see if they have a litigious background by checking the plaintiff/defendant index in the counties where the prospective tenant has lived for the past ten years. Particularly in Santa Monica, with rent control, no tenant wants to risk losing comfortable accommodations close to the beach at way below market value.

2.    A Tenant Who Does Not Obtain Property Insurance Contrary to Their Lease Requirements is Not Held in Material Breach of the Lease.

Los Angeles. The tenant was required to maintain personal property insurance by the terms of the written Lease. For whatever reason, the landlord desired to have the tenant evicted. As part of a Three Day Notice to Perform Covenant or Quit, the landlord alleged that the tenant was in violation of the Lease by failing to maintain personal property insurance.

On the stand the tenant admitted that she never obtained personal property insurance and, therefore, was in violation of the Lease Agreement. The trial judge determined that this was not a material breach of the Lease. Therefore, the tenant did not forfeit the Lease and the tenant won the case. There was no evidence, according to the trial judge, that the tenant had any personal property that was worth insuring.

The Court of Appeal affirmed the trial judge’s decision that their was not a material breach. Therefore, the tenant did not lose her tenancy.

Comment: How would you like to have this landlord? It is not enough that the tenant pays rent in a timely manner, but the landlord attempted to use every little claim to evict the tenant. Obviously, the tenant was paying less than market rent or the landlord had some other motive of getting the tenant out. This is particularly true when the matter went all the way up to the Court of Appeal. Big bucks were spent on evicting this tenant to no avail.
Scott Souders is a real estate attorney who has practiced real estate law in excess of 37 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.