A Tale of Two Insurance Cases and Their Impact on Property Owners

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Recent California appellate decisions in Gharibian v. Wawanesa General Insurance Company and 11640 Woodbridge Condominium Homeowners’ Association v. Farmers Insurance Exchange offer important insights into how courts interpret property insurance policies when damage occurs. Though both cases involved damage to homes, the courts reached different conclusions regarding the insurers’ obligations, underscoring the significance of specific policy language and the nature of the loss. 

Gharibian v. Wawanesa General Insurance Company: Denial Upheld

Background

Following a wildfire approximately half a mile from their home, Hovik Gharibian and Caroline Minasian’s property was inundated with soot and ash debris. Their home suffered no direct burn damage. The homeowners submitted bids for professional cleaning and were paid over $20,000 by Wawanesa General Insurance Company, though they ultimately cleaned the property themselves. Dissatisfied, they sued Wawanesa for breach of contract and bad faith.

Policy Provision at Issue

The Wawanesa policy covered “direct physical loss to property”.

Court’s Reasoning and Ruling

The Second Appellate District affirmed the trial court’s summary judgment in favor of Wawanesa. The court held that Wawanesa owed no duty to compensate the homeowners for cleaning costs not covered under the policy. Inspectors for both Wawanesa and the homeowners confirmed that while soot and ash were present, neither had caused any physical damage to the property. The soot and ash could be removed by wiping, HEPA vacuuming, and power washing without residual damage. Therefore, there was no evidence supporting a claim for “direct physical loss to property”. 

The court reasoned that because the policy did not cover cleaning services in the absence of direct physical loss, Wawanesa did not breach its policy. The prior payment for cleaning services did not alter the coverage provided under the policy. The court relied on the principle that “direct physical loss or damage to property requires a distinct, demonstrable, physical alteration to property”.

11640 Woodbridge Condominium Homeowners’ Association v. Farmers Insurance Exchange: Denial Reversed

Background

While the 11640 Woodbridge Condominium Homeowners’ Association (HOA) was having its building re-roofed, two rainstorms penetrated the partially constructed roof, leading to extensive interior damage. The roofer had removed approximately 80 percent of the existing roof membrane. The HOA filed a claim under its “all-risks” condominium policy with Farmers Insurance Exchange. Farmers denied the claim, citing policy exclusions for water damage and faulty workmanship, alleging the roofer’s work was negligent.

Policy Provisions at Issue

The “all-risks” policy covered all “direct physical loss of or damage to Covered Property… caused by or resulting from any Covered Cause of Loss,” unless specifically excluded:

  • “Covered Property” included “additions under construction, alterations, and repairs to the building or structure,” if not covered by other insurance.
  • The Water Damage Exclusion stated Farmers would not pay for loss from “Water,” but would pay for interior water damage from rain if “[t]he building or structure first sustains damages by a Covered Cause of Loss to its roof or walls through which the rain enters”.
  • The Faulty Workmanship Exclusion precluded coverage for loss from “[f]aulty, inadequate or defective… workmanship, repair, construction [or] renovation”. However, it included a provision that “if an excluded cause of loss… results in a Covered Cause of Loss,” Farmers “will pay for the loss or damage caused by that Covered Cause of Loss”.

Court’s Reasoning and Ruling

The Second Appellate District reversed the trial court’s summary judgment for Farmers, finding triable issues of material fact:

  • Regarding the Water Damage Exclusion, the court found that a roof under repair remains a “roof” within the policy’s meaning, and the HOA’s property was never without some form of roof. The policy’s inclusion of “alterations and repairs” as “Covered Property” supported this. The court reasoned that damage to the roof (potentially triggering the exception to the water exclusion) could result from the reroofing process itself or from weather acting on the incomplete roof, especially as the policy did not exclude losses from deliberate (non-faulty) re-roofing work.
  • Concerning the Faulty Workmanship Exclusion, while the court agreed “workmanship” can refer to both process and product, Farmers had not established that the roofer’s alleged negligence was the sole cause of the HOA’s damages. Evidence suggested wind and rain also contributed to damaging the exposed roof layers. Farmers failed to prove that even with non-negligent work, no rain damage would have occurred. The ensuing loss provision could also allow coverage.

Comparative Analysis: Why the Different Outcomes?

The divergent outcomes in Gharibian and Woodbridge stem from several key distinctions:

Nature of the “Loss”:

  • In Gharibian, the central issue was whether the presence of soot and ash, which could be cleaned without leaving lasting physical alteration, constituted a “direct physical loss”. The court found it did not.
  • In Woodbridge, the interior water damage was undeniably a “physical loss”. The dispute was whether specific policy exclusions applied to negate coverage for this loss that occurred during active repairs.

Policy Language and Type:

  • Gharibian involved a policy requiring “direct physical loss to property”. The insured had the initial burden to demonstrate that their claim fell within this basic scope of coverage. They failed to show a “distinct, demonstrable, physical alteration”.
  • Woodbridge concerned an “all-risks” policy, which covers all risks of direct physical loss unless specifically excluded. Under such policies, the burden shifts to the insurer to prove that a specific exclusion applies. Farmers did not definitively establish that its relied-upon exclusions entirely precluded coverage.

Causation and Application of Exclusions:

  • In Gharibian, because there was no initial covered “physical loss,” the analysis did not heavily focus on exclusions. The cleaning costs themselves were not a covered type of damage.
  • In Woodbridge, the cause of the clear water damage was paramount. The court found triable issues regarding whether the water damage exclusion or the faulty workmanship exclusion applied. The policy covered “alterations and repairs”, and the court found it plausible that damage to the “roof” (even an incomplete one) during such covered work could trigger the exception to the water damage exclusion. Furthermore, the faulty workmanship was not proven to be the sole cause of the loss.

Condition of the Property:

  • The Gharibian property was an intact home affected by external contaminants.
  • The Woodbridge property was actively undergoing significant, intentional alteration (re-roofing), a state explicitly contemplated as covered under “alterations and repairs”. This made the structure inherently more vulnerable, a factor the policy appeared to address.

Implications for Property Owner Clients

These rulings provide valuable takeaways for property owners:

Regarding Gharibian v. Wawanesa:

  • For coverage under policies requiring “direct physical loss,” the mere presence of contaminants like smoke, soot, or ash may not be sufficient if they do not cause a distinct, demonstrable physical alteration or damage to the property itself and can be removed by cleaning without residual harm.
  • Property owners should meticulously document any actual physical changes or damage to their property, not just the need for cleaning or remediation of contaminants.
  • An insurer’s voluntary payment for certain costs (like Wawanesa’s initial payment for cleaning) does not necessarily mean the underlying loss is covered by the policy or expand coverage beyond the policy’s terms.

Regarding Woodbridge HOA v. Farmers:

  • This case is generally favorable for property owners undertaking repairs or renovations, particularly under “all-risks” policies. It affirms that a structure undergoing significant work, such as re-roofing, can still be considered to have a “roof” for policy purposes. Damage occurring during such active work is not automatically outside the scope of coverage.
  • Exclusions for faulty workmanship may not bar coverage if the contractor’s negligence is not proven to be the sole cause of the loss, or if the faulty work leads to a separate “Covered Cause of Loss” (often termed an “ensuing loss”). The insurer bears the burden of proving the exclusion applies and negates all coverage.
  • Policy language explicitly including “additions under construction, alterations, and repairs to the building or structure” as “Covered Property” can be vital in securing coverage for incidents during vulnerable construction periods.
  • This decision highlights the broader protection potentially afforded by “all-risks” policies, where the onus is on the insurer to clearly exclude a cause of loss. If an all-risks policy does not specifically exclude damage that occurs due to deliberate, non-faulty work undertaken during repairs, coverage may be more likely.

Policy Terms and Loss Specifics: The Main Determinants in Coverage Disputes

The Gharibian and Woodbridge decisions demonstrate that the outcome of an insurance claim dispute often hinges on the specific wording of the insurance policy and the precise factual circumstances of the loss. Property owners should be aware that “direct physical loss” typically requires some form of tangible alteration. However, when undertaking repairs or construction, especially with an “all-risks” policy that contemplates such work, coverage for resulting damage may be available even if contractor work is a factor, unless an exclusion clearly and fully applies. Careful review of policy terms, particularly definitions of covered property and exclusions, remains vitally important.

Blaylock v. DMP 250 Newport Center LLC: California Court Affirms Defense Judgment in Crawl Space Injury Case

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Background

In a closely watched decision issued in May 2023, the California Court of Appeal examined the merits of the concealed hazard exception to the Privette doctrine in the context of a workplace injury lawsuit. The court affirmed a defense judgment in favor of a property owner who had been sued by an HVAC technician injured after falling through an access panel in a commercial building’s crawl space. Travis Blaylock v. DMP 250 Newport Center, LLC, et al. demonstrates the heavy burden plaintiffs must meet under Privette to hold landowners liable for on-the-job injuries suffered by contractors’ employees.

The plaintiff, Travis Blaylock, was a project manager for Air Control Systems, Inc. (ACS), an HVAC contractor in southern California. In October 2018, Blaylock suffered serious injuries after falling approximately 10 feet through a plywood access panel while working in a cramped plenum crawl space at an office building in Newport Beach, California owned by DMP 250 Newport Center, LLC and managed by DMP Management, LLC (together, DMP). Blaylock had been dispatched to the crawl space to investigate an airflow issue for one of DMP’s tenants.

Blaylock accessed the crawl space through a door on the roof. He was using his cell phone flashlight to illuminate the dark, confined space between the roof and ceiling where the building’s HVAC ductwork was located. As Blaylock traversed the area, he stepped onto what appeared to be a plywood panel flush with the other sections of plywood covering parts of the crawl space “floor.” 

In actuality, the panel was covering an opening that provided access to the crawl space from a storage room one story below. Unaware that the panel was not meant to bear weight, Blaylock plunged through the opening and crashed onto the floor of the storage room, suffering severe injuries.

After his fall, it became clear the access panel was intended to allow entry into the crawl space from the storage area. Importantly, DMP had no involvement in the original design or construction of the building and denied having any knowledge of the panel or its hazardous nature. DMP only became aware of the access point because of Blaylock’s accident.

Blaylock sued DMP for premises liability and negligence, alleging the unmarked access panel constituted a concealed hazard. DMP moved for summary judgment, arguing that under California’s Privette doctrine, it could not be held liable for Blaylock’s on-the-job injury because he was working for an independent contractor over whom DMP exercised no control.

The trial court agreed and granted summary judgment in DMP’s favor, finding no triable issues as to the concealed hazard exception set forth in Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659. Blaylock appealed.

The court of appeal affirmed, holding that Blaylock failed to demonstrate a triable issue because even if DMP should have known the access panel existed (based on its potential visibility from the storage room below), there was no evidence DMP actually knew or should have known the panel presented a hazard to HVAC workers inside the crawl space. The court reiterated the principle that under Privette, a landowner implicitly delegates responsibility for job safety to an independent contractor.

It is important to note that the court rejected Blaylock’s assertion that the inadequate lighting in the crawl space rendered the access panel a concealed hazard. The court stated it was incumbent on ACS, not DMP, to ensure proper illumination within the workspace. Further, had ACS workers conducted a reasonable inspection of the crawl space, they would have recognized that the access panel was unsafe to walk on since it was affixed to the bottom of the ceiling joists rather than resting atop them like the other sections of plywood flooring.

By holding that DMP had no actual or constructive knowledge of the hazardous condition from the perspective of those working in the crawl space, the Court underscored that when applying the concealed hazard exception, the property owner’s knowledge is paramount. The contractor’s ability to discover the danger through inspection is a secondary consideration.

Key Takeaways

  • The Blaylock case involves a workplace injury lawsuit brought by an HVAC technician who was injured after falling through an access panel in a crawl space while servicing an air conditioning system.
  • The court applied the Privette doctrine, which limits a property owner’s liability for on-the-job injuries sustained by employees of an independent contractor. Under this doctrine, the property owner is not liable if they do not retain control over the work.
  • There is an exception to the Privette doctrine when the property owner knows or should know of a concealed hazardous condition that the contractor does not know about and cannot reasonably discover.
  • The court found the access panel was not a concealed hazard because the lighting conditions were the contractor’s responsibility, and a reasonable inspection by the contractor would have revealed the unsafe nature of the panel.
  • The property owner did not know nor have reason to know the panel presented a hazard to the contractor’s employees. Therefore, the exception did not apply and the Privette doctrine shielded the property owner from liability.
  • The key issues were the defendant’s knowledge of the hazardous condition and whether it was concealed from the contractor. Since there was no evidence on these issues, summary judgment for the defendant was affirmed.

Summary

The Blaylock decision demonstrates that under California’s Privette doctrine, a property owner is generally not liable for injuries suffered by a contractor’s employee on a worksite unless the owner concealed a known hazardous condition. This premises liability case illustrates that to overcome the Privette rule of nonliability, an injured plaintiff must show the property owner actually knew of a hidden danger that the contractor could not have reasonably discovered through inspection.

Empty Commercial Space: Protecting Your Commercial Building During a Temporary Vacancy

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For commercial real estate landlords and business owners, there are several reasons why a commercial property may remain closed for extended periods of time. Your storefront may be lying vacant for a new renter. Shutters can remain down for weeks or months when large-scale renovations are going on. Vacant commercial properties plagued the United States even before the pandemic.

As an owner, you don’t just endure a loss of income when your property is lying vacant, but also an increased risk of garbage dumping, illegal squatting, and metal theft. Landlords should take a proactive approach to protect their property by employing different measures. An experienced real estate attorney can help you better assess the various risks and take the right steps toward protecting your vacant commercial property.

Stay on Top of Insurance and Mortgage Obligations

When a property is let out, the tenant usually remains responsible for maintaining the occupied areas. The rent received is usually used towards paying for the insurance and repairing any parts not included within the lease. All of these costs fall on the landlords in the absence of a tenant.

There is a real danger that the building may deteriorate unless you take active steps to keep the building secure and in good shape. You should check the terms of your insurance policy. Don’t forget to go through the mortgage agreement to keep on top of things. A seasoned real estate attorney may be able to help you identify specific exclusions and conditions that apply if the property is unoccupied.

Changes in Business Rates

The financial impact becomes worse if a commercial property is allowed to remain empty for more than three months. You may become liable for empty property taxes. In 2022, the City Council approved the Santa Cruz Empty Home Tax to ease the pressure on the housing market. Homes lying vacant for more than 8 months are now taxed.

While this rule doesn’t apply to commercial properties, you should still speak with a seasoned real estate attorney in your area to understand the costs you will be liable for. Many commercial property owners resort to letting out their property to companies to avoid empty rates from becoming due.

There are specific benefits and drawbacks to the different strategies for avoiding empty property rates. You should speak with a skilled real estate attorney to learn more about all available alternatives.

Illegal Use of Premises and Squatters

Empty commercial property is highly attractive to squatters since the government has made it illegal to squat in a residential building. As an owner, you will need to employ formal legal proceedings to get the squatters out. This can be a time-consuming and costly affair.

Another main risk of allowing a commercial property to remain vacant is that it may be used for illegal purposes. This can be by squatters or on a more casual basis. Owners can become liable even if no crimes are being committed. For instance, if neighbors report the property as a nuisance, you may need to hire an experienced real estate attorney to take the necessary steps for avoiding liability.

Alternative Options to Leaving Your Commercial Property Lying Vacant

Typically, commercial property is used for business purposes in offices, industrial, retail, amusement, and lodging. The expected vacancy rates for commercial offices in the United States are between 15 – 20%. You need to take the necessary steps for protecting your unoccupied and vacant building spaces. There are several possibilities for putting an empty building to good use.

There is a trend for pop-up events and businesses. This means that there are several companies and individuals out there looking for short-term occupancies. These are known as ‘meanwhile’ leases. You can reach out to local organizations, including charities for leasing out the building for short-term exhibitions and events. You can also turn the empty and neglected space into a vibrant community area.

Every short-term occupation should be properly documented. This way you can get the property back when a long-term tenant shows interest. Your real estate attorney will walk you through the necessary paperwork that needs to be completed.

Vulnerable properties should also carry adequate property insurance. A knowledgeable real estate attorney can help you determine the right amount of insurance for your property. The tiniest mistake in maintaining or securing a commercial property can result in costly lawsuits and damages. This can be harmful to your reputation. Vacant properties, even if they remain empty for a short period, are especially vulnerable.

You need to obtain adequate insurance for your peace of mind and protection. Make sure you speak with a qualified real estate attorney to get the insurance coverage you require.

Request a Consultation from Our Seasoned Real Estate Litigation Attorneys

The knowledgeable real estate litigation attorneys at Peterson, Martin & Reynolds, LLP are determined to protect your commercial property during a vacancy period and will do everything possible to resolve any legal disputes in the most effective manner. If litigation is necessary, we are seasoned professionals who know how to win inside the courtroom.

To set up your confidential consultation with a member of our legal team, call (415) 399-2900 or reach us online.

 

Real Estate Law and Boundary Disputes: Tips for Resolving Conflicts with Neighboring Property Owners

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Conflicting boundaries leading to land disputes are a common occurrence in California. These conflicts usually occur when there is a change in property ownership. You should get professional help to identify and formalize exact boundary lines. Boundary disputes are best resolved through legal representation. An experienced real estate attorney familiar with California laws and boundary disputes can evaluate your current situation and create the right strategy for resolving any issues you may be facing.

Here are a few useful tips when you are seeking a resolution of boundary disputes with neighboring property owners:

  1. Request for a Property Survey

Typically, boundary disputes arise when one party thinks that the other one is encroaching on their land. You should have a surveyor mark the official boundary line during a general property survey. The surveyor can plot various features, such as fences, trees, elevations, and other physical markers.

In fact, calling a surveyor is a great idea if you are looking to make changes to your property, such as planting trees or putting up a fence. In some cases, surveys won’t be possible. This is because the wording of the deed or neighbors may make it too difficult for determining the actual boundary. Consult with an experienced real estate attorney in these situations.

The attorney may be able to use a quiet title lawsuit for getting a judge to determine the boundary line. However, a quiet title lawsuit is more expensive than a regular property survey. A competent attorney will usually keep this as the last option after exploring other inexpensive ways of allocating boundary lines.

  1. Sign a Written Agreement with Your Neighbor

Sometimes, open communication and productive discussions with your neighbors can help you solve complicated disputes. You should always sign a written agreement with your neighbor outlining who owns what. Speak to a qualified real estate attorney to ensure the agreement is worded properly. This document should also include contingencies for boundary line modifications, encroachments, and other situations.

  1. Consider Mediation and Alternative Dispute Resolution

If you and your neighbors cannot arrive at an agreement on your own, an experienced attorney can act as a mediator. Your attorney can also file for alternative dispute resolution (ADR.) This is an impartial and inexpensive way of coming to a satisfactory solution. Mediators usually help in resolving boundary conflicts and any other disputes that may arise in a timely manner.

You can attend the mediation meetings on your own or ask an attorney to remain present with you. It is best to attend mediation sessions with all necessary evidence and documents that help in supporting your claim. Two main benefits of mediation over litigation are that they are less expensive and any decision made is non-imposable. This means that if you don’t approve of the decision, you can take the matter to court. You don’t have to accept a decision until you know for a fact that it is your best alternative.

  1. File a Lawsuit

Real estate litigation may become necessary for resolving a boundary dispute. This can be a time-consuming and expensive course of action. However, a skilled attorney may be able to strategize and take the necessary steps for obtaining a favorable outcome quickly. You can improve the likelihood of getting a favorable outcome by gathering relevant evidence that supports your claim, such as a map, photos, and witness testimonies.

The judge will hear both sides and look at the original deeds, land survey, and other evidence for determining the property line. Having an attorney on your side can help you protect your legal rights and make sure that you get the best possible outcome.

Consult with an Experienced Boundary Disputes Attorney

If you are involved in a boundary dispute with your neighbor, you should speak with an experienced real estate litigation attorney. Your attorney may be able to prevent lengthy arguments and expensive court battles by negotiating with your neighbors. Your attorney will also argue on your behalf to persuade the other party. In boundary disputes, having an attorney is usually the best shot at getting the outcome you desire.

Boundary disputes are complicated. You can resolve yours amicably and quickly with foresight and patience. You need to understand that your neighbors may have a valid claim depending on the circumstances. It always pays off to invest in creative solutions that become a win-win for everyone involved. Real estate attorneys have the necessary knowledge and experience needed to prepare a solid lawsuit that works in their client’s favor.

Our Reputable Northern California Real Estate Lawyers can Protect Your Property Rights

If you are currently dealing with a real estate boundary dispute, you should speak to the experienced attorneys at Peterson, Martin & Reynolds LLP. Our attorneys have substantial experience in all types of real estate disputes and will offer the best legal solutions to resolve the issues while protecting your property rights at all times. Schedule a consultation with our lawyers today. Call us at (415) 399-2900 or contact us online.

 

Real Estate Law and Construction Defects: How To Protect Your Rights As A Homeowner

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Your home is probably the most valuable asset and investment you have. But sometimes for first-time homebuyers, the dream of owning a house can quickly turn into a nightmare because of construction defects. In extreme cases, defects can be serious enough for a family to abandon the property altogether. There is a shocking rise in construction defects as developers hurry through things in order to meet the growing housing demand.

You should speak with a dedicated construction defects attorney to recover financial compensation for any hardships related to construction defects, whether in a new property or renovation of an existing house.

Types of Construction Defects in California

Construction defects laws are in place for protecting homeowners. They cover a wide range of issues, such as code violations, faulty designs, cracked foundations, and unsafe structures. These are a few common types of construction defects:

Design deficiencies

These result from the work of engineering and design professionals, such as architects and structural engineers. Design deficiencies arise when professionals end up making errors or fail to respect applicable professional standards and building codes. For instance, if a roof is not designed as per applicable engineering standards and building codes, it can lead to inadequate support and water intrusion.

Material deficiencies

This includes the use of improper and defective building materials. For instance, the construction plan may be based on using a particular grade of wood for providing strength to the structure. Based on this, the contractors substitute it for a different grade when it’s time to build the element. Certain materials required for the structure may get damaged during transit, which is overlooked by the building contractor. A malfunction may occur in this situation because of the defective material.

Construction deficiencies

These are the result of poor workmanship during the construction of a building. Deficiencies in construction can lead to dry rot, cracked foundations, plumbing problems, electrical problems, and pest infestation.

Subsurface deficiencies

Deficiencies may occur in the preparation of the subsurface. This happens when soil conditions are not suitable for the structure, causing it to become unstable. Building on unstable subsurface can result in the development of cracks in walls, floors, and the foundation of a structure.

Most construction defects occur because the construction industry is highly competitive with many companies trying to offer the lowest bids for contracts. They salvage profits by employing unqualified workers, cutting corners, and poorly supervising subcontractors. If you are an unsuspecting homeowner that is left to foot the bill for these practices, get in touch with an experienced construction accident attorney today.

File a Builder’s Warranty Claim to Recover Costs

If the damaged or defective item in your house is covered under the builder’s warranty, you may be able to recover costs by filing a claim. Many warranties need homeowners to send a written notification to the builder. Sending your request in writing is always a good idea since it leaves you with the available evidence.

Make sure to keep notes of every conversation you have with the builder along with relevant dates. Your attorney may use this to prove that the builder failed in taking any remedial action. It’s essential that you act quickly. In some cases, all it takes is to alert the builder of problems within the warranty period.

You may want to consult an attorney since some warranties can be cleverly written to allow the builder to string a house owner along and delay making repairs. Never bring in outside contractors to take care of the issue. This may result in you losing the warranty benefits.

Causes of Action in a Construction Defect

You can file legal action if your house has a construction defect and you have suffered damages because of it. Besides, the legal claims you can bring against the property developer depend on a number of things, including the type and extent of damages. There are several different types of legal actions for construction defects. These are:

  • Negligence
  • Breach of contract
  • Implied and expressed warranty issues
  • Professional negligence against a design professional
  • Breach of a homeowner association’s declaration or covenants, conditions, and restrictions (CC&Rs)

An experienced construction litigation attorney will be able to help you determine the right type of legal action to take for your particular construction defect.

Remedies for Construction Defects in California

There are different types of costs you can recover by winning a lawsuit for construction defects. These depend a lot on your circumstances. The remedies for construction defects are usually limited to the following categories:

  • Diminution of the value of property
  • Cost to repair the defects
  • Loss of the use of property
  • Legal fees
  • Recovery for litigation expenses
  • Inconvenience losses if you have to move out for repairs

Our Trusted Construction Defects Lawyers Can Provide Strong Legal Advice and Support

At Peterson, Martin & Reynolds LLP, we will thoroughly investigate your construction defect claim, hire engineering or construction experts as necessary, and prove the liability of the builder or contractor. Our attorneys are skilled in handling the most challenging construction or renovation defect cases. To schedule a consultation, call us at (415) 399-2900 or fill out this online contact form.

 

Common Legal Issues That Occur During the Sale of A Property

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There are certain legal issues all homeowners should know of regarding the sale of a house. Sellers are often faced with multiple legal issues and risks when selling a house to a potential homebuyer. You may lose an opportunity to sell because of payment delays or failed commitment from the buyer or sometimes end up getting sued for damages if you have violated the terms of the contract. A strong real estate litigation attorney can make sure you avoid the myriad pitfalls related to selling a house.

Home Sellers Need to Disclose All Facts About the Property

California law states that home sellers are required to disclose any fact that may potentially impact the desirability of a property. As per California Civil Code § 1102, any details that may affect a potential buyer’s willingness to pay or desire to purchase the property should be intimated in writing.

These important facts are known as “material facts.” Any seller that fails in disclosing these facts can face severe consequences. As a rule, you should disclose any item that you are unsure of. Your real estate attorney will ask you to complete a Transfer Disclosure Statement to disclose these material facts.

Deliver a Clear Title at Closing

If you paid off your mortgage or satisfied a judgment without filing the necessary documents with the county clerk, their office will not reflect it. When a title search will be conducted by the buyer before closing, it will show the mortgage as a lien. Any judgment on the property will also come up. Clearing this may delay the closing or take time.

You should provide all necessary documents to the attorney you hire for handling the sale of your house. This includes copies of the title and deed you receive when you acquired it. Your attorney will identify and address any potential title issues before they delay the closing.

Home Sellers May Need to Pay for Buyer’s Title Insurance

In California, home sellers are usually required to use a title company. The company will perform a title search and provide a Preliminary Title Report or PTR. The title company will consider the PTR to provide title insurance to the buyer. Lenders usually require title insurance for funding the buyer’s loan.

The title company and insurance provider are usually selected by both sellers and buyers. In most cases, the company is suggested by the house buyer in the initial offer. The real Estate Settlement Procedures Act (RESPA) is a federal act that prohibits a house seller from making the buyer use a particular title insurance company. You cannot make this a condition of the transaction.

Stemming from this, you can negotiate with the buyer about who pays for the title insurance. In most cases, the seller is required to pay for the title insurance in Southern California. Furthermore, in Northern California, local custom suggests that the buyer pay for the title insurance. Your real estate agent will help you negotiate a fair deal.

Payment of Transfer Tax

Before real estate gets transferred to the buyer, it needs to be informed to the county recorder’s office. This document shows that the property has changed ownership. Transfer tax gets imposed at the time the document is recorded. The payment of transfer tax is negotiable. As per industry standards, the buyer pays this tax in Northern California while the seller foots the bill in Southern California.

Attorneys Can Ensure the Sales Agreement Protects You

You should never sign a sales agreement with a buyer before having your attorney review it. Sales agreements that are prepared by brokers and real estate agents are legally enforceable contracts. You should not sign one until it has been explained and reviewed by your lawyer.

These are a few terms of the sales agreement that you should be careful about:

  • Sellers should make sure the time agreed to obtain a mortgage is listed within the sales agreement. This is if the sale relies on the buyer obtaining a mortgage. You may want to word the document to encourage the buyer to apply for a loan promptly and cooperate with lender requests for documentation.
  • Make sure the closing date is as per your needs. This can be important for sellers that are looking to replace the house by buying a new one. The closing dates of the transactions may need to be coordinated to complete the purchase on time.
  • In many cases, a buyer needs to sell their existing house to complete the purchase with a seller. You should have your attorney review the sales agreement to avoid any language that makes the sale contingent on the buyer being able to sell their property.

Talk to a Skilled and Knowledgeable Real Estate Litigation Attorney – Book a Consultation Today

The experienced attorneys at Peterson, Martin & Reynolds LLP can help you resolve disputes related to real estate sales and purchases. Our attorneys have decades of experience in helping clients obtain the most favorable outcomes in residential and commercial property disputes.

Schedule your confidential case review with our lawyers today. Call us at (415) 399-2900 or contact us online.

Understanding Real Estate Legal Matters Within Trust Administration

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Many estate and trust disputes in California involve the allocation of real property or real estate among multiple beneficiaries. A trustee usually has the discretion to sell real estate and distribute the proceeds to all beneficiaries in equal shares. They may also allocate the property to one or more beneficiaries if there are no objections to the proposed distribution. But without an experienced real estate attorney on your side, trust and probate administration may hit a litigious wall.

Allocation of Assets

If a real estate parcel gets distributed on a pro-rata basis among two siblings, both will get 50% undivided interest in the property if they have an equal remainder share through the trust. This is commonly treated as a tenant in common. In the case of a pure pro-rata distribution of assets, both siblings would get equal interest in the real assets distributed through the trust. Any administrative expenses would be paid first though.

A pro-rata distribution can be rife with conflict. Tenants in common share an equal right to property but may not be able to allocate the use. For instance, which sibling gets Christmas week?

Non-pro rata distribution is the other form of asset allocation. The beneficiaries will receive a proportional share in the total value of assets instead of getting an equal interest.

The sibling that wants the real estate may receive it and the other sibling may get its corresponding value without asset co-ownership. As per California Probate Code section 16246, trustees can choose the manner in which they distribute assets.

Dealing With Divided Interest in Property

The property can transfer to more than a single beneficiary with equal interests in the property. This may seem fair to the transferring party but can give rise to several litigation issues. Problems can quickly arise when the beneficiaries fail to see eye to eye on the disposal of the property. The true owner of the property is not apparent in these cases since everyone owns an equal share.

For instance, if three siblings inherit the family house with only one sibling wanting to sell, they may file a partition action. This is usually when the other two siblings either don’t want to sell their shares or don’t have the money to purchase the third sibling’s share. The third sibling can move the court for forcing the sale of the property to cash out their interest.

Title Transfer Not Made to the Trust

In some cases, a parent will not transfer the title to the trust. Instead, they may transfer the title to a property to one of the children as joint tenants with survivorship rights to avoid probate. In this case, a big problem may arise if there is a trust stating that the property needs to be transferred to all children equally.

The child that has their name on the title as a joint tenant may not want to share the property and may argue that the property was a gift outside the trust. The matter will be tried to be resolved informally through negotiations or mediation among the parties. If no resolution is reached, the trustee or executor asserting the right to property in the name of the trust will need to file an 850 petition in probate court.

This is to have the property transferred back to the trust and redistributed as per the terms of the trust documents among all children. Such matters can become full-blown lawsuits requiring discovery and a trial to determine rightful owners. The action is usually taken by a trustee for protecting the estate assets and bringing them back into the estate.

Estate litigation can become costly, and the trustee usually has the benefit of using estate assets for pursuing a lawsuit. In case the matter remains unresolved and leads to a lengthy lawsuit, the use of assets by the trustee will leave less money in the estate to be distributed. If the problem is not resolved early on, it can become a lose-lose situation for all involved parties.

Real Estate Inheritance Attorneys Can Resolve Legal Issues

Real estate distribution is not always seamless among family members. Inheritance disputes usually revolve around the allocation of property and money. These are a few common issues that an inheritance attorney may work to resolve:

  • Perceived inequity of allocation: Significant changes right before an individual’s death can be a concern. The same holds true for massively different inheritances among the beneficiaries.
  • Wrongful acts: Beneficiaries can always raise doubts about undue influence surrounding the trust.
  • Intention: An experienced real estate inheritance dispute attorney can assess the intentions of the deceased and present it to the court to ensure your loved one’s wishes are honored.

Talk to a Skilled and Knowledgeable Real Estate Attorney Today

At Peterson, Martin & Reynolds LLP, our attorneys have decades of combined experience in working with family members within the court systems to obtain the inheritance they deserve. We are dedicated to helping you receive fair treatment.

Call us at (415) 399-2900 or reach us online for a comprehensive case evaluation.

 

Types Of Co-Ownership in California

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Co-tenancy or co-ownership is largely an umbrella term used to describe ownership among multiple owners holding undivided interests in a real estate property. California law recognizes four distinct types of co-ownerships. An experienced real estate attorney can help you understand the different types of co-ownerships and identify the most suitable type for your interests.

Tenancy in Common

This is a form of co-ownership in which an interest in the property is owned by several persons that are not in a partnership or joint ownership. A tenancy in common is usually the default form of co-ownership as considered by courts. Tenants can own varying shares of property in a tenancy in common. Moreover, all co-owners enjoy an equal right to the entire property.

In the event of a co-owner’s death, their interest may get transferred through probate or some other proceeding. It’s critical to understand that the right of survivorship is not applicable to tenancy in common. In addition, tenants may also transfer their interests without affecting ownership interests or severing the tenancy in common.

Joint Tenancy

In this type of co-ownership, the interest in the property is owned by 2 or more people equally. Joint tenancy is created through a single will or transfer by expressly declaring it in the will. It can also be transferred from sole owners to others or from tenants in common to joint tenants.

Other forms of joint tenancy involve the transfer of interest from spouses that hold the title as community property. Joint tenancy rights can be granted to trustees or executors. In personal property, joint tenancy can be created by written transfer, agreement, or an instrument.

As per Weak v. Weak (1962) 202 Cal.App.2d 632, 638, “[W]here…the deed reflects joint tenancy interests, there is ‘a prima facie case that the property is actually owned in joint tenancy. There is a presumption that ownership is as stated in the deed and the burden is upon the party who seeks to rebut the presumption.’”

Estate of Propst (1990) 50 Cal.3d 448, 455 states that the principal characteristic of a joint tenancy is that it allows the right of survivorship. Joint tenancy can be created through the transfer of a single instrument that allows each joint tenant with an equal share of the property.

All parties to a joint tenancy enjoy equal rights to use the property. They also enjoy a “right of survivorship.” This means that if a party dies, their ownership rights get passed on to surviving co-owners.

If a joint tenant dies, their estate automatically belongs to the surviving tenants. This can prove to be useful in avoiding the time-consuming and expensive probate process.

You can pass on your tenancy share even without having a will in place. In addition, joint owners can transfer their interest whenever they want. Taking this into account, this action would sever the joint tenancy. It will automatically convert the joint tenancy to tenancy in common.

Tenancy in Partnership

A partnership interest is owned by multiple people for the same purposes. Tenancy in partnership refers to a type of co-ownership where the title to a property is owned by the partnership instead of an individual.

All partners in a tenancy partnership possess undivided interests in real estate. They are not allowed to transfer their interests to anyone outside the partnership.

The partner is not a co-owner of the partnership property. The partner does not have a right to transfer their interests in the partnership property. This is whether they want to transfer the interests voluntarily or involuntarily. A seasoned real estate attorney can help you attain a better understanding of tenancy in partnership and also draw up the paperwork so that your interests remain protected.

Community Property

This is a type of co-ownership in which the property is only available to a married couple. Both spouses have an equal share in the assets and debts that are acquired during the course of the marriage. The couple holds individual interest in the community property.

As per California law, property acquired by a couple during the course of their marriage, whether held in joint tenancy, tenancy in common, tenancy by the entirety, or community property, is always presumed to be community property for the purpose of property division in the event of dissolution of marriage or legal separation.

Partition Action for Dealing with Co-Ownership Disputes in California

Disputes can arise at any point in time between co-owners leaving them dissatisfied with their current ownership arrangement. Individuals with a joint tenancy or tenancy in common may choose to end their co-ownership forcefully through a partition action.

Partition action can be started by any party to a co-ownership. Furthermore, it’s not an available option for the option of quasi-community property, quasi-marital interest in the property, and community property. This falls under the purview of family law.

Legal Help is Here from Highly-Rated Real Estate Attorneys in California

At Peterson, Martin & Reynolds LLP, our experienced Northern California real estate attorneys can help you put an end to your co-ownership relationship. To set up a consultation, call us at (415) 399-2900 or reach us online.

 

What Is a Partition Action in California?

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Partition actions involve court-ordered divisions of property. It is usually started when co-owners cannot come to an agreement regarding the property. The subject property is typically sold in a partition action with the proceeds equitably distributed.

Who Can File a Partition Action in California?

Partition actions, also known as petitions for partition, require a disagreement between at least two co-owners. Typically, the disagreement is whether the property can be sold or not. As per California law, any co-owner can file a partition action.

These are the common types of parties to partition actions:

  • Romantic partners: Romantically involved co-owners may want to bring an action if they are no longer together and cannot agree on what to do with the co-owned property. In essence, the action, in this case, is the non-married version of the division of property in a divorce.
  • Family: Co-owners can be family members that either purchased the property together or inherited it through estate planning. Co-owners that don’t live on the property and receive no benefits usually seek to force a partition action.
  • Friends: Platonic friends can purchase property together as well. Reliable friends can prove to be instrumental in securing loans and contributing towards mortgage payments for a property that could not have been acquired on your own. In relation to this, there may be a forced sale of the property if one friend wants to sell their share while the others do not.
  • Post-divorced couples: Ex-spouses can use a partition action to solve their co-ownership problems. If the divorce is not finalized, any property owned by the spouses is considered community property, which falls under the purview of family law.

The one basic requirement for partition action is that the property should be co-owned. This is regardless of how the title is held.

Proving Co-Ownership Through Deeds vs. Quiet Title

The only evidence you need to start a partition action is to show that you are the co-owner of the property. A deed recorded in the county recorder is the most acceptable form of evidence of co-ownership. Under California Evidence Code Section 662, this evidence is presumed to be the strongest since most deeds reflect the true owner of a property.

In rare cases, the person referred to as the grantee in the deed or the holder of legal title may not reflect true ownership. For instance, the deed may say that “Max Doe and Jack Doe hereby transfer to Christina Doe.” Moreover, Max and Jack merely wanted Christina to hold the title till they returned from the Pacific Crest Trail.

If Christina refuses to transfer the title back to them, Max and Jack will need to file an action for quiet title. Max and Jack also have the opportunity to end their co-ownership by litigating the quiet title action under California Code of Civil Procedure 872.610.

Right to Partition is Not Affected by Irrelevant Facts

A partition action can be filed by co-owners regardless of the variation in which they hold the title. In addition, irrelevant facts don’t change the right to partition.

  • Manner of co-ownership since joint tenants and tenants in common can both file a partition action.
  • Percentage of ownership doesn’t impact the right to file a partition action. A co-owner with just 1% property can also file a partition.
  • Type of property or its purpose doesn’t have an impact on the partition action. It doesn’t matter whether the property is a farm residence or a commercial building.
  • Partition action requires a co-owner in any form. It can be a trust, suspended corporation, individual, or others.
  • Occupation of the property doesn’t matter. You can file a partition action whether the property is rented out or the co-owner has occupied it themselves.

The most important factor is that courts won’t weigh whether a partition action is “fair” or not. Under California law, the right to partition is absolute and cannot be denied owing to any supposed difficulty.

Partition Action Can Solve Co-ownership Issues

Partition actions are favored by the law. The original purpose of these actions was to prevent co-tenants from dissension or inconvenience arising from sharing land. Another reason why partition actions are favored is to facilitate the transmission of title and avoid unreasonable restraints on the enjoyment and use of a property.

The courts realize that in the open market, few people will want to purchase a share of the property. They may demand a minority discount from the co-owners.

Get Strong Legal Representation from Our Seasoned Northern California Real Estate Attorneys

The skilled real estate attorneys at Peterson, Martin & Reynolds LLP have the necessary knowledge, experience, and resources to help you file a partition action and end a co-ownership relationship without compromising your interests. Our attorneys will help you unlock equity in your property and put an end to co-ownership disputes.

To schedule a consultation, call us at (415) 399-2900 or fill out this online contact form.

How Does a Real Estate Partition Action Work?

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A partition action is required when multiple people co-own undivided interest in a property. The purpose of a partition action is to allow co-owners to obtain individual title to some defined portion of a jointly owned property. You should consult with a skilled real estate attorney to make sure your rights are protected during this type of legal action.

Filing a Partition Action

Partition actions, as per the California Code of Civil Procedure section 872.210, can be brought by:

  • Co-owner of a property.
  • Owner of an estate in real property if the property is owned by several persons.

Individuals with a right to the property specified in section 872.210 can bring a partition action even if they don’t have a right to immediate or actual possession of the property. Individuals that don’t have any right in a property listed under section 872.210 cannot bring a partition action.

Your Right to Partition in California

Co-owners of a property don’t need a reason to initiate partition proceedings. You have the right to commence a partition action if you have enough interest in a property to issue an action. This means that you should have a clear title. The determination whether you have a clear title or not will be determined by the court, regardless of whether the trial is contested or uncontested.

Other Types of Relief in a Partition Action

The court may order a property to be physically divided if it can be. This way each party receives a proportionate share. Taking this into account, this is not always the case since most real estate has improvements in the form of a house or building that cannot be physically divided between multiple owners.

This solution is usually possible where the real property is an unimproved and vacant lot. It’s generally more practical for a property to be sold entirely and the proceeds divided between co-owners.

When Does a Partition Action Become Necessary?

Property usually has a single owner. It’s passed onto multiple owners when the original owner leaves it in their will. The new owners may not have the same aspirations or goals regarding the property. If the parties are unable to agree on a single purpose for the property, a partition action may be required to divide the property.

Partition actions may be initiated by a couple that purchases a property jointly but doesn’t end up marrying. The couple may not agree on how the property needs to be used. This may again lead to a partition action.

Limitations to Partition Actions

A party can waive their right to real estate partition action through Code of Civil Procedure section 872.710. The waiver can happen through a valid contract or other methods. There are limits to partitioning partnership property. In general, property owned by a partnership doesn’t necessarily guarantee partition rights. This happens when the rights of unsecured creditors can become prejudiced.

Additional limitations can be imposed wherever a party’s right to partition happens from a successive estate. In the case of a successive estate, a partition can only happen if it is in the best interests of all parties.

These are a few factors considered by the court in making such a determination:

  • Expense of repairs
  • Taxes or other charges
  • Character of the property
  • Circumstances under which the estate was created
  • Factors deemed appropriate by the court

Recoverable Costs Through a Partition Action

There are several costs listed under the Code of Civil Procedure section 874.010 that can be recovered by various parties in a partition action. These include:

  • Referee costs.
  • Reasonable fees paid to the attorney for common benefit.
  • Compensation for those employed by the referee in the partition action, including the surveyor.
  • Costs for a title report.

Any other costs expended for the common benefit may also be recoverable through a partition action.

Resolving a Partition Situation Without a Court-Ordered Sale

In many cases, all parties to a partition action agree to sell their property once a lawsuit is brought. This can happen with or without court intervention.

The parties may decide to divide the proceeds fairly. However, it is necessary to have a binding settlement agreement to make sure the parties follow through on the resolution.

Another way of preventing the sale of a property is to have one co-owner agree to buy out the share of the other co-owners. A new deed may be necessary for such situations to show new ownership.

Our Northern California Real Estate Lawyers are Here to Give You Strong Legal Advice and Support. Call Now.

The reputable real estate attorneys at Peterson, Martin & Reynolds LLP have the experience and skills to represent individuals and entities involved in any form of real estate and business disputes. Our attorneys can help you understand your rights and fight to protect your best interests.

To schedule a consultationwith our legal team, call us at (415) 399-2900 or fill out this online contact form.