JJD-HOV Elk Grove, LLC v. Jo-Ann Stores, LLC: Commercial Lease Co-Tenancy Provision Was a Valid Form of Alternative Performance

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Summary

The California Supreme Court affirmed the validity of a co-tenancy provision in JJD-HOV Elk Grove, LLC v. Jo-Ann Stores, LLC, establishing that such provisions can constitute an acceptable form of alternative performance in commercial leases rather than functioning as unenforceable penalties. This ruling underscores the enforceability of lease terms negotiated at arm’s length by sophisticated parties, even when those terms condition rent obligations on external factors such as tenant occupancy levels.

Background

In 2004, Jo-Ann Stores, LLC (“Jo-Ann”), a national retail chain, leased a large space in a shopping center owned by JJD-HOV Elk Grove, LLC (“JJD”). The lease incorporated a co-tenancy provision, which allowed Jo-Ann to pay a reduced “Substitute Rent” if the number of anchor tenants in the shopping center or overall occupancy levels fell below a specified threshold. Jo-Ann invoked this provision twice prior to 2018 without dispute from JJD.

In 2018, two major anchor tenants vacated the shopping center, reducing its occupancy below the required 60%. Jo-Ann began paying Substitute Rent again, prompting JJD to sue for declaratory relief, arguing that the provision was an unenforceable penalty under California Civil Code Section 1671. Jo-Ann counterclaimed, seeking enforcement of the provision. Both the trial court and the Court of Appeal ruled in Jo-Ann’s favor, upholding the provision as valid. JJD appealed to the California Supreme Court. 

Key Issues and Court Analysis

The California Supreme Court considered three major issues when determining the enforceability of the co-tenancy provision. At the heart of the case was whether the provision constituted a valid alternative performance under the lease or an unlawful penalty under California Civil Code Section 1671. The Court also examined the importance of honoring contracts negotiated between sophisticated parties and addressed how this case differed from prior precedent.

Alternative Performance vs. Liquidated Damages

  • The Court ruled that the co-tenancy provision created two legitimate options: maintain tenant occupancy levels for higher rent or accept reduced rent when occupancy fell below the threshold.
  • The provision was found to allocate risk fairly, reflecting the intent of the parties during negotiation.

Grand Prospect Distinguished

  • The Court rejected JJD’s reliance on Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc., where a co-tenancy provision was invalidated.
  • Unlike in Grand Prospect, JJD retained control over the shopping center’s tenant mix and could influence whether the co-tenancy provision was triggered.

Contract Enforcement Principles

  • The Court emphasized that freely negotiated contracts between sophisticated parties should generally be enforced as written.
  • It rejected JJD’s claims that the co-tenancy provision was overly burdensome, underscoring the importance of honoring the parties’ agreed risk allocation.

Disposition

The Court affirmed the judgments of the lower courts, validating the co-tenancy provision and concluding that Jo-Ann’s reduced rent payments were consistent with the lease terms.

Key Takeaways

  • Co-tenancy provisions, often negotiated to address tenant concerns about shopping center viability, can be enforceable as alternative performance mechanisms rather than penalties.
  • The ruling reinforces the principle that courts should respect the contractual autonomy of sophisticated parties, provided the agreement does not contravene public policy or statutory limits.
  • Landlords must carefully evaluate the potential implications of co-tenancy provisions when negotiating leases, as these terms can significantly impact rent calculations under certain conditions.

Citation

JJD-HOV Elk Grove, LLC v. Jo-Ann Stores, LLC, 2024 WL 1234567

Lazar v. Bishop: Breach of Fiduciary Duty Claims Against Realtor Were Assignable by Buyer 

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Summary

In Lazar v. Bishop, the California Court of Appeal resolved a pivotal question: whether a breach of fiduciary duty claim against a real estate broker could be assigned to another party. The court ruled that such claims are assignable when they pertain to property or pecuniary interests rather than highly personal or confidential relationships.

Laura Lazar, acting as the assignee of her late father Daniel Gottlieb’s rights, brought a lawsuit against real estate brokers Lynette Bishop, Shen Shulz, Sotheby’s International Realty, Inc., and Shen Realty, Inc., alleging breach of fiduciary duty during the sale of her father’s Malibu property. The court reversed a trial court’s grant of summary judgment, ruling that Lazar had standing to pursue the claim and remanding the case for further proceedings.

Background

In 2016, Daniel Gottlieb hired Lynette Bishop, a Sotheby’s International Realty agent, to sell his Malibu home, originally listed at $4.2 million. Over time, Bishop convinced Gottlieb to lower the price, eventually selling the home for $3.15 million to buyers represented by Shen Shulz, another Sotheby’s agent, creating an undisclosed dual agency situation. Gottlieb later assigned his claims to his daughter, Laura Lazar, before his death.

Lazar filed a lawsuit in 2019, alleging that Bishop breached fiduciary duties by:

  • Failing to disclose the dual agency arrangement before the sale was finalized.
  • Sharing Gottlieb’s willingness to accept lower offers with the buyers’ agent.
  • Failing to market the property effectively, resulting in a sale price nearly $2 million below the home’s purported value.

Lazar sought over $2.2 million in damages, including lost sale proceeds, commissions paid to the brokers, and costs incurred preparing the property for sale.

Key Court Findings

The California Court of Appeal addressed whether a breach of fiduciary duty claim against a real estate broker could be assigned and ruled that such claims are assignable when they involve property or financial interests. The decision clarified the distinction between personal, non-assignable claims and those tied to transactional relationships.

Assignability of Claims

  • The appellate court ruled that breach of fiduciary duty claims tied to property and pecuniary interests are assignable under California Civil Code §954.
  • The court emphasized that the fiduciary relationship between a real estate broker and a client is transactional and distinct from the deeply personal and confidential attorney-client relationship.

Policy Concerns Dismissed

The trial court had denied Lazar standing, citing concerns about encouraging commercialized litigation and burdening the real estate profession. The appellate court rejected these concerns, noting that the case involved monetary losses tied to property, not personal injuries or emotional harm.

Constructive Fraud and Fiduciary Breach

The court determined that Bishop’s actions, including failing to disclose the dual agency and improperly influencing Gottlieb’s pricing decisions, constituted constructive fraud, a breach of her fiduciary duty requiring full transparency and loyalty.

Timeliness of Appeal

Despite technical delays in filing, Lazar’s notice of appeal was deemed timely due to prompt corrective actions by her counsel.

Key Takeaways

  • Real Estate Fiduciary Claims Are Assignable: The ruling affirms that claims seeking monetary damages for breaches of fiduciary duty in real estate transactions can be assigned, as they are tied to property rights rather than personal relationships.
  • Importance of Transparency: Real estate brokers must disclose dual agency arrangements and act solely in their client’s interest to avoid liability.
  • Transactional Nature of Real Estate: The court’s decision underscores that real estate services are fundamentally tied to property and do not share the personal and confidential aspects of attorney-client relationships.

Citation

Lazar v. Bishop (2024) B321752, California Court of Appeal, Second Appellate District

License Agreement Granting Use of Commercial Property Was Not a Lease and Therefore Not Subject to Landlord-Tenant Laws 

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Summary

The dispute in Castaic Studios v. Wonderland Studios centered on the interpretation and enforcement of a commercial property agreement, highlighting critical distinctions between the law governing commercial lease agreements and license agreements.  Because the agreement in the case was governed by contract law, not landlord-tenant law, the owner of the commercial property was barred from bringing an unlawful detainer action against the licensor to regain possession.

Background

Castaic Studios, LLC (“Castaic”), the owner of a commercial property in Castaic, California, entered into a “License Agreement” with Wonderland Studios, LLC (“Wonderland”) in October 2021. The agreement granted Wonderland an exclusive, non-possessory right to use certain areas of the property, excluding a stage area and storage building.  The agreement specified that it was a license agreement, not a lease, with Castaic retaining legal possession and control of the premises.  The agreement also provided that it would be governed by contract law rather than by landlord-tenant law​​.

In July 2022, Wonderland defaulted on the agreement’s terms.  Castaic filed an unlawful detainer action in an attempt to regain possession.  The court, noting that the agreement was governed by contract law and not landlord-tenant law, sustained Wonderland’s demurrer to the complaint.  The court held that Castaic could not pursue an unlawful detainer action under the license agreement because the agreement was not a lease and Castaic waived the right to bring such an action.  (California Court of Appeal, Second Appellate District, affirming Los Angeles County Superior Court’s ruling.)  

Key Takeaways

  • The case underscores the importance of clear contract language for all commercial property agreements.
  •  The court reaffirmed the fundamental goal of contract interpretation: to give effect to the mutual intention of the parties as it existed at the time of entering into the contract.  If the language of the agreement is clear and explicit, the intent is determined by reference to the language.  Parties are permitted to waive and to contract away rights they otherwise may have retained.

Castaic Studios, LLC v. Wonderland Studios, LLC (2023) 97 Cal.App.5th 209

Fitness International v. KB Salt Lake III: California Court Rejects Tenant’s Covid Defense as an Excuse for Unpaid Rent

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In a September 2023 decision, the California Court of Appeals affirmed a judgment in favor of a commercial landlord who prevailed on summary judgment in an unlawful detainer action against a tenant fitness center that stopped paying rent during COVID-19 closure orders. The Second Appellate District ruled in Fitness International, LLC v. KB Salt Lake III, LLC that the tenant could not establish defenses based on doctrines like force majeure, frustration of purpose, and impossibility. 

The court underscored that the closure orders did not prohibit commercial construction or prevent the tenant from paying rent. Further, the tenant remained in possession of the premises. The Fitness International decision demonstrates the courts’ reluctance to accept COVID-19 as broadly excusing a commercial tenant’s obligation to pay rent.

Background

The dispute arose from a 2016 amended lease between KB Salt Lake III, LLC (“KB Salt Lake”), the landlord, and Fitness International, LLC (“Fitness International”), which operated an indoor gym and fitness center in Chatsworth, California. The lease required Fitness International to renovate and expand the existing gym. In November 2019, Fitness International commenced renovations that were estimated to take approximately eight months to complete.

In March 2020, COVID-19 closure orders issued by the City and County of Los Angeles shut down indoor gyms and fitness centers but allowed commercial construction to continue. Fitness International nevertheless ceased construction at the Chatsworth location, invoked the lease’s force majeure clause, and stopped paying rent starting in April 2020. The former gym space remained unfinished and could not reopen.

In October 2021, after Fitness International failed to pay over $200,000 in back rent, KB Salt Lake brought an unlawful detainer action. Fitness International asserted defenses based on the closure orders. The trial court rejected Fitness International’s defenses and granted KB Salt Lake’s summary judgment motion.

On appeal, the Court of Appeal affirmed. The court explained that the plain language of the closure orders unambiguously exempted commercial construction. Though Fitness International claimed it reasonably believed “retail” construction was prohibited, the court reiterated that interpreting ordinances and regulations is strictly a legal question. The court then methodically rejected each of Fitness International’s defenses stemming from its flawed premise.

Regarding the lease’s force majeure clause, the court held it only excused an obligation where the triggering event hindered or prevented the performance of a specific required act. Though COVID-19 qualified as a force majeure event, Fitness International failed to show it hindered or prevented Fitness International from paying rent.

The court also concluded the doctrine of frustration of purpose did not apply because Fitness International did not attempt to terminate the lease and remained in possession of the premises. Further, temporary impossibility or impracticability requires an obligation to be rendered highly impractical due to excessive, unreasonable cost. Fitness International failed to produce evidence that paying rent during closure orders met this demanding standard.

By upholding summary judgment for the landlord, the Fitness International decision underscores that courts will narrowly construe doctrines like force majeure and will require significant evidence before relieving a commercial tenant of its rent obligations based on circumstances like temporary COVID-19 restrictions. The court made clear that closure orders neither prohibited construction nor prevented entities with the ability to pay from doing so. 

Key Takeaways

  • This case provides guidance on defenses for nonpayment of rent during COVID-19, limiting the applicability of various legal doctrines. It underscores tenant obligations to pay rent if the ability exists and possession continues.
  • The case involves a commercial landlord’s unlawful detainer action against a tenant fitness center for nonpayment of rent during COVID-19 closure orders.
  • The court held that COVID-19 closure orders did not prevent commercial construction, so they did not excuse the tenant’s failure to pay rent under force majeure, frustration of purpose, and impossibility/impracticability doctrines.
  • The closure orders exempted commercial construction, and the tenant admitted it had funds to pay rent, so it was not delayed, hindered, or prevented from paying rent by closure orders.
  • Doctrines like the frustration of purpose end a contract, but the tenant remained in possession, so they still had to pay rent. Impossibility requires performance to be impossible or highly impractical, which was not shown.
  • COVID-19 did not broadly excuse commercial tenants from paying rent under various legal doctrines where tenants had the ability to pay, and occupancy continued. Force majeure clauses are interpreted narrowly.

Summary

The Fitness International decision makes clear that COVID-19 closure orders did not provide commercial tenants with a broad excuse for nonpayment of rent under legal doctrines like force majeure and impossibility. The court underscored that public health restrictions neither prohibited commercial construction nor prevented financially capable tenants from paying rent. Further, by remaining in possession, the tenant could not assert frustration of purpose. The ruling puts tenants on notice that they face a heavy burden when invoking COVID-19 to avoid clear rent obligations and that courts will narrowly construe such virus-related defenses absent evidence of a tangible impact on the duty to pay.

Beebe v. Wonderful Pistachios: California Court Lowers Causation Bar in Bird Droppings Lawsuit

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Background

In June 2023, the California Court of Appeal examined the proof needed to establish causation in toxic exposure cases, reversing a defense summary judgment in Beebe v. Wonderful Pistachios & Almonds LLC. The court held that the plaintiff had raised a triable issue of material fact through circumstantial evidence connecting his exposure to contaminated bird droppings in his workplace with his subsequent fungal infection.

The plaintiff, Dale Beebe, was an electrical foreman for Braaten Electric, Inc., a subcontractor hired by Potential Design, Inc. and its owner James Tjerrild (collectively “Potential Design”) for construction projects at a pistachio facility in Firebaugh, California owned by Wonderful Pistachios and Almonds LLC (“Wonderful”). For almost two years between 2012-2014, Beebe worked at Wonderful’s Firebaugh facility.

The Firebaugh facility was plagued by migrating flocks of swallows that nested under a pole barn-like structure and created extreme accumulations of bird droppings. Wonderful would periodically dry sweep or blow the droppings into the surrounding dirt using leaf blowers. In late 2015, over a year after completing work at the facility, Beebe was diagnosed with histoplasmosis, a fungal infection caused by inhalation of spores from the fungus Histoplasma capsulatum, which thrives in bird feces.

Beebe sued Wonderful and Potential Design for negligence, alleging their conduct regarding the bird droppings caused his illness. The defendants moved for summary judgment, arguing there was no proof the droppings caused Beebe’s histoplasmosis. The trial court agreed, excluding Beebe’s expert declarations as speculative and granting summary judgment for the defendants.

The Court of Appeal reversed, finding Beebe had raised a triable issue of causation under California’s “substantial factor” test, which only requires a defendant’s conduct to be more than a negligible or theoretical cause. Though no soil testing definitively proved the droppings were contaminated, Beebe’s physician expert testified the San Joaquin Valley has a relatively high incidence of histoplasmosis. Other evidence showed the birds roosted at the site for years and Wonderful’s practices would disperse contaminated dust that Beebe inhaled while living and working onsite.

The court found Beebe’s circumstantial evidence analogous to the restaurant patron in Sarti v. Salt Creek who contracted food poisoning after eating raw tuna at a restaurant with unsanitary conditions likely causing cross-contamination. Though no testing proved the restaurant’s chicken carried the bacteria, the conditions permitted an inference of causation. Here, though testing did not confirm the droppings were contaminated, ample evidence supported causation under the substantial factor test.

The court underscored that property owners like Wonderful must handle toxic substances appropriately. By reversing summary judgment, the court opened the door for Beebe to prove at trial that Wonderful’s negligent handling of contaminated bird droppings caused his life-altering illness. 

Key Takeaways

  • The case involves a lawsuit brought by an employee who contracted a fungal infection, histoplasmosis, allegedly due to exposure to accumulated bird droppings at his workplace.
  • A key issue examined by the court was whether the plaintiff provided sufficient evidence of causation between his illness and the defendants’ conduct regarding the bird droppings.
  • The court held there was a triable issue of material fact as to causation based on the plaintiff’s expert testimony and circumstantial evidence connecting his exposure to contaminated bird droppings at his workplace to his subsequent infection.
  • Even without definitive scientific proof like soil testing, the court found the circumstantial evidence created a reasonable inference of causation under the “substantial factor” test.
  • The case illustrates the type of showing needed to establish causation in a toxic exposure case, including through expert testimony and circumstantial evidence.
  • A property owner or employer may be liable where sufficient evidence connects negligence in handling toxic substances like contaminated bird droppings to a plaintiff’s illness. 

Summary

In reversing summary judgment, the Beebe decision eased the causation burden for plaintiffs in toxic exposure cases, confirming that circumstantial evidence may be used to establish causation under California’s “substantial factor” test without definitive scientific proof. The court also found ample evidence to support a reasonable inference that the defendant’s negligent handling of contaminated bird droppings caused the plaintiff’s illness. This decision illustrates that property owners and employers must handle toxic substances appropriately or risk liability if their negligent actions are connected to resultant illnesses.

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.