Obstructed View Ruling a Good Lesson for Orange County Homebuyers

The rigid nature of California’s laws on an obstructed view was recently illustrated in a case heard by the California Court of Appeal. The case is Boxer vs. City of Beverly Hills.

orange-county-lawyer-hammerThe City of Beverly Hills planted some redwood trees in a park near the Boxers’ home. At first, the trees were not a problem for the Boxers, but as they began to grow, and redwoods can grow quite tall, the Boxers began to lose their stunning views of the Hollywood Hills and Los Angeles Basin. They had enjoyed these views for some time. But the problem for the Boxers was even worse than the loss of the daily enjoyment of the view. The Boxers own a very nice property in Beverly Hills. The view significantly enhanced the value of their property, as is often the case with truly impressive views. This was not, therefore, a trivial concern for the Boxers, but a serious financial problem.

The Boxers did not rush off to court right away due to the obstructed view. Beginning in 2005, they sought redress with the City, through correspondence and negotiation. They were continuously ignored, however, so they eventually had no choice but to pursue their remedies in the Los Angeles Superior Court.

The theory pursued by the Boxers was that the law of “inverse condemnation” should apply to the City’s activity with the obstructed view.  Inverse condemnation is a legal term for the situation wherein the government takes private property without paying appropriate compensation. Here, the Boxers argued that the growth of the redwoods undermined the value of their property through the obstructed view, causing monetary damages. The Boxers further argued that the loss they were suffering from the City’s refusal to cut the trees was massive, whereas all the City would lose if it cut the trees was the expense of the tree cutters.

The Boxers, unfortunately, would not find any help in the courts, at any level. The Superior Court threw out their suit, and the Court of Appeal affirmed the lower court’s decision. California’s doctrines on obstructed views are rigid. In the state of California, as a matter of law, there is no remedy for the alleged impairment of view as it pertains to private property.

The Court clarified that obstructed views, in and of themselves, can never be the basis for an inverse condemnation case. Other factors may provide sufficient grounds for a lawsuit, when combined with the loss of a view. For example, noxious fumes emanating from a source related to government activity, or physical encroachment and damage, together with the loss of a view, may enable court action. But again, the loss of the view itself is never sufficient.

One remedy a homeowner may pursue to avoid future obstruction, at least by private landowners and neighbors, is to enter covenants (recordable agreements that run with the land) or easements, whereby the neighbor agrees that no building will go forward on his or her property that will undermine a view. To make the covenant enforceable, many landowners pay consideration in some amount, to avoid a claim down the road that the agreement “lacked consideration.”

California offers its residents some truly breathtaking views, but it is important for potential homeowners to note that in the state of California, there is no firm “right” to a view. Homebuyers, particularly looking at homes on the higher end of values, should keep this in mind when inspecting homes for sale. As the Boxers ultimately learned, a home with a breathtaking view can lose one if its most valuable assets, and the result can be a significant loss in value.

If you are threatened with the loss of a view or have been notified that court action may be sought against you for your own building activity, contact us through hammers-law.com.

DUAL AGENCY IN REAL ESTATE SALES REACHES THE CALIFORNIA SUPREME COURT

sgh-photo-4COne of the areas of real estate law that is most often litigated in California is dual agency.  Our State permits a single agent or agency to represent both the buyer and seller in the negotiation and sale of real estate.  A case regarding dual agency has just reached the California Supreme Court, and the decision by the Court could have serious implications on the real estate industry in California.  The case pits a Malibu homeowner, Hong Kong multimillionaire Hiroshi Horiike, against a Caldwell Banker affiliate.  The same Coldwell Banker brokerage was hired on both sides of the transaction, for Horikke as buying agent, and for the seller as listing agent.

There are good arguments on both sides of the coin when it comes to dual agency.  Dual agents often require lower commissions. They can streamline escrows and reduce the “game playing” of multiple agent deals.  The flip side is that the client often does not reap the benefits arising from single party representation. Brokers are in many instances called upon to act like lawyers, looking out for their client’s best interest when the other side appears to be taking advantage. When the same agent handles both parties, the adversarial aspect of the representation arguably disappears.

In the case involving Horikke, the t0pic of disclosures created a serious problem for the dual agent.  Horrike bought a stunning Tuscan style house overlooking the Pacific Ocean for $12.25 million cash in 2007.  The listing agent provided Horikke with a brochure that stated the house was 15,000 square feet, but county records showed that the house was only 9,500 square feet. The discrepancy in square footage resulted from various factors.  Notably the City of Malibu’s measurement metric is different than other cities and municipalities.  It includes garages and other spaces beyond the primary residence.

When Horikke was in the process of applying for permits to remodel his residence in 2010, he discovered that the house was not as large as he thought it was.  After making this discovery, he decided to sue.  Horikke’s agent, the “selling agent” or “buyer’s agent,” was associated with the same firm as the listing agent, Coldwell Banker, ergo, the “dual agency.”  Hirokke thus sued the listing agent, Chris Cortazzo, arguing that Cortazzo owed him fiduciary duties because he was associated with the same firm representing Hirokke.  In paricular, Hirokke argued that Cortazzo had given another prospective buyer a handwritten note, encouraging the buyer to hire a specialist to verify the square footage of the residence.  Horikke argued that Cortazzo and Coldwell Banker owed him a fiduciary responsibility to provide the same such note.  The case went to trial and the trial court disagreed with Horrike. It found that the listing agent had no fiduciary responsibility to the buyer and that the brokerage itself was not responsible for breach of fiduciary responsibilities based on the actions of individual agents.

The Court of Appeal disagreed with the trial court. The justices found that Cortazzo was in the wrong even if his actions were unintentional.  The justices wrote, “A trier of fact could conclude that although Cortazzo did not intentionally conceal the information, Cortazzo breached his fiduciary duty by failing to communicate all of the material information he knew about the square footage.”  Cortazzo and Coldwell Banker thus petitioned the California Supreme Court to review that ruling.

Cases like this give the real estate industry reason to keep a close eye on their dual agency practices. When the Supreme Court provides its decision on this most recent case, agents should take note.

Contact Orange County real estate attorney Stephen Hammers for more news and relevant information regarding dual agency in California real estate transactions.

Orange County Easement Attorney Obtains Judgment and Ends Dispute Between Neighbors

Neighbor disputes are unfortunate, and while every effort should be made to avoid litigation, sometimes it is simply not possible. When an easement dispute erupted recently, the owner whose land was burdened by the easement contacted Orange County easement attorney Stephen Hammers for help.  The neighbor, who was himself an Orange County attorney, owned the right to landscape the easement area, and use it for general recreation, imposed certain restrictions on the landowner’s use of the easement area for construction on her residence.  This greatly delayed the construction.  The neighbor claimed his easement rights prevailed over the landowner’s use of the easement area for such purposes. Litigation became necessary, and Hammers succeeded in getting the client an injunction to allow continued entry onto the easement.  Judge Moberly in the Orange County Superior Court issued Mr. Hammers’ client the injunction. Meanwhile, the client had also discovered multiple instances of water intrusion into the home, so Hammers also sought a mandatory and permanent injunction precluding wrongful discharge of surface waters in the easement area by the neighbor. The neighbor cross-complained for interference with his property rights and injury to real property. He sought hundreds of thousands in damages, punitive damages and injunctive relief. After several days of testimony between these Irvine neighbors, the court found in favor of Mr. Hammers’ client, issuing permanent, mandatory and prohibitory injunctions, as well as attorney’s fees. All claims on the neighbor’s cross-complaint were denied. The neighbor then appealed to the California Court of Appeal, Case No. G049734. Mr. Hammers again represented Plaintiff on the appeal. The Court of Appeal affirmed the trial court’s judgment in every respect on July 16, 2015, awarding costs of appeal to Mr. Hammers’ client.

Client Homeowner/Developer v. Bhakta
Case No. 30-2012-00600613
Verdict (Judge Chaffee): In favor of Plaintiff, Represented by Mr. Hammers

CHARITABLE SOLICITATION LIMITED BY COURT OF APPEAL

The Fifth District Court of Appeal has announced an important ruling in Donahue Schriber Realty Group v. Nu Creation Outreach, Case No. F068287. The case pertains to the right to solicit charitable donations on sidewalks near store entrances.

A number of business and real estate clients of Price, Crooke, Gary & Hammers and Stephen Hammers have inquired about this issue. This past holiday season, per inquiries to pcghlawyers.com and hammers-law.com, we were advised that more charitable organizations solicited money in front of businesses and stores than ever before. We have found that businesses have been generally tolerant of such activity. Things change, however, when potential customers are discouraged to enter a shop due to excessive solicitation or blockage of entrances. Disagreements and even altercations can erupt in front of stores and business owners understandably object to such activity.

The confrontation in the Donahue Schriber case began when two solicitors for Nu Creation Outreach collected donations on the sidewalks adjacent to the entrances of stores within plaintiff Donahue Schriber’s property. Plaintiff’s shop “policy” was to disallow charitable solicitation of donations within its property. The owners allowed other forms of expressive activity on the property, such as collecting signatures for petitions in designated areas. Plaintiff asked the solicitors to leave the premises, but they refused. When plaintiff called the police, the officers refused to arrest the solicitors without a court order.

Plaintiff hired counsel and moved for a preliminary injunction, claiming disruption of its business. The trial court granted the injunction, precluding charitable solicitation near plaintiff’s place of business. The preliminary injunction provided that solicitors would only be permitted to request donations in a designated public forum. It precluded solicitors from standing right in front of the business or the areas surrounding the entrance of the business or real estate office. The Court of Appeal found no error in that decision, specifying that the shop’s entrances, as well as its “aprons,” were not a public forum.

Business owners and real estate companies are well advised to seek counsel if they encounter problems with excessive charitable solicitation. All solicitation is not problematic, of course, and there are instances wherein solicitors are well within their rights to collect charitable donations. But when there is blockage of entrances or other such difficulties, action should be taken. In addition to retail shops, the activities can be disruptive to professional service organizations. The appellate court’s decision in Donahue Schriber demonstrates that companies such as real estate offices can obtain relief.

This ruling raises an important issue in the landlord tenant context. Who has the obligation to take action when solicitors create problems in front of a lessee’s retail store, the lessee or the lessor? The answer often lies in the allocation of risk and common area provisions of a business lease. If you are experiencing a solicitation problem, or are uncertain of your rights as lessor or lessee, contact an attorney.

Stephen G. Hammers, Price, Crooke, Gary & Hammers, Incorporated, 10 Corporate Park, Suite 300 Irvine, CA 92606 (949) 573-4910; (800) 511-6058; www.hammers-law.com

STATUTE OF FRAUDS KILLS BORROWERS’ SUIT AGAINST BANK

Banks have been scrutinized for lending practices for years, and particularly so following the market downturn in 2008.  Inappropriate and unmonitored loans went into default in the millions across the United States beginning in that year.  The federal government took numerous, specific actions designed to control and regulate lending institutions.

Borrowers continue to file lawsuits as a result of poor lending practices.  The claims in these suits, while in some instances quite legitimate, are still required to follow the basic parameters of California law.  Sometimes, these lawsuits fail due to hard and fast rules regulating oral promises and the “statute of frauds.”  Such is the result in the recent case of Jones v. Wachovia Bank (2014) H038382; Sixth App. Dist., Santa Clara County.

Plaintiffs Mark and Roberta Jones sought damages after losing their home in a foreclosure sale which they understood from a phone conversation with the bank would be postponed to a date 10 days after the actual sale date.  The Jones further alleged they “had ready funds available to cure the outstanding default within the time prescribed by law and made preparations to timely submit funds to Wachovia. Plaintiffs were prevented from doing so by the advancement of the trustee sale date, which the Jones claim was contrary to the oral representation made by Wachovia on the telephone.

The Court of Appeal reviewed some of the basic principles of agreements for real estate loans and modifications.  They are summarized here.  In California, a real property loan generally involves a promissory note secured by a deed of trust in which the debtor (a home buyer) is the trustor, the creditor (a lending institution) is the beneficiary, and a neutral third party serves as the trustee. When a debtor defaults on a loan, the creditor has the right to invoke the power of sale provided by the deed of trust.

The statute of frauds requires certain agreements involving real property to be in writing.  A deed of trust is covered by the statute of frauds (Civ. Code, § 1624(a)(6)), and an agreement to modify a deed of trust is governed by Civil Code section 1698.  An agreement to postpone a valid sale of property beyond the date when said property may be sold under and according to the terms of a trust deed obviously is an agreement to alter the terms of the instrument, raising the issue of the statute of frauds.

To prevent (“estop”) a defendant from asserting the statute of frauds, a plaintiff must show unconscionable injury or unjust enrichment if the promise is not enforced. The doctrine of estoppel has been applied where an unconscionable injury would result from denying enforcement after one party has been induced to make a serious change of position in reliance on the contract or where unjust enrichment would result if a party who has received the benefits of the other’s performance were allowed to invoke the statute.

Here, the plaintiffs were unable to show injury, much less the unconscionable injury needed to avoid application of the statute of frauds. At a minimum, the Jones would have to show that they changed their legal position in some way, or undertook some act that showed detrimental reliance upon a promise by the Bank.  They could not do so, and their claim thus failed.

This opinion by the Court of Appeal demonstrates that the statute of frauds is still an important legal hurdle that a borrower must overcome if he or she is going to sue a bank on alleged oral promises.  There is considerable work for a lawyer to do when making a claim of this nature.  Worse, most loan documents have attorney fee provisions, meaning that if the borrower makes a claim against a bank and fails, the borrower could end up with a judgment for attorneys’ fees when he or she loses.  Borrowers should be very cautious about pursuing a claim on an oral promise by a bank representative, and a thorough discussion with counsel about whether to pursue a case should include the risk of loss.

 

BUYING A VACATION HOME WITH FRIENDS OR FAMILY? SOME THINGS TO CONSIDER…

Sales of vacation homes have been rising sharply lately. Across the country, the number of vacation homes sold last year was up 30% from the year before, according to the National Association of Realtors.  Vacation homes now account for 13% of all home sales. The median price last year was $168,700. Interestingly, most vacation home buyers are under age 45.

Many people have long dreamed of owning a second home, but buying one can seem like an overwhelming task.  One solution to addressing that task, both with regard to the time invested and financial risk, is to join forces and invest with friends or family.  This can be an ideal solution – you get to use the home for part of the year, just as you planned, but the costs can be shared and risks reduced.

Before you take the leap, it’s important to think through everything that will be involved, and what will happen if something goes wrong. You’ll want to have a frank conversation with your partners and draw up an agreement that covers all the bases – a kind of “real estate prenup.”

Here are some things you’ll want to take into account:

What will you use the home for? Are you primarily interested in using the home yourself as a getaway, or renting it for income? You’ll want to be on the same page about this right away, so you don’t wind up disappointing someone’s expectations.

How will the time there be shared? This is critical, and you need a plan. The problem is that it’s often hard to work things out in advance and set a schedule in stone, because everyone’s needs will change over time.

If a brother and sister are sharing a property and they both have small families, the conflicting needs of the families might not be an issue at all. But if four or five families are splitting a home, there are bound to be schedule conflicts, and it can be good to have a formal system.  Some co-owners have created an online spreadsheet on which they can sign up for use of the house. Some randomly assign weeks at the beginning of the year, with the owners being allowed to trade and barter among themselves.

This type of system can be tweaked depending on your needs. For instance, all the owners might be guaranteed a certain number of weeks during the peak season, or families with children might be given priority during school vacations.

You’ll also want to consider whether owners who spend more time at the property should also contribute more to maintenance, insurance and utilities.

Who – or what – will own the property?  Good question for the attorneys(!!)  Often, the best solution for property ownership with friends and family is a limited liability company.  An operating agreement will be drafted to establish the rights and obligations of the “members” in the LLC.  An LLC can help with protection from creditors, and can make it easier to sell or give away an interest in the home. (On the other hand, it might limit your ability to deduct mortgage interest on your taxes.)

What happens if someone wants to sell?  This is a critical question to address in the Operating or Partnership Agreement.  Even if your best friends plan to keep the home forever, they could suffer financial problems and need to back out.  Since it can be hard to sell a fractional share of a home, many agreements provide that every few years, the co-owners will each have the option to force a sale of the entire property.  Another idea is to give the other owners a “right of first refusal,” which means that if someone wants to sell their share, the other owners have the option of buying that person out.  Obviously, you want to avoid co-owning a home with strangers or people you don’t get along with.

How will expenses be handled? While it’s possible for owners simply to contribute money for repairs and other expenses “as needed,” this can lead to a lot of confusion and even conflict. In most cases, the better method is to have owners contribute a fixed amount of money on a regular basis that can be used to pay expenses.

It’s a good idea to have a separate bank account for the management of the property, which is especially easy if the property is owned by an LLC. A separate bank account will minimize issues over who owes what and who paid for what. And if you plan to rent the property to generate investment income, a separate account will make it much easier to track expenses and profits for tax purposes.

If you’re planning to use the property to generate income, you’ll want to establish some rules about when the profits can be withdrawn from the account versus being kept there to pay future expenses.

What about routine maintenance? If maintenance is going to be a significant issue – perhaps because no one lives close enough to the property to take care of things as they arise – then it might be wise to consider hiring a management company.  But even hiring the management company and overseeing its work is a task that must be allocated among the members or partners.

Prescriptive Easement Issue Arises Against Kind Neighbor

NO GOOD DEED WILL GO UNPUNISHED, and that is certainly the case in the law of prescriptive easements.  Here, a well-meaning property owner invited her neighbor onto her property to perform some clean-up.  She quickly realized that her offer of entry put her squarely in the sights of a future easement claim.  Her posting on AVVO.COM follows, as well as my response:

“A neighbor cut a road across our property. a sheriff has given me an incident number. I think I need a lawyer… help!  We live in the forest, in SugarPine. Neighbor refuses to repair the damage. We granted access for him to clean up his needles, and now there is a 150′ Road!! Please advise what I should do next THANKS!! “

This question raises issues of trespass, prescriptive easement and others. Based upon the facts you stated here, the neighbor appears to have exceeded the rights of use you granted him; however, there could be more to this than offensive behavior. The action hints at an intention to set up prescriptive rights on your property. In order to establish a prescriptive easement in California, a claimant must take action on your property that is “open and notorious,” continuous and uninterrupted for a period of at least five (5) years (occasional use could establish the prescriptive use right for the same frequency, e.g., on weekends), adverse, and subject to a “claim of right” (i.e., not consented to). The holder of a “servient estate” (you) must have actual knowledge of the prescriptive use in order for such use to be “open and notorious.”

While situations like these appear on their surface to constitute simply rude and offensive behavior, the statutory requirements for prescriptive easements actually warrant such behavior in order for the offender to succeed(!) Thus, while the two suggestions of Mr. Martz (consulting a lawyer and writing a letter) are good initial considerations in your strategy to address the matter, the manner in which you or your attorney communicate with this claimant is of equal importance. For example, your attorney may consider whether the demand letter should be sent via certified mail, return receipt requested, in order to satisfy legal requirements and ensure you can meet your evidentiary burden. The lawyer may consider a lawsuit for quiet title or other relief. If the matter can be resolved, the attorney might consider whether a settlement agreement should be recorded to ensure that the resolution runs with the land. The bottom line is that consulting with qualified counsel here is an especially good idea because taking the “wrong” action could end up being tantamount to taking no action at all. This is particularly true in light of the 5-year statutory deadline.

Transfer disclosure statement required even in mixed use sales!

Richman v. Hartley, 2014 S.O.S. B245052
This is an important recent case dealing with Transfer Disclosure Statements (“TDS”).

California requires its residential property sellers to disclose, in writing, details about the property they wish to sell. The disclosure obligations apply to nearly all California home sellers – whether selling a single family home, condominium or mobile home. Such disclosures are so important that a body of law is dedicated to ensuring the disclosures are made, known as “the Transfer Disclosure Law.” As a general rule, all sellers of residential real property containing “one to four units” in California must complete and provide written disclosures to the buyer. There are a few exceptions, such as properties that are transferred by court order or from one co-owner to another. (See, California Civil Code section 1102.)

The reason these disclosures are so important is that potential home buyers need to know as much as possible about a property in order to evaluate whether to buy it. The “true” condition of the property affects the offer the buyer is willing to make, and the ultimate sales price. The disclosure obligations remind California home sellers that they have a legal responsibility to be open about a property’s condition, and are subject to litigation (or arbitration) if they hide defects.

In this new case, buyer Hartley argued that he was denied a TDS and that seller was obligated to provide one before closing escrow. He contended that a TDS was “required by law” in the transaction because the improvements on the property included two dwelling units. Richman, the seller, insisted that he was not required to comply with the Transfer Disclosure Law, which, he contends, was intended to apply only to transfers of residential real property, not to a mixed-use property such as the one at issue.

The Court of Appeal had no difficulty at all determining that a TDS was required for the sale of this mixed-use property. Neither the original enactment of the Transfer Disclosure Law nor any subsequent amendments has limited its application to transfers of real property that contain only residential units, and no published decision of an appellate court has so limited it. By its language, then, section 1102 applies to any transfer of real property on which are located one to four residential units, regardless of whether the property also has a commercial use.

The result was also supported by other enactments of the Legislature which expressly defined “residential real property” to exclude mixed-use properties. For instance, Business and Professions Code section 11423, adopted in 1992, defines “residential real property” to mean “real property located in the State of California containing only a one- to four- family residence.” (Id., at subd. (a)(3).) The same language was used in section 2954.8, adopted in 1979, governing the handling of impound accounts by financial institutions. That section limits its application to loans made upon the security of real property “containing only a one- to four- family residence.” (Id., at subd. (a).)
The lesson of the Hartley case, then, for all sellers and brokers transacting a sale of “mixed-use” property, is ALWAYS USE A TDS.