Articles Posted in Real Estate Law

underwood-what-is-commercial-real-estate-300x300Commercial real estate is property being operated to generate business revenue through rental income or capital gains. Because it is meant to generate revenue if it is residential property, it must be used as rental housing to still be considered commercial real estate. It is not personal property. 

Commercial real estate may have multiple uses, like stores and offices or stores and residential property. Under California’s Civil Code, commercial real estate is treated separately from residential real estate. Commercial real estate buyers are presumed to be more experienced and sophisticated in their transactions. This is also because they are usually represented by an agent or broker who represents only their interests. (Easton v. Strassburger (1984) 152 Cal.App.3d 90, 103 fn 8.) Generally, a seller via their broker is required to disclose all facts materially affecting the value or desirability of the property to the purchaser (Civ. Code, § 2079.) This is called the transfer disclosure law. However, this only applies buildings with four or fewer dwellings, so the “transfer disclosure law” usually does not apply to commercial real estate. 

With mixed use properties it may apply depending on the “sophistication” of the buyer. (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1189–1190.) There is less protection for commercial tenants, like businesses occupying commercial real estate. Commercial tenants are considered to be “differently situated” than residential tenants. (Civ. Code, § 1993.04) Commercial tenants are more likely to have resources if the need arises to vacate the rental premises.

underwood-guide-dividing-property-appreciation-300x300Dividing property following divorce or dissolution proceedings can be complicated under family law principles. If the property has appreciated in value, this can make dividing it more contentious and complicated. 

Under family law, a married couple’s earnings received during marriage are considered community property and are divided evenly at divorce. (Cal. Fam. Code § 770-772.) Property that is held in joint title by the spouses is usually considered community property and will be divided as such, meaning 50/50. (Cal. Fam. Code § 2581.) Property can also be converted to joint title if one spouse held it separately before the marriage. This presumption that the property is community property applies absent a written agreement otherwise. Couples can also execute an Aufmuth agreement which essentially states the spouse contributing separately gets a pro rata share in the increased equity of the property or asset. (Cal. Fam. Code § 852.) This ensures the spouse does not just get a flat reimbursement of the amount they paid.

How is Community and Separate Property Divided?

underwood-broker-opinion-value-300x300In determining the value of property, a property owner can seek out a broker’s opinion of value. A broker’s opinion of value, also caller a broker’s price opinion is an assessment of a property’s value. This assessment is done by a real estate broker, often for free to get the property owner’s business.

Broker’s Opinion of Value

A broker’s price opinion is often considered a personal opinion, not a representation of fact. So, it is a cost-effective way to determine value but cannot be relied on to get a loan. The price opinion covers anything that is an estimate prepared by a real estate broker, agent, or salesperson detailing the probable sales price of a price of property. The price opinion will provide a varying level of detail about the property’s condition, market, neighborhood, or comparable sales. (12 U.S.C. § 3355(b).) A broker’s price opinion will not include an automated valuation model. (12 U.S.C. § 3355(c).) An automated valuation model is a computer program that offers an estimated property value on searched properties commonly used on online real estate marketplaces. Federal statute dictates a broker’s price opinion cannot be used as the primary basis to determine a property’s value for originating a mortgage loan secured on a piece of property. (12 U.S.C. § 3355.) So, while a broker’s price opinion cannot be the basis for a loan, their opinion is still valuable. As such, brokers are held to a higher standard of care.

underwood-title-determinative-300x300In California, title is determinative in some instances. This means that a court’s characterization of property in a marital dissolution proceeding determines the division of the property between spouses. How a property is titled may also affect the property’s protection from creditors, taxes, and the probate process. Understanding how and when title is determinative is important because married individuals may hold title in various forms affecting their interests in dissolutions. 

What is a Property Title?

A title is not a physical document given to individuals who acquire interest in property. Instead, a property title is a legal concept made up of various documents, like deeds and surveys, that represent various rights inherent in the ownership of real property. It is important to distinguish the difference between a Title and a Deed. Title refers to the concept of legal ownership of property. Oppositely, a deed is the physical document that transfers legal ownership of the property. In short, deeds help establish title. 

underwood-what-is-jurat-vs-acknowledgement-300x300Property transfers often require documents showing the transfer to be notarized and recorded. This means the document is entered into the county recorder’s office and notarized to ensure the document is authentic. A signed document can be notarized via a jurat or an acknowledgment. The choice of method is left to the person signing. The purpose of this article is to explain the difference between a jurat and an acknowledgment.

What is a jurat?

A jurat is a form of notarization also called verification upon oath or affirmation. This means the signer of the document will swear or affirm the truthfulness of the document’s contents to a notary or notarial official. (Allstate Savings & Loan Assn. v. Lotito (1981) 116 Cal.App.3d 998, 1005.) 

underwood-personal-lien-real-estate-300x300This article is about whether a personal lien, like a lien for child support, can attach to real estate. This is important because property can be used as collateral for debt voluntarily or involuntarily. This means the owner of the property uses the property as collateral by having a lien placed on it. 

What is a personal lien?

A lien applies to future property bought by the debtor, the heirs of the estate if the debtor dies, and any property the debtor transfers into a revocable living trust. Liens implicating personal debts like child support are likely to arise as judgment liens. This means a court can impose the lien when someone does not repay a debt. They can be voluntary with the homeowner (or property owner) choosing to use their property as collateral or involuntary if the court has ordered the lien against the owner’s wishes. (CCP § 697.320) 

underwood-exceptions-in-title-report-300x300Exceptions in a title report, also called a preliminary title report, make a potential buyer aware of issues with the property. Exceptions are important as they may limit what title insurance a buyer is eligible for and may prevent the sale of property altogether.

What is a title report?

A title report is used when conducting a sale or purchase of real estate to help a buyer make an informed decision. A title report is provided by a title insurance company after escrow is opened. It is a document that includes details about the property’s owners, recorded liens against the property, other encumbrances or debts, and conditions. (Ins. Code. § 12340.11.) 

underwood-small-estate-petitions-300x300An Assembly bill applying to decedents’ estates was finalized on August 29, 2024. The bill will amend six sections of the Probate Code (Cal. Prob. Code § 13100-13101, 13150-13152, 13154) and repeal one section (Prob. Code § 13158). This is significant because it impacts how successors of decedents can manage a decedent’s real property.

Specifically, this means real property in estates valued over $750,000, or that was not the primary residence, can no longer take advantage of this expedited process.

Generally, it takes a long time for an estate to go through probate, so this section of the code is meant to facilitate the distribution and disposal of certain types of property in the estate. Normally an estate goes through administration proceedings and to state a claim as a beneficiary that person needs to file a petition. (Prob. Code § 11700-11701.) The petitioning person has to notify the other settled heirs and beneficiaries who can fight the petition. (Prob. Code § 1220.) Because of these lengthy and expensive disputes, estates under a certain value were made exempt from the estate administration process. (Bucholtz v. Belshe (9th Cir. 1997) 114 F.3d 923, 927.) Currently, sections of the Probate Code allow property in an estate under a certain value to be disposed of by a successor. Once this new bill is enacted it will limit the exemption to which the property applies. 

underwood-what-is-title-defect-300x300The purpose of this article is to explain about the legal concept of a title defect. Finding defects in the title of a property is important because it indicates there is a problem with the property’s ownership. Title defects can prevent sale and present additional costs to owners and buyers.

What is a title defect?

Title defects most commonly appear in the “chain of title” when title to property is passed from person to person. This means the title to the land (ownership) is unclear or flawed in the way it was sold or transferred to a current owner. Defects in title can hinder the sale of a home and also who the home can be sold to. This is because if a buyer learns of a defect in the title, he can object to the purchase of the property. (Easton v. Montgomery (1891) 90 Cal. 307, 308; Gates v. McLean (1886) 70 Cal. 42, 49.)

underwood-law-color-of-title-300x300The purpose of this article is to explain the term “color of title.” This is an important concept in real property disputes because it means some has apparent title to property based on a written instrument, but that title is actually defective.

What is Required to Show Color of Title?

Color of title gives the appearance that someone holds title to a piece of property. (Thompson v. Dypvik (1985)174 Cal. App. 3d 329, 339.) The possessor of color of title has a written deed or instrument or judicial decree that seems to transfer good title. However, the transfer is somehow defective and is not actually effective in transferring title. (Packard v. Moss (1885) 68 Cal. 123, 126.) Just because a deed is void does not mean the possessor of color of title has no claim to the property. Instead, the color of title provides exactly that. It can allow someone to assert a right to property under a defective instrument as long as they can show they had a good faith belief the instrument was valid. For example, a deed that describes the land and purports to pass title between two people which is ultimately void or voidable, furnishes color of title on which the recipient of the deed can base a claim of adverse possession. (Id. at 130.)

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