Articles Posted in Real Estate Law

underwood-co-owner-take-rent-property-300x300Often, the question of distributing rent earned on a co-owned property arises in the context of cotenants. Cotenants have equal rights to possess their property with their fellow cotenants. This means that no one cotenant can exclude another from the property. One cotenant can, however, assign their right of possession to a third party. 

This can happen when a cotenant rents out part of the property to a tenant. In this situation, the other cotenants still have the right to possess the property, but they do not have a right to exclude the tenant. The tenant is also prohibited from excluding the other cotenants from occupying the property. 

How can a cotenant lease property they co-own?

Underwood-Blog-Image-Temp-Apr-24-300x300Probate Code section 859 protects certain individuals whose property or money is taken, concealed, or disposed of by another. Section 859 does this by imposing hefty penalties on anyone who wrongfully takes or conceals property belonging to certain groups. 

Specifically, the statute provides:

“If a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to a conservatee, a minor, an elder, a dependent adult, a trust, or the estate of a decedent, or has taken, concealed, or disposed of the property by the use of undue influence in bad faith or through the commission of elder or dependent adult financial abuse . . . the person shall be liable for twice the value of the property recovered by an action under this part.” (Prob. Code § 859 (emphasis added).)

underwood-trustees-beneficiaries-300x300A trust is a legal device that is commonly used in estate planning. A trust represents “a collection of assets and liabilities” that can be held and transferred by an individual to another individual, the “beneficiary.” (Portico Mgmt. Grp., LLC v. Harrison (2011) 202 Cal.App.4th 464, 473.) When the trustee, the person responsible for managing and distributing the trust’s assets, has a personal interest in those assets, certain problems can arise. This is because the trustee is bound by several legal duties designed to safeguard the interests of the beneficiaries. Therefore, if a trustee is also a beneficiary, they must make sure that they do not unduly favor themselves at the expense of the other beneficiaries. 

What is a trustee?

A person who creates a trust, the “settlor,” names a “trustee” who holds legal title to the property held in the trust for the benefit of one or more persons, the “beneficiaries.” (Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 521.) The settlor can create a voluntary or express trust through a formal agreement where the settlor details his intentions regarding the trustee and beneficiaries. A property owner can designate himself as a trustee, creating an express trust holding his property. (Probate Code § 15200(a).) The owner can also designate a third party as a trustee. A trust can be created during the settlor’s life, or, it can be created by a will where it becomes effective upon the settlor’s death.  

underwood-jogani-v-jogani-joint-ownership-300x300Recently, a jury in the Los Angeles Superior Court awarded what may become one of the largest judgments in a real estate case that has ever been issued. Significantly, in addition to a damage award in the billions, the Court also found that the family members were also co-owners in 17,000 apartments across California. As a result, this consequential decision should be better understood for its potential implications for all co-ownership situations. 

Background

This saga started in the late 1970s. The Jogani family, natives of Gujarat, India, built a fortune in the global diamond trade with offices in Europe, Africa, the Middle East, and North America. 

underwood-restraint-on-alienation-300x300Real estate law has many nuances and subtleties. One of the lesser known aspects to real estate law is something known as a “restraint on alienation.” At its most basic, a restraint on alienation limits the sale or transfer of interests in real property. 

Civil Code Section 711 states that “[c]onditions restraining alienation, when repugnant to the interest created, are void.” These conditions may be found in a will that conveys property but provides that the property may not be sold for a certain period of time. (Wharton v. Mollinet (1951) 103 Cal.App.2d 710, 713.) A restriction on the sale of the property will be deemed void and not apply to the recipient’s property interest. Similarly, if property is transferred by a deed, such a restriction will be deemed invalid. The purpose underlying Section 711 is to “clarify[] and protect[] titles for the benefit of the public at large, as well as of the grantees.” (Id.) 

What restraints, if any, are permissible?

underwood-testimony-property-value-partition-cases-300x300The estimated value of a piece of property can be important for resolving several types of legal disputes. It is crucial when a property owner needs to establish damages when the government interferes with the owner’s property and diminishes its value. Spouses may wish to testify regarding the value of their marital property when it is divided during divorce proceedings. A property owner may also want to testify as to their property’s value to contest a bank’s foreclosure on the property.

Testimony regarding a property’s estimated value can also be important during partition proceedings: when one or more co-owners of a property want to sell their property interest a question arises under the Partition of Real Property Act as to the Property’s value. As such, determining who can answer that question becomes of critical importance.

Normally, who can testify as to a property’s value?

underwood-guide-to-right-first-refusal-300x300A right of first refusal – sometimes called a “preemptive right” – is a right provided by contract that gives a party priority to purchase a property if the owner decides to sell. This right may be included in an ownership agreement between two co-owners who are cotenants. The person who holds the right is the “grantee,” and the person who gives the right to a fellow co-owner is the “grantor.”

A right of first refusal gives the cotenant priority over other potential buyers when the other cotenant makes a decision to sell their interest in the property. Unlike a valid option provision where a cotenant is obligated to sell the property to the other cotenant subject to the terms of the ownership agreement, under a right of first refusal, a second cotenant’s ability to purchase the first cotenant’s interest depends on the first cotenant’s desire to sell it. The right of first refusal becomes an option when the owner “voluntarily decides to sell the property and receives a bona fide offer to purchase it from a third party.” (Campbell v. Alger (1999) 71 Cal.App.4th 200, 206-207.)  

What types of instruments contain a right of first refusal?

underwood-primer-on-tax-auctions-300x300One of the more interesting ways to buy real estate is through tax auctions. When a party buys a property through a tax auction or foreclosure, they receive a special type of deed known as a “Sheriff’s Deed.” A sheriff’s deed is a legal instrument that is transferred when a property is sold as a result of a foreclosure. The purpose of this article is to provide information on Sheriff’s Deeds so that persons buying real estate at a tax auction can be better informed on the nature of exactly what they are purchasing.

What is the difference between a judicial and a non-judicial foreclosure?

Most foreclosure sales take place outside of judicial proceedings. This is because many mortgage agreements contain a “power of sale” clause. A “power of sale” clause gives the lender the ability to sell the mortgaged property to satisfy the borrower’s debt if the borrower fails to make their contractual payments. This nonjudicial foreclosure process, however, must comply with strict statutory requirements regarding the timeline of a sale and notice procedures once the borrower defaults. (Civil Code § 2924.) 

underwood-divided-undivided-interest-real-estate-300x300Owning property can be complicated. The purpose of this blog post is to talk about different ways to hold title, and provides information on the meaning of some common terms so the average person can better understand their rights and responsibilities with respect to their property. Different types of property ownership come with different rights. By better understanding these terms, we hope to empower people to able to make the best possible decisions when faced with difficult situations.

Undivided Interests

An undivided co-ownership exists when an entire property belongs to two or more owners. An undivided interest includes the property as a whole and the owners have the right to the entire property. Undivided interests can be characterized as a joint tenancy, where two or more individuals each own a partial and equal right to an entire property. (Civ. Code, § 683.) 

With rising rates keeping inventory and sales down, 2023 has seen a holding pattern for many real estate owners. Prices have held steady, but there has not been much movement in the market.

That’s likely to change in a major way as we head into 2024.

As the founder and president of Underwood Law Firm, a California-based boutique law firm that specializes in partition actions, I have a unique perspective on the real estate market. A partition action is a legal method that allows a property owner in a bad real estate relationship to use the court system to force the sale. Through my work, I have seen how trends in the larger economy can impact this decision, and how anticipated shifts in 2024 might play out for property owners.

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