On August 13, 2019, the Sacramento City Council voted to adopt by a 7-1 margin a rent control and tenant protection measure known as the Sacramento Tenant Protection Act (the “Act”). Citing increasing rent statistics, an influx of in-migration and a shortage of rental units, the Act sets out to provide tenants with protections against
What is Imputed Agent Knowledge Under California’s Real Estate Disclosure Rules
Recently, in RSB Vineyards LLC v. Orsi, the First Appellate District Court of Appeal confirmed the long-standing rule in California: sellers must disclose all known material matters. While this affirmed rule was not surprising, the court was very helpful in providing the first detailed framework for what it means for a seller to have
Is “As-Is” Really “As-Is” in Real Estate Contracts? Tell the Truth, the Whole Truth, or Risk Liability for Nondisclosure
The inclusion of an “as-is” clause in a contract for a real estate transaction has led courts in Oregon to allow parties to a deal to allocate the risk as to the property differently than through the historic concept of “caveat emptor” (let the buyer beware), which permitted a seller to shift the obligation to
The Poisoned Foreclosure – Lawyers Beware of the Affirmative Duty to Search Records
A Sacramento bankruptcy judge issued a hard hitting judgment against Bank of America for the way it handled a single residential foreclosure in Lincoln, California. Referring to the famous novelist whose works evoke oppressive and nightmarish characteristics, Judge Klein wrote: “Franz Kafka lives… [and] he works at Bank of America.” This ruling has been widely discussed for the hefty award recovered by the plaintiff. In addition to the harsh ruling, Judge Klein memorialized a rule that was not previously addressed in case law – the affirmative duty of an attorney to search bankruptcy filings to confirm whether a violation of a stay order was likely. While this rule could arguably be characterized as dicta, because there were no claims against the attorneys in the suit, all attorneys should take note of this rule or risk serious consequences. The relevant facts are summarized below.
In 2008, the plaintiffs entered into a loan with the expectation that they could refinance or modify the loan immediately after closing. However, after closing, Bank of America said that it would not consider a loan modification request unless and until the homeowners ceased making payment. Accordingly, in 2009, the homeowners defaulted on their loan payments, which triggered a series of troublesome events. During the course of the ensuing years, Bank of America strung along the homeowners with multiple “lost” loan modification requests, while at the same time pursuing foreclosure.
Brokers Beware: Acting as a Dual Agent Means Expanded Fiduciary Duties in California
It is well known that under California law a real estate broker may act as a “dual agent” for both the seller and the buyer in a property transaction, provided both parties consent to the arrangement after full disclosure. In such representation, a dual agent owes fiduciary duties to both buyer and seller. Pursuant to a recent case, Horiike v. Coldwell Banker, these fiduciary obligations have now been expanded to also apply to “associate licensees” acting on behalf of a brokerage firm (or the salespeople of the given brokerage firm, as they are more commonly known). In a unanimous decision, the court ruled that when an agent representing a seller is working for the same firm as the agent representing the buyer, they are considered an “associate licensee” and must properly investigate and disclose all important information related to the property subject to the transaction.
In Horiike, the seller and buyer of a luxury Malibu mansion were represented by separate real estate agents. However, both of these agents were acting under the license of a single brokerage firm, Coldwell Banker. The seller’s agent had reason to know that residence’s square footage was significantly different than what was represented in the sales material. The buyer purchased the property and began making renovations. Upon reviewing a building permit previously obtained by the prior owner, the buyer discovered that the property had thousands of square feet less living space than what was disclosed in the marketing materials. Coldwell Banker claimed that because the seller’s agent exclusively represented the seller, there was no fiduciary duty to disclose information relating to the square footage to the buyer. The California Supreme Court thought otherwise.
Choice of Law Provisions Cannot Bypass California’s Prohibition on Jury Waivers
Last week, the California Court of Appeal ruled that a property owner was entitled to a jury trial in a dispute with a lender despite the fact that the loan agreement contained a jury waiver provision and a New York choice-of-law provision.
The case involved the San Francisco apartment complex known as the Rincon Towers. In 2007, the plaintiffs borrowed $110 million on a two-year loan to finance the acquisition. In 2009, the plaintiffs failed to repay the loan. The plaintiffs claimed that under the terms of the loan agreement they were entitled to a one-year extension of the maturity date. The lender disagreed and instead completed a nonjudicial foreclosure sale.