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.

The shared risk/reward concept of an integrated project delivery (IPD) arrangement is an increasingly attractive collaborative approach to construction projects.  But IPD is still a relatively new concept with unique risks and challenges.  In my recent article for the Daily Journal of Commerce, I discuss some key points that should be considered before undertaking …

At some point, almost every tenant of a commercial lease is asked to sign a Subordination, Non-Disturbance and Attornment Agreement (an “SNDA”). Generally, the SNDA comes from the landlord’s lender sometime after the tenant’s lease has been signed and the term has commenced. It can be a complex document with onerous provisions for a tenant, and, without adequate counsel early in the process, a tenant may have little room to negotiate or revise an SNDA.

At its core, an SNDA contains three key provisions. First, the tenant agrees that, notwithstanding that the lease may pre-date the lender’s mortgage, the lease is subordinate and junior to the mortgage. Second, the lender agrees that, so long as the tenant performs its obligations under the lease prior to the expiration of applicable cure periods, the lender will not disturb the tenant’s occupancy or terminate the tenant’s lease in the event of foreclosure or other enforcement by the lender.  The third prong is attornment: the tenant’s agreement to accept the lender (or other purchaser at foreclosure or its successor or assign) as the landlord following foreclosure.  This exchange of promises gives the lender a senior right to its collateral and gives the tenant security in its lease.

A written teaming agreement is useful in defining the roles and responsibilities of a team of designers and contractors seeking to win a contract for a construction project. In my recent article for the Daily Journal of Commerce, I detail several key aspects of a well-drafted teaming agreement. Read the full article here.…

One should never stop learning, so next week I will attend a three-day seminar presented by the Design-Build Institute of America. If I complete the seminar and pass a test, I will become a Designated Design-Build Professional.  The DBIA has an informative page about certification on its website.

In preparation for the seminar, I completed…

Foreclosure sign in front on modern houseThe Supreme Court of Nevada stirred a great deal of controversy in its 2014 opinion SFR Investments Pool 1, LLC v. U.S. Bank, N.A.,[1] holding that a 1991 statute granting superpriority status to certain homeowner’s association (HOA) liens[2] created a true priority lien such that its foreclosure extinguishes all other liens, including a first deed of trust on the property.[3]

Prior to the SFR Investments decision, most lenders assumed the statute merely provided for a payment priority, so that upon a lender’s foreclosure of its deed of trust, the HOA would recover a portion of its overdue assessments—they certainly did not anticipate that an HOA would have the ability to wipe out a “first position” deed of trust.  As one can imagine, the SFR Investments decision did not sit well with lenders and prompted a flurry of additional lawsuits, including a constitutional challenge claiming that the statute violates the Due Process and Takings Clauses of both the United States and Nevada Constitutions.

A letter of intent (“LOI”) is often the first document in a proposed deal – a summary of a range of key terms or concepts for negotiation toward entering into a final, formal agreement. But what seems like a simple document can be much more than a mere list of possible terms to be discussed by the parties, and might just result in a final agreement in one side’s sole discretion.  In some cases, an LOI can be an enforceable agreement to negotiate in good faith toward a final agreement based, at least in part, on its stated terms.  Even those LOIs that specifically say they are non-binding may, in fact, be binding.  For instance, an LOI could be enforceable in its own right if all material terms of a final agreement are set out in the LOI and the parties’ conduct suggests they treated the LOI as a final agreement.  Rather than being a “safe haven” that can be terminated at will without liability, an LOI can present great risk and unintended consequences to the parties if not recognized and handled with care.  Missteps in documentation and/or subsequent conduct of the parties along the way could result in blown deals and damages.  Even an otherwise carefully and clearly drafted LOI may not be free from risk or unintended consequences.

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.