Partition Action to Resolve Co-Ownership Disputes

Relationships, whether business, financial, or personal, don’t always work out the way we plan. Unfortunately, most people don’t plan an exit strategy in the event a relationship ends. This creates problems, especially when it involves co-owned real estate.

When people purchase real property together but don’t plan on how to sell or otherwise transfer the property at a later date, the joint ownership of the property can end up being burdensome and complicated. Perhaps one owner wants to sell the property while the other does not. Or maybe one wants to live in the house and the other wants to be bought out. There are a countless number of scenarios.

In these cases, the parties are left with three alternatives: One party buys out the other party, the parties agree to list and sell the property, or the parties cannot agree and the property is sold through a legal proceeding known as a partition action. The first two alternatives offer the most peaceful and least costly methods to resolve the dispute between the parties. If there is no agreement between the parties, a partition action can serve as the vehicle to end the dispute.

Types of partition action.

Various types of partition actions exist. In the most common scenario, the judge will order the property sold, and an accounting will be prepared to determine each owner’s financial contribution to the property. The Court can then determine each party’s share of the sale proceeds. For example, in the event of two co-owners who originally split the cost of the property evenly, each will be awarded fifty percent of the sale proceeds. Other situations can become more complicated, depending upon the number of owners and the amount originally invested in the property as well as the manner in which title is held.

Partition actions can sometimes result in the division of the actual property, with no sale required. This can often be accomplished in the case of an unimproved piece of land. For example, a four-acre lot could be divided into two, two-acre parcels (assuming the property is sub-dividable).

In some cases, one or more co-owners might be living at the property in question. Unfortunately for this individual, residence takes a backseat to legal ownership. The property can still be subject to a partition action, and the individual in residence could be forced to move.

If you are facing a dispute related to co-ownership of a property, consult with our real estate attorneys in order to explore the options available to you.

Mending Fences Can Be Complicated: What Happens When Neighbors Disagree?

Homeowners build fences for a variety of reasons. Perhaps they want a contained space for children to play in, to keep dogs from roaming, or to create more privacy in the yard. In some instances fences are required. For example, many municipalities require a safe fence and gate around pools.

In most instances homeowners take care to choose attractive fencing that suits their home’s architectural style and the neighborhood. They work with their neighbor to install and maintain the fence between their respective properties.

Unfortunately, some neighbors disregard common association rules or local ordinances when installing or maintaining the common fence. Some neighbors ignore a commonly shared fence that is unsightly or poorly maintained. If this happens with your shared fence, what rights do you have?

If you belong to a homeowners association, the rules and regulations of the association likely set forth standards regarding fence height, style, and other considerations. In this case, the association board should be a homeowner’s “first stop” when addressing a conflict or complaint. If your property is not in an association-regulated neighborhood, your first step should be to reach out to your neighbor to try and come up with a solution to repair the commonly shared fence.

So now the fence needs to be repaired, but who pays for the repair? California Civil Codes Section 841 states that adjoining landowners are presumed to share an equal benefit from any fence dividing their properties and, unless otherwise agreed to by the parties in a written agreement, shall be presumed to be equally responsible for the reasonable costs of construction, maintenance, or necessary replacement of the fence. While the law may provide a solution, a neighbor may refuse to pay or be unable to pay for the fence. In order to benefit from the law, if you plan on incurring costs to repair or replace a commonly shared fence, you must give any affected adjoining neighbor at least 30 days’ prior written notice. The notice shall include that the neighbor is equally responsible for the reasonable costs of construction, maintenance, or necessary replacement of the fence, a description of the nature of the problem facing the shared fence, the proposed solution for addressing the problem, the estimated construction or maintenance costs involved to address the problem, the proposed cost sharing approach, and the proposed timeline for getting the problem addressed.

If your neighbor refuses to cooperate, don’t take that refusal as a reason to install an unattractive fence, which is commonly referred to as a “spite fence”. In California:

“Any fence or other structure in the nature of a fence unnecessarily exceeding 10 feet in height maliciously erected or maintained for the purpose of annoying the owner or occupant of adjoining property is a private nuisance. Any owner or occupant of adjoining property injured either in his comfort or the enjoyment of his estate by such nuisance may enforce the remedies against its continuance prescribed in Title 3, Part 3, Division 4 of this code.” (Civil Code Section 841.4)

Since fencing regulations can vary between cities and neighborhoods, we recommend consulting with a real estate attorney before proceeding with construction or addressing a conflict with a neighbor regarding fences. An attorney can help you determine your rights and responsibilities, and ideally reach a peaceful resolution to your fencing dilemma.

Mending Fences Can Be Complicated: What Happens When Neighbors Disagree?

Homeowners build fences for a variety of reasons. Perhaps they want a contained space for children to play in, to keep dogs from roaming, or to create more privacy in the yard. In some instances fences are required. For example, many municipalities require a safe fence and gate around pools.

In most instances homeowners take care to choose attractive fencing that suits their home’s architectural style and the neighborhood. They work with their neighbor to install and maintain the fence between their respective properties.

Unfortunately, some neighbors disregard common association rules or local ordinances when installing or maintaining the common fence. Some neighbors ignore a commonly shared fence that is unsightly or poorly maintained. If this happens with your shared fence, what rights do you have?

If you belong to a homeowners association, the rules and regulations of the association likely set forth standards regarding fence height, style, and other considerations. In this case, the association board should be a homeowner’s “first stop” when addressing a conflict or complaint. If your property is not in an association-regulated neighborhood, your first step should be to reach out to your neighbor to try and come up with a solution to repair the commonly shared fence.

So now the fence needs to be repaired, but who pays for the repair? California Civil Codes Section 841 states that adjoining landowners are presumed to share an equal benefit from any fence dividing their properties and, unless otherwise agreed to by the parties in a written agreement, shall be presumed to be equally responsible for the reasonable costs of construction, maintenance, or necessary replacement of the fence. While the law may provide a solution, a neighbor may refuse to pay or be unable to pay for the fence. In order to benefit from the law, if you plan on incurring costs to repair or replace a commonly shared fence, you must give any affected adjoining neighbor at least 30 days’ prior written notice. The notice shall include that the neighbor is equally responsible for the reasonable costs of construction, maintenance, or necessary replacement of the fence, a description of the nature of the problem facing the shared fence, the proposed solution for addressing the problem, the estimated construction or maintenance costs involved to address the problem, the proposed cost sharing approach, and the proposed timeline for getting the problem addressed.

If your neighbor refuses to cooperate, don’t take that refusal as a reason to install an unattractive fence, which is commonly referred to as a “spite fence”. In California:

“Any fence or other structure in the nature of a fence unnecessarily exceeding 10 feet in height maliciously erected or maintained for the purpose of annoying the owner or occupant of adjoining property is a private nuisance. Any owner or occupant of adjoining property injured either in his comfort or the enjoyment of his estate by such nuisance may enforce the remedies against its continuance prescribed in Title 3, Part 3, Division 4 of this code.” (Civil Code Section 841.4)

Since fencing regulations can vary between cities and neighborhoods, we recommend consulting with a real estate attorney before proceeding with construction or addressing a conflict with a neighbor regarding fences. An attorney can help you determine your rights and responsibilities, and ideally reach a peaceful resolution to your fencing dilemma.

Should I Choose Arbitration in the Residential Purchase Agreement?

Purchasing a home requires a lot of decisions. Sometimes a choice seems obvious, such as the option to hire a home inspector. In other cases, you might worry that making the wrong choice today will cause unintended consequences later.

Such is the case with the arbitration provision in the standard home purchase agreement. This option is one of only two separately initialed options within the standard C.A.R. purchase form typically used in California, and the choice is yours whether to select it or not.

What is Arbitration? First, it’s important to understand arbitration. If a dispute comes up after the purchase of the home, disgruntled buyers face several potential paths to confront and resolve the problem. One of those choices is litigation, wherein the buyer sues the former owners and/or the real estate agent in the court system. Another option is arbitration.

Arbitration is an alternative to litigation. Instead of going to court, each party is bound to the decision made by an arbitrator. Arbitrators are neutral third parties, typically experienced attorneys or retired judges, and that person (or panel of persons) will make the final decision regarding your claim. Either party can hire attorneys to represent their interests, just as in a court, or you can represent yourself.

Arbitration is often presented as a more affordable alternative to court proceedings, and it typically (but not always) is, but that doesn’t mean the process is inexpensive either. The process, including attorneys and possibly experts, can cost many tens of thousands of dollars. And remember that whatever the outcome, whether arbitration or litigation, the losing party will likely have to pay for the costs and fees incurred by the wining party. That will drive the costs up even higher.

Speed is another potential advantage of arbitration. Litigation can take well over a year from start to finish, while an arbitration typically occurs in perhaps as little as half that time. The arbitration hearing itself is also much less formal that a court hearing, and consequently can be less intimidating to most people.

Is There a Downside? While arbitration can save time (and money, in many cases), one potential drawback is that the decision is final. Since you previously agreed to arbitration in lieu of litigation, you can’t reverse this decision by proceeding to court except in extremely limited circumstances.

Essentially, electing the arbitration clause means that you give up your right to litigation in the event of a dispute. This might be acceptable to you if you know that you wouldn’t want to, or couldn’t afford, an expensive court proceeding. (Very few people can afford a full legal fight!) However, you should be aware of the fact that electing arbitration locks you into this decision regardless of your feelings about the dispute later.

On the other hand, failing to elect the arbitration clause does not mean you give up that option in the future. If a dispute does arise, you can still opt for either litigation or arbitration in the future, but arbitration remains an option only if the other side agrees to it as well.

If you’re considering a residential purchase agreement, we suggest that you consult with a real estate attorney before signing anything. We can explain the pros and cons of individual clauses in depth, so that you can elect the options that feel right to you.

What Should a Tenant Look for in a Commercial Lease?

A new space for your business means new opportunities for growth and success. Of course, there is another side to that coin. Signing a commercial lease also creates financial and legal obligations which may not be acceptable to you, so careful review and understanding of your lease are vitally important.

We recommend that you review any prospective commercial lease with a real estate attorney before signing. Having said that, here are just nine of the many components of the lease to examine, before even considering an agreement.

Names are correct. Names of all parties should be listed correctly on the lease, with your business named as the tenant (rather than you personally).

The term (length) of the lease. This section will outline the length of time your business can occupy the unit and the length of time you will owe rent.

Rent and fees. The amount of your monthly rent should be straightforward, but fees can trip you up. Make sure you understand all fees associated with the lease which can include monthly operating expenses, property management fees, taxes, promotional fees, and percentage rental to name a few.

Security Deposits and Personal Guaranty. Nearly all leases require a security deposit, but the terms can vary. If you are a new business, the landlord may require a personal guaranty in addition to a security deposit.

Holdover Rent. Most commercial leases have a built-in holdover rent in the event that the tenant does not vacate the premises when it expires. While the landlord may allow you to remain in possession after the lease expiration, unless you have a written agreement extending the lease, you may be responsible for holdover rent. This ranges from 125% to 200% of the base rent paid in the month immediately preceding the expiration date.
In addition, if a tenant remains in possession after the expiration of the lease, the lease becomes a month-to-month lease and can typically be terminated by a thirty day written notice.

Terms of utilities. The lease will outline responsibilities of both tenant and landlord, regarding utilities such as Internet, electricity, gas, water, and trash service. While the base rent may be within your budget, make sure that you are adding in all the extra expenses set out in the lease so you have the full picture of what your monthly expenses will be.

Maintenance. Make sure that the lease fully explains who is responsible for repairs and monthly upkeep of the leased space and any surrounding exterior areas. Are there rules regarding cleaning or other responsibilities such as capital improvements? This section should outline these requirements in detail.

Restrictions. Some leases will restrict the type of business you can run from the location, typically found in the Use provision. Ensure that your future plans for the business won’t contradict these limitations.

Insurance. Your landlord might provide a limited amount of insurance for your inventory or business equipment, but in most cases you will be required to obtain your own. This section of the lease will outline your rights and responsibilities. Check with your insurance company to make sure that the insurance you have on your business complies with the requirements set out in the lease.

Assuming you reach agreement with these basic components of a commercial lease, you should now proceed to consultation with a real estate attorney. Many more complicated leasing provisions exist, based upon state and local laws. You should negotiate terms before the final lease is sent to you for execution in order to assure that the final lease is acceptable to you. Be sure to investigate them with legal counsel before you enter a legally binding agreement.

Do You Need a Pool Inspection Prior to Buying a Home?

You’ve found the perfect home, and it has a pool. You’re ready to proceed with a home inspection and possibly make an offer on the property. But wait; do you also need to conduct a pool inspection?

There are several good reasons to obtain an inspection from a qualified pool company. First, if you expect to enjoy the pool for many years, the last thing you want is an unpleasant surprise. This is particularly true if you’re buying the home in the winter when the pool may not be used as frequently. You don’t want to find out in the summer that the pool needs repairs.

The biggest reason to get a pool inspection is to gauge its potential expense. Pools can be an asset, but they are also expensive to maintain and repair. You don’t want to find out after the home purchase that you’re on the hook for thousands of dollars in repairs.

Finally, most home inspectors do not have the expertise necessary to appropriately evaluate a swimming pool. A pool is composed not just of the pool itself, but of various parts such as pumps, filters, heaters, lights, and plumbing. You also want to be sure that any decking around the pool is safe and in good condition.. In short, it’s advisable to obtain the services of an experienced and licensed pool company so that you know the condition of the pool and related equipment before you buy the property..

A qualified pool inspector will investigate issues such as:

  • Leaks – a pressure test can detect these.
  • Drains – the pool must have federally approved covers over all drains, or suction outlets. State laws might also apply.
  • All related equipment – the inspector can test the functionality of all the pool equipment.
  • Fence – local laws vary, but most municipalities require fences and certain types of gates, locks, and alarms around pools for the protection of neighborhood children.

If your inspector does find a problem with the pool, negotiate this issue into your contract. You might ask the seller to fix the problem, or you might prefer a price adjustment on the property. The important thing to remember is that you reach a satisfactory agreement, and write these details into the contract before proceeding with the purchase. That way you can enjoy your new home, and its pool, without worries of safety or any unexpected expenses.

The Advantage of Mediation in Real Estate Contract Disputes

Imagine that you’ve purchased a home, only to discover that the sellers purposely omitted details about the basement which routinely floods. (Yes, in fact there are basements in California!) Or, you’re surprised to learn that the septic system backs up every few months, and has done so for years. Maybe a neighbor has infringed on your property rights in some manner, or you’re involved in a lease dispute with your landlord.

Luckily, there is an option to avoid court altogether. If both parties agree, they can choose to mediate their disputes rather than go to court. In many contracts, such as the standard California Residential Purchase Agreement, mediation is mandatory – the party refusing to mediate loses its right to recover attorney fees if it fails or refuses to mediate, which is a severe and significant penalty.

Compared to court proceedings, mediation is a relatively informal process for dispute resolution. The two parties work with a neutral third party, the mediator. This person does not have the power to impose any decision upon either party. Rather, their job is to facilitate discussion and negotiation. The goal is to reach a conclusion that satisfies (or equally dissatisfies) both parties, while avoiding the time and expense of taking the case to court.

The negotiation process can be conducted in a face-to-face meeting, or via proxies if desired. Each party has the option to represent themselves, or to obtain the services of an attorney to represent them. Mediation is far less formal than court, without complicated and protracted procedures. Decisions can often be reached quickly if both parties agree. It is also significantly less costly than litigation or even arbitration.

The primary advantage of mediation is that it is a non-adversarial process. In court, each side would argue their case and then leave the final decision up to a third party (the judge). Through mediation, solutions can be as creative as both parties can agree upon. Often in court a decision will go either one way or another, but via mediation a compromise can be struck.

To learn more about mediation, and to decide if this process might be preferable for your circumstances, call our real estate attorneys. We will be happy to assess your situation and help you decide how to proceed satisfactorily, or whether mediation is mandatory under your particular real estate agreement.

What Should a Buyer Look for When Reviewing Seller Disclosures?

With regard to real estate transactions, seller disclosures lend critical information to the final purchasing decision. Disclosures are designed to bring serious known issues to the buyers’ attention, concerning safety of the property as well as safety of the investment. The sellers’ legal standard for disclosure is anything that might reasonably affect the value or desirability of the property.

The Transfer Disclosure Statement, or TDS, is required within the state of California on most transactions. This form allows for disclosure of a wide range of information regarding the property, from age of the roof and appliances, to deaths on the property, to structural additions and damages. However, many buyers aren’t sure of what they should be looking for, or how to interpret that information.

For example, the TDS disclosure will list the age of the roof. But an age of “ten years” doesn’t tell the buyer much, unless they know to investigate the roofing materials themselves. A roof can last between ten and fifty years, depending upon the type. So, ten years is middle-aged to old for a tar-and-gravel roof, which typically lasts ten to twenty years. But it’s quite young for a clay roof, which has a lifespan of up to fifty years.

The age of a HVAC system will also be listed, but what does this tell you? You might gain some idea of how long the system will last before it needs replacement. But, because an older system might appear to work, but run much less efficiently than a newer system, you might consider this fact when estimating electric bills.

A crack in the wall might be listed, but is this merely cosmetic? In some cases, yes, but in other cases a crack could be a sign of a much larger issue with the foundation. The lesson here is to fully investigate all items listed on disclosures, even if they seem insignificant at the time. Written disclosures are never an adequate substitute for a pre-purchase inspection of the property by a qualified professional. The inspection takes on even more significance in those transactions, for example the purchase of bank-owned property, where the disclosures are minimal.

Many disclosures are much more obvious with regard to their importance. The lead paint disclosure, required in all 50 states, notifies you of the presence of potentially toxic lead paint within the home. In many older homes, the lead paint has been covered and is theoretically no longer a threat, but you need to know about its presence in the event that you schedule renovation work that could expose you and your family.

Sellers must also complete the Natural Hazard Disclosure Report/Statement, which poses questions regarding flood hazard areas, forest fire risks, and earthquake fault zones. The local government also provides information regarding these classifications.

In most transactions today you will also find additional helpful disclosures. As just one example, the Form SPQ (one of the California Association of Realtor® forms commonly used in residential transactions) gives valuable information which supplements and expands upon the information found in the TDS. Your real estate agent should help you obtain as much information about the property you are considering buying as possible.

When reviewing disclosures, it is important to completely investigate each item listed. The seller is under legal obligation to provide accurate information, but interpretation of this information is the responsibility of the buyer. Your job is to decide whether certain items will be too much trouble, too dangerous, or too expensive for you to accept.

We can help you review these disclosures, or evaluate your options when you feel that problems have not been properly disclosed. Call our real estate attorneys for more information on these issues, and we can help you decide how to proceed.

How Should I Hold Title to My Real Property?

Deciding how to hold title to real property is more than a simple real estate decision. How your property is titled can have ramifications for your estate plan and your heirs, as well as various other tax and legal consequences. It’s a decision to be carefully considered.

California allows numerous ways of titling property, including these more common ones:

  • As a single person
  • As an unmarried person
  • As a married person or registered domestic partner, holding title as their sole and separate property
  • As community property
  • As community property with rights of survivorship
  • As a joint tenancy
  • As tenants in common
  • As a title holding trust
  • As an entity – including corporations, general partnerships, limited partnerships, limited liability companies, co-ownership by person or entity, and other legal entities

When a married couple (or registered domestic partners) obtain property, by California law the property is considered community property, unless stated and agreed to in writing that one half of the couple will not be listed on the title. This means that each half of the couple has the right to dispose of their half of the property under community property law. In the event that one partner passes away, their half of the property typically is deemed by probate court to the surviving spouse or partner unless the deceased spouse had previously disposed of their half of the property to someone other than the surviving spouse.

When “Rights of Survivorship” is added to the community property title, the surviving spouse will automatically assume ownership of the deceased spouse’s half of the property, without the property passing through probate court. As you can see, an important distinction exists between these two types of titles, even though they sound very much the same.

Joint tenancy allows two or more unmarried people (or non-registered domestic partners) to own property together, with rights of survivorship. A tenants in common title allows a similar co-ownership, but without rights of survivorship. In this case, the death of one owner will mean that their share of the property is subject to probate court proceedings, unless they had previously placed that ownership within a trust.

That brings us to trusts, which allow for property held within the trust to be passed to beneficiaries, without the need for probate court.

Various types of entity ownership also exist, usually regarding business partnerships, corporations, or other legal entities. The legal, tax, and estate ramifications for each of these types of title are complex and varied, and necessitate the guidance of a business attorney and planning team. Most especially, buyers should consider having an estate plan in place when buying property and making sure that how they hold title fits in with that plan. Failing to do so can result in high costs and delay when survivors can least afford those obstacles.

For information on any of these methods of titling property, call our real estate or estate planning attorneys. We can help you anticipate survivorship issues, as well as other potential consequences of your decision.

What Inspections Should a Buyer Request When Purchasing a Property?

You’ve been searching for the perfect home. You believe you’ve finally found it. You’re ready to make an offer and get moving on a purchase.

But first, keep in mind that with houses, there is often more going on beneath the surface. The sellers may have everything looking spiffy for showings, but that doesn’t tell you everything you need to know. The seller, in California, also has extensive disclosure obligations, but that does not relieve you as the buyer from doing your own investigations into what exactly you are buying, and that means inspections.

The opportunity to perform inspections before removing any inspection contingency contained in the purchase contract and closing on the purchase of a home is of critical importance. The standard California purchase agreement used in most residential purchases contains a provision making the offer contingent upon the home passing these inspections or agreeing on repairs for whatever is found during the inspections. What exactly should you be looking for?

General home inspection. First, do not do the home inspection yourself. Use a professional, insured home inspector (and perhaps more than one), who will check the home thoroughly for signs of a variety of problems, such as:

  • A failing roof
  • Wood rot (more likely to be found in the termite inspection)
  • Grading problems that might lead to standing water, water entering the home, or erosion
  • Structural issues
  • Leaking plumbing
  • Air conditioning or heating systems that show signs of failure
  • Cracks in the foundation
  • Electrical problems
  • Issues with windows, doors, seals, weatherproofing, etc

A general home inspector should spend considerable time investigating the basement, if the home has one. (Yes, some homes in California do have basements!) Many of the more serious problems that can occur in houses will begin in the basement or other out-of-the-way areas of the home. One result of the general inspection might well be a recommendation to get a specialized inspector to review potential issues in specific areas, e.g. the roof or the electrical system. Think carefully before ignoring these recommendations!

Pests. Your general home inspector might discover signs of a pest problem, but it is critical to have a separate pest control professional investigate the structure. In particular, they will look for signs of a termite infestation, a problem you do not want to inherit.

Lead paint. Most older homes have lead paint within them. Federal law dictates that its presence must be disclosed by home sellers. Your general home inspector can also tell you if he or she finds evidence of lead paint in the home.

Mold inspection. This is a bigger problem in more humid environments. However, mold can invade any home that has ever suffered water damage. Keep in mind that even a past plumbing incident can expose the interior of the house to significant moisture (and therefore mold). Since some types of mold are linked to health problems, obtaining a mold inspection may be worth your time if there are preliminary indications.

Radon inspection. Radon is a potentially dangerous radioactive material that is sometimes present in the soil around a home or even in the air. It can be more prevalent in some areas than others. A radon inspection will uncover toxic levels of radon. Depending upon the source of the radon, the problem can often be corrected.

Water system inspection. If the home uses well water, you should seek an inspection of the system. When wells begin to fail, drilling a new one can lead to excessive expense.

Septic system inspection. If the home uses a septic tank, it’s a good idea to have that system inspected by a professional. Septic tanks can and do fail. They are expensive (and messy) to replace.

In addition to all of these items, check to be sure that the home’s smoke and carbon monoxide detectors are working properly. This will not only save your home in the event of a fire or other event, but might save your life as well.

As always, please contact our real estate attorneys if you have questions about proceeding with the purchase of a home. It is always easier to anticipate potential problems and avoid them, rather than deal with them after the fact.

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