We're not the only ones that think so.  Calls from brokers, buyers and sellers tell us: time in court is coming a broker's (and agent's) way.

The rising real estate market covered a multitude of sins, sins which are now becoming clear.  In addition, 85% (!) of recent licensees hold "conditional" licenses - meaning that they only completed 1 of the 3 "required" courses to get their license in the first place.  (But they promised to complete the other 2 in 18 months...)

With so little experience and training, mistakes got made.  Many were overlooked because of the profits that were made in the rising market.  Now, it's another story.  That's where we come in.

Nobody likes to "need" lawyers; but when you do, you want them to be the best.  To assure that Hanson Law Firm will be assigned to you in the event a claim is made, you need to designate us as your attorneys in your E&O Policy.  (Generally at the time of application or renewal.)

Do it now, because later - may be too late!

You know it's looming.  And you haven't even called a lawyer . . . yet.  There's a lot of money at stake, but you're too busy running your business.

Lawsuits wait for no one, and, as with contingencies, once expired, there's no turning back. Every type of lawsuit has its own statute of limitations.  Do have one year?  Two years?  Three?  Four? Ten? More? When did you discover there was a problem?  What sort of award are you looking?  Are your hands clean?  When it comes to filing your lawsuit, it's use it - or lose it.

Civil Code Section 1088:  the Bane of the Broker!

"If an agent . . . places a listing . . . in the MLS, that agent shall be responsible for the truth of ALL representations or statements made by the agent . . . of which that agent . . . had . . . or should have had knowledge . . . to ANYONE injured by their falseness or inaccuracy."  (Emphasis added.)

OUCH!

How many times have you put something in the MLS that you "thought" was true (like # of bedrooms in a house, or # of units in a "4-plex") that you later learned didn't qualify as a "legal" bedroom or was a bootlegged unit?  Under certain circumstances a Listing Agent can be responsible for "injury" (i.e., money damages) to a buyer, even if not a Dual Agent.  Oh, and not only do appraisers have liability too, but they can rely on that same MLS info and if they get sued, they can cross-complain against the agent for indemnity. 

You get sued for "negligence" and at the end of the trial - you lose.  If that's not bad enough, then the "other" lawyer brings a claim for "attorney fees" based on "breach of contract."  "WHAT?" You say.

It CAN be done.  If the "negligence" relates to a listing or other written agreement that has an attorney fee clause.

Normally, attorney fees are recoverable only if a contract (or statute) provides for it.  Fees are not recoverable for a "tort" like negligence.  But a clever lawyer can nail a broker for fees, after proving only a negligence claim, if the complaint is worded "just right."  As one appellate court said, it all depends on how you look at it. We just think it's Chicken Sh-t to sue a broker and not say what for.

California withholds 3 1/3 percent of the total sales price on sales of real property (that's "sales price", not "profit"). This is not an added tax or fee, but a prepayment of the tax on capital gains expected to be paid.

The good news: Lots of exemptions, most notably - this doesn't apply to personal residence (even if you didn't live in it for 2 of the past 5 years), corporate sellers (sometimes), partnerships and foreclosures. Who's left? Individual investors (but 1031s are exempt). You can get a refund it too much was withheld.

The bad news: California withholds if the deal shows a profit, whether actual dollars end up in the seller's pocket or not. And, oh yeah, do you owe back taxes? Well, for your convenience, and California's coffers, if it turns out you are entitled to a refund of the withholding, California will use it to pay your back taxes for you. It's just a little service they provide for you.

It used to be one of life's tough choices: take the $250,000 exclusion on your personal residence, or move out and turn your house into a rental so you can rollover in a IRC 1031 exchange.

Now, you can do both.  How?  Live in your place for 2 of the last 5 years, and then turn it into a rental.  When you've held it long enough as a rental (yes, no on knows for certain what "enough" means), exchange it.  You get your $250,000 exclusion from gain ($500,000 if you're married), and any gain leftover rolls into your new investment property.

Can you do this now?  Yes.  Can you go back and claim a refund?  Yes. Can you take money out of the sale and not pay tax on it? Yes you can.  Is it rare that the IRS tells us how to save taxes?  Absolutely.  So follow the IRS' revenue procedure carefully.

Quick Review:

Income property bought 22 years ago for $100,000 is now worth $700,000, and has only a $15,000 remaining balance on the mortgage.  Profit: $600,000.  (Nice job, by the way.)  Taxes due (based on long term capital gains rate of 28%): $168,000; you keep: $432,000  (Not as nice.)

IRC section 1031 is your friend, and allows you to "defer" payment of that tax by, buying a second property with the profits of the 1st.  The replacement property needs to be worth at least as much as the 1st one ($700,001) and the new mortgage needs to be at least as much as the old one ($15,001).  You need to identify the replacement property within 45 days, and close escrow on the purchase within 180 days after the sale of the 1st one.  Oh, and you don't pay the IRS that $168,000.  For a while, anyway.

Yup, there's lots more conditions and details.  But, that's what we're for.

What many don’t know is that you must follow very strict rules in recording that lis pendens, or it is invalid. And if the owner brings a motion to expunge it, and wins, the owner “shall” be awarded attorney fees. In some cases, the owner can get attorney fees, even if the lis pendens is voluntarily withdrawn before the hearing on an expungement motion.

Those words can save somebody when a 3rd person makes a claim of ownership adverse to theirs. Like the times when a sellers sells the property twice. Who owns it when the first buyer didn’t record the Deed yet? Generally, the second buyer if they record their deed first!

Recording laws are designed to give protection to an innocent 2nd buyer who has no notice of the 1st buyer’s claims.

As always, there are “exceptions” to the Rule.

Do you need to file a 25102(f)? What is a 25102(f)? How do you set up Articles of Incorporation? What is an SS-4 and how do you get one? Do you need one? (Yes !)

Creating (or running) a business is stressful enough without having to worry about all the legal technicalities. Besides, that’s what we do.

Can somebody buy real property without a written agreement? Generally, no. But then again, there are always exceptions.

The “Statute of Frauds” states that an agreement to buy real property must be in writing to be enforceable. One of the exceptions to the Statute of Frauds is when a buyer of real property actually moves in (thus the “possession is 9/10ths” argument) and also starts making improvements on the land. The Statute of Frauds is designed to make sure that “important” contracts, like those relating to buying real property, those that take more than one year to perform, guaranties, and those for goods more than $500, are all in writing. This protects both sides from the “but, s/he really said” arguments.

Sound familiar? It happens more than we'd like to admit. The legal phrase for what's happened is the creation of a resulting trust. (Which is not a constructive trust, but that's another postcard...)

Can the "true owner" get the property back. Usually.

1. relationship of cost to curative action to rent reserved
2. the term of the lease
3. relationship of the benefit to the landlord when it gets the premises back
4. whether the curative action is structural or not
5. the degree that the tenant's enjoyment of the premises is hampered during the construction of the curative action; and
6. the likelihood the parties contemplated the application

Generally, a surrender must be expressly made; but a landlord can fall into a trap by impliedly accepting a surrender and losing the right to collect otherwise due rent. How? By leasing the property to another without stating the new lease is on behalf of the old tenant, by remodeling the space so as to make it unusable by the first tenant, or by agreeing to return the security deposit upon receiving keys from the old tenant, or by taking over the tenant's position as an "assignor" if there is already a sub-lease or assignment.