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Oakland Real Estate Law Blog

Own Rental Property as an LLC

You should own their commercial rental property in a limited liability company to protect your other assets and savings from claims and liability for the actions or omissions of tenants, contractors and others. All sophisticated and well-advised owners of real estate do.

We practice what we preach. All of my family's apartment buildings are owned by limited partnerships and limited liability companies. My law practice is a limited liability partnership. Before I had partners, the lawyers I employed all worked for my professional corporation.

Putting your rental property in a limited liability company is easy, fast, inexpensive, and provides a lot of protection.

Landlord Loses Over Definition of "Affiliates"

The dictionary definition of "affiliated" may be narrower than you think. It only covers companies who are related by ownership. It does not cover persons who have some interest in common. As will become apparent, the thing affiliates have in common is that someone is in control. If the accused person was not controlling the person who caused the injury, whether directly or indirectly, or at least under the common control of a person who controlled the bad actor, directly or indirectly, then that accused person was probably not an affiliate.

If you see the words "affiliate" or "affiliated" in a contract, ask what the author means. The two sides may need to further define it or delete it.

Buyers' Broker Loses $925,000.00 Commission!

In Westside Estate Agency, Inc. v Randall, released on December 1, 2016, the Los Angeles Court of Appeal held that a broker representing a buyer, who did not have a written representation or commission agreement with the buyer, could not collect a $925,000.00 commission when the client bought the property the broker found, even though the buyer had signed an offer naming the broker as the selling broker entitled to receive a share of the commission, because that offer had been rejected by the seller, and the same property was ultimately purchased with another broker for the buyer.

Supreme Court Rules On Dual Agency

This morning, November 21, 2016, in a unanimous decision, the California Supreme Court re-affirmed that when the real estate agent for the seller and the separate real estate agent for the buyer, both work for the same real estate brokerage company, then they both are fiduciaries for both the seller and the buyer. That means both agents must tell the buyer anything they know about the property which would tend to lower the price, and they must tell the seller anything they know about the buyer's situation which might tend to raise the price. The only exception is a statute which says that the agents cannot tell the buyer that the seller is willing to accept a lower price and cannot tell the seller that the buyer is willing to accept a higher price. 

Deed of Trust Sham Guaranty

If a borrower for a loan secured by commercial real property applies for the loan in the person's own name, the lender is likely to insist that the property and the loan be in the name of a Single-Purpose-Entity (SPE). The lender does this in order to qualify for expedited relief from the automatic stay in bankruptcy, if the borrower tries to slow down or stop foreclosure by filing for bankruptcy. The lender also usually requires a guaranty by the parent company or owner of the SPE. If the money recovered in a foreclosure does not satisfy the loan, almost always the lender cannot recover the shortage from the borrower, but it can recover it from the guarantor. An important exception and defense for the guarantor is available where the lender required the borrower to be an SPE as a subterfuge to circumvent the anti-deficiency laws which protect the borrower against such a claim for the shortage. The law refers to such a lending structure as a sham guaranty.

A recent Court of Appeal decision holds that the sham guaranty defense is not available if the borrower applied for the loan to be in the name of an SPE, but only available when the owner or parent of the SPE applied for the loan directly and was re-directed to the SPE-and-owner/parent-guaranty structure by the lender.

This Time the Courts Got It Wrong

From time to time I write about a new court decision of interest to real estate and construction professionals, and punctuate my comments with the observation that the courts are not stupid and cut through the technical and procedural to get to what is really just. Not this time.

Business Owner Confesses He Needs Security Guards

It has happened again. The trial court and the Court of Appeal in Los Angeles have upheld a $5.42 million jury verdict, where the business posted two security guards in its unisex bathroom area all night until very late, and as soon as they left their post, an employee raped the plaintiff. The bar-club tried to defend by claiming that it had no duty to protect the plaintiff against being raped by one of its employees, because it was not foreseeable that such a crime would occur unless it posted guards. The trial court and the Court of Appeal rejected this defense, because by posting two security guards there every night for most of each night, the bar-club admitted it knew it needed guards in the bathroom area.

Marijuana Law: The Courts Aren't Stupid

MediMarts, Inc., a marijuana dispensary, sued the City of San Jose, to prevent it from enforcing its ordinance imposing its Marijuana Business Tax and requiring MediMarts to submit tax returns disclosing the amount of its sales of cannabis-containing-products, on the grounds that it violated MediMarts' Fifth Amendment right against self-incrimination. Unlike the First Amendment right to free speech which the U.S. Supreme Court has held applies to corporations, it held in 1906 that the Fifth Amendment right against self-incrimination does not apply to corporations.

Court Jurisdiction and the Internet

A person in Texas posts on the internet angry denunciations of a man in California, posts his address and the names of his wife and children, and encourages physical attacks on their persons and property. Can the man sue the person from Texas in California?

The answer is yes, but the lawsuit has to be done correctly. In this particular case, the California man tried to handle the lawsuit himself, made too many mistakes, and will have to pursue any further legal action in Texas, which he is doing.

No Insurance Coverage for Injuries to Unlicensed Contractor's Workers

Your unlicensed contractor or handyman does not have workers compensation insurance. If the work requires a contractor's license, and your contractor doesn't have one, then you are the direct employer of the contractor and each of her employees. If you, the property owner, do not have workers compensation coverage and workers compensation insurance is required by law, then the Labor Code imposes a rebuttable presumption that the "employer"/property owner was negligent. Since you the homeowner were not actively managing the work, especially safety procedures, overcoming the presumption is unlikely. There is no insurance coverage, and there is no monetary limit to the damages which can be awarded to the injured worker!

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