Real estate contacts fall under the same body of law that governs all contracts. The intent of the parties controls the interpretation. There are usually mutual promises given in consideration of each other, and each party is both a promisor and a promisee. There are express and implied contracts. Real estate contracts usually must be in writing, and if the agreement by its terms is not to be performed within one year from the date it is made, it definitely must be in writing. Fraud and mistake can vitiate a contract.

Real estate brokers (and real estate agents) have a special relationship with their clients. This is called an "agency relationship". The relationship is created when the client authorizes the broker to conduct a transaction with third persons on behalf of the client and to exercise a degree of discretion in effecting the purposes of the client. The relationship establishes a fiduciary relationship. As a fiduciary the broker has the same obligations of diligence and faithful service as a trustee. The real estate broker becomes a fiduciary in relations with the client and assumes duties of skill, care and diligence, obligations, and high standards of good faith.

An escrow is where a legal document is delivered by a seller to a third person to be held until the occurrence of a condition, at which time the legal document is handed over to the buyer. Any deposit of money or documents into escrow becomes irrevocable once there is a binding and enforceable contract between the parties supported by adequate consideration (or value). The seller retains the risk of loss for damage to the property by fire or other calamity until either title or possession is transferred to the buyer. Title insurance is a contract of indemnity that indemnifies (or holds harmless) the insured against a loss for a condition or fact that existed on the date the policy was issued. Common policy provisions indemnify for defects, liens, encumbrances, and easements of record, and provide for marketability of title.

Real estate brokers (and real estate agents) have a special relationship with their clients. This is called an "agency relationship". The relationship is created when the client authorizes the broker to conduct a transaction with third persons on behalf of the client and to exercise a degree of discretion in effecting the purposes of the client. The relationship establishes a fiduciary relationship. As a fiduciary the broker has the same obligations of diligence and faithful service as a trustee. The real estate broker becomes a fiduciary in relations with the client and assumes duties of skill, care and diligence, obligations, and high standards of good faith.

An estate describes an ownership interest that a person has in real property that is, or may become, possessory, and which is usually measured in terms of duration. For example, a fee simple estate is an estate for an indefinite duration, while a life estate is an estate for the duration of the life or lives of one or more persons. All estates are interests in land, but not all interests in land are estates. Security devices, such as mortgages and deeds of trust or easements are interests, but they are not estates.

There are several ways to hold title to real property. "Joint tenancy" is an estate with two or more co-owners who take identical interests simultaneously by the same instrument and with the same right to possession. "Community property" is owned in common by husband and wife as a result of its having been acquired during the marriage by means other than an inheritance or a gift to one spouse, each spouse generally holds a one-half interest in the property. "Community property with right of survivorship" is community property but on the death of one of the spouses, the property passes to the survivor like joint tenancy, without administration, pursuant to the terms of the instrument. "Tenancy in common" is created in favor of two or more persons unless a partnership was established, or joint tenancy was declared, or the property was taken as community property.

California has a race-notice statute, which provides that the first to record has priority, if he or she had no notice of a prior interest.

Real estate contacts fall under the same body of law that governs all contracts. The intent of the parties controls the interpretation. There are usually mutual promises given in consideration of each other, and each party is both a promisor and a promisee. There are express and implied contracts. Real estate contracts usually must be in writing, and if the agreement by its terms is not to be performed within one year from the date it is made, it definitely must be in writing. Fraud and mistake can vitiate a contract.Real estate brokers (and real estate agents) have a special relationship with their clients. This is called an "agency relationship". The relationship is created when the client authorizes the broker to conduct a transaction with third persons on behalf of the client and to exercise a degree of discretion in effecting the purposes of the client. The relationship establishes a fiduciary relationship. As a fiduciary the broker has the same obligations of diligence and faithful service as a trustee. The real estate broker becomes a fiduciary in relations with the client and assumes duties of skill, care and diligence, obligations, and high standards of good faith.

Land development involves land use regulation, subdivisions, dedications, environmental regulation, common interest developments, and covenants, conditions, and restrictions.

The general plan is the most important document when it comes to land use planning and local agency regulation. All future development in a county or city must conform to the general plan. Specific plans are considered the next most important form of land use regulation. They implement the general plan and fill in details for specific areas of the general plan where needed. Zoning is the third most important form of land use regulation.

The Subdivision Map Act and Subdivision Land Act regulate and control the development of land in California to ensure that subdivisions conform to the general plan, specific plan (if there is one) and zoning. The Subdivision Map Act regulates and controls the subdivision, design and improvement of real property, while the Subdivision Land Act regulates and controls the offering and sale or leasing of subdivided interests and parcels of real property.

Dedications involve interests granted to the government in exchange for a project’s approval. There must be a nexus between a project and any dedications required by the government.

The California Environmental Quality Act ("CEQA") is a regulatory scheme that is designed to protect the environment. It requires that every public agency obtain an Environmental Impact Report ("EIR") prior to approving any discretionary project, if it can be "fairly argued", based on "substantial evidence" in front of the agency, that a project will have a "significant effect" on the environment.

The Davis-Stirling Act regulates developments that have commonly owned areas as well as individually owned areas, such as a condominium projects, planned developments, stock cooperatives or community apartment projects. The Act discusses powers and obligations of associations and how to conduct matters of common interest.

Covenants, conditions and restrictions ("CC&Rs") that run with the land are promises and restrictions on the use of real property that follow the property from one owner to the next, even though the subsequent transferees do not contractually assume any responsibility for their performance.

A construction contract is a contract between a property owner and a contractor. A construction contract is formed by negotiation or bid. While a bid is an offer, an invitation to bid is not an offer. Bids must conform to the specifications of the project to be accepted. A contract between a subcontractor and a general contractor follow the same rules as construction contracts. Special protections are required in a home improvement contract. If there is no specified time to complete construction, a reasonable time is implied. If an architect is hired by the owner, he or she is considered an agent of the owner. If no price is specified in a construction contract, the price is the cost of construction plus profit and overhead. If there is a problem with a contract, the contractor can still sue under quantum meruit for services rendered.

Contractors or subcontractors may use several methods to enforce their construction contracts. One method is to file a mechanic’s lien to seek foreclosure of the property. Another method is to sue on the contract for a personal judgment. Another method is to go after a bond. Every licensed contractor should have a bond, and public projects require bonds. A bond is a means by which a 3rd party indemnifies a party to a contract for a fee. Another method to enforce a construction contract is to enforce a stop notice with the construction lender or funding company. A stop notice is a written demand by a contractor on the owner, fund control company, or other custodian of the construction funds, to withhold sums claimed by the contractor.

Defective Construction involves the potential liability of contractors, subcontractors, material suppliers, architects, surveyors, engineers, inspectors, developers, and owners. Liability for residential units sold new after January 1, 2003 is covered by "SB800". SB800 provides statutory guidance on how to deal with builder warranties and repairs. A contractor is liable for defects in construction, not defects in plans or designs. An owner-builder takes on the liability of both seller and contractor. A contractor may be liable for breach of contract, negligence, implied warranty and fraud. Indemnity clauses and insurance policies may provide relief to contractors. A subcontractor is only liable for a portion of the work according to the plans and specifications. Engineers and architects owe professional standards of care as independent contractors, and their contracts must be in writing. Developers are often treated as manufacturers with respect to their liabilities. Certain immunities and protections apply to inspectors.

Common issues facing landowners from adjoining landowners are, boundary disputes, encroachments, ground support issues, water flow issues, interference from neighboring trees, and issues related to common walls and fences. An encroachment is the extension of a building or other structure beyond the boundaries of the land on which it was rightfully constructed onto (or over) adjoining land without the adjoining landowner’s permission or consent. When an encroachment actually rests on adjoining land, it constitutes a permanent trespass. When it merely intrudes into the airspace above the adjacent property, it is not a trespass, but may be a nuisance.

An easement is an interest in land owned by another person, consisting in the right to use or control the land, or an area above or below it, for a specific limited purpose, for example to cross it for access to a public road. Easements are created and terminated in a number of different ways.

Adverse possession is the use or enjoyment of real property for a prescribed period of time with a claim of right. The use or enjoyment must be continuous, exclusive, hostile, open, and notorious. A party can acquire title to property by adverse possession. A party can acquire the right to use property (e.g. create an easement) by something called prescription. For adverse possession, the claimant must pay property taxes and have exclusive use. This is not required for prescription.

There are many areas of the law in which real estate owners are exposed to liability. The law prohibits discrimination based upon race, color, religion, sex, national origin, family status, or physical or mental disability in the area of selling, leasing, or lending upon real estate. Nuisance is a potential area of liability. A nuisance is a condition, activity, or situation (such as a loud noise, foul odor, an obstruction, something injurious to health or indecent or offensive to the senses) that interferes with the use or enjoyment of property.

A landowner is liable to someone injured on his or her property if there was a duty of care that was breached and this directly caused injuries to another who suffered damages as a result. Usually, the landowner must have knowledge of the dangerous condition and the ability to control the condition and prevent the injury. Landowners, tenants, and other parties may be responsible for cleaning up properties affected by hazardous or toxic substances even though they did not cause the contamination. A contaminated property is a trap for the unwary.

Mortgages and deeds of trust are used to secure real estate loans. A deed of trust operates like a mortgage except that it conveys title to real property to a trustee as security until the grantor of the deed of trust repays the loan. If a secured piece of real estate is transferred, and the lender does not enforce an acceleration clause in the mortgage or deed of trust, the new buyer takes the property "subject to" the loan. The original borrower may still be liable unless the lender consents to an assumption. It is typical for lenders to assign their loans to other lenders. Filing a homestead protects a portion of the borrower’s equity in the event of a foreclosure.

When a borrower defaults on a real estate loan, the lender must first look to the security for the loan, and foreclose on the real property before going after the borrower’s personal property. If the loan has a power of sale clause, the lender can choose either court foreclosure or private sale. If a private sale is chosen, the lender cannot get a deficiency judgment to hold the borrower personally liable for any balance not recovered from the sale. If a court sale is held, and the original loan proceeds were used to purchase the property, in many cases the borrower cannot be held personally liable for a deficiency. An assignment of rents clause in a deed of trust or mortgage gives the lender the right to collect rents during the foreclosure of a non-owner occupied property.

Lenders must be aware that they can be held liable under many different circumstances. For example; improperly taking and processing loan applications, improperly making loan commitments and construction agreements, negligently disbursing funds, imprudently acquiring construction defects, contamination, and other liabilities through foreclosure, committing negligence, fraud, or circumstances of strict liability, breaching the covenant of good faith and fair dealing, violating the Truth-in-Lending regulations and disclosure requirements, violating the Real Estate Settlement Procedures Act ("RESPA"), taking kickbacks and unearned fees, exceeding the limitation on escrow deposits, violating the Predatory Lending Act, or violating the usury laws.

A lease grants the exclusive possession and use of property (but not title) to a tenant as against everybody else, including the owner, for a definite period of time in exchange for valuable consideration. If the term is for more than one year, the lease must be in writing. A lease option is an irrevocable right to lease. Both an assignment (transfer of all lease rights) and a sublease (transfer of a portion of lease rights) are permissible unless specifically prohibited in the lease.

Covenants in a lease are either dependent or independent. If a covenant is dependent, a party’s performance or tender of performance of his or her own covenant is a condition precedent to the right to recover for the breach of any covenant by the other party. If a covenant is independent, one party may sue for a breach of a covenant by the other without regard to whether the first party has performed his or her covenants. The warranty of habitability (i.e. landlord’s duty to provide habitable premises) is a dependent covenant in a residential lease but an independent covenant in a commercial lease.

Fixtures are incidental or appurtenant to land, are part of the real estate, and require a writing to be transferred. Personal property is not real estate.

A "mobilehome" is a structure designed for both human habitation and for being moved on a street or highway under permit pursuant to the Vehicle Code. Mobilehomes are generally governed by the Mobile Homes-Manufacture Housing Act, the Mobile Homes Parks Act, the Manufactured Housing Community Act, the California Factory-Built Housing Law, and the Mobilehome Residency Law.

When the owner of a mobilehome park owns the land and leases portions of the land to owners of mobilehomes, laws similar to the usual laws applicable between landlords and residential tenants apply. When the owner of a mobilehome has an ownership interest in the mobilehome park as part of a condominium, cooperative, or subdivision, different laws apply.

Foreclosure Sale Injunction: Benefits

In the current real estate market, commercial lenders tend to treat borrowers who have missed one or more loan payments the same. There is seldom an inquiry into why the payments were missed. The lenders tend to be aggressive and want immediate payoffs, late fees, penalties, etc. They usually want to strictly enforce balloon payments, despite the fact that they could be receiving interest rates well above the market rate. In general, the lenders tend to believe that they do not have to give an inch before foreclosure.

Oftentimes, the borrowers just need time to catch up on loan payments, time to refinance, or time to sell the property. Temporary restraining orders (temporary injunctions) and preliminary injunctions can be effective tools against unyielding lenders to stop foreclosure sales. Borrowers can gain valuable time without using up their limited right to bankruptcy. In addition, bankruptcy generally stays on a borrower’s credit for 10 years.

Although it is necessary to file a lawsuit before a motion for an injunction can be brought (if the lender has not already done so), the rewards can be significant. Injunctions force the lender to be flexible. They force the lender to look at the implied covenant of good faith and fair dealing in every contract and the materiality of the breach. Injunctions are particularly powerful when the property is not upside down. The main issue discussed with respect to an injunction is whether or not the borrower will suffer irreparable harm if the injunction is not granted.

Environmental Contamination: What to do if your Property is Contaminated

Real property cases in older areas often involve environmental contamination and multiple “responsible parties”.  It is important to maintain the contact information for anyone who owned or leased the contaminated property and for anyone who may have caused the contamination, including neighbors, contractors, occupants, etc.  It is also important to maintain control of any cleanup efforts if you are paying the bill.  Finally, it is important to check on whether or not you are covered by insurance or a government reimbursement program.