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subdivisionAuthor: Staff

Investing in California real estate often requires assistance from real estate professionals, who have specialized education and experience in particular aspects of the real estate business. The term “professional” often means that a person has obtained a license or certification from a state agency charged with monitoring and enforcing ethical obligations. Certain professions require a license from the state, followed by continuing education and adherence to a code of conduct, like California real estate agents and brokers.

The term “professional,” however, sometimes simply refers to an individual who works in real estate, but who is not bound by a specific code of professional ethics. In either case, real estate professionals owe certain duties to clients and investors, and are liable for damages if they breach those duties.

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commercial propertyAuthor: Staff

For California real estate investors, rental property can produce reliable revenue streams, but these come with responsibilities. Landlords leasing residential properties in California have numerous obligations under various implied warranties. Leases for commercial property have far fewer built-in obligations for landlords. A commercial landlord’s obligations are often limited to the specific terms of the lease contract. Commercial tenants, on the other hand, may have many additional obligations beyond paying rent. While this might appear to benefit landlords, it can also mean significant losses if a commercial tenant breaches their lease. California investors should know the remedies available to them.

Commercial vs. Residential Leases

As mentioned earlier, commercial leases are subject to fewer requirements under California law than residential leases. A commercial lease, for example, does not include the implied warranty of habitability, which obligates a landlord to maintain leased premises in liveable condition for the benefit of tenants. By contrast, maintenance of the property, or even construction of improvements on the property, could be a tenant’s obligation under a commercial lease. Commercial landlords could lease a property on an “as is” basis, as long as the tenant has given informed consent to this arrangement.

Commercial landlords in California are usually bound by the covenant of quiet enjoyment, which protects the tenant’s right to use the property for the purposes expressed in the lease. Unlike residential leases, this covenant can be waived in commercial leases, with the agreement of both parties.
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Legal News GavelAuthor: Staff

With regard to how they can invest their money, California real estate investors have many, many options. They can invest directly in a project, becoming a co-owner or creditor. An investor who joins a project as an owner or partner might take an active role in the project. Investors who prefer a more passive role can invest in a formal business structure like a real estate investment trust (REIT), which is similar to buying shares in a corporation, or a real estate syndicate. (You can read about the differences between a REIT and a real estate syndicate here).

Investors in a real estate syndicate pool their money for a particular project, which might involve improvements to an existing property or an entirely new development. The person or business that initiates the project is known as the syndicator. While the investors take a passive role, the syndicator manages the project, usually in exchange for a fee and a percentage of the profits. The investors place a considerable amount of trust in the syndicator, so it is worth reviewing the duties that a syndicator owes to them.

What Is a Real Estate Syndicate?

A real estate syndicate is a way to finance a project or development through private investors. While REITs typically invest in numerous real estate projects and ventures, a real estate syndicate usually exists to invest in a single project. The same group of investors may go on to invest in more projects together, but they would do so as a new syndicate.

Real estate syndicates in California are often established as limited partnerships (LPs), with the investors as limited partners and the syndicator as general partner. Under this type of business structure, the investors are shielded from liability, but cannot have a direct role in the real estate project. Other syndicates may form as limited liability companies (LLCs), in which the investors own the majority of the business, but leave management and operation to the syndicator.
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Legal News GavelAuthor: Staff

Buying real estate is a risky venture for investors, with buyers betting on the property increasing in value or producing a revenue stream through rental. Buyers also take various chances regarding unknown defects in the property’s title, or defects in the property itself. Researching potential defects is a critical part of any California real estate investment. California law requires sellers of certain types of real estate to make a variety of disclosures to buyers, in the interest of giving prospective buyers as much relevant information as possible. Most of these disclosure rules apply to residential real property. Some investment properties, such as rental houses, are subject to residential real estate disclosure requirements. The sale of an apartment building with more than four dwelling units, however, is not necessarily subject to those rules. It is, however, subject to other disclosure requirements, including known defects or hazards, particularly environmental hazards. California also requires disclosure of certain earthquake risks.

Residential vs. Commercial Property

Residential properties, defined as properties with one to four dwelling units, are subject to a substantial number of disclosure requirements in California. Residential rental properties can appear to fall into both categories, since they are residential for tenants, but commercial for owners. Rental houses, duplexes, and other small structures generally fall under the “residential” category. Sellers must follow the residential disclosure guidelines, even if the buyer is another investor. Larger apartment buildings, on the other hand, are not necessarily subject to those requirements.

Common Law Disclosure Requirements

A 1963 decision by a California appellate court, Lingsch v. Savage, establishes that sellers of commercial property have a duty to disclose any facts known to them that “materially affect[] the value or desirability of the property.” Failure to do so with the intention of inducing someone to purchase a property can result in civil liability for fraud.
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Legal News GavelAuthor: Staff

Ownership of real property in California includes various rights, along with a wide range of restrictions. The specific restrictions will vary from one location to another. Property owners may restrict the use of a piece of property by subsequent owners through restrictive covenants, which are included with the documents transferring title. Some restrictive covenants “run with the land,” meaning that they are binding on subsequent owners of the property. In planned residential developments, the covenants, conditions, and restrictions (CC&Rs) enforced by a homeowners’ association (HOA) include restrictive covenants affecting the use of individual properties. In relatively rare cases, the grantor of a property may set restrictions on the use of the property, resulting in loss of title by the grantee if they violate those restrictions. California real estate investors should carefully examine any possible restrictive covenants affecting property.

Public versus Private Restrictions

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Legal News GavelAuthor: Staff

Ownership of real property includes certain exclusive rights. The owner of real property has the right to improve the land, such as by building a house or other structure. They also have the right to exclude other people from the property without permission. But these and other rights are subject to limitations. A property owner can make improvements to the property, provided the improvements do not violate local zoning ordinances. The right to exclude others from one’s property might be limited by easements attached to the property.

What is an Easement?

An easement is a nonpossessory interest in real property. That means that the owner of an easement does not have the right to actual possession of the property. California real estate investors should check the title history of a property carefully to look for easements.

Positive vs. Negative Easements

An easement can either give others the right to access portions of the property for limited purposes, known as a “positive easement;” or restrict certain uses of the property by the owner, known as a “negative easement.”

A positive easement is one that allows the easement owner to use some part of the property for a specific purpose. California law identifies various purposes for which property owners may grant easements, including:
– Passage over their land, known as a right-of-way;
– Hunting, fishing, or other recreation; and
– Obtaining “water, wood, minerals, and other things.”
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Legal News GavelAuthor: Staff

California’s coastline is one of the state’s greatest assets. It offers some of the best scenery in the world, draws countless tourists, and boasts some of the highest property values in the state. Coastal property offers many opportunities for California real estate investors, but a unique set of rules may apply. The California Coastal Act (CCA) regulates an area known as the Coastal Zone. Back in the 1970’s, the state created the California Coastal Commission (CCC) to enforce the CCA. An issue that has caused controversy recently in cities and towns up and down the coast involves vacation rental homes, commonly known as short-term rentals (STRs). The CCC must approve municipal regulations affecting coastal STRs. It recently rejected an ordinance in Del Mar that would have limited the duration of time STRs could be rented to the public.

A voter initiative in 1972 first established the CCC, and it became a permanent part of the state government when the California Legislature enacted the CCA in 1976. It has jurisdiction over the Coastal Zone, and a significant part of its purpose is to preserve access to the coastline and public beaches. According to state law, the Coastal Zone extends from the U.S.-Mexico border to the California-Oregon state line. It begins at the “state’s outer limit of jurisdiction” in the Pacific Ocean, and extends inland “generally 1,000 yards from the mean high tide line of the sea.” The inland extent may be less than one thousand yards in urban areas, and more in undeveloped areas. Beachfront properties almost everywhere in the state are located within the Coastal Zone. Continue reading

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Legal News GavelAuthor: Staff

Purchasing real estate in California requires a careful review of the property’s title history to avoid a variety of potential problems. Mortgage lenders usually require title insurance to finance a purchase. Title insurance companies will conduct their own review of the title history, but they do so to protect their own interests, rather than the buyer’s. The title insurer will notify the lender and purchaser of known or potential title defects that they will not cover, meaning that the purchaser could still be liable for some problems. It is in the best interest of every California real estate investor to research and investigate the property’s history. The following is a list of a few issues that might appear in a property’s title history.

Errors and Omissions

Clerical and filing errors can have serious repercussions for real property. A deed that incorrectly identifies the boundaries of a property, such as by leaving some portion of the property out of the legal description, can result in the loss of ownership of that part of the property. Other common errors include misspelled names of grantors or grantees, omission of legally required language in a deed, and misfiling of records.

Unknown or Missing Heirs

The general rule in the U.S., based on English common law, is that a grant of land is intended to be in perpetuity unless a deed specifies otherwise. The language used often states that the property is granted to the grantee “and their heirs.” If a previous owner of real property died, and the executor of their estate failed to locate or notify all of the owner’s heirs, those heirs could have a valid claim to some or all of the property, even years later.
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Legal News GavelAuthor: Staff

Purchasing real property is a major investment, not only of money but also of risk. Even if a California real estate investor has enough cash on hand to pay the full price without a mortgage loan, they are still bound by property taxes, land use restrictions, and market forces. Most purchasers of real estate already know about these risks, though. A lesser-known risk involves defects, omissions, or fraud in the property’s title. This can lead to problems that are difficult to foresee, such as claims to the property by a former owner’s previously unknown heir, or difficulty in establishing ownership because of a defective deed. Title insurance covers many of these potential issues. Lenders often require borrowers to obtain title insurance policies in order to protect their investments. California’s laws and practices regarding title insurance can be rather difficult to understand at first.

What Is Title Insurance?

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Buying-a-Fixer-Upper-300x225
Author: Seth Murphy

Seth Murphy first got into doing DIY projects to save money, but over time he has developed a real passion for this hands-on, intensive work. He created papadiy.com to share his ongoing projects and to motivate himself to do more.

As a new home buyer, purchasing a fixer-upper may seem like a lot of work, but it definitely has its advantages. For starters, a house that needs some love generally has a much lower price tag. Imagine how much you can save by buying a place that’s not turnkey! Secondly, fixer-uppers are an opportunity to create your dream home. (Yes, it may take a little bit of elbow grease, but rest assured, it can be worth it in the end.).

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