Articles Posted in Title Issues

commercial propertyAuthor: Staff

Investing in California commercial real estate requires extensive planning and research. A prospective buyer must consider potential legal, financial, structural, and environmental issues. This process of research and review is commonly known as “due diligence.” Since every real estate investment is unique, the precise due diligence process will be different each time. The following is a very general checklist, which may apply to a wide range of properties.

1. Investigate both the property and the seller

Due diligence for a commercial real estate investment is about more than the property itself. An investor should also look into the seller’s reputation and their track record for similar transactions. Even if the property is spotless, an investment might not be worth the risk of an unscrupulous seller.

2. Title and Survey

Inaccurate identification of a property is a common complication. An investor should obtain the full legal description of the property, to compare to official real estate records.
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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

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

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?

Legal News GavelAuthor: Staff

Investing in San Diego real estate offers many great opportunities for returns, but it also poses many potential risks for losses and liabilities. Planning an investment requires researching and investigating risks associated with a particular property. This includes the property’s zoning designation and associated land use restrictions. The Land Development Code (LDC), located in Chapters 11 through 14 of the San Diego Municipal Code, sets forth the zoning regulations and procedures for properties located within the city. Zoning regulations allow certain types of construction and prohibit other types, but it is sometimes possible to get approval from the city to make an exception to the regulations, known as a variance. As a general rule, a variance cannot grant approval to a land use that has already been found to be in violation of the city code. This is why careful research on existing permits affecting a property is so important.

Zones and Regulations in San Diego

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Title Insurance

Author: Alejandro Ramirez.

Alejandro Ramirez, Esq. is the founder of AR | Legal Team.  You can read more of his posts at www.arlegalteam.com. He also works with Bona Law on real estate issues.

All too often, investors and business owners fail to give the title review process its due weight when making a major commercial real estate acquisition, and, as a result, they do not fully understand the title risks involved.

Upon receiving the preliminary title report (Preliminary Report) from the title company, parties sometimes fall into the temptation of skimming through the list of exception items without performing a careful review of the underlying exception documents themselves.  The failure to fully understand the title risks in a deal leads to mismanaged legal and financial risk.

Here are seven reasons to rethink the importance of title review:

  1. Vesting of title. Ownership needs to be fully ascertained to ensure that all seller parties are properly identified in the Purchase and Sale Agreement (PSA), conveyance deed, and any other ancillary documents.  Seems obvious, right? You’d be surprised.
  2. CC&Rs/Restrictive covenants. Covenants, Conditions & Restrictions, commonly called CC&Rs, and other restrictive covenants, should be carefully reviewed to ensure that compliance will not raise any issues for you.  Depending on your intended use, a use restriction can make or break a deal.
  3. Options/Right of First Refusals. Occasionally, options and other similar instruments are used to grant parties certain purchase or sale rights.  Inadvertently bypassing these rights can cause headaches for all.
  4. Easements. The analysis of easements that will survive closing is crucial. There are many kinds of easements (e.g., access, utility, parking, reciprocal, slope and drainage).  An easement may benefit or burden a property.  Buyers should determine if they are willing to live with the terms of the easements involved and whether any such easements will interfere with the buyer’s intended use of the property (and potential future uses by subsequent purchasers).  Oftentimes, certain types of easements (e.g., utility easements) are mistakenly viewed as standard or innocuous, however, buyers should note that the terms of an easement are negotiable.  As a result, the written terms can vary significantly, even as to easements recorded against the same property by the same parties.
  5. There are many forms of encroachments.  An encroachment can expose a buyer to possible liability in many ways.  For example, an encroachment may violate the terms of an easement agreement, or certain encroaching improvements may be subject to removal by the easement holder. In extreme cases, an encroachment may render title unmarketable.
  6. Maintenance Agreements. The maintenance and repair obligations for an easement shared by several owners may be memorialized in a maintenance agreement and recorded against the subject property.  Buyers should determine if they are willing to live with the terms of any applicable maintenance agreements.
  7. Other Unknown or Undisclosed Agreements. Occasionally, pertinent documents may not be provided by the seller. The seller may be unaware of their existence or may have negotiated these documents years ago, but may not remember or think to provide them along with the other due diligence deliverables.  However, their existence can sometimes be discovered if the document appears in the Preliminary Report or if it is mentioned in another document appearing in the Preliminary Report.

The above list is not exhaustive.  In some instances, depending on the context, a comprehensive title review may reveal issues that may justify a price reduction, especially if the seller understands that the issue would similarly affect a sales transaction with any other prospective buyer. An experienced real estate attorney will also be instrumental in reviewing the title commitment and proforma title policy, and suggesting applicable endorsements.

Tips for Carrying Out an Effective Title Review:

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