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California Real Estate Law Principles

DisclaimerThe materials available at this web site are for

informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between American Advantage Law Group and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

Who regulates conduct of real estate agents?

In California:The Real Estate LawCourt DecisionsDepartment of Real EstateRegulations of the Real Estate

Commissioner

The Real Estate LawDivision 4,Business and Professions CodePart 1 covers licensingPart 2 covers transactions and includes

Subdivided Lands Law

Regulations of the Real Estate Commissioner clarify and interpret the Real Estate Law

Real Estate Commissioner appointed by the Governor

Real Estate Advisory Commission appointed by the Commissioner

Six members--licensed California real estate brokers

Four members--nonlicensed members of the public

Department of Real Estate

Real estate brokerageBusiness in which real estate license-related

activities are performed under supervision of a licensed real estate broker

Corporate brokerage must have designated broker-officer

Broker/Salesperson relationshipUnder the Real Estate Law,

the salesperson is always considered the employee of the broker

Salesperson can do business only as an employee of a broker

Who doesn’t need a real estate license?

Person dealing with their own property Corporation acting through regular officers Licensed securities broker or dealer in sale, lease or

exchange of business opportunity Holder of power of attorney from property owner Attorney at law acting as an attorney Receiver, bankruptcy trustee or person under court order Trustee selling under deed of trust Employees of lending institutions, pension trusts, credit

unions or insurance companies, in connection with loans secured by real property or a business

Escrow agents collecting funds in connection with loans secured by liens on real property, when funds are deposited in escrow agent’s trust account

Real estate brokerAt least 18 years oldHonest and truthfulCompleted eight college-level coursesFulfilled experience requirementPassed broker’s licensing examSent in required feeCompleted 45 hours CE every four yearsObeys applicable laws and regulations

Real estate salespersonAt least 18 years oldHonest and truthfulPassed course in Real Estate PrinciplesPassed salesperson’s licensing examEmployed by real estate brokerPaid required license feeMust complete two more courses within 18

monthsMust complete 45 hours of CE every four

yearsObeys applicable laws and regulations

Major real estate trade associations—California Association of Realtors®—California Association of Real Estate Brokers—California Mortgage Association—California Association of Mortgage Brokers—California Association of Business Brokers—California Mortgage Bankers Association—California Building Industry Association—California Association of Community Managers

Historical perspectiveNative AmericansBalboa and conquistadores—1513

MissionsPresidiosPueblos

Mexican independence—1822California possession of Mexico

Treaty of Guadalupe Hidalgo—1848California possession of U.S.

California becomes a state—1850

California todayLand ownershipFederal 45%State 2%Local 2%Private 51%Population more than 33 million, with 97% in

metropolitan areas

Real propertyBundle of Rights:Right of PossessionRight to control property’s useRight to exclude othersRight to dispose of the property

Real estate can be explored, willed, mortgaged, encumbered, leased, traded, exchanged, given away

Definition of real estateIn California, “real estate” is the same as

“real property” and includes:1. Land2. Fixtures to land3. Anything incidental or appurtenant to

land4. Anything immovable by law

FixturesA fixture is anything attached (“affixed”)

to landTests for a fixture:Method of attachmentAdaptabilityRelationship of partiesIntent in placing on landAgreement of parties

Land descriptionTo avoid confusion in describing a parcel of

land, use:Legal descriptionAPN—assessor’s parcel number andStreet address

Methods of legal description of landLot and block system

also called subdivision system

Rectangular survey systemalso called section and township systemU.S. government survey system

Metes and bounds

Survey system in CaliforniaPrincipal base lines and meridians:

HumboldtMt. DiabloSan Bernardino

Township = 36 sectionsSection = 1 sq. mile = 640 acresAcre = 43,560 sq. ft.

Townships

36 square milesTownships run

north in tiers (think weddingsouth cake tiers)

east west in ranges

Estates in LandFee simple estateFee simple absoluteFee simple qualifiedLife estateReversion returns property to original

owner when life estate endsEstate in remainder transfers property

to someone else when the life estate ends

Taking title to real estateGrantor conveys title by grant deed to

grantee, who is identified as one of these:Single (never married)MarriedUnmarried (divorced)WidowWidower

Forms of ownershipOwnership in severalty is ownership by one

person.It is also called...

—Separate ownership—Sole ownership

Concurrent ownershipOwnership by more than one person can

be:Tenancy in common

Unity of possessionJoint tenancy

Unity of timeUnity of titleUnity of interestUnity of possession

Concurrent ownership (cont.)

Community property—Quasi-community property is property

acquired by an out-of-state married person (or California real estate acquired in exchange for real or personal property located anywhere) that would be community property if acquired by a California resident

Tenancy in partnership

Business ownershipof real estateSole proprietorship

CorporationFor-profit is owned by shareholdersNonprofit is owned by membersDomestic if incorporated in CaliforniaForeign if incorporated elsewhereS corporation offers tax advantages—A corporation can limit liability of officers, directors

and shareholders

Business ownership (cont.)

Trust—Title is conveyed by trustor to trustee for benefit of beneficiaryReal Estate Investment Trust (REIT):Regulated by Commissioner of CorporationsMust comply with federal and state tax lawMust be owned by at least 100 different investorsCannot have five investors own more than 50% of trustMust receive at least 95% of income from investmentsMust receive at least 75% of investment income from real

estate

Living trust

Business ownership (cont.)Limited partnership

Real estate syndicate—REIT, corporation, general partnership or

other entity

Limited liability company (LLC)

Information on the WebSecretary of State Business Service Center

www.ss.ca.gov/business/business/htm

How real estatemay be acquiredBy succession or will

dying with a will = testatedying without a will = intestate

By accessionimprovementsaccretionreliction

By occupancyadverse possessionprescription

By transferpublic or private grant or other means

California Law ofIntestate SuccessionCommunity property

If spouse survives:½ already belongs to surviving spouse

Remaining ½ goes to surviving spouse

Separate propertyTo surviving spouse, children (if any), and other next of kin as provided by California law

If no heirs are located, property escheats to state

Acquisition by accessionImprovements may increase property

Land adjacent to flowing body of water can be increased by accretion

New soil is called alluvion or alluviumSoil may be lost by avulsionReliction occurs when soil is uncovered as

waters recede

Acquisition by occupancyAdverse possession requires use to be:OpenNotoriousContinuousHostileAdverse to interests of real owner

Adverse user must pay property taxes

for at least five years of the possession

Acquisition by transferPrivate grantPublic grantPublic dedication

Common lawStatutory

Operation of law or by a courtAction to quiet titlePartition actionPower of saleJudicial foreclosure actionAction for declaratory relief

Acquisition by transfer (cont.)Execution saleForfeitureBankruptcyMarriageEscheatEminent domainEquitable Estoppel

Elements of a valid deed1. In writing2. Description of parties3. Grantor legally capable4. Description of property5. Granting clause6. Signed by grantor(s)7. Delivered to grantee and accepted by

grantee

Acknowledgment and recording– Document is executed when signed.– Acknowledgment is a declaration that

execution is declarant’s own act.– California-licensed notary public may take

acknowledgment anywhere in the state.– Recording must be done in the county

where the property is located.– Chain of title contains all instruments in

property’s recorded history.

Types of deedsGrant deed—implied warrantiesGift deedQuitclaim deedWarranty deed Trust deedReconveyance deedSheriff’s deedTax deed

EncumbrancesAn encumbrance is anything that affects or

limits the fee simple title to real estate oraffects the property’s condition or use.

Marketable title may be defeated by a cloud on the title.

LiensVoluntary = Agreed to by owner

Involuntary = Imposed without owner’s consent

Specific = On named property only

General = On all nonexempt property owned

Mechanic’s lien is available to any of the following employed by owner or owner’s agent:

mechanics, material suppliers, contractors, subcontractors, equipment lessors, artisans, builders, architects, registered engineers, licensed land surveyors, machinists, teamsters, laborers, and union trust fund

Mechanic’s lien Preliminary notice should be made within 20

days from the time work beginsStarting time of work determines priority of lien

claimantsCompletion time occurs when:

work stops and owner (or agent) occupies or uses improvement;

owner (or agent) accepts work;work has stopped for 60 continuous days; orowner files notice of cessation and work has stopped for 30

continuous days.

Mechanic’s lien (cont.)Notice of completion may be filed by

owner within 10 days after completion of improvement.

Filing time for mechanic’s lien: by original contractor of all or part of job, within 60 days

after filing of notice of completion; by any other claimant, within 30 days after filing of

notice of completion; or within 90 days after completion, if a notice of completion

was not filed.

Mechanic’s lien (cont.)If a mechanic terminates a lien

voluntarily, a release of lien should be filed.

Lien release bond allows owner or other party to stop foreclosure of lien if validity is disputed.

Notice of nonresponsibility must be posted within 10 days of owner’s knowledge of unauthorized work.

Legal processAttachment allows the court to take possession

of defendant’s assets.Judgment of court is its determination of rights of

parties.Final judgment becomes a lien on the property of

the judgment debtor after recording of the abstract of judgment.

Writ of execution from the court directs the sheriff to sell nonexempt property of debtor to pay judgment debt.

Discharge follows satisfaction of debt.Notice of satisfaction should be filed.

BankruptcyFederal court proceeding

Trustee in bankruptcy holds title to debtor’s assetsliquidates assets if necessary

to pay creditors.

EasementEasement is the right to use the land of

another.Dominant tenement benefits from

easement.Servient tenement is land over which

easement lies.Easement appurtenant runs with the landEasement in gross belongs to an

individual.

Creation of EasementBy contractBy express grant from owner of

easement propertyBy reserving an easement over land

that is transferredBy implication of lawBy long useBy condemnationBy prescription

Termination of easementExpress agreement of partiesLawsuitAbandonment (nonuse) of prescriptive

easementEstoppelMerger of dominant and servient

tenementsDestruction of servient tenementAdverse possessionExcessive use

RestrictionsCC&Rs

Conditions, Covenants and RestrictionsUsually found in declaration of restrictions filed by subdivision developer

Covenant is a promise to do or not do somethingCondition may be precedent or subsequentRestriction is prohibition against a use

A condition cannot impose a restraint on alienation—something that would prohibit the property from being transferred to a new owner.

Restrictions (cont.)CC&Rs are terminated by:

Expiration of termsVoluntary cancellationMerger of ownershipGovernmental actChange in condition that warrants court

action to remove the restriction

Other limitations on property useZoning—act of city or county

Encroachment—part of an improvement extends over a boundary line

Homestead—exemption from creditor claimsHomeowner $ 50,000Homeowner/family unit 75,000Homeowner/spouse 65 125,000Homeowner/spouse disabled

and unemployable 125,000Homeowner 55, low income 125,000

American Advantage Law Group3848 Campus Dr. Suite #206

Newport Beach, CA 92660 949-863-1888 (phone)949-863-1888 (fax)americanlawfirm411@gmail.com

Real estate seminars held 1 PM PST every Wednesday

DisclaimerThe materials available at this web site are for

informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between American Advantage Law Group and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.