Aronowitz Skidmore Lyon Q & A

In a couple of years, this property will be worth much more than its current price, so said the real estate agent. Is the real estate agent liable if the property loses value instead?

As the real estate market heats up, the urge to jump back into real estate as an investment is alluring. However, investors should treat real estate agents' representations about future appreciation with caution. While a real estate agent may be confident that the value of the property will rise in the future, the agent does not have a crystal ball. Often, representations about future value are nothing more than mere opinions which are not actionable. We can help determine whether a false representation is actionable.

-Lawrence E. Skidmore

Why do attorneys generally prepare such long and complex written contracts and other agreements?

Most attorneys recognize that while the parties to a contract or agreement agree as to what they are respectively supposed be doing, in general, they rarely look at the written documents. It is only when there is a disagreement or confusion as to the parties' rights and obligations under the agreements that they turn to the written documents. The purpose of a well-drafted agreement is to set forth not only the parties' rights and responsibilities, but also how and where disagreements will be resolved. Taking time at the outset can save much more later on.

-Paul S. Aronowitz

I have my contractor's license and I want to put it into a limited liability company I'm forming. Are the license requirements any different?

There are some significant differences imposed by the Contractor's State License Board when a contractor's license is issued to an LLC. The CSLB requires LLC's to maintain a $100,000 bond in addition to the standard $12,500 bond, as well as requiring LLC's to carry a minimum of $1,000,000 in liability insurance. Given the additional requirements, you should not only weigh the cost, but also be sure you can meet the standards for an LLC before beginning the process. We can help you determine which business structure best fits your goals.

-Erin J. Tognetti

The streets in my development are public, but our CC&Rs restrict our parking more than the public ordinances. If we leave a car on the street overnight we can be fined. Is that legal?

The CC&Rs governing a planned development can be more restrictive than local ordinances provided they are not directly contrary. For example, if an ordinance allows parking on public streets up to 72 hours, your CC&Rs can restrict parking to 24 hours. CC&Rs can even restrict what type of animals you can have and how many. The police will not enforce the CC&Rs, but if the CC&Rs include the proper procedures, your homeowners' association can fine you. It is important to read the CC&Rs and make sure you can abide by the rules before buying a home in a development.

-Kathleen Córdova Lyon

We would like to use our home as a short term vacation rental. Our Homeowners Association rules restrict short term vacation rentals and charge extra fees. Is that legal?

The short term vacation rental industry is new and rules are still developing. Whether your HOA can legally restrict the practice or impose extra fees depends on the Association’s authority under the governing documents and the impact the renters have on the Association. Short term renters tend to cost HOA’s more than permanent residents because they use common facilities more intensely and require more staff time to supervise. We can assist you if you want to take part in this exciting new industry.

-Lawrence E. Skidmore

I am purchasing a house with my boyfriend. We intend for the house to go to the other if one of us dies. Will holding title as joint tenants accomplish this?

If you hold the property as joint tenants, it will pass to the other upon death. However, there are several ways either party in a joint tenancy can convert the joint tenancy to a tenant-in-common interest, such as selling all or a portion of their interest to another. If that happens, the joint tenancy will be severed. Unfortunately, you may not find out until the death of that person and the property would not pass directly to you but rather pass according to the transferred interest. We can help you with several options to reduce this risk.

-Kathleen Córdova Lyon

I'm buying a house where the owners converted the garage into living space. Does it matter whether or not they obtained permits from the county before performing the conversion?

Whether improvements were properly permitted can affect many facets of your home purchase. If the work required a permit and is not permitted, they cannot add the square footage of the garage to the overall square footage of the house. This could have implications during the appraisal process because, if you are paying top dollar for the house and getting a bank loan for the purchase price, the appraisal may not be high enough without including the converted garage square footage into the home’s value. The owners can apply for an after-the-fact building permit if this becomes an issue. If you have concerns about improvements to the property you are purchasing, you should talk with an attorney.

-Erin J. Tognetti

I am presently in contract to purchase an investment property. Can I sell another similar property without paying taxes on the gain?

Since you are already contracted to purchase the new property there are two alternatives: 1) Do a simultaneous exchange. i.e. sell the one you own by exchanging it for the new property. It may be difficult to get the property you want to sell and the acquisition to close escrow at the same time; or 2) You can do a reverse exchange where you have an accommodator acquire the new property and hold it till you can sell your existing property. There are strict rules and deadlines so consult an attorney to ensure that you will comply with current laws. We can also help you with understanding and structuring this type of transaction.

-Kathleen Córdova Lyon

I read your article regarding sick pay, but what if my company wants to combine sick time and vacation time into PTO, personal time off?

The benefit of a combined PTO plan is that it limits the number of days your employee can take off with pay. For example, if they have 3 weeks' vacation and are sick for a week, the sick time will be PTO, limiting their vacation to 2 weeks. This can be desired in a small company where you cannot handle long absences. PTO accrues like vacation. Accrual can be limited, but must be paid at termination, unlike sick pay. Provided you have a written policy stating that sick days must be taken as PTO, you are compliant with that part of the new sick pay laws. Consult an attorney to ensure that your plan will comply with current laws.

-Kathleen Córdova Lyon

I am a relatively small employer. I heard there are new rules on sick time. Do these apply to me? What can we expect?

On July 1, 2015 new "sick pay" rules take effect. All employers are required to give a minimum of three paid sick days per year. They can fully vest at the beginning of each year or accrue by the hour. If you chose the latter, sick pay can accrue for two years. If you choose full vesting at the start of each year, there is no carryover to the next year. A terminated employee is not entitled to unused sick pay. There are pros and cons to each method depending on your business. Make sure you are compliant with all of the new sick pay and written policy requirements. There are high penalties for noncompliance.

-Kathleen Córdova Lyon

As the owner of a multi-tenant commercial building, what are my rights to sue my tenant if he starts a fire that damages my building?

Although there may be claims you can assert if the tenant was negligent in starting the fire, most modern commercial leases for multi-tenant buildings provide that the landlord and tenant waive claims against each other for damage to their own property. That waiver is typically part of an intertwined set of clauses that promote an efficient, cost-effective resolution for property damage with each party accepting their own risk of loss while being properly insured against that risk. Consult with legal counsel if you have questions about your commercial lease.

-Lawrence E. Skidmore

Does a foreclosure sale wipe out a junior mechanic's lien?

Where it would appear that a mechanic's lien was "wiped out" by a foreclosure sale of a senior obligation, title insurance companies may not insure the property without a recorded instrument withdrawing the lien. A property owner can make a demand of the claimant to record a Release of Mechanic's Lien and Withdrawal of the Lis Pendens (if a Lis Pendens was recorded). If a Withdrawal is not provided, legal recourse is available to accomplish this which could include recovering your attorney's fees and costs.

-Kathleen Córdova Lyon

We are buying property and were asked to make a decision whether to elect arbitration to resolve any disputes that may arise from the transaction. What is arbitration?

Arbitration refers to an alternative method of resolving disputes outside of the court system. It can have many similarities to court but the principal differences are that arbitration requires the agreement of both parties to participate and a private individual or individuals, as opposed to judges, are selected to decide the case. There are other differences as well that you should discuss with legal counsel to understand before electing arbitration. We are prepared to help you make that decision as well as represent you if you find yourself in arbitration.

-Lawrence E. Skidmore

I am on the Board of my HOA. We send out a yearly request for volunteers but rarely get a response. Since responses are limited, we do not hold elections. Is this Ok?

No, that is not ok. The Davis Stirling Act governing most HOAs has strict requirements for elections and voting. Ballots must be sent out and elections must be held regardless of volunteer turnout. It may seem like a waste of time and money, but failure to follow the Davis Stirling Act in many instances can subject the HOA to a lawsuit from an unhappy homeowner, possibly resulting in fines and payment of their attorneys’ fees to correct the infraction. We can help your HOA determine if it is in compliance with the Davis Stirling Act.

-Kathleen Córdova Lyon

The buyers who purchased our house claim we failed to disclose a material condition. They are demanding mediation. What is mediation and are we required to participate?

Mediation is a process for resolving disputes outside of, or in conjunction with, the court system. A mediator helps the parties to negotiate a settlement. It is non-binding, that is, nobody is required to agree to a settlement. However, if agreement is reached, it is binding. Successful, mediation can save the parties time and money over standard legal channels. We can help you determine whether the purchase agreement obligates you to participate and represent you through the mediation process.

-Lawrence E. Skidmore

I have a trail running thru my property which people hike, bike, and ride on. Can I restrict public use?

It depends on the length of the use by the public. If the use commenced after 1968 then that use does not create a perpetual right. However, if public funds have been used for repair or maintenance then you might not be able to restrict public access. Our office can assist you in determining your rights.

-Paul S. Aronowitz

I hold a promissory note and deed of trust on a property of a company that just filed a Chapter 11 bankruptcy reorganization. The company is in default. Can I foreclose?

Maybe. The company (Debtor) must file a plan of reorganization. If your interest in the property is adequately protected, i.e., there is enough equity or income to assure you will be paid, then you will not be able to foreclose. If not, you will have to make a motion in the bankruptcy court to have the automatic stay removed from the property so you can notice the default and proceed to foreclose. This complicated process is called following someone into bankruptcy, which lour firm can guide you through.

-Kathleen Córdova Lyon

I’m selling my home and the buyer has asked me to carry-back a portion of the purchase price on a note. Should I?

Seller carry-backs are not uncommon. Sometimes the buyer pays the note in full and everything works out fine. However, it is important to understand that when you carry back part of the purchase price, it is “purchase money” meaning your note is a non-recourse loan. This means that if the buyer defaults on your note, you have no recourse and you cannot sue for the unpaid balance. This makes it a risky practice for an individual and you should definitely consult an attorney to understand the potential risks before agreeing to carryback a note.

-Erin J. Tognetti

I want to sell my business and am concerned about what I will have to represent to a Buyer about the business, what records I should turn over and when. Is there a rule of thumb as to these matters in the sale of a business?

Depending on the nature of the business, what you have to represent and what records you turn over to a prospective buyer will vary greatly. Generally, before any records are turned over, you should have an agreement about confidentiality and restrictions on the use of the information. The timing and scope of the records or information provided will depend to a large extent on the proprietary nature of the information and/or its ability to allow the buyer to compete against the business. As to what representations you need to make, this is a critical area that could lead to future liability and should be examined carefully on a case by case basis. Consult an attorney to determine what is appropriate in your circumstance.

-Paul S. Aronowitz

After a disagreement over fees with a customer, he left a terrible online review claiming that my work was defective. Is there anything I can do?

The answer depends on the truthfulness of his statements. If he makes entirely untrue claims as to your workmanship, then his post is defamatory and unlawful. If his statements are overly critical, but mostly true, they may not be defamatory and you may not be able to demand a retraction. If his post falls into a third category where he makes a vague statement that could be opinion, you also might not be able to demand a retraction. Consult an attorney to determine your rights to a retraction and potential damages for defamation.

-Erin J. Tognetti

My company operates only in California, but we have national suppliers’ contracts that require legal action to be brought in another state. Is this binding?

A clause in a contract that requires litigation in a specific county or state is a Forum Selection Clause. Companies often overlook these clauses tucked away in the miscellaneous section at the end of a contract. In most cases, particularly commercial contracts, the Forum Selection Clause is binding. Litigating in another state can be extremely expensive and potentially fatal to your action, particularly when your witnesses are local. Legal counsel can help you with the several exceptions existing in California.

-Kathleen Córdova Lyon

What are my responsibilities if my hourly paid employees work off the clock without my knowing?

Whether an employee voluntarily remains to complete a task or responds to work related e-mails after hours, employers may find themselves confronted by wage and hour claims for off-the-clock work. Generally, an employee is entitled to be paid for all time spent working for an employer that the employer knows or has reason to know is being done. If you suspect your employee is working off-the-clock, consult with legal counsel about your rights and obligations to employees to protect yourself against wage claims.

-Lawrence E. Skidmore

The fence between my neighbor's property and my own is falling down. Can my neighbor force me to pay for half the cost to repair or replace the fence?

The law requires adjoining landowners to share the cost of repair or maintenance of a common fence. This is also true for shared private roads, which can be very costly. However, you have the right to at least 30 days' notice of the repairs needed and the estimated costs. The repair or replacement must be reasonable. If your neighbor insists on new electric gates, it's unlikely you will be required to pay for half. Seek counsel if you feel you are being taken advantage of.

-Kathleen Córdova Lyon

When my tenants left my rental property, they left behind several of their personal belongings. What can I do with them?

The manner in which a landlord must deal with property left behind differs depending on whether the tenants left voluntarily or were, instead, evicted. Generally, the tenant must receive notice that the landlord will hold their property for a specific time, after which, if they don’t retrieve it, the landlord will dispose of the property in the legally required manner. Without the proper notice, the landlord can be liable for improperly disposing of the property. Consult with legal counsel for guidance specific to your situation.

-Lawrence E. Skidmore

My neighbor's tree is growing over my fence and is becoming a nuisance. I've asked him to do something but he refused. Can I cut it back myself?

Property owners do have some rights to protect their property and the tree's encroachment does interfere with your property rights. However, a property owner should be cautious when exercising "self-help." If you harm the tree, you could be liable for up to three times the value of the tree. Also, you'd be surprised how often property owners learn that their boundary line is not exactly where they thought it was. This could open you up to liability for trespass as well as injury to the tree. Oftentimes, it’s best to go the legal route and not risk opening yourself up to liability.

-Erin J. Tognetti

I want to buy a note secured by a deed of trust on commercial property from a private party. I am told the deed of trust is in first position. How can I be sure?

Notes can be modified or assigned to the extent that the deed of trust securing the note may have lost value or position. To protect yourself, you should purchase the note through escrow and purchase a lender’s title policy on the deed of trust. If the deed of trust already has title insurance, you may be able to purchase a less costly endorsement of the prior title and the transfer to you. An attorney can help you review the title so you know exactly what you’re buying and can be assured and insured.

-Kathleen Córdova Lyon

My partner in our construction company is the qualifier for the company’s contractor license. After she retires, can we still use her as the qualifier?

This is the flipside to a licensing question I answered earlier. As I explained then, the qualifier, the Responsible Managing Officer (RMO) or the Responsible Managing Employee (RME), must exercise direct supervision and control over the company’s construction operations. If, after retiring, your ex-partner does not do that, your company, even though holding a license, could be contracting without a license. Not only is this a crime but it can jeopardize your ability to get paid for your work. If your business structure is changing, consult with legal counsel to understand the effects of the change.

-Lawrence E. Skidmore

Can I be a qualifier on a contractor license for a partnership if I’m not involved in the business? I would be paid a consulting fee to allow the use of my contractor license.

As the qualifier for a contractor license, also known as the Responsible Managing Officer (RMO) or the Responsible Managing Employee (RME), the law will require you to exercise direct supervision and control over the partnership’s construction operations. If you are not involved in the business, you are not fulfilling those obligations. Not only does that expose you to discipline on your contractor license, you could also be facing criminal charges. Effective January 1, 2014, it is now a crime for a qualifier to fail to exercise the direct supervision and control the law requires. Next time, we’ll explore concerns for the partnership.

-Lawrence E. Skidmore

I am the Plaintiff in a law suit and I have found during the suit that it is no longer in my best interest to continue. Can I just dismiss the case?

There are times a plaintiff will find that continuing with an action is no longer feasible. This may occur when you find evidence that weakens your case, or when health issues make it difficult to continue. If you simply dismiss the case, defendant(s) are legally entitled to seek costs, such as filing fees to answer or for motions made during the case. You may consider settling for a smaller sum with a release of costs, or get defendants’ agreement not to seek costs in exchange for a dismissal. An attorney can help you understand your exposure to costs.

-Kathleen Córdova Lyon

I bought the assets of a business, but I operate it under a new name. A former employee of the old company has brought a claim against me. Can he do that?

Unfortunately, yes. There is something called "successor liability" and, in certain circumstances, it can lead to you being liable for acts by the predecessor company. The former employee would need to claim that you are basically the same company and the court would look at your facility, your employees, your products, etc. to make that determination. If the prior company is still around, your purchase contract may include terms that could provide you some recourse. Seek the advice of an attorney to best protect yourself in this situation.

-Erin J. Tognetti

I am thinking of purchasing property and the title company says there is a "lis pendens" recorded against the property. What is my exposure as a buyer?

A lis pendens is a notice of pending action recorded against a property when there is litigation regarding an interest in the property. It could be a disputed easement, a boundary line, or outright ownership. A lis pendens effectively puts the buyer on notice of the dispute and if you purchase, you take title subject to the outcome of the dispute. The winner of the litigation would have rights superior to yours and you could lose the property. Do not ignore a lis pendens! Consult with an attorney to understand your options.

-Kathleen Córdova Lyon

I own a commercial building and one of my tenants hasn’t been paying rent. I served a 3-day notice to pay or quit and they still haven’t paid. Can I put a chain on the door?

Absolutely not. You have followed proper procedure by serving them with the 3-day notice, but that doesn’t give you the right to lock them out after their three days are up. If you chain the door, you could actually be liable to them for the lockout and be subject to fines and damages. You need to continue the legal procedure and proceed with an unlawful detainer action against your tenant. An unlawful detainer action is fairly straight-forward and an attorney can help you legally evict your tenant.

-Erin J. Tognetti

Recently we answered a question from a handyman about needing a contractor's license, but what concerns should the homeowner have if hiring an unlicensed contractor or handyman?

The price may be attractive, but there are several concerns to the owner. The Contractors State License Board has no authority over the unlicensed person to answer to complaints about their work. An unlicensed person may not be as competent and is unlikely to get permits for the work or carry liability insurance to pay damage or injury claims. Also, an unlicensed person can be considered the owner's employee requiring the owner to get workers compensation insurance or be liable for injuries on the job. Consult with legal counsel if considering hiring a contractor.

-Lawrence E. Skidmore

We are in a business acquisition and have a few outstanding issues we think we can resolve but not before closing. Is there a way to keep the closing date and protect me as buyer?

One way to ensure the buyer is getting what it believes it is buying, is to split the transaction into parts if possible and wait for resolution of the parts with issues. If that is not possible, seller can carry back a note equal to the portion of the acquisition in question until the issues can be resolved. A well written short-term note tied to the issues and with reasonable interest can be a win-win for buyer and seller. Other approaches may be possible given the transaction. Review of any approach by your legal counsel is strongly recommended.

-Kathleen Córdova Lyon

I had a contractor do some work on my house, but he did not complete the work properly and I'm thinking about suing him. Will I be able to recover the attorney's fees?

In general, the "American Rule" is that parties in litigation pay their own attorneys' fees unless the prevailing party is specifically granted recovery of those fees in the contract or by statute. Even if you and your contractor entered in to a written agreement, you will not be entitled to recover your attorneys' fees unless the contract specifically states that in the event of litigation, the prevailing party's attorneys' fees will be paid by the losing party. Contact an attorney to determine if you would be able to recover attorneys' fees in your situation.

-Erin J. Tognetti

My neighbor and I have an oral agreement allowing me to use a road across his property. Do we need a written agreement?

If the use is intended to be permanent and available to subsequent owners of your property, yes. The agreement should also be recorded as an easement. Otherwise, it is permissive use and the neighbor's consent may actually prevent you from developing rights to the roadway. In most cases, agreements involving an interest in real property must be in writing. However, special circumstances can cause oral agreements to be binding. It is best to seek legal advice to ensure enforceable real property interests.

-Kathleen Córdova Lyon

I'm selling my house. In the past we've had some minor flooding in the garage, but it hasn't happened in the last 5 years. Is that something I have to disclose to the buyer?

A good rule of thumb is that if you're asking whether an item should be disclosed, it probably should be. You are better off disclosing more than may be legally necessary. If the buyer has a problem in the future and they feel the condition should have been disclosed, you could spend money to defend yourself in a legal action, being responsible for repairs, or in some cases, having the sale canceled. Even if the flooding has only been minor in the past, if you don't disclose and your buyer complains, you could be on the hook.

-Erin J. Tognetti

I am a painting contractor. When I work as a subcontractor, I typically do not give the 20 day pre-lien notice. It seems threatening to the owners. Do I need to be concerned about that practice?

Yes, yes, and, I cannot say this louder, yes. Do you like to get paid for your work? If you do, the preliminary notice is required to enforce a mechanics lien and other statutory remedies for payment. Without a preliminary notice, you forfeit those statutory remedies to get paid. How about keeping your hard earned money and keeping your license clean? You can be fined and disciplined if you fail to give the preliminary notice when required. Bottom line, there is nothing threatening about the preliminary notice and most importantly you protect your rights to payment. Seek legal advice if you have questions.

-Lawrence E. Skidmore

My mother passed away and left property to my 2 sisters and me. Both sisters want to keep it and I want to sell. What can we do?

If no one has enough money to buy you out, you can file an action in court for Partition. If the property can be split, the court will likely order "partition in kind," to split the parcel into separate pieces. If it cannot be split, the court will order "partition by sale," which will force the sale of the property and a split of the proceeds. A partition action can be complicated. You should seek legal advice to get the best value.

-Kathleen Córdova Lyon

I am buying rental property and want to reduce my personal liability as to the property. Would holding title to the property under an LLC help?

Maintaining an LLC just to reduce your personal liability for your rental property may be more expensive than it is worth. You may be able to achieve a better result through less expensive personal insurance umbrellas. It depends on the equity in the property and your personal net worth. You should contact your carrier for quotes and seek counsel if it is unclear to you.

-Paul S. Aronowitz

Does my neighbor have the right to trim my tree? She claims branches that overhang into her yard block her view and drop leaves she doesn't want to pick up.

Short answer: Yes, but. While you may own the tree, the branches, fruit and everything else the tree produces, your neighbor has the right to remove branches that overhang into her yard. She can remove the branches even if her only reason is to improve her views. The "but" part of the answer is that she must act "reasonably" when trimming the tree. She cannot cut down the entire tree or trim the tree in such a way as to destroy the tree. If she does, she may owe you more than just the value of the tree. If you believe your neighbor has caused such damage, consult with legal counsel to know your rights.

-Lawrence E. Skidmore

My house is being foreclosed on. I have a first and a second loan on it, but the house will likely sell for less than I owe. Can the bank come after me for the difference?

Banks cannot recover money from you directly that was loaned to purchase your personal residence. If your first and your second were both strictly "purchase money," the bank cannot go after you for any deficiency after foreclosure. This extends to refinanced mortgages of the original purchase money. However, if the second was taken out after purchase as a Home Equity Line of Credit (HELOC), the bank could attempt to recover any portion of that loan not paid off through the foreclosure sale when the HELOC is not the subject of the foreclosure. Consulting your legal adviser would be a good place to start.

-Erin J. Tognetti

I am a general contractor and want to be covered by my subcontractor's insurance for any work they do. Is a certificate from their insurer naming my company as an additional insured sufficient?

A certificate naming you as an additional insured may only be enforceable if the contract between your company and the subcontractor expressly requires both coverage and proof of coverage. If the contract does not require this, the certificate is likely not effective if the certificate says, "as required by contract." The contract between your company and the subcontractor should specifically call out what you are being insured for. You may want to consult with an attorney regarding your contracted insurance requirements for liability as well as indemnification for defense of litigation.

-Kathleen Córdova Lyon

I'm buying a house and the title company gave me a ton of paperwork to read. Do I really need to read it all or is it fairly standard?

Read it all. A Preliminary Title Report (given for your approval) lays out what your title policy will cover. The "Exceptions" section is critical because you are taking title subject to these exceptions (not covered). This section can refer to other documents (easements, maps, CC&R's etc.) Besides reading the Preliminary Title Report, you should request and review any documents referenced in it. If you are uncertain about anything, seek professional advice to avoid unpleasant surprises down the road.

-Erin J. Tognetti

We own a potbellied pig, Oink. Our homeowners association has notified us we are violating the CC&Rs because the CC&Rs allow only "usual household pets." Can the HOA force us to give away our family pet?

People keep many types of animals as pets. That can make defining a "usual household pet" troublesome. Unless your community CC&Rs or the HOA rules define the types of pets considered "usual," the HOA may not have the authority to banish Oink. However, HOAs have considerable discretion to interpret the CC&Rs and rules so long as the HOA acts within its authority, in good faith for the community and not arbitrarily. Legal counsel can help you determine whether the HOA can banish Oink.

-Lawrence E. Skidmore