2008 CASE LAW AND STATUTORY LAW SUMMARIES RELATING TO REALTORS
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The following is a summary of interesting case law and statutory law enacted in the year 2008 concerning the real estate industry. The text of any cited case below is available on line or through my office if you should want to review the entire decision.
Steiner v. Thexton (2008) 163 Cal.App.4th 359. The Court held that a Buyer could not enforce a purchase contract which contained contingencies based upon Buyer’s “sole and absolute discretion”. Agents should avoid drafting contingencies based upon Buyer’s “sole and absolute discretion”. Drafting enforceable purchase agreements with contingencies just got harder.
PROPERTY MANAGEMENT AS “HIGH RISK”.
Tan v. Arnel Management Co. (2008) 162 Cal.App.4th 621. Courts continually expand a property manager’s duty to protect tenants. This case held that a property manager has a duty to protect a tenant from being shot by criminals in an apartment complex in a high crime area. Insurance companies now regard property management as a “high risk” area of the real estate business. Many errors & omissions insurance policies exclude property management leaving the Agent and Broker with no coverage for claims. Agents engaged in property management beware.
ARBITRATION AWARDS ARE FINAL.
Hall Street Associates LLC v. Mattel, Inc. (2008) US Supreme Court No. 06-989. Parties agreeing to Arbitration in the RPA have no right to appeal. The US Supreme Court held that an Arbitration Award cannot be overturned even when based upon glaring errors of law. In other words, the Appellate Court will uphold all Arbitration Awards including those based upon legal error. Parties to real estate contracts should think long and hard before agreeing to Arbitration. The following language added to the Purchase Agreement would be favorable:
“The Arbitrators shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error. Except as specifically set forth, the award is not appealable.”
COMMERCIAL LEASE SQUARE FOOTAGE DISCREPANCY.
McClain v. Octagon Plaza, LLC (2008) 159 Cal.App. 4th 784. Court permitted tenant to sue for misrepresentation based upon difference in square footage in a commercial space notwithstanding disclaimers in the lease agreement. Commercial landlord cannot rely upon a contractual stipulation whereby the parties estimate square footage or upon related disclaimers. If square footage is not accurate, then the tenant may sue the landlord for a rebate in rents regardless of disclaimer provisions in the lease.
UNENFORCEABLE FORBEARANCE AGREEMENT.
Secrest v. Security National Mortgage (2008) 167 Cal.App.4th 544. In this case, Borrower signed and returned a forbearance agreement to the lender with payment of $13,000.00 as required by the forbearance agreement. Lender never signed the agreement, but accepted the money. Two years later lender foreclosed. Court held that the forbearance agreement was unenforceable because it was not signed by the lender. Loan modifications, short sale approvals and forbearance agreements are unenforceable unless signed by the lender. Get lender’s signatures at all cost.
People v. Martinez (2008) 161 Cal.App.4th 754. Jury convicted agent of forgery when the agent told the client she was signing a Bankruptcy Petition when, in fact, the document was a Note and Deed of Trust paying money to the agent. This case is important because a forgery was committed when an agent, by fraud or trickery, causes his client to sign documents without understanding the nature of the document. In other words, an agent commits forgery even though his client signed the documents.