Legal Live Webinar: Condominiums and HOAs – Issues From the Hot Line
As housing costs continue to rise, we see more builders offering common interest developments of one type or another.  Common interest developments generally offer lower prices as well as a life style free of some up keep and maintenance responsibilities, leaving much of that to the Homeowners’ Association.  However, sharing facilities, responsibilities, obligations, and decisions with others can be complicated and have some downsides as well.

Join C.A.R. Attorney Howard Fallman for a legal webinar on Tuesday, October 6th from 1:30 to 2:30 p.m. for a discussion of some of the issues most often heard on the  C.A.R. Hot Line when buying and selling condominiums and dealing with HOAs.

You can sign up for this webinar at Space is limited and may fill up fast. You may want to sign up as quickly as you can. As soon as you register you should immediately receive a confirmation email which you will need to attend the webinar.

CalBRE Alert! 
The California Bureau of Real Estate (CalBRE) has recently issued an alert advising that they are taking notice of salespersons who may be acting as or advertising themselves as “independent” real estate licensees.  Under California’s licensing system, salespersons must always “hang” their license with and work under the supervision of a licensed real estate broker. It it unlawful for a salesperson to conduct licensed real estate activity of their own.  Further, a real estate broker is required to supervise all salespersons licensed under them.
CalBRE is primarily concerned with two activities. First – Property Management. A question that is often heard on the C.A.R. Hot Line is can a salesperson operate a property management business on their own?  The answer is NO!  A property management business must always be operated under the supervision of a licensed real estate broker.
Second – Branding as Independent Licensees. Beginning this year, salespersons have been able to use “Team Names” and to obtain and use “Salesperson-owned Fictitious Business Names.”  Perhaps due to this change in the law, CalBRE is noticing an upsurge in salespersons branding themselves as independent real estate professionals and acting as such, which is a real estate law violation.  CalBRE is also alerting brokers that facilitating such activity by a salesperson is likewise a real estate violation.
Salespersons can use team names and own and use fictitious business names but only when following the legal requirements and when affiliated with and operating under the supervision of a broker. C.A.R.’s Legal Q&A “Fictitious Business Names and Team Names“, will help you make sure that you are following the law. CalBRE has also issued guidance on this.

License and Legal Presence
Next month’s Realegal® will feature a summary of new laws affecting REALTORS®. However, SB 1159, signed by Governor Brown in 2014, has a feature that will become effective January 1, 2016 and provides a small lead in for next month. Persons applying for a real estate license will no longer have to provide proof of legal presence.  They will be required, however, to provide an individual tax identification number or social security number if the applicant is an individual.  See CalBRE’s notice.

Court Orders Rescission Even When Difficult
In most cases, when a buyer of real property sues the seller they keep the property and seek monetary damages for breach of contract or fraud.  However, in appropriate circumstances a party claiming they consented to the contract through mistake, fraud or undue influence exercised by the other party, may seek rescission of the contract by dissaffirming the contract, returning the property, and seeking damages incurred in the rescission. The intent of rescission is to restore the parties as nearly as possible to the positions they were in before entering into the contract.

 In the case of Wong v. Stoler, A138270, First Appellate District, Division One, June 23, 2015, the Court affirms the buyer’s right to rescission even though the trial court found that it was too difficult and not appropriate under the circumstances.  The Wongs, who purchased the property in May 2008, discovered the basis for their claims in November 2008 but did not bring their claim for rescission until after April 2009. During that time they made substantial changes to the landscaping and had started an extensive remodeling project including changes to the garage, the kitchen, a bathroom, and a bedroom closet with a cost of around $300,000. The sellers during that time had bought a new house and spent about $100,000 in renovations.  By the time of the trial about four years had passed since the 2008 purchase.
The basis for the buyer’s claims were that the seller did not disclose the existence of a private sewer system and mislead them about the existence of a homeowners’ association that was to maintain the system. In order for the original builders to get approval to connect the 13 homes on this private street to the public sewer, the City of San Carlos required the formation a homeowners’ association for maintenance. This was never formally done although there had been an informal association since about 2005.
The seller’s transfer disclosure statement indicated that the property was on a public sewer.  While the title documents reference sewer easements they did not clearly attach the easements to the 13 properties or make clear that there was a private sewer. The sellers did not disclose any homeowners’ association, instead telling the buyers there was no association, and they did not disclose any abatement citations or any past or present overflow, all of which at trail were established to have happened.
The trial court found that the seller had acted with reckless disregard in making negligent misrepresentations, that such misrepresentations affected the value of the property, and that the buyers would never have bought the property if they had known about the sewer system and the informal association. The trial court found that rescission would be too difficult citing the changes the buyers had made, the improvements the sellers had made on their new house, the passage of time, and that it would impose an undue burden on the sellers.
Instead, the trial court fashioned its own equitable relief requiring the sellers to indemnify the buyers for the costs of the sewer for not more than 10 years but capped at $360,000.  The court also found that there was an informal maintenance association among the 13 homeowners creating an equitable servitude running with the land, but recognized that it had no jurisdiction over the 12 homeowners not in court.
The Appellate Court found several problems with the trail court’s decision. First, the trial court relied too heavily on the harm that the sellers would suffer.  In plan language the Court, citing a 1923 case, stated “it is no one’s fault but his own, and he must sustain the necessary inconveniences thereby entailed.” Second, the trial court was overly concerned with the complications of unwinding the transaction. While it may be difficult the Court did not see it as insurmountable.  Finally, the Court remanded the case to the trial court to fashion an award giving complete relief including restitution of benefits and any consequential damages, with the goal, to the extent possible to restore the buyers to their status quo before the purchase. This case is a reminder that rescission under Civil Code §§ 1689 and 1692 are alternatives to seeking damages and difficult circumstances should not bar the equitable relief being sought. It is also a reminder that while location, location, location, is likely most important when selling a property, disclose, disclose, disclose is most important in keeping it sold.
A Bit More TRID
With the start date for the new Truth In Lending/TILA Integrated Disclosure literally just around the corner, the Consumer Finance Protection Bureau has annouced the addition of some new consumer tools to its “Owning a Home” site to help consumers with what they need to do during the mortgage process. These new tools include:
  • Guide to the mortgage milestones: The new “Owning a Home” site is organized into different phases of the mortgage process containing practical actions consumers can take, helpful information to keep in mind, and tips on how to avoid pitfalls.
  • Monthly mortgage payment worksheet: The tools include a monthly payment worksheet that helps homebuyers figure out how much they can spend on a mortgage.
  • Interactive sample of the new Know Before You Owe mortgage forms: These can help consumers double-check the details of their own transactions and get definitions for terms they may not understand. For example, for the Loan Estimate, the tool helps consumers check if their rate is locked, if the loan amount is the expected loan amount, if the interest rate is fixed or adjustable, or if there is a prepayment penalty. And “Owning a Home” shows consumers where to look, page-by-page, to check that terms and numbers on both the Loan Estimate and Closing Disclosure match.

The “Owning a Home” site can be found here. The CFPB also issued a press kit which helps to  visually explain the new forms and tools and includes sample documents, a video, and inforgraphics.