There is no legal requirement that mandates the hiring of a real estate lawyer serving San Jose when buying or selling property. However, failure to do so can cost you thousands of dollars in the long run. This is because a real estate lawyer will ensure full disclosure of necessary information, which greatly reduces the risk that the other party will sue you. Your real estate lawyer can also navigate state or county requirements to prevent you from incurring penalties, and he or she can negotiate for terms that are favorable to you, among many other functions.
Many buyers, particularly first-time buyers, fail to consider all legal issues when it comes to real estate transactions. A real estate lawyer will perform due diligence to ensure that all legal requirements are satisfied during the purchase or sale. This due diligence can include working with a title company to perform a title search and to set up title insurance and closing statements. A real estate attorney will also review financial information for the property and current leases of the property, which is especially important in commercial real estate transactions.
Another important job that a real estate lawyer will perform is drafting and reviewing agreements for your real estate transaction, such as letters of intent for purchase and sale agreements. Your real estate attorney can also help you negotiate a favorable agreement that protects your interests. If necessary, your lawyer can draft additional items to document the purchase or sale.
Oftentimes, to limit individual liability, it is advisable for people to take title to rental or commercial properties in the name of an entity instead of as an individual. A real estate attorney can form the entity for you and file all the necessary paperwork.
Recordation of Documents
The recordation of real estate sales or purchases is a very important aspect of these transactions, as it can affect property rights. Your real estate attorney can record grant deeds with the county recorder’s office, and work with the recorder’s office or the assessor’s office to resolve any issues that might arise.
A great way to figure out whether someone’s behavior in connection with a contract or agreement is reasonable is to look at how courts view such things when resolving disputes. A recent disagreement over an easement provides such a perspective, and has application to many other types of commercial transactions. The case* in question illustrated what sort of conduct is reasonable and what is not.
As a general rule, all parties are required to behave reasonably and in good faith in performing any agreement or contract. As an attorney representing banks, lenders, parties in financing transactions, real estate purchasers and property owners in real estate matters in San Jose, Silicon Valley and all around California, I often am exposed to situations in which a question arises about whether someone’s conduct is out of line, so this sort of “temperature check” is useful.
A Refusal To Sign Perfunctory Paperwork
In the case at hand, Party D (plaintiff Dolnikov) owned land but accessing it required use of a driveway easement across the land of Party E (defendant Elizian). The easement had been granted in the 1940s and had been an encumbrance on E’s land ever since. D was in the process of building homes on two lots and each could only be accessed using the easement. As part of the project, D needed to excavate and build a small retaining wall on the existing easement to keep it clear of rock debris and improve the surface. These items were required as a condition to granting certificates of occupancy for the new homes and were in the approved building plans. The local authorities (Los Angeles) had a perfunctory requirement that Party E, who also had an interest in the property, needed to acknowledge a community driveway covenant and the retaining wall permit before they would issue the construction permit for the easement work. The problem? Party E (over whose land the easement ran) refused to sign. E tried to extract up to $200,000 from D as his condition to signing the required paperwork, which D viewed as extortion as she had been and going forward was only going to use the easement for its intended purpose and needed the signatures only to meet the local government requirements. At that point the project came grinding to a halt.
The Court: E’s Refusal To Sign Papers Interfered with D’s Use of the Easement .
A court reviewed the situation and determined that the work on the easement did not change its character or place any material burden on E, that E’s failure to sign two documents required by the city to allow construction to go forward was an unreasonable interference with D’s right to the easement, and ordered E to sign the two documents required under the local ordinances so D could obtain necessary permits to continue the construction.
The Requirement of Good Faith and Fair Dealing Extends to All Agreements .
An interesting aspect of the case is the focus on the covenant of good faith and fair dealing that runs through all contracts, including loan documents and purchase and sale agreements. The court noted that “defendants are also subject to the rule of reasonableness and mutual accommodation,” and “there was no evidence the signatures [being required] imposed a needless burden on defendants…” In other words, a party to an agreement has an affirmative obligation to cooperate in furthering the main objectives of the agreement. The specific context of this case was easements and the court concluded that the covenant of good faith and fair dealing does apply to them, which was not entirely clear before this ruling. Once making that determination, the court treated the analysis as it would any other modern commercial transaction. Commentators note that this case also is representative of a larger trend in terms of the application of the covenant of good faith and fair dealing to most commercial transactions. As such, it serves as a lesson about acceptable conduct for parties in any deal.
*Dolnikov v. Elizian, 222 Cal.App.4 th 419 (2013).
The information appearing in this blog does not constitue legal advice or opinion. Such advice and opinion are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.
In my experience representing banks, asset based lenders and private lenders in San Jose and throughout the San Francisco Bay Area, an overriding concern is to make sure that the lender has the ability to go after the collateral if the borrower does not pay for any reason. Accordingly, a lender, secured creditor or factor taking collateral for a loan* instinctively knows that you need to file a UCC-1 financing statement as part of the transaction. From the earliest days of training, it is drilled into most secured lenders that the UCC-1 is one of those items you must have. It “perfects” the lender’s security interest in collateral, which means that it gives your lien priority and makes the lien rights enforceable against third parties, bankruptcy trustees (if it ever came to that) and others.
UCC Filings and Marketing Strategies
One unintended consequence of UCC filings is beginning to come to light. That is, every filing potentially provides the world – meaning competitors – with information about the lender’s activities. The ongoing development of sophisticated databases allows a person so inclined to figure out who a lender is financing – i.e. who it has as its customers. That, of course, has the potential of leading to targeted marketing efforts. The purpose of this article is to point out that this use of a lender’s UCC filings, which is often not much thought about, is becoming more prolific as database analytical tools become more prolific.
The requirement of filing a UCC-1 financing statement is so fundamental to credit underwriting and the protections it provides are so substantial that it is out of the question for a secured lender, ABL lender or factor to consider going without one. With that strategy effectively off the table, we are seeing the rise of so-called representative parties or third party representatives who insert the representative’s name rather than the actual lender’s name on UCC-1 financing statements in the secured party box. If a representative party has multiple lenders using the service, it effectively disguises the identity of the actual lender. Of course, this disguise comes with a fee!
The legal underpinning for the use of representative parties is found in Section 9502(a)(2) of the California Commercial Code (and similarly numbered sections in other state’s commercial codes). Section 9502 provides that to be “sufficient” or complete, a financing statement must include the debtor’s name, a description of collateral, and the name of the secured party or a representative of the secured party .
You may hear more about use of representative parties, lender fictitious names and other disguising techniques going forward. The reason is straightforward: it is apparently becoming more necessary to foil the attempts of competitors in the marketplace to obtain a lender’s customer list through analysis of the data bases.
*(Note: The UCC filing is used in connection with liens on most business assets, but does not perfect a lender’s security interest in real estate and certain unique types of assets, which are not discussed in this article. )
The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinion are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.
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