Real Estate Legal Updates

Fall, 2010

LAND INTERESTS EQUITABLE EASEMENTS WHEN ALL ELSE FAILS

California Courts have shown an increased willingness to allow equitable easements under certain circumstances.

Simply defined an easement is a right to use land that belongs to someone else. An easement can be created by a written agreement between the parties or ordered by a court of law.

Under California Law there are at least 5 types of easements:

1. 1. An easement created by an express written agreement between the parties;
2. 2. An easement by necessity;
3. 3. A prescriptive easement;
4. 4. An implied easement; and
5. 5. An equitable easement.

Each type of easement has its own requirements.

The equitable easement basically arose out of a sense of fairness. It can be created by court order where to deny a party an easement would be unfair under all the circumstances and relative benefits and hardships on the parties.

In making its determination of whether or not to create an equitable easement the court will consider:

1. 1. Whether the party seeking the easement knew that he was using another’s land and whether he had a good faith belief that he was not using another’s land;
2. 2. There can be no irreparable harm to the landowner whose land will be burdened by the easement unless it is in the public interest;
3. 3. The cost of removing the use of the land must outweigh the cost of continuing the use of the land.

Note that in fashioning an equitable easement California Courts have a fair amount of discretion. For a further explanation of the other types of easements in California please feel free to contact us.

REAL ESTATE-SALES

BROKER DUTY TO DISCLOSE WHEN THE PROCEEDS OF A RESIDENTIAL SALE ARE SUBSTANTIALLY LESS THAN NEEDED TO CLOSE ESCROW EVEN IF NO SHORT SALE IS CONTEMPLATED.

In a surprise ruling the California Court Of Appeals articulated a new broker duty. In Holmes v. Summer, a Broker was aware that a Seller needed a “substantial amount of cash” to close a transaction. The Court stated that the Broker had a duty to disclose this to a prospective Buyer before the offer to purchase the property was accepted by the Seller. The Court further stated that this disclosure is re- quired even if the transaction is not a short sale and the Seller states that he or she will make up the difference between the sales price and sales proceeds with cash.

Unfortunately the court did not give adequate guidance on what constitutes a “substantial amount of cash”. Additionally, Brokers and their Agents should note that there is a duty of confidentiality owed by a Broker to a Seller concerning confidential financial information.

The Court did not give very clear guidance on when the duty to disclose outweighs the confidentiality duty. My best advice is that Brokers and Agents should inquire of the Seller at the point of listing if the proceeds of the asking price are sufficient to cover the loan payoffs and all closing costs. If they are the Seller should make that statement in writing. If they are not the Broker or Agent should get written permission from the Seller to disclose this to the Buyer prior to acceptance of the Buyer’s offer even where there is no short sale contemplated. The Broker should then of course disclose it to the Buyer in writing and have the Buyer sign the disclosure.

The Court also stated that if there is a shortfall and the Seller refuses to allow the Broker to disclose this fact to the Buyer the Broker should turn down the listing.

The Court’s ruling applies only to residential real estate sales. I expect that we will see more of these types of cases and hopefully more guidance from the Courts in the coming months.