Author: ft Editorial Staff

Wellenkamp to Garn

This article the second part in a three-part series reviewing the history of the lender-borrower relationship. The first part, Pre-Wellenkamp history, can be found in our archives. This article focuses on the legal high ground held by owners against lenders and the sudden reversal of owners’ rights under federal mortgage law since the early 1980s. The third and final part in this series will conclude in May 2005. Editor’s note — We would be remiss if we did not acknowledge that the counsel for the plaintiff in the court case examined in this article, Wellenkamp v. Bank of America (1978) 21 C3d 943, was not other than our legal editor, Fred Crane. A sale without lender interference Until mid-1974, lenders consistently threatened to call loans due should the owner sell the secured property. Concern did not exist for either the type of sale, or the type of carryback financing arranged between the seller and buyer. If not paid in full or given a modification of the interest rate and monthly payments, the loan was called due. If the called loan was not paid in full or modified, a Notice of Default (NOD) was recorded. The trustee would then complete the foreclosure, unless the debt was renegotiated or paid in full. Most major lenders with competent legal advice were already aware the courts were not going to allow them to...

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Tiered tax rates on profit

This article sets forth the different tax rates for various amounts of ordinary income and different types of profit, the definition of terms and the accounting procedures for reporting profits. The batching and taxing gains On sales transactions involving one-to-four unit residential property, an Agency Law Addendum is required to be attached to the listing and purchase agreements. The addendum advises the buyer or seller to seek tax advice from a more “competent professional” than the agent they have employed under the listing agreement. [Calif. Civil Code §2079.16; see first tuesday Form 305] However, all real estate licensees are considered professionals. Further, they are permitted to give tax advice, voluntarily if they so choose, or to the best of their knowledge in response to the client’s inquiry, in any real estate transaction they are negotiating. The tax advice becomes part of the real estate services rendered for which they are paid. Thus, a broker and his agents may act as the “competent professional” sought out by the client to give advice. For a broker and his agents, knowledge about income tax law is a valuable asset to be put to work when assisting clients in real estate transactions. Tax knowledge, dispensed as advice in an opinion given to a client by a broker or sales agent, becomes “goodwill.” In turn, the earning power of the goodwill generates further employment...

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Environmental hazards and annoyances

This article presents the environmental conditions located on or in the vicinity of a property which adversely affect occupants of the property due to their injurious effect on the health or sensitivities of humans. Noxious man-made hazards Environmental hazards are noxious or annoying conditions which are man-made hazards, not natural hazards. As environmental hazards, the conditions are classified as either: injurious to the health of humans; or an interference with an individual’s sensitivities. Further, environmental hazards are either located on the property or originate from sources located elsewhere which affect the occupant in his use and enjoyment of the property. Environmental hazards located on the property that pose a direct health threat on occupants due to construction materials, the design of the construction, the soil or its location, include: asbestos-containing building materials and products used for insulation, fire protection and the strengthening of materials [Calif. Health and Safety Code §§25915 et seq.]; formaldehyde used in the composition of construction materials [Calif. Civil Code §2079.7(a); Calif. Business and Professions Code §10084.1]; radon gas concentrations in enclosed, unventilated spaces located within a building where the underlying rock contains uranium [CC §2079.7(a); Bus & P C §10084.1]; hazardous waste from materials, products or substances which are toxic, corrosive, ignitable or reactive [Health & S C §25359.7; Bus & P C §10084.1]; hazardous waste from the attempt to manufacture drugs [CC §1102.18]; toxic...

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The Civil Rights Acts of 1866 and 1870

This article presents the federal scheme that assures all races the equal right to sell, purchase or lease property without discrimination. Property rights cannot be based on race All citizens of the United States have the right to purchase, lease, sell, hold and convey real estate and personal property, regardless of race. [42 United States Code §1982] Further, all persons within the United States, legally or illegally, have the same rights to make and enforce contracts, sue, be sued, enjoy the full benefits of the law and be subject to the same punishments, penalties, taxes and licenses, regardless of race. [42 USC §1981] The protection against race discrimination given under The Civil Rights Acts of 1886 and 1870 applies to discrimination generally, and is much broader than the protection given under The Federal Fair Housing Act. The Civil Rights Acts of 1886 and 1870 apply to race discrimination on all types of real estate, not just residential real estate. In addition, the right to lease, sell, hold and convey real estate is further protected by giving all persons the right to make and enforce contracts regardless of race. Contracts in real estate transactions include purchase agreements, leases, trust deeds, grant deeds and quitclaim deeds. Thus, racially motivated actions in any real-estate-related transaction are prohibited. For example, a city housing authority is to construct low-income public housing. The city housing...

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Pre-Wellenkamp history

This article is part one is a three-part series examining the history of the lender-borrower relationship. Part one presents the background for the legal and legislative resolutions to the ancient conflicts between real estate owners and their lenders. Part two follows the history of due-on enforcement in “Wellenkamp to Garn.” The series concludes with part three in May 2005. Ownership objectives were paramount The demands for survival made by owners who have invested in real estate for income and profit and mortgage lenders who also invest based on the security value in the real estate collide when an owner encumbers real estate with financing. Owners and lenders are always competing for a higher return on their investment. Their investment positions generally are in conflict with one another, since the return to both the owner and the lender must ultimately come out of the property’s value and income flow. Capital growth and a return of equity are the owner’s objectives. Lenders seek an interest income yield, payable either out of the property’s income or for the owner’s use of the property. Pursuit of these conflicting goals often involves economic violence. Owners risk their invested money in the expectation of a return and to hedge against the constantly diminishing purchasing power of the dollar. The return is based on an owner’s projection of the effect the general and local economy will...

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