Adverse possession

Improving property and making property tax payments is open and notorious occupation for adverse claim despite owner having no notice of occupation

Reported by Amanda Ripley

A property owner relocated outside California, leaving his property vacant. The owner’s neighbor occupied the property for nine years, making improvements, paying property taxes and establishing a homeowner’s insurance policy, despite having no legal interest in the subject property. Later, the owner became mentally ill and was found incapable of managing his legal affairs. After the owner died, the neighbor sought title to the property by adverse possession. The owner’s executor claimed the neighbor had not satisfied the requirement of “open and notorious occupation” since the owner was outside California and mentally ill during the neighbor’s occupation of the property and was unaware of the occupation. The neighbor claimed he had satisfied the requirement of “open and notorious occupation” since making improvements and taking on the property tax burden constituted such open and notorious occupation that the owner could be presumed to have had notice of the neighbor’s adverse claim despite living outside California and being mentally ill. A California appeals court held the neighbor had satisfied all the requirements to establish title by adverse possession, since the possession was sufficiently open and notorious and the owner was presumed to have had notice of the adverse claim, despite having had no actual notice. [Nielsen v. Gibson (2009) 178 CA4th 318]


Buyer permitted to cancel sale contract upon discovery of contaminated property

Reported by Alex Gomory

A buyer entered into a purchase agreement to acquire a property and opened escrow. During the escrow period, the property was found to be chemically contaminated. Due to concerns about the contamination, the buyer cancelled the purchase agreement and escrow to avoid it closing. The seller later resold the property for a substantially smaller amount. The seller made a demand on the first buyer for the difference between the purchase price agreed to by that buyer and the resale price, which the buyer refused. The seller claimed he was entitled to the difference since the lower resale price was the result of a drop in the property’s value during the period before escrow was cancelled. The buyer claimed the seller was not entitled to the difference between the two prices since the change in price was due to the contamination on the property and the passage of time, not any failure of the buyer’s performance due to the cancellation of the purchase agreement and escrow. A California court of appeals rejected the seller’s demand for his loss of the difference between the price agreed to by the buyer and the resale price he received since the buyer’s failure to close escrow on the sale was excused due to the discovery that the property was contaminated. [Sharanbianlou v. Karp (February 5, 2010) _CA4th_]

Covenants, conditions and restrictions

Owner is obligated by CC&Rs to clean drainage channels within HOA-maintained landscape area

Reported by Alex Gomory

The covenants, conditions and restrictions (CC&Rs) for a common interest development (CID) required the homeowners association (HOA) to maintain landscaping in specified areas and granted the HOA a nonexclusive easement over lots for this purpose. The CC&Rs also required each homeowner to maintain drainage channels located on his lot. The owner of a lot within the CID failed to maintain a drainage channel located in an HOA-maintained landscape area on his property. The HOA made a demand on the owner to repair the drainage channel, claiming the maintenance of drainage channels located within a lot was the owner’s responsibility under the CC&Rs. The owner refused to make the channel repairs, claiming the HOA was responsible for them since the channel was located within the HOA-maintained landscape easement on his lot. A California court of appeals held the owner was required under the CC&Rs to maintain the drainage channel repairs throughout his lot since the HOA’s obligation to maintain landscaping did not supplant the unrelated requirement that the owner maintain all drainage channels on his property, regardless of their location within the lot. [Starlight Ridge South Homeowners Association v. Hunter-Bloor (2009) 177 CA4th 440]


Buyer’s broker earns fee when his listed buyer acquires an option to buy

Reported by Amanda Ripley

A buyer entered into a listing agreement with a broker, agreeing to pay a fee if the buyer acquired any beneficial interest in property the broker was employed to locate. The buyer acquired a purchase option for a property the broker located. The broker made a demand on the buyer for his fee, which the buyer rejected. The broker claimed his fee was earned when the buyer was granted a purchase option by the property owner, since the buyer’s listing agreement called for the broker to be paid a fee if the buyer acquired a beneficial interest in property the broker was hired to locate. The buyer claimed he did not owe the broker a fee since the buyer never exercised the purchase option and thus never acquired a beneficial interest in the property. A California appeals court held the buyer owed the broker a fee since the buyer acquired a beneficial interest in the property at the time the purchase option was granted by the property owner, and an exercise of the option was not a condition which had to occur before the broker earned a fee. [RC Royal Development and Realty Corporation v. Standard Pacific Corporation (2009) 177 CA4th 1410]

Editor’s Note – For an example of a standard listing agreement, see first tuesday Form 103, the Buyer’s Listing Agreement.


Property reassessment triggered on transfer of property to LLC

Reported by Alex Gomory

An owner of property transferred his ownership to a Limited Liability Company (LLC) in which he held 50% ownership as a member. Upon the transfer, the assessor reassessed the property, which in turn increased property taxes. The LLC paid the increased property taxes and sought a refund of the amount of increase, claiming the 100% change of ownership necessary to trigger reassessment had not transpired since the former owner continued to benefit financially from the property and take part in its management as a 50% shareholder in the LLC. The assessor claimed the reassessment was valid since full ownership of the property had been transferred from the owner to a separate entity. A California appeals court held the LLC was not entitled to a refund of the increase in property taxes due to reassessment since transfer of property by an individual for a fractional ownership interest in an LLC is a change in ownership which is not exempt from reassessment. [Fashion Valley Mall, LLC v. County of San Diego (2009) 176 CA4th 871]


Visitor who failed to pay registration fee is not covered by ADA in mobilehome park recreational areas

Reported by Alex Gomory

To use a mobilehome park’s pool area, visitors were required to register and pay a $10 fee. A visitor with a physical handicap tried to use the pool facilities without paying the fee or registering as a visitor, but found them inaccessible to the handicapped. The visitor made a demand on the mobilehome park for money losses based on the park’s violation of the Americans with Disabilities Act (ADA) since the pool was not accessible to the handicapped. The park’s landlord claimed the visitor was barred from seeking a money judgment against the park since the mobilehome park was not open to the public and the visitor was not a tenant in the park and, as a visitor, had not paid the fee to use the pool. A California appeals court held the visitor was barred from any recovery based on the park’s violations of the ADA since the visitor was not a member of the park, and had not registered or paid for use of the mobilehome park’s pool area. [Reycraft v. Lee, et al. (2009) 177 CA4th 1211]

Mobilehome owner evicted for failure to meet the park’s demand to rehabilitate mobilehome

Reported by Alex Gomory

The management of a mobilehome park served the owner of a mobilehome located in the park with a list of code violations and repairs that had to be corrected to make the mobilehome habitable. The owner of the mobilehome corrected the code violations but failed to make any of the repairs required to make the mobilehome habitable. Park management then served the mobilehome owner with a “Notice To Correct Violations of Rental Agreement Or Surrender Possession,” which required the owner to make the necessary corrections or have his tenancy terminated. The mobilehome owner failed to comply and park management demanded the owner vacate the park. The mobilehome owner sought to prevent the termination of his right to possess the space and keep the mobilehome in the park, claiming the termination of his tenancy was invalid since he had repaired all code violations. The park management claimed the forfeiture of his tenancy was valid since the mobilehome owner had not corrected the repairs necessary to make the mobilehome habitable, as stated in the list of repairs and the notice given to perform or quit. A California appeals court held the mobilehome park management was entitled to terminate the mobilehome owner’s tenancy and remove the mobilehome from the park since the mobilehome owner had failed to make the repairs as noticed by the park management to make his mobilehome habitable. [Simandle v. Vista de Santa Barbara Associates, LP (2009) 178 CA4th 1317]

Title issues

To clear title of a trust deed, indexing a reconveyance is separate from recording

Reported by Alex Gomory


A property owner submitted a document to the county recorder for the reconveyance of a trust deed encumbering his property. The recorder properly stamped and recorded the reconveyance, but failed to also enter it into the general index which is used by the public to conduct a title search. The owner sought statutory monetary compensation, claiming the recorder had not properly recorded the reconveyance since the document was not indexed in a searchable database within the required two-day period. The recorder claimed that the reconveyance had been properly recorded since the recording process only involves assigning a recording number to a reconveyance document and does not include the indexing of the document. A California appeals court ruled that the county had properly stamped and recorded the reconveyance since necessary information about the reconveyance was recorded within two days, and indexing is not a part of the stamping and recording process covered by the statute calling for monetary penalties for failure to record. [Rickets v. McCormack (2009) 177 CA4th 1324]

Trustee’s sales

Trustee sale guarantee insurer not liable to buyer for missed substitution of trustee

Reported by Anthony Renaud

A trust deed lender foreclosed by a trustee’s sale. The trustee named in the trust deed had been substituted out and replaced by another trustee. The title company issuing the trustees guarantee did not discover the recorded substitution of trustee and the trustee named in the trust deed conducted the foreclosure sale. The lender acquired the property at the foreclosure sale. An investor acquired the property from the lender without requiring the lender to provide a policy of title insurance. The foreclosed owner sought to quiet title to the property in his name, claiming the foreclosure sale and trustees deed conveying title to the investor were void since the sale had not been conducted by the trustee of record. The investor incurred costs and expenses in his successful defense of his title. The investor made a demand on the title company which issued the trustee’s guarantee policy for his costs and expenses incurred defending his title claiming the title company owed him a duty of care and acted negligently in searching title to determine the status of the trustee under the deed of trust. The title company claimed it owed the investor no duty of care and was not liable for any costs and expenses incurred by the investor since the investor was a subsequent purchaser after the trustee’s sale and not the named insured. A California court of appeals held the title company insuring the trustee owed the investor no duty of care and was not liable for costs and expenses incurred by the investor in defense of his title since the investor was a subsequent purchaser who must look to his title insurer for coverage, not the insurer of title for the trustee’s sale who did not create the defective title.  [Heritage Oaks Partners v. First American Title Insurance Company (2007) 155 CA4th 339]