Articles Posted in Real Estate

Without financing, home ownership would likely remain out of reach for most people in this country. Few homebuyers have the means to pay the full purchase price in cash. Mortgages typically include a deed of trust granting the lender the right to foreclose on the property. The foreclosure process allows the lender to recover some or all of their investment if a borrower defaults. Most deeds of trust include a “power of sale” clause, which allows a trustee designated by the lender to sell the property without a court order. This is known as nonjudicial foreclosure. California foreclosure law protects homeowners by requiring trustees and lenders to follow a rigid process before selling a property. Federal law protects consumers from unscrupulous debt collection practices, but courts have reached differing conclusions about whether federal debt collection laws apply to nonjudicial foreclosure. The U.S. Supreme Court recently agreed to hear a case that raises this question, Obduskey v. McCarthy & Holthus LLP.

The federal Fair Debt Collection Practices Act (FDCPA) prohibits “abusive, deceptive, and unfair debt collection practices” by debt collectors. 15 U.S.C. § 1692(a). It defines “debt collectors” as anyone who “collects or attempts to collect” debts owed to other people or businesses in interstate commerce, or who engages in such activities as a regular business. Id. at § 1692a(6). In addition to its prohibitions on misleading and abusive practices, the FDCPA also requires debt collectors, after contacting a consumer regarding an alleged debt, to provide them with information validating the debt. Id. at § 1692g.

California’s nonjudicial foreclosure laws also require notice and disclosures to debtors. A mortgage lender or trustee must provide notice to a borrower at least 30 days before filing a notice of default in the public record, and it cannot conduct a sale of the property for several months after that. Cal. Civ. Code §§ 2923.5, 2924. California homeowners’ associations (HOAs) can pursue nonjudicial foreclosure as a remedy for unpaid assessments, but only if the total delinquent amount is at least $1,800, or the delinquency has persisted for over 12 months. Id. at § 5730. In addition to various notice requirements, an HOA’s board must vote on the foreclosure at least 30 days before they may sell the property. Id. at § 5705.

California real estate development involves numerous potential risks, ranging from lost money on an investment to legal liability for injuries caused by hazards or defects. Determining who is liable for an injury often requires an extensive examination of ownership and any improvements made to the property. The owner of a piece of real estate might be liable for an injury caused by a hazard on their property under the theory of premises liability. Injuries—both personal injuries and financial losses—could also be a result of negligence by someone hired to work on the property. In 2014, the California Supreme Court ruled on a dispute between a homeowners association (HOA) for a San Francisco condominium project and two architectural firms involved in designing the project. The plaintiff alleged, on behalf of all of the homeowners, that negligent architectural designs led to defects that “made the condominium units uninhabitable and unsafe during certain periods due to high temperatures.” Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP, 59 Cal.4th 568, 572 (2014). The court ruled in the plaintiff HOA’s favor.

One of the fastest growing forms of residential property is the “common-interest development,” in which separately owned residential units share common areas such as elevator lobbies, fitness centers, and pools. Developers create HOAs as private nonprofit organizations to handle the management and maintenance of common areas. An HOA has a legal duty, under premises liability law, to maintain common areas that are reasonably free of defects or hazards, and to warn residents, their guests, and others of known hazards on the premises. The Beacon case, in contrast, was about duties owed to an HOA with regard to defects on the property.

The plaintiff in Beacon was the HOA created for a 595-unit residential condominium project in San Francisco. The developer hired the defendants to “provide architectural and engineering services.” Beacon, 59 Cal.4th at 571. The defendants were aware “that the finished construction would be sold as condominiums.” Id. The plaintiff’s lawsuit alleged negligent design, which caused “several defects, including extensive water infiltration, inadequate fire separations, structural cracks, and other safety hazards.” Id. at 572. The allegation of uninhabitability during summer months arose from “solar heat gain” caused by a lack of ventilation and substandard windows. Id.

California real estate law allows the creation of homeowner associations (HOAs) to govern certain types of properties, known as “common interest developments” (CIDs). An HOA is responsible for maintaining a CID’s common areas, and it has the authority to collect fees from homeowners to pay for maintenance. When an HOA negligently fails to maintain a common area, the HOA may be liable for injuries that occur as a result. A recent appellate court decision from New Jersey addressed HOAs’ duty of care to residents and others. It is worth revisiting California law on this issue.

Determining a property owner’s liability for an injury occurring on their premises involves two important distinctions:

– First, did the injured person have permission to be on the property? A property owner owes a minimal duty of care to a trespasser, meaning someone who enters their property without permission.