Issue 2
Five Things To Things To Think About
When Jointly Purchasing Real Property

In my practice I have had many cases where people jointly owning real estate have wound up in litigation. Here are five things to think about at the time you purchase the property which can help you avoid costly litigation:

How will you take title to the property?

From the beginning, you must understand that the manner in which you take title is very important. If the deed that gives you and your partner(s) title to the property lists each of you as individuals grantees rather than listing the name of your partnership (or other entity), then the property is not owned by the partnership, but rather by each of the individuals. This can have significant consequences later. If the property is held in the name of an entity (e.g. partnership or limited liability company), decisions regarding management are made based upon voting rights of the members and only the entity, not the individuals will act. That is the entity will enter into contracts to build, manage, renovate or sell the property. On the other hand, if the property is held in the name of the individuals, each of the individuals must sign the contract to sell the property unless the individual is selling only her share. Remember, the more individual owners you have the more difficult it will be to manage everyone's goals and expectations. Thus, the more individual parties, the more important it is to consider creating an entity to take title to the property.
If you decide to take title as individuals, how will you hold title?

If you wish to hold the property in the names of the individuals make sure you know the manner in which title is taken. Often, people come to my office and do not understand the difference between holding property as joint tenants or as tenants in common. The key difference between the two is that when parties hold property as joint tenants, the party who survives the other(s) ends up owning all of the property and the others cannot pass the property to heirs. The other significant difference is that when a property is held in joint tenancy, each of the individual owners is deemed to own an equal and undivided share of the property rather than a specific percentage.
Who will manage the property?

People who purchase property with friends or relatives often make the mistake of not having a written agreement for the management of the property. An agreement defining each party's responsibility for various aspects of management will prevent needless argument and hard feelings later. This writing does not have to encompass all issues, but rather should provide the basic framework for management. Also, should subsequent issues arise, the original agreement can easily be changed or amended by future written agreements.
4. What are each party's financial responsibilities and what happens if one party does not live up to her responsibilities?

If one or more of the parties will occupy the property, reasonable rent or division of expenses (including the mortgage) should be put in writing. Also, there should be an agreement between the parties on how the failure to pay financial responsibilities such as a party's share of the mortgage, taxes, or maintenance will affect that party's interest in the property. In other words, if one party pays an increased amount of the mortgage or pay for repairs while the other does not make the necessary contribution act as a loan for one party to the other or is does it become a buy out of the non-paying party's interest.
What happens if one party wants to sell the property?

Invariably, people's circumstances change. Often this leads to a party wishing to sell the property or to have her interest bought out. It is important at the outset to have an agreement which governs how a party can do so. A provision allowing a party to buy out another owner and specifying the method of determining the price for the buy out is essential to prevent the unnecessary litigation.

Case Summaries

A dedicated street abutting private property belonged to the City and not abutting landowners where dedication was accepted by the city even if the street was never opened to the public.

Wright v. City of Morro Bay (2006) SOS 5441.

FACTS
Plaintiffs Wright and Reddell sought to quiet title to a dedicated street abutting their property because the street was never opened or used for public purpose. Plaintiffs claimed that their properties extended from the boundary of their lots to the centerline of the street. The trial court dismissed plaintiffs' case.

DECISION
The Court of Appeal upheld a dismissal agreeing that the City did not abandon the street even though it was created in 1888. The offer of dedication was made with the filing of the subdivision map and the offer was accepted in 1935 by resolution. Even though the street was never opened or used for public purpose, the Court reasoned that acceptance was made, that mere nonuse did not show abandonment or give rise to an estoppel claim, and that abandonment of a public street is defined exclusively by statute.

A contractor who never issued a written or published request for subbids and accepted a subcontractor bid including a gratuitous offer to be bonded was allowed to substitute in another subcontractor when the original subcontractor refused to be bonded.

Golden State Boring & Pipe Jacking, Inc. v. Orange County Water District (Colich Construction) (2006) SOS 5290.

FACTS
Colich Construction, the general contractor, did not advertise or issue written invitations for subcontract bids but instead informally requested bids for subcontracts. Golden State Boring (GSB) submitted the low bid including a provision that "if bond is required, a fee of 2.5% of the contract price will be added." Colich submitted its bid, listing GSB as a subcontractor. GSB later sought to avoid being bonded.

DECISION
GSB gratuitously stated its unilateral offer to provide a performance bond in its bid. Public Contract Code § 4108 precluding a prime contractor from imposing a bond requirement was inapplicable because Colich never made a written or published request for subbids as specified in the Code. GSB gratuitously offered to be bonded in its subbid and its refusal to provide the promised bond entitled Colich to substitute in another subcontractor.

street alteration which increase traffic or which reduce but do not eliminate access to property do not constitute takings; and
the public development plans which do not directly or specifically affect the landowner's property are not takings.

Border Business Park, Inc. v. City Of San Diego (2006) SOS 5061.

FACTS
Border Business Park owned 312 acres of land, including a business park, in Otay Mesa. It brought suit against the City for two inverse condemnation claims. The City entered a development agreement with Border for the location of a new international airport in 1989. The City failed to consult Mexican officials regarding the use of Mexican airspace and the disinterest of the Mexican government caused abandonment of the plan. The proposal included runways directly through the business park and potential buyers looked elsewhere.

In 1995, the government caused border-bound traffic to be re-routed so that the business park became inundated with truck traffic. The traffic affected the business park for approximately 5 years and significantly affected ingress and egress to the property.

DECISION
The appellate court reversed both inverse condemnation judgments and directed judgment for the City. Regarding the airport, the court ruled that because the airport plan did not directly or specially affect Border, the claim failed as a matter of law. Regarding the traffic, the court found persuasive the City's argument that street alterations which significantly increase traffic or which reduce but do not eliminate access to a property do not give rise to a compensable taking.

A real estate agent acting as an agent for a party to an agreement even where it is not a signatory can enforce the arbitration clause in the agreement.

Westra v. Marcus & Millichap Real Estate Investment Brokerage Co. (2005) 129 Cal. App. 4th 759.

FACTS
The real estate company, Marcus & Millichap, acted as agent for both buyers, Westra, and the seller, Skyline 23 King City, LP. The purchase agreement contained a provision that "Buyer, Seller, and Agent" agreed to arbitrate if a controversy arose. Marcus & Millichap did not sign the agreement, but attempted to enforce the agreement.

DECISION
The Court of Appeals held that Marcus & Millichap was entitled to enforce the arbitration clause contained in a purchase and sale agreement because it was acting an agent for a party to the purchase agreement.

Under a local ordinance, landlords within the City of San Francisco are required to provide relocation assistance in the amount of $4,500 per tenant up to $13,500 per unit when removing property from the rental market.

Pieri v. City & County of San Francisco (2006) 137 Cal. App. 4th 886.

FACTS
In this case, the City of San Francisco enacted an ordinance, S.F. Admin Code, ch. 37, § 37.9A, subd.(e)(3), that required landlords to provide relocation assistance to their tenants when removing property from the rental market. The trial court ruled for the landlords by citing the Ellis Act. The trial court had concluded that the Ellis Act, Gov. Code § 7060.1, subd. (c), allows relocation assistance only for low income tenants.

DECISION
The Court of Appeals determined that the Ellis Act did not conflict with the local ordinance and the Ellis Act was not intended to restrict public entities such as the City of San Francisco from reducing adverse impacts on displaced tenants. The Court left undetermined whether the specific amount of relocation assistance was reasonable, stating only that reasonable relocation assistance compensation for displaced tenants did not violate the Ellis Act.

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