Arizona Supreme Court Clarifies Area Variance Standard; Property Owners May Obtain an Area Variance When Special Circumstances Existed at Purchase

By:  Nick Wood, Adam Lang, Noel Griemsmann, and Brianna Long

In Pawn 1st v. City of Phoenix, the Arizona Supreme Court rejected a Court of Appeals rule that would have unduly restrained alienation of property in Arizona. The Court of Appeals found that the City of Phoenix Board of Adjustment acted beyond its authority when it granted an area variance to a pawn shop where the special circumstances causing a need for the variance existed before the pawn shop purchased the property. Under Arizona law, boards of adjustment cannot grant an area variance where the special circumstances requiring the variance are self-imposed.… Read More »

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Who says you can’t choose between liquidated damages or actual damages?

In Colorado, courts enforce liquidated damages provisions if three elements are satisfied: (1) the parties intended to liquidate damages; (2) the amount of liquidated damages was a reasonable estimate of the presumed actual damages caused by a breach; and (3) at the time of contracting, it was difficult to ascertain the amount of actual damages that would result from a breach. But what happens when a contract gives a party a right to choose between liquidated damages or actual damages? This seems troublesome because it allows a party to set the floor for their damages without limitation if actual damages exceed the contractual amount.… Read More »

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What Happens When a Secured Creditor Files a Late Claim in an Equity Receivership?

By: Ben Reeves

Pitting a receivership court’s inherent equitable powers against pre-existing property rights can lead to some pretty interesting questions.  In SEC v. Wells Fargo Bank, N.A., 848 F.3d 1339, 1343-44 (11th Cir. 2017), the Eleventh Circuit recently examined whether a district court’s inherent authority to establish a claims submission process allowed the court to extinguish a security interest in real property based solely upon an untimely proof of claim.  Much to the relief of secured creditors, the Eleventh Circuit held that the district court erred, as a matter of law, by extinguishing the creditor’s pre-existing property rights under those circumstances.… Read More »

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Arizona Court of Appeals Awards Attorneys’ Fees in Quiet-Title Action

In Arizona, a party successfully quieting title to property may recover its attorneys’ fees if it satisfies three requirements: (1) the party requests a quitclaim deed from the party adversely claiming title twenty days before bringing the quiet-title action; (2) the party tenders five dollars for the execution and delivery of the deed; and (3) the adverse party fails to comply. Ariz. Rev. Stat. § 12-1103(B). Recently, in McCleary v. Tripodi, No. 2 CA-CV 2016-0145, 2017 WL 3723472 (Ariz. Ct. App. Aug. 29, 2017), the Arizona Court of Appeals awarded attorneys’ fees to the prevailing party under this statute.

In McCleary v.Read More »

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Pacing in Construction Scheduling Disputes

On a high level, construction delay litigation involves sorting out the impacts to the critical project path and determining which party is responsible for those impacts. One of the more difficult elements of this process is determining whether a delay would have occurred regardless of one party’s critical path impact due to a separate, independent impact to the critical path by the other party.  For example, a contractor cannot collect delay damages for delays caused by the owner if the contractor itself was causing independent impacts that would have pushed off the completion date anyway.

However, the concept of “pacing” provides a potential defense for a party who is not on pace with the as-planned schedule for noncritical activities, even where those activities are still ongoing after the planned completion date.… Read More »

Author: Luke Mecklenburg | Leave a comment

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The “Ugly” Property Next Door is Ruining My Property Value

By:  Kevin J. Parker

Traditional bases for private nuisance claims include circumstances where noise, light, vibration, or odor emanating from a neighboring property harm the value of your property. Such bases can be objectively verified and quantified.  Courts in various states depart, however, on the issue of whether pure unsightliness of a neighboring property, which diminishes the value of your property, supports a cognizable damages claim against the neighboring property owner under the law of nuisance.

 As explained by the Vermont Supreme Court in the recent case of Myrick v. Peck Electric Co., 2017 WL 129041 (January 13, 2017), state laws vary on the viability of a claim for aesthetic nuisance. … Read More »

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Nevada Supreme Court Clarifies the Litigation Waiver of the One-Action Rule

By Bob L. Olson 

Nevada has a one-action rule which, with limited exceptions, requires a creditor seeking to recover a debt secured by real property to proceed against the security first prior to seeking recovery from the debtor personally. In the event that a law suit is filed in violation of the one-action rule, final judgment may be entered in favor of the creditor but that judgment “releases and discharges the mortgage or other lien.”  NRS 40.455(3).  Nevada law further provides that, with the exception of certain guaranties, any provision in an agreement relating to the sale of real property which contains a waiver of Nevada’s anti-deficiency laws may not be enforced by a court because doing so violates Nevada’s public policy. … Read More »

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Arizona Supreme Court Confirms a Prevailing Homeowner Can Recover Fees on Implied Warranty Claims

By Rick Erickson

On August 9th, in Sirrah Enterprises, L.L.C. v. Wunderlich, the Arizona Supreme Court settled the question about recovery of attorneys’ fees after prevailing on implied warranty claims against a residential contractor.  The simple answer is, yes, a homeowner who prevails on the merits can recover the fees they spent to prove that shoddy construction breached the implied warranty of workmanship and habitability.  Why?  Because, as Justice Timmer articulated, “[t]he implied warranty is a contract term.”  Although implied, the warranty is legally part of the written agreement in which “a residential builder warrants that its work is performed in a workmanlike manner and that the structure is habitable.”

In other words, a claim based on the implied warranty not only arises out of the contract, the claim is actually based on a contract term.… Read More »

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RICO Madness: The Nuisance of Owning and Operating a Marijuana Facility

By:  Bob Henry

On June 7, 2017, the Tenth Circuit Court of Appeals issued its opinion in Safe Streets Alliance, et al. v. Hickenlooper, et al., (No. 16-1048), an opinion that could open the doors to property use litigation involving marijuana facilities.   One of the issues in Safe Streets was whether a property owner can use the federal RICO statutory scheme to obtain relief arising out of a neighboring property owner using property for the cultivation of marijuana in a manner that causes an impact to the value, use, and enjoyment of one’s property.  

The pertinent factual allegations in Safe Streets (on the federal RICO issue) were straightforward.     Read More »

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Erasing Any Doubt: Arizona FED Actions Do Not Accrue Until Formal Demand for Possession is Tendered

By:  Bob Henry

Clearing up any lingering confusion, in Carrington Mortgage Services, LLC v. Woods, 767 Ariz. Adv. Rep. 4 (June 22, 2017), the Arizona Court of Appeals confirmed that residential forcible entry and detainer actions in Arizona accrue for statute of limitations purposes when a party entitled to possession makes a formal demand for return of possession not when the party could have made a demand for return of possession.

In Carrington, the borrowers (the Woodses) remained in property that they had acquired in 2008 but then lost to foreclosure several years later.  The original lender obtained title to the property at a trustee’s sale on February 16, 2010, but did not take any action to remove the Woodses at that time. … Read More »

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Orchestrating Bias: Arbitrator’s Undisclosed Membership in Philharmonic Group with Pauly Shore’s Attorney Not Grounds to Reverse Award in Real Estate Dispute

By:  Lyndsey Torp

The California court of appeal recently issued an unpublished decision in Knispel v. Shore, 2017 WL 2492535, affirming a judgment confirming an arbitration award in a real estate dispute involving Pauly Shore.  The court of appeal held that the arbitrator’s failure to disclose her membership in the Los Angeles Lawyers Philharmonic Group with the attorney representing Pauly was not grounds to overturn the judgment.

The underlying arbitration involved a dispute between Michael Scott Shore, on the one hand, and his brother, Pauly, among others, on the other hand, regarding certain residential property located on Sunset Boulevard near The Comedy Store in West Hollywood (owned and operated by their mother, Mitzi Shore).… Read More »

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California Supreme Court Hands Victory to Private Property Owners Over Public Use

By:  Sean M. Sherlock

In 1970 the California Supreme Court held that, under certain circumstances, private property owners impliedly dedicate their property to the public if they permit the public to use it. Gion v. City of Santa Cruz (1970) 2 Cal.3d 29.  This holding was controversial, and the next year the California Legislature enacted Civil Code section 1009 limiting the public’s ability to permanently use private property through an implied dedication.

In the 40-plus years since then, the lower courts have wrestled with the issue of whether the statute limiting implied dedication applies only to recreational uses by the public, or also to nonrecreational uses.… Read More »

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Appeals of Rulings by The Registrar of Contractors Must Be Timely Filed in Superior Court.

By Rick Erickson

Recently in Johnson v. Arizona Registrar of Contractors, the Arizona Court of Appeals affirmed dismissal of a homeowner’s late appeal of an adverse decision by the Registrar of Contractors (“Registrar”).  After successfully pursuing a complaint to suspend a roofing contractor’s license, the homeowner tried but failed to get her roofing repair costs from the Registrar’s Recovery Fund.  The homeowner sent her appeal to the Registrar.  However, the governing Arizona statute, A.R.S. § 12-904(A), clearly required the homeowner’s appeal to be filed in Superior Court, not with the Registrar.  Once the homeowner realized her mistake, her appeal to Superior Court was a day late. … Read More »

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Does Your 998 Offer to Compromise Include Attorneys’ Fees and Costs?

By: Anthony J. Carucci

In California, the “prevailing party” in litigation is generally entitled to recover its costs as a matter of law. See Cal. Code Civ. Proc. § 1032. But under California Code of Civil Procedure section 998, a party may make a so-called “offer to compromise,” which can reverse the parties’ entitlement to costs after the date of the offer, depending on the outcome of the litigation. Cal. Code Civ. Proc. § 998. The potential payoff of a 998 offer to compromise is explained in section 998(c)(1):

If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.

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Conflicts of Laws, Deficiency Actions, and Statutes of Limitations – Oh My!

By: Ben Reeves

What law governs a deficiency action if the choice-of-law provisions in the note and deed of trust conflict? The Arizona Court of Appeals answered that very question in ZB, N.A. v. Hoeller, No. 1 CA-CV 16-0071 (Ct. App. April 15, 2017).  It turns out, the note controls.

The Facts

In ZB, ZB, N.A. (ZB), a Utah bank, lent money to the Hoellers to purchase a commercial property in Missouri.  The note included a choice-of-law provision stating that Utah law governed the debt.  The deed of trust securing the commercial property, however, provided that Missouri law controlled “procedural matters related to the perfection and enforcement of [ZB’s] rights and remedies against the [p]roperty.”  In 2012, the Hoellers defaulted, and the bank recovered the property through a trustee’s sale.… Read More »

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Landlords Beware: Subordination Agreements

By: Kevin J. Parker

In the recent Arizona Court of Appeals case Earle Investments, LLC v. Southern Desert Medical Center Partners, 762 Ariz. Adv. Rep. 12 (2017), the Court of Appeals addressed the question of the scope of a subordination agreement signed by the property owner (Lessor/Landlord) at the request of the Lessee/Tenant and Lessee/Tenant’s Lender.  In general, by subordination, Party No. 1 with a higher/better lien priority agrees to allow Party No. 2 (usually a lender providing construction funds for the overall betterment of the property) to get a lien position in front of Party No. 1.  Party No.… Read More »

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Colorado House Bill 1279 stalls over 120-day unit owner election period

With the session more than halfway through, the Colorado Legislature’s 2017 attempts at meaningful construction defect reform may fail again.  This year, the Legislature did not attempt a single-bill construction defect overhaul like those that have failed over the last half-decade.  Rather, it has sought to enact reforms on a piecemeal basis, with several smaller bills addressing specific issues that have been affecting condominium construction along Colorado’s booming Front Range. 

This new approach appears to be headed towards much the same outcome as the failed efforts of the past.  House Bill 1169 would have given developers a statutory right to repair before being sued by homeowners, and Senate Bill 156 would mandate arbitration or mediation. Read More »

Author: Luke Mecklenburg | Leave a comment

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What is the Effect of an Untimely Challenge to the Timeliness of a Trustee’s Sale?

By: Ben Reeves

Ever wonder what happens if a person challenges the timeliness of a trustee’s sale after the sale already occurred? Waiver of the argument of course!  And, in the case of Wells Fargo Bank, N.A. v. Waltner, the affirmance of an eviction judgment.

In the Waltner case, Wells Fargo Bank, N.A., as Trustee for WaMu Mortgage Pass-Through Certificates, Series 2005-PR4 Trust (the “Bank”), purchased a residential property at a trustee’s sale in September 2015.  The Bank gave the occupant of the house, Sarah Waltner (“Waltner”), notice to vacate the property, but she did not do so.  Accordingly, the Bank filed a summary action to evict Waltner, which the trial court ultimately granted.… Read More »

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Utah Becomes First State to Enact the Uniform Commercial Real Estate Receivership Act

By:  David Leta

On March 25, Utah became the first state to enact the Uniform Commercial Real Estate Receivership Act (“UCRERA”) which was drafted by the National Conference of Commissioners on Uniform State Laws (the “Conference”) and adopted by the Conference at its annual meeting in July 2015. The Utah Uniform Commercial Real Estate Receivership Act, (the “Utah Act”) mirrors UCRERA and applies to all commercial real property receiverships that are filed in the Utah District Courts on and after May 9, 2017.

The Utah Act provides both substantive and procedural guidance in an area of law that historically has been marked by inconsistency and uncertainty.… Read More »

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Arizona Supreme Court Holds a Credit Bid at a Trustee’s Sale Should Not be Credited to a Title Insurer Under a Standard Lender’s Title Policy To the Extent the Bid Exceeds the Collateral’s Fair Market Value

By:  Richard H. Herold

The Arizona Supreme Court recently addressed what impact, if any, a lender’s credit bid at an Arizona trustee’s sale has on an insurer’s liability under Sections 2, 7 and 9 of the standard’s lender’s title policy (“Policy”), holding in Equity Income Partners, LP v. Chicago Title Insurance Company, 241 Ariz. 334, 387 P.3d 1263 (February 7, 2017) as follows:

  1. Section 2 of the Policy, entitled “Continuation of Insurance,” not Section 9, entitled “Reduction of Insurance; Reduction or Termination of Liability,” applies when a lender acquires property at a trustee sale by “either a full- or partial-credit bid” since Section 2 directly addresses the existence and amount of coverage in such circumstances.
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Federal Court Issues Permanent Injunction and Permanently Shuts Down Santa Ysabel’s Desert Rose Bingo

By: Anthony J. Carucci

On December 12, 2016, Judge Battaglia of the United States District Court for the Southern District of California issued the Court’s long-awaited ruling on the State of California and Federal Government’s motions for summary judgment in the Iipay Nation of Santa Ysabel tribe’s (the “Tribe”) Desert Rose Bingo case. The State of California argued that the Tribe’s Internet bingo website, Desert Rose Bingo, offered a Class III game—as classified under the Indian Gaming Regulatory Act (“IGRA”)—to patrons in violation of the Tribe’s Tribal-State Compact with the State. Both the State and the Federal Government also argued that the Tribe’s Internet bingo operation violated the federal Unlawful Internet Gambling Enforcement Act (“UIGEA”) by allowing patrons to participate off-reservation.… Read More »

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Forcible Entry and Detainer Actions: Courts May Not Consider Tenant’s Hardship

By: Erica Stutman

If you own property and a tenant wrongfully refuses to vacate the premises (for example when the lease expires or after proper written notice of termination), you may have a quick and easy remedy to have the tenant removed. Arizona’s forcible entry and detainer (FED) statute allows a person to bring a speedy, summary action to obtain an order that the person must leave the property immediately. See A.R.S. § 12-1171 – 1183.  To allow for quick resolution, the only question a court may consider in a FED action is who has the right of possession of the property. … Read More »

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Green Energy Can Complicate Real Estate Foreclosures

Bob L. Olson

A quick drive through almost any newer residential community in the Southwest will show that a lot of residents are embracing “Green Energy” or renewable energy by placing solar panels on their properties. While most people would agree that increasing the use of alternative energy is socially responsible, there are a number of real estate investors that may view it as an opportunity to make additional profits by purchasing distressed properties with solar panels and then reselling those properties for more than they would be worth without solar panels. The theory is relatively straight forward as many believe that foreclosure of a deed of trust that was recorded before the solar panels were installed would extinguish any liens in favor of the vendor that sold or financed the sale of the solar panels. … Read More »

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Franchisors Should Consider Signing a Conditional Lease Assignment Rather Than a Franchisee’s Lease

By:  Richard H. Herold

In Franchise & High Properties, LLC v. Happy’s Franchise, LLC, a 2015 decision issued by the Court of Appeals in Michigan, the franchisor, Happy’s Pizza Franchise, LLC, signed a five-year lease for the commercial space to be occupied by its franchisee, Happy’s Pizza #19, Inc.  The franchisor did so to secure a right of first refusal to purchase the property and to enforce the franchise agreement to have the lease assigned to the franchisor if the franchisee defaulted.

The issue in the case was whether the term “tenant” referred solely to Happy’s Pizza #19 or whether it also included Happy’s Franchise as a co-tenant. … Read More »

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Sierra Pacific v. Bradbury goes unchallenged: Colorado’s six-year statute of repose begins when a subcontractor’s scope of work ends

It’s official: the October 20, 2016 deadline to petition for certiorari  to the Colorado Court of Appeals on its decision in Sierra Pacific Industries, Inc. v. Bradbury has passed, so it appears that decision will stand.

In Sierra Pacific, the Court of Appeals held as a matter of first impression that the statute of repose for a general contractor to sue a subcontractor begins to run when a subcontractor’s scope of work is substantially complete, regardless of the status of the overall project.  Sierra Pac. Indus., Inc. v. Bradbury, 2016 COA 132, ¶ 28, ___ P.3d ___.  The Court of Appeals interpreted the statute of repose in C.R.S.… Read More »

Author: Luke Mecklenburg | Leave a comment

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Avoiding Lender Liability for Credit-Related Actions in California

By: Anthony J. Carucci

Aside from general statutory prohibitions on lender discrimination, there are certain circumstances under California law in which lenders may be held liable for credit-related actions, such as negotiating or denying credit. See generally 11 Cal. Real Est. § 35:3 (explaining that the business of lending money is subject to the Unruh Civil Rights Act, Cal. Civ. Code § 51 et seq., the Fair Employment and Housing Act, Cal. Gov. Code § 12900 et seq., the Federal Fair Housing Act, 42 U.S.C. § 3601 et seq., and the Equal Credit Opportunity Act, 15 U.S.C. § 1691, et seq.Read More »

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What Do I Do With This Stuff? Dealing With Abandoned Property After Foreclosure

By: Lyndsey Torp

You’ve successfully foreclosed on a commercial building in California, and, thankfully, the borrower moved out after foreclosure or after a period of tenancy. But the borrower left behind all sorts of property – furniture, filing cabinets, records, and other assorted property.  While you may be tempted to just toss it all in the dumpster, doing so may subject you to liability.  There are several statutes that you should consider when determining how to handle the abandoned property.

Statutory Options for a Landlord

A landlord-tenant relationship may arise following foreclosure if, for example, the owner of the property accepts rent from the former owner.… Read More »

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Developer Awarded Cost of Preparing Administrative Record in CEQA Lawsuit

Lawsuits under the California Environmental Quality Act (“CEQA”) typically proceed as petitions for administrative mandamus. This means the petitioner is asking the court to review an agency’s decision and ultimately issue a mandate directing the agency to set aside its decision.  In this respect the court acts like an appellate court, reviewing the agency’s decision.  There are no witnesses or trial exhibits or jurors or opening statements.  The court reads the parties’ briefs, hears their arguments, and makes its decision based on the evidence in the administrative record of proceedings.

The administrative record is often voluminous. It includes not only the environmental reports, but also all project application materials, staff reports and related documents, public notices, written comments and responses, all evidence or correspondence submitted to or relied upon by the agency, hearing transcripts, written findings, and more. … Read More »

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Washington Answers the Question of Whether Title Companies Owe a Duty of Care to Third Parties…

By: Ben Reeves

Last year (as we blogged about here and wrote a more in depth Law360 article about here), the Ninth Circuit certified to the Washington Supreme Court the question of whether title companies owe a duty of care to third parties when they record legal instruments. We finally have an answer…

“We answer the certified question no and hold that title companies do not owe a duty of care to third parties in the recording of legal instruments. Such a duty is contrary to Washington’s policy and precedent, and other duty of care considerations.”

Centurion Properties III, LLC v.Read More »

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California Supreme Court Upholds Precondemnation Procedures

By Patrick J. Paul

On July 21, 2016, the California Supreme Court in Property Reserve v. Superior Court upheld the state’s precondemnation entry and testing statutes provided they were reformed to allow impacted property owners the ability to have a jury trial to determine damages associated with such entry and testing.

The California Department of Water Resources (DWR) sought to construct water conveyance facilities that would require significant property condemnation. As part of this process, DWR further sought to investigate the environmental and geological suitability of more than 150 private properties considered for the conveyance route.

DWR proposed two sets of precondemnation diligence – – environmental and geological activities.… Read More »

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Equitable Subrogation Part Deux: Mechanic’s Lien vs. Later Bank Deed of Trust

By Kevin J. Parker

https://www.swlaw.com/people/kevin_parker

This post follows, almost two years to the day, Rick Erickson’s post of August 29, 2014. As noted by Rick Erickson in his August 29, 2014 post, the Arizona Supreme Court in the Weitz case (2014) had determined that equitable subrogation principles were applicable to enable an earlier-recorded mechanic’s lien to be trumped by a later-recorded bank deed of trust, if the loan secured by the later deed of trust paid off a lien that had been ahead of the mechanic’s lien.  In a decision filed August 9, 2016, the Arizona Court of Appeals further clarified the scope of such equitable subrogation.… Read More »

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“Rip and Tear” Damage Remains Covered Under CGL Policy as “Accident”—for Now.

By: Michael Lindsay and Luke Mecklenburg

The Colorado Supreme Court has approved a settlement between the parties to an appeal of the 2012 Colorado Pool Systems v. Scottsdale Insurance Company Court of Appeals case, leaving that ruling intact.  The ruling parses a fine line between uncovered costs of repairing defective work and covered costs of damage caused to nondefective work while repairing defective work.  This nuanced opinion, which is now established Colorado law, is worth a second look.

In Colorado Pool Systems, Inc. v. Scottsdale Insurance Company, the Colorado Court of Appeals determined that so-called “rip and tear” damage caused by a construction professional to nondefective work while correcting defective work is covered as an “accident” under standard Commercial General Liability insurance language. … Read More »

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Landlords Must Not be Arbitrary When Denying a Tenant’s Request To Sublease or Assign

By:  Richard Herold

So, you’re a landlord who’s entered into a 30-year lease, the lease has rent escalation clauses which are dramatically out of step with the market, and it’s your view that you are therefore losing money every month. The tenant is closing its business and wants to sublet or assign the lease to a similar business for the final seven years of the lease.  While these cases are fact-sensitive, some of the following rules may apply where the lease provides the tenant with an opportunity to ask the landlord to consent to an assignment of the lease or a sublease.… Read More »

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Hold that paintbrush! A glimpse into design-control in planned communities

House

By: Erica Stutman

You are choosing a new paint color for the outside of your house, and you think, “Since all the other houses are beige, I’ll do mine purple.” Not so fast – you better check your community’s governing documents before brushing on that first coat of paint.

If you live in a planned community, you’ve probably seen a Declaration of Covenants, Conditions, and Restrictions (or similarly-titled document) (CC&Rs), which established the community and a homeowners’ association to govern it. Among other things, CC&Rs often allow for the creation of a design-review or architectural committee to act on behalf of the association, giving the committee members broad discretion to review and approve homeowners’ plans to modify their properties.… Read More »

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Common Law Indemnity Claim Affirmed on Justifiable Beliefs

By Rick Erickson https://www.swlaw.com/people/rick_erickson

Yesterday, the Arizona Court of Appeals issued an interesting opinion in Hatch Development v. Solomon. Hatch illustrated two key points in real estate and construction litigation: (1) a contractor’s indemnity does not always require an expressly written obligation; and (2) when facts are undisputed that a contractor is solely at fault for a construction defect, a property owner can be indemnified after paying a neighboring property owner for damages caused by the contractor’s defective work.

Hatch was a homeowner who hired Solomon to install sewer lines. After installation, heavy rain led to muddy water in the sewer lines, suggesting a defect in the installation. … Read More »

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California’s One-Action Rule May Apply to Federal Lenders

By: Anthony J. Carucci

California’s one-action rule provides that “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property or an estate for years therein . . . .” Cal. Code Civ. Proc. § 726(a). In other words, the one-action rule prescribes that the only process for recovery of a debt secured by a mortgage or deed of trust is to foreclose on the lien. The rule aims to prevent a multiplicity of actions and vexatious litigation, and to force a beneficiary to look to all of the security as the primary fund for payment of a debt before looking to the trustor’s other assets.… Read More »

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Governor Ducey Vetoes Water and Development Bills

By Patrick J. Paul

With the second regular legislative session of Governor Doug Ducey’s tenure complete, the Governor exercised his veto pen rejecting several laws impacting water and land development.

On May 9th, Governor Ducey vetoed two measures that could have allowed developers to manipulate the requirements of Arizona’s Groundwater Management Act of 1980: Senate bills 1268 (adequate water supply requirements) and 1400 (county water supply).  The bills’ sponsor, Senator Gail Griffin, had expressed concerns that the federal government was exercising too much control of the water supply in Cochise County in its efforts to ensure the continued flow of water in the San Pedro River.… Read More »

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Applying New California Rules to Your Real Estate Litigation Practice

By: Lyndsey Torp

Several new California procedural rules went into effect on January 1, 2016. While we are several months into the new year, litigators may need a reminder of these new rules.  The list below summarizes several of the notable new rules.

  • Pleading Stage
    • New California Code of Procedure section 430.41(a)(2) mandates that the parties meet and confer at least five days before filing a demurrer (California’s motion to dismiss). If the parties fail to meet and confer, the demurring party may submit a declaration to the court explaining why the meet and confer did not happen, and the demurring party is granted an automatic 30-day extension.
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California Case Deals with Nuisance Lawsuit Intended to Delay Foreclosure

A recent California case provides good precedent for dealing with nuisance lawsuits that are intended to delay valid foreclosures. In Brown v. Deutsche Bank National Trust Company —Cal.Rptr.3d—, 2016 WL 2726229 (May 9, 2016), plaintiff sued defendants to stop them from foreclosing on her home.  The trial court sustained defendants’ demurrer without leave to amend, and dismissed plaintiff’s complaint.  The court of appeal affirmed.

In 2004, plaintiff took a $450,000 home loan from Washington Mutual Bank. Washington Mutual failed in 2008, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed its receiver.  The FDIC sold many of Washington Mutual’s assets, including loans and mortgage servicing rights, to JPMorgan Chase Bank (“Chase”). … Read More »

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Special Rules for Eviction Actions

By:  Kevin Parker

In a recent case, the Arizona Court of Appeals addressed the special rules of procedure for eviction actions. The eviction rules became effective January 1, 2009.  In Sotomayor v. Sotomayor-Munoz, 735 Ariz. Adv. Rep. 28 (March 28, 2016), the court addressed the question of whether the evicted tenant had timely appealed.  The trial court had entered a formal judgment of eviction; and the tenant had filed various post-judgment motions which the tenant apparently believed extended the tenant’s deadline for filing a notice of appeal.  The Court of Appeals determined that the appeal was untimely because, according to the court, the particular motions filed by the tenant did not extend the appeal deadline. … Read More »

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Nevada Supreme Court Holds that Foreclosure Of HOA Lien Extinguishes Equal Priority HOA Lien.

By: Bob L. Olson

In Nevada’s master-planned communities it is common for one home to be in multiple homeowners’ associations.  In such cases there is generally a master association for the master-planned community and then sub-associations for specific developments within the master-planned community.  The liens of the master association and the sub-association have equal priority unless their declarations provide otherwise. See NRS 116.3116(8) (formerly NRS 116.3116(4)).  Earlier this year in Southern Highlands Community Association v. San Florentine Avenue Trust, 132 Nev. Adv. Op. 3 (Jan. 14, 2016), the Nevada Supreme Court (the “Court”) had the opportunity to discuss the effect of the foreclosure by one association on the other association’s lien of equal priority.… Read More »

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Examining Denver’s new construction defect reform ordinance

Construction defect reform is a hot-button issue in Colorado.  This is especially true along the booming Front Range, where rapidly increasing population has driven the prices of renting and buying property a mile high.  Developers maintain that building condominiums is just too risky given their exposure to lawsuits from dissatisfied owners under current state law, while homeowners’ rights groups insist that the current system is necessary to protect homeowners from shoddy construction in what amounts to the biggest investment of many peoples’ lives.

In the face of such a polarizing issue, the Colorado legislature has tried but failed to pass any meaningful reform.… Read More »

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Eminent Domain: Be Careful What You Ask For

By:  Richard Herold and Patrick Paul

The condemnation[1] of property for public works may not always be as clean and easy as the government would like.  Although local governments are often critical players in the cleanup and redevelopment of contaminated properties, contaminated property can: (1) trigger disclosure requirements; (2) lead to environmental liability, for example, under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) (42 U.S.C. §9601, et seq.) or an analogous state statute;[2] and/or (3) impact the ultimate valuation of the property.

Local governments can be liable under CERCLA as any one of the following:

  • A current owner or operator of the contaminated property
  • An owner or operator of the property at the time of contamination
  • A party who arranged for the disposal of contamination
  • One who transported the hazardous substances to the property

Condemning authorities can, however, avail of Superfund’s bona fide prospective purchaser defense by engaging in all appropriate inquiry in advance of condemnation and/or taking reasonable post condemnation steps with respect to any known or discovered contamination.… Read More »

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Tips on Pursuing and Defending Complaints against Contractors

By Rick Erickson firm bio

The often staggering cost of litigation has prompted an equally staggering amount of regulatory complaints against contractors in recent years. Why? Because filing a complaint against a contractor may not cost a complainant anything but time. And any litigation expenses are mostly borne by the contractor/respondent, who is anxious to defend and protect their license and reputation (i.e. their livelihood).

Here are some tips for pursuing or responding to a complaint and getting the best out of your state’s contractor regulatory agency (in Arizona, the Registrar of Contractors):

(1)        Respect the Registrar. Your regulatory agency is probably understaffed and overworked.… Read More »

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Lenders Should Contract for the Right to Recover Lost Goodwill Proceeds when Commercial Property is taken in Eminent Domain

By: Anthony J. Carucci

Business Goodwill Generally

In California, the “goodwill” of a business “consists of the benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in probable retention of old or acquisition of new patronage.” Cal. Code Civ. Proc. § 1263.510(b). Put another way: “Goodwill is the amount by which a business’s overall value exceeds the value of its constituent assets, often due to a recognizable brand name, a sterling reputation, or an ideal location. Regardless of the cause, however, goodwill almost always translates into a business’s profitability.” People ex rel.Read More »

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Guarantors’ “Lost Profits” Completely Offset Lender’s Deficiency Claim

By: Ben Reeves

Believe it or not, lenders can breach loan agreements too…and when they do, there can be significant consequences. In Great Western Bank v. LJC Dev., LLC, 726 Ariz. Adv. Rep. 21 (Ariz. Ct. App. Nov. 10, 2015), the Court of Appeals affirmed that guarantors’ “lost profits” resulting from the lender’s breach of a loan agreement completely offset the amount owed under the guaranty. Much can be learned from this unusual outcome, so please continue reading for an analysis of the facts and legal principles of this case.

The Loan Agreements

In Great Western Bank, the bank entered into an acquisition and development loan (the “A&D Loan”) with Cedar Ridge Investments, LLC (“Borrower”) to allow Borrower to acquire and begin the development of infrastructure for a fifty-home subdivision in Flagstaff, AZ to be known as Cedar Ridge.… Read More »

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The Uniform Law Commission Approves the Uniform Commercial Real Estate Receivership Act

By: Ben Reeves

As we previously reported here, several years ago the Uniform Law Commission (the “ULC”) (the organization that drafted such favorites as the Uniform Commercial Code and the Uniform Arbitration Act) determined that states would benefit from a model act that would govern the powers, rights, and duties of receivers appointed over commercial real property. Since that time, a drafting committee has worked diligently to prepare a comprehensive statute that would address this unique area of law. The ULC recently approved the drafting committee’s final version, and the result is the Uniform Commercial Real Estate Receivership Act (the “Act”).… Read More »

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School district’s condemnation of a private road passes the test

By: Erica Stutman

The power of eminent domain allows a government or quasi-governmental entity to condemn (take) private property for a public use upon a showing of necessity.  In exchange, the property owner must receive “just compensation” equal to the property’s fair market value, and may be entitled to additional damages, such as severance damages, relocation expenses, costs, or interest.  The eminent domain powers of school districts and other political subdivisions is set forth in A.R.S. § 12-1111.

In Catalina Foothills Unified School District No. 16 v. La Paloma Property Owners Association, the Arizona Court of Appeals confirmed that a school district may condemn a private road for vehicles to enter a school campus. … Read More »

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Property Taxes: A Shopping Center May Not Always be a Shopping Center

By:  Rick Herold, Craig McPike & Ben Reeves

In the world of real property taxes, Valuation + Classification = Assessed Valuation.  Sounds simple, right?  The County Assessor determines the first factor, valuation (subject to certain guidelines under applicable Arizona law).  The Arizona State Legislature determines the second factor, the property’s legal classification and corresponding assessment ratio (i.e., tax rate).  Given the wide disparity in assessment ratios, classification can be a major issue for taxpayers.

Recently, the Court of Appeals confirmed that a shopping center for valuation purposes may not be a shopping center for classification purposes.  Scottsdale/101 Associates LLC v.Read More »

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Statute of Frauds: (1) Email as “Writing” and (2) Email Signature as “Signature”

By:  Kevin J. Parker

Arizona, like most states, has a Statute of Frauds that essentially requires real estate related contracts to be both (1) in writing and (2) signed by the party to be charged.  A.R.S. § 44-101.  Questions often arise as to whether an email can satisfy the “writing” requirement, and whether an electronic signature can satisfy the “signed by the party to be charged” requirement.  The answer to these questions, like many legal questions, is: it depends.  Whether an email can satisfy the “writing” requirement might depend on whether the transaction relates to interstate commerce.  Pursuant to federal statute, 15 U.S.C.… Read More »

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It just got a little bit easier to enforce judgment liens

By:  Ben Reeves

Last year, we posted It just got a little bit harder to enforce judgment liens, which analyzed a Court of Appeals decision that invalidated a judgment lien against third-party purchasers due to the judgment creditors’ failure to record an information statement along with the judgment.  Lewis v. Debord, 236 Ariz. 57, 335 P.3d 1136 (Ct. App. 2014).  In that case, even though the Court of Appeals found that the judgment lien remained valid, the opinion concluded that the failure to record the information statement affected the “priority” of the judgment lien and rendered the third-party purchasers’ ownership interest superior to the judgment creditors’ lien interest. … Read More »

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Offensive Discovery after Strudley and Changes to the Colorado Rules of Civil Procedure

By: Neal McConomy

Toxic tort cases often involve real property, especially in areas with large mining and energy sectors like the West and Southwest. The cases frequently have large potential damage values and require extensive discovery. Numerous expert witnesses, vast amounts of real property testing, and significant document production are common. The cost of engaging in this far reaching discovery is often a significant factor in early settlement negotiations. Toxic tort defendants have a substantial incentive to settle disputes before engaging in discovery no matter the likelihood of success at trial because the discovery costs alone represent a sizeable expense that cannot be recovered even with a successful verdict at trial.… Read More »

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Homebuilders Welcome Recent Court Decisions

By:  Patrick Paul

Arizona homebuilders will welcome with open arms two recent legal rulings of substantial impact to their industry. In the first decision, on July 28, 2015, in Sullivan v. Pulte Home Corp., No. 1 CA-CV 14-0199, the Arizona Court of Appeals held that homebuilders do not owe a duty of care to subsequent (non-original homeowners) for economic losses arising from latent construction defects unaccompanied by physical injury to persons or other property.

The fairly simple fact scenario follows.  In 2000, Pulte Home Corporation sold the home at issue to the original homeowners, who, in 2003, sold the property to the Sullivan Plaintiffs.  … Read More »

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Does a title company owe a duty of care to third parties in the recording of legal instruments?

By: Ben Reeves

This is precisely the question that the Ninth Circuit recently certified to the Washington Supreme Court in Centurion Properties III, LLC v. Chicago Title Ins. Co.

Facts of the Case

In this case, Centurion Properties III, LLC (the “Borrower”) purchased a tract of real property in Washington with a loan from General Electric Capital Corporation (the “Senior Lender”), and secured the loan with a first position lien against the property. The loan documents and lien instruments specifically prohibited further encumbrance of the property without the Senior Lender’s prior written consent. Chicago Title served as the escrow agent, closing agent, and the title insurer for this transaction.… Read More »

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HOA Super Priority Legal Battles Continue in the Silver State: What Senate Bill 306 Means for Nevada HOAs, Lenders and Homeowners

By:  Aaron D. Ford and Karl O. Riley

In 1991, the Nevada Legislature enacted the Uniform Common-Interest Ownership Act (UCIOA) which had been promulgated by the National Conference of Commissioners on Uniform State Laws (NCCUSL) (the Statute).[1] This law provides that a homeowners association (HOA) may record a lien on each home in the community it governs and in enacting this law, the Legislature authorized an HOA to foreclose its lien through a nonjudicial foreclosure process.[2] When the lien attaches or comes into existence continues to be a dispute issue in the ongoing litigation. Under this law, the HOA’s lien is prior to the first mortgage lien to the extent of certain maintenance and abatement charges and either six or nine months of assessments for common expenses, depending on the circumstances.… Read More »

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New Landlords Should Not Ignore Arizona’s Requirement To Register With The County Assessor’s Office

By: Cory L. Braddock

With ongoing price volatility in Arizona’s residential real estate market, homeowners may be tempted to become recreational landlords. Anyone considering renting their home, however, should be aware that Arizona law requires residential rental property owners to register their residential rental property with the county assessor’s office, presumably so that assessor can assess the appropriate taxes to the property owner. See A.R.S. § 33-1902.

The owner of a residential rental property is required to maintain the following information with the county assessor:

  1.  The name, address, and telephone number of the property owner;
  2. The street address and parcel number of the property; and
  3. The year the property was built.
Read More »
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Are Short-Term Vacation Rentals Legal?

By: Ben Reeves

The recent explosion in popularity of short-term vacation rentals through services such as Airbnb.com and VRBO.com not only provides terrifying horror stories about problem renters (google it if you’re interested), but also raises serious questions about the legality of the practice.

Many cities are currently struggling with this very issue. Opponents to short-term rentals argue that transient renters disrupt otherwise peaceful neighborhoods and negatively impact local business like traditional hotels. Proponents of the practice contend that they have a constitutionally protected property right to use their private property without governmental interference. In Jerome, Arizona, the City recently grappled with this very issue, and ultimately decided to inform a few of its citizens that they could no longer rent their homes on a short-term basis—much to the chagrin of the affected property owners.… Read More »

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Arizona Court Clarifies Premise Liability

By:  Kevin J. Parker

In a recent Arizona Court of Appeals case, the court clarified the rules for liability of a property owner to a person injured on the premises. In Lee v. M & H Enterprises, Inc. and Wal-Mart Stores, Inc. (filed April 21, 2015), the Arizona Court of Appeals addressed the question whether Wal-Mart as the property owner was liable for injuries suffered by an employee of an independent contractor performing construction services on the premises. The injured person sued both Wal-Mart and his employer, the construction company. The court reiterated the general rule that a landowner is not liable for the negligent conduct of an independent contractor on the premises unless the landowner has been independently negligent.… Read More »

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Guarantors Can Waive Anti-Deficiency Protections

By:  Richard H. Herold and Ben Reeves

In Arizona, guarantors can now be held liable for deficiencies even where borrowers avoid liability due to Arizona’s anti-deficiency statute.

Arizona courts have been active in the last few years in addressing the law governing post-trustee’s sale deficiencies under Arizona’s anti-deficiency statute, A.R.S. §33-814(G), which provides that no deficiency action may be maintained “if trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling is sold pursuant to [a] trustee’s…sale.” The deficiency is determined by crediting the borrower and guarantor with the higher of: (a) the fair market value of the property on the date of the trustee’s sale; or (b) the sale price at the trustee’s sale, to reduce the total balance due and owing.… Read More »

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Upheld: Injured Subcontractor’s Lent Employee Has No Claim Against Landowner or General Contractor After Choosing Workers’ Compensation and Failing to Prove Landowner Controlled the Work

By Rick Erickson (http://www.swlaw.com/attorneys/rick_erickson)

On this Memorial Day 2015, I write in honor of my U.S. Marine Corps colleague, Megan McClung, who was killed in Iraq nine years ago this December.  Major McClung and I served together in Anbar Province in 2006.  She was the first female Marine Corps officer to be killed in Iraq and the first female graduate of the U.S. Naval Academy to be killed in action.  She is buried at Arlington National Cemetery.

In Lee v. M and H Enterprises, Inc., — P.3d —- (decided Apr. 21, 2015), the Arizona Court of Appeals recently clarified why, in most cases, landowners and general contractors are not liable when subcontractor employees are injured or killed on construction projects.… Read More »

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The FDIC Reigns “Supreme” in Nevada

By: Nathan Kanute

For several years, Nevada Courts have considered a myriad of issues related to how Nevada law applies to loans made by banks that are later take over by the FDIC. In the past eight months, the Nevada Supreme Court has addressed two of those issues. See Munoz v. Branch Banking and Trust Company, Inc., 131 Nev., Adv. Op. 23 (Apr. 30, 2015) and Federal Deposit Insurance Corp. v. Rhodes, 130 Nev., Adv. Op. 88 (Oct. 30, 2014). In both cases, the Court held that the Supremacy Clause of the United States Constitution precluded application of the applicable Nevada statutes.… Read More »

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Successful Laches Defense Becoming Commonplace in Colorado

By: Neal McConomy

Boiler plate language in responsive pleadings often includes “Plaintiff’s claims are barred by the doctrine of laches” (or “The doctrine of laches bars Plaintiff’s claims” if you prefer the active voice).  However, litigation of a laches defense is fairly rare, and a defendant successfully arguing a laches defense is something of a legal Haley’s Comet, only less reliable. Often, courts refuse to consider a laches defense if a statute of limitations applies. See e.g., Ivani Contracting Corp. v. City of New York, 103 F.3d 257 (2d Cir. 1997); and Lyons P’ship v. Morris Costumes, Inc., 243 F.3d 789 (4th Cir.… Read More »

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Nevada Supreme Court holds that Voluntary Payment Doctrine Prohibits a Party from Recovering Amounts Wrongly Paid to Homeowner’s Association in Order to Prevent Foreclosure

By:          Bob L. Olson

On September 30,2014, we posted “Lenders Beware: the Nevada Supreme Court Holds that Foreclosures of Homeowner’s Association Liens May Extinguish First Priority Deeds of Trust” which discussed the recent decision of SFR Investments Pool 1, LLC v. U.S. Bank, N.A., 130 Nev. Adv. Op. 75 (Sept. 18, 2014) (“SFR”).   At the risk of oversimplification, the SFR Court held that:

  1. NRS 116.3116 (the “Statute”) splits the lien of a homeowner’s association (“HOA”) into a “superpriority piece” and a “subpriority piece.”
  2. The superpriority piece of the HOA’s lien consists of the “last nine months of unpaid HOA dues and maintenance and nuisance-abatement charges” and is prior to the first priority lien.
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Federal Courts to Apply More Protective State Law when Analyzing Validity of Pre-dispute Jury Trial Waivers in Diversity Jurisdiction Cases

By Anthony J. Carucci

The Ninth Circuit Court of Appeals recently held that federal courts sitting in diversity jurisdiction must apply the underlying state law to determine the validity of pre-dispute jury trial waivers where the state law is more protective than the federal law. In re Cnty. of Orange, No. 14-72343, 2015 WL 1727240, at *4–5 (9th Cir. Apr. 16, 2015).

Facts/Procedural History

In 2007, plaintiff County of Orange (the “County”) hired defendant Tata America International Corporation (“Tata”) to develop a property tax management system. Id. at *5. In 2008, the parties entered into a contract for that purpose, which included an unambiguous jury trial waiver.… Read More »

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Arizona Courts Lacks Authority To Stay Forcible Entry And Detainer Judgments When The Judgment Itself Is Not Pending Appeal

By: Nicholas Kunz1411947988kdp8g

Can a court stay the execution of a Forcible Entry and Detainer (“FED”) action when the FED judgment itself is not appealed? The Arizona Court of Appeals recently addressed this question, holding that the court did not have the authority to stay the execution of the FED judgment, because only the denial of an Abeyance/Motion to Set Aside Judgment—and not the original FED judgment—was being appealed.

Facts/Procedural History

Tri City National Bank (“TCNB”) became the owner of a property occupied by the Gradys through a trustee sale. Shortly after the trustee sale, TCNB filed an action for FED to remove the Gradys from the property.… Read More »

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Church Property Tax Liability in Arizona for Commercial Leases

By: Bob Henry

Arizona House Bill 2128, which was signed into law by Governor Doug Ducey on March 23, 2015, has potential impact on the commercial real estate leasing market.  The bill enables owners of real property that is leased to religious institutions to enjoy the closest thing to a complete exemption that is available to lessees of real property owned by for-profit organizations or individuals.

This blog does not opine on policy issues, and the wisdom of this legislation can be debated.  But this legislation nevertheless creates some potential practical and logistical issues—for better or worse, and depending on one’s perspective and circumstances. … Read More »

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A Purchaser Who Doesn’t Inquire May Be Teeing Up For Failure

 

By: Erica Stutman

Picture this:  While on the hunt for new development opportunities, you stumble across a golf course in the middle of a high-end community, and you think this would be the perfect spot for more houses, or a retail center, or a movie theater, or …oh, the possibilities are endless!  Better yet, you learn you can buy it for a bargain. Before closing the deal, you review the property’s recorded chain of title and find nothing requiring the property to be used as a golf course. You sign the closing papers and start planning your perfect new development.… Read More »

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If Receiver’s Sales Aren’t Foreclosures, What Are They?

By:  Ben Reeves & Bob Olson

When no statute specifically authorizes a court-appointed receiver to sell real property, what type of sale is it?  The Supreme Court of Nevada recently addressed this question, holding that “a receiver sale of real property that secures a loan is a form of judicial foreclosure.”  U.S. Bank v. Palmilla Dev. Co., 131 Nev. Adv. Op. 9 (2015).

Facts

In U.S. Bank v. Palmilla, U.S. Bank made a $20.15 million loan to Palmilla Development Company secured by a development of townhomes.  Palmilla defaulted, and U.S. Bank applied for, and obtained, the appointment of a receiver over its real property collateral.… Read More »

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Injunctive Relief for Building Encroachment. Do I Have to Move the House?

By Kevin Parker

When a land owner mistakenly builds a house or other building or structure that encroaches on a neighbor’s property, what is the remedy?  Does the offending land owner have to physically remove the structure from the neighbor’s property?   Is the harmed neighbor entitled to a mandatory injunction against continuing trespass?  Can the offending land owner invoke equitable “balancing of hardships” and simply pay damages?  In a recent case, the Supreme Court of Rhode Island distinguished the encroachment situation from traditional injunctive relief analysis.  (A court order requiring the offending land owner to remove the offending structure would be a mandatory injunction order.)  The general rule is that a party seeking injunctive relief must prove irreparable harm not remediable by damages. … Read More »

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Inverse Condemnation: When is Your Claim Precluded by the Arizona Statute of Limitations?

By:  Richard Herold

An inverse condemnation of a landowner’s property can occur when a governmental entity: (1) physically takes the property without compensation; or (2) passes a new law that has a serious impact on the value and/or utility of the property.  At times, the taking may be obvious, for example, if the governmental entity deprives the owner of access to the property by putting up a fence.  While regulatory takings are at times less obvious and/or pressing, in both cases, the property owner may adopt the view that he or she will simply address the problem later.

Believe it or not, the property owner needs to move quickly and file suit within one year of the taking.… Read More »

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Are Vacant Lots Protected Under Arizona’s Anti-deficiency Statutes?

By:  Ben Reeves

No, of course not.  Arizona’s anti-deficiency statutes only prohibit deficiency judgments after a trustee’s sale of a “dwelling”.[1]  Under no definition can a vacant lot constitute a “dwelling”.  This was the Arizona Supreme Court’s holding in BMO v. Wildwood Creek Ranch, LLC.

In BMO, Shawn and Kristina Rudgear (through their company Wildwood Creek Ranch, LLC) borrowed $260,000 to fund construction of a home on a vacant 2.26-acre lot.  This loan was secured by a deed of trust against the lot.

Construction of the home never began, the Rudgears defaulted, and BMO Harris Bank foreclosed via trustee’s sale. 

Read More »
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Can an Unsigned Minute Entry Create a Judgment Lien?

By:  Ben Reeves

It appears that 2014 was a banner year for Arizona law on judgment liens.  Indeed, we recently posted about the Lewis v. DeBord decision, which invalidates judgment liens vis-à-vis third-party purchasers if the judgment creditor fails to record an “information statement” with the judgment.  The Court of Appeals has again tackled the question of judgment liens under Arizona law.

In Sysco Arizona, Inc. v. Hoskins, the Court of Appeals held that a recorded unsigned minute entry (which awarded judgment in the amount of $395,598.00) did not create a judgment lien.  The reason for this ruling is simple – under Arizona law, an unsigned minute entry (even if it awards a money judgment) is not a formal “judgment” and the statutes require the recordation of a formal “judgment” to create a “judgment lien”. … Read More »

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Transfer of Property Title to a Holding Company Did Not Divest Landowner of Owner-Occupant Status Under A.R.S. § 33-1002(B)

By:  Richard G. Erickson

Recently, in Marco Crane & Rigging Co. v. Masaryk, 703 Ariz. Adv. Rep. 29 (Dec. 30, 2014), the Arizona Court of Appeals established that a subcontractor on a residential project has no lien rights against an owner-occupant, even though the homeowner transferred the property’s title to a holding company (an Arizona limited liability company) after the subcontractor commenced work.

In other words, the lien protections afforded to owner-occupants are determined, at the latest, when a contractor records its lien.  After the contractor commences work and records its lien, the homeowner’s actions in negating owner-occupant status do not divest the homeowner of statutory protections against lienholders. … Read More »

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Update – Prospective Waivers of “Fair Market Value” Hearings are Definitely Void.

fountain-390788_1280By:  Ben Reeves

In 2013, we blogged about the Arizona Court of Appeals’ determination that prospective contractual waivers of “fair market value” hearings are unenforceable as a matter of public policy.  The link to our prior blog post is here.  Although we noted some deficiencies in the Court of Appeals’ reasoning, we recognized that the holding reached a defensible legal result.  On review, the Arizona Supreme Court reached the same outcome…but with a more robust legal analysis.  See CSA 13-101 Loop, LLC v. Loop 101, LLC, et al., No. CV-14-0029 (Ariz. Dec. 31, 2014).[1]

The Arizona Supreme Court held that although Arizona’s anti-deficiency statutory scheme did not expressly prohibit contractual waivers of “fair market value” hearings, Arizona’s overall public policy behind the trustee’s sale process entitled borrowers and guarantors to the protection afforded by a “fair market value” hearing.… Read More »

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Beneath the Surface: Entek GRB, LLC v. Stull Ranches, LLC and the Continuing Battle Between Surface Owners and Subsurface Owners

By: Neal McConomy

On August 14, 2014, the Tenth Circuit vacated and remanded the lower court’s decision regarding a dispute between a surface owner’s and a subsurface owner’s respective rights to access and enjoy land and property rights.  Entek GRB, LLC v. Stull Ranches, LLC, 763 F.3d 1252 (10th Cir. 2014).  The decision reached in Entek GRB, LLC v. Stull Ranches, LLC addresses a debate occurring throughout Colorado and the United States: what controls do surface owners have regarding subsurface owners’ claims for access to and occupation of surface areas in their pursuit to exercise their rights to the oil, gas, and other minerals beneath the surface owner’s land. … Read More »

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Guarantor Waivers Narrowed

By:  Lyndsey A. Torp and Sean M. Sherlock

A general waiver by a guarantor of “all defenses” does not actually waive “all defenses.”   California Bank & Trust v. Del Ponti, — Cal.Rptr.3d —, 2014 WL 6908141 (Cal.App. 4 Dist.).  That was the holding in a recent opinion wherein the California Court of Appeal affirmed judgment against a lender, holding that the bank could not recover on its loan guaranties because it had breached the underlying loan agreement.

In California Bank & Trust v. Del Ponti, borrower obtained a construction loan from Vineyard Bank (which was later assigned to California Bank & Trust) to develop a townhome project, with guaranties from two principals of the borrower. … Read More »

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It just got a little bit harder to enforce judgment liens

LewisQuoteBy:  Ben Reeves

Introduction

As everyone knows, the enactment of the Statute of Westminster II in 1285 ushered the concept of a “judgment lien” into English law.  The statute – for the first time in English legal history – authorized a judgment creditor to obtain a writ of elegit (as opposed to a writ of fieri facias) to take possession of the judgment debtor’s land to pay for the judgment debtor’s debts.  1285 was indeed a very good year for judgment creditors.  Nearly three-quarters of a millennium later, the judgment lien remains an important remedy for judgment creditors.

Judgment Liens in Arizona

Although Arizona law has (for the most part) abandoned the use of fanciful Latin phraseology, Arizona does provide for a “judgment lien” – which (despite the plain, uninspired name) creates a lien against all of the real property then owned or later acquired by the judgment debtor. … Read More »

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California Case Requires Arbitration Despite Lack of Actual Controversy

 

By:  Lyndsey A. Torp and Sean M. Sherlock

For parties to litigate a contract dispute in a court of law, the parties’ disagreement must have ripened into an actual controversy presenting more than a mere academic difference of opinion.  But under a recent California Court of Appeal opinion, no actual controversy is required to compel arbitration over a disagreement.  Bunker Hill Park Limited v. U.S. Bank National Association, — Cal.Rptr.3d —, 2014 WL 6684796 (Cal.App. 2 Dist.).  To avoid being compelled to arbitrate purely academic disagreements, parties should draft their arbitration clauses to limit arbitrable disputes to those that have ripened into actual controversies.… Read More »

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Nevada Supreme Court adds New Elements to Constructive Eviction Claims.

By Bob L. Olson

Nevada, like many jurisdictions, has recognized the ability of a tenant to vacate property if it becomes unfit for occupancy for the purpose for which it was leased.  This is commonly known as a “constructive eviction.”  Traditionally, to establish a claim for or defense of constructive eviction, the tenant had to prove the following three elements:

1.         The landlord either acted or failed to act;

2.         The landlord’s action or inaction rendered the whole or a substantial part of the premises unfit of occupancy for the purpose for which it was leased; and

3.         The tenant must actually vacate the property within a reasonable time.… Read More »

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Landlords Need Not Deny Puppy Love

By: Erica Stutman

Dog-lovers will be happy to know they may rent property to a tenant and the tenant’s dog without necessarily being subject to strict liability if man’s best friend turns out to be not-so-friendly after all.  In Spirlong v. Browne, the Arizona Court of Appeals decided that the strict liability for injuries or damages caused by a dog that is imposed upon a person “keeping” a dog requires that the person exercises care, custody, or control of the dog, and that merely allowing a dog to live in your property does not alone subject a person to liability.  … Read More »

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General Contractor’s Prospective Waiver Of Its Lien Rights Is Enforceable In California

By: Lyndsey Torp

http://www.swlaw.com/attorneys/lyndsey_torp

In another decision favoring lenders (See http://www.swlaw.com/blog/real-estate-litigation/2014/08/29/arizona-supreme-court-to-contractor-sorry-but-equitable-subrogation-of-a-banks-later-deed-of-trust-trumps-earlier-mechanics-lien-rights/), the California Court of Appeal, in an opinion published in September 2014, entitled Moorefield Construction, Inc. v. Intervest Mortgage Investment Company, et al., D065464, held an original contractor can contractually waive or impair its own lien rights, even before it gets paid or performs work, as long as it does not waive or impair the lien rights of its subcontractors. In Moorefield, the court of appeal reversed a trial court’s decision awarding a general contractor $2.2 million on its mechanic’s lien.  In doing so, the court of appeal upheld a subordination agreement that the general contractor, Moorefield Construction, Inc., signed with the lender, Intervest Mortgage, “subordinating” the general contractor’s mechanic’s lien claim to the lender’s deed of trust, which was security for the construction loan.… Read More »

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Arizona Chamber of Commerce Forms Policy Group for Real Estate and Community Development Issues

By:  Bob Henry

The Arizona Chamber of Commerce & Industry has formed a new policy committee for “Real Estate and Community Development Issues.”  The Arizona Chamber’s policy committees—now 16 different committees that cover policy areas ranging from “Budget & Government Reform” to “Workplace, Workers Compensation and Insurance”—are actively involved in supporting and opposing legislation on issues that are of particular importance to the Arizona business community.  The Arizona Chamber’s formation of a new policy committee focusing specifically on real estate and community development issues should thus be welcome news to those who do business in the real estate industry in Arizona. … Read More »

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Vendees’ Liens—Construction Lenders Beware!

By:  David A. Sprentall

A recent Arizona Court of Appeals decision highlights a lien priority risk for secured construction lenders when the financed project fails. The problem—known as a “vendee lien”—is most likely to arise when up-front deposits are paid by buyers of units in condominiums or similar projects.

The case, Rigoli v. 44 Monroe Marketing, LLC, involved a construction loan made by Corus Bank in 2006 for the development of the 44 West Monroe condominium tower in downtown Phoenix. As a condition to the loan, the developer was required to have presales of at least 100 units and earnest money deposits of approximately $4.5 million.… Read More »

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Homestead Exemption Cannot be Denied on Equitable Grounds

By Kevin J. Parker

Arizona’s homestead exemption allows a person to protect from certain creditors up to $150,000 of their equity in their residence (dwelling house, condominium, or mobile home).  A.R.S. § 33-1101 et seq.  This homestead equity is exempt from non-consensual liens, for example recorded judgments against the owner.  The homestead exemption does not apply as against consensual liens such as a mortgage or deed of trust.

 In a recent opinion, the Arizona Court of Appeals addressed the question of whether a property owner could be precluded on equitable grounds from asserting the homestead exemption.  Rogone v. Correia (Opinion filed September 25, 2014). … Read More »

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New California Case Illustrates Peril of Full Credit Bid

By: Sean M. Sherlock

In a new California case, a lender that made a full credit bid at a foreclosure sale lost its right as mortgagee under a lender’s insurance policy for damage to the property that occurred prior to foreclosure. This was so even though the lender held multiple deeds of trust, and foreclosed on only one of them. The case provides valuable guidance in devising a foreclosure bidding strategy.

In Najah v. Scottsdale Ins. Co., ___ Cal.Rptr.3d ___, 2014 WL 4827882 (Cal.App. 2 Dist., Sep. 30, 2014), plaintiff (lender) sued defendant (insurer) for failing to pay a claim for property damage that occurred prior to plaintiff’s foreclosure on the property.… Read More »

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Lenders Beware: the Nevada Supreme Court Holds That Foreclosures of Homeowners’ Association Liens May Extinguish First Priority Deeds of Trust

By:  Bob L. Olson

Nevada has adopted the Uniform Common Interest Ownership Act of 1982 (the “Act”) which governs homeowners’ associations (“HOA”). One particular provision of that Act, enacted by Nevada in 1991 and later amended, and codified as NRS 116.3116 (the “Statute”), states that HOA liens are “prior to all other liens and encumbrances on a unit” except for, among other liens:

(b) A first security interest on the unit recorded before the date on which the assessment sought to be enforced became delinquent . . . :

NRS 116.3116(2)(b) (emphasis added).

At first glance the Statute unconditionally subordinates the HOA’s lien to a first priority mortgage or deed of trust (hereinafter “first priority lien” and the holder, the “mortgage holder”) recorded against the unit before the date on which the assessment sought to be enforced became delinquent.… Read More »

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Easements Made Easier: Building Pipelines with the Power of Eminent Domain Under the Natural Gas Act

By: Richard H. Herold

Any person or entity seeking to construct a natural gas pipeline and successful in obtaining a certificate of convenience and necessity from the Federal Energy Regulatory Commission may exercise the power of eminent domain to obtain easements across private property when those easements are necessary and cannot be obtained consensually (by contract) from the landowners.  Columbia Gas Transmission, L.L.C. v. 76 Acres More or Less, 2014 WL 2960836 (D. Md. June 27, 2014).  the Columbia Gas Court recently held that (1) the property’s legal description need not be attached to sufficiently identify the property to be condemned, and (2) even in the absence of a federal condemnation statute authorizing immediate possession of the property, the condemning plaintiff may obtain an order to take immediate possession of the property since it would be wasteful and inefficient to skip over one or more parcels in the construction process – only if the condemning plaintiff is capable of satisfying the requirements for preliminary injunctive relief under Fed.R.Civ.P.… Read More »

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Social Media Concerns Potentially Affecting Arizona’s Real Estate Industry

By:  Jefferson R. Hayden  http://www.swlaw.com/attorneys/jefferson_hayden

A growing number of governmental authorities are cracking down on the use of social media with regard to commercial transactions.  In Arizona, for example, legislation was proposed restricting an employer’s right to access social media account information of its employees.  Though SB 1411 was not passed in 2013, the Arizona real estate industry should pay close attention to its own social media practices since it is covered by the Fair Housing Act.  If the legislative progression of other states is any indicator, the Arizona real estate industry may also encounter future issues in both the landlord/tenant and lending realms.… Read More »

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Arizona Supreme Court to Contractor: Sorry But Equitable Subrogation of a Bank’s Later Deed of Trust Trumps Earlier Mechanics’ Lien Rights

By Rick Erickson

http://www.swlaw.com/attorneys/rick_erickson

The smoke has finally cleared in a hard and long-fought battle between a bank and contractor both claiming priority to foreclose millions of dollars on a Phoenix condominium project. The project, well-known as Summit at Copper Square in central Phoenix (“Summit”), went broke in 2007. The foreclosure case began in 2008, and the construction and real estate industries have been keeping a close eye on the outcome. In the end, the Arizona Supreme Court weighed in for its “first opportunity to address the interplay between equitable subrogation and the priority granted to mechanics’ liens by [Arizona Revised Statutes] § 33-992(A).”

The Arizona Supreme Court issued its decision in The Weitz Company L.L.C.… Read More »

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Nevada Supreme Court Clarifies Mechanic and Materialman Lien Issues

By:  Nathan Kanute and Bob Olson

On August 7, 2014, the Nevada Supreme Court issued two opinions dealing with the priority of mechanics’ liens and the proof required for a materialman to establish a lien.  These cases provide valuable guidance to lenders, materialmen, contractors, and subcontractors operating in Nevada.

In Byrd Underground, LLC v. Angaur, LLC, 130 Nev. Adv. Op. 62, the United States Bankruptcy Court for the District of Nevada certified three questions to the Nevada Supreme Court.  The questions focused on whether placement of fill materials and grading constituted “construction of a work of improvement” for purposes of a lien priority determination under NRS 108.225. … Read More »

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A Subsequent Developer has no Ability to Force a Public Body to Call an Abandoning Developer’s Performance Bonds for Infrastructure Improvements.

The Arizona Court of Appeals decided on July 22, 2014 that a developer cannot compel a public entity to call its performance bonds to complete infrastructure improvements on a construction project that a prior developer abandoned due to bankruptcy.  Ponderosa Fire Dist. et al. v. Coconino County et al., 1 CA-CV 13-0545.

– See more on this case from our blogger Rick Erickson at: http://www.swlaw.com/blog/construction-ally/2014/07/23/a-subsequent-developer-has-no-ability-to-force-a-public-body-to-call-an-abandoning-developers-performance-bonds-for-infrastructure-improvements/#sthash.3iBSqIC1.dpufRead More »

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Colorado Supreme Court Revisits Rule Against Perpetuities

By: Ginny Olmstead   http://www.swlaw.com/attorneys/virginia_olmstead

In March of this year, the Colorado Supreme Court revisited a fundamental doctrine of property law, which it described as “long cherished by law school professors and dreaded by most law students: the infamous rule against perpetuities.”  The rule applies an unusual formula to prevent property from remaining “tied up” by grants of contingent future interests vesting too remotely in time.  Although the rule was originally crafted to prevent excessively long family settlements, courts have since applied it to commercial transactions as well.  This has created some odd results in case law governing commercial transactions, because the rule’s formula is structured around “lives in being” and potential heirs. … Read More »

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Full Credit Bid Rule Bars Recovery for Wrongfully Enjoined Lender

By:  Michelle Keogh

On June 30, 2014, Judge James A. Teilborg, a Senior District Judge in Arizona, ruled that Tri City National Bank (“TCNB”) was not entitled to bond money posted by the plaintiffs after TCNB was wrongfully enjoined from executing a trustee sale.  Grady v. Bank of Elmwood, 2014 WL 2930510 (D. Ariz. June 30, 2014).

In Grady, the plaintiffs initially sought injunctive relief against Bank of Elmwood (“BOE”).  Plaintiffs signed a promissory note and a deed of trust with BOE for their home loan of just over $1.8M.  Less than a year later, the plaintiffs filed suit in Maricopa County Superior Court seeking to have the note voided for fraud. … Read More »

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Guarantors Remain Liable for “Carve-out” Obligations, Despite Non-recourse Loan

By:  Ben Reeves

Introduction

Believe it or not, guaranty contracts mean what they say.  If a guarantor agrees to reimburse a lender for misappropriated security deposits, unpaid taxes, and the cost of enforcement, then – not surprisingly – courts will hold the guarantors liable for these expenses.

In Investors Warranty of America, Inc. v. Arrowhead Business Center, L.P., the guarantors signed a limited guaranty contract obligating them to pay up to $350,000 if the borrower defaulted on the $5,250,000 commercial loan secured by an office building in Peoria.  In addition to this capped amount, the guarantors agreed to pay for certain “carve-out” expenses, including misappropriated security deposits, unpaid taxes, and costs of enforcement. … Read More »

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Governmental Power and Property Lines

By: Neal McConomy

On May 27, 2014, the Colorado Supreme Court issued its opinion in Town of Dillon v. Yacht Club Condos. Home Owners Ass’n, 2014 CO 37.  Overturning the rulings of both the trial court and the Colorado Court of Appeals, the Colorado Supreme Court reaffirmed the long-standing deference Colorado law shows to state legislative bodies exerting their police powers.  This opinion reminds Colorado property owners that property rights and interests end at the property line and no one should rely on the ability to use public land around their property in the future.

Between 1965 and 1967, a developer constructed the Yacht Club Condominiums in Dillon, Colorado, consisting of three buildings and fifty condominium units. … Read More »

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Guarantors Score Two Victories Before the Nevada Supreme Court.

By:  Bob Olson and Nathan Kanute

On May 29, 2013, the Nevada Supreme Court issued two decisions that all real estate lenders need to be aware of because they have the potential to eliminate the ability of a lender to recover a deficiency judgment from a guarantor.

In Nevada it is common for lenders to commence foreclosure proceedings and, at the same time, sue all guarantors that have waived the benefit of Nevada’s one-action rule for the full amount of the debt they guaranteed.  Often the foreclosure sale will occur before lender obtains a judgment against the guarantor.  In Lavi v.Read More »

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Real estate salesperson succeeds in mission to collect commission

By: Erica Stutman

A.R.S. § 32-2152 allows a real estate broker or salesperson to file a court action to collect earned compensation if he was a “qualified licensed broker or salesperson at the time the claim arose.”  In Focus Point Prop., LLC v. Johnson, 689 Ariz. Adv. Rep. 4 (June 19, 2014), plaintiff Cleo Johnson tested the meaning of a “qualified” licensee, arguing that her salesperson was not entitled to his commission because his license could have been revoked at the time he performed his services.

In 2009, Johnson, trustee of a trust, hired Jeff Kantor from Focus Point Properties to sell a commercial property owned by the trust and also to assist with rehabilitation activities and leasing.  … Read More »

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Nevada Supreme Court and District Court Issue Decisions Regarding Nevada’s Limitations on Deficiency Judgments.

By:  Bob Olson and Nathan Kanute

In 2011 the Nevada Legislature enacted Assembly Bill 273 (“AB 273”) which amended NRS 40.459 by limiting deficiency judgments to the difference between the amount the lender paid to acquire the loan or obligation and the larger of the market value of the property or the amount paid for the property at a foreclosure sale.  As one can imagine, a large number of borrowers and guarantors have tried to take advantage of this recent law to limit or in some cases eliminate their liability for deficiencies.  Creditors, on the other hand, have cried foul by arguing that, among other things, the law cannot be applied retroactively, it impairs the value of their pre-enactment paper and violates the Contracts Clauses of both the United States and Nevada Constitutions. … Read More »

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Is the Future Bright for Commercial Real Estate in Arizona?

By Cory L. Braddock

AZRE Magazine recently published an interesting article discussing the outlook for the commercial real estate market in Arizona.  To give it a read, click here.… Read More »

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Borrowers Can Avoid Liability Even After a Trustee’s Sale

By:  Ben Reeves

Since a lender must have a valid debt and valid lien to conduct a trustee’s sale, a borrower that allows the foreclosure sale to occur impliedly agrees that the debt and lien are valid.  In Madison v. Groseth and BT Capital, LLC v. TD Serv. Co. of Arizona, 229 Ariz. 299, 301, 275 P.3d 598, 600 (2012), Arizona appellate courts reached that exact conclusion, holding that under A.R.S. § 33-811(C), a borrower that does not obtain an injunction stopping a trustee’s sale waives all defenses to the validity of the sale and all defenses related to the sale. … Read More »

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