Under Colorado House Bill 17-1279, HOA Boards Now Must Get Members’ Informed Consent Before Bringing A Construction Defect Action

By: Luke Mecklenburg

Last year, I wrote a post calling attention to stalled efforts in the Colorado legislature to pass  meaningful construction defect reform.  Shortly thereafter, the legislature got it done in the form of House Bill 17-1279.  This bill creates an important pre-litigation notice-and-approval process whenever an HOA initiates a construction defect action in its own name or on behalf of two or more of its members.

Before May 2017, the pre-litigation requirements that an HOA had to fulfill before bringing a construction defect claim under the Colorado Construction Defect Action Reform Act (“CDARA”) were generally minor. For example, while many declarations required majority approval from the community prior to initiation of claims, in practice, what the industry was seeing is that some HOAs were making it so that only a majority of the HOA Board had to approve bringing the claim, rather than the majority of interested unit owners. … Read More »

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When Does a Contractor Legally Abandon a Construction Project?

By Rick Erickson

Lately, we’ve been spending more time as litigators pursuing and defending claims of abandonment against contractors. It has become apparent that abandonment is often misinterpreted in its legal meaning and effect.  Here are some thoughts on abandonment to consider.

On its face, the concept of abandonment is simple enough. For any number of reasons, a contractor abandons a project when the contractor stops showing up.  Abandonment is major concern for all players on the project because it causes critical path delays and significant costs to replace the contractor with another contractor, many times at a much higher cost than the original contractors’ bid.… Read More »

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Withdrawal of an Admission in California May Shift Costs—Including Attorneys’ Fees—Incurred in Connection with the Withdrawal

By: Tony Carucci

Under California Code of Civil Procedure section 2033.300, a court may permit a party to withdraw an admission made in response to a request for admission upon noticed motion. The court may only do so, however, “if it determines that the admission was the result of mistake, inadvertence, or excusable neglect, and that the party who obtained the admission will not be substantially prejudiced in maintaining that party’s action or defense on the merits.” Cal. Code Civ. Proc. § 2033.300(b). The court may also “impose conditions on the granting of the motion that are just, including, but not limited to .… Read More »

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Is the Issuance of a City Use Permit Referable? Not When It Is an Administrative Act

By: Adam E. Lang

Arizona’s Constitution gives electors in cities, towns, and counties the ability to refer legislation that was enacted by their local elected officials to the ballot for popular vote. Ariz. Const. art. IV, Pt. 1 § 1(8). But only legislative acts are referable; administrative acts are not. In general, a legislative act makes new law and creates policy, is permanent in nature, and is generally applied. On the other hand, an administrative act is one that executes and implements a law already in place. Wennerstrom v. City of Mesa, 169 Ariz. 485, 489-90, 821 P.2d 146, 150-51 (1991).… Read More »

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The Contributors to This Blog Are Pleased to Announce That….

Snell & Wilmer’s Real Estate Litigation Group, which provides the content for The Real Estate Litigation Blog, is pleased to announce that it has been recognized in both the national and metropolitan rankings by U.S. News Media Group and Best Lawyers for the 2018 edition of “Best Law Firms.”  We achieved the following rankings:

 •            National Tier 1: Litigation – Real Estate

•             Phoenix (AZ) Tier 1: Litigation – Real Estate

•             Utah Tier 1: Litigation – Real Estate

•             Colorado Tier 1: Litigation – Real Estate

•             Reno (NV) Tier 1: Litigation – Real Estate

•             Tucson (AZ) Tier 1: Litigation – Real Estate

The rankings are determined through an evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process.  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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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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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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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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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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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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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 »

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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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“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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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Unmitigated Waivers: Guarantors Remain Liable Despite 4-Year Delay in Foreclosure Sale

debt clockBy:  Ben Reeves

If a lender delays foreclosure allowing years of default interest to accrue such that a guarantor’s obligation increases from $6 million to $12 million, should the guarantor remain on the hook for the full $12 million?  In Pi’ikea, LLC v. Williamson, 683 Ariz. Adv. Rep. 32 (Ct. App. 2014), the Arizona Court of Appeals recently confirmed that if the guarantor waived the “mitigation of damages” or “impairment of collateral” defense in its guaranty contract, then the answer is an unmitigated YES.

The Facts

In 2004, TBM Equities, LLC borrowed $5,922,000 to build an apartment complex in Tucson, AZ. … Read More »

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Arizona Supreme Court Holds That Property Owner Who Quarreled With Light Rail Construction Should Be Compensated For Lost Access

By Eric H. Spencer

Late last week, the Arizona Supreme Court handed down a decision that clarified the rights of property owners who lose access to an abutting road and, in the process, reinforced the principle that both elimination and substantial impairment of access is compensable under the Arizona Constitution.  But perhaps more significant, the Supreme Court in City of Phoenix v. Garretson held that a property owner should be compensated even if it retains relatively convenient access to that road through other means.

In so holding, the Supreme Court no doubt sent initial shockwaves through public works departments across Arizona who may be wondering whether they are hamstrung in making even basic traffic improvements. … Read More »

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The Registrar is Changing the Game for Complaints Against Arizona Contractors

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

Sweeping changes at the Registrar of Contractors have the construction and real estate industries concerned and curious.  The Registrar recently received some poor performance reports by the Auditor General and State Ombudsmen.  As a result, the Registrar overhauled its procedures for handling complaints and adjudicating contested cases against Arizona contractors.  You should be following these changes before the Registrar rolls out its new approach this summer.     

The Registrar regulates contractor licensing and enforcement of workmanship standards against thousands of licensees throughout Arizona.  In doing so, the Registrar dictates administrative remedies available to property owners on residential and commercial projects. … Read More »

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Beyond Real Estate: Publicly Traded Homebuilders (And Other Public Companies) Must be Aware of Cybersecurity and Data Breach Disclosure Requirements Applicable to SEC Filings

By:  Richard H. Herold

Generally speaking, publicly traded homebuilders and other public companies must disclose material information in their SEC filings.  “Information is considered material if there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision or if the information would significantly alter the total mix of information available.”  Basic v. Levinson, 485 U.S. 224 (1988)

As the agenda of hackers and other criminals advances, so has the issue of cybersecurity, focusing on what risks exist in the company’s cybersecurity defenses and, if there has already been a data breach incident, whether the scope of the breach and the resulting adverse consequences (which may include regulatory investigations, SEC or FTC enforcement actions, securities class actions, and/or derivative lawsuits) is material and must be reported in SEC filings.… Read More »

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Frustration of Purpose: A Frustrating Doctrine

By: Erica Stutman

Next Gen Capital, LLC v. Consumer Lending Associates, LLC illustrates the difficulty a tenant faces when trying to avoid liability for breaching a lease based on the “frustration of purpose” defense. No. 1 CA-CV 12-0624 (Ariz. Ct. App. Dec. 19, 2013).  In 2007, Consumer Lending Associates (“CLA”) signed a five-year lease, which limited CLA’s primary use of the premises to operating its “payday loan” business.  CLA was operating pursuant to an Arizona statute, which, by its terms, expired on July 1, 2010.  When the authorizing statute expired, CLA vacated the premises and refused to pay rent due through the end of the term, claiming that the lease terminated “by operation of Arizona law.”  The landlord sued for breach of contract, and the superior court granted a motion for summary judgment, holding that CLA had to pay unpaid rent and relates charges through the end of the lease term. … Read More »

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Partition Disputes

Partition is a statutory procedure whereby co-tenants (for example joint tenancy, tenancy-in-common, community property) can file a court action to physically divide or sell the property.  See A.R.S. § 12-1211 et seq.  Unless the co-tenants have a private partition agreement, any co-tenant can compel sale or physical division of the property through the statutory partition process.  Under the statutory partition process, the court appoints commissioners to study whether a physical division of the property is appropriate.  If so, the property will be physically divided among the co-owners.  If not, the property will be sold by the commissioners and the net proceeds divided among the co-owners. … Read More »

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The Uniform Law Commission Makes Progress Drafting a Model Act on the Appointment and Powers of Real Estate Receivers

By:  Ben Reeves

If all goes as planned, the Uniform Law Commission will finalize and promulgate a model act dealing with the appointment and powers of commercial real estate receivers at some point in 2015.  Last month, the Drafting Committee for this model act met in Minneapolis, MN to discuss and revise the latest draft.  Since a significant part of my practice is devoted to real estate receiverships in Arizona, I flew up to Minnesota to participate in the meeting as an Observer.

Led by Chair, Tom Hemmendinger, and Reporter, Wilson Freyermuth, the committee meticulously analyzed every aspect of the draft act, including the grounds for appointment, the receiver’s powers upon appointment, the rights of third-parties affected by a receivership, and – by far the most provocative issue – whether a receiver should have the power to sell real property. … Read More »

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CC&Rs Remain Subject to Statutory Modification

By:  Andy Stone

Future legislation may impact current CC&R obligations.  In an important decision for all communities, homeowner associations, builders, and developers, the Arizona Court of Appeals recently held that new laws may apply retroactively to modify or eliminate CC&R provisions.

In Hawk v. PC Village Ass’n, Inc., No. 1CA-CV-12-0362 (Ariz. Ct. App. September 3, 2013), the Arizona Court of Appeals held that a 2009 law, which renders unenforceable any covenant, restriction or condition prohibiting the posting of “for sale” signs, invalidated a restriction recorded before 2009.

In 2009, the Hawks purchased a lot in a master-planned community managed by PC Village Association, Inc. … Read More »

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AZRE Article Discusses Social Media Resources for the Industry

By:  Matthew P. Fischer

In the most recent issue of the magazine AZRE: Arizona Commercial Real Estate (September October 2013), reporter and former editor Peter Madrid wrote on social media coverage of the Arizona commercial real estate industry in his article, “The Message Is the Medium:  Commercial real estate practice groups embracing social media as a source and outlet of gathering disseminating relevant news.”  Among the social media resources mentioned, Mr. Madrid discusses the Snell & Wilmer Real Estate Litigation Blog.  You can read the article online by clicking the hyperlinked title.  Keep up the great work AZRE!… Read More »

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