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Answers To Your Questions About California Real Estate And More

The many regulations involved in California construction law, real estate law and eminent domain are incredibly complex. If you are wondering about your rights or you need a legal issue clarified, we at The Horowitz Law Firm, APC, can help you. Our Los Angeles-area attorneys have more than 40 combined decades of experience practicing law. They have the information you need about the legal concerns you face.

What is the difference between actual title and record title?
What is not covered by title insurance?
What is a lien?
What is a mechanics lien?
What is an abstract of title?
I’ve heard about people who have made money by buying property cheaply at mortgage foreclosure sales and then reselling it at a profit. What does this involve? Is it something I could do?
What is Torrens or registered title?
What is a contract for deed or land installment contract?
What is the difference between actual title and record title?
What is adverse possession?
What is a variance?
What does it mean when something is said to be grandfathered in for zoning purposes?
Learn More: Real Estate Law

What Is Not Covered By Title Insurance?

Like all forms of insurance, title insurance does not cover every conceivable problem. It is important to understand its limitations. Title insurance is based on examination of the county real estate records. Generally, it will not cover problems arising from facts outside of the recorded chain of title.

One common problem not covered is boundary line issues, which would be revealed by a survey of the property. Unrecorded mechanics’ liens and unpaid public utility bills are other examples. The title insurance policy will describe many of the situations it does not cover; these same limitations will generally be found in an attorney’s title examination. A qualified real property attorney can assist in helping a buyer understand the limits of a title policy and can take care of issues not covered by the policy.

What Is A Lien?

A lien is any legal claim on real property that acts as a security for the payment of a debt or other obligation. If the debt is not repaid as promised, the lender or the lien holder can foreclose its claim on the property and force a public sale to pay the debt. The most common form of a lien on property is a mortgage. While all mortgages are liens, not all liens are mortgages.

Other types of liens are commonly encountered. Part of the work of the real property attorney is to check for outstanding liens at the time a real estate transaction closes. These include such things as:

Judgment liens resulting from a court judgment against the owners
Mechanics liens resulting from recent improvements to the property
Liens for unpaid taxes
Liens for unpaid municipal utilities, such as water and sewer.

Often, if a seller is divorced, the divorce decree will provide the ex-spouse with a lien on the couple’s property to be paid at the time of sale.

What Is A Mechanics Lien?

Mechanic’s and materialmen’s liens provide collection rights to persons and businesses that make improvements to real property. They are of particular concern to the purchaser of real property, as the seller may have had significant work done on the property in anticipation of sale. If the seller has not yet paid for that work, mechanics liens can result.

On any given project, the general contractor, the subcontractors, and the lumberyard and other suppliers will have mechanics lien rights. Commonly, the contractor has the right to serve the owner of the property with a lien claim or notice of lien. They also have the right to record it as part of the county land title records when payment is not made. If the lien is not paid, the contractor can commence a court proceeding to foreclose the lien and to sell the land in payment of the obligation.

Mechanics liens can result in an owner being forced to pay twice for the same work. This occurs when the owner pays the general contractor in full for the work in advance. If the general contractor fails to pay his subcontractors, the subcontractors may still have the right to file a lien and force the sale of the property. The fact that the owner has already paid the general contractor for the work may not be a defense. This problem can be prevented by obtaining mechanics lien waivers from all materials suppliers and subcontractors prior to full payment.

Usually, the time for filing a mechanics lien is short. Usually, the lien must be filed within sixty to 120 days of the last day of work on the property.

What Is An Abstract Of Title?

An abstract of title is a summary of the legal history of a piece of real property. It is used by title insurance companies as the basis for issuing title insurance. It is used by attorneys examining the title as the basis for their conclusions with regard to ownership. The abstract of title is not a legal document; it is a summary prepared by a title company or abstracting firm.

To prepare the abstract, an employee called an abstractor reviews all of the records on file that relate to that particular piece of property. The abstractor prepares a summary of each transaction, which identifies the instruments, names the grantors and grantees, lists the dates the instruments were signed and filed, and, where appropriate, provides a summary of their contents. This sequence of deeds and other documents is often called the property’s chain of title. The function of the abstract is to summarize it accurately.

A new abstract is not prepared each time the property is sold. Rather, at each sale, the abstract is updated to reflect new transactions since the time of the last update. Each time the abstract is updated, the abstractor will also conduct a search for judgments, bankruptcies, tax liens, and similar documents that could affect the title. Generally, a purchase agreement will provide that the seller will pay for and provide an updated abstract to the prospective buyer for examination.

While an abstract is not a legal document and can be replaced by a qualified abstract or title firm, it is an important document. A new abstract is expensive. Depending on the history of the property, creating a new abstract can cost several hundred to a few thousand dollars. Not all property requires an abstract of title. If property is governed by the Torrens or land title registration system, the owner receives a governmental title to the property, which eliminates the need for the abstract.

Can People Make Money By Buying Property At Mortgage Foreclosure Sales And Reselling It At A Profit?

There are indeed companies and investors who buy foreclosed properties and make money doing so. This is, however, an extremely high-risk form of investment that is not for the inexperienced or faint of heart.

Consider the differences between a sheriff’s sale and a standard real estate purchase. In a normal transaction, the seller gives the buyer an opportunity to inspect the property. They provide promises and warranties regarding the title that are backed up by a title insurance policy or an attorney’s title opinion. In a sheriff’s sale, none of these safeguards exist. The deed has no covenants, warranties or representations of any kind. Generally, the purchaser has no recourse if there is something wrong with the title.

Another major problem is that there is little or no opportunity to inspect the property. In general, the delinquent borrower still lives in the property at the time of the sale. They may be at best uncooperative and at worst downright hostile if asked to allow inspection. Moreover, in many states, the borrower will be allowed to remain in the property for some period of time after the sale. This is often up to six months and sometimes as much as a year. During this period, the borrower has no incentive to maintain the property, pay taxes, or utility bills. They may actually be antagonistic enough to deliberately damage the property.

These problems explain why the mortgagor/lender is usually the only bidder at a sheriff’s foreclosure sale. With experience and the assistance of competent counsel, a purchaser can indeed successfully obtain good title to property, often at bargain prices, through the foreclosure sale process. But this is an activity best left to those with expertise in the area and a high tolerance for financial risk.

What Is Torrens Or Registered Title?

The United States has two systems for determining real estate title, which exist side by side in some jurisdictions:

Abstract system: The most common and oldest system. The abstract is a summary of all deeds and other instruments relating to a particular piece of property that have been recorded in the county land office. The attorney or title insurance firm reviews the abstract, traces the various lines of ownership from person to person and deed to deed over the years, matches mortgages with satisfactions of mortgages and so forth, finally arriving at a conclusion as to who owns the property and what liens or encumbrances are still valid and in force.
Registered land titles: In some states, the abstract system is being gradually replaced by a system of registered land titles. Land is initially registered through a court proceeding. An examiner will examine the abstract of title and draw a conclusion as to ownership. A court action commences to obtain a decree of registration confirming that ownership, with notice being given to anyone in the chain of title who might have grounds to object.

At the end of the process, the owner obtains a certificate of title. Much like the title to an automobile, the certificate is evidence of the ownership of the property. Any liens or encumbrances must be recorded on the certificate to be valid. When ownership of the property changes, the old certificate of title will be canceled and a new certificate issued in the name of the new owner. The registration process greatly simplifies the task of examining and determining the title. This system is also referred to as the Torrens system, after its developer Sir Robert Torrens (1814-1884).

What Is A Contract For Deed Or Land Installment Contract?

The most common method of financing the purchase of real property is a traditional promissory note secured by a mortgage. Some states provide for an alternative financing method. It is most commonly used in transactions between private parties. This is called a contract for deed or land installment contract. Such a contract looks like a purchase agreement contract, but effectively acts as a mortgage.

Contracts for deed are often used for short-term financing (of a few years or less). They may contain a balloon payment clause. The contract is said to balloon on a specified date, at which time the entire outstanding and unpaid balance of the purchase price will be due and payable. The hope is that the buyer will be able to use the contract period to find financing.

Terminating contracts for deed or land installment contracts is frequently easier and faster than foreclosing a mortgage. If the buyer fails to make the required payments (including any balloon payment when due), the seller can cancel the contract. If the buyer fails to cure the default within the time provided by statute, he or she can lose the property and any money paid to date.

What Is The Difference Between Actual Title And Record Title?

Actual title refers to who actually owns real property. In real estate law, title examiners and title insurance companies are governed by the concept of record title. The principle behind various statutes allowing the recording of deeds and other instruments of title is that buyers are entitled to rely on the record of title as reflected in the county records and to make decisions based on that record.

For example, say a prospective buyer has title to a piece of property examined. The examination shows an unpaid mortgage that the seller did not reveal. There are two possibilities:

The first is that the mortgage is unpaid and will need to be paid if the property is to be sold.
A common problem, however, is that the mortgage was paid in full years ago, but the owner forgot to obtain (or record) a satisfaction. The seller’s actual title is good, in the sense that the mortgage has in fact been paid and no one can foreclose on it. But the seller’s record title is not good, because the real estate records do not reflect this fact.

In either case, the seller lacks a marketable title. The situation would need to be corrected before the property can be sold.

Making sure that the record title accurately reflects its actual ownership is one of the important services that an attorney can provide a buyer or seller.

What Is Adverse Possession?

Adverse possession is a right to use or own property that is the result of continued use and occupancy over a period of time, generally 10 to 20 years. If a non-owner of property occupies and uses the property without the permission of the actual owner for long enough, the law will find that the actual owner has lost his or her rights in the property and ownership has transferred.

Since adverse possession results in taking property without payment, the principle is applied very carefully, and only if certain specified conditions are met. For example, the adverse use must be obvious to the real owner. And the use must be hostile, meaning that it is without the permission of the real owner. Use of another’s property with the permission of the owner will never create a right of adverse possession.

Adverse possession issues arise most often where an adjacent property owner encroaches on a neighbor. Assume your neighbor erects a fence three feet onto your property and starts using the land as a garden. As the owner, you would have the right to remove the fence and the garden. Or, you could sign an agreement with the neighbor allowing him to use the land. If you took no action, and the adverse use continued for the specified number of years, the neighbor could come to own that portion of the property.

For this reason, it is important when purchasing property to check for encroachments and adverse uses. Conduct a survey if there is any question as to where the property lines actually are.

What Is A Variance?

A variance is permission to depart from the requirements of a zoning ordinance. Generally, a variance is granted or denied through administrative action. The theory behind state and local zoning ordinances is that uses within a particular area should be uniform. While this system generally works well, there will be a need for exceptions. Depending on the needs of the individuals and the impact on the neighborhood, it may be possible to change the zoning by obtaining a variance.

Variances can be divided into area variances and use variances:

Area variance: May be requested where the use is permissible, but does not quite fit the property. For example, if an owner wanted to add a deck to his or her home that would violate the minimum setback requirements of the zoning regulation, or wanted to build a two-story garage, which exceeded the height requirement, an area variance would be required.
Use variance: Relates to the use of the property that is otherwise impermissible in the given zone. If, for example, a landowner wanted to build a grocery store in a locality zoned exclusively for residential purposes, a use variance would be required.

Generally, a use variance will be harder to obtain than an area variance. The land owner requesting the variance must show undue hardship that is not self-imposed, and must demonstrate that the variance would not harm the public welfare, would not have an excessive impact on the general zoning plan, or would not adversely impact surrounding property values. The purpose of this requirement is to prevent an owner from building a nonconforming structure and then seeking a variance for it on the grounds that it would be a hardship to tear it down.

What Does It Mean When Something Is Grandfathered In For Zoning Purposes?

One goal of zoning is to separate property uses into distinct zoning districts (residential, commercial, industrial, etc.) and to keep uses within each zone uniform. But what happens to a business that existed prior to the time when its location was zoned residential?

At this point, the constitutional prohibition against taking property without just compensation comes into play. If a use predates the zoning plan, it can remain. The government lacks the power to close a business in a zone that becomes residential, or to tear down a home in an industrial zone, unless it is willing to compensate the owner. Such exceptions are called nonconforming uses. The portion of the zoning statute allowing prior nonconforming uses is called a grandfather clause. Such a use is said to be grandfathered in.

Nonconforming uses are not exempt from all zoning regulations. While they cannot be taken (without compensation), the government is not required to allow them to change or expand. The use is generally limited to what existed when the zoning ordinance was adopted. Also, if the nonconforming use is abandoned or ceases, the grandfather rights are lost, and the nonconforming use cannot be restarted at a later date.

What Is Some Basic Information I Should Know About Real Estate Law?

Real estate law is a highly complex area of legal practice. Real estate is also an area in which consumers and businesses are well advised to seek legal counsel and advice. Attempting to do it yourself without adequate experience can have long-term, disastrous consequences. For example:

Hidden problems: First, problems in real estate, particularly real estate title law, often do not become apparent for many years. A mistake made at the time a property was purchased may not make itself known until the time comes to sell the property years later. By that time, it may be possible to correct it only with great difficulty and expense.
Differences between states: Second, real estate law is one area of legal practice that varies greatly from state to state. In many areas of law, there is a trend towards uniformity between states. Real estate, however, is by definition immobile. Each state has modified that law to suit its own needs. General principles of real estate law may not provide adequate guidance when attempting to deal with a specific fact situation in a particular state. The real estate attorneys in each state specialize in that state’s statutes, rules and procedures. Your attorney will ensure that a real estate transaction goes smoothly and that the interests of all parties are protected.

As with any area of law, real estate law has many distinct components. The real estate attorney may practice in one or more of these areas. Common areas of specialization include the following:

Commercial leasing: The leasing of real property for business use, usually for extended periods of time. The attorney involved in commercial leasing needs to protect the needs of a business owner for continuity and stability while at the same time making the lease flexible enough to adjust to changing circumstances as the years progress.
Commercial real estate law: The purchase, sale, and operation of property for business, as opposed to residential purposes. It deals primarily with the need for businesses to make sure that the property they purchase is both legally and physically appropriate for the type of business they hope to conduct.
Condemnation: The process by which the government takes property for a public purpose and determines how much it must pay the owner to do so. For most individuals, the most important aspect of a condemnation proceeding will be obtaining a fair price for the land.
Condominiums and cooperatives: A condominium or cooperative attempts to combine the advantages of home ownership (building equity, tax advantages, and the like) with the advantages of apartment living (such as limited maintenance responsibilities). Condominium and cooperative law deals not only with the purchase of the property itself, but with the rights and responsibilities of the owners of the various units.
Conveyancing: The art of transferring property from one owner to the next. It involves the technical requirements necessary to create a valid deed, mortgage, or other instrument. It also involves advising the purchaser as to the various options available by which title to property can be taken and held.
Eminent domain law: The right of governments and private companies exercising public functions to take land for public purposes. It is closely related to condemnation, which is the process by which the land is actually taken. Eminent domain law also deals with situations where a landowner wants to force the government to take and pay for property on the theory that the government’s activities already amount to a taking for which compensation is required.
Land use and zoning law: The methods by which government (and occasionally private individuals) attempt to control development and preserve the character of neighborhoods by regulating the uses to which land can be put and the types of buildings that can be erected on the land.
Landlord and tenant law: The interaction between tenants and landlords, most commonly in a residential setting. It attempts to balance the rights of the landlord to control the property, to receive rent in a timely fashion, and to remove tenants who breach their lease promptly against the rights of tenants to privacy, security, and a well-maintained rental unit.
Mortgage and foreclosure law: The most common method of providing secured financing for the purchase of real property and for other purposes. Mortgage financing is used in the vast majority of real estate transactions. This area of law governs the issuance of the mortgage as well as the lender’s right to collect the secured debt through foreclosure if the borrower fails to pay as promised.

The attorney practicing residential real estate helps the consumer with what is frequently the most important purchase in his or her life-the purchase of a new home. The attorney will guide the consumer through the complexities of real property law as it relates to the purchase and explain potential options and pitfalls.

Title insurance provides the buyer of property with certainty and security by guaranteeing against title defects and hidden problems that could be costly to the buyer.

Ask More Questions To Our Sherman Oaks Construction Law Attorneys

These are merely a few of the inquiries that we hear every day. To get more information or to get counsel on a particular issue, please contact our team at The Horowitz Law Firm, APC. To set up an initial consultation, please call 818-528-5183 or send us an email.