Receivership: Available Remedy for Growing Problem of Vacant Foreclosure Properties
Griswold Law has posted articles in the past explaining how the receivership remedy can be an effective tool for city and county municipalities fighting the ever-present problem with vacant foreclosure properties in neighborhoods. DSnews.com published an informative article today that highlights this problem as it continues to infect cities and counties across the nation.
When you couple the growing count of vacant foreclosures with the recent restrictions caused by the elimination of redevelopment funds for cities in California, an environment is created whereby the situation appears like it will get worse before better in California.
Cities and counties can petition for the appointment of a health and safety receiver when a property becomes a health and safety hazard to the community and/or the occupants. The receivership remedy has the potential to save municipalities’ money and alleviate the current drain on their time and staff resources.
Richardson “Red” Griswold is appointed by courts in California to act as a Health & Safety Code Receiver. Mr. Griswold also acts as the Director of the California Receivership Group, LLC, San Diego Division. For more information, please contact Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
For further reading on this topic, be sure to check out our recent articles on Health & Safety Receivership remedy for hoarding and slumlord-owned properties or browse the complete list of articles about court-appointed receivers.
Health & Safety Receivership: Abating Fire Hazards
As discussed in previous blog articles, health and safety receiverships are implemented for a variety of reasons. The motivating force in all health and safety receiverships is to address substantial health and safety risks effecting property owners, tenants, and the surrounding community.
As we continue to enjoy our Southern California summer, fall is approaching and that will bring the seasonal Santa Ana winds. These warm, dry, and windy conditions lead to fire risk in and around the counties of San Diego, Orange, Los Angeles, Riverside, San Bernardino, and Imperial.
With the current ongoing problems with abandoned and distressed properties, many properties suffer from overgrown weeds. Couple the concern of Santa Ana winds with vagrancy and vandalism issues and the risk of fires on abandoned properties becomes a major concern. Under Health & Safety Code section 17980, et seq., a receiver can be appointed to control and abate a property that has failed to maintain appropriate weed abatement in defense of fire risk.
Richardson “Red” Griswold is appointed by courts in California to act as a Health & Safety Code Receiver. Mr. Griswold also acts as the Director of the California Receivership Group, LLC, San Diego Division. For more information, please contact Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
For further reading on this topic, be sure to check out our recent articles on Health & Safety Receivership remedy for hoarding and slumlord-owned properties or browse the complete list of articles about court-appointed receivers.
Commercial Tenants May Be Required to Pay Rent to Bank when Landlord in Default
Section 2938 of the California Civil Code requires commercial tenants to pay their rent to the creditor of their landlord when a landlord defaults on its obligations to its creditor under certain circumstances. The general principle is that if a landlord defaults under an obligation to the creditor, the creditor can compel the tenant to make rental payments directly to it.
This assumes the creditor has followed all requirements under Section 2938 and the creditor-landlord relationship includes a conditional assignment of the right to receive such rental payments. The creditor can then provide notice to the tenant (in the form prescribed in the statute), and subsequently, the tenant is required by law to make rental payments directly to the creditor.
There are a few exceptions to Section 2938 as a safeguard mechanism for the tenant. For example, if a tenant made a good faith payment to the landlord with 10 days following the receipt of the notice from the creditor, the tenant is not in violation of the statute. Of importance, the statute makes it clear that the tenant’s rental obligations are satisfied to the extent paid to a creditor.
As more and more commercial property owners struggle to keep up with their obligations in this economy, Section 2938 is being exercised by creditors (banks) more frequently. As a commercial tenant, you need to be aware of this potential scenario arising.
For more information regarding Section 2938 or other real estate legal issues, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
Receiver Richardson “Red” Griswold Concludes another Orange County Health & Safety Receivership
Richardson “Red” Griswold of Griswold Law was nominated by an Orange County city, and appointed by the Superior Court judge under CA Health & Safety Code
section 17980, et seq., to act as a receiver over a single family home that had fallen into serious disrepair with multiple and severe health and safety, building, and other municipal code violations.
Upon appointment, Mr. Griswold inspected the property with a licensed contractor, removed and relocated the occupants of the property due to safety concerns, and secured the property as the rehabilitation project prepared to begin. A receivership budget was created, accounting for construction costs, occupant relocation costs, receivership fees and expenses, and property expenses. After securing financing, the construction project began.
Once all code violations had been corrected and the structure was deemed safe and habitable, the owner was moved back into the property and the neighborhood and safety concerns were resolved.
Attorney Richardson “Red” Griswold is commonly appointed as a Health & Safety Code Receiver for dilapidated properties in Southern California. Mr. Griswold also acts as the Director of the California Receivership Group, LLC, San Diego Division. Please contact Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com for more information about receiverships.
New Short Sale Law in California (SB 458): Secondary Lien-Holders Lose Rights
It is being heavily reported that the new law (SB 458) signed into effect this past week regarding short sale transactions in California will aid the short sale process and provide further protections to sellers. In short, the new law prohibits second lien-holders from going after short sale sellers for the deficiency amount between what is owed on the loan and the lesser amount the second lien-holder agrees to accept to complete the transaction. This restriction is already in place for primary lien-holder deficiencies.
The issue to watch for is whether these restrictions will lead to less second lien-holders agreeing to short sale transactions. Because remember—short sales do not close until the current lien-holders sign off on receiving the short pay-off.
Another concern (for another article) is what effect this law will have on the future lending decisions by lenders in California. I would imagine lending on real property in California just became a lot less desirable.
The new law sure sounds good on its face and in the headlines, but we will have to wait and see on whether the new law truly helps or hurts the current real estate market in San Diego and the rest of California.
If you have legal questions regarding a real estate transaction or how this new law may impact you, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
Landlord Tenant Law: Lease Assignments
We recently posted an article about subleases, and how this may be a remedy for renters who need help paying the rent, or need to move out of their rental unit temporarily but plan on coming back. However, if a tenant who has entered into a written lease agreement for a fixed period of time needs to move out PERMANENTLY before the lease term ends, they would be better off executing an assignment of the lease. This can be an issue with residential or commercial leases.
An assignment of the lease differs from a sublease in that the tenant completely transfers their rights as a tenant to someone else. Similar to a sublease, the assignment is a contract between the original tenant and the new tenant. Also similar to a sublease, the original lease contract may prohibit assignment of the lease, but the original tenant may ask the landlord to agree to allow it.
The difference is that in a sublease the original tenant is still responsible for paying the landlord the rent, and in an assignment the new tenant can pay the landlord directly. Despite this, the original tenant is still liable to the landlord for any and all unpaid rent. If the new tenant doesn’t pay, the landlord can go after the original tenant for the amount of rent due. 
If the original tenant wants to avoid this liability, they can make an agreement called a novation. The novation agreement is entered into between the original tenant, the new tenant and the landlord, and specifically states that the new tenant will be solely responsible to the landlord under the assignment.
Tenants should be careful about entering into a sublease or assignment since they ultimately are still liable for the amount of rent due!
It is recommended you consult with a real estate attorney about your landlord-tenant concerns and inquiries. For more information, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
Be sure to check out the Griswold Law Blog’s complete list of articles of concern for landlords and tenants here.
Tips for Entrepreneurs: Leasing a Commercial Space
While some business endeavors can be conducted completely from home, there are situations in which a business’s success depends on finding the perfect storefront. So what are the differences between renting a residential property and renting a commercial property- and what should you look for?
In many ways, you should look out for the same attributes you’d look for in a residential property- the space should be clean and well-maintained, you should take note of any pre-existing damage and ask the property owner to make repairs (using the same principles described in this article about residential rentals, and of course, you want a desirable location where you feel your business could thrive. We’ve discussed the importance of carefully and completely reading leases before you sign the contract- this concept definitely applies to both residential and commercial leases. Remember, there is no “standard” lease, so you cannot predict or assume the terms of the agreement.
Of course, the property will not be in a residential zoned area. Commercial spaces typically fall into the category of business park, industrial park, or commercial retail property. Which type of space you decide to move into depends on the type of business you are conducting. You will want to make sure your use of the property abides by local zoning ordinances. If neither you nor the landlord is sure your business is allowed to operate in the space, you should contact an experienced commercial real estate attorney and consult with the applicable city, county and/or state offices.
Often times, commercial lease terms are for longer periods of time – 5 year terms are commonly seen. Especially if your business is in its first stages, a long lease term may be risky. If the business fails and you close shop, you are still legally obligated to pay rent for the entire lease term.
Be aware of “Triple Net” leases and CAM fees. These types of lease terms are more common in commercial leases than residential leases. “Triple Net” leases mean the landlord asks the tenant to pay rent, property taxes, property insurance, and maintenance fees. The tenant is essentially completely maintaining the property financially, but receives no ownership rights. CAM fees are also commonly included as “additional rent due” in commercial lease terms. CAM stands for “Common Area Maintenance” and often means fees for gardeners, upkeep/cleaning of the property exterior, or trash pick-up. If the specific types of CAM charges aren’t explicitly listed in the lease terms, you should ask the landlord to add them with specificity so you aren’t surprised by the charges later.
If your business depends on the flow of visitors coming in and out (like a retail store or restaurant), there are other specific factors to consider. You want the property to be both visible and easy to access. Visibility means the store can be easily identified from the street. You’ll want consumers to see the property exterior and know what business is inside. There may be local ordinance restrictions regarding advertising and signage, so be aware of any rules before you move in. The building should also be easy to access. The parking situation may be a factor in certain areas. If there is no designated parking lot, you’ll want to be aware of street parking rules. A lack of parking availability may turn off potential customers.
As you can tell, there are many factors to consider when considering a business location—some legal and some non-legal.
For more information regarding starting your own business, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
Griswold Law is always posting articles about concepts and issues involved with running a business. Be sure to check out the complete list of these articles!
Los Angeles and United States File Lawsuits Against Deutsche Bank Mortgage Subsidiary
Deutsche Bank is having a rough month. On May 3, 2011, the U.S. government filed a civil lawsuit against banking giant Deutsche Bank, alleging the bank’s mortgage subsidiary lied about the quality of loans insured under a government program. The mortgages were guaranteed by the Federal Housing Administration and are expected to cost the government more than $1 billion, the New York Times reports.
On May 4, 2011, the very next day, The Los Angeles city attorney filed a lawsuit against Deutsche Bank, seeking hundreds of millions of dollars in penalties and restitution and an injunction forcing it to clean up its foreclosed properties in Los Angeles. The bank has foreclosed on over 2,000 properties in Los Angeles over the past four years, and the complaint alleges these properties have fallen into disrepair and become hot spots for crime. See this Los Angeles Times article for more details.
Both the city of Los Angeles and the U.S. government explicitly mention that they are aiming to send messages to other lenders. Officials from the Justice Department and the Department of Housing and Urban Development said the lawsuit should serve as a warning to other lenders that are issuing loans using a government guarantee. L.A. City Attorney Carmen A. Trutanich said he wants the suit to send “a strong message to other banks.”
For more information regarding real estate law, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
Griswold Law is always posting articles about foreclosure. Be sure to check out the complete list of these articles!
Tips for Entrepreneurs: Doing Business Under a Fictitious Business Name
Is your business name “fictitious”? While the term “fictitious business name” may sound fishy, it actually is a legal term defined by the California Business and Professions Code. The terms “fictitious business name” and “DBA” (an acronym for “doing business as…”) are often used interchangeably, but California code uses the term “fictitious business name,” so we will, too.
California Business and Professions Code § 17900 describes how a business name can be “fictitious” depending on the name used and the type of business that is using it.
- For an individual, a fictitious business name would be any company name that does not include the surname of the individual, or a name that suggests the existence of additional owners.
- For a partnership, it would be a name that does not include the surname of each general partner or a name that suggests the existence of additional owners. A name that “suggests the existence of additional owners” means that there is something like “& Company” or “& Associates” at the end of your business name.
- For a corporation or LLC, a fictitious business name would be doing business under any name other than the name on file with the Secretary of State in the entity’s organizational document.
So, if Jack B. Nimble wants to start a business as a sole proprietor and he decides to call his accounting firm “Nimble & Associates,” he WOULD need to file a fictitious business name statement. However, if wants to call his company “Nimble Accounting,” he would NOT need to file a fictitious business name statement because he is conducting business using his legal name.
California law requires every person or company doing business under a fictitious name to file a fictitious business name statement within 40 days from the time the registrant begins to transact such business under the name. The statement needs to be filed in the county where the company is located. There is no state-wide register of fictitious business names; each county has their own.
In each county, the filing of fictitious business name statements is handled by the County Recorder/Clerk office. There will be a short form to fill out and a filing fee must be paid. Sounds easy enough, right? There is one final step which requires that the filed fictitious business name statement be published in a local publication once a week for four consecutive weeks. The publication needs to begin within 30 days of the initial filing, and an affidavit of publication needs to be filed with the County Recorder. The County Recorder’s office can provide you a list of publications that publish and file affidavits for fictitious business name statements. These publications will charge a fee for the publication and affidavit.
For more information regarding starting your own business, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
Griswold Law is always posting articles about concepts and issues involved with running a business. Be sure to check out the complete list of these articles!
Landlord Tenant Law: Subleases
Situations can arise where a renter who has entered into a written lease agreement for a fixed period of time needs to move out (even if only temporarily) before the lease term has ended. Maybe the tenant got a new job suddenly and needs to relocate. Maybe the tenant knows he or she won’t be able to make rent payments anymore and wants to avoid an eviction on their record. Maybe the tenant is a college student and plans on going home for the summer but wants to return again in fall.
We hear a lot of people asking how they can “get out of their lease” in situations like these, and while generally a tenant can’t back out of the lease terms (it is a signed contract to the landlord, after all), there are options out there for tenants. Tenants can’t cancel a lease, but with the landlord’s agreement, they can sublease or assign the original lease to a new tenant- for a short period of time or for the remainder of the lease term. In this article, we will discuss the sublease option.
In a sublease, the original tenant is either bringing in a new roommate to share the rental unit with them (this might happen if the original tenant is having trouble paying the rent by themselves), or the original tenant is completely moving out and allowing a new “subtenant” to move in, usually for a fixed period of time. Under a sublease, the original tenant is still ultimately responsible for paying the rent, and the subtenant will pay the original tenant, not the landlord. If the subtenant does not pay the rent, the original tenant is still liable to pay the landlord.
A sublease is a separate, written agreement from the original lease. It should contain when, where and how the rent should be paid, define who is responsible for utilities, and set forth the dates that the agreement begins and ends. If the original tenant is leaving any property in the rental unit that they want to collect later, each item should be listed and its condition described. It’s especially important to list all the property left in the unit if you are a tenant who is subleasing the apartment for only a short period of time and plan on returning shortly (like the situation with the college student moving home for the summer).
Many times, the landlord includes a provision in the lease that prohibits the tenant from adding subtenants. Landlords will do this because it is in their best interest to know who is living in their rental units, and who is paying the rent. However, even if the original lease prohibits subleases, the tenant can try asking the landlord to agree to lift this provision and allow subtenants. Even if the original lease doesn’t contain a provision prohibiting subleasing, a tenant should get the landlord’s approval before they execute a sublease, and even offer the landlord a copy of the written sublease. This is a common courtesy and it’s important to keep relations between landlords and tenants friendly and respectful on both ends.
It is recommended you consult with a real estate attorney about your landlord-tenant concerns and inquiries. For more information, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
Be sure to check out the Griswold Law Blog’s complete list of articles of concern for tenants here.