Enforcing Restrictive Land Covenants

Land Covenant AttorneysRestrictive covenants are contract clauses that  limit a contracting party’s future conduct. A restrictive land covenant prevents certain use of the land. In this article, we will discuss restrictive land covenants, and how to enforce them in California.

In general, restrictive land covenants serve the purpose of enforcing neighborhood presentation standards. These are your restrictive easements, Covenants, Conditions, and Restrictions (“CC&Rs”), and other Home Owner’s Association rules. They can range from mandating where a home owner puts his trash cans to the permissible colors of a home’s façade. Such covenants are typically written into a deed, or at least referenced in the deed and recorded. Nahrstedt v. Lakeside Village, 8 Cal.4th 361 (1994). Restrictive land covenants are usually created by developers of a planned community, and enforced by community representatives or land owners.

Restrictive covenants “run with the land.” This means that they are tied to the property (land), and not to a  specific owner(s). In other words, the limitations of a restrictive land covenant are legally binding for anybody who subsequently buys the property.

A restrictive land covenant is enforceable as long it was recorded, it is being enforced in a fair and non-discriminatory manner, and there is still an individual or group benefiting from it. It can be enforced by any individual land owner who benefits from the restriction, or the collective homeowner’s association if there is one.  (Cal. Civ. Code §5975).

For the most part, homeowner’s associations are the principal enforcers of restrictive land covenants. California’s Civil Code authorizes these types of associations to initiate legal action, defend, settle, or intervene in litigation, arbitration, mediation, or administrative proceedings on behalf of the association membership (Cal. Civ. Code §5980). An association can take action to enforce CC&Rs, resolve issues concerning damage to common areas, and similar land-use matters.

Steps for enforcing a restrictive land covenant will vary based on the planned community. For example, one particular homeowner’s association may have outlined provisions for commencement of an enforcement action. In the absence of a homeowner’s association, the land owner seeking to enforce a restrictive land covenant can sue. A plaintiff in an action seeking to enforce CC&Rs can petition the court for an injunction against the defendant, which would require the defendant to stop non-compliance and seek money damages.

If you have any questions about restrictive covenants, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you.

U.S. Supreme Court Will Hear Takings Clause Case from California

wine-countryIn January 2015, the United States Supreme Court agreed to hear a property case that originated in California dealing with whether the Fifth Amendment of the United States Constitution protects the seizure of personal property as well as real property.

The case, Horne v. U.S. Department of Agriculture, has already been before the United States Supreme Court before. In 2002 and 2003, the U.S. Department of Agriculture (the “USDA”) forced the Horne family to take almost half of its raisin crop off the market to help keep rising prices down. The Horne family sued, arguing that the USDA’s demand amounted to a taking of personal property for which the Horne family was entitled to compensation, just like a taking of real property would. When the case first came before the United States Supreme Court, the Court agreed to hear the case, but its decision did not address whether the government’s raisin marketing order constituted a “taking” of private property.  Instead the Court ruled on a procedural matter, holding that the San Francisco-based 9th U.S. Circuit Court of Appeals had jurisdiction to consider the takings claim, reversing the 9th Circuit’s finding that the claim had to be heard by the Court of Federal Claims.

The case went back to the 9th Circuit Court of Appeals, which ruled that there was no taking because the Takings Clause rule applies only to real property. The Horne family appealed, and the case will go before the United States Supreme Court once again. Horne v. U.S. Department of Agriculture, 750 F. 3d 1128 (2014).

The Takings Clause prohibits the Federal government from taking real property for public use without just compensation. The Supreme Court’s decision in this case can have major implications for business owners and farmers subject to government market orders.  However, the expansion of 5th Amendment protections to personal property could also set the stage for more federal lawsuits and claims that certain government regulations amount to takings of personal property.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and real property claims. Contact us at (310) 277-7747 to see how we can help you.

What is a Partition Action?

As a business law firm, we often deal with partnership disputes.  We have shared information on our blog on how to protect against partnership disputes, as well as tips for solving them such disputes.  Unfortunately, not all disputes can be prevented or solved.  In these circumstances, partnerships often dissolve. When that is the case, , and a partition action may be necessary to distribute partnership assets.

In a partition action, known as a partition of partnership property, a court is asked to divide partnership property equally between amongst interested parties. The guidelines for distributing assets in a partition action are set out in California Code of Civil Procedure section 872.010, et seq.  Although most partition actions involve real estate, but the laws of partition actions can be applied to distributing any type of partnership property, such as manufacturing equipment. Specifically, this type of action would be referred to as an action for partition of partnership property.

If a partner wants to file for a partition action, he or she will have to file a complaint with the court seeking a partition action is initiated like any other legal dispute, meaning that the partner would file a complaint in the appropriate court alleging a cause of action for partition of partnership property.  When the action involves real property, the plaintiff will shall also have to record a notice of pendency of the action, called a ““lis pendens,” in the office of with the county recorder of each county in which any real property described in the complaint is located.  Once recorded, the party should file a Notice of Lis Pendens with the court. This will prevent the other partner from selling or taking loans out on the property by putting buyers and lenders on notice of the pending action.

In general, a court will allow a partition unless it is against the interest of the parties. To determine whether the partition is in the best interest of the parties, the court will consider the character of the property and expenses associated with the partition.

If a court finds that a partition is in the best interest of the parties, it will usually order that the business or property be sold and the proceeds be divided amongst the partners. However, sometimes the parties are able to come to a partition settlement agreement, and the court will merely issue a judgment so that the agreement will be enforced.

If you have questions about partition actions or partnership disputes, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, commercial and real property claims. Contact us at (310) 277-7747 to see how we can help you.

Contract Law: Defining Conflicting Terms- Part 2

Previously on the blog, we discussed ambiguous and conflicting terms in contracts. Most contracts include clauses which provide interpretation rules for ambiguous and conflicting terms. In the absence of such a clause (or if the provisions of the clause do not resolve the conflict), certain California statutes, and case law interpreting and applying those rules, will provide the method of determining  which, if any, ambiguous or conflicting terms can be enforced.

Generally speaking, an ambiguous term can reasonably be read in more than one way.  Likewise, a conflicting term exists where compliance with one or more contractual provisions would violate another contractual provision.

The California Legislature codified contract interpretation rules in the California Civil Code to cover a variety of circumstances that can arise with ambiguous or conflicting terms. A summary of a few of the most common principles  follows below.

Contract Interpretation in General

  • A contract must be interpreted to give effect to the mutual intention of the parties as they existed at the time of contracting, so far as such intentions are both ascertainable and lawful. Civil Code § 1636
  • The whole of a contract should be taken together, so as to give effect to every part, if reasonably practicable, with each clause helping to interpret the other. Civil Code § 1641
  • Several contracts relating to the same matters, between the same parties, and made as part or parts of substantially one transaction, are to be taken together. Civil Code § 1642
  • A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates. Civil Code § 1647
  • No matter how broad a contract is, it extends only to those things the parties intended to contract. Civil Code § 1648
  • Inconsistencies in a contract must be reconciled, if possible, by an interpretation that will give some effect to the inconsistent clauses, subordinate to the general intent and purpose of the whole contract. Civil Code § 1652

Interpreting Specific Contract Language

  • Contract language should be understood in an ordinary and popular sense, not in its strict legal meaning. The exception to this is when parties use words meant to be taken in a technical sense. For example, construction contracts often use language that references published trade standards, which can be used to interpret the contract. Civil Code § 1644
  • Technical words should be interpreted as usually understood by individuals in the profession or business to which they relate, unless clearly used in a different sense. Civil Code § 1645
  • Contract words that are wholly inconsistent with a contract’s nature, or with the main intention of the parties, are to be rejected. Civil Code § 1653

If you have any questions about ambiguous or conflicting terms in a contract, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

What is Incorporation by Reference in a Contract?

Previously on our blog, we discussed how more complex contracts allude to other existing contracts and documents. Incorporation by reference is the method of making these alluded-to documents part of a contract, and is often used to save space when parties want to include or reference another legal document or contract into a new contract. To properly incorporate another document by reference, it has to be adequately described in a new contract, and it is good practice also to attach a copy of the referenced document to the new contract to which it is being incorporated.

The concept of incorporation by reference is similar to that of flow-down contract clauses in construction contracts.  For example, a flow-down clause is used to bind subcontractors to the general contractor in the same fashion as the general contractor is bound under its contract with the property owner. In the same vein, subcontracts usually incorporate general contracts by reference.

When drafting an incorporation by reference clause, parties have the option to incorporate certain provisions of an existing legal document, or the entire document. If the parties make it clear that only certain provisions are to be incorporated, the incorporation by reference clause should be explicitly clear in its limited scope and purpose. However, if the incorporation clause is very general, this could lead to potential disputes about which provisions to a contract were incorporated. To avoid any confusion, parties should specify exactly which terms are being incorporated.

Any time existing legal documents are incorporated by reference, there is a potential for conflicting terms. It is therefore important that all provisions are reviewed for conflicts, and a contract provision dictating how conflicting terms will be resolved should also be included.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

Defining Conflicting Terms in a Contract

Conflicting terms in a contract exist when there are certain provisions that cannot each be complied with because performing one would violate another, or where the use and meaning of a particular term or terms varies throughout the contract. This situation can occur  when multiple parties are drafting and revising a contract without carefully reviewing the impact of each change on other portions of the contract, or when conflicting changes are made to a standard form contract that one or more parties are not entirely familiar with, and again, do not carefully review the impact of each change.  Conflicts can also occur when the terms used in the agreement are not defined and are unclear to people unfamiliar with the deal, industry, or product.

For example, sometimes other contracts or documents are alluded to in a contract but not actually defined in the agreement.  A contract could also rely heavily on terms that are defined by industry standards but which are foreign to people outside of the industry. All of these situations cold give rise to potentially conflicting terms, such as a reference to a term where the industry meaning and usage is in conflict with the meaning and use applied  in the contract.

A properly drafted contract will avoid conflicting terms and ambiguities, and, in anticipation of potential conflicts, include clauses which provide rules of interpretation. Contracts can also designate clauses in one portion of a contract to supersede conflicting provisions found in another part of the contract. Almost every contract will have a provision stating that if one provision is in conflict with another, the rest of the contract is still enforceable, and provide how the conflicting terms will be handled.

Also, a contract can very well provide a means for resolving conflicting terms and ambiguities, but still fail to resolve a conflict that arises under an unanticipated or obscure situation. In that situation, the contract parties can turn to California statutes and appellate court cases to find other rules of interpretation.

If you have any questions about conflicting terms in a contract, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

Obtaining a Variance to a Zoning Restriction

In order to build a development, home, or addition that does not comply with local zoning ordinances or restrictions, a property owner or developer must obtain a variance. The exact process of obtaining a variance will vary based on applicable city or county laws, and can vary depending on the scope of the project and the type of variance sought.

For example, there could be different processes or requirements for “residential use” variances versus “residential area” variances.  Generally speaking, there are two types of variances: an “area variance” and a “use variance.” An area variance can be requested by a property owner or developer who is seeking an exception to a regulation dealing with land configuration or physical structure improvements.  A use variance, on the other hand, seeks an exception to the type of use of land permitted by a zoning ordinance or restriction.

Similarly, the process or requirements for residential variances differ as compared to variances for agricultural, industrial, recreational, or commercial property.  Once you have determined the type of variance you will need, the next step will be to contact the local city or county government office that handles development in the area where the property is located.  The local government office will usually have an application that must be completed, and typically require copies of relevant site plans, floor plans, and elevation drawings, as well as the payment of any fees associated with application submission.  Once complete, a city board will review your application and may require public hearings on the application.  If the variance request is denied, there is generally an appeals process.

If you have questions about obtaining a variance, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

Complying with the Uniform Electronic Transactions Act

Every contract in California (and across the country) must meet certain legal requirements to be considered “valid,” such as the manifestation of assent by both parties to be bound by the terms of the transaction.  For centuries parties have been “signing on the dotted line” to evidence their assent to the terms of the agreement.

In an increasingly digital economy many contracts are being consummated electronically.  The Uniform Electronic Transactions Act (the “UETA”) (found at Civil Code § 1633.1 et seq.) responds to the proliferation of contracting and business conducted by electronic means in California.  By following the guidelines of the statute the parties can complete all parts of the transaction entirely by electronic means, including through the transmission of electronic signatures.

Recently, the California Court of Appeal ruled on a case that dealt with the UETA’s provisions governing electronic signatures.  In J.B.B. Investment Partners, Ltd. v. Fair, ___ Cal.App.4th ___ (December 30, 2014) 2014 WL 7421609, the issue that the court addressed was whether the defendant’s “printed name at the end of his e-mail was enforceable under both UETA and, if not, by the law of contract.”

Interestingly, the defendant in J.B.B. Investment Partners, Ltd. at first appeared to agree via email to the settlement agreement proposed by the plaintiffs.  However, once the plaintiffs filed suit to enforce the settlement, the defendant said that there had been no agreement under the UETA because he did not intend for his printed name in his emails to be an “electronic signature.”  The trial court disagreed, ruled to enforce the settlement agreement, and the defendant appealed.

The appellate court focused in on the definitional requirement for a signature under the UETA (Civil Code § 1633.2(h)), which requires that an electronic signature have the “intent to sign the electronic record.”   The court further found that another relevant factor was the apparent lack of agreement to conduct the settlement by electronic means, while acknowledging that the statute specifically does not require an express agreement, allowing the intent to be gleaned from “the context and surrounding circumstances, including the parties’ conduct.”

In the this case, somewhat surprisingly, the appellate court found that despite the defendant’s repeated emails saying “I agree,” the plaintiff’s failed to meet their burden of showing that the parties had agreed to consummate the transaction via electronic means.  While the court acknowledged that simple “names typed at the end of emails can be electronic signatures,” the issue here was that the agreement that plaintiffs were attempting to bind defendant did not appear to be a final agreement (here, meaning that additional terms were added later).  The court also found that later versions of the settlement agreement contained specific electronic signature provisions not found in the version that the defendant said he agreed to (such provisions requiring the use of commercially available electronic signature software), and that there was no agreement between the parties that a simple printed name at the bottom of an email would constitute a signature.  These same facts also led the court to conclude that there was no agreement under “the law of contract.”

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.

What Constitutes Doing Business in California?

Even if your business is not based in California, you may be held to certain California filing obligations and tax liabilities if your business meets the legal definition of “doing business” in California.

There are two definitions for doing business in California. One is from the Franchise Tax Board, and determines whether an individual or business will have tax liabilities in California. The other is established by the California Corporations Code, and it determines what corporate filing obligations an out-of-state business will have with the California Secretary of State.

Doing Business in California According to the Franchise Tax Board

According to the Franchise Tax Board, doing business in California consists of “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.” An out-of-state entity is treated as “doing business” in California if:

  • The entity is commercially domiciled in California (meaning the entity is controlled in California, like a headquarters);
  • Sales in California exceed the lesser of $500,000 or 25% of the entity’s total sales;
  • The entity has real or tangible property in California exceeding the lesser of $50,000 or 25% of the entity’s total real and tangible property; or
  • The amount paid in California by the entity for compensation exceeds the lesser of $50,000 or 25% of the total compensation paid.

If none of those situations apply, an entity organized in a jurisdiction outside of California could still be considered to be doing business in California if it is a member or general partner of an entity that does business in California, or if any of the entity’s members, managers, or other agents conduct business in California on behalf of the entity.

Doing Business in California According to the California Corporations Code

Under the California Corporations Code, “doing business” is referred to as “transact[ing] intrastate business,” which is defined as “entering into repeated and successive transactions of its business in [California], other than interstate or foreign commerce.” An entity might need to register with the California Secretary of State if it meets this definition. However, the application and meaning of this definition differs from entity to entity. Because of this varied application, it is best to consult with an experienced business attorney to determine your precise tax liabilities  and filing obligations.

Ezer Williamson Law provides a  wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.

Dissolving a Joint Venture

There are many reasons why parties may end up dissolving a joint venture. Their efforts may have been unsuccessful, their project may me complete, there could be clashing management styles, or there could simply be a need for a new characterization of the businesses.

If the parties to the joint venture have a written agreement governing the relationship, that agreement will likely contain the provisions that will determine the process for dissolution. In the absence of an agreement, California law will dictate how the relationship will be terminated.

If the joint venture was characterized as a limited liability company or corporation, the parties will need to follow the formal procedures to dissolve and cancel the existence of the applicable entity. In the absence of this separate legal entity characterization, the parties to the joint venture will need to proceed as if they were dissolving a general partnership. One of the most important steps will be to notify third parties, as well as relevant licensing and taxing authorities. If third parties such as vendors are not notified of the dissolution, the parties to the joint venture could be responsible for any debts that are accrued by the third party under the principles of agency.

Upon dissolving a joint venture, the parties will split the assets and debts in accordance to their agreement. In the absence of an agreement, the parties will get back what assets they contributed.  If, however, the parties do not retake possession of certain assets, such assets should be sold.

If you have questions about dissolving a joint venture, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.