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Keys to Protecting Yourself in the Purchase or Sale of a Home and Avoiding Litigation: “You Get What You Pay For”

July 23, 2012 in Purchase or Sale of Home

A frequent complaint echoed by many home sellers and home buyers alike is that the real estate broker’s commission is excessive.  The complaints are frequently heard particularly in transactions which are completed within the first sixty days after a home is initially listed for sale.  “The broker did not work hard enough to earn such a high commission” is the claim.  Such misplaced resentment frequently can result in litigation between the broker and the seller or between the buyer and the seller concerning the actual condition of the property.  The resulting litigation is costly for the participants.

What buyers and sellers alike often do not understand is that it is the actual experience of the real estate broker which caused the transaction to close earlier than otherwise might be expected and/or results in a problem free sale.  For example, an experienced realtor is often in a position to assist the parties in procuring a competent home inspector which will facilitate both the disclosure obligations on the part of the seller to the buyer, and satisfy the prospective purchaser’s duty of inquiry into the condition of the property.  Experienced realtors can advise their sellers on what must be disclosed and what may be disclosed.  In addition, given the multitude of forms which must be signed by both parties in escrow under California law, an experienced realtor will insure that all of the necessary forms are executed by the parties, and can also assist the parties by retaining a competent and experienced escrow company and escrow officer to streamline the escrow process.  Moreover, the more experience a realtor has with respect to these transactions, the more likely solutions to problems, which inevitably arise during escrow, can be formulated which are satisfactory to both parties.

Most real estate commissions are usually set between five percent and six percent of the purchase price.  Since the commissions are paid out of the sale proceeds, sellers are often tempted to extract a one or two percent reduction in the commission because the seller mistakenly believes that he will realize a higher profit.  In reality, this tactic often time leads to a lack of total commitment on the part of the realtor in bringing the transaction to a successful conclusion, or with respect to the seller, the effort by the realtor to achieve the highest possible sales price for the seller.  Thus, even if the seller is successful in negotiating a lower commission, the net result to the seller is often less than had the seller agreed to pay the usual and customary commission at the outset of his listing of the property.  Finally, an experienced realtor can often assist a prospective purchaser with procuring a mortgage at a favorable rate with a bonafide lender which ultimately saves the buyer potentially thousands of dollars in monthly mortgage payments over the term of the loan.  Selecting an experienced realtor, and a commitment to pay a fair commission for his services, generally will result in a satisfactory result. Like the old saying goes: “You get what you pay for”.

Major Changes in Calif Mechanic’s Lien Law

May 14, 2012 in California Mechanic's Lien Law

Effective July 1, 2012 there will be significant substantive changes in the California Civil Code relating to construction involving private and public works of improvement and in particular relating to California’s mechanic’s liens laws.  These significant changes will affect all property owners, contractors, sub-contractors and design professionals in connection with such works of improvement.
First and foremost, the mechanic’s lien law has now been renumbered from former Civil Code Sections 3082-3267 to Sections 8000-9566.  The renumbered sections also include claims involving Stop Notices as well as bond claims relating to private and public works of improvement.  Although case law interpreting former code sections 3082-3267 will continue to be applicable, there are significant changes enacted by the California Legislature pertaining to such critical issues as who may be a mechanic’s lien claimant, the timing of recordation of various documents relating to mechanic’s liens, costs related to enforcement of mechanic’s liens claims, and recovery of attorney’s fees incurred by a party filing a petition to expunge stale mechanic’s liens.
Under new Civil Code Section 8014 landscape architects have now been included as design professionals who can assert design professional liens.  More importantly, such design professional’s liens can now be converted into mechanic’s liens under Section 8319.  Prior to July 1, 2012 design professional liens were extinguished upon commencement of the work of improvement.  Now, design professionals have the added protection of converting their design professional liens into mechanic’s liens.  The recording of such liens are now dependent on the design lien holder’s completion of his own work or the completion of the actual work of improvement in general, just like other lien claimants.  Under the new law a property owner must record the actual Notice of Completion within fifteen (15) days. (Section 8182)   Previous law required the owner to record the Notice of Completion within ten (10) days of actual completion.
Effective under the new law, a contractor seeking to perfect a mechanic’s lien claim must serve not only the owner and general contractor with a Twenty Day Preliminary Notice, but also must serve his notice on the construction lender and/or reputed construction lender.  The required notice language for Twenty Day Preliminary Notices has also been changed under the new form.
Any property owner seeking to bond around a recorded mechanic’s lien by recording a Lien Release Bond will be required to post a bond in an amount equal to one hundred twenty five percent (125%) of the lien claim rather than one hundred and fifty percent (150%) under the old rule. (Section 8424)
Those lien claimants seeking to record a mechanic’s lien are now afforded sixty (60) days from the date the property owner records a Notice of Cessation of Labor.  Thus the time period for recording a mechanic’s lien under the new law has been extended an additional thirty (30) days.
Finally, a party seeking to expunge a stale mechanic’s lien clouding title to their property and having to retain the services of an attorney can now recover the party’s reasonable attorney’s fees from the mechanic’s lien claimant.  Under prior law the attorney’s fees incurred by a petition seeking to expunge a stale lien were capped at two thousand dollars ($2,000).
The changes discussed herein are representative of many of the major changes in California’s mechanic’s lien law.  Going forward all parties connected with significant construction projects would be well advised to consult with an attorney familiar with the changes in California’s mechanic’s lien law.  Lack of familiarity with the new rules are likely to lead to catastrophic results.  Such results, based on a failure to follow the requirements of the new law, would include the inability of valid lien claimants to enforce their lien rights and property owners inability to limit the number of mechanic’s liens recorded on their property, exposing the property owners to additional claims by mechanic’s lien claimants who otherwise would have been precluded from enforcing such mechanic’s lien claims.