What is a Short Sale?

A “short sale” in real estate refers to a sale of real estate that falls short of the loan balance owed on the mortgage. When a property is sold in this manner, the lender allows the property to be sold for an amount less that what is owed to them.  Under a short sale the lender may agree to “write-off” the difference between what remained on the loan balance and what the property actually sold for. It does not necessarily guarantee that the difference will be forgiven by the lender; instead, this is something that has to be negotiated with the lender.

What is a Foreclosure?

A “foreclosure” is a proceeding that allows a lender to end all ownership rights when the owner of a property stops making mortgage payments and is in default. Basically it allows the lender to reacquire the property. While each state is different, in California the lender generally has a right to pursue a property owner for the deficiency owing after the foreclosure has taken place.  This means that if your property is not sold, or the purchase price was not enough to cover the balance on the loan, the lender can turn the loan over to debt collectors, or sue you for the balance still owing, and/or pursue payment from you even if you file for bankruptcy.

However, there is an important exception to this rule:  the lender has no right to collect a deficiency from you if the loan was used for the original purchase of your primary residence, and you still live there.  If you refinanced your home, or if the loan was for a second home, commercial property, or investment property, this exception does not apply.  

Why a Short Sale May Be a Better Option for a Distressed Homeowner

There are a number of reasons that a short sale may be in the best interest of a seller who needs to let go of a property.  One important advantage to a short sale pertains to future home purchases.  For example, Fannie-Mae, the Federal National Mortgage Association, adjusted their guidelines in 2008 to allow an individual that successfully completes a short sale to be eligible for a Fannie-Mae baked mortgage package after only two years.  In contrast, an individual who loses their home to a foreclosure will not be eligible for a Fannie Mae backed mortgage for five years.

Another advantage to a short sale would be in the area of credit score issues.  The impact of a foreclosure can be a downgrade of your credit score anywhere from 200 to over 300 points, and it will affect your score for a minimum of three years.  However, the impact of a short sale on your credit score can be as little as 50 points and its effect can be as brief as 12-18 months.

How to Start a Short Sale

If you think you might be interested in short-selling your home or other real estate, it is best to talk to a legal expert about the process and related legal issues, such as potential tax consequences to you when part of your mortgage loan is forgiven.  The skilled real estate attorneys at San Diego Law Firm have specialized experience in handling short sales as well as a unique knowledge of the real estate market.  To schedule a consultation, please call San Diego Law Firm at 619-794-0243.

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What is a Partnership?

 Actually, you may very well be conducting your business as a partnership without realizing it. Under California law, a “partnership” is an association of two or more people who agree to carry on a business as co-owners and share the profits.  Unlike a corporation, a partnership can be created without legal formalities, although a written partnership contract and the related legal documents can be important to long-term success. 

How a Cross-Purchase Plan Protects Your Business if Your Partner Dies

If there are only a small number of owners working every day to provide a product or service, negotiate with vendors and customers, manage shop, and attend business meetings, you can imagine the impact that the unexpected death of one owner would have on the ability of the business to survive.  This is especially true when you consider that the business would, at the same time, be legally required to pay out the value of the deceased partner’s share to his or her heirs.  This could force the sudden liquidation of the business, or use up its cash cushion and require a sale of business assets.   

One way you can protect against the impact of such an unfortunate situation is with a “cross-purchase plan,” drafted by a skilled business attorney and signed by each partner.  In a cross-purchase plan, each partner agrees that the remaining partners will have both the duty and the right to purchase a deceased partner’s interest in the business.  To fund this purchase, the partnership takes out a life insurance policy on each partner for the benefit of the surviving partners.  The cross-purchase plan typically sets the buy-out price at either a pre-determined amount or an amount determined by an independent valuation of the business at the time of death.  The surviving partners then use the life insurance money to buy the shares of the deceased partner, and the money goes into the deceased partner’s estate and eventually is distributed to his or her legal heirs. 

Purchasing a life insurance policy to benefit you in your role as a surviving business partner is not something that may naturally occur to you when you start or formalize your business.  But if your business is the source of your family’s income or the beginning of a legacy you hope to leave behind, a cross-purchase plan with a life insurance policy on your partner(s) can be your best protection.  If you are the surviving partner you can not only preserve your business but also satisfy the financial needs and legal rights of your deceased partner’s family, while providing the same sort of protection and peace of mind for your own family if your business partner survives you.

At San Diego Law Firm, our experienced business attorneys understand the passion and work that goes into operating a small business. A cross-purchase plan is just one of the many beneficial strategies available to you when you formalize your partnership, whether it is new or ongoing, with a written partnership contract and other related legal documents.  We can prepare every document you’ll need to give your partnership the greatest legal, financial, and tax benefits, and advise you on the wide variety of ways you can protect both your business and your personal finances.  We remain available to help you with both minor and serious legal problems whenever you need us.  To learn more or set up a consultation, please call San Diego Law Firm at (619) 794-0243.

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Unlike your real estate agent—whose goal is to complete the sale and earn a commission—your real estate lawyer doesn’t work on a commission.  What’s more, sometimes a real estate agent represents both the seller and buyer.  In these situations, there’s bound to be conflict in representing both sides.  After all, sellers want to get the highest price possible, the buyer the lowest, and the real estate agent’s commission is usually greater if the sale price is higher. 

As your real estate attorneys, it’s not our job to push for a sale.  We focus on protecting your interests because we know there’s a lot at stake in any real estate purchase and sale. 

Take a close look at the property and potential legal problems

Whether you’re a buyer or seller, your lawyer can examine any legal issues related to the property.  Buyers need to make sure their investment will be worthwhile, and sellers need to be careful not to violate real estate laws and/or violate the purchase and sale contract. 

Real estate agents do a lot in a real estate sale and purchase, but their role is not to give legal advice.  Whether you’re buying a home or investment property, there are many legal issues to examine.  For example, we’ll:

      ●    Examine the title (including the history of ownership for the property), and check whether there are any clouds on the title that need to be cleared

      ●    Look for any liens, easements, property line disputes, and zoning violations

      ●    Advise you about inspections and disclosures

      ●    Prepare your purchase agreement (see below for more on this)

Understand the deal, and know what to ask for

There’s a lot of paperwork involved in buying and selling a home and other real estate, which means there are a lot of terms to negotiate if you know what to ask for. 

Your sale or purchase officially begins with the Purchase Agreement.  If the buyer’s offer is accepted by the seller, you’re both in a binding contract.  In most situations there can be serious consequences for backing out in violation of the contract, but your lawyer can build in protections in case things go wrong later. 

The key terms of the deal are in the purchase contract, but often the real estate agent will use a standard fill-in-the-blanks contract that won’t necessarily keep your personal interests safe.  Here are a few examples of what your real estate lawyer can help you with when preparing the purchase agreement and overseeing related issues: 

      ●    Will the seller make any promises and guarantees to the buyer when transferring ownership?

      ●    If you’re a buyer, will you be let out of the contract if you can’t get a loan, or aren’t able to sell your current home?  Also, are the terms offered by the lender good for you in the long run?

      ●    If inspections reveal problems, will the seller be responsible for any and all repairs?  Will the buyer be given credits instead?  And at what point can a buyer cancel the deal?

      ●    As a buyer, do you know how you should take title to the property?  For example, will it help or hurt you to take title as “joint tenants with right of survivorship.”  If you’re a real estate investor, should you create an LLC or corporation to hold title?

Getting help at the closing

The closing finalizes the transaction and transfers ownership from seller to buyer.  We’ll make sure contingencies have been removed, settle any remaining issues, and ensure you provide and receive all the required documents.  The bottom line is that you need to fully understand the real estate documents you’re given.  We’ll explain the terms, and identify things that should be included in your purchase agreement. 

Your real estate agent or broker does a lot for you, but your agent can’t provide the same kind of legal help and advice that a real estate lawyer can.  We’ll work to protect your interests at every stage in the process and look into potential problems.  Contact San Diego Law Firm’s skilled real estate attorneys at (619) 794-0243.

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For instance, sometimes tension is created because of a flawed management approach.  In ManagingEmployees.net, longtime business manager and blogger Pat Brill explains that effective managing means finding a balance between your focus on employee performance and establishing a connection with employees. 

Brill suggests that you learn to identify with the thoughts and feelings of your employees on their work.  Not only can this help your business by boosting performance, but if you’re able to connect with your employees, this can go a long way in reducing the chance of a lawsuit.  The last thing you want is a disgruntled employee who wants to get even when they leave the company. 

Use an Annual Employee Acknowledgement

Another important step toward reducing employee lawsuits is to have an employee annual acknowledgement.  Even if you are sued, a good acknowledgement can still help you improve your chances of winning the lawsuit at trial (or, even better, getting the case dismissed early).

Here are a few general examples of what your written acknowledgement should do:

      ●    Make sure that your employee knows he or she is an at-will employee, and that others are not authorized to change this relationship.  Also confirm that related promises haven’t been made.  This helps you minimize the risk of a wrongful termination lawsuit because when an employee is “at-will,” it means that both the employer and the employee have the right to end the employment at any time and for any or no reason (except, for example, because of retaliation or discrimination).

      ●    Confirm that the employee received the most recently dated employee handbook, and that the employee knows he or she is responsible for its contents.

      ●    Create the type of record that will reduce the chance your employees will sue you for wage and hour issues, harassment, and discrimination.

      ●    Remind the employee that only the employer has the right to change any policies, and can do so at any time.

Not every acknowledgment lives up to its goals, so it’s important to have a knowledgeable business and employment lawyer create a well-planned document.  We’ll prepare your annual acknowledgment to include important terms and make sure it’s in clear and understandable language for employees. 

Also remember that an old acknowledgement may not do you very much good if you’re sued.  A yearly acknowledgement is one of several smart and inexpensive business practices you should put into place.  It may save you a lot of time and money down the road.  Contact San Diego Law Firm’s seasoned business attorneys for more employer advice, including how you can avoid common traps that lead to wrongful termination and other lawsuits against your business.  Call San Diego Law Firm at (619) 794-0243.

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What happens if you keep property titled under your personal name? 

If you’re sued and lose the case, then your personal bank accounts and other assets can be used to pay off a judgment.  But if you create an LLC or corporation, then typically only the property in the name of the company will be subject to these debts. 

To further limit potential liability, you should consider placing each investment property you own in a different company.  That way, a lawsuit against one company doesn’t affect other companies holding additional real estate. 

We’ll advise you on the best practices you should employ to you maintain the protections and benefits of California LLCs and corporations, and explain the tax implications and other important considerations. 

Real estate owners should keep in mind that lawsuits can come about for many different reasons, such as:

      ●    Accidents and injuries on the property

      ●    Legal disputes with tenants

      ●    Creditor disputes

Some of these claims could be partially covered by any insurance coverage you may have, but all too often the liability exceeds the coverage.  That’s why many people buy investment or rental properties through an LLC or corporation (or transfer title to one of these companies if the real estate is already owned under the investor’s personal name).

How else can you maximize the success of your real estate investments?

On the business end, investor and blogger John Fedro shares his advice in “5 Ways To Streamline Your Real Estate Investing Business Machine,” including:

      ●    At the top of Fedro’s list is a recommendation that you specialize in one real estate niche, because if you take on too much there’s more of a chance that you’ll fail. 

      ●    You’re also forewarned that even though not everything about your real estate ventures is exciting, you can’t ignore your responsibilities.  To that end, he suggests you make sure you complete at least one real estate task every day. 

      ●    Also do your “due diligence.”  In other words, before buying, thoroughly inspect every property so that you don’t end up in a financial and legal disaster later.  (This means inspecting the physical condition of the property, and looking for potential legal problems with the property.)

Before you buy real estate, contact your real estate attorney at San Diego Law Firm to evaluate the many legal issues involved in your real estate transaction. 

Don’t wait too long, because an LLC or corporation won’t protect you from claims created while the real estate was owned under your personal name.  Find out whether an LLC or corporation is a good option for ownership of your investment properties by contacting San Diego Law Firm’s skilled real estate attorneys at (619) 794-0243.

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You’re probably cautious about who to bring in as a co-owner, and you might not be sure of what criteria to focus on.  Professional consultant Mary Abbajay writes in her blog about “The Partnership Paradox: How to Choose a Business Partner.”  She suggests that you first look at yourself, because this will help you identify the things you need in a business partner.  This includes examining your own goals, strengths, and weaknesses.  Abbajay then suggests a few more questions to ask, including:

      ●    Will this person be able to invest financially in your business, now and in the long term?

      ●    What types of benefits will this person likely bring (or not bring) to your business?

      ●    What kind of network does he or she have?

      ●    Does this person share your work ethic?

If you do decide to add another co-owner, make a smart decision for your business by first looking into the many legal and tax issues that can affect you.  For example, here are just a few more things that will also play a role in your decision to add a business co-owner:

 1.  The law sometimes limits co-ownership

Under California law, you can’t always bring in a new co-owner.  For example, if you’re in a professional corporation, the law generally requires that every co-owner be licensed in the profession.  Sometimes, California licensed professionals can join your business as co-owners even if their license isn’t in your specific profession (such as in a professional medical corporation).  In these very limited situations, exact legal requirements must be met.  But in most cases, only licensed professionals in your same field can be co-owners in a professional corporation. 

2. Get your agreement in writing

A written agreement is required for many businesses.  You may already have a written agreement, so make sure you follow any rules in that agreement about adding new owners.

Partnership agreements, operating agreements, and shareholder agreements are all examples of written contracts between you and the other co-owners.  This agreement is your opportunity to create a strong business relationship with your new business partner, and detail your business expectations and responsibilities. 

Never depend on vague oral agreements.  Your business is too important, and the risk of misunderstandings that can damage your business is too great.  Here are a few terms to discuss with each other and then include in your agreement:

      ●    Set out the ownership shares, purchase price to buy into the business, and the payment terms.

      ●    Decide if the new co-owner will only be an investor, or also work for the business and be paid a salary.

      ●    Clarify everyone’s rights and responsibilities in the business (including day-to-day management and decision making roles).

      ●    Agree on how profits and losses will be divided.

      ●    Create an exit strategy.  Usually, this includes a “buy-sell agreement” that’s used in case someone leaves the business later.  Without a buy-sell (or “buyout”) agreement, you could get stuck with someone you don’t want for a business partner.

3.  Look carefully at how your business is set up

There are many different business structures, and not all are created equal.  The most common business forms are:

      ●    Sole Proprietorships (a business owned by a single person),

      ●    Partnerships (including “limited” and “general” partnerships),

      ●    Limited Liability Companies (LLCs), and

      ●    Corporations (including S-chapter corporations and professional corporations).

If you decide to bring in a new co-owner, you may need to change your business structure to address the changing tax and legal issues for you and the incoming owner.  Keep in mind that your options can be limited by California law depending on the type of business you run. 

Some of these business structures provide zero protection for a business owner’s personal assets.  This means money and property in your personal name can be subject to business debts.  Business structures like LLCs and corporations can help avoid this personal liability. 

We’ll help you weigh the benefits and drawbacks of each.  In any case, don’t wait to change your business structure after it’s too late to protect your personal assets. 

Contact your lawyer at San Diego Law Firm for guidance when you expand your business’s ownership circle.  Do your part now to set things up right, because a few simple steps can often help you avoid headache and expense later.  Call San Diego Law Firm’s business lawyers at (619) 794-0243.

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As prices go up in San Diego, more homeowners will likely put their real estate on the market.  San Diego’s North County Times reports that median home prices in our county climbed 8.9 percent in January.  If you’re a potential real estate seller or buyer, your focus is probably on the sale/purchase price and financing.  These are no doubt essential terms to the property’s sale and purchase.  For the long run, also think about what type of deed will be given.   If you don’t, you may regret it later. 

What is a deed, and what can it do for you?

A deed is a document that transfers real estate ownership from seller to buyer.  Certain basic information has to be included in a deed for it to be valid.  This includes the names of the buyers and sellers, the property’s legal description (which isn’t as simple as a street address), words that transfer the property, signatures, and so on.

If you’re a seller, the deed can reduce the chances that you’ll be financially responsible for the real estate after you’ve sold it.  If you’re a buyer, the deed can help protect your major investment.  On the other hand, the deed may not give you any protection at all. 

After buying or selling real estate, always double check that the deed was officially “recorded.”  This means that for local real estate, the deed will be filed at the San Diego County Recorder’s office.  Once recorded, anyone is free to check the property’s ownership records.  This simple step is one important way to protect buyers and sellers.  But before the deed is turned in, you’ll need to figure out what kind of deed should be written up:

“Warranty Deed” or “Quitclaim Deed”?  Do you know the difference?

There are many different types of deeds.  Each has its own purpose, but not every kind of deed will be right for your situation.  After a sale goes through, there’s a chance that problems can come to light such as lawsuits, liens, or “easements” that give someone the right to use the property.  But who will be responsible for these problems?  The answer might depend on the deed you’ve negotiated before buying the real estate. 

Two common deed examples are the quitclaim deed and warranty deed. 

     ●  A quitclaim deed only transfers the seller’s ownership interest in the property (if any), and makes no promises to the buyer. 

     ●  A warranty deed can include many promises to the buyer.  For example, a warranty deed might guarantee that the seller will be responsible for existing liens and other problems – even problems created by people who owned the property before the current seller. 

There’s usually more than meets the eye when it comes to deeds, and the promises that should or shouldn’t be included when buying and selling real estate.  With a sale and purchase this big, you need to fully understand what you’re bargaining for.  As experienced real estate attorneys, we’ll advise you on the potential advantages, drawbacks, and other legal considerations.  You can do a lot to minimize risk in your real estate sale or purchase, which means saving time and money later.  Get the information and advice you need with any deed and title problems from San Diego Law Firm’s skilled real estate lawyers.  Reach us at (619) 794-0243.

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Putting his practices into play can also have the added benefit of promoting a greater sense of loyalty and a stronger relationship among your business’s co-owners.  Business partners aren’t always on the same page, and disagreements are to be expected whenever you go into business with someone else.  Even so, your actions and that of your partners must always be tied to an underlying goal founded on your business’s shared best interests. 

The Business Comes First: Co-Owners Must Act Responsibly to the Business and Each Other

California law says that as a business owner, you must put the best interest of the business above your own personal interests.  This means that, by law, you must act responsibly when it comes to the business.  You can’t do something to profit or benefit yourself at the expense of the business, or the other co-owners or shareholders.  (There is an exception when you tell the co-owners or shareholders what you want to do, and they completely understand how it affects them, and they still agree to it.)  Here are a few examples of the legal “do’s and don’ts” created by your legal responsibility to put the business first:

     ●  Do:  Give the business “first crack” at all opportunities to make money when those opportunities are related to the business in any way.

     ●  Don’t:  Keep secrets from your business co-owners and shareholders when those secrets have any effect on the business, or on the co-owners.

     ●  Do:  Be loyal to your co-owners.

     ●  Don’t:  Betray the business trust of your co-owners, especially in any way that would embarrass them or cost them money, unless they are doing something that is illegal or obviously harmful to others.

Perhaps most important of all is your responsibility to be careful – to make decisions responsibly and to always try to work for the benefit of the business.  This doesn’t mean that every decision will yield perfect results – that would be impossible.  What’s important is to be as careful as possible when you make any decision that affects the business.

When in Doubt, Ask Your Lawyer at San Diego Law Firm

You can improve the likelihood that everyone in your business will put the business first by following the suggestions mentioned above on creating a strong team, since these methods tend to reinforce everyone’s commitment to the business and its goals.

A clear, simple partnership agreement, or LLC documents,  (either of which San Diego Law Firm can prepare for you), can also be used to spell out each co-owner’s responsibilities in placing the business first.  If things fall apart, our skilled business litigation attorneys can help you handle and, possibly quickly stop, a business dispute.  And, if you ever find yourself caught in  a difficult situation between your own personal affairs and your business, don’t mishandle it.  We can advise you on how to handle potential conflicts to protect both yourself and your business.  Contact San Diego Law Firm at (619) 794-0243.

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Adverse possession laws continue to change and every state has its own rules for establishing adverse possession, but in a “quiet title” action, California generally requires the possessor to prove that the possession was actual, open, hostile, continuous, and exclusive.  Without going into too much detail, this means that there must be an occupation of the land, and the possession has to be obvious to a property owner who might inspect the property or to anyone else (such as when a trespasser paves the driveway, plants a garden or crops, fences the owner out of a strip of his property, or lives on the property).  Also, the trespasser can’t share the land with the owner or strangers, except that if the trespasser leaves and another takes over the land, the possession can still be considered to continue if the trespasser had sold or given the property to that person.  In these cases, the time the first trespasser spent on the property can pass to the new possessor.  Some states will also look at the intent of the person in possession, and require that the possessor know he’s trespassing, while a few others instead require that the trespasser be innocently mistaken about ownership.  California law additionally requires that the claimed land be designated clearly enough and be improved or cultivated.  For many would-be adverse possessors, California’s biggest hurdle to ownership is our state’s requirement that the trespasser pay all of the property’s taxes and assessments (so the truth is that a squatter doesn’t get the land completely free).  All of these requirements have to have been continually met for at least 5 years for a California adverse possession claim to be successful.  If this happens to property you bought, then you can lose your real estate despite the fact that you have signed legal documents clearly stating that you own the property. 

If you’re a property owner, be on the lookout for squatters and trespassers, because potential ownership claims over your real estate may be on the horizon.  Owners with vacant property are not the only ones at risk, because there could be something less obvious and less drastic happening than someone taking over your entire property through adverse possession.  For example, a neighbor may have recently constructed a fence that encroaches on your property line, paved a driveway on your land, built an extra room or other structure on your property, or simply have taken over the landscaping of a strip of your land.  What’s more, even if the requirements for adverse possession are not met, a trespasser may be able to gain a right to use your property.  In this situation, the person using the property may get a “prescriptive easement” because of their use of your property for a specific purpose.  There are many different types of easements, but a prescriptive easement can sometimes be created if people have been using your property without your permission over a period of time.  The existence of the easement may hurt the value of your real estate, so it’s important to take the steps needed early on.  There are ways to allow the use of your property in writing, and without risking the creation of an easement.  Not only that, but if an easement is created on your property, you can end up being responsible to another for any damage you cause to the easement.  If you’re a property owner, protect your investment’s value and don’t ignore encroachments on your property, because letting time pass can be dangerous.  If you believe you’ve gained the right to use a property, or even ownership in it, we’ll assess your case and seek the best route to perfect your interest.  In any real estate dispute, we’ll advise you and help negotiate or otherwise resolve the matter as quickly as possible.  As soon as a boundary dispute or other property concern arises, safeguard your interests and contact San Diego Law Firm’s experienced real estate lawyers at (619) 794-0243.

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If you do need to hire new employees, don’t lose sight of the legal issues that go along with hiring.  A few examples here include possible discrimination when advertising for new positions, questions you can’t ask when interviewing potential employees, and the terms of employment.  Federal anti-discrimination laws and additional protections under California law make discrimination illegal when based on categories that include disability, marital status, sex, age, national origin, race, sexual orientation, religion, medical condition, and so on.  Exceptions are very limited (e.g. a women-only hiring policy for women’s locker room workers) and have to be evaluated on a case by case basis.  Discrimination can occur in all aspects of employment, even well before hiring someone when your business advertises a job, chooses its recruitment methods, or interviews candidates for an open position.  When it comes to interviews, you have to be careful not to ask questions about the applicant’s age, what his or her childcare arrangements are, about plans to have kids, or anything else that relates to a status that’s protected from discrimination if the question isn’t required to determine the applicant’s ability to do the job and isn’t legally acceptable.  Discrimination laws are complex, and you need to speak with an attorney who can explain the details of how these federal and California laws apply to your business practices. 

Aside from discrimination issues, when hiring a new employee you have to be clear about several terms of the employment relationship to help prevent disputes (and potentially lawsuits) later on with that employee.  Misunderstandings can often be prevented with non disclosure agreements (also called NDAs or confidentiality agreements), and employee handbooks or manuals that make clear whether the employment is at-will and set out company policies without creating unintended terms of employment.  These are just a few general examples, but keep in mind that many other issues can come up when dealing with prospective hires and current employees.  We’ll prepare important agreements you may need and advise you on the legal aspects of running a business, including compliance with California’s harassment laws, wage and hour laws, and employee termination rules so you can avoid many common disputes that carry serious consequences.  Contact San Diego Law Firm to learn more about the best employment and hiring practices and how you can minimize the risk of getting sued.  Our experienced business lawyers can be reached at (619) 794-0243.

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