Real Estate Recovery Fund: Another Source for Recovery
Kenneth W. Chung
 Whether it's a shopping center, office building or a house, some real estate brokers and agents have regrettably resorted to fraud in order to make a sale and earn a quick commission. In one example, a broker, in order to complete a difficult sale, told the buyer of a house that the roof was new, and therefore the buyer did not have to worry about leaks. This misrepresentation was made despite the seller telling the broker that the roof was several years old and had leaked before. After the buyer moved in, the roof leaked and caused significant damage to the buyer's belongings. After the buyer obtained a $20,000 judgment for fraud against the broker, the buyer could not collect anything since the broker had no assets. The broker's insurance company denied coverage since the judgment was based on fraud.
Although most victims in this situation would be out of luck, fortunately for this buyer, the California Department of Real Estate has established the Real Estate Recovery Fund from which the buyer may seek compensation. The following are requirements for seeking reimbursement from this fund: (1) a final civil judgment, arbitration award or criminal restitution order must be obtained against the licensee; (2) the judgment or award must be based on a finding of intentional fraud or conversion of trust funds in connection with a transaction requiring a real estate license; (3) the victim must make a reasonable search for the licensee's assets and attempt to collect from the licensee as well as all other parties that may be liable to the victim; and (4) other procedural requirements outlined in Business and Professions Code Section 10471 et seq. must be followed.
If the application is granted, the Department of Real Estate will pay the victim his or her actual and direct loss in a transaction, up to a statutory maximum of $50,000 per transaction, with a possible total aggregate maximum of $250,000 against a licensee. When a payment is made from the Recovery Fund, the agent or broker's license will be automatically suspended until the amount is repaid into the Recovery Fund, with 10% interest, by the offending licensee. Since the inception of the Recovery Fund, approximately $33 million has been paid out to deserving victims of real estate fraud.
If you or someone you know has been the victim of a real estate fraud by an agent or broker, our knowledgeable real estate attorneys are available to guide you in pursuing the appropriate recoveries.
Mr. Chung is a senior partner with Kring & Chung's Irvine office and can be reached at (949) 261-7700 or kchung@kringandchung.com. Mr. Chung is also a licensed California real estate broker. He manages the firm's real estate litigation and transactions department. |
| California Mechanic's Lien Law Amendments
Monica Dean
The California Legislature recently amended California Civil Code Sections 3084 and 3146 relating to mechanic's liens. In particular, Assembly Bill ("AB") 457 requires additional notices in order to preserve a lien claimant's rights to enforce a mechanic's lien. The amendments to Sections 3084 and 3146 will become operative on January 1, 2011.
Under current statutory provisions, most persons who furnish labor, service, equipment, or materials for private projects are required to serve a written preliminary notice within 20 days after the first date of furnishing labor, service, equipment, or materials to the jobsite to the owner or reputed owner; to the original contractor, or reputed contractor; and to the construction lender, if any, or to the reputed construction lender, if any, prior to asserting a claim on a mechanic's lien. (Civil Code Section 3097.) Those who are under direct contract with the owner are not required to serve a 20-day preliminary written notice. The existing provisions do not require a lien claimant to provide notice or serve the owner, contractor or lender the mechanic's lien when it is recorded in the office of the county recorder of the county in which the property is located. In response to complaints by property owners, AB 457 was proposed and ratified in order to provide property owners with notice that a mechanic's lien was recorded against their property, prior to an action to foreclose on the lien being initiated by a lien claimant.
California Civil Code Section 3084
First, AB 457 amended California Civil Code Section 3084, to require that a Notice of Mechanic's Lien and mechanic's lien be served on the owner or reputed owner of the property by registered mail, certified mail, or first-class mail before the mechanic's lien is recorded. The Notice of Mechanic's Lien and mechanic's lien must be mailed to the owner or reputed owner at the owner's or reputed owner's residence or place of business address or at the address shown by the building permit on file with the authority issuing a building permit for the work. If the owner or reputed owner of the property cannot be served the Notice of Mechanic's Lien and mechanic's lien, these can be served on the construction lender or the original contractor.
The amendments to Section 3084 also require a proof of service affidavit to be completed and signed by the person serving the Notice of Mechanical's Lien (lien claimant). The failure to serve a copy of the mechanic's lien and the Notice of Mechanic's lien would cause the mechanic's lien to be unenforceable as a matter of law.
Amended Section 3084 specifies the language of the Notice of Mechanic's lien and the type and required font size of at least 10 point. The specific language is set forth below.
NOTICE OF MECHANIC'S LIEN
ATTENTION!
Upon the recording of the enclosed MECHANIC'S LIEN with the county recorder's office of the county where the property is located, your property is subject to the filing of a legal action seeking a court-ordered foreclosure sale of the real property on which the lien has been recorded. That legal action must be filed with the court no later than 90 days after the date the mechanic's lien is recorded.
The party identified in the mechanic's lien may have provided labor or materials for improvements to your property and may not have been paid for these items. You are receiving this notice because it is a required step in filing a mechanic's lien foreclosure action against your property. The foreclosure action will seek a sale of your property in order to pay for unpaid labor, materials, or improvements provided to your property. This may affect your ability to borrow against, refinance, or sell the property until the mechanic's lien is released.
BECAUSE THE LIEN AFFECTS YOUR PROPERTY, YOU MAY WISH TO SPEAK WITH YOUR CONTRACTOR IMMEDIATELY, OR CONTACT AN ATTORNEY, OR FOR MORE INFORMATION ON MECHANIC'S LIENS GO TO THE CONTRACTORS' STATE LICENSE BOARD WEB SITE AT www.cslb.ca.gov. California Civil Code Section 3146
Second, AB 457 amends Section 3146 of the California Civil Code. Under the current statute, the language is permissive and does not require a lien claimant to record a lis pendens (a notice of the pendency of the proceedings) in the office of the county recorder of the county in which the property is located after filing an action to foreclose on a mechanic's lien in the proper court. In contrast, the amendments to Section 3146 require a lien claimant to record a lis pendens in the office of the county recorder of the county in which the property is located. The lis pendens must be recorded within 20 days after the filing of an action to foreclosure on a mechanic's lien in the proper court. Section 3146 provides that after the time of the recording of the lis pendens, a purchaser or encumbrancer of the property are deemed to have constructive notice of the pendency of the action.
The attorneys at Kring and Chung can ensure that you are complying with these important new requirements. For more information on California mechanic's lien law, please call us or stop by to discuss.
Ms. Dean is an associate with Kring & Chung, LLP's Las Vegas office. She can be reached at (702) 260-9500, or mdean@kringandchung.com. |
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New Court of Appeal Case Should Be a Warning for Additional Insureds about Self-Insured Retentions
J. Christopher Bennington
The Fourth District Court of Appeal recently issued an opinion that should stand as a warning for all clients who think they have additional insured coverage from their subcontractors or vendors. In Forecast Homes, Inc. v. Steadfast Ins. Co. (2010) -- Cal.App.4th --, -- Cal. Cal.Rptr.3d --, 2010 WL 95091, 10 Cal. Daily Op. Serv. 1953, 2010 Daily Journal D.A.R. 2379, the court upheld a policy provision that denied coverage to an additional insured where the named insured under the policy did not pay the policy's self-insured retention (SIR).
Forecast was a general contractor sued in several construction defect actions between 2001 and 2003. It tendered its defense in those cases to the carriers for a number of its subcontractors. Policies issued to those subcontractors all named Forecast as an additional insured. Several of those subcontractor policies were issued by Steadfast, which denied all of the Forecast tenders on the grounds that the policies specifically required the named insured alone to pay the SIRs, and did not allow for payment of the SIRs by any other carrier or any additional insured. Since only Forecast had been named as a defendant in the tendered cases, none of the subcontractor insureds had paid the required retention under any of the Steadfast policies. As a result, the court upheld Steadfast's denial of coverage to Forecast in all cases.
While we believe that this is not a well-reasoned decision and that the specific policy forms at issue do not support the result, the fact remains that this is the law in California at the moment. It is also true that a number of carriers have been adding such "named insured only" provisions to their SIR endorsements. This could leave an additional insured without the expected additional insured coverage in cases where the named insured subcontractor is not a party to the lawsuit, for one reason or another, or, more importantly, where the named insured subcontractor has closed the business, has gone bankrupt, or is otherwise unable or unwilling to pay the SIR.
In order to protect your additional insured coverage, it is essential: 1) that your subcontracts and vendor agreements specifically provide that the policies may not include a "named insured only" SIR provision, and 2) that you review the policies in question to make sure that the offending forms are not included in the policy actually issued to your vendor or subcontractor. It is never enough to accept a certificate of insurance that shows you as an additional insured.
Please note that not all policies with SIR provisions include the "named insured only" language at issue in the Forecast case. But it is important to know exactly what additional insured coverage is being provided to you by your subcontractors' and vendors' carriers.
Mr. Bennington is an associate with Kring & Chung, LLP's Westlake Village office. He can be contacted at (805) 494-3892, or cbennington@kringandchung.com. |
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Cal-OSHA Regulations Can Form the Basis of Tort Claims
Richard C. Hatem
You already know that Cal-OSHA regulations can form the basis for claims by your employees or for fines levied by the State, but did you know that Cal-OSHA regulations can now be used as the basis of a third party tort claim?
For example: One of your employees is slightly injured by a hazardous condition at the job site. He reports it to your company's foreman, but the foreman fails to report the condition to the general contractor. This is a hazardous condition that was not created by your company. Later, an employee of another subcontractor seriously injures himself at the same hazardous condition. Can your company be held liable even though your contract does not require that you report hazardous conditions created by others? The surprising answer is yes.
Your business can face exposure to litigation in unexpected areas. This is why Kring & Chung stays abreast of all changes in the law. Kring & Chung can help you protect your business from liability by consulting with you on a regular basis.
The fact pattern referenced above is an actual case entitled Miguel Suarez, et. al., v. Pacific Northstar Mechanical, Inc. (2009) 180 Cal.App.4th 430. In this case, the California Appellate Court held that a contractor that became aware of a dangerous hazard can be held liable for not reporting the condition. This is true even though the Court agreed that the contractor did not create the condition. Additionally, the Court found that the contractor's own subcontract did not require that it report the condition.
In 1999, the California Legislature amended the Labor Code to provide that the statutes governing workplace safety [(§§ 6300 et seq. (Cal-OSHA)], as well as "occupational safety and health standards adopted under [Cal-OSHA]," are admissible under Evidence Code sections 452 and 669 "in the same manner as any other statute, ordinance, or regulation."
This was confirmed in 2004, when the California Supreme Court concluded that, due to the changes referenced above, "plaintiffs may use Cal-OSHA provisions to show a duty or standard of care to the same extent as any other regulation or statute, whether the defendant is their employer or a third party." See Elsner v. Uveges (2004) 34 Cal.4th 915. Accordingly, the new Labor Code sections can be used to establish tort liability on the part of third parties.
As you can see, the Suarez case was decided based on numerous modifications to California law, all occurring within the last decade or so. These changes are constant. Attempting to stay informed all by yourself is not an efficient use of a business owner's time. Kring & Chung can help you develop policies to avoid this kind of liability. We can train your workers, prepare proper employee handbooks, and coordinate guidelines to protect you. In these tough economic times it is important to plan wisely and avoid potentially devastating legal challenges.
Mr. Hatem is an associate with Kring & Chung, LLP's Irvine office. He can be contacted at (949) 261-7700, or rhatem@kringandchung.com. |
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Kring & Chung in the Community
Kring & Chung, LLP was a proud sponsor of the 5th Annual Community Law School presented by the Orange County Korean American Bar Association. The Community Law School was held on April 24, 2010 at Kia Motors in Irvine. Attorneys presented legal seminars in areas including civil litigation, bankruptcy, estate planning and immigration in order to educate the public on important and topical legal issues. Kenneth Chung was a co-founder and past president of OCKABA. |
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Our Offices
Orange County
38 Corporate Park
Irvine, CA 92606
(949) 261-7700
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Sacramento, CA 95816
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San Diego, CA 92130
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Ontario, CA 91764
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Westlake Village, CA 91362
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Las Vegas, CA 89117
(702) 260-9500
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Los Angeles, CA 90010
(213) 384-1905
Our Attorneys
Partners
Kyle D. Kring
Kenneth W. Chung
Paul T. McBride
Robert P. Mougin
Kathleen Elder-Blakely
Timothy J. Broussard
David P. Ramirez
Suzanne M. Rehmani
Ronald J. Skocypec
Ted A. Connor*
Shane Singh
Laura C. Hess
Han Joo Kim*
Associates
Roland J. Amundsen
J. Christopher Bennington
Scott M. Bonesteel
Min K. Chai
Brendan J. Coughlin
June Yang Cutter
Monica R. Dean
Michael B. Efron
Merielle R. Enriquez
Christopher F. Geiger, Jr.
Anna Greenstin
Richard C. Hatem
John A. Kaniewski
Alyssa L. Morrison
Allyson K. Myers
Justin G. Reden
Matthew A. Reynolds
Arie L. Spangler
Michelle L. Wiederhold
Of Counsel
Timothy J. Schafer
David M. Griffith
Paul A. Rianda
*A Professional Corporation |
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Attorney Spotlight
Orange County Korean American Federation
Kenneth Chung was appointed as the General Counsel for the Orange County Korean American Federation. The OCKAF was established 21 years ago in Orange County to service the Orange County community including the growing Korean American population. The goals of OCKAF are to encourage civic participation, bridge cultural gaps, promote awareness of issues that affect the community and support social, economic and cultural functions throughout the community.
Family Law
We are pleased to annouce that Michael B. Efron obtained a favorable trial result in reducing our client's long term permanent monthly spousal support obligation and gained a permanent termination date for this monthly obligation to cease within 12 months.
Our client was married for 26 years and had been divorced for over 6 years. The original Spousal Support order provided for payment of support to the ex-wife for the rest of his life or until she received social security benefits at his retirement age. This open-ended burden did not seem fair as she had substantial real property holdings from both the parties dissolution and inheritance after the parties separation from one another. Through discovery, it was determined that the ex-wife had not worked since the dissolution and elected to care for her elderly parents instead. She had been receiving monthly rental income from various assets both in the United States and overseas, all of which have produced significant earnings for her over the years. In addition to other findings, these factors lead to the presumption that she did not need support in the amount originally ordered and the court agreed to reduce the amount and set a termination date on the obligation for support.
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California Incorporates "Green" Standards Into Building Code
Arie L. Spangler California will soon become the first state in the nation to incorporate mandatory "green" building standards into its building code. California's green building code, also referred to as "CalGreen," will apply to all new construction, with the exception of federal buildings and hospitals. CalGreen encompasses Part 11 of the 12-part California Code of Regulations, Title 24, also known as the California Building Standards Code.
Unlike LEED certification, which is voluntary and can only be obtained by way of a fairly expensive third-party inspection process, CalGreen standards will be enforced by city or county building inspectors during the normal building inspection process. Failure to adhere to CalGreen standards will delay project completion. While builders will be required to adhere to CalGreen's minimum standards, they may also continue to strive for LEED and similar third party certifications that recognize and award a project's sustainability. Additionally, local governments may adopt stricter building guidelines in recognition of an area's unique environmental conditions.
CalGreen's minimum mandatory standards include the following: · Reduce overall indoor water usage by 20 percent;
· Reduce construction waste by 50 percent through recycling and/or salvaging non-hazardous construction and/or demolition debris;
· Use low-VOC paint, flooring materials, drywall, sealants, etc.;
· Re-use trees, vegetation and soil removed during excavation and/or land clearing;
· Install separate water meters for different uses (commercial buildings only); and
· Install a specific number of bike racks and designated low-emissions, fuel-efficient and/or carpool vehicle parking (commercial buildings only).
In addition to its mandatory standards, CalGreen also includes voluntary, more stringent standards that are divided into two separate tiers. Cities and counties may choose to adopt a portion or all of the CalGreen Tier 1 or Tier 2 standards into the local building code. Just as builders whose projects meet stringent LEED requirements may use an LEED certification to entice tenants or buyers, builders whose projects conform to CalGreen's voluntary standards will be able to market their project as CalGreen Tier 1 or Tier 2 Certified.
CalGreen's voluntary Tier 1 and Tier 2 standards include the following:
· Preserve open space and native vegetation;
· Reduce building's energy usage by 15 to 30 percent;
· Construct projects near public transit corridors;
· Reduce construction waste by 65 to 75 percent;
· Reduce use of cement in foundation mix designs by 20 to 25;
· Install Energy Star lighting and appliances;
· Use building materials from renewable sources, such as bamboo or cork, engineered wood, agricultural based products and solid wood;
· Plant native, drought tolerant landscaping, with grass limited to 25 to 50 percent of total landscaped area; and
· Orient buildings to face within 30 degrees of the south to optimize the use of solar energy.
CalGreen will apply to all new commercial and residential construction permits obtained after January 1, 2011. The implementation of the state's green building code will require builders to revise standard contracts to ensure that each trade adheres to CalGreen.
As any new code requirement increases the opportunities for potential non-compliance, it is likely CalGreen will subject builders and trade contractors to increased exposure for construction defects. When new projects do not achieve a noticeable reduction in energy and/or water consumption, we anticipate commercial tenants and/or residential home buyers will claim that the builder failed to adhere to CalGreen standards, subjecting it to potential liability for code violations.
If you would like assistance in ensuring that your project and its contracts meet CalGreen standards and/or in obtaining CalGreen Tier 1, Tier 2 and/or LEED certification, contact Kring & Chung, LLP. Ms. Spangler is an associate with Kring & Chung, LLP's San Diego office. She can be contacted at (858) 436-0268, or aspangler@kringandchung.com. |
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