MEDIATION BEFORE LITIGATION IN REAL ESTATE DISPUTES

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Mediation and Real Estate.

Most houses in Los Angeles are purchased using the California Association of Realtor’s form California Residential Purchase Agreement has. The Purchase Agreement provides that the parties will mediate disputes and this article explains what that means.

The Purchase Agreement at para 17 a (Mediation and Arbitration) states:

“Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction before resorting to arbitration or court action. …If for any dispute or claim to which this paragraph applies, any party (I) commences an action without first attempting to resolve the matter through mediation, or (ii) before commencement of an action, refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action.

If there is between Buyer and Seller arising out of the Purchase Agreement the parties are obligated to go to Mediation before suing – in court or Arbitration. Arising out of means that it something that directly comes from the Purchase Agreement and is less broad than arising from.

First of all, you don’t have to GO to mediation you must OFFER to go to mediation. If the other side accepts that offer or makes the offer, you must go the mediation or suffer the consequences.

　

If you don’t go to mediation, you lose your right to collect attorneys fees, even if you win ths case. This means that you could win the case and lose money. In most cases, the loss of the right to attorneys fees, is a significant factor in the outcome of the case.

The California Courts have reiterated existing California law: “The new provision barring recovery of legal fees by a prevailing party who refuses a request for mediation means what it says and will be enforced.” The attorneys fees provision of the mediation clause “is designed to encourage mediation at the earliest possible time.” Moreover, “opponents accordingly are not entitled to postpone it until they feel that they have marshaled the strongest possible support for their positions in litigation and mediation.” The court also noted that there is a strong public policy in favor of mediation as a preferable alternative to judicial proceedings because it is less expensive and more expeditious.

Real estate parties and their attorneys should in most cases offer mediation first and accept an offer of mediation. Not only, does it gives both sides a chance to settle the case before spending thousands of dollars on their attorneys. In addition in the vast majority of cases, having the right to collect your attorneys fees is a key consideration. Even in a real Estate case for a two million dollar house, waving attorneys fees of $50 or $100,000 hurts.

Waving attorneys fees by an over anxious attorney may well result in a valid claim for malpractice. Before filing, offer to mediate.

For more information contact David DiJuliomailto:rdj@dijuliolaw.com Or contact the DiJulio Law Group: Los Angeles real estate attorneys with more than 35 years of experience. Call 888-519-1613 or email rdd@dijuliolaw.com.

Beware.

What are the Consequences of Not Going to Mediation?

What happens If I don’t Go to Mediation?

When Does the Mediation Clause Apply?

The Mediation Clause.

SHORT SALE BONANZA

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During the next few months, short sales will sky rocket. Short Sales are sales of upside down houses for the market value. To make the short sale work the first and second mortgage holders must write down the loans to equal the true market value of the house. Since the first has first call on the funds, the second write down a much large percentage of its loan, often 80-90%. Seconds have been resistant to do so, in hopes that the First would foreclose because under current law, if the First forecloses and makes the Second worthless, the Second the right waive the deed of trust and sue on the note- for the full amount of the second loan.

However, under an amendment of CA Code of Civil Procedure 580, the second cannot get a deficiency judgment in any event on any loan, refinance, or other credit transaction that is used to refinance a purchase money loan, as defined, or subsequent refinances of a purchase money loan.

The law seems to limit these rules to new loans but I believe that holders of Seconds will be fearful that the law will be extended by the courts to all loans. If that happens the Second becomes worthless. I think that this threat will induce the seconds to take what they can get in a short sale.

For more information contact David DiJuliomailto:rdj@dijuliolaw.com or a broker that specializes in short sales.

DiJulio Law Group: Los Angeles real estate attorneys with more than 35 years of experience. Call 888-519-1613 or emal rdj@dijuliolaw.com.

DiJulio Law Group

DiJulio Law Group won an Appeal on Foreclosure Law.

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The Court of Appeal in the Second District ( Los Angeles) said in a published decision issued on August 1, 2012 that modifaction of a note does not affect the limtation on the “Bank” from collecting more that the house is worth (i.e. no deficiency judgment.)

The court held:

“No deficiency judgment shall lie in any event after a sale of real property　.　.　.　under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property.” (Code Civ. Proc., § 580b.) Section　580b was “drafted in contemplation of the standard purchase money mortgage transaction, in which the vendor of real property retains an interest in the land sold to secure payment of part of the purchase price.” (Roseleaf Corp. v. Chierighino (1963) 59　Cal.2d 35, 42.) It also acts as a “stabilizing factor in land sales” and “prevents the aggravation of [a] downturn that would result if defaulting purchasers were burdened with large personal liability.” (Ibid.) The purpose of the statute causes it to be applied liberally and broadly. (DeBerard Properties, Ltd. v. Lim (1999) 20　Cal.4th 659, 663.)

Section 580b applies to the Promissory Note because Rocha retained an interest in the property being sold with the ability to foreclose on it upon nonpayment by the Weinsteins-albeit with lower priority than the first deed of trust. Because the property being purchased was used as security, this clearly falls within the definition of a　”deed of trust　.　.　.　given to the vendor to secure payment of the balance of the purchase price” to which section　580b applies.

“[I]n no event shall there be a deficiency judgment,　.　.　.　because the security has become valueless or is exhausted　.　.　.　after a sale under [a senior] trust deed.” (Brown v. Jensen (1953) 41 Cal.2d 193, 198.) In Brown, a property vendor who held a secondary deed of trust was denied relief outside of foreclosure even though the security had already been exhausted. One who issues a trust deed “assumes the risk that it may become inadequate.” (Id. at p. 197.) This is especially true “where he takes　.　.　.　a　second trust deed.” (Ibid.)

Here, the fact that a previous sale exhausted the security of the Promissory Note makes section 580b applicable. In this case, like in Brown, the holder of the first trust deed exhausted the security in a foreclosure sale. The statute places the risk of the devaluation or exhaustion of the security on Rocha, because he “[took]　.　.　.　a　second trust deed.” In short, section 580b applies to the Promissory Note because the transaction is a seller financed transaction, and the security was exhausted by a senior foreclosure sale.

For more information contact David DiJuliomailto:rdj@dijuliolaw.com .

DiJulio Law Group: Los Angeles real estate attorneys with more than 35 years of experience. Call 888-519-1613 or emal rdj@dijuliolaw.com.

SECOND MORTGAGES CAN NO LONGER SUE AFTER FORECLOSURE ON THE FIRST

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The California Legislature has amended the rules for seconds suing after a foreclosure suit. Under current law, after foreclosure sale by the first, the second can sue for the note unless it was part of the purchase price. But starting January 1, 2013 the rules will be changed to prevent the seconds from suing on refinances too.

The law provides that no deficiency judgment shall lie in any event on any loan, refinance, or other credit transaction that is used to refinance a purchase money loan, as defined, or subsequent refinances of a purchase money loan

However there is an exception for refinances that had a cash out or a HELOC where additional funds were withdrawn,

These provisions would apply to a loan, refinance, or other credit transaction used to refinance a purchase money loan which is executed on or after January 1, 2013.

For more information contact rdd@dijuliolaw.com or go to DiJulio Law Group

SUMMARY OF THE HOMEOWNERS BILL OF RIGHTS

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Under the New California Homeowners Bill of Rights, the State of California has found that it is essential to modify the foreclosure process to ensure that borrowers have a meaningful opportunity to obtain available loss mitigation options.

The California Homeowners Bill of Rights which goes into effect January 1, 2013, has five major components:

  • Prohibiting “dual track” foreclosures that occur when a Bank continues foreclosure while also reviewing a homeowner’s application for a loan modification.
  • Creating a single point of contact for homeowners who are negotiating a loan modification.
  • Expanding notice requirements that must be provided to a borrower before taking action on a loan modification application or pursuing foreclosure; and
  • Allowing injunctions to stop all activiity until violations are corrected
  • Permitting civil penalties against Banks that file multiple, inaccurate mortgage documents or commit reckless or willful violations of law.

By prohibiting dual-tracking (refi and sale at the same time) this legislation provides borrowers with certainty that their loan application will receive full review and consideration before any foreclosure occurs. These requirements also provide the borrower with a legal remedy to challenge the actions of Banks that engage in dual-track or other material violations of law.

The Homeowner Bill of Rights also requires a single point of contact for borrowers seeking loan modification. This requirement will make loan Banks more accountable and prevent them from repeatedly transferring applications and phone calls to various departments and employees.

Under the new law, Banks must notify borrowers when a modification application is due, if foreclosure has been postponed and if a modification has been denied. Each of these new rules increases transparency and helps to ensure that borrowers are properly informed of the actions taken by a Bank before foreclosure activities begin.

Borrowers have a right to file private lawsuits under this new law to block foreclosure until the lender corrects any material violation. Borrowers can also receive treble damages up to $50,000 if Banks act intentionally or recklessly in violating the law. These provisions protect the rights of consumers, while allowing Banks to correct unintentional violations.

The new Bill of Rights also gives the homeowner the right to designate a lawyer or other representative to help in the loan modification and the foreclosure prevention process. Finally, the court can award a prevailing borrower reasonable attorney’s fees and costs in an action brought pursuant to this section

By David DiJulio:

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