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Navigating the Complexities of Co-Ownership Disputes in Real Estate

Horst Legal Counsel — Mon, 18 Nov 2024 16:01:35 +0000

Jointly owning property can be a cost-efficient and lucrative investment, but when disputes arise, it can quickly become a legal and financial challenge. Whether it is in the context of a shared vacation home, an investment property, or inherited real estate, co-ownership disagreements can be complex. Understanding the causes of disputes and your legal options can help you resolve these issues more effectively.

What Are Co-Ownership Disputes?

Co-ownership disputes occur when two or more owners disagree about the property’s use, management, or sale. These conflicts often involve financial contributions, maintenance responsibilities, renovation decisions, or whether to sell the property. Unlike landlord-tenant disputes, co-ownership conflicts often involve equal ownership rights, making them more challenging to resolve.

These disputes can arise out of a number of different circumstances. For instance, unequal contributions to maintenance or expenses can lead to resentment among co-owners. For example, if one owner feels they are shouldering more of the financial burden, it can create friction and distrust. Similarly, property use conflicts can arise when one owner wants to rent the property for income, while another prefers to keep it for personal use. These differing priorities can lead to significant disagreements.

Disagreements on whether to sell the property can also be a major point of contention. Some co-owners may want to liquidate the asset to access their share of the equity, while others may wish to retain the property for its long-term value or sentimental reasons. Renovation disputes are another frequent issue, as co-owners may have different visions for upgrades or improvements, leading to conflicts over how to proceed and who should bear the costs.

Personal conflicts, particularly in family-owned properties, can further complicate matters. Existing personal issues can spill over into co-ownership arrangements, making it difficult to reach consensus on property-related decisions.

Litigation Options for Resolving Disputes

Co-ownership disputes can take various forms, often requiring litigation to resolve:

Partition Action: This legal process can force the sale or division of the property, allowing co-owners to sever their ties. A partition action involves a court-ordered sale or physical division of the property, ensuring that each co-owner receives their fair share.
Breach of Contract Claims: If a co-ownership agreement exists and one party fails to adhere to its terms, such as not contributing to expenses or making unauthorized use of the property, the other party may seek legal recourse through a breach of contract claim.
Accounting Actions: These involve a court-ordered accounting to ensure all financial contributions and expenses are accurately recorded and fairly distributed. This can help resolve disputes over financial contributions and expenditures.
Injunctions: A co-owner might seek an injunction to prevent another co-owner from taking certain actions, such as unauthorized renovations or renting out the property without consent. This legal remedy helps maintain the status quo until the dispute is resolved.
Declaratory Relief: Co-owners may seek a court declaration to clarify their rights and obligations under the co-ownership arrangement. This can provide legal certainty and help prevent future disputes by having the court declare the parties’ rights and duties.

How to Prevent Co-Ownership Disputes

Preventing disputes starts with drafting a clear agreement that outlines responsibilities, financial obligations, and decision-making processes. Setting expectations early by discussing plans for the property and financial contributions can also help. Additionally, having an exit strategy in place can provide a clear path forward if one owner decides to sell or leave the arrangement.

Real-Life Examples

Consider siblings who inherit a vacation home but have different ideas on renting versus personal use. If mediation fails, a partition action may be necessary to resolve the dispute. In another scenario, business partners might disagree on property upgrades. One partner can file a breach of contract claim if the other fails to adhere to the agreed-upon terms.

The Role of Legal Counsel

A real estate attorney can be invaluable in these situations, helping you understand your rights, draft co-ownership agreements, or pursue legal action if necessary. They can guide you through the litigation process and represent your interests in court.

Conclusion: Take Control of Co-Ownership Disputes

Co-ownership disputes don’t have to be the end of a beneficial arrangement. With the right strategies and legal guidance, you can resolve issues effectively. Contact us today to explore your options and find a resolution that works for everyone involved.

By understanding the common causes of disputes and knowing your legal options, you can navigate the complexities of co-ownership more effectively. Whether through litigation or other legal actions, there are ways to resolve conflicts and maintain a positive co-ownership experience.

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Piercing the Corporate Veil in California: What Business Owners Need to Know

Horst Legal Counsel — Mon, 11 Nov 2024 23:17:45 +0000

In the realm of corporate law, the concept of limited liability is a cornerstone, providing a shield for shareholders against personal liability for the debts and obligations of the corporation. However, this protection is not absolute. Under certain circumstances, courts may “pierce the corporate veil” and hold shareholders personally liable. In California, courts have developed specific criteria for when this drastic measure is warranted.

Understanding the Doctrine

Piercing the corporate veil is a legal remedy used to prevent injustice or fraud. It allows creditors to go after the personal assets of shareholders when the corporation is deemed to be a mere alter ego of its owners. This doctrine ensures that individuals cannot misuse the corporate structure to evade their legal responsibilities.

Criteria for Piercing the Veil in California

California courts apply a two-pronged test to determine whether to pierce the corporate veil:

Unity of Interest and Ownership: The plaintiff seeking to pierce the veil must show that there is such a unity of interest and ownership between the corporation and its shareholders that their separate personalities no longer exist. Factors considered include (but are not limited to):
- Commingling of funds and assets;
- Failure to observe corporate formalities;
- Undercapitalization; and
- Use of corporate assets for personal purposes.
Inequitable Result: The plaintiff must also demonstrate that an inequitable result would follow if the corporate veil is not pierced. This typically involves showing that the corporation was used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or unjust act.

Practical Implications for Business Owners

For business owners, understanding the doctrine of piercing the corporate veil is crucial. To minimize the risk of having your corporate entity disregarded and facing the prospect of personal liability, it is essential to:

Maintain adequate capitalization for the corporation;
Keep corporate and personal finances separate;
Follow all corporate formalities, such as holding regular board meetings and maintaining accurate records; and
Avoid using corporate assets for personal expenses.

Conclusion

While the corporate veil provides significant protection for members of LLCs and corporate shareholders, it is not impenetrable. By adhering to best practices and maintaining a clear separation between personal and corporate activities, business owners can safeguard against the risk of personal liability.

If a plaintiff is asserting that you bear personal liability for your company’s impact on them, reach out to Horst Legal Counsel, PC for a free consultation.

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5 Reason that Early Mediation May Be Right For Your Legal Dispute

Horst Legal Counsel — Mon, 04 Nov 2024 22:56:35 +0000

Legal disputes often bring stress, uncertainty, and the risk of costly court battles. While those who have not spent significant time in litigation often see it as a path to vindication and justice, the reality is that it is seldom an effective tool for that purpose and even more rarely an efficient one. Thus, it is not surprising that around 95% of cases settle before trial. Embracing this reality early can significantly impact the ultimate outcome of a dispute. We have previously written about the importance of thoughtfully timing settlement efforts to maximize leverage in litigation. This article focuses on why it is often wise for parties to attempt early mediation to resolve their legal conflicts.

What Is Early Mediation, and Why May It Be Appropriate for Your Case?

Early mediation is exactly what it sounds like: hiring a mediator to help facilitate a mutually-agreeable settlement shortly after a case is initiated, or even before formally filing a lawsuit. Like mediating at any other point, early mediation offers parties an opportunity to avoid litigation costs and create certainty with regard to their respective outcomes, as well as potentially preserve what remains of personal or professional relationships. Mediating at the outset of a case, however, can amplify these benefits.

1. Preserving Valuable Relationships

While parties to litigation are, by definition, already in conflict, the process of litigation frequently exacerbates this conflict and feelings of ill-will. Whether the dispute in question is among business partners, neighbors, or companies that have done business together, there are frequently real consequences to the relationships among parties deteriorating completely. The longer a dispute lingers, the more damage it can do to these important connections. When disputes are resolved quickly, there's less time for tensions to escalate, making it easier to move forward positively.

2. Avoiding Parties Becoming “Pot-Committed” Through the Cost of Litigation

One of the primary advantages of early mediation is the substantial reduction of legal fees and costs. As litigation progresses, these expenses skyrocket. So, an obvious benefit of mediating at the outset of a case is that the sooner a case can be settled, the less they have to pay their lawyers.

Perhaps less obvious, however, is early mediation can make settlements both more likely and more beneficial for both parties to a dispute, specifically because it can occur before the parties have expended significant resources doing battle with each other. For most parties, money is a finite resource. Simply put, money spent on legal fees is money that a defendant cannot spend to settle a case, and, frequently, it is money that raises plaintiffs’ bottom line for settling their claims. For this reason, the parties are financially in the best position to settle a matter at the very beginning.

3. Avoiding the “Litigation Mindset”

Once litigation begins in earnest, parties can become entrenched in their positions, making compromise difficult. Litigants often take aggressive positions, look for tactical advantages, and engage each other in ways that cannot help but to create a focus on beating your adversary. Early mediation has the potential to focus parties on finding fair resolutions to their disputes before “winning” becomes as important to the litigants as achieving the best net result.

The Joy of Certainty

It is incredibly common for the outcome of a lawsuit to turn entirely on one or more “coin flip” legal or factual issues. In such circumstances, cases become “all-or-nothing” propositions. Mediating early can allow parties to share the risk of being “wrong” on those critical issues and obtain certainty, rather than making an expensive bet that they come out on top.

The Value of Not Litigating

Take it from a litigator: Litigation is not a pleasant experience. Whether you are an individual having problems with a neighbor or a business owner in a contract dispute with a vendor, an active lawsuit will steal time from critical tasks and add dramatically to your underlying stress levels. It requires more of your time than you think it will, and it requires you to deal with your adversaries at their worst, often while you, yourself, are at your worst. At times, litigation is nonetheless the only viable path forward. If, however, there is a chance that this unpleasantness can reasonably be avoided, it is almost always worth exploring.

If you have questions about whether early mediation is right for your dispute, reach out to Horst Legal Counsel at admin@horstcounsel.com to set up a free consultation.

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The Cannabis Industry Isn’t Wearing Any Clothes! California Court of Appeal Exposes Tenuous Reality of “State Legalization”

Jason Horst — Wed, 30 Oct 2024 21:18:42 +0000

As a litigator who has tried dozens of cannabis-related cases in the eight years since California voters legalized cannabis for adult use, yesterday’s decision by the California Court of Appeal in JCCrandall v. Santa Barbara immediately called to mind an image from one of my favorite childhood books. A young girl steps out from a throng of adoring subjects, points toward their lavishly adorned sovereign, and just blurts out what we all knew the whole time: “The Emperor isn’t wearing any clothes!”

Indeed, cannabis-focused lawyers and legal scholars have long recognized the inherent logic of the court’s nonetheless grave proclamation: “No matter how much California voters and the Legislature might try, cannabis cultivation and transportation are illegal in California as long as it remains illegal under federal law.”

The Court’s decision in JCCrandall is rooted in the United States Constitution’s Supremacy Clause. And, as every law student learned in their Constitutional Law classes, under the Supremacy Clause, federal law is “the supreme Law of the Land” and preempts any conflicting state laws. The potential application of the Supremacy Clause has always been a vulnerability of what is commonly referred to as the “state-legal” cannabis industry.

JCCrandall appears to represent, however, the first time that any California court has actually applied the Supremacy Clause in refusing to enforce the state’s clearly-articulated statutes making commercial cannabis activity legal under state law. What happens next is far from certain, but the JCCrandall case is likely to shake up litigation of cannabis-related issues in courts throughout the state.

The Case

The JCCrandall case involved a challenge to a conditional use permit (“CUP”) issued by Santa Barbara County to a cannabis cultivator by an adjacent landowner over whose property the cultivator held a right-of-way easement. The easement had been granted to the cultivator’s owner long before cannabis was legalized by California voters through Proposition 64 and was the only way to access the property for which the County issued the CUP.

The adjacent landowner sued to invalidate the CUP, challenging the County’s finding that streets and highways to the property were adequate because, among other reasons, use of the easement for transporting cannabis is illegal. The County defended the suit in large part based on California Civil Code section 1550.5(b), which provides:

Notwithstanding any law, including, but not limited to, . . . federal law, commercial activity relating to medicinal cannabis or adult use cannabis conducted in compliance with California law and any applicable local standards, requirements, and regulations shall be deemed to be all of the following:

A lawful object of contract.
Not contrary to, an express provisions of law, any policy of express law, or good morals.
Not against public policy.

The Court of Appeal found this defense unpersuasive, because section 1550.5(b) “defies the Supremacy Clause.” Cannabis is illegal under federal law; ergo, it is illegal under California law. Thus stripping the invisible layers of protection provided by “cannabis legalization” off of the County’s CUP process, the court found that the County could not force the adjacent landowner to allow his property to be used to transport cannabis because illegality activity is outside the scope of the right-of-way easement. Without the easement, the findings underlying the CUP were not supportable.

The Impact

The holding in JCCrandall is limited to the context of whether section 1550.5(b) is valid as applied to a CUP “premised on [the adjacent landowner] being forced to allow its property to be used in cannabis transportation.” Expressly not decided was the question of its validity in disputes among parties consensually engaged in cannabis business. There is little question, however, that the decision will reverberate in such cases throughout the state in the months and years to come.

To be sure, there may well be ways to distinguish JCCrandall from, for example, cases between contracting cannabis companies. But if California courts coalesce around the position that section 1550.5(b) is invalid under the Supremacy Clause, the impact on legal protections within the “state-legal” industry could be dramatically impacted.

To date, California courts have not seriously questioned their ability to enforce cannabis-related contracts and order relief from cannabis-related torts. If that changes, cannabis industry litigants in California courts may want to freshen up on case law regarding the extent to which federal courts may award relief in cannabis-related disputes. There, the emerging consensus is that federal courts can award such relief, so long as doing so does not require the court to order a violation of the federal Controlled Substances Act. Some of the relevant authority suggests differing treatment of cases involving those unwittingly drawn into cannabis activity and those between parties engaging with eyes wide open.

While it is impossible to know where California courts will ultimately land, until the law is settled, there will be litigants in almost every cannabis-related case that are incentivized to use the JCCrandall case to their advantage, meaning that it is very likely that the courts will soon be invited to expand on its holding. And those seeking to beat back such expansion will be rowing upstream against a straightforward application of the Supremacy Clause to a state statutory scheme that plainly conflicts with federal law. Depending on how the resulting case law develops, there could be significant impact on how cannabis businesses do business and the industry’s attractiveness to potential new entrants and investors.

Conclusion

The decision in JCCrandall underscores the enduring conflict between state and federal law regarding cannabis legalization. By focusing on the inarguable doctrine of federal supremacy over state law, the court has reminded cannabis industry stakeholders, at a minimum, that the path to true legalization requires not just state-level reforms, but a fundamental change in federal law. Until then, the cannabis industry remains, like the Emperor, clothed in an illusion of legality.

by Jason Horst

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The Crucial Role of Standard of Review in California Civil Appeals

Horst Legal Counsel — Tue, 22 Oct 2024 15:12:30 +0000

If you are considering appealing a decision from a California Superior Court in a civil case, it is essential to understand the concept of the standard of review. This legal principle dictates how the Court of Appeal will evaluate the decisions made by the trial court or jury. Misunderstanding or overlooking the standard by which the court will evaluate your appeal can lead to wasted resources and missed opportunities for success.

What is the Standard of Review?

The standard of review is the lens through which an appellate court examines the decisions of a lower court. It determines the level of deference the appellate court will give to the trial court’s findings and rulings. Different standards apply to different types of issues, and knowing which standard applies to your case is essential for framing your arguments effectively.

Potential of Standards of Review

De Novo Review: This is the most generous standard from the perspective of appellants (those appealing a decision). Under de novo review, the appellate court re-examines an issue without deferring to the trial court’s conclusions. This standard typically applies to questions of law, such as the interpretation of statutes or constitutional provisions.
Abuse of Discretion: This standard is more challenging for appellants. The appellate court will only overturn the trial court’s decision under this standard of review if it finds that the decision applied the incorrect legal standard or exceeded the bounds of reason, considering all the circumstances before it. This standard often applies to procedural rulings and discretionary decisions, such as the admissibility of evidence.
Substantial Evidence: Under this standard, the appellate court reviews the trial court’s factual findings to determine if they are supported by substantial evidence. This means that the findings will not be overturned unless they are unreasonable and the evidence supporting them would not be adequate for a reasonable person to accept. This standard is highly deferential to the trial court’s findings.

Why Understanding the Standard of Review is Important

Evaluating Whether to Appeal: Appeals are time-consuming and costly. Understanding the standard of review can help you assess the likelihood of success and decide whether pursuing an appeal is a prudent use of resources. For example, if the standard is substantial evidence, and the trial court’s findings are well-supported, the chances of reversal are slim.
Strategic Planning: Knowing the applicable standard of review helps in crafting your appellate arguments. For instance, if your appeal involves a question of law subject to de novo review, the details of your specific case may matter less than those of decisions that appellate courts have issued in the past and the language of the statutory provisions in question. Conversely, if the standard is abuse of discretion, your arguments must focus on demonstrating that the trial court’s decision was unreasonable given the nuances of your case.
Effective Briefing: Appellate briefs must clearly state the applicable standard of review for each issue raised. Doing so not only complies with procedural rules but also guides the appellate court in its analysis. A well-argued brief that aligns with the correct standard of review is more persuasive and increases the chances of a favorable outcome.

Conclusion

Understanding the standard of review is not just a procedural formality; it is a fundamental aspect of appellate advocacy and a crucial factor to understand in deciding whether to file an appeal. It shapes your arguments, influences your strategy, and ultimately impacts the success of your appeal.

In the intricate world of civil appeals, knowledge is power. Equip yourself with a thorough understanding of the standard of review, and you will be better prepared to tackle the challenges of the appellate landscape. If you need any assistance, contact us at admin@horstcounsel.com.

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Undue Influence in the Execution of a Deed in California

Horst Legal Counsel — Mon, 21 Oct 2024 21:52:16 +0000

In California, the concept of undue influence plays a critical role in the execution of deeds, particularly in property transactions. Undue influence occurs when one party exerts excessive pressure on another, undermining their free will and resulting in an unfair transaction. This legal principle is especially pertinent in cases involving confidential relationships, where one party places significant trust in another. Understanding the impact of undue influence is essential for both legal practitioners and individuals involved in property transactions.

What Constitutes Undue Influence?

Under California law, undue influence is defined as excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity. The California Civil Code Section 1575 outlines the elements of undue influence, which include:

A confidential relationship between the parties.
The use of excessive pressure by the dominant party.
An unfair result that benefits the dominant party at the expense of the vulnerable party.

One of the seminal cases in California that illustrates the application of undue influence in the execution of a deed is Sparks v. Mendoza. This case provides a clear example of how courts evaluate claims of undue influence.

In Sparks v. Mendoza, the court found the existence of a confidential relationship based on several factors:

The grantor’s unfamiliarity with the English language.
The grantee’s role as the grantor’s agent and advisor in business transactions.
The grantor not receiving any independent advice regarding the transaction.
The absence of any consideration for the transaction.

The court held that a deed procured by undue influence is not legally delivered and is voidable. This case established that when a confidential relationship exists and there is no consideration, a presumption of undue influence arises. This shifts the burden of proof to the grantee to show fairness and good faith in the transaction.

Legal Implications

The Sparks v. Mendoza case underscores several critical points about undue influence in California:

Presumption of Undue Influence: When a confidential relationship exists and a transaction lacks consideration, California courts will presume undue influence. This shifts the burden of proof to the dominant party to demonstrate that the transaction was fair and free from undue influence.
Voidable Transactions: Deeds executed under undue influence are voidable. This means that the affected party can seek to have the transaction set aside, restoring their original property rights.
Importance of Independent Advice: To counter claims of undue influence, it is crucial for the dominant party to ensure that the vulnerable party receives independent legal advice. This helps demonstrate that the transaction was entered into freely and with full understanding.

Protecting Against Undue Influence

To protect against undue influence, individuals should:

Seek independent legal counsel before executing significant transactions, especially when a confidential relationship is involved.
Ensure transparency in all dealings and fully understand the implications of any documents they sign.
Document the transaction process thoroughly, including any advice received and the steps taken to ensure fairness.

Conclusion

Undue influence can significantly impact the validity of property transactions in California. The Sparks v. Mendoza case illustrates how courts scrutinize transactions involving confidential relationships and lack of consideration. By understanding the legal framework and taking proactive steps, individuals can protect their interests and ensure that their property transactions are fair and legally sound.

For more insights on property law and undue influence, visit Horst Legal Counsel. If you believe that title to a property has been procured by undue influence, Contact us at admin@horstcounsel.com.

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Riding the Wave: How and Why to Think About Settlement of Business Disputes

Horst Legal Counsel — Mon, 30 Sep 2024 22:20:30 +0000

California’s real estate market continues to evolve, and with it, the types of legal disputes that arise.

In California, business disputes are common. The difference between a favorable and unfavorable outcome to such a dispute can have a profound impact on your company. Business owners often see their companies’ very viability as turning on their ability to prevail in fights over breached contracts, shareholder or partnership disputes, and business torts. Typically, however, litigants are well-served to take an expansive view of what it means to “win” their case.

Watching Suits and other legal dramas can condition us to think that legal victories only happen in the courthouse. But the reality is that roughly 95% of all civil lawsuits settle outside of court. This is largely because litigating cases from complaint through trial will often cost hundreds of thousands, if not millions of dollars, with no guarantee of victory. Unless your contract entitles prevailing parties to attorney’s fees, any amounts that a business spends fighting over the controversy are generally sunk costs, regardless of outcome. Thus, going to trial is rarely a company’s ideal approach for creating the best net financial outcome in any dispute.

The Importance of Leverage in Litigation and Settlement

This is not to say that the litigation process lacks value. Far from it. But litigation is often more appropriately viewed as a business transaction than as a crusade for justice. Like with any business transaction, leverage matters a great deal in civil litigation. And because the overwhelming likelihood is that your case will settle sooner or later, litigants are well-served to include considerations regarding what a desirable settlement might look like at the outset of their cases and strategize about how to leverage such a settlement.

In most cases, the best lever that parties can use to effect a settlement is cost. As discussed above, litigation is deeply expensive. Few businesses can comfortably afford to see a contested matter through trial when the outcome is uncertain. Those that can will often be able to leverage the cost of litigation against shorter-stacked opponents. Nonetheless, any party to a dispute can increase its settlement leverage by understanding how to anticipate and manage litigation costs.

Litigation expenses tend to come in waves. Efforts to settle a case are often most successful when parties see these waves cresting in front of them. This is because in considering any proposed settlement, these parties are more likely to include the value of not being drowned in legal fees along with that of any substantive benefits received. Thus, parties hoping to reach a favorable settlement should time settlement discussions and mediation to occur during moments when reaching resolution will allow the opposing party to avoid imminent litigation costs.

Factoring Litigation Costs into Settlement Strategy

Of course, litigation cost tsunamis generally hit both sides of a conflict, not just one. So, does that mean that there is not actually any advantage created by seeking to “ride the wave” in your settlement strategy? Not if you and your attorney have properly prepared. While there are aspects of litigation that are reactive (i.e., that the other party can impose on you), through early evaluation of your case, you can reliably identify the majority of major cost waves long in advance—and, indeed, you have a great deal of discretion about when to make waves.

Moreover, thoroughly assessing your case early should allow your attorney to put together a realistic estimate of the costs of your matter and the range of likely outcomes. This enables you to develop an informed strategy for how the case should settle in order to ensure your best net result, taking costs into account.

Settlement Strategy Is a Case-by-Case Analysis

Critically, this assessment may result in very different strategies from one case to the next. Some will call for early mediation before parties become “pot-committed” by spending tens of thousands in fees that will make resolution more challenging. Others will be best served by creating leverage through the discovery process in order to move the opposing party off their own stated assessments of the case that you believe unsupported by the evidence. This latter scenario may make it unwise to invest any resources towards settlement efforts until long after a case begins.

If you need help determining what the right approach is for your case, reach out to the attorneys at Horst Legal Counsel. Together, we can help you reach the best net result for your business. Contact us at admin@horstcounsel.com.

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Recent Trends in California Real Estate Disputes: What You Need to Know

Horst Legal Counsel — Thu, 26 Sep 2024 20:39:07 +0000

California’s real estate market continues to evolve, and with it, the types of legal disputes that arise. Understanding these trends can help property owners, investors, and developers navigate the market, anticipate challenges they may face, and avoid costly legal battles. Below are some of the key trends currently driving real estate disputes in California.

Increased Litigation Over Defencient Disclosures

One of the most common issues in real estate disputes revolves around the failure to disclose important information about a property. Under California law, sellers are required to disclose known material defects, but disputes often arise when buyers discover previously undisclosed issues such as structural problems, water damage, or environmental hazards after the purchase.In these cases, the failure to disclose can lead to litigation, with buyers seeking compensation for repairs or loss of property value. Ensuring full transparency during the sale process, thoroughly reviewing disclosure forms, and conducting thorough independent investigations prior to closing are essential steps for both sellers and buyers to reduce the risk of future disputes.

Boundary and Easement Disputes Are Becoming More Common

Boundary lines and easements are becoming frequent points of contention, especially as property values rise across California. Even minor discrepancies in property boundaries or easements, which grant the right to use part of a property for specific purposes, can lead to significant legal conflicts. These disputes can arise from outdated or unclear property descriptions, encroachments, or disagreements over access rights.Before purchasing a property or making improvements, it’s important to ensure that you understand all boundary lines and easements impacting the property. Disputes can escalate quickly where there is ambiguity about property rights, leading to drawn-out legal proceedings that could have been avoided with proper due diligence.

Environmental and Climate-Related Disputes on the Rise

California’s susceptibility to natural disasters such as wildfires and floods has resulted in an increase in real estate disputes related to environmental and climate risks. Properties located in high-risk areas, particularly along the coast or in fire-prone regions, face unique challenges, including disputes over insurance coverage, zoning restrictions, and non-disclosure of environmental hazards.As climate change continues to affect real estate values, as well as the availability and terms of insurance policies, buyers and sellers alike must carefully evaluate the environmental risks associated with a property. Disclosure of such risks is not only a legal obligation but also a crucial step in avoiding disputes down the road.

Construction Defect Claims Continue to Surge

New developments in California have led to an increase in construction defect claims. Buyers of newly built homes are increasingly pursuing legal action against builders and developers over issues like faulty construction, improper materials, or violations of building codes. These defects can include anything from foundation problems to water intrusion, and they often don’t become apparent until after the property has been purchased.California law provides homeowners with up to 10 years to file a lawsuit for certain types of latent construction defects, making this a long-term risk for developers. Both property owners and developers need to be aware of the potential for such claims and take steps to ensure that construction standards are met and any defects are addressed promptly. While developers, in particular, can effectively manage these risks through insurance, doing so often requires carefully reviewing your policies each year to ensure that they cover what you think they do.

Tenant-Landlord Disputes Fueled by Regulatory Changes

California’s rental market is highly regulated, and recent changes to state and local laws have contributed to an increase in tenant-landlord disputes. Laws such as AB 1482, which introduced rent caps and stricter eviction protections, have made it more difficult for landlords to navigate the rental market without facing legal challenges. Disputes often involve issues like wrongful eviction, rent increases, and habitability concerns.Both landlords and tenants need to stay informed about their rights and obligations under these new laws. Failing to comply with the legal requirements for rent increases, lease terminations, or property maintenance can lead to disputes that require legal intervention.The landscape of real estate disputes in California is evolving, with new trends emerging in areas such as disclosure failures, boundary disputes, construction defects, tenant-landlord conflicts, and environmental risks. Understanding these trends is critical for anyone involved in real estate transactions to protect their interests and avoid costly legal battles. Staying informed and addressing potential issues early can help mitigate the risks associated with these disputes, allowing parties to focus on successful property investments and developments. If you need assistance with any of these issues, contact Horst Legal Counsel today.

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Celebrity IP Licensing in the Cannabis Industry

Horst Legal Counsel — Mon, 13 Dec 2021 02:09:11 +0000

Since cannabis has become legalized in many states, celebrities have been endorsing their own brands. Celebrities such as Tommy Chong, Bob Marley, Snoop Dogg, and many others have been licensing their brand to cannabis businesses as well as promoting the products. It can be a mutually beneficial relationship. As it often does, however, the presence of cannabis creates unique legal considerations that parties need to keep in mind during the drafting and negotiation process.

Receiving profits

As part of a celebrity license agreement, the parties may decide that the celebrity will be compensated with a percentage of sales from the products. This is certainly not unusual, but the parties to such agreements must take particular care in specifying precisely when this percentage gets calculated. From the perspective of the cannabis business, it would be preferable to calculate the celebrity’s percentage after all the expenses and taxes are calculated. Significant cannabis excise taxes and the unavailability of standard tax deductions due to Internal Revenue Code §280e eat far more dramatically into gross revenue than in typical product-based industries, so parties must be cautious in borrowing standard terms from these industries. In California, at least, another issue unique to the cannabis industry is that the cannabis business will need to register the celebrity with the Department of Cannabis Control as a Financial Interest Holder. This requirement can create a sour taste in the mouths of some celebrities. Thus, it is best to get this and other unusual regulatory requirements out in the open at the outset and account for them in the licensing agreement itself.

Celebrity advertisements

The cannabis business may be inclined to ask the celebrity to promote the business or the products themselves on the celebrity’s social media. However, it will be critical that the celebrity abide by the cannabis regulations surrounding advertisements. Such requirements demand that the licensee keep a record of advertisements, so the licensee needs to keep track of the celebrity’s social media accounts or require the celebrity to always send a copy to the licensee. The posts need to also include the licensee’s license number and exclude depictions/images of individuals under 21 years old and any objects that may appeal to someone under 21 years of age. Plus, it needs to be verified that at least 71.6% of the social media’s audience is 21 years or older. From the perspective of the celebrity, these requirements may be onerous, but worst of all, they could run the risk of being banned or shadow banned from social media for advertising cannabis on the social media. The parties would be wise to negotiate up front how, if at all, such events might alter the parties’ rights as against one another.

Termination and the remaining packaging

If the contract is terminated for any reason, it is important to consider what happens to the products already packaged in the brand and any remaining packaging with the brand already on it. Retailers are generally not allowed to package products so the retailer would have to return packaged product to another licensee for repackaging. Unfortunately, returns on cannabis are extremely limited so it would be best practice to include in the contract that any remaining products that are already packaged in the brand be allowed to be sold. For any packaging that hasn’t already been used, the celebrity could allow the licensee to use it through a sell-off period or the licensee could give the packaging to the celebrity and offset the celebrity’s proceeds with the cost of the packaging.

Dispute resolution and the illegal contract doctrine

Contracts often require the parties to use arbitration or mediation in the case of dispute resolution. Unfortunately, cannabis is still illegal on a federal level, so the illegal contract doctrine presents a potential danger to parties seeking to enforce cannabis-related contracts. While California has passed legislation stating clearly that otherwise legitimate contracts related to commercial cannabis business are lawful, federal district courts—even in the Ninth Circuit—have been increasingly willing to declare at least some such contracts unenforceable. Parties, however, can work around this prospect by inserting contract provisions waiving the doctrine and submitting the matter to arbitration. This allows the parties to any dispute arising out of a celebrity licensing deal to focus on the substance of their positions, rather than the legality of cannabis.

Kevin Dalia

Jason Horst

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