CALIFORNIA REAL ESTATE PRINCIPLES 1. CALIFORNIA DIVERSITY a. Capitalism : an economic system in which most of the economy’s resources are privately owned and managed. b. California is the 8 th largest economy in the world, and generates 13% of the US GDP. c. Net worth : the value of all assets minus all liabilities. d. Appreciation : increase in the market value of real estate e. Inflation : increase in the price of goods/services or decrease in purchasing power f. Affordability index : measures how many households can afford a median-priced home. g. Median home price : midway between most expensive and least expensive h. C.A.R. (California Association or REALTORS) :trade association dedicated to the advancement of professionalism in real estate. i. Realtor : someone who is a member of the association ii. Real estate agent : someone who’s licensed by the D.R.E. i. List 3 major careers in R.E. i. Management ii. Finance iii. Construction iv. Brokerage j. Name 2 types of R.E. licenses i. R.E. Sales person ii. R.E. Broker 2. PROPERTY, ESTATES, AND OWNERSHIP: “Who owns this property, and What’s their interest in it?”- a. Bundle of rights (U.P.T.E.E.) : i. U se: right to use, within law, in any way or purpose ii. P ossess: right to live on property and keep others out iii. T ransfer: right to sell, give, or dispose of property iv. E ncumber: right to borrow against, or use as collateral v. E njoy: right to peace and quiet enjoyment b. Personal property vs. Real property i. Personal aka chattel: moveable, and transferred/sold via Bill of Sale ii. Real: immoveable, and is transferred/sold via Deed ; anything permanently attached to the land 1. Airspace, to a reasonable height 2. Surface rights 3. Mineral rights: gold, precious metals; unless they’re fugitive (non-solid, i.e.: gas, oil) 4. Water rights: streams, underground water
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CALIFORNIA REAL ESTATE PRINCIPLES
1. CALIFORNIA DIVERSITY
a. Capitalism : an economic system in which most of the economy’s resources are privately owned and managed.
b. California is the 8th largest economy in the world, and generates 13% of the US GDP.
c. Net worth : the value of all assets minus all liabilities.
d. Appreciation : increase in the market value of real estate
e. Inflation : increase in the price of goods/services or decrease in purchasing power
f. Affordability index : measures how many households can afford a median-priced home.
g. Median home price : midway between most expensive and least expensive
h. C.A.R. (California Association or REALTORS) :trade association dedicated to the advancement of professionalism in
real estate.
i. Realtor : someone who is a member of the association
ii. Real estate agent : someone who’s licensed by the D.R.E.
i. List 3 major careers in R.E.
i. Management
ii. Finance
iii. Construction
iv. Brokerage
j. Name 2 types of R.E. licenses
i. R.E. Sales person
ii. R.E. Broker
2. PROPERTY, ESTATES, AND OWNERSHIP: “Who owns this property, and What’s their interest in it?”-
a. Bundle of rights (U.P.T.E.E.):
i. U se: right to use, within law, in any way or purpose
ii. P ossess: right to live on property and keep others out
iii. T ransfer: right to sell, give, or dispose of property
iv. E ncumber: right to borrow against, or use as collateral
v. E njoy: right to peace and quiet enjoyment
b. Personal property vs. Real property
i. Personal aka chattel: moveable, and transferred/sold via Bill of Sale
ii. Real: immoveable, and is transferred/sold via Deed; anything permanently attached to the land
a. Under the Correlative-rights Doctrine, the owner may take only a reasonable share of
the underground H2O
b. Riparian Rights : property bordering a river/stream
c. Littoral rights : property bordering a lake; owns up to the low water mark/edge of the
lake
d. For land bordering oceans, property owners own up to the ordinary high tide mark
e. Appropriation : gov’t right to divert water for a beneficial use
iii. Improvements : anything resting on the land to become permanent, i.e. pools, fences, garages, etc.
iv. Fixtures : anything that’s permanently attached to real property.
1. 5 tests to determine a fixture (M.A.R.I.A.)
a. M ethod of Attachment – moveable or immoveable?
i. Fructus naturales : naturally occurring plant growth, i.e. grass
ii. Emblements : commercial groves/crops for annual harvest/sale
CALIFORNIA REAL ESTATE PRINCIPLES
iii. Fructus indutriales : crops produced by human labor, i.e. corn
b. A daptation – item specially made for property?
c. R elationship of parties – tenant/landlord; lender/borrower
d. I ntention – what was the intent, and was it informed/written
e. A greement of the parties
2. Trade fixtures
a. Personal property used to conduct a business, i.e. shelves, cabinets, refrigerators, etc.
b. Tenants can retain this property, even though landlord owns it, but is responsible for
repairing any damages that result from replacing them.
3. Anything Appurtenant to the Land
a. Appurtenance : anything used with the land for its benefit (belonging to), i.e. easements,
stock rights to mutual water companies
b. Easement : right of way across a parcel of land
c. Types of Estates
i. Estate : ownership interest or claim on real property
1. Freehold Estate
a. Indefinite duration
b. Can be sold or inherited
c. Free from anyone else’s restrictions
d. Types
i. Estates in Fee , aka (Fee Simple Estate or Estate of Inheritance or
Perpetual estate)
1. An estate passed through inheritance or by will after owner’s
death.
2. Fee simple absolute : No conditions or limitations on use
3. Fee simple qualified /defeasible : seller imposes qualifications or
conditions that buyer must/must not do
4. Condition Subsequent : owner mustn’t do something with that
property
a. Penalty: property will go back to former owner
5. Condition Precedent : restriction/condition must occur before
transaction becomes absolute and final
ii. Life Estates : Limited in duration to the life of the owner or designated person
(pur autre vie)
1. Has all rights that go with fee ownership except disposing of the
estate by will
2. Must pay taxes and maintain property
3. May collect all rents and keep profits for the duration of the life
estate
4. Types of Life Estates
a. Estate in Reversion : A deeds estate to B. B dies. The
estate then goes back to A.
b. Reserving a Life Estate : A deeds estate to B for the life
of C. When C dies, estate goes to D.
c. Estate in Remainder : A deeds estate to B, with
provision that when B dies, estate goes to C. C’s
interest is called the “Estate in Remainder”.
CALIFORNIA REAL ESTATE PRINCIPLES
2. Less-than-freehold estate (aka Leasehold Estate): estate owned by a tenant who rents real property.
a. Leasehold Estate aka Chattels real (lease/rental agreement)
i. Moveable document describing temporary possession and use of the
property… PERSONAL PROPERTY
b. Temporary and limited rights of use (lease), fixed amt of time
c. Types of Leasehold estates
i. Estate for years : fixed term lease w/ definite end date stated
ii. Estate from Period to Period : periodic tenancy, i.e. month to month, 30-day
notice to quit, and terminates by either party
iii. Estate at Will : no written agreement between landlord and tenant, can be
ended by unilateral decision, & 30-day notice must be given
iv. Estate by Sufferance : tenant occupies property without paying rent or
permission from landlord (squatters)
d. Ownership of Real Property
i. Tenancy : mode or method of ownership or holding title to property
ii. Title : evidence that owner of land is in lawful possession
iii. Paramount title : right to real property that prevails over any other person’s claim of title
iv. Separate Ownership (aka Ownership in Severalty): ownership by one person/entity
v. Concurrent Ownership : co-ownership (4 types)
1. Tenancy in Common : 2 or more persons whose interests aren’t necessarily equal, but are owners of
undivided interests in a single estate
a. May take title at different times
b. May take title on separate deeds
c. May have unequal interests
d. Have undivided interest or equal right or possession (one unity)
e. Partition Action : asking the courts to decide fate of investment when the owners can’t
come to an agreement
2. Joint Tenancy : 2 or more parties own real property as co owners, with right of survivorship
(meaning that if one of the joint owners pass, then the surviving owner automatically becomes sole
owner of property). i.e. married couple
a. Four Unities of Joint
Tenancy: T-TIP (all 4
must occur)
i. T ime : all parties must become joint tenants at same time
ii. T itle : All parties must take title on the same deed
iii. I nterest : all parties have equal undivided interest in property
iv. P ossession : All parties have equal right of possesion
3. Community Property : all property acquired during a valid marriage except for separate property
a. Separate Property
i. Property owned before marriage
ii. Property acquired by gift or inheritance
iii. Income derived from separate property
b. 3 choices on taking title in CA as married couple
i. Joint Tenancy
1. Right of survivorship
2. May include a tax liability for surviving spouse
ii. Community property
CALIFORNIA REAL ESTATE PRINCIPLES
1. Right of survivorship
2. Includes probate when spouse dies, and costs involved in that
process
iii. Community property with the right of survivorship, but no particular tax
liability because of spouse’s death and no probate
c. Intestate Succession : if there’s no will, spouse inherits all community property
4. Tenancy in Partnership: ownership by 2 or more persons who form a partnership for business
purposes
Joint Tenancy Tenancy in Common Community Property PartnershipParties Any Number Any Number Spouses Only Any NumberInterest Must be equal Equal or unequal Must be equal Mutual consentPossession Equal right Equal right Equal right Equal rightDeath Survivorship No Survivorship Survivorship (no will) No Survivorship
vi. Recording Safeguard Ownership
1. Acknowledgement
a. before a notary public, or certain public official
b. formal declaration by the person (grantor) who executed the instrument that he/she did in
fact the execute the instrument
2. Recording Process
a. copying the instrument to be recorded in proper index
b. filing it in alphabetical order, under names of parties immediately
c. To be valid, documents must be recorded by the county recorder in the county within
which the property is located.
i. Marked “filed for record”
ii. Stamped with the proper time and date of recording and returned to the person
who requested the recording.
d. Constructive Notice: public notice, i.e newspaper, news broadcast, etc.
e. Actual Notice: direct, express information about the ownership interest of a property.
3. Priorities in Recording
a. first one recorded takes precedence
3. Encumbrances and Transfer of Ownership
a. Encumbrances: an interest in real property that is held by someone other than the owner (ALL LIENS ARE
ENCUMBRANCES, BUT NOT ALL EMCUMBRANCES ARE LIENS)
i. MONEY ENCUMBRANCES
1. Voluntary lien: borrowing money, using the property as a security for the loan
2. Involuntary lien: liens placed on property because owner has taxes or debt owed
3. Specific lien: lien placed on a certain property, i.e. mechanic’s lien, trust deed, tax lien
a. Mechanic’s lien : lien against property placed by anyone who supplies labor, services, or
materials used for improvements on real property who didn’t received payment for the
improvements made
i. Must be verified and recorded
ii. Preliminary notice
1. Written notice given to owner within 20 days of first furnishing
labor or materials for a job
iii. Notice of completion
1. If owner records notice of completion within 10 days after project
is finished, contractor has 60 days to file. All others have 30 days.
iv. No notice of completion
CALIFORNIA REAL ESTATE PRINCIPLES
1. If owner doesn’t record notice of completion when project is
finished, then all claimants have 90 days to record mechanic’s lien
v. Foreclosure action
1. After mechanic’s lien is recorded, the claimant has 90 days to
bring foreclosure action to enfoce the lien.
vi. Notice of Non-responsibility:
1. Unauthorized work on property must be recorded and posted on
property to be valid, stating owner’s not responsible for work
being done. Owner must record this notice within 10 days after
discovering it
b. Tax Liens : liens on property because of unpaid taxes
i. Special assignments : taxes levied for specific local purposes
c. Lis Pendens : recorded notice pending litigation affecting title of property
d. Attachment lien : aka writ of attachment, process by which the court holds the real or
personal property of a defendant as security for a possible judgment pending outcome of
lawsuit
i. Judgment : final determination of the rights of parties in a lawsuit
ii. Abstract of Judgment : Court decision
iii. Writ of Execution : aka execution sale, court forced sale of a property to
satisfy the judgment
4. General lien: lien on ALL properties of a debtor
ii. NON-MONEY ENCUMBRANCES : encumbrance that affects use of a property
1. Easements : right to enter or use someone else’s land for specific purpose
a. Ingress : right to enter onto a property using easement
b. Egress : Right to exit a property using easement
c. Appurtenant Easement : An easement that’s used for the benefit of the land
i. Appurtenance : anything used for benefit of the land
ii. Servient tenement : person who’s giving the easement to be used
iii. Dominant tenement : Person receiving the benefit of the easement
d. Easement in Gross : an easement that’s not appurtenant to any one parcel, i.e. public
utilities to install power lines
e. Creating an easement
i. Express grant : grant by deed or express agreement
ii. Express reservation : seller of a parcel who owns adjoining land reserves an
easement over the former property.
iii. Implied Grant or Reservation : existence of an easement is obvious and
necessary at time of conveyance, even though not mentioned in deed.
iv. Necessity : easement made when parcel is completely landlocked and has no
access
f. Prescription : acquiring an interest, not ownership, of certain property
i. Easement by Prescription (a specified interest in property): continuous and
uninterrupted use by a single party for a period of 5 years
1. Must be against the owner’s wishes
2. Be open and notorious
3. Party claiming Easement by Prescription must have reasonable
claim to use the property
CALIFORNIA REAL ESTATE PRINCIPLES
ii. Adverse Possession (Acquires title to the property): payment of taxes for 5
continuous yrs
g. Terminating Easement (A.D.A.M. E. L.E.E.) Adam E. Lee
i. A bandonment: Obvious and intentional surrender of the easement (after 5
years of non-use)
ii. D estruction of the Servient Tenement: Gov’t takes easement for its own use
iii. A dverse Possession: servient tenement owner prevents dominant tenement
owner from using easement for 5 yrs
iv. M erger: servient and dominant tenement owners are the same, i.e. servient
tenement owner buys parcel next that used easement
v. E xpress release: owner of dominant tenement is the one who can release an
easement
vi. L egal proceedings: owner of servient tenement brings action to quiet title
against the owner of the dominant tenement
1. Quiet Title Action (aka Action to Quiet Title): a lawsuit to
establish or settle title to real property
vii. E stoppel: Non-use and the property owner has reason to believe that no
further use is intended.
viii. E xcessive use
iii. RESTRICTIONS : limitations placed on the use of the property
1. Private restriction: restrictions place by a present or past owner and affect only a specific property or
development
a. CC&R’s: Covenants, Conditions, and Restrictions
i. Covenant: A promise to do or not to do certain things
1. Penalties for a Breach
a. Money damages
b. Injunction: court order to do/not do an act
ii. Conditions: a promise to do/not do something (usually a limitation on the use
of the property)
1. Penalties for a Breach
a. Return of the property to the grantor
2. Condition Subsequent
a. A restriction placed in a deed at the time of
conveyance, upon future use of the property. It is a
condition that’s placed on the property that comes into
play subsequent to the transaction.
3. Condition Precedent
a. A restriction that a certain event, or condition, must
occur before title can pass to the new owner.
iii. Restrictions: limitations on use of property
1. Public restriction: (ZONING) promotes public health and general
public welfare, i.e. R1, C1, M1
2. Downzoning : changing from high density use to lower density use
3. Non-Conforming : existing structures that are exempted from
conforming to new regulations because of the “grandfather
clause,” which allows the owner to continue to use the structures.
CALIFORNIA REAL ESTATE PRINCIPLES
If he wants to make changes to the property, then he has to comply
w/ zoning laws.
4. Variance : an allowable difference to the zoning laws for a
structure or land use
2. Zoning (public restriction): government restrictions the benefit the public
3. Encroachments : unauthorized intrusion on the adjoining land, limiting use and reducing size and
value.
iv. Homestead Protection
1. Homestead : limits the amount of liability for certain debts against which a home can be used to
satisfy a judgment. “Declaration of Homestead” is the recorded document that protects a
homeowner from foreclosure by certain judgment creditors. First $75,000 of home’s value may not
be used to satisfy judgment against head of household. $150,000 for mentally disabled or over 65,
and $50,000 for all others
2. Requirements for Valid Homestead : Only one can be valid at a time
a. Claimant must be living on the property at the time of the filing
b. Must state his or her status as head of household or other
c. Must describe the property
d. Give an estimate of value
v. HOW REAL ESTATE IS ACQUIRED OR CONVEYED
1. Will : disposition of property after death
a. Testator : a person who makes a will
b. Testate : means the person who died left a valid will
c. Devise : a gift of real property
d. Bequest (aka legacy) : a gift of money or personal property by will
e. Codicil : Will’s maker may change a will before death
f. Witnessed Will : will that’s usually prepared by an attorney and signed by the maker
(testator) and two witnesses
g. Holographic Will : will that’s written in the maker’s writing, dated, and signed by the
maker
h. Probate : legal process to prove a will is valid, and to determine creditors’ claims and
beneficiaries’ interested in an estate upon owner’s death
i. Executor or Executrix : person named in a will that is appointed as a
representative to handle the estate of the deceased
ii. Administrator or Administratrix : Court appointed person who administers
the estate because there’s no will
2. Succession : legal transfer of a person’s interests in real and personal property under the laws of
descent and distribution.
a. Intestate Succession : inheriting property as a result of someone’s death without a will.
3. Accession : process by which there is an addition to property by the efforts of man or natural forces
a. Alluvium : gradual build-up of soil
b. Accretion : gradual build-up of soil by natural causes on property bordering rivers, lakes,
or oceans
c. Erosion : gradual wearing away of land by water, wind, or glacial ice
d. Avulsion : sudden washing or tearing away of land by water action
e. Reliction : when land covered by water becomes uncovered because of alluvial deposits
along the banks of streams
4. Occupancy: using property (squatting)
CALIFORNIA REAL ESTATE PRINCIPLES
a. Must be occupied without owner’s knowledge
b. Cannot be publicly owned
c. Three steps to acquire property by occupancy:
i. Abandonment
ii. Adverse possession: acquired through continued possession and payment of
taxes (P.A.N.C.H.O.)
1. P ossession must be actual occupation
2. A dverse
3. N otorious
4. C ontinuous and uninterrupted for 5 yrs
5. H ostile to the present owner’s title and wishes
6. O pen
iii. Prescription
d. Transfer: property acquired when title is conveyed (transferred) from one person to
another via a written document
i. Real property may be transferred (alienated) by private grant, public grant,
public declaration, or operation of the law (court action)
1. Private grant: transfer by written instrument (formal legal
documents such as deed, will, or contract), i.e. grant deed,
quitclaim deed, gift deed, warranty deed
2. Grant deed: written document that stransfers title to real property
and must contain granting clause
a. Grantor: person conveying the property
b. Grantee: person receiving the property
c. A grant deed must have a granting clause and has two
implied warranties by the grantor:
i. That the grantor has not already conveyed
title to any other person
ii. That the estate is free from encumbrances
other than those disclosed by the grantor
d. “et ux” : means “and wife”
e. Requirements for a Valid Grant Deed
i. Deed must be in writing, according to the
statutes of frauds
ii. Parties to the transfer must be sufficiently
identified and described
iii. Grantor must be competent to convey
property
iv. Grantee must be capable of holding title
v. Property must be adequately described but
doesn’t require legal description
vi. Words of granting such as grant or convey
must be included
vii. Deed must be executed by grantor
(seller) . Deed may be signed by a witnessed
mark “X”
CALIFORNIA REAL ESTATE PRINCIPLES
viii. Deed must be delivered to and accepted by
the grantee. Deed isn’t effective until it’s
delivered.
ix. Acknowledgement : signed statement made
in front of notary public that the named
person is confirming that the signature on a
document is genuine and was made of free
will
x. Constructive Notice : given notice by
recording a document or taking physical
possession of property
xi. Chain of Title : sequential record of changes
in ownership showing the connection from
one owner to the next
xii. Priority : first to record a deed is the first in
right
3. Quitclaim Deed : transfers any interest at the time the deed is
signed, but doesn’t warranty clear title. Cloud on Title: any
condition that might affect the clear title of real property or minor
defect in the chain of title which needs to be removed.
4. Gift Deed : gift of property to a grantee, where the consideration is
love and affection
5. Warranty Deed : deed used to transfer title, guaranteeing the title
is clear and grantor has right to transfer it. (no longer used in CA)
6. Public Grant : transfer of title by government to private individual.
Patent: document used by the gov’t to transfer title to land instead
of using deed
7. Public Dedication : private property intended for public use
a. Common Law Dedication : property owner implies
through his or her conduct the intent that the public use
the land. To be effective, it must be accepted by public
use/local ordinance
b. Statutory Dedication : dedication by private individual
to the public, using Subdivision Map Act
c. Deed : formal transfer by a party as in a gift deed where
there is no consideration
ii. Operation of Law: involuntary transfer of property
1. Foreclosure : legal process used by a lender to seize property of a
homeowner, usually due to homemaker not making payments on
the mortgage
2. Bankruptcy : court proceeding to relieve a person’s or company’s
financial insolvency (debt exceeds assests)
3. Quiet Title Action : court proceeding to clear a cloud on the title of
real property
4. Executions sale : forced sale under Writ of Execution (legal
document used by courts to forcing sale to satisfy judgement) with
proceeds to satisfy money judgment
CALIFORNIA REAL ESTATE PRINCIPLES
5. Partition Action : court proceeding to settle a dispute between co-
owners about dividing their interests in real property
6. Escheat : legal process in which property reverts to the state
because the deceased owner left no will and has no legal heirs.
State must wait 5 yrs to claim property
7. Eminent Domain : power of gov’t to take private property for
public use after paying just compensation (fair and reasonable
payment) to the owner
a. Condemnation : acquiring private property for public
use… under 5th Amendment
b. Inverse Condemnation : private party forces gov’t to
pay just compensation if property value or use has been
diminished by public entity
CALIFORNIA REAL ESTATE PRINCIPLES
4. Contracts: the Basics
a. Contracts in General
i. Express Contract: the parties declare the terms and put their intentions in words, either oral, or written.
ii. Implied Contract: agreement shown by act and conduct rather than words
iii. Bilateral Contract: agreement in which each person promised to perform an act in exchange for another
person’s promise to perform
iv. Unilateral Contract : contract in which a party promises to perform without expectation of performance by the
other party
v. Executory Contract : contract in which obligations to perform exists on one or both sides
vi. Executed Contract : all parties have performed completely
vii. Void Contract : contract with no legal effect because of lack of capacity or illegal subject matter
viii. Voidable Contract : contract that’s valid and enforceable on its face, but may be rejected by one or both parties
ix. Unenforceable Contract : Valid contract but for some reason cannot be proved by one or both of the parties…
Oral Agreements
x. Valid Contract : binding and enforceable contract
b. Basic Elements of All Contracts
i. Legally Competent Parties
1. Must be 18, unless married, in military, or declared emancipated by courts
2. Mentally competent
3. Power of Attorney : authority given to another person to act on behalf of another
a. When dealing with real property, power of attorney must be recorded to be valid, and is
good for as long as the principal is competent. It can be revoked at any time by recording
revocation
ii. Mutual Consent between both Parties (aka Meeting of the Minds)
1. All parties mutually agree
2. Genuine assent: offer and acceptance is genuine and freely made by all parties
a. No Genuine Assent if:
i. Fraud: act meant to deceive in order to get someone to part with something of
value
ii. Innocent Misrepresentation: unknowingly providing wrong information,
where a contract may be rescinded or revoked by party that felt misled
iii. Mistake: an agreement that was unclear or there was a misunderstanding in
facts
iv. Duress (or menace): use of force which is the threat of violence
v. Undue Influence: using unfair advantage to get agreement
iii. Offer : contractual intent of offeror to enter into a contract
iv. Acceptance : unqualified agreement to the terms of an offer
1. Counteroffer : rejection of original offer that becomes new offer
v. Termination
1. Lapse of time : revoked if the offeree fails to accept it within a prescribed period
2. Communication of Notice of Revocation : notice is filed by the offeror anytime before the other
party has communicated acceptance
3. Failure of offeree to fulfill a condition of acceptance prescribed by the offeror
4. A qualified acceptance, or counteroffer by the offeree
5. Rejection by the offeree
6. Death or insanity of the offeror or offeree
7. Unlawful object of the proposed contract
CALIFORNIA REAL ESTATE PRINCIPLES
vi. Sufficient Consideration
1. Consideration : something of value such as a promise of future payment, money, property, or
personal services
2. Acceptable Consideration : terms that denote acceptable consideration include valuable, adequate,
good, or sufficient consideration
3. Forbearance : forgiving a debt or obligation, or giving up an interest or a right, qualifies as valuable
consideration
c. Contracts that Must be in Writing
i. Statute of Frauds: most contracts are required by law to be in writing, unless it’s a lease for less than a year
1. Purpose is to prevent forgery, perjury, and dishonest conduct of unethical people
ii. Parol Evidence Rule: Oral/word of mouth agreements
d. Discharge of Contracts : the cancellation or termination of a contract
i. Performance: contract fully performed
1. Tender of performance : an offer by one of the parties to carry out his or her part of the contract,
made at time to close escrow
2. Waiver : relinquishment or refusal to accept a right
3. Specific Performance : a court action brought about by one party to force the other (breaching) party
to fulfill the conditions of the contract
ii. Release: person whom an obligation is owed releasing the other party from the obligation to perform the
contract
iii. Mutual Rescission : when all parties to a contract agree to cancel the agreement
iv. Assignment: transfer all the interests of the assignor to the assignee. Assignee takes over assignor’s rights,
remedies, benefits, and duties in the contract.
v. Novation: substitution, by agreement, of a new obligation for an existing one, w/ intent to extinguish the
original contract
vi. Breach: failure to perform on part or all of the terms and conditions of a contract
1. Remedies:
a. Unilateral Rescission: Legal action taken to repeal a contract by one party when the other
party had breached a contract
b. Lawsuit for Money Damages
c. Lawsuit for Specific Performance: forcing the breaching party to carry out remainder of
contract according to agreed-upon terms, price, and conditions
e. Statute of Limitations: set of laws determining civil action time limits prescribed by law
i. 90 Days: civil action to recover personal property left at hotel or apt
ii. 6 Months: action against an officer to recover property seized in an official capacity
iii. 1 year: libel or slander, injury or death caused by wrongful act, or loss to depositor against a bank for the
payment of a forged check
iv. 2 years: action on a contract, not in writing; action based on a policy of title insurance
v. 3 yrs: Action on a liability created by statute; action for trespass on or injury to real property (i.e.
encroachment); action for relief on the grounds of fraud or mistake; attachment
vi. 4 yrs: action on any written contract; includes most real estate contracts
vii. 10 yrs: action on a judgment or decree of any court in the US
5. AGENCY RELATIONSHIPS
a. Agency : legal relationship in which principal authorizes an agent to act as the principal’s representative when dealing with
third parties.
i. Fiduciary relationship : relationship that implies a position of trust or confidence. Agents are bound by agency
acts in the best interests of the principal.
CALIFORNIA REAL ESTATE PRINCIPLES
ii. Special Agent : agent employed to perform a specific task
iii. General Agent : agent authorized by a principal to perform any and all tasks associated with the continued
operation of a particular project
iv. Actual authority : express authority given by principal or given by the law and not denied by the principal
v. Power of Attorney : written document that gives a person legal authority to act on another person’s behalf
vi. Special Power of Attorney : authorizing an agent to do certain specific acts
vii. General Power of Attorney : allows agent to transact all the business of the principal
b. Agency Relationships in Real Estate:
i. The agent is always a licensed real estate broker
ii. Listing Agent : broker who obtains a listing from a seller to act as an agent for compensation
iii. Subagent : Broker delegated by the listing agent (if authorized by seller) who represents the seller in finding a
buyer for the listed property
iv. Buyer’s Agent : broker employed by the buyer to locate a certain kind of real property
v. Dual Agent : broker acting as agent for both the seller and buyer in the same transaction
vi. Selling Agent : broker who finds a buyer and obtains an offer for the real property
vii. Cooperating Broker : selling agent who assists another broker by finding a buyer
Agent (Broker) Principal (Client) Third Party (Customer)
Listing Agent Seller Buyer
Subagent Seller Buyer
Buyer's Agent Buyer Seller
Selling Agent Seller or Buyer Seller or Buyer
Cooperating Broker Seller or Buyer Seller or Buyer
Dual Agent Seller & Buyer No Third Party
viii. MLS (Multiple Listing Service) : a cooperative listing service conducted by a group of brokers, usually
members of a real estate association
ix. Sales Associate (aka associate licensee) : a licensed real estate salesperson or broker whose license is held by
an employing licensed broker.
c. Disclosing the Agency Relationship
i. Agency Relationship Disclosure Act: law that requires an agent supply a written document, called Disclosure
Real Estate Agency Relationship, explaining the nature of agency. Disclosure must be made PRIOR to taking a
listing or writing an offer.
1. Basic requirements:
a. Fiduciary duty of utmost care, integrity, honesty, and loyalty in dealing with the agent’s
principal
b. Reasonable skill and care in performance of agent’s duties
c. Duty of honesty, fair dealing, and good faith
d. Duty to disclose all facts known to the agent materially affecting the value or desirability
of the property not know to the other parties.
ii. Disclosure Process (D.E.C.)
1. D isclose: all parties are made aware that they do have a choice of who is to represent them as their
own agent
2. E lect: all parties involved to confirm that they understand they agent’s role
3. C onfirm: all parties to the transaction are required to acknowledge that they understand who is
representing whom, and sign the agency confirmation form
d. Creating an Agency Relationship
i. Agreement
CALIFORNIA REAL ESTATE PRINCIPLES
1. Must be in writing to be enforceable in the court of law. Two most common are:
a. Listing Agreements : written contract by which a principal, or seller, employs a broker to
sell real estate. MOST COMMON WAY
i. Unilateral: Promise for an action
ii. Bilateral: Promise for a promise
iii. Seller agrees to pay a commission upon presentation of a ready, willing, and
able buyer who meets all the terms of listing, aka “meeting of the minds”
iv. Types of Listing Agreements (RLA, RLAA, and RLAN)