Remedies of Landlord +13California · Real Estate · English

Unlawful detainer is the quick alternative to ejectment. It is available against a tenant who: holds over after expiration; continues in possession after rent default; continues after breach of conditions/covenants (including no-assignment); commits waste or nuisance; or fails to quit after notice of intent to terminate. Usually a three-day notice to cure or quit is required; incurable breaches need not offer a cure option.

• ✓Unlawful detainer is faster than ejectment for regaining possession
• ✓Available for holdover, rent default, covenant breach, waste/nuisance, or failure to quit
• ✓Incurable breaches do not require offering an option to cure

An unlawful detainer awards possession and rent owing through the judgment date only - post-judgment rent and other damages (e.g., physical damage) require a separate proceeding. If the tenant relinquishes possession before trial, the case converts to an ordinary civil suit losing calendar priority. The tenant has five days from service of summons to answer, or judgment is entered for the landlord; affirmative defenses must be raised in the answer or waived.

• ✓Unlawful detainer recovers rent only through the judgment date
• ✓Tenant has five days to answer the summons or lose by default
• ✓Post-judgment rent and property damage require a separate proceeding

The most common tenant defenses are: landlord's failure to comply with procedural requirements (e.g., improper three-day notice service); breach of the implied warranty of habitability; retaliation for lawful exercise of tenant rights (e.g., reporting code violations); or discrimination based on race or other prohibited category. After judgment for the landlord, the sheriff removes the tenant; the landlord cannot forcibly self-evict.

• ✓Improper notice service, habitability breach, retaliation, and discrimination are common defenses
• ✓Only the sheriff (not the landlord) may forcibly remove the tenant
• ✓Retaliatory or discriminatory eviction is a valid defense

On rent default, the landlord may sue for each installment as it becomes due (CC 1951.4), whether the tenant stays or abandons - though financially unsatisfactory. Alternatively, under CC 1951.2 the landlord may terminate after a three-day notice and recover damages. On abandonment, the landlord usually retakes for the tenant's account, relets, and later sues for the difference between lease rent and reletting proceeds.

• ✓Landlord may sue for each installment as due (CC 1951.4)
• ✓Landlord may terminate and recover damages under CC 1951.2 after a three-day notice
• ✓On abandonment, damages equal lease rent minus reletting proceeds

In a suit for unpaid rent, the tenant may assert defenses including any lease right to withhold/offset for landlord's non-compliance, or the landlord's breach of the implied warranty of habitability.

• ✓Tenant may raise contractual withholding/offset rights as a defense
• ✓Breach of the implied warranty of habitability is a defense to rent collection

MLB-arranged loans funded by private investors and secured by real property liens are 'hard money' or 'private money' loans.

• ✓'Hard money' now called 'private money' or 'private equity capital' applies to purchase, equity, refinance, cash-out, development, and construction loans
• ✓Use of 'private money' does not excuse MLBs from following appraisal standards and borrower underwriting requirements
• ✓MLBs as fiduciaries must ensure a reasonable repayment method and that the loan is suitable for both borrower and investor

When relying on private investor funds, MLBs perform in three roles under Real Estate and Securities Law.

• ✓The three roles are issuer, real estate broker agent/fiduciary, and de-facto broker/dealer
• ✓Notes in series secured by the same deed of trust, notes of equal priority, or fractionalized interests sold to private investors (multi-lender transactions) must occur through MLBs
• ✓Private investors seek higher returns for higher risk; whole-note lenders acting for their own account must still follow lending and usury law

MLBs must deliver disclosures to private investors and borrowers before they become obligated.

• ✓Private investors must receive disclosures under B&P 10176, 10177, 10232.4, 10232.5, 10232.6, and 10237 et seq. plus securities disclosures before committing funds
• ✓Borrowers must receive disclosures under B&P 10176, 10177, and 10240 et seq. before becoming obligated
• ✓The objective is informed decision-making and loan suitability for investors and borrowers

Loans made or arranged by licensed real estate brokers are exempt from California usury law.

• ✓Proposition 2 (1979) exempted broker made/arranged real property loans from usury limits (Civil Code 1916.1)
• ✓The exemption applies regardless of the nature of the security property and extends to broker-arranged extensions, forbearances, or refinancings
• ✓Private investors making or renegotiating loans without a broker arranging the transaction remain subject to usury law
• ✓MLBs may not include non-real-property security when establishing loan-to-value ratios under B&P 10238(h)(1) and (2)

Notes in series or fractionalized interests to no more than 10 investors qualify under a statutory securities exemption.

• ✓Notes providing fractionalized interests to no more than 10 investors are securities under B&P 10237 et seq. and Corporations Code 25102.5
• ✓'Quasi-private placement' allows the issuer to market to private investors through media without a preexisting business relationship
• ✓Offerings must be qualified by exemption or registration with the DOC, or by coordination with the SEC for interstate issuance
• ✓Regulation D exemption requires 100% of investors and 80% of issuer's business in the same state (Rule 147); there are no exemptions for fraud

MLB-arranged loans on subdivision projects represent risk capital with diminishing risk by project stage.

• ✓Highest risk is raw land loans before entitlements, then land development (offsite/backbone and onsite), then vertical construction
• ✓MLBs must underwrite the borrower and project to determine whether permanent/take-out financing is reasonably obtainable
• ✓Practitioners should not engage in subdivision or construction financing without knowledgeable construction and securities legal counsel

If an advertisement states any triggering term—amount/percentage of down payment, number of payments or period of repayment, amount of any payment, or amount of any finance charge—additional disclosures are required: the down payment amount/percentage, repayment terms over the full loan term (including balloon payments), and the APR (noting if it may increase after consummation).

• ✓Triggering terms are: down payment amount, number/period of payments, amount of any payment, or amount of any finance charge
• ✓Triggering terms require disclosing the down payment, full-term repayment terms, and the APR
• ✓The disclosure must note if the APR may be increased after consummation

Anyone placing an advertisement for consumer credit (any media, including websites) must comply with TILA/Regulation Z advertising rules. Real estate brokers, mortgage brokers, and homebuilders must comply even if not the creditor. Disclosures must be clear and conspicuous. Advertised terms may be stated only if actually available, and non-creditors must have evidence of a lender's willingness to offer them.

• ✓All advertisers of consumer credit must comply, including brokers and homebuilders who are not the creditor
• ✓Advertised specific credit terms may be stated only if actually available
• ✓If a rate of finance charge is stated, it must be stated as an 'annual percentage rate' using that term

For dwelling-secured credit ads (other than TV/radio), if a simple annual rate is stated and more than one rate applies, each rate and its applicable period must be disclosed clearly and conspicuously with equal prominence and close proximity to the triggering rate. If payments are stated, disclose the period, amount of each payment (including balloon), and for first-lien loans, that payments exclude taxes and insurance and the actual obligation will be greater.

• ✓Each applicable simple annual rate and its period must be disclosed with equal prominence and close proximity
• ✓For first-lien dwelling ads stating payments, disclose that payments exclude taxes/insurance and the actual obligation is greater
• ✓The APR may be disclosed with greater prominence than other information
• ✓Envelopes and banner/pop-up ads linked to applications are excluded from these disclosure requirements

Prohibited acts in dwelling-secured credit ads include: misusing 'fixed' for variable-rate/increasing-payment loans without proper ARM disclosure; misleading payment/rate comparisons; misrepresenting government endorsement (unless truly FHA/VA); misleading use of the current lender's name; misleading debt-elimination claims; misusing 'counselor' to refer to a for-profit broker/creditor; and misleading foreign-language advertisements.

• ✓'Fixed' may not be used for variable-rate/increasing-payment loans without equally prominent ARM disclosure
• ✓Government endorsement claims are prohibited unless the loan is actually FHA/VA or similar
• ✓Using the borrower's current lender's name requires disclosing the advertiser and non-association
• ✓The term 'counselor' may not be used to refer to a for-profit mortgage broker or creditor

TV/radio ads may comply by stating the required disclosures or by stating them and listing a toll-free number for additional cost information. If a paper/Internet ad for principal-dwelling credit states that the credit may exceed the dwelling's fair market value, it must disclose that interest on the excess is not tax-deductible and that the borrower should consult a tax adviser.

• ✓TV/radio ads may use a toll-free number alternative for additional cost information
• ✓Ads stating credit may exceed fair market value must disclose the excess interest is not tax-deductible
• ✓Such ads must advise the borrower to consult a tax adviser about deductibility

GRM analyzes gross rents; GIM analyzes all gross income (used when other income like parking is significant). GRM = Sales Price ÷ Monthly Rent. Multipliers may be monthly or annual but must be applied consistently. Multipliers are NOT averaged.

• ✓GRM = Sales Price ÷ Monthly Rent
• ✓Use GIM when additional income sources are significant
• ✓GRM/GIM must be applied consistently (monthly or annual)
• ✓Multipliers are NOT averaged; judgment selects appropriate multiplier
• ✓Selected multiplier × market rent of subject = value estimate

After completing the approaches, the value indications are reconciled to a final opinion. The final opinion is NOT an average; greater weight is given based on data quantity/quality and relevance to the assignment. The final value should be rounded, not stated in odd dollars and cents.

• ✓Final opinion of value is NOT an average of the approaches
• ✓Greater weight is given based on data quantity, quality, and relevance
• ✓The final value should be rounded, not stated in odd dollars/cents
• ✓Relevance is impacted by intended use, property type, and market participant behavior

The Taxpayer Relief Act of 1997 replaced the old rollover and 'over 55' rules with a capital gains exclusion for principal residence sellers who meet ownership/use requirements.

• ✓$500,000 exclusion for couples; $250,000 for single filers
• ✓Must have lived in the house for two of the last five years
• ✓'Rollover' and 'over 55' one-time $125,000 rules repealed
• ✓Applies to sales after May 6, 1997
• ✓Individuals can qualify every two years; losses on personal residence not deductible

Property may be disposed of by exchange rather than sale. To qualify as tax-deferred, properties must be 'like-kind' in nature/character; gain/loss is deferred by carrying over basis. Receipt of 'boot' triggers recognition of gain.

• ✓Properties must be 'like-kind' in nature or character (not use, quality, or grade)
• ✓Personal use real property does not qualify (but vacation home/residence may with guidelines)
• ✓Deferred gain: new property takes same cost basis as property transferred; holding periods combine
• ✓Boot (cash/other assets) received triggers gain recognition (lesser of boot or gain realized)
• ✓Losses are still excluded from recognition even when boot is received
• ✓Debt relief on encumbered property is treated as boot received

Capital gain is the taxable profit from selling a capital asset, calculated as sales price minus adjusted basis, expenses of sale, and closing costs. Sales/exchanges must be reported on Form 1099-S.

• ✓Capital gain = sales price minus adjusted basis, sale expenses, and closing costs
• ✓Adjusted basis = original basis adjusted for capital improvements, depreciation, and fixing-up expenses
• ✓Sales/exchanges reported on IRS Form 1099-S
• ✓Long-term net capital gains generally taxed at no higher than 15%

Taxpayers receiving payments over multiple years must report as an installment sale unless they elect otherwise. This defers gain by spreading it across tax years using a gross profit percentage.

• ✓Required unless taxpayer specifically elects otherwise
• ✓Avoids bunching gain in the year of sale by spreading recognition
• ✓Gross Profit Percentage = realized profit / contract price
• ✓Applies each year's profit as that percentage of payments received

Rent is ordinary income to the lessor. Various payments (advance rent, security deposits, cancellation payments, lease procurement costs) have specific tax treatment for lessor and lessee.

• ✓Rent is ordinary income to lessor; deductible business expense to non-residential lessee
• ✓Advance rent = income to lessor when paid; security deposit not income until forfeited
• ✓Forfeited deposit is income to lessor and deductible by lessee
• ✓Lease procurement costs (commissions, legal, title) must be prorated over lease life
• ✓Losses/expenses of residential-property lessees are personal and not deductible

Under B&P Code Section 10148, brokers must retain trust records and transaction documents for three years, and the Commissioner may examine and audit these records.

• ✓Retain listings, deposit receipts, canceled checks, trust records, and related documents for three years
• ✓Retention period runs from closing, or from the listing date if the transaction is not consummated
• ✓Records must be made available for examination during business hours and are subject to audit upon sufficient cause without further notice (audit must not be harassing)

Additional B&P Code sections provide grounds for revocation/suspension (also chargeable under 10177(d)). Key sections include: 10145 (trust funds), 10146 (advance fees in trust account), 10148 (retention of records for three years), 10161.8 (notify DRE of salesperson employment/termination), and 10141 (notice of sales price within one month).

• ✓Section 10148 requires retention of all transaction records for a three-year period
• ✓Section 10141 requires notice of sales price to buyer and seller within one month of sale
• ✓Section 10145 specifies a licensee's responsibilities in handling trust funds

Section 10177.4 prohibits compensation for referring customers to escrow, pest control, home warranty, title insurers, or controlled escrow companies. Section 10142 requires a licensee to give a copy of any contract to the signing party at the time it is signed. Section 10140.6 requires advertising to disclose the licensee is performing licensed acts.

• ✓Section 10177.4 prohibits referral compensation to escrow, pest control, home warranty, or title companies
• ✓Section 10142 requires giving a contract copy to the signing party at the time of signing
• ✓Section 10140.6 requires advertising to disclose that a licensee is performing the acts

A broker should consult the escrow holder before telling principals escrow will close on a certain date, since many details could cause delay. Instructions and amended instructions must be in writing. Without instruction from the buyers as principals, the broker cannot put up money due from buyers or instruct deduction from the broker's commission, as buyers may be deliberately withholding funds until a seller condition is met. Accepting buyer funds from anyone other than the buyers (except per buyer instructions) may cause escrow to close against the principals' intentions.

• ✓Escrow instructions and amended instructions must be in writing
• ✓Without buyer instructions, a broker cannot advance the buyer's funds or deduct from commission
• ✓Accepting buyer funds from a third party may cause escrow to close against the principals' intentions

Brokers should provide the escrow officer with correct spelling of principals' names, addresses, and phone numbers. Brokers, salespersons, and escrow officers should NOT assist with how buyers take title (legal/tax consequences require independent professional advice). Brokers should give lender names, addresses, servicing agents, and loan numbers (many lenders and FHA require 30-day advance payoff notice). Brokers should notify escrow when the loan is 'locked' or an approval letter issued (the approval must come from the lender, not a mortgage broker). Principals should meet with the escrow officer when executing instructions.

• ✓Brokers, salespersons, and escrow officers must not advise on how buyers take title — independent advice is required
• ✓Many lenders and FHA require a 30-day advance payoff notice
• ✓The loan approval letter must come from the lender, not from a mortgage broker

CalHFA is a self-supporting state government agency established in 1975 (known as CHFA until 2002) that finances mortgage loans to low- and moderate-income first-time homebuyers. It is not a direct lender but offers products through a network of approved private lenders, typically at reduced fixed rates, often with down payment assistance.

• ✓CalHFA (formerly CHFA) was established in 1975 as a self-supporting state agency
• ✓CalHFA serves low- and moderate-income first-time homebuyers
• ✓CalHFA is not a direct lender; it works through approved private lenders with reduced fixed rates and down payment assistance

The State Housing Law provides minimum construction and occupancy requirements for dwellings, administered by HCD and enforced locally through building permits.

• ✓Administered by the Codes and Standards Division of the Department of Housing and Community Development
• ✓Construction regulations enforced by local building inspectors; occupancy/sanitation by local health officers
• ✓No construction or alterations may begin prior to issuance of a building permit
• ✓Applications must be accompanied by plans, specifications, and a plot plan (Health and Safety Code 17910 et seq.)

Every person engaging in contracting must be licensed by the Contractors' State License Board, with limited exemptions and grounds for discipline.

• ✓Licensing exemptions include public entities, utilities, oil/gas, certain agriculture, minor work not exceeding $500, and owner's own work (unless sold within one year)
• ✓Contractors must meet experience/knowledge qualifications and post a bond or cash deposit
• ✓Grounds for discipline include abandoning a project, diverting funds, departing from plans, safety/building law violations, and material breach of contract (Business and Professions Code 7000 et seq.)

Since 1970, uniform codes apply in lieu of local building codes, with local government retaining limited zoning and yard powers.

• ✓Uniform Housing, Building, Plumbing, Mechanical, and National Electric Codes apply in lieu of local codes
• ✓Local government retains power over use zoning, fire zones, setbacks, side/rear yards, and property lines (Health and Safety Code 17922(b))
• ✓Local variances are permitted only with an express finding of reasonable necessity
• ✓Factory-built housing is regulated by HCD under the California Factory Built Housing Law (Health & Safety Code 19960 et seq.)

Franchising is a business plan where a franchisor grants a franchisee the right to offer, sell, or distribute goods/services under a prescribed marketing plan for a franchise fee. The Franchise Investment Law (Corporations Code Section 31000 et seq.) requires full disclosure in an offering prospectus delivered to a prospective purchaser at least 10 business days prior to a binding agreement or receipt of consideration, whichever is first.

• ✓Franchise Investment Law is found at Corporations Code Section 31000 et seq.
• ✓Offering prospectus must be delivered at least 10 business days before a binding franchise agreement or receipt of any consideration, whichever occurs first
• ✓The California Department of Corporations Index Section can confirm if a franchise is registered

Under Corporations Code Section 31210, three categories of persons may sell franchises: a person identified in a registered application with the Commissioner of Corporations; a licensed real estate broker or salesperson; and a person licensed as a broker-dealer or agent under the Corporate Securities Law of 1968.

• ✓A real estate broker or salesperson may sell franchise interests without being identified in the registration application
• ✓A person identified in the registration application may sell the franchise even without a real estate or securities license
• ✓Broker-dealers/agents licensed under the Corporate Securities Law of 1968 may also sell franchises

A tax-free exchange is the trade or exchange of one real property for another without the need to pay income taxes on the gain at the time of the trade.

• ✓Involves trading one real property for another
• ✓Defers income tax on the gain at time of trade

Straight line depreciation applies a constant rate over useful life. Sum of the years digits is an accelerated method. Salvage value is the anticipated fair market value at the end of useful life, considered in all but declining balance methods.

• ✓Straight line depreciates at a constant rate over useful life
• ✓Sum of the years digits is an accelerated depreciation method
• ✓Salvage value must be considered with all but declining balance methods

A REIT is a business trust dealing principally with interests in land, organized to conform to the Internal Revenue Code, allowing investors to pool funds and pass profits through to individual taxed investors.

• ✓REIT deals principally with interests in land
• ✓Organized to conform to the Internal Revenue Code
• ✓Real estate trust lets investors escape corporation taxes; profits passed to individuals

A real estate syndicate is an organization of investors, usually a limited partnership, joined to pool capital for the acquisition of real property interests.

• ✓Usually formed as a limited partnership
• ✓Pools capital for acquiring real property interests

Yield is the interest earned by an investor on an investment (also called return). The yield rate is yield expressed as a percentage of the total investment (rate of return).

• ✓Yield is interest earned; also called return
• ✓Yield rate expresses yield as a percentage of total investment

When acting as an agent in a sale, lease, or exchange, a licensee must disclose to a prospective purchaser or lessee facts materially affecting value or desirability when the licensee has reason to believe they are not known to or readily observable by the buyer. Licensees must not knowingly misrepresent property value, condition, size, boundaries, or permitted uses.

• ✓An agent must disclose material facts affecting value/desirability not readily observable by the buyer
• ✓Licensees must not knowingly misrepresent value, condition, square footage, boundaries, or usability
• ✓Underestimating probable closing costs to induce an offer is unlawful

A listing agent must present all written offers received before closing unless instructed otherwise or the offer is patently frivolous. An agent must not present competing offers to induce acceptance of the offer paying the greatest commission without regard to the owner's benefit. Licensees must disclose direct/indirect interests they expect to acquire.

• ✓A listing agent must present all written offers before closing unless instructed or offer is patently frivolous
• ✓An agent cannot manipulate competing offers to maximize the broker's commission over the owner's benefit
• ✓A licensee must disclose direct or indirect interest expected to be acquired, including via relatives or entities

A licensee cannot make additions or modifications to an instrument previously signed or initialed by a party without their knowledge and consent. Representations to a note purchaser about securing property market value require a reasonable basis. Licensees must disclose significant interest in an entity when recommending its services.

• ✓No additions or modifications to a signed instrument without the party's knowledge and consent
• ✓Representations of a note's securing property market value require a reasonable basis for belief
• ✓A licensee must disclose any significant interest in an entity whose services they recommend

Article 5 governs MLB duties in transactions with non-institutional private investors/lenders.

• ✓Article 5 (B&P 10230-10236.6) applies to arranging loans funded by non-institutional private lenders not licensed as lenders
• ✓It also applies to buying, selling, or exchanging notes and deeds of trust on behalf of private investors
• ✓When selling/assigning interests in loans they funded, MLBs must act as agent and fiduciary of the private investors under Securities Law

Pooling private investor funds is prohibited unless authorized through a qualified securities offering.

• ✓Funds may only be accepted for a specific loan or purchase of a specific note/interest unless a DOC-qualified offering authorizes pooling (B&P 10231)
• ✓Offerings by registration receive a DOC permit; offerings by exemption must notice the DOC (Corporations Code 25102.1)
• ✓25102(f) exemptions may be limited to not more than one offering per 6-month period (two per year)

A broker meets threshold criteria based on loan volume, dollar amounts, or collections in a 12-month period.

• ✓Threshold is met by negotiating 10 or more transactions over $1,000,000 aggregate, or collections of $250,000 or more (B&P 10232(a))
• ✓Depository institution, licensed lender, securities-permit, and $15 million+ pension trust transactions are excluded from the count
• ✓A threshold broker must notify the DRE in writing within 30 days; late notice incurs $50/day then $100/day penalties up to $10,000

Threshold brokers must file annual and quarterly reports with the DRE.

• ✓Two annual reports (Trust Fund review/TAR and Mortgage Loan/Trust Deed Business Activities report) are due within 90 days of fiscal year end
• ✓A quarterly trust fund status report is due within 30 days after each of the first three fiscal quarters
• ✓Reports are filed under penalty of perjury; failure allows the Commissioner to examine records and charge 1.5 times the examination cost

B&P 10232.4 and 10232.5 require MLBs to deliver a Lender/Purchaser Disclosure Statement.

• ✓The statement must set forth loan/note terms, borrower information, security property details, loan servicing provisions, and encumbrance information
• ✓It must disclose joint beneficiary arrangements and any self-dealing under B&P 10231.2 and 10238(e)
• ✓It must be delivered before the investor becomes obligated; when self-dealing, delivered to the DRE at least 24 hours before receiving funds
• ✓Advertising/soliciting funds for the broker's benefit requires prior DRE approval of the format

Brokers must not disburse loan funds until the security instrument is recorded absent written authorization.

• ✓Without written lender authorization, the broker may not disburse funds until the deed of trust or mortgage is recorded
• ✓If authorized to release funds early, the security instrument must be recorded or delivered with recommendation for immediate recordation within 10 days (B&P 10233.2, 10234, 10234.5)
• ✓The broker must deliver conformed copies of the recorded instrument to the investor within a reasonable time

Table funding by a real estate broker is generally unlawful in California with narrow exemptions.

• ✓The only exemption (Section 10234(d)) is when the lender is a depository institution/licensed lender and the property is not a dwelling or unimproved
• ✓MLBs may not table fund any residential mortgage loan or loan secured by unimproved property regardless of lender status
• ✓To avoid table funding, the originator must use its 'own funds,' approve the loan, and be named payee/beneficiary; the assignee cannot be the licensee or its nominee
• ✓'Own funds' means the broker's/lender's capital or an independent line of credit appearing as a debt on the financial statement

A servicing broker may not retain payment funds beyond a set period without written authorization.

• ✓A broker may not retain funds received on a note for more than 25 days without written authorization from the lender
• ✓The authorization may not provide for interest to the broker; the servicing agreement must be in writing (B&P 10231.1)
• ✓The 25-day distribution period also applies to payoff funds due to private investors

An MLB servicing a note may advance its own funds to protect the security.

• ✓Advances may be made to authorized third parties to protect security, including debt service on a senior loan on the same property
• ✓The broker must provide written notice of an advance for taxes, insurance, or senior debt service to the note holder within 10 days (B&P 10233.1)

B&P 10235 prohibits false, misleading, or deceptive advertising by MLBs.

• ✓An ad cannot imply a yield different from note interest rates unless it states actual rates and the discount between principal balance and offering price
• ✓Article 5 prohibits offering premiums/gifts/inducements to prospective note purchasers or lenders; inducements to borrowers are allowed if not steering to unsuitable products with no added costs (B&P 10236.1)
• ✓MLBs must disclose license status and identity of regulatory agency; 'Real Estate Broker, CA. Dept. of Real Estate' plus license number complies (B&P 10235.5, 10236.4(a))