Sources of Real Estate Law - Chapters 1-2

Question 1

Understand the origins of California real estate law

Answer 1

The United States Constitution (US Constitution) lists and explains the powers of the federal government. All other powers not given to the federal government rest with the individual states or with the people. A state may provide more constitutional protection than the federal government if it chooses, but it may not provide less.

Question 2

Distinguish which branches of law are responsible for which legal activities

Answer 2

Both the federal and state governments created under the US Constitution are separated into three branches:

• the legislative
• the executive
• the judicial

The state and federal legislators enact the codes and statues which regulate most aspects of real estate interests. The executive branch polices the law and establishes regulations to carry out the administration of government as established by the legislature. The Judiciary branch settles disputes and issues case opinions regarding the application of the law and regulations.

Question 3

Understand the nature and extent of federal and state law controlling California real estate

Answer 3

The authority of the California legislature to enact laws regulating real estate activities comes from three main Constitutional Powers:

• the police power
• the power of eminent domain and
• the power to tax

The federal government has the right to regulate all commercial Enterprises which affect interstate commerce.

A federal law will preempt state and local statutes and ordinances when:

• the federal interest outweighs local interest
• the federal law is so pervasive as to exclude inconsistent State Law and
• inconsistent treatment nationwide would result if state law controls.

Question 4

Identify the constitutional protections in place if the government abuses its power

Answer 4

The US Constitution gives owners guarantees when the federal or state government attempts to abuse their powers. 2 key constitutional guarantees exist for Real Estate owners:

• the DUE PROCESS CLAUSE and
• the EQUAL PROTECTION CLAUSE.

As general real estate law becomes more specialized, the role of administrative agencies becomes increasingly important. Many administrative agencies are given the powers of all three branches of the government and are given the necessary powers to judge cases involving their own regulations. Thus, the courts are relieved of processing and resolving these disputes.

Question 5

administrative agencies

Answer 5

ADMINISTRATIVE AGENCIES are government entities created by the state or federal legislature and local governing bodies to oversee specialized matters. Most have legislative, executive, and judicial authority.

Question 6

common law

Answer 6

California real estate law has been influenced by two key sources of human conduct

• the English legal system, or COMMON LAW &
• the Spanish legal system, or CIVIL LAW

These legal traditions continue to exist today in the form of:

• statutes regulations and ordinances and
• case law

COMMON LAW is an English legal system in which disputes are decided on a case-by-case basis before a judge and applying codes and prior cases. The common law of England has been the predominant influence on California real estate law. This legal framework was officially adopted by California soon after obtaining statehood in 1850. Today, the common law is often called “judge made” law. When similar legal disputes arise, the judge refers back to the logic of earlier decisions to decide current cases. The reliance on an earlier decision to decide a current case is called stare decisis. The earlier case relied on is called precedent.

Question 7

civil law

Answer 7

California real estate law has been influenced by two key sources of human conduct:

• the English legal system, or COMMON LAW &
• the Spanish legal system, or CIVIL LAW

CIVIL LAW is a Spanish legal system in which an elaborate system of statutes addresses permissible conduct of the people in advance of disputes. Civil law establishes statutes to settle legal disputes in advance, rather than on a case-by-case basis.

Question 8

due process

Answer 8

DUE PROCESS is a constitutional guarantee of fair dealings between the government and property owners. The due process clause covers both:

• the content of laws, called substantive due process and
• how the government procedurally applies those laws, called procedural due process.

Question 9

eminent domain

Answer 9

The authority of the California legislature to enact laws regulating real estate activities comes from three main Constitutional Powers:

• the police power
• the power of eminent domain and
• the power to tax

EMINENT DOMAIN is the the second key power of the state to regulate real estate. Eminent domain is the right of the government to take private property for public use on payment to the owner of the property’s fair market value. The process of using the power of eminent domain is called condemnation.

Question 10

equal protection

Answer 10

EQUAL PROTECTION is a constitutional guarantee that similarly situated persons be treated similarly under the law.

For example:
Covenants, conditions and restrictions (CC&Rs) which limit subdivision sales to non-minorities violate: equal protection laws.

Question 11

federalism

Answer 11

FEDERALISM is a form of government in which individual states share powers with a national or central government. Under federalism, the individual states remain independent (Sovereign) to regulate any matters within their own borders which are not already controlled by the federal government. Each state has its own constitution to regulate state matters remaining under their control. A state may provide more constitutional protection than the federal government if it chooses, but it may not provide less.

Question 12

interstate commerce

Answer 12

The authority of the California legislature to enact laws regulating real estate activities comes from three main Constitutional Powers:

• the police power
• the power of eminent domain and
• the power to tax

INTERSTATE COMMERCE is the flow of goods and services between and within states.

The federal government’s authority to regulate real estate also comes from the US Constitution. Like the state, the federal government has the power to tax and the power to take private property for public use.

However, the federal government has no police power. In its place the federal government has a powerful Clause to regulate areas of national concern, call the Commerce Clause.

The federal government has the right to regulate all commercial Enterprises which affect interstate commerce.

Originally, the Clause was designed to combat attempts by local states to pass protection as laws under their police Powers which would inhibit the flow of goods between states - interstate commerce. Today, the clause also applies to local and intra-state activities which have an indirect effect on the flow of goods, services and people from state-to-state.

Question 13

inverse condemnation

Answer 13

INVERSE CONDEMNATION is a government taking of privately-held real estate interest which does not constitute eminent domain and for which the property owners seeks compensation. When government acquires property without following the eminent domain procedure, the affected property owner has the right to bring an inverse condemnation lawsuit against the government entity that has taken his or her property. The suit filed by the owner is “inverse” rather than “direct” because it is brought by the property owner, not by the government agency or other entity having eminent domain power. Therefore, the property owner carries the burden of proof that property rights were acquired without the payment of compensation. This differs from a direct condemnation following eminent domain procedures which places the burden of proof upon the condemnor to show that the acquisition is necessary and that the project has a true public purpose.

Note: most California inverse condemnation cases filed by owners fail.

Question 14

legislative branch

Answer 14

Both the federal and state governments created under the US Constitution are separated into three branches

• the legislative
• the executive and
• the judicial

The LEGISLATIVE BRANCH of government is the branch of government which enacts the codes and statutes which regulate most aspects of real estate interests.

Question 15

executive branch

Answer 15

Both the federal and state governments created under the US Constitution are separated into three branches

• the legislative
• the executive and
• the judicial

The EXECUTIVE BRANCH is the branch of government which polices the law and establishes regulations to carry out the administration of government as established by the legislature.

Question 16

judicial branch

Answer 16

Both the federal and state governments created under the US Constitution are separated into three branches

• the legislative
• the executive and
• the judicial

The JUDICIAL BRANCH is the branch of government which settles disputes and issues case opinions regarding the application of the codes cases and regulation.

Question 17

police power

Answer 17

The authority of the California legislature to enact laws regulating real estate activities comes from three main Constitutional Powers:

• the police power
• the power of eminent domain and
• the power to tax

POLICE POWER is the first key power of the state to regulate real estate. Police power is the power to protect the public’s well-being and is the constitutional source of the state or local government’s authority to act. Police power is the basis for laws governing such things as Highway construction and maintenance, rent control, zoning and traffic.

A statute or ordinance passed under the government’s constitutional police power and affecting real estate-related activity is valid as long as the law:

• is fair and reasonable
• addresses a legitimate State interest
• does not unreasonably burden the flow of interstate commerce
• does not conflict with related federal law.

Question 18

Identify the different types of courts

Answer 18

Two separate and mutually exclusive court systems hear disputes arising in California: the state courts and the federal courts. Whether a legal dispute belongs in the state or federal court system depends on which court has jurisdiction.

Question 19

Distinguish between the state and federal court systems

Answer 19

The state of California has a three-tiered court system which includes:

• Calif Trial Courts, called the Superior Court System
• Appellate Courts and
• the California Supreme Court.

The US Federal System has a three tiered court system which includes:

• Federal Trial Courts, called the District Courts.
• Federal Appellate Courts and
• the US Supreme Court.

Other trial courts exist in the federal system to hear claims in particular areas of law, such as the:

• US Bankruptcy Court
• US Tax Court and
• US Claims Court.

Question 20

Learn which types of real estate claims fall under the jurisdiction of each court

Answer 20

Two types of jurisdiction exist within each court system:

• SUBJECT MATTER jurisdiction over the subject matter of the lawsuit, such as the ownership of real estate and
• PERSONAL jurisdiction over the persons in the lawsuit, such as the buyer and the seller.

In addition to subject matter jurisdiction, a court needs to have jurisdiction over the person being sued, called personal jurisdiction.

The federal courts are constitutionally established courts of limited jurisdiction. Thus, the federal courts are strictly Limited in the types of cases they can hear and decide.
FEDERAL COURTS = LIMITED JURISDICTION

On the other hand the state courts are considered courts of General jurisdiction since they are not limited to certain types of controversies.
STATE COURTS = GENERAL JURISTICTION (NOT LIMITED)

Unless the person suing can prove their case belongs in federal court, it needs to be brought in a state court.

For the purpose of real estate law, a federal court has jurisdiction over two types of cases

• disputes involving questions of federal law or
• a legal dispute between citizens of different states.

The federal court may require the person suing to exhaust their state court rights before suing on federal court grounds.

In some cases, the federal courts have exclusive jurisdiction, such as in
* admiralty, (the jurisdiction of courts of law over cases concerning ships or the sea and other navigable waters; maritime law)
* patent law or
* bankruptcy cases,
which state courts may not decide.

Question 21

Understand how to apply state and federal law to various real estate claims

Answer 21

All legal disputes, both civil and criminal, are filed in Superior Court unless jurisdiction has been given by statute to a separately established court. Within the superior court system, proceedings are classified depending on the amount of money in the dispute. Legal disputes involving:

• more than $25,000 are classified as UNLIMITED CIVIL ACTIONS
• less than $25,000 are classified as LIMITED CIVIL ACTIONS and
• less than $10,000 brought by natural persons or less than $5,000 by other than a natural person, are allocated to the SMALL CLAIMS DIVISION.

The proper location to hear a legal dispute depends on venue, not jurisdiction.

When a federal court accepts a case between citizens of different states it needs to decide which state law to apply. Ordinarily, the court applies the state law where the federal court is located. However, the court also weighs the interest of each state on the result of the case.

Question 22

appellate courts

Answer 22

APPELLATE COURTS are courts which review trial court decisions to determine whether the proper rules of law were correctly applied.

Question 23

choice of law clause

Answer 23

A CHOICE-OF-LAW CLAUSE is a clause which sets the state law applicable in the event of a dispute. Brokers with Interstate practices eliminate the issue of which state law will apply in a dispute by inserting a California choice-of-law clause in the listing agreement. With a choice-of-law clause, the clients agree in advance which state’s law applies if a dispute arises. For example, when a California broker enters into a listing agreement calling for Arizona law to apply, the broker agrees the fee Provisions in the listing agreement are unenforceable.

Question 24

equitable remedies

Answer 24

EQUITABLE REMEDIES are non money remedies based on issues of fairness. Specific performance of a purchase agreement and an injunction ordering a nuisance to be stopped are examples of Equitable remedies. Small claims court also have the authority to issue equitable remedies including rescission, restitution, reformation and specific performance.

Question 25

jurisdiction

Answer 25

JURISDICTION is the power of a court to hear a dispute and rule on a legal issue. Whether a legal dispute belongs in the state or federal court system depends on which court has jurisdiction. Jurisdiction is the power of a court to hear a case and rule on a legal matter granted by the state or federal Constitution, the state legislature or congress. Two types of jurisdiction exist within each court system:

• jurisdiction over the SUBJECT MATTER of the lawsuit, such as the ownership of Real Estate and
• jurisdiction over the PERSONS in the lawsuit, such as a buyer and seller.

Question 26

small claims

Answer 26

SMALL CLAIMS is an informal Court proceeding for disputes regarding amounts of $5,000 or less or $10,000 or less for individuals.

Small claims courts are informal, barring the use of an attorney to represent a party. The Court’s rules are designed for quick resolutions of minor legal disputes. A superior court limited civil action (legal dispute of $25K or less) may be filed in a small claims court if it falls within the small claims jurisdiction. In this event, the Small Claims Court rules govern.

Question 27

superior court system

Answer 27

The SUPERIOR COURT SYSTEM is California’s trial court system. California Superior Court system is comprised of County courts which hear disputes arising in their respective counties. All legal disputes, both civil and criminal, are first filed in a superior court unless jurisdiction has been given by statute to a separately established court.

Question 28

Supreme Court

Answer 28

SUPREME COURT is the final court for appeals in both the state and federal court systems.

The losing party before an appellate court may petition the Supreme Court asking it to review the Appellate Court decision for its correctness. The petition is accepted or rejected by the United States Supreme Court or by California Supreme Court. If the case is accepted the court is said to grant CERTIORARI to review the case. Only a small percentage of the cases appealed to the Supreme Court are ever accepted and heard. As a result, the opinions of the appellate courts most often become the final statement of the law on the case.

Question 29

trial courts

Answer 29

TRIAL COURTS are courts which hear and decide the facts of a case and apply the proper rules of law to resolve the dispute.

Question 30

venue

Answer 30

VENUE is the physical location of the Court which has jurisdiction and the correct Forum to hear a dispute. The proper location to hear a legal dispute depends on venue, not jurisdiction. Jurisdiction is concerned with which type of court is empowered to hear the subject matter of the dispute, such as the superior court with a small claims division within it, or whether the case will be heard in state or federal court. In contrast, venue determines the physical location of the Court which has jurisdiction and the correct form to hear the matter.