Potential Penalty Relief for Late Property Tax Payments Related to COVID-19
Property owners who missed the April deadline for paying the second installment of real property taxes because of the COVID-19 pandemic may be eligible for relief from late payment penalties. But to get this relief, you may need to act soon.
ALERT: On May 6, 2020, Governor Newsom issued Executive Order N-61-20, directing county tax collectors to waive, until May 6, 2021, all penalties, costs, and interest for late payment of the second installment of property taxes under the following conditions:
The real property is owner-occupied residential property or owner-occupied “small business” property (this includes wineries with up to 1,000 employees);
The taxes owed were not delinquent on March 4, 2020;
The taxpayer timely files a claim for relief on a form prescribed by the county tax collector; and
“The taxpayer demonstrates to the satisfaction of the tax collector that the taxpayer has suffered economic hardship, or was otherwise unable to tender payment of taxes in a timely fashion, due to the COVID-19 pandemic, or any local, state, or federal government response to COVID-19.”
As a result of Executive Order N-61-20, county tax collectors may revise the application forms, deadlines, and review process referenced below, so taxpayers should check the website of their county tax collectors for more information. A link to a list of all county tax collectors and their websites is below.
The second installment of real property taxes was due April 10, 2020. Missing that deadline normally results in a penalty of 10% of any unpaid taxes, and monthly interest of 1.5% also starts accruing on July 1. But, in light of the global COVID-19 pandemic, county tax collectors have indicated a willingness to cancel penalties where the failure to pay by the deadline “is due to reasonable cause and circumstances beyond the taxpayer’s control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect.” This authority arises under Revenue and Taxation Code Section 4985.2(a), which allows tax collectors to cancel penalties, costs, and charges resulting from tax delinquency under certain circumstances.
While this is welcome news, tax payers should be aware that the grounds for relief are narrow, the current deadlines are tight (with Napa County’s application for penalty relief due on May 15, 2020), and all delinquent taxes will need to be paid to be eligible for penalty relief.
For example, Sonoma County’s tax collector had, before the governor’s executive order, issued guidelines providing that potential penalty relief requires that the property owner (“Owner”) sign a declaration under penalty of perjury that:
(a) Failure to make a timely payment is due to Owner’s experience of at least one of the following circumstances:
(i) A medical condition directly related to the COVID-19 disease;
(ii) The County Health Officer’s COVID-19 Shelter-in-Place Order No. C19-03, as amended by Order No. C19-05, (“Order”) precluded Owner from working or generating sufficient revenue/income, resulting in severe economic hardship;
(iii) Other reasonable cause or circumstance directly related to COVID-19 and/or the Order;
(b) The circumstance was beyond Owner’s control;
(c) Failure to make a timely payment occurred despite Owner’s exercise of ordinary care and without willful neglect.
Under the latest executive order, all counties will be able to use the same standard of impacts from COVID-19. Applicants will need to provide documents supporting their claim for relief.
Currently, deadlines to request relief are approaching, though those deadlines may change with the governor’s executive order. Napa County requires COVID-19-related penalty relief applications be filed by May 15, 2020, while Sonoma County property owners have until June 10, 2020 to file applications. Napa County does not require payment with the application, but if relief is granted, requires payment by June 10, 2020. In contrast, Sonoma County requires payment with the application. It is important to note that relief only applies to late payment of the second installment of property taxes; payment in full of any prior tax delinquencies plus applicable penalties and interest is required with the application in order to be eligible for relief.
Below are links, from prior to the governor’s order, to information and application forms for COVID-19-related late payment penalty relief, listed in order of the application deadlines.
Napa County (Filing Deadline: May 15, 2020)
Tax collector webpage on COVID-19, with links to FAQs and COVID-19 penalty relief application form.
Payment deadline: June 10, 2020
Sonoma County (Filing Deadline:June 10, 2020)
Tax collector webpage on COVID-19, with links to COVID-19 penalty relief guidelines and application form.
Payment required with application filing.
Lake County (Filing Deadline:June 30, 2020)
Tax collector webpage with links to COVID-19 FAQs and COVID-19 penalty relief application form.
On January 1, 2016, Senate Bill 655 became effective. Notwithstanding the Toxic Mold Protection Act of 2001 and the absence of guidelines and standards under this act, Senate Bill 655 explicitly lists mold as a problem which may potentially render a property uninhabitable or substandard. The law primarily affects residential rental properties.
The Mold Act of 2001
In 2001, California adopted the Toxic Mold Protection Act of 2001 (Mold Act). (California Health & Safety Code, Sections 26100, et seq.) This Act required the California Department of Public Health (CDPH) to study the issue of fungal contamination in indoor environments and publish its findings. It also directed the CDPH to adopt permissible exposure limits to mold in indoor environments, if feasible, and to adopt standards for assessing the health risks posed by mold in indoor environments, guidelines for identifying indoor mold and remediation guidelines addressing the removal of the mold and its underlying causes. (Cal. Health & Safety Code, Section 26103.) As of December 31, 2015, the CDPH has not adopted the permissible exposure limits, nor has it adopted standards for assessing health risks, guidelines for identifying indoor mold or remediation guidelines addressing its removal. In 2005, in a report titled Implementation of the Toxic Mold Protection Act of 2001, the CDPH concluded that for various reasons, “science-based PELs for indoor molds cannot be established at this time.” [Note that PELs refers to permissible exposure limits.]
At the present time there are no “hard and fast” disclosure requirements for landlords of residential real property relative to mold under the Mold Act of 2001. Certainly, common sense dictates that if mold is present, and if the landlord has actual knowledge of the presence of mold, and for that matter active water intrusion issues, the landlord should disclose such facts in writing to the prospective tenants. Nor are there any remediation requirements imposed on residential landlords under the Mold Act. Residential landlords are also not required to conduct tests, either air or surface, of units or buildings to determine whether the presence of mold exists under the Mold Act.
Senate Bill 655
Effective January 1, 2016, notwithstanding the absence of PELs and guidelines by the CDPH, residential landlords face the prospect of being held accountable for an uninhabitable and/or substandard property due to mold. Civil Code Section 1941.7 and Health and Safety Code Sections 17920 and 17920.3 now expressly provide that mold is a type of problem that could render a property uninhabitable or substandard, and for which a landlord may have a repair obligation. This new law imposes on a residential landlord certain repair requirements, except in the case of the following: 1. The landlord has no notice of the problem and 2. The tenant’s failure to keep the property clean and sanitary or the tenant’s own improper use of the plumbing fixtures contributed substantially to the problem. However, even in the foregoing circumstances, it is recommended that the residential landlord repair the problems under the statutory requirement that a landlord has a duty to maintain the habitability of the residential property. Failure to do so provides the tenant with various legal remedies, including rent withholding, termination of the rental agreement, discounting of rent and other rights and damages.
While there are no specific criteria for determining when a dwelling is uninhabitable due to mold, Senate Bill 655 provides that a property is substandard based on mold when there is visible mold growth, as determined by a health officer or code enforcement officer, to such an extent that it endangers the health, safety or welfare of the occupants. The amount of visible mold growth and the declaration of substandard are within the discretion of the officer reviewing the premises, as there are no specific quantities stated in the statutes. Note that the law does specifically exclude the presence of minor mold found on surfaces that can accumulate moisture as part of their properly functioning and intended use.
Landlords are encouraged to make full disclosure of any issues with the property and also to include in their rental agreements a provision that makes the tenant contractually responsible for taking reasonable steps to reduce dampness and thereby limit mold. A rental agreement should also include a provision requiring the tenant to notify the landlord immediately should there be any plumbing overflows or if the tenant sees any mold growth. Finally, a residential rental agreement should contain a hold harmless provision under which the tenant agrees to hold harmless and indemnify the landlord for any resulting mold due to the tenant’s failure to comply with the terms of the rental agreement relative to mold.
CFPB Postpones Integrated Disclosure Enactment Date
The Consumer Finance Protection Bureau issued a final ruling postponing the effective date of the Know Before You Owe mortgage disclosure rule also known at the TILA-RESPA Integrated Disclosure rule to October 3, 2015. The original effective date was August 1, 2015.
As the last quarter of 2014 looms before us, our California Legislature, spurred on by real estate interest groups including the California Association of Realtors, has been busy implementing and sponsoring new legislation that either directly or indirectly affects real estate in California. Below are some of the new laws that will take effect on January 1, 2015.
NO RECORD RETENTION REQUIREMENT FOR REAL ESTATE PROFESSIONALS FOR TWEETS AND TEXT MESSAGES.
Beginning January 1, 2015, real estate professionals will not need to retain as part of their permanent record of a transaction “electronic messages of an ‘ephemeral nature’ such as text messages, instant messages and tweets (unless designed to be retained or to create a permanent record).” The law does not clearly exclude emails from record retention. Hence, if you want a communication to be included as a permanent part of a transaction, at the very least communicate via email, rather than texting, tweeting or instant messaging. This law will be codified as Business and Professions Code, Section 10148 and also at Civil Code, Section 1624.
AGENCY DISCLOSURE REQUIREMENT EXPANDED.
Current law requires that listing and selling agents in a residential (single family one to four units) real estate transaction provide the seller and buyer with a prescribed disclosure form containing general information on real estate agency relationships. This requirement applies not just to purchases and sales, but also to lease transactions for more than one year. Additionally, current law requires the listing and selling agents to confirm their agency relationship by disclosing to the buyer and seller whether the agent is acting as the buyer’s agent exclusively, the seller’s agent exclusively, or as a dual agent representing both the buyer and the seller. Effective January 1, 2015, a new law extends these agency disclosure requirements to include transactions for the sale of commercial real property, and to the lease for more than one year of commercial real property. The new law defines commercial property to include vacant land, industrial property or any residential property containing more than four dwelling units. The law is codified at Civil Code, Section 2079.13.
DOCUMENT BUNDLING PROHIBITED BY HOAs AS PART OF THE REQUIRED COMMON INTEREST DEVELOPMENT DISCLOSURES. SELLER MUST PAY HOA FEES.
Existing law requires delivery of various common interest disclosure documents upon the transfer of a real property interest in a common interest development. These disclosures include, without limitation, CC&Rs, Bylaws, Operating Rules, rental and age restrictions, budget reports, regular and special assessments, etc. Some HOAs have, in the past, engaged in “document bundling” defined as requiring the purchase of a package of documents together with the legally mandated disclosures. Under Civil Code Sections 4528 and 4530, beginning January 1, 2015, HOAs are prohibited from the practice of document bundling.
The new law requires that the fees for the HOA mandated disclosures must be individually itemized for each document, and that the fees for all mandated disclosures must be separately stated and separately billed from all other fees, fines or assessments. Only statutorily mandated disclosures may appear on the statutory form. Procedurally, once a written request for the mandated disclosures is made, the HOA must estimate the cost of the mandated disclosures prior to processing the request. Where there is no “hard copy” delivery of documents, the HOA may not charge an additional fee for electronic delivery in lieu of a hard copy.
Also under this new law, a seller will be required to provide a prospective purchaser with all mandated common interest development disclosures in the seller’s possession, free of charge. If a seller confirms in writing that the document s/he is providing is a current document, then the HOA may not bill for it. An HOA may collect a reasonable fee based on the HOA’s actual cost for the procurement, preparation, reproduction, and delivery of the mandated disclosures, but only from the seller. This law makes it the responsibility of the seller to pay the HOA, person or entity that provides the mandated disclosures.
DOCUMENTARY TRANSFER TAX – PURCHASE PRICE CANNOT BE KEPT SECRET.
Existing law allows a buyer or seller to demand from the County that the documentary transfer tax to be paid on the sale of a property be shown on a separate document. This enabled some buyers or sellers to effectively keep the sales price secret, since the amount of the documentary transfer tax can be reliably used to deduce the purchase price. This new law requires that every document subject to the documentary transfer tax must show on its face the amount of the tax due when submitted to the County. This law is codified at Revenue and Tax Code, Section 11932 and 11933 and is effective January 1, 2015.
September is a particularly busy month in the Legislature with many bills being sent to the Governor for his consideration and execution. The Governor is required to act on these bills in October. As bills are signed in to law, and to the extent the new laws affect real property, we will keep you abreast of them here at Terra Terroir.
Sellers Beware: Disclosure Requirements Expanded
In March 2014 we provided warning that new seller disclosure requirements would become effective July 1, 2014. These expanded disclosure obligations are now in effect. Sellers of single family residential property must now disclose certain construction defect claims. A new Transfer Disclosure Statement expanding the disclosure obligation of sellers of single family residences, defined as one to four units, requires sellers to disclose if they are aware of any of the following claims threatening to or impacting the property:
1. claims for damages by the seller based on construction defects;
2. claims for breach of warranty; or
3. claims for breach of an enhanced protection agreement, including any lawsuits or claims for damages under Civil Code Sections 910 or 914 alleging a defect or a deficiency in property or common areas.
If you are a seller of property in a mass-produced housing development, you are now obligated to disclose any known, threatened or impending claims by homeowners for defects affecting the community and potentially your home.
These changes relate to construction defect claims arising out of what is commonly referred to as SB800, which is codified at California Civil Code Section 895 through 945.5.
Drafting Easements Agreements – Practical Considerations and Potential Pitfalls
Paul Carey, a partner in the Litigation department presented on the practical considerations and potential pitfalls of drafting easements in an online webinar designed to educate the legal community.
In a unanimous decision, the California Supreme Court granted review of Horiike v. Coldwell Banker, S218734. The appellate court upheld the decision of the trial court that two different salespersons within the same brokerage, one representing the seller and one the buyer, were dual agents, and that the seller’s agent owed fiduciary duties to the buyer.
DP&F will continue to monitor this case as it moves through the briefing and argument stages to final decision.
Vineyard Purchases: Avoid Attorney Fees, Get a Survey
All too often purchasers of real property make assumptions about the extent of land included in their purchase, relying on visible landmarks such as tree lines and existing fences. Despite the opportunity, and many times admonitions, to engage a land surveyor prior to the consummation of a purchase, prospective buyers often times wait until after the fact, or not at all, to conduct a survey. In doing so, the buyers may be setting themselves up for serious consequences that translate into large dollar expenditures.
Let’s assume that you’ve purchased land on which you intend to plant a vineyard. Let’s further assume that there is an existing fence that you were either told or presumed was the common boundary between you and your adjacent neighbor. Now let’s go one step further and assume that you have gone to the time, trouble and expense of assessing the soil, contracting for vines, installing the trellising and irrigation and planting the vines. All is proceeding along until the adjacent land is sold, the new neighbor has a survey performed, and several rows of your maturing vines are now indisputably located on your neighbor’s property. What recourse do you have? Californialaw provides for use and ownership interests in the lands of others provided that certain conditions are satisfied.
You may claim a possessory (versus ownership) right if you have used the land in question openly and notoriously, under claim of right (without permission), for five continuous uninterrupted years, hostilely (figuratively speaking) to the true owner of the property in question. If you personally have not used the land in question for five continuous years, you may be able to “tack” your predecessor’s time of possession onto your actual possession to satisfy the five-year time frame. Assuming you can unequivocally establish these five elements, you may claim a prescriptive easement in the property; a right to use the property distinct from ownership of it.
If you can establish one more element, i.e., that you paid real property taxes on the land in question for five continuous years, you may be able to claim exclusive possession, i.e., ownership, of the property under the theory of adverse possession. You have the burden of proving that you not only used the property openly and notoriously, under claim of right, for five continuous uninterrupted years, hostilely to the true owner, but also that you paid the assessed taxes on the property.
Conclusively establishing your claim of use under a prescriptive easement or ownership under adverse possession often times requires a lawsuit to quiet title, which can be an expensive proposition.
When buying land for a vineyard or even planting a vineyard on land you believe have owned for a while, engaging a professional land surveyor to confirm the exact boundary line may be the proverbial ounce of prevention needed to avoid costly issues in the future.
For more information on real estate issues contact Delphine Adams at [email protected]
Copyright Dickenson Peatman & Fogarty at www.lexvini.com
Vineyard Property:The Not So Common Sense of Preventing Prescriptive Easments – Part II
This is the second part of a two part post discussing prescriptive easements.
Last time we talked about how one of two neighbors (“Joe”) should be careful not to compromise or lose his claim to a prescriptive easement to continue using a road on his neighbor’s (“Jane’s”) property by using not so common, common sense. This time we’ll talk about what Jane could do to protect her property from prescriptive easements.
Readers will recall from the last blog (or may already know), that a prescriptive easement is a legal right of access that arises from longstanding (at least 5 consecutive years) open use of property, hostile to the property owner’s rights or under claim of right, including a claim based on a mistaken belief that a legal right already existed. What, you may ask, can an owner like Jane do to protect her property from the creation of such an easement if she doesn’t object to Joe’s use when it first began and doesn’t want to lock Joe out or sue him if he refuses to stop using the road on her property?
There are three ways to protect against prescriptive easements in a situation like this: first, Jane and her predecessor could have posted statutorily prescribed signage on their property (Cal. Civil Code section 1008); second, Jane and her predecessor could have recorded and served a statutorily prescribed Notice of Consent to Use of Land (Cal. Civil Code section 813); and/or third, Jane and her predecessor could have approached Joe when his use first began to confirm that his use was permissive, not hostile. It is important to note, however, that the two described statutory options offer only prospective protection against prescriptive easements. What that means is this: If the prescriptive easement had already come into being before the signs are posted or the notice is served and recorded, then the signs and notice will not defeat that easement. This caveat is the subject of the postscript at the end of this blog.
Posting signs: Under section 1008, a property owner may post signs at each entrance to his/her property or along the property boundary at intervals of not more than 200 feet. The sign must read substantially as follows: “Right to pass by permission, and subject to control, of owner: Section 1008, Civil Code.” These signs give notice to the world of permission to pass onto the property, which defeats any claim of adverse use. (Aaron v. Dunham 41 Cal.Rptr.3d, at 36.) The section 1008 signs must be posted by the property owner or his/her agent, not by a lessee. (Aaron v. Dunham 41 Cal.Rptr.3d, at 37-38.) Section 1008 reads in full as follows:
No use by any person or persons, no matter how long continued, of any land, shall ever ripen into an easement by prescription, if the owner of such property posts at each entrance to the property or at intervals of not more than 200 feet along the boundary a sign reading substantially as follows: “Right to pass by permission, and subject to control, of owner: Section 1008, Civil Code.”
The advantage of this procedure is that no direct communication needs to be given to known adverse users (which in some people’s view encourages further use). The disadvantage of this procedure relates to proof of compliance with the statute. In that regard, it is not uncommon for such signs to be removed (particularly in cases of acrimonious neighbor relations), thus making proof of compliance with the statute more difficult. For that reason, when clients elect to use this procedure to protect their properties, I recommend that they or someone working for them keep a written record (like a log book with dated photographs) beginning when the signs were first posted, and continuing through periodic inspections at regular intervals such as every month or every 6 months.
Notice of Consent: Section 813 allows a property owner to record and serve a Notice of Consent to Use of Property. Such a notice creates a conclusive presumption that any subsequent use of the property within the scope of the notice will be deemed to be permissive and will not give rise to a private prescriptive easement. The full text of that statute appears below:
The holder of record title to land may record in the office of the recorder of any county in which any part of the land is situated, a description of said land and a notice reading substantially as follows: “The right of the public or any person to make any use whatsoever of the above described land or any portion thereof (other than any use expressly allowed by a written or recorded map, agreement, deed or dedication) is by permission, and subject to control, of owner: Section 813, Civil Code.”
The recorded notice is conclusive evidence that subsequent use of the land during the time such notice is in effect by the public or any user for any purpose (other than any use expressly allowed by a written or recorded map, agreement, deed or dedication) is permissive and with consent in any judicial proceeding involving the issue as to whether all or any portion of such land has been dedicated to public use or whether any user has a prescriptive right in such land or any portion thereof. The notice may be revoked by the holder of record title by recording a notice of revocation in the office of the recorder wherein the notice is recorded. After recording a notice pursuant to this section, and prior to any revocation thereof, the owner shall not prevent any public use appropriate thereto by physical obstruction, notice or otherwise.
In the event of use by other than the general public, any such notices, to be effective, shall also be served by registered mail on the user.
The recording of a notice pursuant to this section shall not be deemed to affect rights vested at the time of recording.
The permission for public use of real property provided for in such a recorded notice may be conditioned upon reasonable restrictions on the time, place, and manner of such public use, and no use in violation of such restrictions shall be considered public use for purposes of a finding of implied dedication.
The advantage of recording such a notice is that proof of compliance with the statute will always be possible since the notice will be a matter of public record. Care should be taken, however, to be sure to include a proof of service with the recorded notice (demonstrating compliance with the service requirements of the statute) so that such proof also remains a matter of public record. The disadvantages of this alternative are, in my opinion, that: (1) where the use is by persons other than the general public (i.e., repeated use by known individuals such as neighbors) the notice must also be served by certified mail on those known adverse users, thereby telling them that they have permission to continue their use (which some property owners don’t like to do); and (2) the statute prohibits the landowner recording the notice from interfering with the permitted use “by physical obstruction, notice or otherwise” until the notice of consent is revoked. Although I have not found any appellate decision determining the effect of any such subsequent interference, I believe that if ever raised on appeal, California courts will hold that such interference eliminates the protection from prescription otherwise provided by the statute (it is also possible that a trial court would reach the same conclusion even in the absence of guiding precedent given the plain language of the statute, although I have seen at least one trial court refuse to do that).
Express permission: Express permission is the quickest, most effective and least expensive solution to the problem of a potential prescriptive easement, yet it is often the last option considered if it is considered at all. Simply put, if Joe in our example acknowledges in writing to Jane (or her predecessor) that his use is and has been permissive (and is thus not hostile or adverse), then Joe’s use will not ripen into a prescriptive easement so long as Joe does not later expressly repudiate that permission and begin and complete a new 5 year prescriptive cycle of use. A unilateral offer of permission, however, is not sufficient, unless it is extended pursuant to the recorded notice or posted sign statutes discussed above. Instead, the potential prescriptive user (Joe, in our example) must acknowledge and accept the permission for this alternative to be effective. Given that proof is the measure of success, the acknowledgment should be written, although the form of the writing can be as simple as a signed letter or as formal as a recorded license agreement including indemnity, insurance and hold harmless provisions.
If the express permission route is followed, however, it is important to remember that permission will only be effective to defeat claims by the person acknowledging permission and not claims by other possible prescriptive users who might not be known, but whose use is sufficiently open and adverse to qualify as prescriptive use. Therefore, it is usually best for someone in Jane’s position to pursue more than one solution.
Postscript: In the last blog I mentioned a principle called “vesting.” Simply put, once 5 years of the requisite hostile use has passed, a prescriptive easement will become fixed and enforceable (i.e., it will “vest”), such that any later statutory signs or recorded notice will not defeat that easement. However, an express agreement with the neighbor (“Joe” in our example) acknowledging that the present AND historic uses are and have been permissive can, if properly drafted, offer such protection. So what could Jane have done in our example to protect herself from a previously perfected prescriptive easement in Joe’s favor (remember, under our facts, Joe had been using the road for more than 5 years before Jane acquired her property)? Unfortunately, there is not much Jane could do except to spot the issue during the due diligence period under her contract to purchase the property, and then to either: (1) ask her seller to secure a written permissive use agreement from Joe, or quiet title against any claim Joe might make, either by court action or negotiated quitclaim deed; (2) ask her title company to insure against any such claim by Joe (hard to get, but possible); and/or (3) negotiate a reduction in the purchase price to offset the actual or potential existence of a prescriptive easement.
For more information or assistance on real property issues contact Paul Carey at [email protected]
Copyright Dickenson Peatman & Fogarty at www.lexvini.com
Vineyard Property: The Not So Common Sense of Prescriptive Easements – Part I
This is the first part of a two part post discussing prescriptive easements.
Common sense – that’s what guides most of us, most of the time, and that’s a good thing. However, when it comes to protecting property rights, common sense solutions can sometimes be dangerous. This is because some rules of property law are counterintuitive, such as the rules relating to prescriptive easements. (A prescriptive easement is a legal right of access that arises from longstanding open use of property, hostile to the property owner’s rights or under claim of right, including a claim based on a mistaken belief that a legal right already existed.)
Take, for example, the case of the property owner (we’ll call him Joe) whose neighbor (we’ll call her Jane) told him he could no longer use an access road that crossed Jane’s property because Jane intended to plant vineyard over the road and surrounding area. Joe, however, had been using that road for over 20 years to service a vineyard on his property. For the first 15 years Joe had been using the road, he believed he had a right to use it and he had never asked permission from Jane or her predecessor. In addition, for the whole time Joe had been using the road, neither Jane nor her predecessor had ever taken steps to protect their property from the creation of a prescriptive easement. (Those steps are a topic for a later blog.) Under the rules of law relating to prescriptive easements Joe could have protected his right to continue using the access road in dispute, but his lawyer’s ability to do that after the dispute arose was compromised by the fact that Joe had previously pursued what he believed to be a common sense solution to his problem a number of years before he sought legal advice.
Specifically, a few years before the dispute arose with Jane, Joe discovered that he did not have a deeded easement over the road in question. Common sense told Joe he should do something to confirm and preserve his right to use the road. As Joe put it when he later explained it to his lawyer: “Don’t worry, when I found out I didn’t have a deeded easement, I made sure I protected my right to use the road by contacting my neighbor (Jane’s predecessor) and confirming that I had his permission to use the road. I then documented that permission in a letter.” Pleased with his proactive approach to the problem, Joe proudly produced a copy of the letter for his attorney, and then watched in dismay while his attorney sadly shook his head and told Joe he should have seen an attorney before doing anything.
While common sense told Joe that getting his neighbor to acknowledge that Joe could continue using the road, the law did not. What Joe didn’t know was that a prescriptive easement cannot exist when the use relied on to support the creation of the easement was permissive! Put another way, permissive use CANNOT be hostile or under a claim of right and therefore will not support the existence of a prescriptive easement.
Although Joe could still assert his claim to a prescriptive easement based on (1) the rule that a prescriptive easement “vests” immediately after 5 consecutive years of adverse use (which in his case had occurred long before he secured permission), and (2) the fact that his more recent request for permission was based on a mistaken belief that it would preserve his right to use the road, his common sense self help effort made it more difficult for his attorney to protect Joe’s easement because Joe had inadvertently created evidence that his neighbor could use to try to prove that Joe never really did believe he had a right to continue using the easement (or else why would he have felt he needed to ask his neighbor’s permission?).
The moral of the story is this: When it comes to the law, particularly some of the more antiquated rules relating to real property, talk to an attorney with experience in the particular area of the law involved before you do what common sense tells you.
Coming up: Could Jane and her predecessor have done anything to protect against the creation of a prescriptive easement in Joe’s favor? Yes…
For more information or assistance on real property issues contact Paul Carey at [email protected]
Copyright Dickenson Peatman & Fogarty at www.lexvini.com
Avoiding Tax Reassessment in Transfer of Vineyard or Winery Properties
California real property is reassessed upon certain transfers causing higher (or lower) property taxes. Generally, a reassessment will occur when ownership of the property is transferred. Exclusions from reassessment are available for transfers of real property between spouses and between a parent and a child. Therefore, family owned vineyards and winery property may have been transferred down through generations without being reassessed and without a significant increase in property taxes.
Vineyards or winery property held in a legal entity (e.g., a corporation, partnership or LLC) are subject to reassessment upon a change in ownership of the entity, but the exclusion from reassessment for transfers between parent and child does not apply. Entities are subject to a complicated set of rules that determine when a change in ownership takes place resulting in a reassessment. If you are not careful, a transfer of a 1% interest of the entity can cause an unexpected reassessment of the entire property. The death of a shareholder, partner or LLC member can be a reassessment event as his or her interest passes to the next generation.
Generally, a transfer of entity interests results in a reassessment if someone acquires more than 50% of the entity or if there is a cumulative transfer of more than 50% of the entity. Whether any particular transfer is a change in ownership depends on how the entity acquired the property, the details of prior transfers and any applicable exclusions.
Beginning in 2010, any change in ownership of an entity that holds real property in California must be reported to the California Board of Equalization on Form BOE 100. Failure to report a change in ownership can result in a 10% penalty. County assessor forms required upon the death of a real property owner now include a question about the decedent’s interest in any legal entity.
If your vineyard or winery property is held in a legal entity, always consider the property tax consequences before restructuring or making transfers of shares or interests. A review of potential property tax issues should be included in every vineyard or winery owner’s estate plan as well.
For further information or assistance with estate planning matters, please contact Dickenson, Peatman & Fogarty at [email protected].
Copyright Dickenson Peatman & Fogarty at www.lexvini.com
Fight Continues Over Lot-Line Adjustments in Napa County
The Sierra Club and a Napa resident have filed separate appeals of two Napa County Superior Court rulings that upheld Napa County’s policy on allowing “successive” lot-line adjustments involving four or fewer parcels.
The County’s policy on lot-line adjustments first came under assault in connection with long-time grape grower and vintner, Will Nord, whose company, Calness Vintners, represented by Dickenson, Peatman & Fogarty, applied to reconfigure six existing legal parcels in the unincorporated area of Napa County on the eastern boundary of the Town of Yountville. Residents of an adjacent residential subdivision, led by Carol Vendrillo, appealed the County’s ministerial approval of the second of two lot-line adjustments, claiming that State law required approval of a discretionary subdivision map. The Napa County Board of Supervisors unanimously rejected the appeal, and Vendrillo sued.
Following Vendrillo’s lawsuit, the Board passed an Ordinance clarifying the County’s longstanding policy of allowing approval of lot-line adjustments to occur in succession as long as the prior lot-line adjustment had been recorded. The Board’s rationale was that the State Subdivision Map Act is silent on the issue, leaving local governments free to decide whether to allow successive four-parcel lot-line adjustments or whether to “aggregate” the parcels previously involved in a lot-line adjustment with the parcels currently proposed for adjustment and require a subdivision map. (A subdivision map is required where five or more parcels are being reconfigured and is a discretionary approval requiring CEQA review.) The Sierra Club filed suit against the County over the Ordinance.
The November court rulings on both challenges firmly sided with the County. According to the Court, “[I]f the legislature had intended to bring all sequential lot line adjustments within the purview of the Map Act, it easily could have used alternative language to make that intention clear.” The ruling in the Sierra Club case also called out plaintiff’s counsel’s inability “to answer whether the court should also interpret into the statute a time limitation as to when the previous adjustment might have occurred.” In other words, opposing counsel did not answer the question of whether lot-line adjustments occurring 5, 10 or 100 years apart should be considered “successive?”
For more information or assistance with land use matters in Napa County contact Dickenson, Peatman & Fogarty at [email protected].
Copyright Dickenson Peatman & Fogarty at www.lexvini.com
Sonoma County Proposes Revisions to the Rules for Williamson Act Contracts
The Sonoma County Permit and Resource Management Department has drafted new rules to be applied to properties in Williamson Act agricultural preserve contracts. The proposed 49 pages of rules will replace the existing seven pages of rules that were originally adopted in 1970. Much of the new document clarifies existing state law and county policies, but a few new recommendations are proposed. There will be an increase in the amount of farm income to qualify for agricultural preserve on prime land from $200 per acre to $800 per acre. Also, a minimum of 50 percent of the prime land or six acres, whichever is more, has to be continuously used for agricultural production. The minimum parcel size to qualify for an agricultural preserve on prime land is 10 acres while on non-prime land the minimum is 40 acres.
The rules also eliminate some existing land uses that have been considered compatible with contracted land such as forestry, raising of horses, residential uses and quasi-public uses, but new allowed uses are added such as raising ornamental trees, apiaries and irrigated pasture crops.
Wineries and other agriculture processing faculties will still be permitted but will be classified as “compatible uses” rather than as straight agricultural uses. As such, they will be limited to occupying no more than five percent of the parcel area or five acres, whichever is less.
The first public hearing on the proposed rules was held on January 20, 2011 in front of the Sonoma County Planning Commission. There will be at least one more Planning Commission hearing before the rules are considered by the Board of Supervisors because so many people showed up to comment on the new rules.
The controversy surrounding this revision is warranted as all Williamson Act contracts have a clause which allows for revisions and binds the landowner to comply no matter how the rules are amended in the future. Even more troublesome is the fact that the landowners who are under contract and facing greater restrictions on the uses permitted on their property may not reap the benefit or purpose of being under contract. The Williamson Act program itself is in peril. Governor Jerry Brown has targeted the funds typically provided to counties and cities across California to subsidize the tax breaks that these property owners receive as a place to reduce the deficit. If the program funding is eliminated on a state level, many counties will have to decide whether they can continue to forego the tax revenue without any chance of subsidy from the State.
For more information on land use issues in Sonoma County contact Dickenson, Peatman & Fogarty at [email protected]
Copyright Dickenson Peatman & Fogarty at www.lexvini.com
Proposed California Budget Could Impact Williamson Act Subventions
This week, California Governor Jerry Brown unveiled his budget proposing to cut state spending by $12.5 billion dollars. Some of these cuts will directly impact land use and agriculture. Specifically, the Governor’s budget proposes the permanent suspension of Williamson Act subventions. The Williamson Act allows agricultural landowners to commit their properties to agricultural uses in exchange for discounted county property taxes. The state then reimburses counties for lost property tax revenues through annual subventions. At this time, it is not clear whether this budget will be adopted as proposed or how severely this budget action will impact those wine-growing counties that have embraced the Act.
Copyright Dickenson Peatman & Fogarty at www.lexvini.com