Real Cases in Real Estate by Andrea Lee Negroni, Esq. – March 13th Update

Real Cases in Real Estate by Andrea Lee Negroni, Esq. – March 13th Update

Real Cases in Real Estate is a weekly update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

Followers of Real Cases in Real Estate will learn and be entertained by lawsuits involving nuisance, trespass, zoning violations, deed restrictions, title insurance, public utilities, mechanics liens, construction defects, adverse possession, foreclosure and eviction, divorce and marital property rights, tenants' rights, and more. Real Cases in Real Estate uncovers the unpredictable, amusing, and sometimes outrageous disputes between next-door neighbors, contractors and homeowners, condo boards and residents, real estate brokers and homebuyers, and zoning administrators and developers.

Each fully cited case summary highlights the essential law of the case and explains the principal legal theories and concepts relevant to the outcome. Plain language treatment makes Real Cases in Real Estate accessible to lawyers and laymen alike.

Whether you follow real estate law professionally or as a hobby, you'll find something new and useful every week in Real Cases in Real Estate.

 

Updates for the Week of March 13th, 2011

A landlord that treats a business as its tenant cannot claim that the business is not the party entitled to return of a security deposit under the lease.

A complex set of facts and a large cast of players were involved in the lease of a California commercial property to a computer sales company. The rental property was owned by a married couple (Chian and Lee), who apparently did business under the name Agape. Chian's brother owned a company called Royal, which managed the property. The tenant was a computer sales company called Faxy, owned by Cheung. Faxy did business under a fictitious name, Agio Solutions. If you've got all these names straight, Cheung also owned another computer business called Protec. Protec used the fictitious name Agio (the same fictitious name used by Faxy).

Faxy leased space from Chian and Lee, but the landlord named on the lease was Royal. A $40,000 security deposit was made, with the agreement that $25,000 would be refunded when the tenant provided insurance covering damage to a glass wall in the premises. Cheung paid rent to Chian or Lee and gave them 1099s showing they were recipients of the rental income. Chian paid income taxes on the rental income. At some time during the lease, Cheung attempted to merge his two businesses (Faxy and Protec) together, telling his landlord that Protec was going to take over Faxy's liabilities and assets. Cheung continued to pay the monthly rent and exercised all the lease extension periods of the original lease signed by Faxy.

Problems started when the lease expired and Cheung sought refund of the security deposit. Even though he had obtained the insurance policy covering the glass wall, the landlord never returned the $25,000 portion of the deposit. Eventually, though, the landlord gave Protec notice that about $14,000 damage to the property would be withheld from the security and $26,000 would be refunded. The landlord wrote a check for $26,894 which was cashed by an "unknown" company called Rex Line. Protec sued the landlords for a refund of the $40,000 security deposit, interest on the $25,000 it claimed should have been refunded when the insurance was produced, and other amounts.  The court entered judgment for Protec. The landlord appealed, claiming that Protec was "not a real party in interest" and had no right to relief.

The bottom line here is that the landlord (whether it was Royal, Chian and Lee or a family trust owned by Chian and Lee) treated Protec as its tenant for years, allowing Protec to exercise extension options, accepting rent from Protec, negotiating with Protec about the return of the security deposit, and even claiming to have issued the refund of deposit to Protec. The California Appeals court held that after treating Protec as its tenant, the landlords were estopped from claiming they were not the tenants. The judgment for Protec was affirmed.

Lexis.com subscribers can view the enhanced version of Protec Inv. v. Hedge, 2010 Cal. App. Unpub. LEXIS 10059 (Cal. App. 2d Dist. Dec. 17, 2010) 

Non-subscribers can use lexisOne's Free Case Law search to view the free, un-enhanced version of Protec Inv. v. Hedge, 2010 Cal. App. Unpub. LEXIS 10059 (Cal. App. 2d Dist. Dec. 17, 2010) 

 

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