Recent Legal Developments
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Mark Allen Wilson, Esq.
Charles D. Richmond, Esq.
A long-held misconception by some under California's Fair Employment and Housing Act ('FEHA") is it is the disabled tenant/owner-resident's responsibility to initiate an interactive process with the property owner or Home Owners Association ("HOA") after a disability accommodation request. Acting on this ill-conceived notion could expose a property owner or HOA to civil liability for disability discrimination.
For the first time ever, CACI jury instructions and verdict forms now include disability discrimination in housing under the California Fair Employment and Housing Act (“FEHA”), effective July 28, 2017, although a separate jury instruction for “failure to engage in the interactive process,” a stand-alone civil cause of action, is glaringly absent. [See Lauralyn Swanson v. Morongo Unified School District (2014) 232 Cal.App.4th 954, 963-964, __ Cal.Rptr.3d __: Failure to engage in the interactive process is “a separate cause of action” under FEHA]. Despite the critical importance of the interactive process in FEHA disability discrimination in housing cases and in disregard to urging by legal practitioners during the CACI commenting period, the California Judicial Council failed to include even a reference to the interactive process in the two recently enacted FEHA “disability discrimination in housing” jury instructions (i.e. - CACI 2548 “Refusal to Make Reasonable Accommodation in Housing” and CACI 2549 “Refusal to Permit Reasonable Modification to Housing Unit”).
The absence of a new CACI jury instruction regarding the interactive process requirement in housing under FEHA is even more glaring considering a separate CACI jury instruction for “failure to engage in the interactive process” by an employer under FEHA. (i.e. – “CACI 2546”) has been in existence for at least ten (10) years. The body of FEHA discrimination cases is predominately made up of employment cases, although FEHA protections designed and implemented to prevent discriminatory practices apply to both employment and housing. Gov’t Code § 12920. For that reason, mandatory precedent exists holding that principles developed in FEHA employment discrimination cases also apply in FEHA discrimination cases in the housing context. (Brown v. Smith (1997) 55 Cal.App.4th 767, 782 [64 Cal.Rptr.2d 301]).
Notwithstanding the Judicial Council’s inaction, Property owners / landlords and HOA board of directors should treat every disability accommodation request seriously and immediately engage in a good faith interactive process with the tenant, or, in the case of an HOA, with the resident owner/tenant, to fully vet each accommodation request and discuss alternative accommodations … no matter how seemingly trivial or unreasonable the accommodation request appears to be. To act otherwise could subject property owners, HOA’s, and state or federal public housing agencies to civil liability for disability discrimination, even where a disability accommodation is later found to be unreasonable by a court of law.
FEHA is codified under Government Code § 12900 et seq. and declares disability discrimination in housing, among other types of discrimination, is against public policy in California. [Gov’t Code § 12920]. Under FEHA, the opportunity to “seek, obtain, and hold housing” without discrimination because of disability constitutes a “civil right” [Gov’t Code § 12921 (b)], and the definition of “disability” includes three categories: medical condition, mental disability, or physical disability [Gov’t Code §§ 12955.3 and 12926 (i), (j), and (m)].
The California Legislature, under FEHA, declares disability discrimination protections “independent from those in the Americans with Disabilities Act of 1990” (“ADA”) and describes the ADA as providing a “floor of protections” while California’s law “has always, even prior to passage of the federal act, afforded additional protections.” [Gov’t Code § 12926.1 (a)]. FEHA contains “broad definitions” of “medical condition,” “physical disability,” and “mental disability,” and requires only a “limitation upon a major life activity,” as opposed to the more stringent “substantial limitation” requirement under the federal Disabilities Act of 1990. [Gov’t Code § 12926.1 (b) and (c)]. FEHA provides greater protection against discrimination in housing than federal law, and courts often look to federal cases interpreting federal disability statutes when interpreting FEHA:
"FEHA in the housing area is thus intended to conform to the general requirements of federal law in the area and may provide greater protection against discrimination." (Brown v. Smith (1997) 55 Cal.App.4th 767, 780.) In other words, the FHA provides a minimum level of protection that FEHA may exceed. Courts often look to cases construing the FHA, the Rehabilitation Act of 1973, and the Americans for Disability Act of 1990 when interpreting FEHA. (Spitzer v. Good Guys, Inc. (2000) 80 Cal.App.4th 1376, 1384.) (Auburn Woods I Homeowners Assoc. v. Fair Employment and Housing Commission (2004) 121 Cal.App.4th 1578, 1591).
An owner’s/landlord’s/HOA’s refusal to make reasonable accommodations for the disabled in housing is tantamount to disability discrimination. [Gov’t Code § 12927 (c) (1)].
“Discrimination” … includes refusal to make reasonable accommodations in rules, policies, practices, or services when these accommodations may be necessary to afford a disabled person equal opportunity to use and enjoy a dwelling.” [Gov’t Code § 12927 (c) (1)].
The elements for a refusal to make a reasonable accommodation are clearly delineated in the body of FEHA case law, including the Auburn Woods case cited above:
“In order to establish discrimination based on a refusal to provide reasonable accommodations, a party must establish that he or she (1) suffers from a disability as defined in FEHA, (2) the discriminating party knew of, or should have known of, the disability, (3) accommodation is necessary to afford an equal opportunity to use and enjoy the dwelling, and (4) the discriminating party refused to make this accommodation. (See § 12927, subd. (c); Giebeler v. M & B Associates (9th Cir. 2003) 343 F.3d 1143, 1147; Janush v. Charities Housing Development Corp. (N.D.Cal. 2000) 169 F.Supp.2d 1133, 1135 (Janush).) Substantial evidence supported the FEHC decision on each of these points.” [Auburn Woods I Homeowners Assoc. v. Fair Employment and Housing Commission (2004) 121 Cal.App.4th 1578, 1592].
An accommodation request must be “reasonable.” An accommodation request is “reasonable” if it "seems reasonable on its face, i.e., ordinarily or in the run of cases” (i.e. – it’s “reasonable” if the accommodation appears to be "feasible" or "plausible." (US Airways, Inc. v. Barnett (2002) 535 U.S. 391, 402, 122 S. Ct. 1516, 1523).
By enacting FEHA, the Legislature “affirms the importance of the interactive process … in determining a reasonable accommodation.” [Gov’t Code § 12926.1 (e)]. In addition, Gov’t Code § 12940(n) states:
“It is an unlawful employment practice … for an employer or other entity covered by this part to fail to engage in a timely, good faith, interactive process with the employee or applicant to determine effective reasonable accommodations, if any, in response to a request for reasonable accommodation by an employee or applicant with a known physical or mental disability or known medical condition.” (Underline added for emphasis)
It is a well-known tenet of FEHA case law that doctrines established in employment cases also apply in housing cases. “[T]he basic principles applicable in employment cases should also apply in the housing context.” (Brown v. Smith (1997) 55 Cal.App.4th 767, 782 [64 Cal.Rptr.2d 301]).
Auburn Woods I Homeowners Association v. Fair Employment & Housing Commission (2004) 121 Cal.App.4th 1578, 18 Cal.Rptr.3d 669 (“Auburn Woods”) is a 2004 disability discrimination in housing case instructional in the nuances of the interactive process, particularly the shifting of burdens from a disabled tenant/resident to the owner/landlord to initiate an “interactive process” once a request for an accommodation is made. (Auburn Woods I Homeowners Association v. Fair Employment & Housing Com. (2004) 121 Cal.App.4th 1578, 1598, 18 Cal.Rptr.3d 669, _). In Auburn Woods, an HOA denied a request for a companion dog as a disability accommodation by a married couple who owned a condominium and had severe physical and mental disabilities, including serious depression. (Auburn Woods I Homeowners Association v. Fair Employment & Housing Com., supra,121 Cal.App.4th at 1584). The Auburn Woods court made the following comments when discussing the importance of the interactive process following a tenant’s request for a disability accommodation:
“As one court noted, “If a landlord is skeptical of a tenant’s alleged disability or the landlord’s ability to provide an accommodation, it is incumbent upon the landlord to request documentation or open a dialogue.” (Jankowski Lee & Associates v. Cisneros (7th Cir. 1996) 91 F.3d 891, 895.) This obligation to “open a dialogue” with a party requesting a reasonable accommodation is part of an interactive process in which each party seeks and shares information. (E.g., Jensen v. Wells Fargo Bank, supra, 85 Cal.App.4th at p. 266; Spitzer v. Good Guys, Inc., supra, 80 Cal.App.4th at pp. 1384-1385; Prilliman v. United Air Lines, Inc. (1997) 53 Cal.App.4th 935, 949-950 [62 Cal.Rptr.2d 142]; Loulseged v. Azko Nobel Inc. (5th Cir. 1999) 178 F.3d 731, 735-736 and fn. 5.). (Auburn Woods I Homeowners Association v. Fair Employment & Housing Com., supra,121 Cal.App.4th at 1598).
As the language cited above by the Auburn Woods court makes clear (e.g. “… it is incumbent upon the landlord to request documentation or open a dialogue,” and “[T]his obligation to ‘open a dialogue’ with a party requesting a reasonable accommodation is part of an interactive process”), once a disabled tenant requests an accommodation the burden shifts to the owner/landlord to request the information it believes it needs to make a decision on the accommodation requested and contemplate alternative accommodations with the tenant. In fact, Auburn Woods, due to the dearth of citable FEHA cases in the housing context, also cites to an employment law case (i.e. Taylor v. Phoenixville School District)to highlight this shifting burden to initiate the interactive process onto the owner/landlord. [See also - Brown v. Smith (1997) 55 Cal.App.4th 767, 782 [64 Cal.Rptr.2d 301]: “[T]he basic principles applicable in employment cases should also apply in the housing context.”]:
As one court noted in the context of a claim of employment discrimination: “Once the employer knows of the disability and the employee’s desire for accommodations, it makes sense to place the burden on the employer to request additional information that the employer believes it needs. Disabled employees, especially those with psychiatric disabilities, may have good reasons for not wanting to reveal unnecessarily every detail of their medical records because much of the information may be irrelevant to identifying and justifying accommodations, could be embarrassing, and might actually exacerbate workplace prejudice. . . . [¶] . . . [Moreover], an employee with a mental illness may have difficulty effectively relaying medical information about his or her condition, particularly when the symptoms are flaring and reasonable accommodations are needed.” ((Taylor v. Phoenixville School District, supra, 184 F.3d at p. 315.) Taylor v. Phoenixville School District, supra, 184 F.3d at p. 315.) (Auburn Woods I Homeowners Association v. Fair Employment & Housing Com., supra,121 Cal.App.4th at 1598).
The Auburn Woods court then draws a direct comparison of the “shifting burden” in previously cited housing and employment cases to the facts of its case at hand and Auburn Woods’ unsubstantiated allegation (i.e. - found to be not credible by the administration law judge) that the couple failed to comply with their request for documentation of their medical disabilities:
The same is true here. (See Brown v. Smith, supra, 55 Cal.App.4th at p. 782 [principles at issue in cases of employment discrimination may be applied in cases of housing discrimination].) If Auburn Woods needed additional information about the Elebiaris’ medical condition or their need to keep Pooky, it was obligated to request it. It could not simply sit back and deny a request for reasonable accommodation because it did not think sufficient information had been presented or because it did not think the Elebiaris had spoken the “magic words” required to claim the protections of FEHA. (See Prilliman v. United Airlines, Inc., supra, 53 Cal.App.4th at p. 954.) (Auburn Woods I Homeowners Association v. Fair Employment & Housing Com., supra, 121 Cal.App.4th at 1598).
If Vinson is disabled, the DLIR also had a duty to engage in an interactive process to consider his requested accommodations. As we have explained in the context of our employment cases, once the need for accommodation has been established, there is a mandatory obligation to engage in an informal interactive process "to clarify what the individual needs and identify the appropriate accommodation." Barnett v. U.S. Air, Inc., 228 F.3d 1105, 1112 (9th Cir. 2000) (quoting EEOC Enforcement Guidance: Reasonable Accommodation and Undue Hardship Under the Americans with Disabilities Act, EEO Compliance Manual (CCH), § 902, No. 915.002 (March 1, 1999), at 5440). This interactive process is triggered upon notification of the disability and the desire for accommodation. Barnett, 228 F.3d at 1114. An employer who fails to engage in such an interactive process in good faith may incur liability "if a reasonable accommodation would have been possible." Id. at 1116. (Vinson v. Thomas (9th Cir. 2002) 288 F.3d 1145, 1154).
As the Vinson court holds, an employer who fails to engage in the interactive process in good faith may incur liability “if a reasonable accommodation would have been possible.” It logically follows that an owner/landlord who fails to engage in an interactive process to ascertain alternative accommodations may incur liability even if the requested accommodation is unreasonable. “[T]he basic principles applicable in employment cases should also apply in the housing context.” (Brown v. Smith (1997) 55 Cal.App.4th 767, 782 [64 Cal.Rptr.2d 301]). The only way to determine whether a reasonable accommodation would have been possible is through a timely and good faith interactive process. [See Dark v. Curry County, (9th Cir. 2006) 451 F.3d 1078, 1088: “… our cases make clear that [owner/landlords bear] an affirmative obligation to engage in an interactive process in order to identify, if possible, a reasonable accommodation”].
A good-faith interactive process requires a “fact-specific, individualized analysis” – mere speculation is not enough. Huynh v. Harasz, No. 14-CV-02367-LHK (N.D.C.A. May 12, 2016) (“Huynh”) cites 9th Circuit precedent that succinctly frames how the “reasonableness” inquiry and the good-faith interactive process requirement go hand-in-hand:
“In Wong v. Regents of University of California, 192 F.3d 807 (9th Cir. 1999), the Ninth Circuit stated that “[b]ecause the issue of reasonableness depends on the individual circumstances of each case, this determination requires a fact-specific, individualized analysis of the disabled individual’s circumstances and the accommodations that might allow him to meet the program’s standards.” Id. at 818 (emphasis added). “Mere speculation that a suggested accommodation is not feasible falls short of the reasonable accommodation requirement; [state and federal law] create a duty to gather sufficient information from the disabled individual and qualified experts as needed to determine what accommodations are necessary to enable the individual to meet the standards in question.” Id. (internal quotation marks and alteration omitted). (Huynh v. Harasz, No. 14-CV-02367-LHK (N.D.C.A. May 12, 2016)).
The Huynh court then cites an additional 9th Circuit case that sheds further light on the relationship between “reasonable” accommodations and the interactive process:
Two years later, in Duvall v. County of Kitsap, 260 F.3d 1124, 1139 (9th Cir. 2001), the Ninth Circuit again held that public entities must “undertake a fact-specific investigation to determine what constitutes a reasonable accommodation.” In Humphrey v. Memorial Hospitals Association, 239 F.3d 1128, 1137 (9th Cir. 2001), the Ninth Circuit further stated that “[o]nce an employer becomes aware of the need for accommodation, that employer has a mandatory obligation under the ADA to engage in an interactive process with the employee to identify and implement [an] appropriate reasonable accommodation.” “The interactive process requires communication and good-faith exploration of possible accommodations between employers and individual employees.” Id. Those “who fail to engage in the interactive process in good faith face liability for the remedies imposed by the statute if a reasonable accommodation would have been possible.” Id. at 1137-38.” (Huynh v. Harasz, No. 14-CV-02367-LHK (N.D.C.A. May 12, 2016).
As federal and state case law interpreting FEHA and the interactive process indicate, it is imperative for owner/landlords, HOA’s, and applicable housing agencies to initiate a timely and good faith interactive process after a disability accommodation is requested. An accommodation request must be “reasonable” and the way to ascertain its “reasonableness” is via a timely, good faith interactive process.
Owners/landlords and HOA’s must immediately respond to requests for disability accommodations with an individualized, facts-driven inquiry that exhausts all questions the owner-landlord may have and ruminates on all potential alternative reasonable accommodations. To do otherwise will expose property owners, HOA’s, and housing agencies to civil liability for disability discrimination for failure to engage in an interactive process and failure to make a reasonable accommodation in housing. FEHA disability discrimination in employment cases involving failure to engage in the interactive process are instructional and have guided holdings in FEHA housing cases. [See Brown v. Smith (1997) 55 Cal.App.4th 767, 782 [64 Cal.Rptr.2d 301: “[T]he basic principles applicable in employment cases should also apply in the housing context.”]. An additional CACI jury instruction is desperately needed for “disability discrimination for failure to engage in the interactive process” in the housing context to instruct juries on this critically important area of disability discrimination. We owe it to disabled tenants and residents and to the property owners, HOA’s, and housing agencies to have appropriate jury instructions that clearly and concisely instruct juries on disability law in the housing context.
Courtesy of CEB, we are bringing you selected legal developments in areas of California real property law that are covered by CEB’s publications. This month’s feature is from the October 2017 update to CA Mechanics Liens and Related Construction Remedies (Cal CEB). References are to the book’s section numbers. See CEB’s RPLS landing page for special discounts for section members.
In response to a supreme court ruling that charter cities need not require contractors to comply with prevailing wage laws in their public works projects, Lab C §1782 was enacted to provide financial incentives for charter cities to require contractor compliance with prevailing wage laws. In 2016, a court of appeal held that such financial incentives neither violate the constitutional "home rule" doctrine nor violate prohibitions against legislative restrictions on local governmental entities' use of local taxes. City of El Centro v Lanier (2016) 245 CA4th 1494. See §§1.16, 9.5.
Prejudgment interest is available on construction contract claims when the damages sought are certain or capable of being made certain by calculation. CC §3287(a). When liability is disputed but the amount claimed is not, the claimant remains entitled to an award of prejudgment interest. Watson Bowman Acme Corp. v RGW Constr., Inc. (2016) 2 CA5th 279, 294. See §1.27A.
Although in Cates Constr., Inc. v Talbot Partners (1999) 21 C4th 28, the California Supreme Court ruled that a developer, the obligee under a performance bond, may not recover tort or punitive damages for a bond surety's breach of the covenant of good faith and fair dealing, a federal district court recently suggested that a claim for breach of contract may lie against the surety by an obligee. See Archer Western Contractors, LLC v International Fidelity Ins. Co. (SD Cal, March 26, 2017, No. 16-CV-1494 JLS (BGS)) 2017 US Dist Lexis 31594, cited in §§1.49, 10.3, 10.6.
Although Bus & P C §7031 prohibits recovery by an unlicensed person or entity only for "the performance of any act or contract where a license is required," the courts have differed on how to apply the bar when an unlicensed contractor provides a combination of work, i.e., when some work requires a license and other activities consist of non-construction-related services. In Phoenix Mechanical Pipeline, Inc. v Space Exploration Technols. Corp. (2017) 12 CA5th 842, the court of appeal held that the unlicensed plaintiff could proceed on its breach of contract claims for recovery of non-construction services, such as general maintenance and repair, trash disposal, hauling, and car washing, because the plaintiff had asserted that each task was performed under a separate contract. See §2.28A.
A person whose contractor's license has been revoked may not be an officer, director, associate, partner, or qualifying individual of another licensee. In addition, by legislative amendment in 2016, accusations against and investigations of entity contractors, which are already made public, will also appear on the license record of such individual qualifiers. See Bus & P C §7124.6, cited in §§2.30, 8.38.
The trend of legislative amendments to Bus & P C §7031's bar on collection actions by unlicensed contractors and subcontractors has been to narrow the available exceptions to that bar on the basis of substantial compliance. In 2016, amendments to §7031 eliminated a contractor's ability to establish substantial compliance with the licensing requirements in the event that the contractor did not know (or reasonably should not have known) that he or she was not licensed. See §§2.33, 8.70.
In Picerne Constr. Corp. v Castellino Villas (2016) 244 CA4th 1201, the court held that "actual completion," not "substantial completion," triggers the running of the 90-day period for a contractor to record a mechanics lien. See §§3.46, 3.55, 8.61.
Many construction agreements and subcontracts contain binding and enforceable arbitration clauses, which by nature preclude a trial by jury. But a contractual pre-dispute waiver of a jury trial is unenforceable, and the California Constitution preserves the right to a jury trial in all matters for which a jury trial was available at common law, even if there is a choice-of-law provision requiring the agreement to be interpreted under the law of another state. See Rincon EV Realty LLC v CP III Rincon Towers, Inc. (2017) 8 CA5th 1, cited in §§3.94, 10.75.
The current state of the law presents a difficult challenge to a mechanics lien or stop notice claimant when the surety company that issued the release bond becomes insolvent and files for bankruptcy. A discussion of strategies for both claimants and owners was added to this book in §3.120B.
Under newly enacted CCP §415.20(c), if the only address reasonably known for the person to be served is a private mailbox in a commercial mail receiving agency, service of process may be effected on the first delivery attempt by leaving a copy of the notice with the mail receiving agency in the manner specified. It is uncertain whether this amendment affects statutes that incorporate service of process rules in CCP §415.20 for the service of preliminary notices and other pre-litigation notices required for mechanics liens, stop notices, and construction bond claims. See §4.31. See also §§3.40–3.41, 4.28, 4.47, 4.104, 4.133, 9.27, 9.42.
There is currently a split of authority on whether a contractor is entitled to withhold the retention payment when there is a good faith dispute about something other than the retention under CC §8814(c). This issue is pending before the supreme court in United Riggers & Erectors, Inc. v Coast Iron & Steel Co. (review granted Mar. 16, 2016, S231549; superseded opinion at 243 CA4th 151). See §§4.157, 7.27, 8.26.
There is a temporary exception in Pub Cont C §10261(b) to the cap on the percentage of retention proceeds that a public entity may withhold under Pub Cont C §10261(a). The exception applies when the director of the department has determined that a project is substantially complex and therefore requires a higher retention amount than 5 percent, and the department includes in the bid documents details explaining the basis for the finding and the actual retention amount. Pub Cont C §10261(b). The exception provisions in §10261(b) will expire on January 1, 2023, unless extended. See §4.158.
In public works, under Pub Cont C §7201(b)(1), there is a temporary cap on the percentage of retention proceeds that may be withheld from any payment by the original contractor from any subcontractor and by a subcontractor from any sub-subcontractor. Until January 1, 2023, retention proceeds may not exceed 5 percent of the payment, and the total retention proceeds withheld may not exceed 5 percent of the contract price. See §4.159.
The California Department of Transportation is temporarily prohibited from withholding retention proceeds on any progress payment to a contractor for work performed on a transportation project. See Pub Cont C §7202(a) (scheduled to sunset on January 1, 2020; discussed in §§4.158).
According to the Supreme Court, an unsuccessful bidder on a public works contract may not state a cause of action for intentional interference with prospective economic advantage against a winning bidder who illegally obtains the contract, as the highly regulated nature of the bidding process cannot form the basis of an existing economic relationship or a probability of future benefit. See Roy Allan Slurry Seal, Inc. v American Asphalt S., Inc. (2017) 2 C5th 505, cited in §§4.166, 4.166B.
Most construction contracts contain a provision that requires a signed written change order before payment is made for any extra or additional work. Some courts have found an exception to this requirement when the general contractor has waived the right by its conduct. See, e.g., U.S. ex rel Agate Steel, Inc. v Jaynes Corp. (D NV, June 17, 2016, No. 2:13-CV-01907-APG-NJK) 2016 US Dist Lexis 79878, cited in §5.46A.
Although mechanics lien claimants may foreclose after abandonment of the debtor's real property in a bankruptcy, they cannot bring a court action against the debtor seeking damages or attorney fees after the abandonment and a Chapter 7 discharge of monetary debts. See, e.g., Desert Pine Villas Homeowners Ass'n v Kabiling (In re Kabiling) (BAP 9th Cir 2016) 551 BR 440. But a debtor's discharge does not prevent a claimant from filing an action against the debtor seeking only equitable relief. See Irizarry v Schmidt (In re Irizarry) (BAP 9th Cir 1994) 171 BR 874. See §6.29.
For recent cases awarding damages to a debtor in bankruptcy after a creditor has violated the automatic stay, see §6.46C.
In the case of In re EPD Inv. Co., LLC (9th Cir 2016) 821 F3d 1146, the Ninth Circuit upheld the denial of a request to order arbitration and agreed with the bankruptcy court that the trustee's fraudulent conveyance, subordination, and disallowance causes of action were core proceedings, which gave the bankruptcy court discretion to weigh the competing bankruptcy and arbitration interests. See §6.50A.
The Bankruptcy Code protects transfers in which the debtor receives a substantially contemporaneous exchange of new value because these transfers do not deplete the bankruptcy estate or affect the equality of distribution of the estate's assets. But see Weinstein v Southwest Specialty Contrs. (In re Big Town Mechanical, LLC) (D Nev, April 6, 2016, No. BK-S-13-14209-MKN, AP No. 15-01075-MKN) 2016 Bankr Lexis 2526 (conditional waiver and release of inchoate mechanics lien rights in exchange for payment to subcontractor did not constitute new value, because subcontractor did not show that both parties intended exchange of new value and payment to be contemporaneous and did not show that exchange in fact was contemporaneous), cited in §§6.66, 6.68, 6.70.
The Ninth Circuit extended the presumption of reasonably equivalent value with respect to an adversary proceeding seeking to avoid a California tax foreclosure under 11 USC §548(a)(1)(B). See Tracht Gut, LLC v County of Los Angeles (In re Tracht Gut, LLC) (9th Cir 2016) 836 F3d 1146, in which the court held that the presumption should apply in an adversary proceeding seeking to avoid the transfer of tax-defaulted real property as long as the procedural requirements of California law were met. See §6.78A.
In 2017, substantial amendments were made to the contractor registration law for public works, which was originally enacted in 2014. In particular, Lab C §1771.1(g)–(k) now prescribes severe monetary penalties and stop work orders for violations of the registration law. Also, under Lab C §1773.3(c)–(e), severe monetary penalties may be collected from public agencies for allowing an unregistered contractor or subcontractor to work in violation of the registration mandated in Lab C §1725.5(a) or for failing to comply with Lab C §1773.3(a). Finally, an awarding agency must withhold final payment owing to the contractor until at least 30 days after all information required by §1773.3(a) has been submitted. But a contractor or subcontractor will not be liable for any penalties assessed against an awarding agency, and the agency may not require a contractor or subcontractor to indemnify it or otherwise be liable for any penalties assessed against it. See §7.2B.
There is increasing use of computer software by participants in construction projects to track the progress of work by (and payments to) a multitude of participants. Architects, contractors, and subcontractors, and their employees, use laptops, tablets, and smartphones to access and share information before and during the course of construction. As a result, each participant is at increased risk of both loss and liability if a cyber breach occurs. A new discussion of cyber insurance in construction was added in §§7.18D, 9.9A.
The general contractor must cooperate with the bond surety and respond to its communications regarding claims. In Travelers Cas. Sur. Co. of Am. v K.O.O. Constr., Inc. (ND Cal, Dec. 16, 2016, No. 16-CV-00518-JC) 2016 US Dist Lexis 174479, the court found that the contractor breached its contractual duty to indemnify when the surety informed the contractor of every claim against the bonds and provided the contractor with the opportunity to respond or resolve the claims before the surety paid the claimants but the contractor failed to resolve the claims and then failed to reimburse the surety. See §§7.58, 10.75.
Under a 2017 amendment to CC §4615(c), which governs mechanics liens recorded against a condominium owner's individual unit for work performed on common areas, the owner may release the lien against his or her unit by procuring and recording a lien release bond, under CC §8424, in an amount equal to 125 percent of the sum secured by the lien that is attributable to that owner's separate interest. See §§8.16, 8.75.
An owner who chooses not to use a licensed contractor may be exposed to liability. The Privette doctrine, which generally protects an owner from vicarious liability for injuries to a third party caused by the work of an independent contractor, does not apply when the contractor is unlicensed. Blackwell v Vasilas (2016) 244 CA4th 160. Under Lab C §2750.5, an unlicensed contractor is presumed to be an employee of the hirer for purposes of imposing tort liability. See §8.38.
A lis pendens not properly served is absolutely void and subject to expungement. Ray Sanchez Inv. v Superior Court (PCH Enters., Inc.) (2016) 244 CA4th 259, 263 (granting expungement when plaintiff recorded lis pendens but did not include proof of service with recorded document and failed to serve new third-party owner). See §8.84.
Absent a statutory directive, state agencies and other public entities are not required to engage in competitive bidding, regardless of the price of a work of improvement. Even when directed to conduct bidding for projects costing over a specified amount, a public entity may use its own in-house employees to complete a project, regardless of the total cost, without soliciting bids. Construction Indus. Force Account Council v Ross Valley Sanitary Dist. (2016) 244 CA4th 1303. See §9.4.
But there is a trend toward making public projects subject to competitive bidding. See, e.g., Ed C §§17400–17412; McGee v Balfour Beatty Constr., LLC (2016) 247 CA 4th 235 (conflict of interest action may lie in public works lease-leaseback arrangement, even though exemption to competitive bidding process under pre-2017 version of Ed C §17406 may have been satisfied). See §9.4.
Added by Stats 2016, ch 810, §1 (AB 626), Pub Cont C §9204 establishes an alternative dispute resolution (ADR) procedure for claims on public works projects for which the contact was entered into on or after January 1, 2017. In order to invoke these ADR procedures, a contractor must submit a separate demand by registered or certified mail, with return receipt requested, seeking a time extension, relief from liquidated damages, compensation for work performed, or payment of an amount disputed by the public entity. See §9.6A.
Some public entities contractually expand statutory requirements for bid specifications by requiring each bidder to list all subcontractors and material suppliers, regardless of the size of the project or the amount of work to be done by the subcontractors or suppliers; a recent case demonstrates why it may be in the interest of public entities to do so. See DeSilva Gates Constr., LP v Department of Transp. (2015) 242 CA4th 1409 (CalTrans issued bid specifications that echoed same disclosure requirement as Pub Cont C §4104(a)(1), and contractor's bid was both responsive to specifications and compliant with §4104(a)(1); thus CalTrans had no grounds for declaring bid to be nonresponsive when bid omitted subcontractor who would perform work amounting to only .001 percent of total bid). See §9.20.
Wednesday, November 8, 2017
Registration 11:30 – 12:00
MCLE 12:00 – 1:30
Networking lunch 1:30 – 2:30
Location: The State Bar of California, 180 Howard Street, San Francisco, CA 94105
Reigster Online Here
In person Program: Earn 1.5 hours MCLE credit.
We will be offering online registration in the near future. The Deadline to pre-register is Wednesday, November 1, 2017
Presented by The State Bar of California Real Property Law Section and the Women in Real Estate Law Affinity Group of the National Association of Women Lawyers in conjunction with Women in Leasing Law
It takes a village to design, implement and construct tenant improvements pursuant to the work letter attached to the commercial real estate lease. It seems like a cast of thousands are required including client (tenant), landlord construction representative, leasing counsel, broker, general contractor, project manager, architect and engineers. This workshop brings together the key players in a typical high tech office build out for a lively discussion of each real estate professional’s role in the lease negotiation and construction process to provide a better understanding of how to productively negotiate and perform the work letter.
Moderator: Jo Ann Woodsum, The Law Offices of Jo Ann Woodsum
Registration Fee: $25. Seating is limited: RSVP Required.
Cancellations or refund requests must be received in writing by Wednesday, November 1, 2017. Refunds will not be available after Wednesday, November 1, 2017.
On-site registration is subject to availability. Call 415-538-2508 to confirm space availability.
For special assistance, please call 415-538-2564. For registration information call 415-538-2508. Telephone registrations will not be accepted. For program content and/or Section information call 415-538-2564.
The State Bar of California and the Real Property Law Sectionare approved State Bar of California MCLE providers,
Thursday, November 9, 2017, 12 noon - 1 p.m.
This program offers 1 hour participatory credit. You must register in advance to attend.
Speaker: Frantz Farreau
The Seventh Annual Real Estate and Law Symposium
Thursday, February 8, 2018
1 p.m. - 5:30 p.m.
555 Salvatierra Walk
Paul Brest Hall (Law School)
Stanford, CA 94305
Network and share ideas with Real Estate Professionals from around the State.
Save the Date!
Thursday - Sunday, April 19 – 22, 2018
37th Annual Real Property Law Section Retreat
April 18 – 22, 2018
Hyatt Regency San Francisco
Check back here for all the details as we get closer to the date.
We are delighted to publish legal cartoons from one of our own -- Scott Miller. Scott is Of Counsel to Dudnick Detwiler Rivin & Stikker LLP in San Francisco. His practice focuses on commercial real estate and environmental law. Check out http://www.blurb.com/bookstore/detail/2646318 to order Scott’s book on real estate cartoons, entitled A New Lease on Life. If you have any suggested topics for Scott, please feel free to contact him at firstname.lastname@example.org, and who knows? You might get your idea immortalized in the next E-Bulletin!
© 2017 Scott H. Miller
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Thank you for being a part of the Real Property Law Section. The section is committed to providing relevant real estate practice information and materials for our members. Besides publishing the superb quarterly California Real Property Journal, the section organizes dozens of live programs, including the Annual Retreat and the State Bar Annual Meeting. These periodic e-mails are being sent to you because you are a member of the State Bar of California Real Property Law Section. For more information about the Real Property Law Section, please see the section's website: realpropertylaw.calbar.ca.gov.
The statements and opinions herein are those of the contributors and not necessarily those of the State Bar of California, the Real Property Law Section, or any government body. This publication is designed to provide information in regard to the subject matter covered and is made available with the understanding that the publisher is not engaged in rendering legal or professional services. If legal advice or expert assistance is required, the services of a competent professional should be sought.