Frequently Asked Questions (FAQs)

Law Advocate Group offers comprehensive services in the areas of civil litigation, contract disputes, estate planning, and criminal defense. Within civil litigation, we commonly handle business and corporate cases, employment cases, real estate and HOA cases, and entertainment cases.

Our firm specializes in litigation, and provides methods of alternative dispute resolution such as arbitration, mediation, and negotiation.

Our firm provides comprehensive solutions to a wide range of clients including individuals, families, business owners, and corporations.

Law Advocate Group’s team of attorneys specialize in civil litigation, business law, corporate law, estate planning, and criminal defense. Within these areas, we offer comprehensive solutions in contract development and dispute resolution for small businesses, mid-sized businesses, startups, and corporations. Our attorneys have also worked extensively with clients within the real estate and entertainment industries.

To set up a consultation with an attorney from Law Advocate Group, please call our Beverly Hills office at (310) 651-3065 or fill out the form on our contact page.

Yes, the attorneys of Law Advocate Group require a retainer for their services. Please contact our Beverly Hills or Los Angeles offices at (310) 651-3065 for more information.

Business law and corporate law are broad legal topics that encompass business, commerce, consumer transactions, and the formation and management of business entities. Some of the more important areas of corporate law include sales, secured transactions, negotiable instruments, and debtor and creditor law. Business law overlaps, but also includes the formation and management of business entities. An attorney with experience in business and commercial law can help you with all of your questions.

See our business law page to read about the legal services that Law Advocate Group offers to businesses and corporations.

The basic sole proprietorship is a business with one owner that is not registered with a state as a limited liability company (LLC), partnership, or corporation. Business decisions are managed by the owner. Its establishment is inexpensive and comparatively uncomplicated. However, the business owner and his or her assets have no protection from personal liability. Any action by the sole proprietor or an employee may create personal liability against the owner for business debts or legal judgments. The profits or losses from the business are reported on the owner’s personal tax return.

Advantages of Sole Proprietorship

• Simple to form and run
• No double taxation on profits

Disadvantages of Sole Proprietorship

• Only one owner is responsible for all business decisions
• The owner is responsible for all business losses.
• Judgment creditors can get whatever the owner has — whether or not invested in the business. In other words, the owner has no shield against liability.

Read more about how to set up a sole proprietorship in California.

In a limited partnership, there is at least one general partner who manages the business operations and at least one limited partner who may contribute capital, but does not have substantial management control. The general partner is personally liable for the business’s debts and liabilities. A limited partner has limited liability, meaning that the limited partner can be liable only to the extent of his or her capital contribution. To form a limited partnership, most states require the filing of a certificate with the secretary of state. Limited partnership agreements can be very complex.

Advantages of Limited Partnership

• Few legal formalities and very flexible
• Limited partner may be a lucrative capital investor.

Disadvantages of Limited Partnership

• General partners have unlimited personal liability for business losses and are legally responsible for the business actions of each partner.
• Limited partners must take care to not exert control over the business that could open them up to general partner liability.

Read more about limited partnerships.

A corporation is a legal and tax entity that is separate from the people who own, control and manage it. A corporation is a legal person. Effectively, this means that the corporation can enter into contracts, take on debt and pay taxes apart from its owners. Therefore, with some exceptions, the owners of the corporation are personally protected from the corporation’s liabilities and creditors. Generally, an owner stands to lose only what he or she has invested in the corporation. Each state has its own procedure for establishing a new corporation, but most states require the filing of articles of incorporation with the secretary of state. Other matters at start-up usually include drafting corporate bylaws, holding the initial meeting of the board of directors and issuing ownership stock.

Advantages of a Corporation

• Owners have limited liability.
• Centralized management and control structure
• Ownership interests are more readily divisible and transferable.

Disadvantages of a Corporation

• Costly and complicated to set up
• Complex management responsibilities
• Double taxation at corporate and individual levels

See our corporate law page to read about the legal services that Law Advocate Group offers to businesses and corporations.

An LLC combines elements of partnerships and corporations. To create an LLC, there is, most often, a filing of articles with a branch of state government charged with LLC oversight. In general, this filing will be with the secretary of state’s office. Most states allow the formation of an LLC with only one person. In addition to the articles, there should also be a written LLC operating agreement that sets out the LLC members’ rights and responsibilities. Although filing of this agreement may not be required, it should be completed to ease management of the LLC.

Similar to limited partners, the owners, called members, of the LLC risk losing only that money that has been invested in the LLC. Only LLC assets are used to pay the LLC’s debts. Therefore, with certain exceptions, the members of the LLC are protected from personal liability. As in a partnership, LLC owners report profits and losses on their personal income tax returns. Therefore, the LLC is not a separate taxable entity.

Advantages of Limited Liability Company

• Owners risk losing only the money that they invested in the LLC, with certain exceptions.
• lexibility in rules of management
• Pass-Through taxation at the individual level like General Partnership

Disadvantages of Limited Liability Company

• Can be complex to set up and manage

The Internal Revenue Code allows for two different levels of corporate tax treatment.

Subchapter C corporations include most large, publicly held businesses. These corporations face double taxation on their profits if they pay dividends: C corporations file their own tax returns and pay taxes on profits before paying dividends to shareholders, which are subsequently taxed on the shareholders’ individual returns.

Subchapter S corporations meet certain requirements that allow the business to insulate shareholders from corporate debts but to avoid the double taxation that is imposed by subchapter C. To receive subchapter S treatment, corporations:

• Must be domestic
• Must not be affiliated with a larger corporate group
• Must have no more than one hundred shareholders
• Must have only one class of stock
• Must not have any corporate or partnership shareholders
• Must not have any nonresident alien shareholders

Also, after a business is incorporated, all shareholders must agree to subchapter S treatment prior to electing that option with the Internal Revenue Service. The limitations imposed by the subchapter may affect the transferability and marketability of corporate shares.

Read more about the differences between C and S Corporations.

Once incorporators establish a new business, the directors must ensure that it maintains its legal status. Depending on the business form, certain legal formalities must be followed for this purpose. Once incorporated, an ongoing business’s obligations include:

• Obtaining federal and state tax-identification numbers for the business and filing needed tax returns annually
• Issuing shares of stock as mandated by the articles of incorporation and federal securities law
• Establishing and maintaining corporate books and records, including accounting ledgers, shareholder records and corporate minutes
• Calling and conducting an initial meeting of the board of directors or shareholders, as required in the articles of incorporation
• Conforming all decisions and internal procedures set forth by the articles of incorporation
• Recording all actions and decisions of the board of directors in the corporate minutes
• Maintaining annual registration with the state government, as required by law.

Also, some businesses must comply with licensing requirements or professional standards to preserve their status. These businesses may need to maintain further records or use special procedures or equipment based on rules for their specific industries.

In many situations, a failure to abide by corporate obligations can result in personal liability for directors, officers, or shareholders for business obligations and debts. Because of these harsh consequences and because the specific legal requirements vary depending on the business’s location and form, businesses should seek professional legal advice.

Any time a corporation undertakes a major change or transaction, it should be reflected in its minutes. In addition, meetings of shareholders and directors should take place at least annually if for no other reason than to elect new officers and directors. Failure to adhere to the formality of regular meetings can jeopardize the corporation’s ability to shield its officers, directors and shareholders from personal liability for the corporation’s actions.

Sometimes, courts will allow plaintiffs to receive compensation from corporate officers, directors, or shareholders for damages rather than limiting recovery to corporate resources. This procedure avoids the usual corporate immunity for organizational wrongdoing, and may be imposed in a variety of situations.

The specific criteria for piercing the corporate veil vary somewhat from state to state and may include the following:

• If a business is indistinguishable from its owners in practical terms, courts will not allow owners to benefit from limited liability.
  • Example: Joe Tractors, Inc. and Joe share the same banking account. Joe signs business contracts in his own name. Joe may be liable for breaching a business contract because he and his company are legally indistinct.
• If a corporation is formed for fraudulent purposes, courts will allow recourse to the owners.
• If a business fails to follow corporate formalities in areas such as record-keeping and decision-making procedures, a court may impose liability on the individuals controlling the business.
• The potential for personal liability encourages businesses to observe legal requirements and to avoid damage to third parties.

Joint ventures and partnerships share certain characteristics. A joint venture is a sort of partnership where two or more entities join together for a particular “short term” purpose. In both partnerships and joint ventures, each partner has equal ability to legally bind the entire entity. A partner can represent the entire organization in the normal course of business and his or her legal actions on behalf of the joint venture or partnership create legal obligations.

Although the powers of individual partners in a partnership or joint venture can be limited by agreement, such agreements do not bind third parties. Because business contacts outside of the partnership may have no knowledge of the limitations, they may be entitled to rely on the apparent authority of an individual partner as determined by the usual course of dealing or customs in the trade.

A non-profit corporation is a corporation formed to carry out a charitable, educational, religious, literary or scientific purpose. A nonprofit corporation doesn’t pay federal or state income taxes on profits it makes from activities in which it engages to carry out its objectives. This is because the IRS and state tax agencies believe that the benefits the public derives from these organizations’ activities entitle them to a special tax-exempt status.

The most common federal tax exemption for nonprofits comes from Section 501(c)(3) of the Internal Revenue Code, which is why nonprofits are sometimes called 501(c)(3) corporations.

Some businesses rely on sales to build their capital, whereas others must rely on investors to raise the amount of money they need to get started or to expand. One business that might depend on investment is a company that produces software; although it may have an excellent idea, the company cannot pay its staff of developers or market its product until it has something to sell. If a business will need a large amount of invested money, its organizers should select an entity that will be attractive to the type of investors that best fit its needs.

When deciding what business form to choose, a business should consider its financial needs. Investors may come in the form of friends and family, individuals involved in the business, partner companies, venture capitalists and others.

Each type of investor has different needs. A partner company that is financing a venture that will be crucial to its own success may want some control over the business’s management. An employee may want a share of the profits but may not wish to be directly involved in the day-to-day management.

Some business entities may be limited by law as to who can own their shares. For example, a professional corporation may have shares owned only by individuals licensed to provide its type of professional services.

Investors want to minimize their risk. Generally, a business entity that shields investors from liability is preferable.

In a General Partnership, an investor becomes a partner by contributing capital. A partner has the right to share profits, but partnership debts are also shared by partners.

A Limited Partnership can receive investment contributions from either general partners or limited partners. A general partner has no liability shield. A limited partner’s liability, however, is limited to the amount of his or her contribution.

Members in a limited liability company (LLC) also enjoy a liability limitation. An LLC could also be advantageous to potential investors if the business anticipates start-up losses.

Corporations provide a liability shield to all investors. Corporations can also issue stock either as voting shares (which allow shareholders some control of the company) or non-voting shares. A corporation can issue just a few shares to a small number of shareholders, including investors, or it can make a public offering to the broader market of investors.

CA Franchise Tax Board
The IRS
CA State Board of Equalization

Civil litigation involves a non-criminal legal dispute between two or more parties. While criminal law focuses on jail time during the penalty phase, civil litigation seeks monetary compensation for damages or a specific performance rather than criminal sanctions being placed on the accused.

The litigation attorneys of Law Advocate Group represent parties in trials, arbitrations, hearings, and mediations before administrative boards. We serve clients on a case-by-case basis, providing tailored legal strategies that reflect individual and business objectives while considering costs and legal timelines.

Our firm provides litigation services in a variety of areas of civil law. Some of these areas include the following: contract litigation, business litigation, employment litigation, entertainment litigation, real estate litigation, and corporate litigation.

The litigation process begins with the filing of a lawsuit, or complaint, outlining their grievances and desired remedies. The defendant then files an answer, which may include counterclaims or defenses. During the discovery phase, both sides exchange evidence and information through depositions, interrogatories, and document requests. A judge or jury then evaluates the evidence and arguments to render a decision. When working with a civil litigator, they will handle the correspondence with the opposing party and provide guidance throughout legal proceedings.

The purpose of civil litigation is to resolve non-criminal disputes and enforce legal rights through the court system. It allows one party (the plaintiff) to seek compensation, damages, or specific performance against another party (the defendant). Common civil matters include business disputes, contract breaches, real estate conflicts, and personal injury claims. Civil litigation attorneys work with clients to evaluate the strength of their case and determine the best legal strategy, whether it be litigation or alternative dispute resolution.

The litigation timeline varies based on the complexity of the case, court availability, and whether the parties attempt settlement. Straightforward cases may conclude within several months, while more complex litigation can last one to three years or longer. Your Los Angeles civil litigation lawyer can help you understand the likely duration based on your unique circumstances.

Civil cases go to litigation when the parties cannot reach a fair resolution through negotiation, mediation, or arbitration. Litigation becomes necessary when critical issues—such as liability, damages, or contractual obligations—remain in dispute and must be decided by a judge or jury. Speaking with your civil attorney can give you a better idea of why your specific case would proceed to trial.

Civil litigation can conclude in several ways:

• Judgment for the plaintiff: The defendant is found liable and must pay damages or comply with a court order.
• Judgment for the defendant: The court finds no liability, and the defendant owes nothing.
• Settlement: The parties voluntarily resolve the dispute before trial.
• Dismissal: The court dismisses the case for procedural or legal reasons.

Most civil cases settle before reaching trial. Courts encourage settlement to conserve time and resources, and many clients prefer the control and certainty that settlement provides compared to the unpredictability of a trial verdict. By working closely with an attorney, you can determine whether settling or going to trial is the best option for you.

Whether to settle or proceed to trial depends on your goals, the risks involved, and the strength of your case. Settlement offers predictability and often reduces costs, while litigation may be necessary when the opposing party refuses to negotiate in good faith or when a public judgment is strategically important. A skilled civil litigation attorney will help you weigh your options and pursue the most favorable path for your case.

Typically, each party is responsible for their own legal fees, unless a contract, statute, or court order provides otherwise. The losing party may be required to pay damages or costs awarded by the court.

To win a civil case, your litigation attorney must show that your side of the story is more likely true than not. In other words, the evidence needs to tip the scale in your favor. Success usually comes from having strong evidence, trustworthy witnesses, clear legal arguments, and an experienced lawyer who knows how to present your case effectively in court.

If you lose a civil suit, the court may order you to pay damages, attorney fees, or comply with other legal remedies such as injunctions. However, you may have the right to appeal if you believe a legal or procedural error may have affected the judgment.

Most cases resolve before trial due to the cost, time commitment, and inherent in litigation. Settlements, on the other hand, allow parties to reach mutually acceptable outcomes without the stress of extended court proceedings.

No. Civil litigation typically involves monetary disputes and legal rights, not criminal conduct. While losing a civil case can result in financial obligations or court orders, it does not lead to jail time. However, ignoring a court order, such as failing to appear or comply, can result in additional legal penalties.

Yes. A valid arrest may be made without a warrant under “exigent circumstances,” if the arrestee consents, or if the arresting officer witnesses the commission of a crime or has probable cause to believe that a crime is being committed.

Crimes in California are categorized as petty offenses, misdemeanors and felonies according to the severity of punishment associated with the particular crime. Petty offenses include traffic violations and infractions of minor ordinances. Misdemeanors generally are crimes involving punishment greater than that for petty offenses, but less than one year in jail. Felonies normally are crimes involving punishment of more than one year in jail.

Yes. If you refuse a police officer’s request to submit to or complete a chemical test to determine your blood-alcohol level, you may lose the privilege of having a driver’s license for a period of one year. Before your license is suspended, the Department of Motor Vehicles must show that the police officer who requested the test had a reasonable cause to believe that you were operating a motor vehicle in violation of the laws against driving under the influence and that you refused or failed to complete any of the requested blood-alcohol-content tests.

It depends upon the circumstances. A police officer may perform an investigatory stop if he or she has a particularized suspicion that the driver or an occupant has committed or is committing a crime. During the stop, the officer may search the vehicle if his or her observations give him or her probable cause to believe that the vehicle contains contraband.

A defendant may defend his or her own case, but it can be dangerous to do so, especially if the case involves more than a minor infraction. Criminal defense law can be confusing, and the state usually is well prepared to prosecute its cases. Besides simply presenting a defense, criminal defense lawyers are adept at negotiating for a lesser charge or punishment and are adept at positioning cases for appeal, both of which can be important in resolving a case.

Read more about the services Law Advocate Group offers in criminal defense law.

The Miranda doctrine requires the police to warn a suspect that he or she has a right to remain silent, that any statement made by the suspect can be used as evidence against him or her, that the suspect has a right to the presence of an attorney during questioning, and if the accused cannot afford an attorney, the court will appoint an attorney. The so-called “Miranda warning” does not apply to any volunteered statements, and the suspect may waive his or her rights, provided that thee waiver is made voluntarily and knowingly.

Minors have the same rights regarding the Miranda warnings as adults. Also, a minor can invoke the privilege against self-incrimination. The minor may ask to see or telephone his or her parent or guardian or some other adult standing in a relationship to the minor similar to that of an attorney.

A criminal record can severely affect a person’s rights, including the ability to obtain employment, hold public office, exercise voting rights, enjoy full child custody rights, serve on a jury or be a member of the military. To escape from that past, the previously convicted person must expunge — or clear — his or her criminal record. Sometimes, this is described as “sealing” or “destroying” the records. After this process, the past blemished record of a person will be cleared, and the person will be restored to his original position, as if the person had not committed any offense.

California law permits expungement of arrest records when the charges against the arrested persons are not proved. Also, a convicted person may be eligible for a certificate of rehabilitation, which has limited application and is the first step in the pardon process.

Read more about expunging a criminal record in California.

Expungement of a Criminal Record in California

The United States Department of Justice:
https://www.usdoj.gov/

American Bar Association Criminal Justice Section:
https://www.abanet.org/crimjust/home.html

California court information system:
https://www.courtinfo.ca.gov/programs/collab/index.htm

National Association of Criminal Defense Lawyers

California Attorneys for Criminal Justice:
https://www.cacj.org/

In California, it is illegal to drive under the influence of alcohol and/or drugs or to drive with a BAC (Blood Alcohol Concentration) of 0.08% or more.

If you are facing DUI charges, contact the DUI attorneys of Law Advocate Group.

A DUI conviction can carry potential penalties of incarceration ranging from days to years; probation; monetary charges, such as fines, penalties, and restitution; suspension or revocation of a California driver’s license; and mandatory treatment programs.

A first DUI offense carries penalties of:

• Up to six months in jail
• Fines ranging from $390 to $1,000
• Assessments of three times the fine imposed
• Six-month suspension of driver’s license
• Mandatory alcohol-awareness classes for three to nine months
• Probation for one to five years

A second DUI offense within ten years carries penalties of:

• 96 hours to one year in jail
• Fines ranging from $390 to $1,000
• Driver’s license suspension for two years
• Probation for one to five years
• Mandatory alcohol-awareness classes for 18 months

A third DUI offense within ten years carries penalties of:

• Four months to one year in jail
• Fines ranging from $390 to $1,000
• Driver’s license suspension for three years
• Probation for one to five years
• Mandatory alcohol-awareness classes for 18 months

A fourth DUI offense within 10 years may carry penalties of:

•  Felony Charges
•  Iinvolve imprisonment in a state penitentiary.

To speak with a DUI attorney today, call Law Advocate Group at (310) 651-3065 or visit our contact page so that we may get in touch with you as soon as possible.

Yes, you can be charged with DUI even in a parking lot.

Yes. DUI charges can be beaten, depending on the facts and circumstances. Blood-alcohol-concentration measurements, discrepancies and lapses in procedure, disclosure of the testing device or method, lab certification, and the authority of the personnel involved who conducted the test all can be challenged in a DUI charge.

Yes. If you refuse a police officer’s request to submit to or complete a chemical test to determine your blood-alcohol level, you may lose the privilege of having a driver’s license for a period of one year. Before your license is suspended, the Department of Motor Vehicles must show that the police officer who requested the test had a reasonable cause to believe that you were operating a motor vehicle in violation of the laws against driving under the influence and that you refused or failed to complete any of the requested blood alcohol content tests.

California Department of Transportation:
https://www.dot.ca.gov/

California Courts – Self-Help Center:
https://www.courtinfo.ca.gov/selfhelp/traffic/common.htm

California Department of Motor Vehicles:
https://www.dmv.ca.gov/

California DUI A Drunk Driving Law Guide:
https://www.california-drunkdriving.org/ 

Product liability is the area of law that deals with any injury or damage that a consumer experiences when using a defective or dangerous product. The injury or damage could be a result of product failure, mislabeling or misuse. Product liability cases frequently involve strict liability, negligence, breach of warranty and a variety of consumer protection claims.

Read more about product liability law in California.

Product liability claims typically involve one of the following defects:

• Manufacturing Defect – where the product was well designed but improperly made
• Design Defect  –  when the design of the product is unsafe and subsequently leads to danger in the entire product line
• Insufficient Instructions or Warnings – where a product was safe for use, but the instructions or warnings were insufficient

Read more about defective product liability in California.

If a claim falls under the strict-liability law, a plaintiff needs only to show that the product was defective and that the defect caused the injury or damage. Thus, a plaintiff does not have to establish fault.

A product liability claim can involve several complicated issues including what types of claims exist, whom to file suit against, and whether the potential defendants have any strong defenses. Moreover, sometimes product liability cases result in class actions and involve complicated causation issues requiring expert testimony. Thus, it is advisable to consult with an attorney who can carefully evaluate your case.

The doctrine of caveat emptor requires a buyer to inspect and ask relevant safety questions about a product before purchasing; on the other hand, strict liability imposes a responsibility on the distribution chain for the injury caused by a defective product. Generally speaking, the law presumes that manufacturers are in the best position to check and to prevent a defective product from entering the market; however, a buyer should also inspect a product and exercise caution during use.

To recover product liability damages, a plaintiff must establish that

• The defective product is a ‘product’ as defined by the law
• The product was defective
• The defect was inherent when it left the manufacturer or the other defendants in the chain of distribution
• The injury or damage was caused by the defect in the product.

Although there is no specific limit to the list of products that are covered under the product liability law, some categories of products that could form the basis of a product liability suit are:

• Alcoholic beverages
• Apparel
• Asbestos
• Chemicals & cosmetics
• Firearms
• Food & agricultural products
• Machinery and tools
• Medical products & devices
• Motor vehicle defects
• Pharmaceutical products
• Recreational products
• Tobacco

The possible legal theories in product liability cases include:

• Negligence — a defendant’s lack of reasonable care in the manufacture or sale of the product, or in warning/instructing about its use
• Breach of Warranty — a defendant’s failure to fulfill the express terms and conditions promised when the product was purchased
• Misrepresentation — a defendant’s provision of false or misleading information to a buyer about a product’s safety
• Strict Liability —  defendants, regardless of fault, distributed a defective product that caused injury

If a defendant establishes that injury was caused by the plaintiff’s improper use — despite warnings and instructions — the claims are generally dismissed. However, the inquiry can be highly case specific and can depend on the kind of the product, the purpose of the product, the reasonable foreseeable care taken by defendants, the sufficiency of warning and instructions, and other factors that would have enabled the plaintiff to avoid the injury.

The product liability law basically recognizes three kinds of warranties as a part of the Uniform Commercial Code (UCC). These are:

• express warranties
• implied warranty of merchantability
• implied warranty of fitness for a particular purpose

If a defendant fails to fulfill or breaches any of the warranties stated above, it may be liable for both breach of warranty and strict liability. Breach-of-warranty claims require a plaintiff to show that a defendant received prompt notice of the breach, that defendant failed to take action to fix the defect, and that the buyer has relied on the warranty.

California law places the burden of foreseeing all uses of a product on manufacturers. Thus, a manufacturer must take reasonable care and caution while manufacturing the product and inform others about, for example, how the product works and what the possible side effects or hazards might be. If a manufacturer fails to provide adequate warning or instruction about the product, it can be liable for negligence or strict liability, depending on the facts of the particular case.

LexisNexis Workers’ Compensation Web Center

U.S. Consumer Product Safety Commission
https://www.cpsc.gov/

Federal Trade Commission’s Bureau of Consumer Protection
https://www.ftc.gov/bcp/index.shtml

International Organization for Standardization
https://www.iso.org/iso/home.htm

Public Citizen (consumer watchdog for product safety)
httsp://www.citizen.org/

U.S. Food and Drug Administration
https://www.fda.gov/

Real estate (also called real property) refers to land and things attached to land. For most consumers, real estate consists of their home and the lot surrounding it. Commercial real estate may include factories, equipment, and other facilities. In addition to buildings and equipment, resources existing on (or under) the land — such as minerals and gas — are part of real estate. Some of these components of real estate can be sold separately.

Deeds indicate, and are generally required to transfer, ownership of real estate. A deed contains the names of the old and new owners and a legal description of the property and is signed by the person transferring the property. Different kinds of deeds — such as the warranty deed, quit claim deed and grant deed — transfer different interests in property. For example, a seller conveying property by a general warranty deed ensures good and marketable title to the buyer and will defend the title to the property from all persons. In contrast, a seller conveying property by a quit claim deed conveys only what specific title the seller may have to the property — with no warranty as to ownership or defects in the title.

When a bank or other financial institution provides a loan for the purchase of real estate, a mortgage interest is created. The bank’s loan is secured by an interest in the property. State laws interpret mortgages differently, resulting in different consequences if the borrower fails to make a payment. Mortgages can be fixed rate (interest rates and monthly payments stay the same throughout the life of the loan) or they can be adjustable (interest rates may vary with economic changes ,and monthly payments change accordingly). Some government programs offer special mortgage rates or programs for veterans or other individuals. Some homeowners will take on a second mortgage or a home equity loan secured by their property for home improvement or for other financial needs. All of these mortgage interests can be foreclosed on if the homeowner does not meet his or her financial obligations under the loan.

If a homeowner fails to make mortgage payments, the lender may foreclose on the property. Depending on state law and the terms of the mortgage contract, the lender may do a statutory foreclosure without going to court or a judicial foreclosure in court. State laws provide strict regulations regarding proper notices and opportunities to pay before the property is sold in a foreclosure sale. In several states, a homeowner may stay in his or her home during a foreclosure. A lender may want to avoid foreclosure and its costs by working out an agreement with the homeowner, frequently accepting interest-only payments or partial payments to assist the homeowner. If your home mortgage is at risk of foreclosure, you should consult with an attorney as soon as possible.

Title insurance provides valuable protection for property buyers. As with all forms of insurance, however, it does not cover every conceivable problem and it is important to understand its limitations. Title insurance is based on examination of the county real estate records, and it generally will not cover problems arising from facts outside of the recorded chain of title. One common problem not covered by title insurance is boundary line issues, which would be revealed by a survey of the property (for example, it turns out that your fence is actually two feet onto your neighbor’s property). Unrecorded mechanic’s liens and unpaid public utility bills are other examples. The title insurance policy will describe many of the situations it does not cover; these same limitations will generally be found in an attorney’s title examination. A qualified real property attorney can assist in helping a buyer understand the limits of a title policy and can take care of issues not covered by the policy.

A lien is any legal claim on real property that acts as a security for the payment of a debt or other obligation. If the debt is not repaid as promised, the lender or the lien holder can foreclose its claim on the property and force a public sale to pay the debt. The most common form of a lien on property is a mortgage. Although all mortgages are liens, not all liens are mortgages. Other types of liens are commonly encountered, and part of the work of the real-property attorney is to check for outstanding liens at the time that a real estate transaction closes. These include such things as judgment liens resulting from a court judgment against the owners, mechanic’s liens resulting from recent improvements to the property, liens for unpaid taxes, and liens for unpaid municipal utilities such as water and sewer. Often, if a seller is divorced, the divorce decree will provide the ex-spouse with a lien on the couple’s property to be paid at the time of sale.

Mechanic’s lien exist in most states to provide special collection rights to persons and businesses that make improvements to real property. They are of particular concern to the purchaser of real property, because the seller may have had significant work done on the property in anticipation of sale. If the seller has not yet paid for that work, mechanic’s liens can result. The definition of mechanics and materialmen usually includes anyone who provides services such as carpentry, plumbing, painting, and the like, and anyone who supplies building materials and supplies for the project. On any given project, the general contractor, the subcontractors, and the lumberyard and other suppliers will have mechanic’s lien rights. Some states also grant these rights to professionals such as architects, engineers and surveyors.

The laws governing mechanic’s liens vary greatly from state to state. Commonly, however, the contractor has the right to serve the owner of the property with a lien claim or notice of lien and to record it as part of the county land title records when payment is not made for materials or services provided for the improvement of real property. If the lien is not paid, the contractor can commence a court proceeding to foreclose the lien and to sell the land in payment of the obligation. In some states, the contractor is required to file a notice of lien or to provide the owner with notices relative to the possibility of a lien, prior to commencing work on the property or supplying materials. Usually, the time for filing a mechanic’s lien is short; commonly, the lien must be filed within 60 to 120 days of the last day of work on the property.

Mechanic’s liens are of special concern, because in certain circumstances, they can result in an owner being forced to pay twice for the same work. Commonly, this occurs when the owner pays the general contractor in full for the work in advance. If the general contractor then fails to pay his subcontractors, the subcontractors may still have the right to file a lien and force the sale of the property if they are not paid. The fact that the owner has already paid the general contractor for the work may not be a defense. This problem can be prevented by obtaining mechanic’s lien waivers from all materials suppliers and subcontractors prior to full payment.

An abstract of title is a summary of the legal history of a piece of real property. It is used by title insurance companies as the basis for issuing title insurance and by attorneys examining title as the basis for their conclusions with regard to ownership. Despite its importance, the abstract of title is not a legal document and is not prepared by any governmental agency. Rather, it is a summary prepared by a title company or abstracting firm. To prepare the abstract, an employee of the firm, called an abstractor, reviews all of the records on file with the office of the county recorder or similar government land title office, which relate to that particular piece of property. The abstractor prepares a short summary of each transaction, arranged in chronological order, which identifies the instruments (for example, deed, mortgage); names the grantors and grantees; lists the dates that the instruments were signed and filed; and, where appropriate, provides a summary of their contents. This sequence of deeds and other documents is often called the property’s chain of title, and the function of the abstract is to summarize it accurately.

The abstract of title will have as its first entry a summary of the transaction by which the United States Government conveyed the land to a private party for the first time. It then shows every transaction affecting the land from that date up until the present. A new abstract is not prepared each time the property is sold. Rather, at each sale the abstract is updated to reflect new transactions since the time of the last update. Each time the abstract is updated, the abstractor will also conduct a search for judgments, bankruptcies, tax liens, and other similar documents that could affect title to the property. Generally, a purchase agreement will provide that the seller will pay for and provide an updated abstract to the prospective buyer for examination.

Although an abstract is not a legal document and can be replaced at any time by a qualified abstract or title firm, it is still an important document to safeguard. A new abstract is expensive. Depending on the history of the property, creating a new abstract can cost several hundred to a few thousand dollars. Not all property, however, requires an abstract of title. If property is governed by the Torrens or land title registration system — meaning that the owner received a governmental title to the property — then the need for the abstract is eliminated.

There are indeed companies and investors who specialize in buying foreclosed properties, and they do make money doing so. This is, however, an extremely high-risk form of investment that is definitely not for the inexperienced or faint of heart.

Consider the differences between a sheriff’s sale and a standard real estate purchase. In a normal sale transaction, the seller gives the buyer an opportunity to inspect the property, and the seller provides promises and warranties regarding title. These promises are, in turn, generally backed up by a title insurance policy or an attorney’s title opinion. In a sheriff’s sale, none of these safeguards exist; the rule is caveat emptor, or let the buyer beware. The deed that the sheriff conveys to the purchaser has no covenants, warranties, or representations of any kind, and the purchaser generally has no recourse if there is something wrong with the title to the real estate.

Another major problem with purchasing at a sheriff’s sale is that there is little or no opportunity to inspect the property prior to the sale. In general, the delinquent borrower still lives in the property at the time of the sale, and may be at best uncooperative (and at worst downright hostile) if asked to allow inspection by a prospective purchaser. Moreover, in many states the borrower will be allowed to remain in the property for some period of time after the sale (the redemption period); this is often up to six months and sometimes as much as a year. During this period, the borrower obviously has no incentive to maintain the property, pay taxes, or utility bills, and may actually be antagonistic enough to deliberately damage the property.

These problems explain why the mortgagor/lender is usually the only bidder at a sheriff’s foreclosure sale. With experience and the assistance of competent counsel, a purchaser can indeed successfully obtain good title to property, often at bargain prices, through the foreclosure sale process. But this is an activity best left to those with expertise in the area and a high tolerance for financial risk.

The United States has two systems for determining real estate title, which exist side by side in some jurisdictions. The most common and oldest is the abstract system. The abstract is a summary of all deeds and other instruments relating to a particular piece of property that have been recorded in the county land office. The attorney or title insurance firm reviews the abstract, traces the various lines of ownership from person to person and deed to deed over the years, matches mortgages with satisfactions of mortgages and so forth, finally arriving at a conclusion as to who owns the property and what liens or encumbrances are still valid and in force.

In some states, particularly Illinois, Hawaii, Massachusetts, and Minnesota, the abstract system is being gradually replaced by a system of registered land titles. Land is initially registered through a court proceeding. An examiner of titles or a similar government official will examine the abstract of title and will draw a conclusion as to ownership. A court action is then commenced to obtain a decree of registration confirming that ownership, with notice being given to anyone in the chain of title who might have grounds to object.

At the end of the process, the owner obtains a certificate of title to the property. Much like the title to an automobile in some respects, the certificate is conclusive evidence as to the ownership of the property for most purposes, and any liens or encumbrances must be recorded (or memorialized) on the certificate to be valid. When ownership of the property changes, the old certificate of title will be canceled and a new certificate issued in the name of the new owner. The registration process greatly simplifies the task of examining and determining title. This system is also referred to as the Torrens system, after its developer Sir Robert Torrens.

The concept of actual title to a particular piece of property refers to who actually owns it. In real estate law, however, title examiners and title insurance companies are governed by the concept of record title. The basic principle behind various statutes allowing recording of deeds and other instruments of title in the county in which the property is located is that buyers and other interested parties are entitled to rely on the record of title as reflected in the county records and to make decisions based on that record.

An example will serve to illustrate this distinction. A prospective buyer has title to a piece of property examined. The examination shows an unpaid mortgage that the seller did not reveal. There are two possibilities. The first is that the mortgage is unpaid and will need to be paid if the property is to be sold. A common problem, however, is that the mortgage actually was paid in full years ago, but the owner forgot to obtain (or record) a satisfaction. The seller’s actual title is good, in the sense that the mortgage has in fact been paid and no one can foreclose on it. But the seller’s record title is not good, because the real estate records do not reflect this fact. In either case, the seller lacks marketable title, and the situation would need to be corrected before the property can be sold.

Making sure that all appropriate steps are taken to affirm that the record title to property accurately reflects its actual ownership is one of the important services that an attorney working in the area of real-property law can provide to a buyer or seller.

Adverse possession is a right to use or own property that is the result of continued use and occupancy over a period of time, generally ten to 20 years, depending on the state. If a non-owner of property occupies and uses the property without the permission of the actual owner for long enough, the law will find that the actual owner has lost his or her rights in the property and that ownership has transferred. Because the doctrine of adverse possession results in taking property without payment, the principle is applied very carefully by the courts and only if certain specified conditions are met. Thus, for example, the adverse use must be obvious to the real owner. And the use must be hostile, meaning that it is without the permission of the real owner. Use of another’s property with the permission of the owner will never create a right of adverse possession.

Adverse-possession issues arise most often where an adjacent property owner encroaches on a neighbor, although they may also arise in other situations. For example, assume that your neighbor erects a fence three feet onto your property, preventing you from using that space, and the neighbor starts using the land as a garden. Obviously, as owner you would have the right to remove the fence and the garden. Or, you could sign an agreement with the neighbor allowing him to use the land with your permission for a specified period of time. But, if as owner you took no action, and the adverse use continued for the specified number of years, the neighbor could come to actually own that portion of the property. For this reason, it is important when purchasing property to check for encroachments and adverse uses, and to conduct a survey if there is any question as to where the property lines actually are.

The theory behind state and local zoning ordinances is that uses within a particular area should be uniform. Although this system generally works well, obviously there will, on occasion, be the need for exceptions to the general rule. Depending on the needs of the individuals involved, and the impact on the neighborhood as a whole, it may be possible to change the zoning on a particular property by obtaining a variance. A variance is permission to depart from the requirements of a zoning ordinance in one or more particulars. Generally, a variance request is granted or denied through administrative action. Variances can be divided into area variances and use variances.

An area variance may be requested where the use is permissible, but does not quite fit the property. For example, if an owner wanted to add a deck to his or her home that would violate the minimum setback requirements of the zoning regulation, or if the owner wanted to build a two-story garage, which exceeded the height requirement, an area variance would be required. By contrast, the use variance relates to a use of the property that is otherwise impermissible in the given zone. If, for example, a landowner wanted to build a grocery store in a locality zoned exclusively for residential purposes, a use variance would be required. Generally, a use variance will be more difficult to obtain than an area variance. The land owner requesting the variance must show undue hardship that is not self-imposed and must demonstrate that the variance would not harm the public welfare, would not have an excessive impact on the general zoning plan, or would not adversely impact surrounding property values. The requirement that any hardship not be self-imposed is of particular significance. The purpose of this requirement is to prevent an owner from building a nonconforming structure and then seeking a variance for it on the grounds that it would be a hardship to tear it down.

One goal of zoning is to separate property uses into distinct zoning districts (for example, residential, commercial, industrial) and to keep uses within each zone uniform. For example, if a district is zoned for residential use, no businesses will normally be permitted to open there. However, what happens to a business that existed and was operating prior to the time when its location was zoned residential?

At this point, the constitutional prohibition against taking property without just compensation comes into play. If a use predates the zoning plan, it will be permitted to remain, because the government lacks the power to simply close a business in a zone that becomes residential or to require a home in an industrial zone to be torn down, unless it is willing to compensate the owner for the loss. Such exceptions are called nonconforming uses. Commonly, the portion of the zoning statute allowing prior nonconforming uses is called a grandfather clause and such a use is said to be grandfathered in.

Nonconforming uses, however, are not exempt from all zoning regulation. Although they cannot be taken (without compensation), the government is not required to allow them to change or expand. The use is generally limited to what existed when the zoning ordinance was adopted. Also, if the nonconforming use is abandoned or if it ceases, the grandfather rights are lost, and the nonconforming use cannot be restarted at a later date. Under many laws, if a nonconforming structure is destroyed by fire or other cause, it may not be rebuilt. The hope is that, with these restrictions in place, nonconforming uses will decrease and cease over time.