Several years ago I tried an unlawful detainer case that the commercial tenants defended on the basis that their lease was void because it had been negotiated and signed by a unlicensed property manager. The court agreed that the Lease was void, but the tenants lost the case because they had no right to possession without a lease.
Illegality issues can arise in a number of other real estate cases: an unlicensed broker cannot recover a real estate commission; an unlicensed contractor may not be entitled to payment; and a contract for the sale of unsubdivided parcels of the land may be unenforceable.
This last issue was the subject of Black Hill Investments, Inc. v. Albertson's, Inc. (2007) 146 Cal.App.4th 883. In that case, a buyer was able to cancel a purchase agreement because the seller, Albertson's, Inc., failed to include the proper language in the contract. While it is generally illegal to sell parcels that have not been subdivided, there is an exception under Government Code section 66499.30(e) which permits the sale of an unsubdivided parcel when the contract is expressly conditioned on the recordation of a subdivision map. The contract in question allowed Albertson's Inc. to cancel the sale if the subdivision map was not recorded, but did not make the obligation of the buyer to purchase the parcel conditional upon the recordation of the map. Even though the subdivision map was recorded before the buyer canceled, the Court of Appeal determined the contract was void from its inception and could not be revived by the recordation of the map.
In entering into contracts for the sale of unsubdivided land, as well as other real estate contracts, the parties should take care to include the proper language and to confirm that the status of the parties will not render the contract void from its inception.
