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Tag: lien

  • Kanye West sues ex-employee over Malibu mansion lien

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    Kanye West, the rapper now known as Ye, is suing his former project manager and his lawyers, alleging they wrongfully put a $1.8-million lien on his former Malibu mansion.

    The suit, filed in Los Angeles Superior Court on Thursday, alleges that Tony Saxon, Ye’s former project manager on the property, and the law firm West Coast Trial Lawyers, “wrongfully” placed an “invalid” lien on the property “while simultaneously launching an aggressive publicity campaign designed to pressure Ye, chill prospective transactions, and extract payment on disputed claims already being litigated in court.”

    Saxon’s lawyers were not immediately available for comment.

    Saxon, who was also employed as West’s security guard and caretaker at the Malibu property, sued the controversial rapper in Los Angeles Superior Court in September 2023, claiming a slate of labor violations, nonpayment of services and disability discrimination.

    In January 2024, Saxon placed the $1.8-million “mechanics” lien on the property in order to secure compensation for his work as project manager and construction-related services, according to court filings.

    A mechanics lien, also referred to as a contractor’s lien, is usually filed by an unpaid contractor, laborer or supplier, as a hold against the property. If the party remains unpaid, it can prompt a foreclosure sale of the property to secure compensation.

    Ye has denied Saxon’s allegations. In a November 2023 response to the complaint, Ye disputed that Saxon “has sustained any injury, damage, or loss by reason of any act, omission or breach by Defendant.”

    According to Ye’s recent complaint, he listed the property for sale in December 2023. A month later, he alleged, Saxon and his attorneys recorded the lien and “immediately” issued statements to the media.

    The suit cites a statement Saxon’s attorney, Ronald Zambrano, made to Business Insider: “If someone wants to buy Kanye’s Malibu home, they will have to deal with us first. That sale cannot happen without Tony getting paid first.”

    “These statements were designed to create public pressure and to interfere with the Plaintiffs’ ability to sell and finance the Property by falsely conveying that Defendants held an adjudicated, enforceable right to block a transaction and divert sale proceeds,” the complaint states.

    The filing contends that last year the Los Angeles Superior Court granted Ye’s motion to release the lien from the bond and awarded him attorneys fees.

    The Malibu property’s short existence has a long history of legal and financial drama.

    In 2021, West purchased the beachfront concrete mansion — designed by Pritzker Prize-winning Japanese architect Tadao Ando — for $57.3 million. He then gutted the property on Malibu Road, reportedly saying “This is going to be my bomb shelter. This is going to be my Batcave.”

    Three years later, the hip-hop star sold the unfinished mansion (he had removed the windows, doors, electricity and plumbing and broke down walls), at a significant loss to developer Steven Belmont’s Belwood Investments for $21 million.

    Belmont, who spent more money to renovate the home, had spent three years in prison after being charged with attempted murder for a pitchfork attack in Napa County. He promised to restore the architectural jewel to its former glory.

    However, the property has been mired in various legal and financial entanglements including foreclosure threats.

    Last August, the notorious mansion was once again put on the market with a $4.1 million price cut after a previous offer reportedly fell through, according to Realtor.com.

    The legal battle surrounding Ye’s former Malibu pad is the latest in a series of public and legal dramas that the music impresario has been involved in recent years.

    In 2022, the mercurial superstar lost numerous lucrative partnerships with companies like Adidas and the Gap, following a raft of antisemitic statements, including declaring himself a Nazi on X (which he later recanted).

    Two years later, Ye abruptly shut down Donda Academy, the troubled private school he founded in 2020.

    Ye, the school and some of his affiliated businesses faced faced multiple lawsuits from former employees and educators, alleging they were victims of wrongful termination, a hostile work environment and other claims.

    In court filings, Ye has denied each of the claims made against him by former employees and educators at Donda.

    Several of those suits have been settled.

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    Stacy Perman

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  • House approves plan to end ‘equity theft’ in foreclosure sales

    House approves plan to end ‘equity theft’ in foreclosure sales

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    BOSTON — The state House of Representatives has approved a proposal to stop “equity theft” from property owners who fall behind on their local taxes, which comes in response to federal and state court rulings that deemed the practice unconstitutional.

    The bill, which passed Wednesday by a vote of 154-0, would establish a process allowing delinquent property owners to claim “excess equity” within 60 days of a foreclosure sale or seizure by local governments.

    The excess equity would be determined by deducting the tax title account balance owed to a local government on date of a foreclosure judgment, the cost of appraisal, and other related expenses, according to the proposal. Property owners would need to file a claim to recoup the excess equity.

    The changes are a matter of fairness to property owners who shouldn’t lose equity in their home that they’ve built up over years because of an unpaid tax bill, lawmakers said.

    “No one, and no entity, should gain a windfall profit in a split second by stealing every bit of equity someone else has built over decades or a lifetime,” state Rep. Tram Nguyen, D-Andover, said in remarks ahead of the bill’s passage. “Not here. Not anywhere.”

    Another architect of the bill, state Rep. Mark Cusack, D-Braintree, said the changes are aimed at “protecting property owners and making towns whole” and ensuring that excess equity is “returned to the rightful owners.”

    To help prevent property owners from slipping into foreclosure, the proposal would require local governments to provide advanced notice to people who have fallen behind on their taxes and at risk of having a lien placed on their property.

    Movement on the legislation comes amid pressure on lawmakers to act following a series of court rulings over the past year holding that government can’t take value of someone’s property beyond taxes owed without reimbursement.

    A 2023 U.S. Supreme Court issued a ruling in a Minnesota tax foreclosure case that effectively deemed the practice unconstitutional by siding with a 94-year-old woman over her claim that a county government violated the Constitution by keeping a $25,000 profit when it sold her home in a tax foreclosure sale.

    Chief Justice John Roberts wrote in the ruling that taxpayers are only required to pay the government what it is owed and anything beyond that is an unconstitutional taking of property.

    “The taxpayer must render unto Caesar what is Caesar’s but no more,” Roberts wrote, in a reference to biblical scripture.

    In April, a Massachusetts judge added to the pressure on lawmakers to take steps to comply with the high court’s ruling. Superior Court Judge Michael Callan’s ruling in a Hamden County lawsuit deemed the law “unconstitutional,” saying “the statutory scheme, in its present form, is untenable and requires Legislative correction.”

    Massachusetts is among a dozen states, plus Washington, D.C., with tax foreclosure laws allowing local governments or investors to take dramatically more than what is owed from homeowners who slip into default.

    Under the state’s foreclosure law, cities and towns can sell or keep tax liens on delinquent properties. The lienholder — whether it’s a local government or investor — can file for foreclosure once the debt is six months old.

    Once a property is foreclosed on, the lienholder gets a deed and can keep or sell it. A lienholder can keep profits from the sale, under the law.

    Critics of the practice, including the Boston-based New England Legal Foundation, argue that if the government seizes a home to collect overdue taxes the homeowner should be allowed to collect the surplus revenue from the sale once the taxes are paid.

    Dan Winslow, the foundation’s president, said the House’s plan to fix the law “strikes a fair balance between the need for cities and towns to collect taxes for local services while protecting homeowners from being cheated out of their hard-earned equity.”

    A 2022 report by Pacific Legal Foundation found homeowners in Massachusetts and other states collectively lost more than $777 million in savings on more than 5,600 homes based on their market value, above what they owed in taxes. On average, homeowners lost 86% of their equity, the group said.

    Local governments, which often sell properties for a fraction of market value, collected about $26 million more than they were owed on 1,300 homes, the report said.

    Meanwhile, private investors collected an estimated $250 million more than they were owed on about 2,600 homes, the report’s authors said.

    In Massachusetts, the report identifies about 315 homes in the state — including several in Lawrence — that have been affected by home “equity theft” totaling more than $48 million.

    The House’s excess equity proposal must be approved by the state Senate before heading to Gov. Maura Healey’s desk for consideration.

    Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com

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    By Christian M. Wade | Statehouse Reporter

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  • The Next Few Landmines In Nonrecourse Carveouts

    The Next Few Landmines In Nonrecourse Carveouts

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    Nonrecourse carveout guaranties are part of the landscape for commercial real estate loans, much as landmines are part of the landscape for recent war zones.

    These nonrecourse carveout landmines have often exploded dramatically in the faces of carveout guarantors. Guaranties triggered full recourse for the loan if the borrower violated one of several dozen single purpose entity covenants, ranging from the trivial to the fundamentally misguided.

    In the latter category, some SPE covenants required the borrower to remain solvent or limit its ordinary indebtedness to certain capped amounts—covenants the borrower would inevitably violate if it got into financial trouble. The guarantor could face personal liability for the entire loan if the property couldn’t cover its expenses. Such exposure is fundamentally inconsistent with the logic of nonrecourse financing.

    Many lenders have corrected their documents to prevent such anomalies. Today’s updated SPE covenants often don’t support claims for liability of the type suggested in the previous paragraph. Instead, liability depends on whether the borrower, controlled by the guarantor, actually did bad things that hurt the lender.

    That doesn’t mean all of the landmines have been cleared. At least two significant landmines remain. More will surely become apparent in the litigation that today’s commercial real estate downturn will trigger.

    As one significant remaining landmine, many nonrecourse carveout guaranties make the guarantor personally liable for the entire loan if any voluntary lien is recorded in violation of the loan documents. Lenders have been known to claim that mechanics’ liens are voluntary on the basis that the borrower chose to order construction work and then chose not to pay for it. If a mechanic’s lien gets filed, the lender can then try to assert that the guarantor becomes personally liable for the entire loan.

    That picture has two things wrong with it. First, the lender’s interpretation of “voluntary” seems unreasonable. Worse, if the lender is right, the mere filing of a mechanic’s lien triggers full personal liability for the loan, even if the borrower quickly removes the lien. In contrast, the loan documents themselves typically give the borrower reasonable time to cure a problem before the lender can take action. That different treatment means the mere filing of a mechanic’s lien could make the guarantor immediately liable for the full loan even though the borrower itself still had time to fix the problem. The same is true if the borrower does somehow carelessly file a lien that is truly “voluntary.”

    Borrowers and guarantors can and should solve those problems. First, they should insist on defining “voluntary” lien narrowly, to capture only cases where, for example, the borrower intentionally creates a junior lien, such as a second mortgage. Whether or not that position prevails, the guarantor should insist on having notice and opportunity to cure before any voluntary lien, however defined, triggers full personal liability for the entire loan. Guarantors should have at least the same protections as the borrower. Practically no nonrecourse carveout guaranty extends that sort of courtesy to any guarantor if any lien arises.

    Similar anomalies arise if the borrower incurs prohibited indebtedness. The loan documents give the borrower some time to correct (repay) that indebtedness. The guarantor should demand similar protection. If the prohibited indebtedness arises because the property is sucking wind, that shouldn’t trigger any guarantor liability at all.

    Another landmine: if a troubled borrower admits in writing that it can’t pay its debts, most loan documents make that a default. It also usually makes the guarantor personally liable for the whole loan. That’s partly because such an admission can help the borrower’s creditors start an involuntary bankruptcy or similar proceedings under state law. The lender doesn’t want that to happen. That all sounds reasonable.

    It may, however, mean that ordinary, innocent communications with creditors, or even the lender, about the borrower’s financial problems can conceivably create exposure for both the borrower and the guarantor. If the borrower admits in those conversations that it can’t pay its debts, the guarantor might face personal liability for the entire loan. If the admissions are accurate, however, and the borrower in fact can’t pay its debts, does it really even do much incremental damage if the borrower admits a fact that is staring everyone in the face?

    A careful guarantor will want to limit the “admission of inability to pay debts” trigger for liability as much as possible, or even eliminate it. If written broadly, as it usually is, it creates a tripwire and could give the lender all kinds of opportunities to try to make the guarantor personally liable for the whole loan.

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    Joshua Stein, Contributor

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