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Abers v. Rounsavell

October 18, 2010


Appeals from a judgment and postjudgment order of the Superior Court of Orange County, Stephen J. Sundvold, Judge. Reversed with directions. (Super. Ct. No. 05CC00047).

The opinion of the court was delivered by: Rylaarsdam, Acting P. J.



These appeals concern a Santa Ana condominium project that falls somewhere between owning a home and renting it. Plaintiffs (the homeowners) purchased a leasehold interest in their individual homes in a 150-unit condominium project. Each has been assigned a single-unit ground lease with lessors, the trustees of a family trust.

The ground leases are for a long term (75 years), with a rent adjustment clause for increasing the rents after 30 years. The rent adjustment clauses call for reassessing the ground rent based on a percentage of the appraised value of the "leased land." It is now time to adjust the ground rents.

What meaning should be given for the term "leased land," as used in the 150 single-unit leases? The homeowners contend that we should look to the four corners of each ground lease, which basically describes the "leased land" as the individual condominium unit, as well as a small fractional share of part of the common areas. The trustees urge us to consider extrinsic evidence to expand the definition of "leased land" to include the entire condominium acreage, including the land underneath the complex's recreation center, which is the subject of a separate ground lease with the homeowners association.

Like the trial court, we have examined the trustees' proffered interpretation of the ground leases, and the related extrinsic evidence. Unlike the trial court, we find no ambiguity, either latent or patent. Because none of the language in the single-unit leases is reasonably susceptible to the trustees' suggested interpretation, we reverse the judgment for the trustees.

Our decision for the homeowners on the principal appeal moots the trustees' appeal from the postjudgment order denying attorney fees.


1. The Phased Development of the Condominium Project (1969-1975)

a. The Warner Lease and Assignment to Warmington

The trustees administer the John and Vera B. Rohrs Trust, which owns 18 and one-half acres of land in Santa Ana on which the Shady Hollow condominium project was developed in the mid 1970s.

The trustees initially entered into a unitary lease in 1969 to lease 18 and one-half acres of undeveloped property to Warner Enterprises for a 55-year term for apartments. The initial ground rent was based on a percentage of the fair market value of the undivided parcel.

Warner never built the apartments. Four years later, with the trustees' consent, Warner assigned its interest in the ground lease to Warmington Development, which instead decided to build condominiums.

In March 1974, Warmington recorded a parcel map for the 18 and one-half acres. The parcel map envisioned the phased development of a 150-unit condominium project on three separate parcels: (1) parcel one, for 83 condominiums, to be constructed in the first phase; (2) parcel two, for a recreation center (a clubhouse and swimming pool), and (3) parcel three, for an additional 67 condominium units, to be constructed in the second phase.

The trustees and Warmington decided to structure the transaction as ground leases, rather than a fee sale. Warmington would construct the condominium units, and arrange for them to be placed on the residential real estate market. The homebuyers would never acquire fee ownership in the condominium units; instead they would accept an assignment of one of 150 separate single-unit ground leases, which were to be prepared and executed by the trustees and Warmington. These 150 leases would supersede the unitary Warner lease.

b. Parcel One Ground Leases

The condominium plan for the parcel one units was recorded in June 1974. The leases followed the same exemplar, with an express integration clause "that there are no verbal agreements, representations, warranties or other understandings affecting the same." They defined the "leased land" in each single-unit lease as the specified condominium unit, and an undivided 1/83rd interest as a tenant in common in the parcel one common areas. Running for a 75-year term ending on December 31, 2049, they provided for a monthly ground rent for the "leased land" of $42 for the first 30 years, for an annual total of $504.

The rent adjustment clause was contained in the same paragraph (paragraph 22) of each of the initial 83 leases. Midway through the 30th year of the lease, the ground rent for the "leased land" would be adjusted to eight percent of the then current fair market value, exclusive of all land improvements. Were the parties unable to agree upon the adjusted rent, the rent would be determined by three arbitrators, two of whom would be individually selected by the parties. New rent adjustments would apply for succeeding 10-year periods through the end of the lease.

On October 18, 1974, the trustees and Warmington executed individual single-unit leases for the 83 parcel one units. The same day, they formally terminated the Warner lease insofar as it affected parcel one.

As the units were sold, each purchaser signed an assignment for the particular described condominium. The assignment contained the same legal description of the leased property as the ground lease to which it pertained. The assignments were signed by the individual purchasers, as the assignees, and by a Warmington representative, as the assignor.

c. Parcel Two Ground Lease (Recreation Center)

The trustees and Warmington created a separate ground lease for the recreation center on parcel two. This ground lease also ran for a 75-year term through December 31, 2049, but there was no rent adjustment clause. Instead, the lease provided for a nominal rent of $1 for the entire term, with no rent increase.

The trustees and Warmington executed the parcel two ground lease on October 18, 1974, the same day they executed the parcel one ground leases, and the same day they terminated the Warner lease with respect to parcel one and parcel two.

Warmington recorded a declaration of covenants, conditions and restrictions (CC&Rs) for the Shady Hollow Homeowners Association (HOA). These documents governed the 83 units on parcel one, and the recreation center on parcel two. In November 1974, Warmington assigned the parcel two ground lease to the HOA. The trustees agreed to this assignment.

d. Parcel Three Ground Leases

The project's second phase consisted of an additional 67 condominium units to be constructed on parcel three. In October 1974, Warmington recorded the parcel three condominium ...

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