Reference no: EM134007621

Question

Orande owned a beautiful home in the plush CALIacre subdivision of Las Nachos. All of the homes were set back, so no one could see the buildings from the street. Being a strongly family oriented person, Orande wanted room for all family members who wanted to share their time together. So, after the family eventually occupied all the space in the original house, Orande converted a sizable portion of the huge garage into an "in-laws" apartment. That way, he had even more living space available for the family if the need arose.

In the meantime, Orande's best friend, Fandango, lost her job and needed reasonable living quarters for her and her husband. So, Orande and Fandango entered into an oral lease allowing Fandango and her husband to live in the apartment on a month-to-month basis either until either Orande or Fandango gave the other a 30 day notice to terminate the lease. Fandango and her husband moved in immediately.

Eventually, Orande wanted an even larger home. So, he advertised the home for sale in the local newspaper. The ad emphasized the home was a beautiful single-family residence with an attached rental unit.

As luck would have it, one of Orande's long time business associates, Padrina, was one of the first persons who responded to the ad. While Orande and she toured the home and sat over a cup of coffee discussing the sale, Orande learned Padrina, too, was "from the old country." The more they talked, the more they new they were going to make a deal. By the end of the evening, they worked out all the details. This included how Padrina could use rental monies from the apartment to help pay the mortgage, since she could not afford the house without the additional income. Exhausted, Padrina hugged Orande, thanked him and went home saying she would return in the morning.

The next morning Padrina was even more excited. She arrived at Orande's house with two copies of her hand-written note which she had signed and which contained the following information:

"July 18, 2002

Orande,

Thank you so much for agreeing to sell your CALIacre home and its attached rental unit in Las Nachos to me for $1,500,000. With the income from the apartment, I am sure I can afford the $1,250,000 loan I will have to get. My mortgage broker has already worked it out for me. I have the rest in cash from stock I sold recently.

Please initial both copies of this, one for each of us, so as to confirm these terms. I have already signed both. I will need mine to get the mortgage application under way. As soon as the lender finishes the appraisal and survey, I will let you know.

Please send the title update to my attorney, R.J., whom you know.

Sincerely,

Padrina

Initials:___________ Dated:__________

Orande"

Orande initialed both and gave one to Padrina. She left and immediately applied to the lender for her loan, paying the lender for the application fee, impending appraisal and survey.

After reviewing the title update, R.J. immediately notified Padrina and Orande that the property was subject to a properly recorded Declaration of Covenants, Easements, Restrictions and Limitations that limited the property to single family use. Therefore, using the garage as a rental unit for someone not a part of the owner's family constituted a violation of the covenants and subjected the property to prospective litigation by the homeowners' association which had the right to enforce the covenants.

Further, R.J. reviewed the survey at about the same time. As a result of that review, R.J. reported that the property was subject to a dedicated fifteen foot easement for electrical and other utilities running across the entire rear portion of the lot.

During all of this, the lender's appraiser completed her job. The property appraised at $1,750,000.

Padrina now seeks legal advice as to what her legal options are. Presuming there is a valid and enforceable contract between Orande and Padrina, what will R.J. most likely advise her?