All posts by Robert Bevans

The Deadly Double Dip–Things for Unhappy Condominium Unit Owners to Think About before suing their Association

Condominium, Litigation/Disputes, ,

The case made perfect sense. The Condominium Trustees were acting capriciously, and without any regard for my client’s well-being. There had been a water main break which has damaged my client’s unit, and he was aware of a substantial payment from the insurance company which provided the common area insurance. My client wanted to repair the damage to his unit, and he wanted a portion of the insurance proceeds to do this repair. 

So we wrote a few nasty letter, which were ignored. Then, we sat down with the client and discussed litigation. We gave the client a budget and a timetable. They were reasonable, and we  got clearance to proceed. We filed a lawsuit, and then we got hit with the BOMB. The Trustees hired a very expensive law firm to defend their position. The law firm required a substantial retainer, far more than our firm quoted for representing the client throughout the entire litigation, including a trial if necessary. By the rules of the Condominium, my client was required to advance his share of the retainer to the Trustee’s law firm. If this sounds like “Oz” to you, you can imagine my client’s reaction.

The case has since settled, with a result that my client could live with. In fact, my client received a substantial percentage of the advanced retainer back when the matter settled. That made things more palatable to my client.

There are some lessons to be learned from this set of circumstances, which I want to pass along to each of you:

     1. Review the Condominium Documents carefully before you Purchase. Look to see if there is an arbitration provision for disputes. Arbitration is becoming more common in newer documents, and some Lenders are insisting on arbitration provisions, especially for smaller Condominiums.

     2. Pursue all non-litigation avenues before deciding to start litigation.  Without arbitration. litigation is a lonely path for a single unit owner, and often more expensive than a unit owner can anticipate. Try to find a sympathetic person on the Condominium Board of Trustees, who can bring about a non-litigation based solution. It is worth the effort.

     3. If your Condominium Documents do not provide for arbitration, try to get them amended.  Amending Condominium Documents is generally expensive, mainly because the consent of Lenders will need to be obtained. Lenders favor arbitration. Therefore, the normal Lender will be receptive to the type of change which institutes arbitration. It is definiotely worth pursuing.

Many Condominiums are poorly managed, with the least capable people serving as Trustees. That being the case, it is imperative that the Condominium Documents be adapted, as much as possible, to permit free speech by unit owners and a non-confiscatory way to settle disputes. “Double dipping” really hurts, and it is not fair.

The Collection of Unpaid Common Area Fees–A Success Story with Legs

Condominium, ,

Recently, a client of mine contacted me with a problem. He was the sole Trustee of a six unit condominium in Massachusetts, where I practice as a title attorney with over 40 years of experience. It seems that one Unit Owner had not paid common area fees for more than a year (believe it or not) and the Condominium was starting to feel the effects of the delinquency.

After chastising my client for waiting so long to get in touch with me, I went to work. Initially i sent a demand to the Unit Owner. As expected, this was ignored. My next course of action was a title search to determine the name of the Unit Owner’s mortgage lender. Once this was determined, I notified the lender of the large delinquency, including penalties, late fees and my fees, again to no avail. Finally, i pulled the trigger with the “silver bullet”–a complaint against the Unit Owner with notice that a foreclosure sale would soon take place to obtain funds to liquidate the outstanding indebtedness.

In Massachusetts, as well as most other jurisdictions, the amount owed for common area fees, when properly handled, constitutes a “super lien”, ahead even of the first mortgage. When the lender was notified of the fact that our law firm was taking the “super lien” step, they contacted me, asked how much the total outstanding indebtedness was and sent us a check for the total amount due, plus attorneys fees.

There are some great results which were realized by this exercise:

     1. The Condominium got every penny that was due.

     2. The Condominium did not have to pay our law firm any fees for services. These were paid by the lender, as part of their steps to remove the “super lien”.

     3. In future Questionnaires from othr lenders, the Condominium does not have to indicate a large receivable from a delinquent Unit Owner. Such disclosure often impeads getting a Condominium cleared for future mortgage loans.

There are some holes here, too. If the Unit Owner continues not to pay, future actions will need to be commenced. That will leave the Condominium with a 60 day or so shortfall on common area fees. On balance, however, the Condominium’s financial position has been much enhanced by the actions we have taken, and I would urge any of you who have this type of problem in buildings you manage, or are attempting to complete sales transactions, to contact knowledgeable counsel immediately to get the Condominium on this sure-fire collection course.

The AirConditoning System Only feeds the second floor–What to do when the pre-closing inspection reveals an issue that complicates closing

closing, Litigation/Disputes, ,

Recently, I conducted a residential closing on a property in a high end suburb of Boston, The property was generally in great condition, but my client, the BUYER, informed me that the pre-closing inspection (not the inspection after the Offer, but the “walk-through”) indicated that the air conditioning system in the home didn’t feed both floors. The SELLER said he was mistaken, and there was no problem with the air conditioning system, at all.

An impasse arose where the closing, itself, was in jeopardy. The problem was that this is a “grey” area in most sales agreements. It is not a material kind of breach of the covenant that the property will be in the same condition that it was at the time of the signing of the sales agreement. On the other hand, the BUYER expected a fully operational air conditioning system.

After some rather heated discussion between counsel, a compromise position was reached, whereby a sum of money was held in escrow pending analysis and repair by an air-conditioning professional. That work was done; the $360 charge paid out of the escrow, and the  both parties were generally satisfied.

That was a good thing, because at the worst part of the closing negotiations, my BUYER was not going to close on the transaction, and perhaps leave a healthy deposit on the table, pending litigation, and the SELLER needed the sales proceeds to buy another home in Florida.

So when it was over, I tried to develop some provision I might put in the sales agreement which could prevent this from re-occurring. I came up with the following provision, and I would appreciate feedback from the ActiveRain community (1) whether you think this approach makes sense or (2) what other ways you have seen to deal with this type of problem.

MY SUGGESTED PROVISION:

       “If at the “walk-through” the BUYER determines, in good faith, that there is a condition on the premises which is not consistent with the condition which existed when the purchase and sale agreement was executed, but which is not of such material nature which would prevent completing the delivery of the deed and the payment of full consideration for the premises, the BUYER may, nevertheless, complete the transaction, and the BUYER and SELLER will agree on an appropriate escrow sum to be held by BUYER’s attorney, for a period of no longer than thirty (30) days to permit the parties to resolve the problem with the assistance of professionals skilled in the area which is in dispute.”

Let me know if you think this works, or any other thoughts you may have. Thanks

Helping your customer purchase an REO–Some important observations which may help you walk through this minefield.

closing, ,

One of the areas which my law firm, Topkins & Bevans, with offices in Boston, Waltham and Braintree, Massachusetts, has recently become extremely active is real estate owned by banks and other financial institutions after foreclosure (generally known as “REOS”). REO purchases are not for the meek, and I thought I would share with the Active Rain community some of the “issues” which almost always obtain when purchasing an REO:

     1. REO Properties are always sold “as-is”. This means that you may be able to get limited financial concessions for problems at, or around the dwelling, but virtually “never” have an REO Seller, which will fix or restore problems in the dwelling.

     2. The closing date on the REO sales agreement is rarely, if ever, the date of the actual closing. There are generally too many title issues which are lurking in the property’s history to permit an orderly closing. This can be especially troublesome for people buying an REO as their intended residence. We have seen many instances where REO Buyers are “homeless” because they have made plans to leave their prior residence for the REO property only to experience delays. Be prepared for not a lot of “human kindness” from the REO Seller even though your client is in a desperate situation.

     3. Most REO properties are handled by servicers for the investors. Accordingly, there is a rather rigid “chain of comman” which muct be adhered to and can rarely be side-stepped. This means that delay in reaching decisions is almost always a “given” and you, and your client, will be disadvanatged.

     4. Foreclosure sales are the culmination of a generally lengthy process, with many areas where terminable error can sneak in. The Internal revenue Service and state Department of Revenue must be given appropriate Notice. The foreclosure documents must be drafted correctly, or confirmatory documents will be required. Any such documents need to go up the “chain of command” and that can occasion delays. The Buyer’s attorney, or title company, will be expected to certify title. This is hard to do if the foreclosure has “flaws”. The investor Seller is rather picky about the flaws in the title. Once the investor signs off, it does not want to deal with the property again. This can definitely cause delays.

     5. If a closing cannot be scheduled in the reasonably near future, the Seller may pull the property off the market even though the Buyer wants to complete the purchase. The Seller would rather wait until the title issues are all resolved. The Seller really doesn’t care to whom the property is sold. The Seller just wants to know that once the deal is done, it is “done”, so that need for closure often drives the bus.

     6. There are some continuing issues with outstanding liens on the proeprty, most notably in the payment of overdue condominium common area fees. If the outstanding fees are in excess of certain prescribed numbers, the Seller will not permit that a HUD-1 Settlement Statement to include payments with respect to that problem. Don’t ask me why, but it can cause problems.

    7. An Owner’s Policy of Title Insurance is an absolute “must” for REO purchases. There are just too many areas where a slip-up will cause problems down the road. Some of our REO Sellers will ask our firm to write the Owner’s Policy and pay for same as their closing cost. Others are not as generous. In any event, make sure you Buyer has a Policy. That is among the best advice you can give to your REO purchaser.

Closing really means Final, Final!!! Things a realtor can do at a closing that REALLY matter

closing, , , ,

Recently, I conducted a real estate closing in Massachusetts that came together in less than two(2) weeks from Offer to Closing. After the closing was completed, but before I had disbursed funds to the Seller, my Buyer discovered that a closing cost credit that was clearly set for in the Purchase Agreement did not make it to the HUD-1 Settlement Statement for the transaction.

This was, of course, after the Lender had “thoroughly reviewed” the HUD-1 and give its approval. Fortunately for my Buyer, our office has a ZERO TOLERANCE policy of not remitting to the Seller until a final review of the Purchase Agreement is made and the items on the HUD-1 Settlement Statement compared to the terms of the Purchase Agreement. To be perfectly candid with my readers, this ZERO TOLERANCE policy was born from a colossal mistake one of my paralegals made in the past which led to our firm absorbing a $5,300 loss in a residential sales transaction.

In any event, I am sure that not all closing agents practice the paranoia we have made as POLICY at Topkins & Bevans. That being the case, I have the following suggestions for you realtors who attend closings on behalf of the Seller or the Buyer:

     1.  Bring the fully signed copy of the Purchase Agreement with you to the Closing. It is a sad commentary, but you may be the only entity which actually has that kind of document in your possession. I find it often the case that I will negotiate the Purchase Agreement, and add riders, but, in the end, I never get a signed copy of the final Agreement.

     2.  Compare the Signed Copy of the Purchase Agreement with the HUD-1 Settlement Statement. The Buyer and Seller are busily working with the closing agent on getting all the documents signed. The Seller wants his money; the Buyer wants to get out of the Closing as fast as possible to pick up the kids at Mom’s, or greet the mover, or do a thousand other last minute things. You are there with actually very little left to do. You have done most of your work already. But, you can do all parties a big favor by just going through things “one more time”.

     3. Bring any discrepancies you discover discreetly to the attention of the closing agent. Certainly, your goal here is NOT trying to “show-up” the closing agent. You just want things to be CORRECT. Believe me, he or she will appreciate your efforts. So should the affected party for whom you may have saved thousands of dollars. If the closing is a chance for you to continue marketing, this diligent review of the Purchase Agreement will only underscore your thorough approach to all situations and enhance your standing with everyone in the Closing room.

The next time you hear a colleague complain about the requirement of going to a closing and being bored out of his or her mind, suggest the review set forth herein. I am almost sure that such advice, after being adhered to a few times, will engender a “thank you” from the person you suggested it to. Money errors at the Closing are hard to fix, and often result in expense of time and money, even if they can be rectified. You can be a vehicle for preventing these errors, and I urge you to be PRO-ACTIVE in this endeavor.

The Yellow Sheet in My Middle Drawer–You want to be on the “plus” side with me (and everyone else you deal with)

Uncategorized, ,

I have been practicing real estate law in Massachusetts for more than 40 years. In that period, I have participated in probably 25,000 or so real estate transactions. Early in the game, I realized that some opposing counsel, realtors, appraisers, mortgage people and other real estate professionals were cooperative, honest and/or enterprising. Others were dishonest, obstreperous and/or downright lazy.

Since Boston is in many ways a small town, I started keep a yellow sheet (now there are about 200 of these) in the middle drawer of my desk. As I dealt with people on deals, I made a determination that they were either “plus” or “minus”. I then divided my yellow sheet with a line, and placed the “plus” people on the left side and the “minus” people on the right side, and then put my sheet back into the middle drawer.

It has been amazing to me how helpful my yellow sheets have been through the years. It is more amazing how many times I have had dealings with people from 5, 10 or 15 years ago on new transactions. I check my sheets to see if they are there, and if they are “plus” or “minus”.

If they are “plus”, I bend over backwards to make the deal work. I accommodate people with extensions for financing, closing and inspections. I travel far and wide to make their life easier. They have earned this type of treatment because they treated me similarly in the past.

If they are “minus”, they are probably going to have a harder time speaking with me, and when they do, they may not like what they hear, I will never be unprofessional, but I will certainly not walk the extra mile to help them out. Sometimes, I will have an advantage, and if the people are “minus”, I will use attempt to use it to their detriment.

The moral of this story is that the real estate community in almost every city is smaller than people think. You may have an edge in some transactions. In others, you will be coming from off the pace. Guide your behavior on the basis that you will probably be dealing with the people on the other side at another time, with another deal. Make yourself a “plus” and you will always have a chance to do a great job for the person you are representing. Don’t ever make a long-lasting enemy in our business. The price you may pay is just not worth it.

The Short Sale Samba–A Lender Does a Slow Dance, while Innocent People Involved are Victimized

Short Sales & Foreclosures, ,

This is a true story. After going back and forth with respect to the consequences, legal and otherwise, I have decided not to name the Lender. What has happened, nevertheless, is true and it underscores a power within the financial institutions in our country which is unbridled, and, in my mind, abusive.

A client came to me with a problem with his mortgage. He is an unemployed father of three children, and saddled with two mortgages on his residence in suburban Boston, which he cannot pay. In fact, he had not made a payment on his mortgages, or his property taxes, in some time. He told me that he had the property on the market for the last nine months, with six different realtors, and he had not elicited one offer which was even worthy of consideration.

I suggested he work with one of my trusted realtor contacts, and that perhaps the reason he was not getting any offers was the fact that his asking price was far above the value of the residence. He met with my suggested realtor, she did her homework on value, and they agreed on a new listing at a reasonable price, which the realtor was reasonably certain she could get.

In fact, the realtor received multiple offers at the lower price, one of which was with a cash Buyer (with proven funds to close) and a forty-five day closing. We assembled all of the required information, including two (2) brokers opinions of value, a proposed HUD-1, and a purchase and sale agreement with a five(5%) deposit which my firm is(was) holding.

The Lender was initially unresponsive. They were “swamped” with requests for short-sales, and did not have an analyst available to determine if the short-sale would be approved. After several follow up inquiries, we found that an analyst had been assigned to the matter, and we would be hearing from the Lender “soon”. By the way, the time that the analyst was assigned was considerably beyond the 45 day closing window, but our Buyer was willing to extend, and various extensions had been executed.

The final correspondence with the Lender indicated that the analyst had reviewed our proposal and would be willing to submit out short sale for approval, but only upon the following conditions:

     1. The Lender would “charge-off”, probably means, “sell for pennies” the line of credit second mortgage. This is a short hand statement which means that at some point in time a “bottom fisher” who purchaed the debt would be coming after my client.

     2. My client would be required to sign a promissory note for any balance remaining on the first mortgage after the short sale. It was possible that the Lender would consider issuing a Form 1099 for the difference rather than require the promissory note.

     3. If my client does not agree, in writing, with these terms, the request for the short sale is automatically rejected.

My client will not go forward with these terms. This means that at some point in time, the two mortages will be foreclosed upon. The Lender will be required to absorb the expenses of foreclosure, no less than $30,000 in Massahusetts and then pay an REO realtor a commission to sell the property after foreclosure. In the meantime, my client continues to live in the residence, without the Lender receiving any payment from my client. The process, including an eviction after the foreclosure, can easily take nine months. Why does this make any economic sense for the Lender, given the fact that the suggested short sale price is the true current market value of the residence?

The saddest part of this scenario, however, does not concern the Lender or my client. What about my realtor friend who worked so hard to find a Buyer and then finally sold the home? Why should she get nothing for her efforts? What about the Buyer who offered a fair price and expected, at some point, to purchase this home of his dreams? Why should these people be punished because the Lender has some view of making the person who is down on his luck “pay the price”

These are difficult times for many people. Very rarely does the Lender sue the Owner for mortgage deficiencies. Why shouldn’t this, and other, properties be put back on the market so we can move forward to establish a rational residential real eatate market? I find this all perplexing as much as anything else because we, as a professional, are powerless to make Lenders, who we have bailed out with public funds, act responsibly and with a view to the general well-being of our citizens.

Seller’s attending closings–Very little to gain: Perhaps a lot to lose

closing, Litigation/Disputes, ,

In my over 40 years of conducting real estate closings in New England, I wouldn’t say I have seen everything. I would say, however, that I have seen enough to reach the conclusion that having the Seller present at a real estate closing is rarely a positive experience, and in some instances, is an invitation to trouble.

Put aside the possible distractions of having another “persona” at the closing table who wants to comment about the length of the process or the interminable amount of paperwork involved in a typical real estate closing. That is part of the territory, and I believe I, and the other people in my law firm, know how to deal with that. Also, put aside the possible antagonisms that may have developed between the Seller and the Buyer over some aspect of the pre-purchase and sale negotiations about the property. The real estate professionals at the closing table should have the skill to deflect this aspect of the process, so things can proceed at an acceptable pace.

The real problem is the potential for litigation about the condition of the premises based on a comment, or lack of comment, made by an attending Seller. If I am representing a Seller at a closing, armed with a durable Power of Attorney, I am duly ignorant about the history of the home or the condition of the premises. If I am asked about the “spot” on the bedroom ceiling, or the trace of water that the inspector found in the finished basement, I can truly answer “I do not know”, and that will be the end of the discussion.

What if the Seller is present and asked the same question? As a point of fact, there was a water problem, maybe 6 years ago, and the derivation of the problem had been found, and the problem resolved. The Seller just had not gotten around to “painting and patching” the spot on the ceiling. That explanation would be honest, and should be sufficient to end the discussion. What if the Seller panics, and thinks, if I mention water now, I may kill the sale, right at the closing table? So, the Seller either denies that there was ever a problem or otherwise lies about why there is a spot. Months, or years, later, there is a water problem in the home, and the Buyer clearly remembers the Seller stating, at the closing, before many witnesses, that there was NO water? The chances for a lawsuit, even after closing, are greatly increased.

The moral of this story is that we, as real estate professionals, are better served if the Seller does not attend the closing. If the Seller wants to meet the Buyer, or convey information important information about the home to the Buyer, suggest a post closing event. Better yet, suggest that the Seller write down information for the Buyer and deliver it at the closing. While the writer hates to be as defensive as the suggestions in this post appear, litigation after a sale is costly and never really benefits either the Buyer or the Seller.  It certainly is not a felicitous event for a realtor. The Buyer is purchasing a “used” home in most circumstances. Small problems are bound to appear. Gratuitous, or even fabricated, remarks at a closing by the Seller can be costly. Use your influence on your customer to prevent the problem before it arises.

Short Sale Shenanigans–Do not get involved; Do not let your clients get involved!!!

Short Sales & Foreclosures,

It was bound to happen. Short sales, the new salvation for an inconsistent real estate market, have too many characteristics which facilitate fraud. One party, the Lender, is being asked to take a “hit” for immediate payment on a delinquent mortgage. Another party, the Buyer, is getting a great deal on a home or condominium . The third player, the Seller, is getting out from under an onerous debt, and given the chance to “move on” with his or her life.

I have written in the past about the dreadful performance of many Lenders in addressing requests for short sales. I have a request in front of an unnamed Lender right now that is for fair value with a cash Buyer. The last word I have from the Lender is that the “analyst” who will make the short sale decision has not as yet been determined. In a word, this transaction has little or no chance of succeeding, even though it represents a good opportunity for all people involved.

That is one side of short sales. The more tawdry other side is the apparent current practice of providing post short sale credits to Buyers (and Sellers) by realtors once the transaction is completed. In effect, the parties are “re-arranging” the real substance of the short sale, generally to the detriment of the Lender who gave approval to same.

I heard today about a transaction where the closing agent for a short sale, had two HUD-1 Settlement Statements  prepared to reflect the transaction, one which described the sale the way it had been presented to the Lender who approved the short sale, the other which described the credit given by one or both realtors, probably designed to backstop the realtor’s tax ramifications.

My advice to each and every one of you. Do not participate in ANY of these types of post closing credit schemes. They are fraudulent, and people involved with the fraud can, and will, be punished. There is no positive spin you can put on HUD-1 (Version 1) and HUD-1 (Version 2). There is only one legitimate Settlement Statement, and it is the one that was presented to the short sale Lender who approved the sale.

I urge you to disseminate this gospel far and wide. It has been difficult enough to obtain Lender approval of short sales; if the Lender starts to suspect wrong-doing after the short sale, there will be an impasse in short sales that will certainly not accelerate the recovery which all of us all hoping for, and desperately need..

Perfecting Your Persona–Being Different Is Not Enough

Marketing / Communication, ,

While acting as a real estate professional, working on purchase and sale agreements, leases, real estate closings and the like, has been interesting, I must admit that nothing in my over 40 years of practicing has been elevated to the status of “earth-shattering” or even unique. What I do every day is generally routine; many other people are able to do the same things that I do. There is no question about that.

So, sometimes I ask myself why is it that I have been able to achieve a fair level of success here, while some others have failed. I have reached the following conclusions:

1. You must do something in your profession that makes people remember you. It sounds simple enough, and most times it is. In the past few years, I have taken to wearing bow ties. It is not that I look particularly good in bow ties. It is just that I am becoming known as the lawyer “who wears a bow tie.” That small thing sets me apart from other attorneys, which, essentially, has been my plan. I know a mortgage originator who brings a pie, which she has freshly baked, to every real estate closing in which she is involved. She has, naturally, started to be known as the “pie lady.” The connotation is positive; she brings sweet things to her Buyers. Another person I work with always wears a special hat to her closings. Gradually, she gets herself noticed, and commented about, when she changes hat, and it is a discussion item.

2. Once people remember you, you need to be “good“. Obviously, something that makes people remember you is what drives new business to your door. But, now, comes the important part. You need to make that initial reaction have some substance. If you are a practicing attorney, you need to be the one who returns “every” phone call, who schedules closings not for his or her convenience, but for the convenience of the client. You need to always be the person who stays calm when others are frazzled, who always offers solutions when none seem apparent, who never gives up until the deal is closed and the deed on record. If you are a loan officer, you need to be the person who always looks for alternative ways of structuring the deal, who shows up at the closing in case there are last minute glitches, who is always positive and never “kills” a deal that can be rescued. If you are a realtor, you need to have a reputation as being a “deal maker” not a “deal breaker”. You need to work ceaselessly to find solutions when there is an impasse. In certain circumstances, you need to be willing to make concessions on your own fee to make the deal happen. You need to be totally loyal to your client.

As I have said, if you can combine the “persona” you have established with a reputation that is postive, you will set yourself above the rest. People will seek you out, and just you.It is great to be on the first page of Google; it is even greater to have a flock of “raving fans” who go out of their way to refer business to you. Your “positve persona” is the key to success; we all can improve ours through hard work and creative thinking.