All posts by Robert Bevans

Newly Built Home or Condo–Work very very hard on the Offer Document

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I have been running into a lot of situations where there was a “misunderstanding” as to what was included in a newly built home or condominium. In one situation, the developer indicated in the marketing piece that he would direct the gas range vent outside at his cost. Now when we are trying to reach agreement on the P & S, he wants an extra $500. One developer indicated that he would place a door on the Buyer’s garage. When we sat down to draft the  operative document, he indicated he cannot do this because of “zoning requirements” As Roseanne Rosannadanna used to say, “There is always something”.

What can we, as responsible real estate professionals do? What we have always done, ask questions, take notes and get things down in writing either on the submission document or in a letter between the parties. A lot of developers are tight for cash. They will “weasel” out of verbal commitments if they can. If it is in writing, and signed off on, it is much more difficult. And by being extremely thorough, you and I are doing “right” by our customers. That is a good feeling, especially in these days where there are not a lot of deals out there. Let’s make the ones we do “Da Vincis”.

New Condominiums–More TRAPS for the unwary

Condominium, , , ,

It is starting to happen again. Just like it did in the late 1980’s and early 1990’s. Condominiums are in financial trouble, I have previously written a Featured Post about delinquent condominium Unit Owners and what Trustees MUST do to collect common area fees from them.

A similar, but potentially much more serious, situation obtains with the Condominium developer. As most of you probably know, as soon as the Master Deed is recorded, each Unit in the recorded document must start paying common area fees. There is some question whether each Unit needs to contribute the required amounts to the reserve account. That varies from state to state. Let’s just stick with the fee for each Unit for operations.

The law is that the developer must pay condominium common area fees for his unsold Units. I am afraid that this requirement is “more honored in its breach than in its observance”, as the Bard would say. Cash flow is generally tight for new developers, and they perhaps cannot afford to pay. They can deliver a Certificate at the closing, indicating that the common areas fees are paid with respect to the Unit which is being purchased. It may well be a different story for the unsold Units.

My suggestion in this area is that the real estate professionals representing the BUYER need to be militant. Place a provision in the Purchase and Sale Agreement or Rider where the SELLER makes an affirmative statement that the common area fees for all Units owned by the SELLER are current. Require the SELLER to demonstrate that fact at the closing by bringing a Condominium Bank Statement which  proves that payment has been made.

Once the SELLER understands that there will be no closing without everything being current, there will be a great incentive to make matters right. The numbers can really “explode” unless some approach is taken to require the developer to keep up the monthly payments. It is not a pleasant situation for a new BUYER to walk into a situation where there are financial problems at day one. All of us need to work hard to try to prevent this.

If you are looking for suggested P & S language for these situations, please contact me at etopkins@topbev.com. I am a Massachusetts real estate attorney, but I am reasonably confident that the language I have developed will hold up in other jurisdictions, as well.

The Blase Mortgage Lender–How Much Longer Can we Put Up with This?

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Recently, I was representing a young couple buying their first home with an FHA mortgage. The Purchase and Sale Agreement was signed in early March. The closing was set forth for late April. Plenty of time for the Lender. The written mortgage commitment issued in late March with standard conditions. My clients easily fulfilled them.

THREE days before the scheduled closing, the Lender informed my client that “they were backed up and all closing were being pushed back for FIVE days.” The Seller had scheduled a day off for the original closing date to do the final walk-through. My clients are looking a being homeless if there any any further delays. There were no suggestions of underwriting problems. The Lender was “backed up” and that was all there was to it.

When you consider all of the things that all real estate professionals need to do to have a successful closing, this “walk away” approach by the Lender is simply not acceptable. The SELLER in my case wants to be paid (at least a per diem for the delay). My clients are in jeopardy of not having a roof over their heads. Do you think there is any way that the Lender will “chip in”” on this? Personally, I do not.

As an industry, we really need to develop ways to make the Lender more accountable for this type of behavior. I would suggest substantial fines for each time it happens, some of which could be paid to FNMA/FHLMC and some which can be paid to the Borrowers. Maybe, the state Banking Commission should suspend licenses of Lenders who do this more than “X” times in a given period. I am a real estate attorney in Massachusetts, and in our state, the attorney conducts the closing, I am fed up with the insouciance of the Lender. We all suffer when closings do not take place, and allowing the Lenders to run “roughshod” over our industry is unacceptable.

I would appreciate your view and suggestions. In this time of reduced activity, every closing is important. Lenders must be hed accountable for not realizing how many people they hurt when they are “backed up”. Hire some more people!!!Work longer hours!!! Stand up and be responsible!!!

Delinquent Common Area Fees–The Only Policy is ZERO TOLERANCE

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It was the late 1980’s. Condominiums in Massachusetts were literally going “broke” because unit owners were not paying their common area fees. That meant that water bills and common electricity bills were not being paid. The towns and utilities tried to work with the Trustees to the extent they could. In many situations, Condominiums went bankrupt because the amounts due and owing got “out of hand”.

But help was on the way. Condominium Trade groups organized in states across the country started drafting new, and effective, legislation which gave Condominiums some clout with the Unit Owners. Massachusetts adopted this statute in 1992. It should have proved a Godsend, but unfortunately, it has not. There are still condominiums in trouble because of delinquencies. The statute involved, which has become part of Section 6 of Chapter 183A, is not being used to its fullest capacity.

In effect the new statute gave the Trustees tremendous power to collect. Fall behind by 60 days or more, and the Trustees can commence an action against you, force you to pay penalties and legal fees, and if you do not get caught up, sell your Unit at foreclosure and wipe out all mortgagees.

The last sentence is the important one. Once this type of action is commenced, the only thing the Trustees need to do is notify the Mortgage Lender(s) for the Unit. It has been my experience that the Unit Common area fees get “caught up” in days. WHY, you ask? Because if the Lender does not pay, in full (including attorneys fees and penalties) the Lender will lose out on the collateral.

So, my advice to each and every person reading this post who owns a condominium is to question your Trustees to make sure they have an automatic procedure for collectionm once Common Area fees become 60 days deliquent. If they so not, they should, and there should be zero tolerance for not proceeding. The enforcement action costs the Condominium nothing!!!!

If any of you have further questions on enforcement procedures, please contact me at etopkins@topbev.com. This is an important Condominium right, and SHOULD NOT EVER BE IGNORED OR DELAYED.

The post set forth above was originally included in my blog, www.realtorsresourceblog.com, which is intended to assist the real estate profession with various topical issues. I am an experienced Massachusetts real estate and estate planning attorney. I hope you will find these materials useful.

Massachusetts Tenancy by the Entirety and Declaration of Homestead–A Basic Primer

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In Massachusetts, and possibly in other states as well, significant protection is given to the non-debtor spouse if the married couple elects to take title as “husband and wife, tenants by the entirety”. There are other advantages to tenancy by the entirety, such as avoiding probate, but the principal advantage is one of protection. The bottom line is this: IF YOUR PRINCIPAL RESIDENCE IS PROPERLY PUT IN YOUR NAME WITH YOUR SPOUSE, AS “HUSBAND AND WIFE, TENANTS BY THE ENTIRETY” A CREDITOR CANNOT ATTACH YOUR HOUSE, OR FORECLOSE ON YOUR HOUSE, FOR AN OBLIGATION INCURRED BY THE OTHER SPOUSE.

It is important to note that, in Massachusetts, you must be married at the time you take title, the property must be your principal residence, and the deed must include the “husband and wife, tenants by the entirety” language. A deed to only “husband and wife” creates a tenancy in common. A deed to “married persons” creates a joint tenancy without the protections described above. A deed to unmarried persons as “tenants by the entirety” also creates a severable joint tenancy.

Even though “tenancy by the entirety” creates important protection to a married couple, I still recommend that one of the married owners record a Declaration of Homestead. There is a $35 filing fee involved, and a small fee for producing the document, but that is the spouse’s only exposure. In exchange, a Massachusetts Homestead declarant receives insulation of up to $500,00 of equity in his or her home (subject to some “anti-fraud” provisions in the Federal Bankruptcy Law and a few other exclusions). This type of protection is especially helpful in the following situations:

     1. The obligations involved are “joint” so that tenancy by the entirety will not protect.

     2. There is a divorce or death, which has the effect of terminating a tenancy by the entirety.

     3. There are minor children in the home, who are protected by a Declaration of Homestead.

There may be circumstances, mainly for wealthy clients who need to establish individual assets for estate planning reason, where tenancy by the entirety is not the proper choice for ownership. In more than forty years of practicing real estate law, I have not identified ANY situation where filing a Declaration of Homestead is not advantageous. I would be more than happy to discuss any aspects of this post with potential Massachusetts property owners, or out of state individuals who are considering a purchase of real estate in Massachusetts. The consequences of the choices such as the ones described herein can be important, and you need to know what you are getting into before deciding which type of ownership is best for you.

Braintree, Massachusetts–A Great Place to Practice Real Estate Law

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While my principal office location is on Newbury Street in Boston, Massachusetts, I spend a considerable amount of time in my Braintree, Massachusetts office (150 Grossman Drive, Suite 405, Braintree, Massachusetts: 781-849-5906; Facsimile 781-848-3656). Real estate attorneys are finding out every day that their physical location is critical to garnering clients who buy and sell homes, and require real estate mortgage financing.

Braintree, Massachusetts is literally the “Gateway to the South Shore” of Massachusetts. Located approximately 14 miles south of Boston, Braintree offers convenience for South Shore real estate transactions to many thriving residential communities like Norwell, Hingham, Scituate, Cohasset and Milton.

I have enjoyed having an office in Braintree for more than 15 years. There are cultural advantages in Braintree; Thayer Academy is located there. There are wonderful restaurants and one of the most active shopping Malls in Massachusetts. The Public Library is well-run as are other municipal services.

Please do not hesitate to contact me for all of your South Shore real estate transactions. I am available at any time, at any place, to give you the kind of legal service which you deserve. For those of you in the Western suburbs, Topkins & Bevans also has a full-service office at 255 Bear Hill Road, Waltham, Massachusetts (781-890-6230; Facsimile: 781-466-6982).

“Kiddie” Condos–They make more sense than ever in this Market

Condominium, Marketing / Communication, , , ,

I have written about “kids at school” in prior posts. With more kids at college and grad school (grad school, especially grad school, because jobs our of college are becoming so scarce), there are some strategies we can suggest for “kiddie” condos which may produce some sales for realtors, mortgage originators and real estate attorneys (my defined group “The Resource Triangle”.

These are my thoughts:

      1. Price of Condominiums are lower than they have been. Certain areas of Boston have held up better than others; in general the market is soft, especially in the $200,000 to $400,000 range.

      2. Rental prices are increasing because people have to live somewhere, and they are not buying as rapidly as they did. The rental population is on the increase, as well.

      3. There are some distinct tax strategies which make a parent’s purchasing a condominium for his or her child during the time that the child is a student:

          a. After tax benefits, the actual cost may be lower than rental.

          b. At some point in time, the parent can make the child the owner of the Unit, thus entitling the child to take advantage of the $250,000 exclusion when the Unit is sold. In Boston (and other cities, I am assuming), owners who live at the premises are also entitled to favorable real estate tax treatment.

          c. If we are at the bottomo of the real estate cycle, or close to the bottom, the appreciation in the Unit can be passed on to the child, rather than the parent. That becomes a handy way to handle estate planning transfer for the parent.

          d. In Boston, I am aware of several Lenders who have developed “Kiddie” Condo programs. Wainwright Bank, a Lender for whom I do a lot of work and an ActiveRain member, has such a program.

If your customers need any further advice about Kiddie condos, have them contact me directly. I have completed at least fifty (50) of thes e deals in the past three years, all of which have worked to the Parent’s advantage.

Condominium Due Diligence–Our Professional Responsibilities

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The stormy winter we have experienced needs to be factored in when purchasing a condominium unit. Roofs and other systems have been under a considerable amount of strain, and according to casualty insurance statistics, claims are at record levels.  Those leaks through ceilings and walls can be plastered and painted over. The causes of the problems, however, are being addressed by Condominium associations and the results may well be future special assessments. I am continually told by Sellers that the Condominium Trustees “do not keep minutes of their meetings.” This is distressing on two levels (1) is it a short-hand way of saying the Trustees really never meet? or (2) are there matters which are being discussed which can have potential financial impact to the Unit Owners, which the Trustees would rather keep to themselves? In either circumstance, this type of response raises a “red flag” for me, the attorney tying to protect my client who is considering a Condominium purchase.

More than at any time, the present state of Condominium governance places a responsibility on us as real estate professionals to ask questions and probe.  Ask the Management Company or a member of the Condominium Board of Trustees whether the Condominium is planning an assessment for a new roof or extensive system repairs. If there are assessments coming, try to negotiate with your Seller to pay some ,or even all, of planned assessments. Speak to other unit owners. Find out what they know.

At Topkins & Bevans, we pride ourselves on giving responsible representation to Buyers.  We review (1) Condominium documents, (2) minutes of the Trustee meetings and (3) recent budgets. and financial statements. We poke holes in these documents, where necessary. We direct question to the Management Company, the Trustees and the Seller so that when the Buyer moves forward, he or she is apprised of the animal he or she is dealing with. Sometimes, our Buyers move forward even though we have warned them of the pitfalls associated with their purchase. That is their choice, but at least we have permitted them to make an informed decision.

Where There’s No Will, There’s No Way

Estate Planning, Health Care Proxy/HIPPA, , , , ,

There always seems to be an excuse why we cannot sit down, organize our priorities, settle on the right set of fiduciaries and get our estate plans in order.  What most people do not seem to realize, however, is that permitting the state to use its formulae to settle your affairs after your death in almost all circumstances does not produce a result that you would have wanted.  More than that, it can cause heartache and pain to those you leave behind, and family disputes that many times cannot be smoothed over, even over time.

There follows a working outline of manageable steps which you can take to prepare to sit down with an estate planning attorney.  If you have a good idea of the answers to these questions, the actual drafting of your will and constituent documents can be relatively painless and completed within a reasonable time at a reasonable cost.

       1. Determine whom you need to protect and provide for.

For married couples with children, this generally flows naturally.  Your surviving spouse is your key beneficiary with children being taken care of should you both perish in a common accident.  But even with these basic tenets agreed upon, there are some ancillary decisions which need to be addressed.

In Massachusetts, 18 years of age is majority. If you and your spouse die and leave children, those children will be entitled to any assets you leave them at age 18.  Is 18 the age you want your child to have unbridled use of hundreds of thousand, or even millions, of dollars?  Most of the time the answer to this question is “no” although many of us have life insurance policies, or pension or profit sharing plans which provide for proceeds to pass to a spouse, or alternatively, children. The way to protect your children from themselves is to create a Trust mechanism, either in your will or by way of revocable trust, which will permit your children to have use of these assets but not be able to spend them without any controls.  Only by getting your estate plan drafted and making proper beneficiary designations can you be sure that these objectives can be met.

For unmarried couples, the perils of not having wills are serious.  Massachusetts intestacy laws make no provision for people who are not spouses, children, parents, siblings or blood relatives.  Whatever your intentions are regarding your partner, it behooves you to make them clear through a will or revocable trust.

Further, when you are not married to your partner, issues such as health care decisions will not flow to your partner without specific designation of the person in a health care proxy or HIPPA designation.  Many are the situation where the person you really want deciding important health issues for you is shunted aside in favor of family members who really are not aware of your wishes and are only involved because of blood relationship.

  1. Determine which individuals you wish to act as fiduciaries and obtain their consent to act in these capacities.

 

There are generally four (4) different roles which need to be addressed.  Many times the same people can act in more than one capacity, but often there is a benefit in spreading the roles out over several people.

•(a)     Executor:  This person needs to be honest and organized.  Choose someone who can take charge of your affairs, select appropriate professionals to act on behalf of the estate, and move on.  Generally, about 18 months time is needed to complete the Executor’s tasks.

•(b)    Guardian:  Surviving spouse will automatically take over as your children’s guardian.  With simultaneous death of spouses, care must be taken to designate someone who can shepherd your children through the years of minority.  Be careful about selecting your parents.  While they may be the natural choice, the burden of raising small children may be too much for them.  Siblings with children are normally the best guardians, although care has to be taken when a larger than manageable family is created with the addition of your children.

•(c)     Trustee:  This is normally a long term person, so age considerations are important.  If you will want a Trust to exist until your youngest child is 35, you should think about someone who is likely to be around through the period in question.  Again, honesty and good judgment are traits which make a good Trustee.  You do not need an accountant, attorney or investments advisor for a Trustee.  You just need someone who can find suitable professionals to serve the Trust.

•(d)    Health Care Agent: This is the person you name in your health care proxy to make medical decisions for you when you are unable.  Your spouse or partner is a natural choice.  Often it makes sense to make alternative selections should the person you wish to use be unavailable.

Armed with answers to the questions and issues described above, you are in a very good position to move forward with your estate plan.  At Topkins & Bevans, we try to make the process efficient and manageable.  Appointments to discuss estate plans are entirely free of charge, and it is only after we have agreed on a document program, that we will discuss a fee arrangement with you.

System “5/25”—A Proven Way to stay in touch with your Players

Customer Service, Marketing / Communication, , , ,

Over the years, it has become more and more apparent to me that sales involves connecting with people who know, and appreciate, what I have to offer, not at my convenience, but, realistically, at theirs. One way I have found to stay in touch with these important contacts is to utilize the “5/25 System” on a consistent basis.

The System is simple. Pick out your 5 most important clients, or customers, and put them on a schedule. Then, analyze the rest of the important people in your business and pare that list down to 25 people. Obviously, the list of 30, as I call it, can change on a dime. The best way for it to change is for some new player to arrive on the scene to supplant someone else, who is marginal. The worst way your list can change is for a “favored 30” player and you to have a falling out, or disagreement, which makes continued contact with that person difficult, or maybe even impossible. If the latter happens, be decisive!!!! Excise that person from the list and find an acceptable substitute.

     1. The “Favored Five”.  You need to get yourself in front of the favored five at least once a week. Since these people are so important, it probably makes sense to vary your contact. Some weeks it may be a long email or a meeting for a cup of coffee. Other weeks you might invite them to a play or ball game. Whatever the excuse, you MUST be in front of these five people every week, without fail. At some point, your “Favored Five” are going to see what you are doing. None of mine have every held against me my elevating them to this favored status. Most understand that I am making a commitment to ============-][frequent communication with them so I can acknowledge how important they are to me practice.

     2. The “Terrific Twenty-five”.  These people are very important to me, but they have not achieved “Favored Five” status. In time, they may reach that level. For the time being, the “Terrific Twenty-five” need to be contacted at least once a month. Obviously, you can get with them more than that, but under no circumstances, should you let a month go by without an email, telephone call, visit at their office, or other contact. You need to stay on the “Terrific Twenty-five” radar screen. You do not need to make them a weekly contact, but they need to know that you are “around” and you care.

The results of this rathered structured approach have been impressive for me. My “Favored Five” people have generally been the ones who respond to new initiatives and proposals. When I am in front of them, they “remember” things which they wanted to discuss with me and thus new opportunities arise. The “Terrific Twenty-five” are in a slightly different category. They have not lost touch with me, but I am not a constant part of their business life, in most circumstances. That can sometimes be a good thing. Sometimes, the “Terrifics” want to change their role. Many times this is justified. The group of thirty is not static; you will see changes evolve as you move ahead.

There is nothing mystical about the 5 and 25 numerical selections. What is important is that you identify your “real players” and your “might be real players” as soon as possible, and then make sure you find ways to have continuing interaction with them. For me, this has been an incredible “practice builder” and also a way for me to develop lifetime friendships. What is better than those two results?