All posts by Robert Bevans

Thinking Ahead–I will not permit any kind of utility “shut-offs” on my watch as BUYER’s Attorney, if I can Possibly Avoid Them

Uncategorized,

Recently, I wrote a post about the problems I encountered when a client of mine had serious closing problems because, by mistake, the dwelling in question had its electricity shut down, pipes froze and there was ensuing damage. Fortunately, for all concerned I had a financially viable SELLER who was motivated. Substantially all of the repairs have been completed in three (3) days and we are closing on the purchase today.

My client will be buying a dwelling, with three brand new radiators, a bunch of state of the art piping, newly, freshly painted drywall and, generally, an upgrade in condition from the “condition the premise are at the date of the home inspection, reasonable wear and tear excepted” In a word, my client has “lucked out”. They are good people who did not deserve all this last minute anguish so “good things happened to good people”.

The comments I received form the ActiveRain community on this situation were thoughtful, and I got to thinking how ironic it is that in Massachusetts, where I practice real estate law, and which is known for frigid winters, there is no real estate association or real estate bar association standard clause in the purchase and sale Agreement dealing with this type of situation.

Henceforth, that will changes, at least for me. In my BUYER representation contracts, I intend to include the following:

“The SELLER agrees to maintain the premises from the date of this Agreement until the time that the BUYER receives the Deed and keys to the dwelling in substantially the same conditions as exist on the date of this Agreement. This not only includes maintaining the lawn and shrubbery in the usual manner, but insuring that all utilities leading to the premises are kept operational and not “shut off” under any circumstances. The parties agree that the financial and other damages to be suffered by the BUYER as a result of SELLER’s breach of this covenant will be difficult to ascertain, so in addition to the SELLER’s agreeing to bear the full expense of repair should the SELLER violate this covenant, the SELLER also agrees to pay the expenses, if any, for the BUYER to extend BUYER’s financing commitment and a “Break-up” fee of One (1%) of the Purchase Price set forth elsewhere in this Agreement”

I do not expect many SELLERS to agree to this. It would probably only happen if they, or their attorney, did not read my comments. On the other hand, I have told the SELLER, in advance that “shut-offs” are serious and not acceptable. Since I write posts frequently, I will inform you of my success here. Again, your comments were very helpful, and I would appreciate more, if you can find the time.

Care and Feeding of the “Ten”—Making Sure You Contact the Really Important People in Your Practice No Less Frequently than Once a Week

Customer Service, Marketing / Communication, ,

In a way, I am torn. I have totally “bought in” to social media, and I do not miss a day when I do not log in to Active Rain. I must admit that my ActiveRain experience would be truthfully designated as one for  “fun and profit”,  because I have only been on ActiveRain since last March, and I have developed a lot of friendships on the blogging site, quite unexpectedly,  I might add. I tweet once in a while and sort of keep up on Facebook and Linked-In, but not as much as I probably should. As one person aptly put it at the recent New York Rain Camp, which I attended, “There are only a certain number of hours in the day when I am awake!!!!!”

Having said all the above, I remain a traditional guy, with traditional values. My connections with the real estate industry in Massachusetts for the past forty years has taught me one thing. There are approximately TEN people in your professional life who make a difference to you, and you need to be in touch with them on a frequent basis, no less frequently than weekly, in my circumstances. These are the people who send you referrals; these are the people who are your “raving fans”. These are the people you cannot miss “connecting with” at least once a week.

My procedure for the TEN is quite simple. Every Monday morning I write their names down on a sheet of yellow legal paper. I look at my Outlook schedule and put in a contact with each of the TENsome time that week. I usually vary the approach. Sometimes it is an email just saying “hi–anything doing?”. Other times it is a call to their cell phone. Once in a while it is a handwritten note. I try to throw in impromptu visits “because I happened to be in the neighborhood” which, at times, is a small exaggeration since my intention was to drive “to then neighborhood”.

Anything to get into communication with these important people. Why, you ask? Because once the dialogue begins, good things almost always start flowing from it. “Gee, do you do that work?” “Oh, you know this person.” “Can you introduce me to Susie Jones? I really have been dying to meet her”. All of these “openings” can lead to “closings” and closings is what makes my world go around.

Like me, you will find that the membership in the TENis a shifting constituency. People who used to be sources of ideas and business are no longer as enthusiastic. Domestic problems and health issues can distract people. They may be losing interest. You can stay their friend, but they gradually shift out of the TEN. Compiling the list, and then reshuffling it from time time time, is a worthwhile exercise. If you are a record keeper like me, you will be amazed at how view these people are the twenty percent of your client who produce eighty per cent of your business. Treat them with the deference that such standing deserves.

That Old Stand-By “The Condominum Conversion”—Some “how to” Steps for a Real Estate strategy that Still Remains Viable

Condominium, , ,

Even in today’s distressed real estate environment, there are times where a condominium conversion makes sense. I have been working on condominium conversions for more than twenty year. There follows a short summary of the process, with the thought that condominium conversion may make the best sense for your multi-unit Sellers. My firm, Topkins & Bevans, continues to assist  developers and individuals with condominium conversions. We have developed a team of engineers, financing people, accountants and marketing professionals which can take most of the anguish out of the process.  

 INITIAL STEPS

A  Massachusetts condominium can only be created by adherence to the provisions of Massachusetts Laws, Chapter 183A. The first professional to be involved is the engineer, or in some cases, an architect.  This professional needs to provide two separate documents.  The first is a site plan, which shows the footprint of the building on the land. If there are parking spaces to be conveyed or parking easement, they are indicated on the site plan.  Any easements or rights of way are also delineated.  The professional also needs to draft condominium floor plans, which configure the units which are being created.  If there are yards, decks or roof rights, these need to be shown on the condominium floor plans.  Common areas , including those for exclusive unit to certain units, are marked off.

Once the plans are developed, our firm gets into the action.  We draft the following two necessary documents which will accompany the plans described above: 

 •1.      Master Deed.  This document makes the property a condominium.  It references the Site Plan and the Condominium Floors plans.  It indicates the exact boundaries of each Unit.  It provides descriptions of any exclusive easements or rights.  Often, there is language in the Master Deed which makes FNMA and FHLMC able to purchase loans secured by the condominium units.  The Master Deed also sets forth the percentage of ownership and actual configuration of each Unit.  In effect, the Master Deed gives the purchaser necessary specific information as to what he or she is actually purchasing.

•2.      Condominium Trust.  This document sets forth the rules and regulations of condominium operations.  Condominiums are run by a group of Trustees, elected by the unit owners.  The Trustees meet periodically and make decisions concerning operations.  They contract for repairs, maintenance, insurance and snow removal.  They collect monthly fees, which are set, annually, and they make sure each unit owner is current in payment of necessary fees.  All of the details of these items are described in the Trust document.  Additionally, the Trust will control whether pets are permitted and also describe procedures which must be adhered to if you are renting your unit..  Most new Trust documents also set forth an arbitration procedure to be utilized if a unit owner takes issue with the actions of the Trustees.

 FINAL STEPS

After the documents are drafted and recorded, it is time to sell the condominium units you created.  There are tax ramifications which need to be addressed.  An accountant thoroughly familiar with the proper steps is essential.  Similarly, real estate professionals can market your units effectively and can actually be showing the units while the documentation is being completed.  You as the organizer need to obtain common area insurance and prepare an initial budget which will be used to determine the condominium monthly fee.  An experienced condominium attorney can help you accomplish all these steps at a pace which works for you.

There is work involved in a condominium conversion.  There are also cash outlays.  On the other hand, it is estimated that a two or three family dwelling converted into condominiums is still  worth no less than one hundred fifty percent of its value as an apartment dwelling.  With that kind of increase in value, especially in a difficult rental market, it behooves any property owner to consider condominium conversion.

Acts of God Between the Signing of A Purchase and Sale Agreement and the Closing–The Buyer Really Doesn’t have a Lot of Remedies

closing, Uncategorized, ,

It happened last evening in a bedroom community north of Boston. The tenant who had rented the home my clients are purchasing had vacated the dwelling on January 31, 2010 and informed all affected utilities,including the electric company. For reason still unknown, the electric company immediately shut off the electricity. The pipes froze, and there is rather severe damage to the interior of the dwelling including a flooded basement.

The closing was scheduled for this afternoon.  It has been postponed until Thursday afternoon. The Lender’s rate commitment runs out on Friday. The more the parties look at the damage, the more certain we all are that the repairs and replacements will not be done for at least a week. My clients, the Buyers, have requested an extension of their mortgage interest rate. They are likely to receive same, but at a cost.

I protected my client from this eventuality in the purchase and sale agreement by saying that if for any reason, the Seller was not able to deliver the premises in substantially the same condition as they were in at the time of signing the purchase and sale agreement on the agreed upon closing date, and my client could not extend their interest rate at no charge, we could terminate the deal and receive our deposit back. This is not what my client wants to do. They want the house, and they are willing to pay for a thirty day extension. I had asked, in the course of the negotiations, for the Seller to agree to pay for this extension, but that request was not agreed to.

In any event, we are now at that miserable state of affairs where in the middle of winter, the house which my clients have dreamed of owning has “clay feet” What is worse, with the exception of withdrawing from the purchase, there are no real remedies under Massachusetts law which protect my Buyer.

The event was not the fault of the Seller, at least it would be hard to attribute NStar’s negligence to the Seller in a court of law. Realistically, the Seller is suffering here as well, as the Seller struggles to assess the damage and fix what went wrong, all , at least initially, out of their pockets.

When the dmage is substantially rectified, and we close, I am anticipating requesting the following from the  Seller in connection with the home purchase:

     1. An assignment of insurance claims which the Seller may have with respect to the damage to the extent that same have not been paid to the Seller by the time of the closing date, as well as an affirmative covenant to assist my client with any subsequent claims.

     2. An assignment of any claims against NStar, if any, for shutting down the electricity without consent of the Owner and without contemplating the effect of such an action.

I would be very interested in hearing from any of you, either lawyers or other real estate professionals about any other ways I can protect my clients in this unfortunate situation. Perhaps, there is something obvious which I am missing.

Protection of Your Investment, Easy Allocation of Contributions of Partners–It is extremely hard to beat the “Limited Liability Company”

Uncategorized, ,

Anyone who owns a business venture should be concerned with certain basic truths.  It is a sad but true fact that our society is becoming more and more litigious every day, and more and more small business owners are finding themselves on the wrong side of law suits.  Right or wrong, the experience of defending a legal action is extremely stressful inflatable horse.

I have acted as a Massachusetts real estate attorney for more than 40 years. During that period, I have never had a client who “enjoyed” being sued and experiencing the expense and disruption of a lawsuit.  It makes sense to put a legal shield between yourself and the creditors of your business, whether real or contingent.  The  Limited Liability Company (“LLC”) is an entity completely separate from its members.

With proper planning, none of the members of the LLC should be personally liable for the debts of the LLC whether they arise in contract or tort. The LLC also offers some unique advantages for unmarried coupleswho own real estate together. This has been a subject of a recent post in which ActiveRain member showed much interest

The operating agreement of the LLC can be tailored to determine an “exit strategy” should the couple break up.  More importantly, the operating agreement can be fashioned in such a way as to recognize disparate contributions of equity or disparate payments on the mortgage, so there can be no problems sorting our who owns what and who is entitled to what tax deduction.  In many instances, the LLC can replace the use of joint tenancy agreements and tenancy in common agreements, which are often cumbersome and difficulty to administer and enforce.

Do you need to raise money for a real estate or venture capital project?  The LLC is a perfect vehicle.  Admitting new members is a simple process, and there are no limits to the number and/or character of additional investors.  They can include all types of individuals, corporations, trusts, pension plans, foreign investors (both out of Massachusetts and out of the country).  This is certainly not the case with the corporate structure that most closely rivals the LLC, the subchapter S corporation.

So, if your real estate transaction involves any group of people other than a married couple, I would strongly suggest an LLC. The planning, and protective, possibilities are endless, and the actuak working of the LLC easy to master. In the near future, my website, www.topkinsandbevans.com will contain examples  of many different types of Operating Agreements. I am sure you will find one among that group which can be adapted to fit your unique needs.

What Does It Cost?

The cost to set up and maintain an LLC are roughly comparable to setting up a corporation, (figure between $1,500 and $2,000 including filing fee and drafting of the articles of organization and operating agreement).  After the initial cost, however, the ongoing costs are minimal.  There is no need to hold an annual meeting of shareholders or directors.  The person designated as “manager” in the articles of organization can take actions on behalf of the entity without the approval of directors.  Moreover, in a single member LLC,  we at Topkins & Bevans have determined that there is no need for an operating agreement, so that the initial cost in that scenario is lower.

Real Estate Attorneys at Open Houses–Some Uncommon Opportunities to Shine

Customer Service, Marketing / Communication,

I am not trying to imitate that I have no life outside of my profession. I have a beautiful and talented wife, four devoted children and three interesting grandchildren. On the other hand, when a favorite loan originator of mine asks me to sit with him or her at an open house for a few hours on a Sunday afternoon in the winter time, I rarely refuse.

The open houses generally run no more than two or three hours. Sometimes they are not very well-attended. But, even when just two or three couples show up, I enjoy the arena. First of all, they do not expect an attorney to be in attendance. Most of the couples are young, and they have not yet established a relationship with an attorney. That is something for their parents, not them.

They ask me questions; I try to answer. We interact. I have some cards on the kitchen counter which have my name, cell phone number and email address. They are oversize cards which are gridded. I purchase them through Levenger’s. They are perfect for open houses because the people who come can use them to sketch floor plans. Their “floor plans” have my name and vital information on them. What could be better?

If I had not become an attorney, I would have been a teacher. I like to explain. I like to interact with people and see what makes them tick. My open house experience gives me this chance. More than that, I am doing a favor for, and keeping company with, a consistent source of business introductions. It all ends when the robins show up, and I can put a golf ball in the air. In the meantime, my Sunday open houses mean a lot to me, and I hope I can continue them for many winters to come.

FSBO’s–They are Increasing in Number; They Have their share of “Holes”; It Would be a mistake to view them as the “Enemy”

Uncategorized,

In the past three weeks, I have been actively involved in three FSBO’s. As a Massachusetts real estate attorney, I am often the “default resource” for people who do not want to pay a broker’s fee for the sale of their home. Whether this is an accurate conclusion on their part or not, they no not see the “value added” of a 3 or 4 or 5 percent charge to sell their home. They can rely on Craig’s List; they can relay on word of mouth; they can rely on the Internet:

I thought it might be worthwhile to describe the three situations in some detail. They may give our ActiveRain Naton some insight into FSBO’s and the fact that a constricted economy has caused many more people to use them:

     1. The Luxury Home in the Suburbs. My client is an extremely successful person in the financial area. His home is in pristine condition. He has an opportunity to relocate to the Western state where he grew up. He got the word out through the network in which he operates that his home was available, A similarly situated young couple had recently signed a purchase and sale agreement to sell their home. They have the money and the credit score. I have worked many times with their attorney on other deals. There were a few title issues. The other attorney and I worked things out. Last night I picked up the signed purchase and sale agreements at my client’s home. I will be holding the deposit for a closing in late March. This is a done deal, with very little likelihood of not taking place. I find it hard to see how a Realtor could have filled many of the holes here. My fee will be be more than usual, but certainly not in the middle five figures. This transaction would appear to have presented an efficiency that cannot be questioned. ActiveRain Nation may question this statement. I would be interested in hearing your comments.

     2. The Home in the Suburbs which has some “issues”.This matter came to me at a time when the Seller had received an “Offer” from a couple who had seen the FSBO Listing on Craig’s List. The Offer was a “low-ball” and there was no pre-approval letter attached. The Seller is in the “in-between” stages; he may be losing his job, and he would rather take a defensive stage and sell his home now. I prepared a counter Offer which provided some of the protections an Offer should contain, especially for a Seller. The putative Buyer declined to respond. He was a “tire kicker” from the get-go. My client has wasted money  , and is no further along. Sooner rather than later, I am going to suggest that the client list this home with a Realtor. It is my feeling that this will be easier to do now that he has seen how expensive and wasteful of time and money FSBO’s can be. I do not believe I could have told him this; he had to experience it.

    3. The Condo in the Back Bay that my Seller has not really even decided whether he wants to sell or not. This is a different kind of FSBO. It is kind of “I will run it up the flagpole and see if anyone salutes.” The Unit has charm and the asking price is only a little over market. My sense is that in this economy the Seller will not get much traffic. I prepared an Offer for them to use if one of their open houses produces a Buyer. I am not holding my breath. I am not getting any of my broker friends involved just yet. This Seller is a reverse “tire kicker”, and it is my belief that having a Realtor involved at this stage would not be productive.

So, there is a waterfront of three (3) FSBO’s, each offering different situations. Our industry should be considering how we can offer”value added” to FSBO Sellers. They are a rapidly increasing population, and just calling the Sellers who are listing property without a realtor  may not be the ultimate solution.

The Case of the Victimized School Teachers–Sometimes You just have to say “what the Heck!!!”

Customer Service

A few months ago, I received a call from a client whose daughter lived with three other women in an apartment.  The landlord, who had a chain of apartments in the Greater Boston area, was being neglectful.  There was a rodent problem, a leak in the ceiling persisted, and in this winter of winters, the heating system often failed.  Phone calls, letters, threats of non-payment of rent all were ignored.  In desperation, we were called upon to try to make the situation better.

The women wanted to remain in the apartment.  They all taught school in the local area.  They were friends and had found a location that was suitable.  They wanted the landlord to be responsive to their needs and live up to the assumption which exists in all Massachusetts tenancies which provides that an apartment must be “habitable”.  We started off with normal channels.  We wrote a certified letter to the landlord, requesting a forum to explain the problems.  This was unanswered.  We sent another letter and advised the landlord that if remedial action was not commenced, we would advise our clients to withhold rent.  Again, no response.  We informed the health officers in the town involved and requested that they inspect the alleged problems.  They conducted an inspection and cited the landlord for health code violations.  The landlord agreed to address the problems, but nothing happened.

With no other options available, we  advised our clients not  to pay rent to the landlord. We kept their rent in a segregated account.  The landlord sued: we defended.  When we had our day in court, subpoenaed the health officer to testify, and presented the facts, we were able to demonstrate that the landlord had violated the Lease and was not entitled to rent until the health code violations were rectified. The landlord has finally responded, and the problems have been rectified. The women are not vacating the apartment. We are confident that the landlord has learned a lesson and will take better care of health and safety issues in the future.

What we proposed to our clients was risky. Self-help is generally not recognized in our judicial system as a means of protest. But, we prevailed in this instance because the facts were so decidely on our side. It is cases like this which make the practice of law gratifying. Helping others help themselves gives one a good feeling

Let the other side win a few points–You will be amazed how well transactions move along when both sides feel good about the deal

Marketing / Communication, Uncategorized, ,

I went to a good law school where I was challenged every day to develop new and innovative ideas. In effect, I was told that what I did needed to be special, because I was “so well trained”. Over forty years into a career as a Massachusetts real estate attorney have demonstrated to me that the wisdom of this approach is fleeting. I am much better off being thorough and competent, rather than being the “best and brightest” who always gets the better of the deal.

What I am trying to say is that a real estate transaction is like trying to catch a fish. Until the fish is in the boat,no one wins, not the fisherman; not the person steering the boat; not the people waiting on shore for their seafood dinner. In real estate, you really have nothing until you have a signed purchase agreement at a reasonable price with a deposit. Oh sure, you can hold out for a better price and show how tough you are, but the danger is that you obtained such a good price, there was no way the property appraisal would match the purchase price, so you are back to square one.

It has been my experience that real estate transaction come in waves. There is the initial negotiation which leads to a sales agreement. Each side wants an agreement that demonstrates that they did not “get taken”. As we approach the closing, ancillary issues come up. Can we move the closing date slightly? Would you be interesting in including the refrigerator? Can we close at my attorney’s office because it is “kid friendly” and I have three young children.

If the initial negotiation went smoothly, and the parties more or less got along (through their representatives), the rest of the transaction will usually continue to be amicable. The purchase will close, and that is how all of us will get paid. You will be surprised how many “yes” answers you will get when the initial dealings went well.

I tell all of my clients I do not want the phrase “He wrote the perfect purchase and sale agreement” on my headstone. I would rather be known as a person who was a “deal-maker”, who knew his craft and practiced it in such a way that people were comfortable using him. I am sure each of you feel the same way as approach Ground Hog Day and yearn for the joys of the spring market.

Appearing Before Local Zoning or Planning Boards–Use the Local Luiminary to Help You “Sail Through the Process”

Uncategorized, , ,

There are some important things I have learned about appearances before local Planning Boards or Zoning Boards. Have someone really “local” leading your team. I am a Massachusetts practicing real estate attorney with more than 40 years of experience. From time to time, I am asked to represent clients before local Boards. I can make myself familiar with the terms of the local ordinances. I can speak to people I know in the community involved to find out what the appetite is in that community for the type of development or zoning change my client is seeking. I have some public speaking ability.

All of that being said, I never, ever appear before a local Board without retaining an attorney or attorneys who live in the town or city in question, or have a considerable amount of experience obtaining successful decisions in that arena. I have experienced too many “knowing looks” from  Board members in the past, when I tell them where I am from. It just doesn’t get me much mileage when I appear in Town X, in Y County and inform the Board members that I practice in Boston.

Have your  primary attorney find out who it is who gets  positive decisions in the town or city you are working in. Contact that person. In Massachusetts. I have complied a list of “go-to” people in many communities. I will gladly furnish my knowledge to any of you if you contact me.

You may want to keep your primary attorney somehow involved for iinformation and communication purposes, only. Your primary attorney should stay “way” in the background.  Allow the local luminary to have center stage.

If there ever is a time when “LOCAL” means something, it is before municipal Boards, who have the power to either make or break your intended transaction(s). Make sure your appearance before these bodies acknowledges that fact, and your chances of success are exponentially increased.