Category Archives: Uncategorized

Couples “Uncoupling”–The Sequel

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Many of you showed interest in this post, and I thought it might make some sense to “flesh out” terms and conditions  a well-drafted Tenancy in Common Agreement or Joint Tenancy Agreement (the “Uncoupling Documents”) might contain. There is nothing magic here: common sense and simplicity should always be the ruling impulses.

Here are some ground rules.

     1. Both parties should have counsel. If people are willing to enter into an agreement like this, they want it to be enforceable somewhere down the road. It is perfectly acceptable for one attorney to take the laboring oar in drafting, with the other attorney serving in a “review” status. That will obviate the ability of a party to say, “I did not understand” or “I signed but I didn’t know what I was getting into.” The cost of a reviewing attorney should be minimal.

     2. There is no need to record this document. At least in Massachusetts, where I practice, recording serves the function of giving notice to the world of a certain set of circumstances affecting a property. It is title driven. The Uncoupling Documents do not affect title. They are simply some understanding the parties have with regard to their ownership. As a point of fact, recording the Uncoupling Documents may complicate title review.

     3.  Basic “Exit Approaches” I have used.

          a. Notice to the other person with an Offer to purchase at a price. The other person has thirty (30) days to accept or say that he or she will buy the offering person’s interest at the price in the first offer. This keeps the offers from the first person honest and fair.

       b. The same Notice as Paragraph 3a, but no price. Each party then selects an appraiser, and the price is the average of the two appraisals. There is a variation of this approach which has the appraisers selected by the parties selecting a third appraiser, and the third appraiser doing the appraisal, and it is binding. This approach has the merit of having the price be accurate. I still like to give the “non-offering” party a chance to buy at whatever price has been determined.

       c. Whoever ends up withdrawing, at whatever price, there is a provision for delayed payment. I usually suggest a down payment of at least 20%, with the balance to be paid over three (3) years at prime plus 2%. There is obviously no magic in this, but some formula should be included to give the other person time to buy out the withdrawing person. A sale of the dwelling would trigger payment in full at that time.

       d. Sell the property and split the proceed. This may be the easiest, and cleanest, solution. Each party should be able to require this. It clears the air, and gives each party the ability to “move on” and not have to deal with the other on any continuing basis. I have found it helpful to make some provision for selecting a firm or person to market the property is another good provision for the Uncoupling Document.

Most people will honor a written agreement that they understand and have signed. The problem in the Uncoupling Scenario is that people have a real problem agreeing on what is “fair”. There is hurt or deception mixed in to their relationship. The ability to have a well-drafted and easily to understand exit strategy can ease the pain for both sides. That is what I have found in my more than forty (40) years of trying to help people protect themselves.

Couples “Uncoupling” and Owning Real Estate–“Breaking Up is Hard to Do”

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In Massachusetts, where I have been practicing real estate law for more than 40 years, many unmarried couples purchase real estate together. Some engaged people are trying to take advantage of the current low interest rates, and market indecision, to get something “we own before we marry”. Other couples, who never intend to marry, have the inclination to pool their assets to make joint ownership  a part of their personal relationship.

When I assist people in purchases who are in this situation, I explain to them their two ownership options; tenancies in common and joint owners with right of survivorship. Only the extremely practical even consider tenancies in common, whereby at the death of one of the owners, his or her undivided one half interest in the property passes to the person’s estate. Almost everyone chooses “joint ownership with right of survivorship” I might add that in each of these situations, I strongly suggest that the parties enter into Tenancy In Common Agreements or Joint Ownership Agreements to provide in advance for the possibility that they may part company from each other while owning the property in both names.

Very few clients are willing to enter into the Agreements I outline above. I may write a future post on what  terms and conditions these documents contain. In any event, most couple says “No”, so when a couple breaks up, the “fun” really starts. One party moves out, and says “why should she continue to make the mortgage payments, I no longer live here”.  And “by the way, I put down most of the down payment, and I want my money back, NOW” “I will only pay the mortgage payment if I can claim ALL the deductions on my tax return.”  “I will not sign for a refinancing, even at better rates, unless you buy me out on my terms” “OK, if you have moved out, I am changing the locks, and you cannot have access to the property” I can honestly tell you I have heard all these statements and more.

There is a judicial solution for these situations. It is called a “Petition for Partition” and it is an equitable proceeding, wherein all the factors involving the Tenancy are examined. It is not cheap!!! It is not fast!! It rarely reaches a conclusion that addresses all the concerns of the parties!!!

When you, as real estate professionals,  see an unmarried couple buying real estate, urge them to enter into some kind of “exit strategy” agreement. It is truly for their own good. A failure to have something in place can only exacerbate the drama of the break up. This piece of advice could be the single most important thing you do for these customers; they will thank you somewhere down the line. Topkins & Bevans are there to help, if any of your customers wish to discuss this entirely sensible, and prudent, strategy.

Is Your Massachusetts Client About to be Foreclosed Upon?–No Need to Start Packing Up Things Just Yet

Short Sales & Foreclosures, Uncategorized

This is an actual situation which is confronting a client of mine who has not made a mortgage (or tax) payment in the last eighteen (18) months. The mortgage lender has finally gotten around to scheduling a foreclosure sale. This course of action has really been necessitated by the lender’s unwillingness to demonstrate the least degree of flexibility in terms of several short sale go-rounds.

The sale is scheduled for the end of January. My client has asked me for a timetable as to when he must leave. Since there has been a dearth of good news for him in the past year or so, I was not unhappy describing the path he would face in terms of when he needs to vacate the premises. None of these suppositions are “sure things” but this has been my experience:

     1. The Foreclosure Sale. Lately in Massachusetts, outside bidders have been appearing at foreclosure sales and making winning bids. As much as anything else, this has been caused by the lender’s obtaining current and realistic appraisals of the property in question, and adjusting their bidding instructions accordingly. Furthermore, the lender now have a pretty good “feel” for the expense of boarding and otherwise securing REO property, and they would rather sustain their losses and move on. Assume there is a successful bidder at the foreclosure sale. The “closing” on the sale generally takes place in 30-45 days. During that period, there is no question that my client can remain in the home.

    2. After the Foreclosure Closing. Self help, even for former owners who remain on the premises, is a thing of the past. The former owner is afforded the due process safeguards of a “tenant” in terms of removing him from the dwelling. This means the service of a notice to quit, which will be followed by a Summary Process hearing, which will be followed by a judgment for possession, which will be followed by an execution and eventual physcial eviction. For a sinle adult, this process can be completed in probably 6 to 8 weeks. For a faimilt with childred, or elderly former owners, add another three months or so. Often during this period, the former owners will be presented with a “cash for keys” scenario, and very often the amount of cash involved is not small.

So, I told my client to plan to leave his home around Memorial Day. It could be a longer duration than that time, but will almost certainly not be shorter. That’s four (4) more months of cost-free housing. What a country we live in!!!

Purchasing Real Estate from an Estate–Get Some Legal Help Very Early in the Game!!!

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More often than not, a purchase from an Estate in Massachusetts can offer a “bargain price” element to the purchaser who is involved. The heirs may be anxious to “liquefy” their inheritance, and do not want the inconvenience of having to maintain the real estate in question, including insurance and taxes. There are, however, some title issues which you, as real estate professionals, should be aware of when you are involved in an “Estate Sale”, and I thought it might be helpful to bring these items to your attention:

     1. When there is a Will and an Executor: 

      a. The Executor is a fiduciary. In a word, that means that the Executor must obtain the very best price he, she or it can obtain for the real estate that is being sold. So, as difficult as it may be for some people to understand, in Massachusetts, even if an Executor enters into a Purchase and Sale Agreement for the sale of a piece of real property, the Executor must state that if a higher offer is presented prior to closing, the Executor must accept that offer. This happens rarely, but if you are representing a Buyer, it is important to let that person know that the Executor is not trying to pull a fast one with this language, the Executor is following the law

     b. If the sale transaction takes place within a year of the death of the decedent. The Executor will apply to the Probate Court for a License to Sell. The P & S will be presented with the application. The executor can then complete the transaction with the approval of the Court, and if a creditor does not contest the License, the creditor will have no standing to seek a surcharge from the Executor.

 2.      When there is no Will and no Executor:

    a. While it is never a good thing to do,  many people never execute a Will. That means that their property will pass to their heirs at law, as determined by the intestacy laws of the Commonwealth of Massachusetts. Rarely, if ever, do these laws precisely mirror what the decedent had in mind. Moreover, a deed in this situation must be executed by all parties who have an interest as a legatee under the statute. This can give “grey hairs” to even the most patient conveyancers.

   b. If the sale transaction is to take place within a year of death, there are more problems. A License to Sell will still be required, if the Buyer wants to relieve him or herself from the claims of creditors. A second step must be taken prior to the issuance of the License. Someone must take the role of “Administrator” of the Estate to apply for a License to Sell. This can take time, and at such time as you get a listing from a group of heirs of an intestate estate, I strongly advise that you start the Administrator application process right away.

As this post indicates, the sale of property which was owned by someone no longer living can be complicated and may be fraught with peril for the Buyer. Make sure that you obtain competent legal advice on the correct path early in the game. The other lesson here is to encourage all of your customers to make sure their Wills and other estate planning documents are in order. There is really no easy way to “get there from here” if a valid Will is not in existence.

New Residential Construction Contracts in Massachusetts–In this Case, Less May be Less

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First of all, I want to state my main premise when dealing with the new construction of homes. I insist that my clients do the research on the builder they have selected. There is no substitute for a great track record. I tell my clients to get at least two references of people for whom the builder has built a house, or performed substantial renovation work. This includes addresses and phone numbers. I tell my client to inform the builder that they intend to contact the former customers directly, either in person or by phone. They are going to ask questions like:

     1. How was working with this builder? Was he concerned about details? Did he get the house built on time? Did he come back promptly during the warranty period?

     2. Would you recommend this builder to your friends and family?

Assuming the answers to these questions are “yes”, I believe that, at the very minimum, the following elements need to be included in the Construction Contract:

     1. A commitment to build the home in accordance with the initialed plans and specifications.

     2. A delivery of an insurance certificate from the Builder which covers Builder’s Risks and Workman’s Compensation.

     3. An Arbitration Provision to cover disputes. Neither side can afford litigation in the course of building a new home.

     4. A commitment by the builder to deliver “lien releases” so-called before the final payment of the contract price is required.

     5. A One-Year Builder’s Warranty which sets forth in detail what is covered,and not covered, in terms of the quality of the work.

You would be surprised how “summary” some of the Construction Contracts my clients present to me from their builders can be.  In one instance, the terms of the contract were written on the clean side of an envelope. I cannot let my clients move forward on a six or seven figure project with a “handshake”. In the case of something as important as building a new home is, a comprehensive Construction Contract is essential. That is what I provide for my clients, or I do not get involved in their representation

Massachusetts Real Estate Investors–The LLC beats All the Others for Ease of Operations and Protection

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As a practicing real estate attorney with more than 40 years of experience in Massachusetts real estate transactions, I have pretty much seen all permutations and combinations of investment entities. When I first started practicing, limited partnerships were in vogue. That entity became further refined when people started creating corporations to be general partners. Limited Partnerships, frankly, had limitations. There was difficulty allocating cash flow among the participants; there were worries that any participation by a limited partner might make that person subject to entity liability. Limited Partnerships are still in use in special situations. These generally involve large, large transactions in commercial contexts.

Through the years, many people have embraced the use of Nominee, or Dummy, Trusts. These entities have the basic advantage of anonymity, and not much else. Recently, most tax accountants are taking the position that the Nominee Trust must file an informational tax return and thereunder “pass-through” the income and depreciation to the underlying beneficiaries. At one point, this second expensive step was not required. The worst part about the Nominee Trust, from my point of view, is that there is no real certainty that the underlying beneficiaries would be insulated from liability for obligations of the Nominee Trust. I now use Nominee Trusts in only situations where the property is residential and liability and umbrella insurance coverage would appear adequate for normal risks.

This brings us to my “Entity of Choice”, the Limited Liability Company (the “LLC“). Until relatively recently, Massachusetts, in its typical fashion, refused to join the other 49 states in permitting Single MemberLLC’s. Fortunately, those days are over, and the Single Member LLC is permitted. For your information, before the change, we needed to enlist a family member or close friend to become a minuscule Member to comply with the statute.

Now that Single Member LLC’s are permitted, there is no reason to use any other entity (other than an owner being “penny-wise and pound foolish” regarding the cost. In Massachusetts, there is a $500 filing fee for the LLC. There is an additional $500 Annual Fee after filing. Be advised, that there is a way to have “serial” LLC’s to avoid some of these fees, but that will be the subject of a future post.

So, for rather short money, a person who owns investment real estate in Massachusetts can operate like a sole proprietorship (some caveats here, see below) and have all the insulation aspects of a corporation. Moreover, if desired, an LLC Operating Agreement can be precisely tailored to admit “partner” Members and give them unique benefits. The Massachusetts LLC has one, or more, Managers (really a combination chief executive officer and sole board of directors member) and any number of Members (think of shareholders). The Certificate of Organization for the LLC generally provides the Manager with plenipotentiary powers, including the power to deal with real estate. The only thing the Manager has to remember at all times is to sign all leases and other contracts as “John Doe, Manager of the LLC”

At Topkins & Bevans, the law firmof which I am the founding partner, we work with Massachusetts LLC’s virtually every day. Call, or email,  me with any  Massachusetts LLCquestions or concerns, and we will gladly address them for you. No charge for any of this until, we both agree there will be. Just part of being a good ActiveRain citizen.

Being a Landlord in Massachusetts–The Perils are Real!!!!

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We are far removed from the time when the Landlord held all the cards in Massachusetts residential leases.  it would be more accurate to say, “Landlord Beware!!!” Even before the recent economic downturn which Massachusetts has been experiencing began, Landlords hav been on the run. Evictions for non-payment are certainly not automatic or swift. if a family with children is involved, or a person with special needs is your tenant, you may be looking at a year or more to get people out, even if they are not paying rent.

A new scam by tenants has also arisen where the Landlord owns a Condominium Unit, and cannot keep up his mortgage or monthly common area payments. The tenant just stops paying the rent and makes a deal with the Condominium Trustees to pay the monthly fees directly to the Condominium Association. With the length of time that foreclosures are taking, this can put the tenant in a “cheap rent situation” for an extended period of time.

A word of caution to all prospective Landlords. Familiarize yourself with the rules of security deposits and collecting last month’s rent.

     1. Security Deposits.  a. Never, ever collect a Security Deposit without having a tenant sign a Condition Statement. If you leave the condition of the rental unit open to “discussion” when the tenant vacates, you are asking for a lawsuit. Once the tenant acknowledges that the rental unit is in perfect condition, or notes exceptions as they exist, the road to retaining all, or a portion, of the security deposit gets much easier.

 b. Make sure that the security deposit is placed in a segregated savings account with the tenant’s social security number being credited with the interest. A failure to so segregate these funds has been adjudicated as a consumer protection violation in Massachusetts, with consequent treble damage liability lurking.

     2. Last Month’s Rent.As long as it is so labeled, this payment can be used by the Landlord. The Landlord needs to understand that he or she MUST make annual payments of interest to the tenant on this prepayment. Failure to make these payments may also leave the Landlord subject to consumer protection penalties.

At Topkins & Bevans, we advise Landlords on how to proceed on a statewide basis. Do not hesitate to contact us with any questions you may have on lease drafting or operations. We are glad to provide timely and accurate responses.

Massachusetts Buyer Beware!!!! If there is a foreclosure in your back title, you may not be getting what you are expecting

Short Sales & Foreclosures, Uncategorized

Here is a tale of woe that is real, and may be repeated many times in the future for Massachusetts real estate scenarios. Well before I started representing my client, he purchased a home which had a recent foreclosure in its title. My client, now attempting to do a refinancing to take advantage of lower interest rates, has run into a seemingly “non-fixable” road block with regard to his home. The property in question had been foreclosed upon and purchased back by the bank at auction. My client subsequently purchased the property from the bank at a price in excess of $450,000. At the purchase closing, my client made a decision not to purchase an owner’s policy of title insurance as it was “too expensive.”

After the closing took place, the Massachusetts Land Court issued several decisions that, in part, retroactively invalidated certain foreclosures. My client, who informed me he had paid for substantial improvements to the property, had just learned his application to refinance the property had been denied as a result of the Land Court decisions. In sum, the underlying foreclosure by the bank had been rendered invalid and, therefore, there is a question as to whether my client even owns the property. The invalid foreclosure probably means that the person who was foreclosed upon still owns the property. Not all foreclosures will be affected.

The Land Court decision concerned a foreclosure where the original mortgagee had assigned the mortgage to another servicer but had not received an executed assignment for recording prior to the commencement of the foreclosure. That being the case, the Land Court held that the foreclosing party did not “own” the mortgage and could not foreclose on a mortgage that it did not own. The decision stressed that the assignment did not have to be “on record” before the foreclosure. It just needed to be in existence. It would appear that if my client had purchased owner’s title insurance, he would at least have “insurable title” to his property. Insurable title would probably be enough to permit a refinancing of the property. That would be much better than the current condition.

On the other hand, “insurable title” is NOT “marketable title”, and even if there was an owner’s policy in place, my client may have insurmountable problems selling this property in the future, if the person examining the title realizes that the proper steps were not taken in terms of the foreclosure. People attempting to sell homes which have foreclosures in the title may be faced with the unpleasant prospect of obtaining a confirmatory deed from the former owner who may be “long gone” or “hard to find” and then paying a large sum to obtain same. Given the circumstances, and the justifiable reliance these people had on the strength of the owner’s policy, many title insurance companies may be willing to pay the fee to the former owner just to straighten out the really difficult position the current owner (who paid a premium for an owner’s policy) now find himself in.

Without an owner’s policy, a seller of real property with this problem is facing the difficult, and expensive, prospect of cleaning up this title problem, all on his or her own dime. The lesson learned here, at least in Massachusetts, is that if you are aware that a customer of yours is purchasing a home which has a foreclosure in its title history, you need to be extremely careful about moving forward. I have recently contacted my state senator to see if he could sponsor legislation which would cure this problem. In my eyes, the good faith purchaser for value should always prevail over the person who did not pay his or her mortgage and was, accordingly, foreclosed upon. I urge all of you Bay Staters to consider similar kinds of initiatives with your elected officials, so we can prevent this situation from becoming extremely disruptive to our already fragile real estate market.

Throwing Out the Baby with the Bath Water–Make sure your “Associations” with other Professionals don’t bring you Down

closing, Uncategorized

I swear, it was not my fault. In my mind, every closing in which I,or my firm participated, was handled promptly and professionally. We even conducted the closings “on-site” to make it easier for the 30 or so purchasers of the Condominium Units. Toward the end of the process, I started to see what the problem was. The mortgage loan originator, who brought my firm to the deal, and introduced me to the very talented and helpful Realtor whose commitment to this project was total had totally “dropped the ball”. Phone calls were not returned by the originator; data was requested from Borrowers two, sometimes three, times for the same piece of paper or information. The level of frustration was high, and I could feel it as I closed successive loans.

The transactions are now completed, and the project is sold out. I often get future business from people whom I have met at closings. There has not been one from this set of closings. I thought my rapport with the listing Realtor was excellent. She and I had spoken about how she wanted to get me involved in future deals. She doesn’t even return my emails or phone calls.

It is apparent to me that I have been tossed down the drain by my association with this originator and this lender. Since I was the closing agent, I must be involved with the problem. As most of you know, that is not really the case. My law firm is independent from this, or any other, lender. We review the title, prepare the closing documents and conduct the closings. We operate under a set of ethical rules which are governed by our State Bar Association.

Regrettably, none of this seems to matter to the purchasers or the listing agent. The purpose of this post is not to rant. It is to caution all of you that you need to be extremely careful with whom you associate in your business dealings. Bad behavior, or negligence, on the part of the Realtor, mortgage professional or attorney or escrow agent can drag you down, even if you performed your part of the transaction flawlessly. My late, great father had an expression, “Tell me who your friends are, and I will tell you who you are” It would appear that the wisdom of this truism applies to our respective professional lives as much, or more, than our personal lives.

Bad Home Inspection–Don’t Let It Kill Your Purchase

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In times like these, the last thing any of us need is a bad home inspection. Many of you have labored long and hard to find the right home for your Buyer, negotiated the purchase price and other terms, made arrangements for financing,perhaps even had your Buyer engage an attorney for assistance with the sale agreement, only to see the results of the home inspection reveal substantial problems with the home.

I want to inform each of you that when I am representing a Buyer, the first thing I tell the Buyer is “the home inspection is not a second opportunity to negotiate the amount of the purchase price.” In most instances, the Buyer is purchasing a “used home”, and used homes probably do not have the most efficient electrical wiring or most modern air-conditioning system. There are certain negative aspects of the home inspection which must be accepted by either the Seller agreeing to rectify same, or a manageable closing cost credit.

What I am addressing here is a substantial in inspection problem. A material crack in the foundation, a roof that maybe has no more than six (6) months of useful life, a health and safety issue such as asbestos insulation being present. These types of inspection issues are material, and the Buyer is well within its rights to walk away when they present themselves.

The point of this post is to suggest that you still may be able to do your deal, if you use the inspection report wisely. The Seller wants to sell the home; the Seller has entered into an agreement indicating same. The Buyer may be willing to go further is major price concessions are given. I have worked on several deals the past year where the Seller made large price concessions once the home inspection was completed.

In Massachusetts, where I practice law, the Seller, and the Seller’s agents are generally not liable for defects in the home of which they are not aware. Once an inspection reports indicates major problems, the liability issue changes. The Seller now knows that there is a major problem, and that problem will need to be disclosed to every potential Buyer. Perhaps, you can convince the Seller to deal with your Buyer. This is a person who might be willing to go forward and complete the purchase, if the terms are sweetened to address the problem. In the situations like this where I have been involved, I have urged the Buyer’s Agent to present the Buyer as “the devil you know”. As I have indicated, this strategy has worked for my Buyers on several occasions in 2009, and I urge you to consider using it in 2010.