Monthly Archives: July 2010

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.

How to get an offer accepted? Use a Realtor!

closing, Marketing / Communication

This is an extremely sensible approach to REO practice. I do a lot of REO work for Lenders, and I would like all my sales agents to have this material.

How to get an offer accepted? Use a Realtor!

Many buyers are asking on various internet portals how to get an offer accepted.  My answer is easy, use a Realtor. The multiple offer phenomenons have returned in certain markets. Where is that? The areas are in the Short sale and Bank-owned property. This market is smoking.

 I have buyers who have submitted at least 15 offers. Forget low balls, think full price and above asking price. Then why is my offer still not accepted? Buyers ask these questions. How is it that the lower priced offer got accepted? The answer is they had cash, you have FHA. Many private remarks to agents state NO FHA. As discouraging it is you still have to keep going. Now the great news comes CONGRATS, your offer has been accepted, six, seven, eight months later still no Closing. Why is that? It is called SHORT SALE!.

This process is tedious and lengthy. Do you have to patience for this? 

I just closed on a Bank Owned Property, after four different attempts. Why did it take this long? The buyer had all cash, we needed to learn, that automatic low balls do not get acceptance. We were in multiple offers all four times. We missed out four times. Then as luck would have it, the first buyer did not perform. Said they had all cash, truth be told they were exaggerations. Then the second buyer did not perform either. So you would think we automatically came in. No, we had to give best and final to compete with three other buyers. So an All Cash nine day escrow with virtually no contingencies and a million dollar got us a property.

 No what did it take to get the offer accepted? The answer is a good strategy, good financial status and a strong stomach to take on a fixer with virtually no contingencies and a Realtor that guided the buyer through these turbulent negotiations. So we had a happy ending on the REO.

 We are still waiting on the Short Sale, patience is a virtue. We are being virtuous.If you are a consumer  who is considering buying  or selling  a home, investment real estate, vacation homes, or beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Culver City, Marina Del Rey, Venice or Malibu. Feel Free to give me a call at 310.486.1002 (USA) or email me at homes@endrebarath.com  or visit one of my websites at http://www.endrebarath.com  Your Pet Friendly Realtor. I contribute a portion of My commission to Local Animal Rescue Organizations.  

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.

Together We REALLY Can–The Combined Enterprise of the Buyer’s Agent and the Buyer’s Attorney in Condominium Purchases

Condominium

While there has been a marked increase in both new and conversion condominiums in Massachusetts, where I practice real estate law,and most other jurisdictions in ActiveRain nation, it is my sense that many people get involved in a condominium purchase without any real understanding of what they are getting into and the inherent risks involved in condominium ownership. I have written other posts about the inconsistencies of condominium governance and the difficulties condominiums experience in encouraging able and stable people to serve as Trustees and Officers. That will not be the subject of this post.

This post is designed to be more positive. I want to lay out some of the guidelines I have followed in representing Buyers of Condominium Units, and how I have been able to work together with committed Buyer Agents to do the best possible work in terms of due diligence and disclosure. It is this “teamwork” element that I want to stress. I am so grateful for the advent of Buyer’s Agency, because I now have a real ally on the Buyer’s side. There are no conflicts here; the Buyer’s Agent and I are on the same page.

•1.       Pre-Offer Stage. This is where the Buyer’s Agent can really shine. I suggest that the Buyer’s Agent accompany the Buyer to the Condominium and then knock on some doors. Speak to the current residents. Ask them how things are going with the Condominium Trustees. Do they keep you informed of meetings? Are minutes ever distributed? If you have day-to-day problems, are they addressed? More than anything, this due diligence will give your Buyer a sense of what he or she is getting into. Remember, if the people interviewed lie, or even embellish, they are going to have some really embarrassing moments making explanations for their imprecations in the elevator or the laundry room.

•2.       Offer Stage. This is where the Buyer’s Agent and I can combine our efforts. The Buyer’s agent must be meticulous in terms of including everything that is included in the purchase in terms of appliances and other personal property. The Agent must make sure that the Buyer’s obligations are subject to the review of the Condominium Documents and Financial Information by Buyer’s counsel. Once the Offer is signed, I can almost always locate the Master Deed and Condominium Trust on-line. I will do this right away and alert my client to any aspect of the documents (pet’s policy, right of first refusal, policy on rentals) which I think is important. The Buyer’s Agent should be obtaining a current Financial Statement, Budget for the coming year and Minutes (if any) of the Condominium Trustees. I will review these, as well, and report any items which may be “red-flags”.

•3.       Purchase and Sale and Thenafter. There are certain basic items which I will include in my Buyer’s Rider. These include a statement about no future assessments and title representations which will be important at the closing table. My firm will obtain what is called a Municipal Lien Certificate which indicates the status of tax payments to the city or town where the Unit is located. Normally, the Buyer’s Agent will track down the 6(d) Certificate (statement that the Condominium is current in monthly condominium fees) and a Certificate of Insurance issued by the insurance carrier, who insures the Condominium common areas, which indicates the Buyer as an insured under that policy at 12:01 AM on the date of closing. The Buyer’s Agent often assists the Buyer in obtaining an HO6 Policy which protects personal property within the Buyer’s Unit and liability for occurrences within the Unit.

So, you can see how truly “joint” the enterprise between Buyer’s Agent and Buyer’s Attorney has become in terms of Condominium purchases. Together, we cannot solve all the problems which exist in Condominium governance. On the other hand, we can make sure that we have an informed, and prepared, consumer, and that knowledge can do nothing but make the experience more manageable.

Bridge as Life–Using Play of the Hand Techniques to Improve Your Negotiating

Customer Service, Marketing / Communication

My dad and mom taught me to play Bridge when I was a teenager. We had an instant game anytime we wanted with my older sister as the fourth. I play a lot of Bridge in college (probably too much, now that I think about it) and then have resumed playing as an adult with a regular group at my golf club. I have even played in a few duplicate tournaments from time to time.

Like all other card games, there is a certain element of luck involved in a Bridge game. Not so much in Tournament Bridge, but in the informal games that most of us play. That being said, I truly believe that there is also an important element of skill in the play of a Bridge hand. There are certain techniques that the declarer utilizes that demonstrate mastery of the game and almost always put the skillful player ahead of the others. It occurred to me that some of these techniques may be usable in real estate negotiations so I am chronicling them here.

•1.       The Endgame.  A clever declarer can make his or her contract if he puts the player to his left in a position where whatever he leads, the declarer wins. Picture the declare sitting South holding Ace-Jack of a suit, and his opponent sitting West holding King-Ten. If the declarer at the end of the game, can lose a trick to West when there are but two cards remaining, whatever of the two cards West leads (King or Ten), South will win both tricks. I would compare this situation to dealings with a stubborn seller, or listing agent. If you can get that person to be maneuvered into a situation where he or she is suggesting a solution to a problem, you have an advantage. You are never “bidding against yourself.” You always have a reference point to return to if things get heated. You remind the person what he or she once suggested. A lot of times, I like to embellish upon getting the other side into an “endgame” position by not responding in a telephone conversation after the person is finished. This makes the other side uncomfortable and starting to explain, and even modify, their position. That silence has helped me win many important advantages.

•2.       The Finesse. If you have Ace- Queen of a suit in your hand, and you think that the person sitting East sitting has the King, you can play a small card from the Dummy, and if East doesn’t play the King, the declarer plays the Queen from South and, in general, neutralizes the King so that it never wins a trick. This compares to a situation where you know that one of the parties to the transaction (maybe the husband or wife Seller) is very negative about the deal. You need to find a way to neutralize that person, by convincing the person you are dealing with directly (either listing agent or attorney) that this negative person can “kill this deal”. In effect you are using the old “finesse” technique to move the person to the sidelines where he or she cannot continue to be a problem.

•3.       The Squeeze. At the end of a bridge hand, a declarer with a bunch of winning cards can succeed by playing all of these winning cards to force the opponents to guess what to discard and what to hang on to. The result of the “squeeze” is to promote small cards into winners, if the opponents have not kept accurate track of the cards played. In real estate, the “squeeze” is available when we sense desperation on the other side. The skill involved here is to spend time to determine what your client or customer really wants, or needs, and then to make a longer list of demands, which eventually funnels into getting the important concessions your client really needs. You start out with a laundry list, and end  up with just the few essential items. The other side has been “squeezed” but gathers some comfort in the knowledge that they said “no” to a few requests.

If it sounds like I treat real estate negotiations as a game perhaps that is a correct observation. With the help of other real estate professionals on my team, I want to get the best possible result for my client. To me, that is what the game is all about.