Legal Scoop on Southwest Florida Real Estate

Legal Scoop on Southwest Florida Real Estate

Update: Condemnation of Underwater Mortgages

Posted in Eminent Domain

underwater-mortgage-small.jpgSince our last update at the beginning of this year, Irvington, New Jersey has taken a small step toward the use of eminent domain to acquire underwater mortgages. In late March 2014, the Council of the Township of Irvington, in a 6 to 1 vote, approved a resolution calling for the Township’s Planning Board to “identify properties ‘in potential foreclosure that may be designated as areas in need of redevelopment,’” according to Eunice Lee’s article in The Star Ledger.

The Township’s resolution authorized “the [P]lanning [B]oard to prepare a redevelopment plan targeting 199 ‘underwater’ mortgages held by private investment groups, with the goal of acquiring them and offering better deals to the borrowers,” as reported by Joseph Tyrrell in the NJ Spotlight.

According to The Star Ledger, “Irvington would pay the mortgage holders’ fair market value and then restructure mortgages into lower principal payments that are more favorable for homeowners.” While the Township of Irvington has not yet actually begun condemning underwater mortgages, it has taken a small step in that direction with its resolution.

Stay tuned to our blog for further updates!

Residential Property Disclosures: Seller Beware!

Posted in Due Diligence, Real Estate

contract flickr MarkMoz12Lawsuits regarding nondisclosure of a home’s problems are becoming more prevalent. Historically, the rule of “caveat emptor” or “buyer beware” was the prevailing standard in residential transactions. However, the law has evolved and Florida now requires sellers of residential property to make certain disclosures to buyers about the property’s condition and history. An increasing number of sellers and sometimes their real estate agents are finding themselves on the hook for nondisclosure. Therefore, it is important for both home sellers and real estate agents to be familiar with the disclosures required.

Florida law provides that, with some exceptions, a home seller must disclose any facts or conditions about the property that have a substantial impact on its value or desirability, and that are not easily observable to a buyer. This has been the standard since the Florida Supreme Court decided the case of Johnson v. Davis, 480 So.2d 625 in 1985.

Although not required by Florida law, it is well advised that property disclosures be made in writing together with proof of delivery to the buyer. Although some required disclosures are included in the prevailing residential real estate contract forms, disclosures relating to the specific property are normally made by separate disclosure form. Types of issues or property conditions required to be disclosed include:

  • whether improvements have been made without building permits;
  • whether the property contains any environmental hazards such as asbestos, lead, mold, Chinese drywall;
  • whether any infestations or damage have occurred from wood-destroying organisms such as termites and carpenter ants;
  • whether there are any problems with essential components of the home, such as the roof, plumbing, electrical wiring, major appliances, HVAC;
  • whether any actual or potential claims, complaints or court proceedings affect the property;
  • whether the property is subject to the rules of a condominium or condominium association; and,
  • whether any disputes have arisen regarding the property’s boundaries.

The good news for sellers in Florida, home sellers are not responsible for defects they “should have known” about. Rather, Florida sellers are required to disclose only those property defects of which they have actual knowledge. This standard was determined in the case of Jensen v. Bailey, 76 So.3d 980 (Fla. 2nd DCA 2011). In this case, the Court recognized that sellers should not be expected to guarantee to buyers that their properties are free of all defects. Instead, to make a claim against a seller, the buyer must be able to demonstrate that:

  • the seller knew about the property defect;
  • the defect has a substantial impact on the value of the property;
  • the buyer did not know about the defect at the time of purchase;
  • the defect was not readily observable or easy for the buyer to detect; and,
  • the seller did not disclose the defect to the buyer.

It is important to note that selling a home in “As-Is” condition, does not relieve a seller from the disclosure duties under Florida law. The “As Is” condition means only that the buyer agrees to take the property in its existing condition without the seller having to make any repairs.

Bottom line: Sellers are well advised to carefully review their property disclosures to any prospective purchaser. A little extra caution at this stage of any potential transaction can limit a seller’s liability exposure and help avoid a lawsuit post closing.

Image Credit

What’s Going on with State Road 29?

Posted in Eminent Domain

8293998585_d02b699ef7_q.jpgThe Florida Department of Transportation is studying State Road 29 in order to determine the need for transportation improvements in Immokalee. FDOT is taking a look at State Road 29 from Oil Well Road in Collier County to State Road 82 and considering four alternatives designed to reduce truck traffic in downtown Immokalee, improve regional connections, improve emergency evacuation capabilities, support future population growth, improve safety, and improve the economy.

One alternative that FDOT is considering involves widening State Road 29. Two other alternatives FDOT is considering are by-pass corridors to avoid impacting downtown Immokalee. The fourth alternative that FDOT is considering is a “no build” alternative.

As shown in FDOT’s March 2014 Project Development & Environment Study newsletter, FDOT will host a public workshop from 5:00 pm to 7:00 pm on Thursday, April 3, 2014 at Immokalee One-Stop Career Center, 750 South 5th Street, Immokalee, Florida. Members of the public are welcome to attend to review project information, aerial photographs, and a video.  In addition, the public will have an opportunity to ask questions and discuss the project with FDOT representatives.

Stay turned to our blog for further developments!

How Much is that Doggy in the Window (of My Condominium)? Are pet restrictions becoming a thing of the past?

Posted in Condominium, HOA

dog in windowMany condominium and homeowner’s associations have pet restrictions, ranging from prohibiting all pets to allowing only pets of a certain size and/or breed. These restrictions are increasingly being challenged and associations are finding it harder to enforce them and subjecting themselves to liability if they attempt to enforce them.

Exceptions Mandated By Federal Law

There are Federal laws that require associations to make exceptions, in certain circumstances, to their pet restrictions. The two main laws relied upon are the Fair Housing Act and the Americans with Disabilities Act.

The Fair Housing Act

The Fair Housing Act requires associations to make reasonable accommodations in its rules when necessary to afford a person equal opportunity to use and enjoy their home. Failure to do so can result in a discrimination claim under that Act. To require an association to make accommodations:

  • a person needs to show that he/she is handicapped, as defined in the Act
  • that the association knew or should have known of the handicap
  • that the association knew that an accommodation was needed to allow the person to enjoy their home
  • that making the accommodation is reasonable
  • and that the association refused.

An association may ask the person to provide proof of the handicap and that the person needs an assistance animal as a result, but associations need to be careful of the type of proof asked for. The need does not have to be a physical need, such as a visually impaired person needing a seeing eye dog. The need can be emotionally based, and those animals are commonly referred to as emotional support animals. Documentation from a doctor, psychiatrist, or mental health worker may be sufficient to require the association to make the accommodation.

Americans with Disabilities Act

In order for a person to claim an exception to an association’s pet restrictions under the Americans with Disabilities, that Act requires that the pet, which is called a service animal, be trained. However, the Fair Housing Act does not have that requirement and some courts and the U.S. Department of Housing and Urban Development have stated that emotional support animals do not have to be trained. As a result, most people trying to escape an association’s pet restrictions rely on the Fair Housing Act.

The typical animal for which owners and tenants seek exception to pet restrictions are dogs, but the Fair Housing Act does not limit the type of animal which qualifies as an assistance animal or emotional support animal.

Bottom line: Associations need to be more careful when enforcing their pet restrictions, especially when someone is asking the association to allow his or her animal based on physical or mental disabilities. The number of persons claiming the need for these types of animals is growing and many associations believe that the laws are being abused. However, refusal of an association to properly handle a person’s request to have an assistance animal, emotional support animal, or service animal, or to make accommodations to allow the animal when someone meets the tests under law, can expose an association to financial liability.

Photo Courtesy of mjhagen on Flickr

Henderson Franklin Sponsors 2014 Market Watch Real Estate

Posted in Real Estate

Business GraphHenderson Franklin attorneys joined nearly one thousand other Southwest Florida real estate professionals at the annual News Press Market Watch Real Estate event, held at the Harborside Event Center in downtown Fort Myers. As a law firm that has a long tradition — stretching back to 1924 — of assisting clients in all aspects of real estate, we were proud to, again, join the list of sponsors for the event.

Attendees witnessed three presentations, each anchored in considerable amounts of market data compiled on the sectors of real estate that are vital to Southwest Florida: residential sales and development, land acquisition and development, and commercial real estate. Market data for 2013 confirmed the prevailing mood in the real estate industry: restrained confidence that the market has been restored to realistic and sustainable growth.

Residential sales remained sturdy in Lee County with 12,345 single family homes sold in 2013, a negligible drop of only 40 homes from 2012. With the demand and supply of single family homes both relatively unchanged from 2012 to 2013, a 23% increase in the median sales price to $158,000 demonstrates that buyers continue to see value in prices from the deflated lows of 2009 and 2010.

Developer optimism continued from 2012 as last year marked a 72% increase overall in construction permits for single and multi-family dwellings in Lee, Collier and Charlotte counties. Some of the notable transactions and planned developments include a 32 million dollar acquisition of 1,798 acres in Naples by Taylor Morrison, projected to be an 800 single family home community with an 18 hole championship golf course; and, a 45 million dollar acquisition by Lennar Homes in Bonita Springs, also planned for a single family home community with a golf course.

On the commercial real estate side, positive trends continued in multi-family building permits and in the Lee County lease market. Multi-family building permits in Lee County enjoyed a 92% increase from 2012. In the Lee County lease market, the amount of square footage of space occupied compared to that vacated increased in each of the important office, industrial and retail segments.

Other economic indicators contributed to the collective optimism as the data for the number of visitors to Southwest Florida, the total number of airport passengers, and the population estimates each reflected moderate gains.

Henderson Franklin clients were involved in key transactions highlighted during the event, and we are pleased to have contributed to our area’s growth in 2013 through our representation of developers, local governments, and individual investors.

Clearing Title to Real Property on the Death of a Spouse

Posted in Real Estate

Mortgage contractMany married couples own most of their assets as joint tenants with rights of survivorship (JTWROS) or by Tenants by the Entireties (a specific joint ownership between husband and wife). On the death of the first spouse, the surviving spouse often assumes that the property, whether real or personal, simply transfers to the surviving spouse. This is certainly true of tangible personal property (such as household furnishings, jewelry, clothing and personal effects). Intangible property, such as bank accounts, stocks, bonds, mutual funds and investment accounts may require the production of a certified copy of the death certificate in order to transfer the title into the surviving spouse’s sole name.

Florida law, however, requires three steps in order to clear the title of the real estate from joint tenancy or tenants by the entireties into the surviving spouse’s name:

  1. The first requirement is that a certified copy of the death certificate be recorded with the Clerk of Court in the county where the real property is located. If the couple owns real property in more than one county, a recording is required in each county. Preferably, the death certificate should not recite a cause of death. (In Florida, you can obtain a death certificate with or without a cause of death recited on the certificate. Other states do not offer this option.) If the death certificate recites a cause of death, the Clerk’s office will remove the information before the certificate is recorded. The recording of the death certificate proves the death of the joint tenant. This is often sufficient to transfer title to real property in many states. Florida procedures, however, require two more steps.
  2. The second step is that the surviving joint tenant should execute an “Affidavit of Continuous Marriage.” The affidavit is not required by statute to transfer the property, but most title insurance companies will require that the affidavit be filed with the County Clerk in order to transfer the property in the future. The Affidavit will typically state that the couple was married on a specific date, and remained married to each other without an intervening divorce until the date of death of the deceased spouse. The “Affidavit of Continuous Marriage” provides proof that the Tenancy by the Entireties of the couple was valid through the time of death of the deceased spouse, and may defeat any liens that may attach if filed against only one spouse. Such liens may include judgments, child support liens or tax liens and warrants. An intervening divorce would sever the entireties tenancy into a tenancy in common, potentially allowing certain liens or judgments against one spouse to attach to property previously held as marital property.
  3. The third step to clearing title to jointly held real estate is the filing of an Affidavit of No Florida Estate Tax. These are forms generated by the Florida Department of Revenue and is commonly referred to as a DR-312 or DR-313. Florida has not had an Estate Tax since 2004, when only estates that were required to file a Federal Estate Tax were required to pay a Florida Estate Tax. The requirement to file a DR-312 or DR-313 remains, however. If the Estate of the decedent is not required to file a Federal Estate Tax Return (required for Estates over $5.34 million in 2014), then the personal representative executes and records a DR-312, indicating that no Florida Estate Tax is due, and that the Estate is not filing a Federal Estate Tax Return. If the Estate of the decedent is required to file a Federal Estate Tax Return, the personal representative executes and records a DR-313, indicating that a Federal Estate Tax Return (Form 706) will be filed.

The real purpose behind filing the DR-312 or DR-313 is to create a public record of whether the Decedent’s Estate will be filing a Federal Estate Tax Return. If the Estate is required to file a 706 return, the filing of the DR-313 creates a putative tax lien in favor of the United States Government. Real property cannot be sold until the IRS releases its unrecorded putative lien, typically through the recording of the IRS’ Closing Letter in the public record. If the Estate wishes to sell the real property during the 706 audit period, the Estate must receive and record a Release of Lien by the IRS before the proceeds of the sale can be released to the Estate. For Estates that file a DR-312 indicating that the Estate will not be filing a 706, the DR-312 acts as a public record to indicate that there is no putative tax lien against the property.

Bottom line.  Clearing title to real estate upon the death of the first spouse is often overlooked until the surviving spouse wants to sell the property, or by the surviving beneficiaries when the second spouse dies. Closings can be delayed while title is cleared. Sometimes, beneficiaries do not have sufficient knowledge to provide affidavits without further research. For these reasons, the surviving spouse should seek counsel and assistance shortly after the death of the first spouse to make sure that title to real estate is properly cleared, and title is vested in the sole name of the surviving spouse.

Should You Convey Your Property to a Trust?

Posted in Real Estate

TrustI receive many calls requesting assistance with conveying real property into a trust, whether it be a revocable trust, land trust or the like. Some people desire to hold title to their real estate in the name of a trust for estate planning purposes, which may include spouses attempting to equalize their estates. Other people desire to hold title to their real estate in the name of a trust so the beneficiaries of the trust are kept private. And other people elect to hold title in the name of a trust for no other reason than to avoid the need to probate their estate. All of these reasons are valid reasons to consider conveying your real estate into a trust. However, there are some things you should be aware of before proceeding with the conveyance.

Florida’s “Land Trust” Statute

First, here is a little history on Florida law known as the “land trust” statute. Under Florida law, legal and equitable title is vested in the name of the trustee and provides the trustee with the authority to act on behalf of the trust beneficiaries. This authority is typically stated in the deed conveying the property to the trustee. The benefit of this is that any person dealing with the trustee does not need to review the actual trust agreement and that person is protected from any action of the trustee, even if the trustee exceeded his or her trust authority. Anyone dealing with the trustee is assured the trustee has full authority to deal with the property and any claims between the trustee and the beneficiaries will not affect the transaction between the trustee and any third party.

Here are some factors to consider before deciding whether to convey your real property into a trust:

  • Is there is a mortgage encumbering the property? If so, you will need to determine if documentary stamp tax is due on the conveyance. Florida law provides that documentary stamp tax is due to the State of Florida on documents that transfer an interest in Florida real property. The current tax rate is $.70 per $100 (or portion thereof) of the total consideration paid, given, or to be paid or given, for the transfer (other than Miami-Dade County, where the tax rate is $.60 per $100 or portion thereof). If the property is mortgaged, tax is generally due on the outstanding balance of the mortgage encumbering the property. There are some exceptions to this rule that you will need to review to determine if documentary stamp is due on your conveyance.  If tax is due and you do not pay it, the State of Florida may impose penalties and interest on the conveyance and you may not be notified of this for several years after the conveyance.
  • Do you have written consent from the lender? You should also review the mortgage to determine if a conveyance into a trust is permitted, or if prior written consent is required from your lender. If the loan document requires prior written lender consent and you do not obtain the consent prior to conveying the property to a trust, this may be deemed an event of default and the lender may be able to accelerate the loan and foreclose on the property.
  • Condo and HOA Concerns. If the property is governed by a condominium, homeowners or property owners association, you should review the association documents to determine if association approval is required prior to your conveyance to the trust.
  • Florida’s Homestead Laws. If the property is your homestead (or if you anticipate the property will be your homestead in the future), you should review your situation as it relates to Florida’s complex homestead laws to determine if it is best to convey the property into a trust or continue holding title to the property in your individual name or with your spouse.

Bottom line: To avoid undesired and unanticipated consequences, it is always best to consult with a real estate attorney prior to conveying your real property into a trust.

Lenders Beware: Lee County Passes Abandoned Property Ordinance

Posted in Judicial Update, Lenders, Real Estate

Nationwide, one out of every five homes in foreclosure are abandoned — equating to a total of 170,000 abandoned homes, according to recent studies. Florida accounts for 33% of that figure, or about 55,000 abandoned homes. Florida cities, in fact, represent 85 out of the top 100 cities based on total number of owner-vacated foreclosures. Lee County’s city of Cape Coral is #13 on that list, with over 2,200 owner-vacated foreclosures.

To combat the security problems that can arise from vacant homes and the potential blight on neighborhoods and communities, counties and municipalities across Florida have responded by passing Abandoned Property ordinances. These ordinances place registration, inspection and maintenance obligations on lenders during the mortgage foreclosure process. Lee County recently passed its Abandoned Property Ordinance, which took effect January 2014:

When Registration is Required for Lenders

The lender obligations under the ordinance are triggered in a number of instances, but most commonly, lenders will need to register their properties when either a notice of foreclosure is filed or a notice of default is given to the property owner. Lenders should be cognizant that a mere default letter to the borrower — without filing a foreclosure lawsuit — requires the lender to register the property.

Additionally, lenders who have acquired title through a deed in lieu of foreclosure or a foreclosure sale are required to register their respective properties, even if they held title prior to January 1, 2014 – i.e., lenders who acquired title prior to the ordinance’s enactment are not exempt.

The ordinance does not distinguish between commercial and residential properties. For example, a commercial lender who has provided a notice of default to a property owner or who has acquired title through a foreclosure sale is required to register the property with the County. Nor does the ordinance distinguish between institutional lenders and private lenders.

What Registration Entails

Continue Reading

Update: Condemnation of Underwater Mortgages

Posted in Eminent Domain

underwater-mortgage-small.jpgWell, it’s the beginning of a new year, and this a good time to tell you the state of the proposed use of eminent domain to acquire underwater mortgages. While no local government has actually begun condemnation proceedings to acquire underwater mortgages, a few things have changed since our last update in October. Additional cities do, however, appear to be interested in the concept. As outlined by lawyer Anthony F. Della Pelle, Newark, New Jersey and Irvington, New Jersey have expressed an interest in using eminent domain to acquire underwater mortgages. According to The New York Times, Robert Hockett, the Cornell University Law School professor associated with the concept, said “things seem to be picking up steam in Minnesota, and I’ve just been contacted in the past couple of weeks by two cities in Pennsylvania as well.” The San Francisco Chronicle reports the California towns of El Monte, Baldwin Park, and Pomona are also considering the use of eminent domain to acquire underwater mortgages.

The ACLU has even tried to get in on the action, filing a lawsuit against the Federal Housing Finance Agency, as reported in the same San Francisco Chronicle article. As Anthony Della Pelle explains, the ACLU “suit was filed under the federal Freedom of Information Act, and seeks copies of public federal records relating to the efforts of the FHFA to use its regulatory powers over mortgage agencies Fannie Mae and Freddie Mac, which control most residential mortgages in the United States, and also relating to communications between FHFA and various financial institutions, associations and organizations.”

And then there is Richmond, California . . . .  Rather than getting the five-vote supermajority required to begin the condemnation of underwater mortgages, the Richmond City Council could try to form a joint powers authority with other local governments in order to move forward with the use of eminent domain to acquire underwater mortgages, as reported in the San Francisco Chronicle. As shown in the article, a Richmond City Council member opposed to the use of eminent domain to acquire underwater mortgages believes a joint powers authority amounts to “an end run around the [City Council] supermajority requirement.”

Stay tuned to our blog for further updates!

Increase in Foreign Investment = Increase in Tax Implications for Florida Real Estate Buyers

Posted in Property Tax, Real Estate, Visas

tax burdenThe Foreign Investment in Real Property Act of 1980 (mercifully shortened in real estate and tax circles to “FIRPTA”) is a federal law designed to collect taxes on a foreign seller’s “disposition” of real property held in the U.S. The Act casts a wide net and applies not only to the sale of both commercial and residential properties, but also other real property interests such as swimming pools, mines, crops, and timber, just to name a few. Besides the typical sale of real property, the Act also extends to foreclosures and corporate mergers/reorganizations, among other “dispositions” of real property.

Foreign Investment on the Rise

With both residential and commercial real estate prices rising, but still deflated from the highs in 2008, both the U.S. as a whole, and Florida in particular, have experienced an influx of foreign investment in real estate.

Continue Reading