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Well, 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!

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

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In this post, we will highlight the fourth segment of the seven-segment, 23-mile long State Road 82 widening project. The fourth segment runs on State Road 82 from Homestead Road to the Lee/Hendry County line. The Florida Department of Transportation will expand State Road 82 from two lanes to four lanes along this stretch, and FDOT will acquire enough right-of-way to expand State Road 82 to six lanes. This link shows the details of this segment of the project.

According to the project website, the Homestead Road to Lee/County County line segment is currently in the design phase.

Stay tuned to our blog for further developments!

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Good Intentions

In passing the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress created the Consumer Financial Protection Bureau (CFPB). The purpose of the CFPB was to safeguard consumers against fraud and other predatory practices by financial institutions.

The CFPB recently issued a final rule which will require residential mortgage lenders to begin using new mortgage forms designed to make it easier for borrowers to review important information such as interest rate, monthly payments and costs to close the loan. So far, so good.

Unintended Consequences

Some of the new mortgage rules the CFPB has issued this year will influence qualification requirements and the types of mortgages that borrowers may get. Although the new rules may not affect many people seeking to buy a home or refinance their home loans since lenders have already tightened their lending standards following the financial crisis, analysts say certain groups of borrowers will be adversely affected.

New lending rules would bar people from obtaining a mortgage or refinancing if it puts their household borrowing over 43 percent of their income. Borrowers seeking larger mortgages, self-employed borrowers, first-time homebuyers, especially those who have college loans, and seniors, many with substantial savings, but lower incomes, may all need to jump through additional hoops to get a home loan. Those who lost jobs during the recession or who otherwise have had career disruptions in the past five years may find it difficult to get a real estate loan due to CFPB regulations regarding verification of job history and employment standing. Small business owners and independent contractors whose incomes are volatile, and recently divorced or widowed people could all have a tough time getting mortgages or refinancings. In sum, it has been estimated that anywhere from 10% to 50% of potential borrowers who qualify for real estate loans will be adversely affected under the new regulations.

The rules are aimed at protecting consumers from hurting themselves, but will likely reduce loan availability, loan choices and increase borrowing costs. Additional regulatory compliance costs are likely to put smaller community banks with fewer resources at risk of closing down or offering fewer services to their clients. Is it a good idea to reduce choices and increase regulatory compliance costs in the name of protecting some borrowers from hurting themselves while adversely affecting other borrowers and favoring the “too big to fail” financial institutions? Is a new federal bureaucracy the best way to protect consumers from “predatory lenders” or an example of the “nanny state?” As noted above, lenders have already tightened their lending standards since the financial crisis.

Will the good intentions outweigh the unintended consequences?  Time will tell.

Here’s some important news for those of you who own property fronting on Homestead Road. The Lee County Department of Transportation is widening Homestead Road to four lanes.  The project will run for 2 ¼ miles, from south of Sunrise Boulevard to Alabama Road.  The project will include on-road bike lanes and the addition of sidewalks on both sides of Homestead Road. Currently, right-of-way acquisition is underway. Construction for the project is funded for fiscal year 2015/2016.  It is important to start planning now, as right-of-way acquisition will affect property owners along this segment of Homestead Road. A link to the right-of-way map can be found here so you can determine whether you may be affected.

Stay tuned to our blog for further developments!

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During the past 2-3 years, Lee County has been engaging in a systematic and comprehensive streamlining of its zoning, permitting and development review processes.  In a report released recently by the County’s Department of Community Development (DCD), the results of this streamlining effort are identified in detail.

Working independently and in conjunction with the Business Issues Task Force of the County’s Horizon Council, DCD has developed and implemented improvements in customer service and technology, amendments to the County’s Land Development Code, and is in the process of proposing changes to its comprehensive plan that facilitate the processing of permitting applications.  Some of the highlights include:

Continue Reading Lee County Continues Streamlining Its Permitting Processes

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If you’ve traveled on Bonita Beach Road, you know it’s been under some construction over the past couple of years. Well . . . the Bonita Beach Road widening project continues to move forward. Lee County DOT is designing the road widening plans for Phase III of the project. Phase III is two miles long and runs from Windsor Boulevard (west of US 41) to Old US 41 in Bonita Springs. The project will include widening the road to six lanes, adding on-road bike lanes, and sidewalks.

At this point, neither right-of-way acquisition, nor construction are funded. Right-of-way acquisition and construction are expected to take place roughly six to ten years from now. Although this is quite some time in the future, it’s important to start planning now, as right-of-way acquisition will affect existing businesses along either side of Bonita Beach Road in the Phase III area. Here’s a link to the right-of-way maps so you can determine whether you may be affected.

Stay tuned to our blog for further developments!

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As a real estate lawyer, a significant part of my practice involves preparing and negotiating commercial and residential lease agreements. At times, however, potential clients may decide to find a sample lease agreement online, or have their realtor prepare the lease, to avoid attorney fees.

Proceed With Caution

Because most commercial leases are for 5, 10, or even 20 years, the length of time you will be bound by the lease terms warrants hiring legal counsel to look after your best interests. This is equally important in a residential setting, as housing costs are generally the largest monthly or yearly expenditure. From both the landlord’s and tenant’s perspectives, it is important to clearly and thoroughly set forth the terms of the agreement, whether it is a residential or commercial lease, to avoid disputes as to each party’s responsibilities and obligations. The most common issues that create disputes with lease agreements include:

  1. Condition of the property was not thoroughly investigated.
  2. Unclear language concerning the responsible party for maintenance and repairs.
  3. Unclear language as to the type and amount of insurance required to be obtained by each party.
  4. Notice and cure periods, as well as when late fees are triggered, are not clearly stated.
  5. The language is not clear as to how the tenant may exercise an option for the lease term to be extended, known as a renewal option, nor does the lease clearly provide the rent for the renewal option and what happens if the parties cannot agree upon the new rent amount.
  6. The lease was not signed as required by law or an authorized representative did not sign the lease.
  7. Language does not address who owns alterations or improvements made to the property.
  8. Unclear language as to if either party is obligated to repair or rebuild in event of partial or total destruction, or when a party has the right to terminate the lease in the event of destruction.
  9. Failure to clearly state the conditions to be satisfied for the security deposit to be returned to tenant.
  10. If tenant is given an option to purchase, the language fails to clearly provide the terms and conditions of said option and whether tenant’s deposit for the option is non-refundable.

Be extra cautious when negotiating a lease with an option to purchase. An option to purchase requires the parties to not only set forth the terms and conditions to lease the premises, but also requires all terms and conditions of a contract be discussed and clearly set forth in the lease. Often the option to purchase provision is not properly drafted and is a common cause for legal disputes.

Finally, commercial landlords should avoid using a previously prepared lease agreement for a new transaction, even if the agreement was prepared by an attorney. Not only is each transaction unique, but the laws may have changed since the previous agreement was drafted.

The value of thorough due diligence cannot be underestimated by either party before entering into a lease agreement. For instance, is the tenant credit worthy and has a background check on tenant been obtained? Is the landlord responsive when repairs are required? Is the landlord financially sound or is there pending foreclosure or other lawsuits against the landlord?

Keep in mind that once a dispute arises with a lease agreement, the attorney must work within the language in the lease agreement. It is more beneficial, and less costly, to hire an attorney to protect you before a problem arises. In the event a dispute arises, be sure to contact your legal counsel as soon as possible to protect your interests.

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In this post, we will highlight the third segment in the seven-segment, 23-mile long State Road 82 widening project. The third segment runs from Alabama Road to Homestead Road. According to the project’s website, “FDOT is preparing design plans to expand State Road 82 from two to four lanes from Alabama Road to Homestead Road in Lee County.” This segment of State Road 82 could be widened from four lanes to six lanes in the future.

According to the project’s website, the right-of-way acquisition phase should begin in early 2014. If you own property running along State Road 82 between Alabama Road and Homestead Road, portions of your property may be needed for the project. In that case, you would hear from FDOT.

As of October 21, 2013, the FDOT’s Project Summary showed that the FDOT has allocated $1,165,097.00 for right-of-way acquisition in fiscal year 2016. As of October 21, 2013, the FDOT’s project schedule for this segment shows that appraisal work will take place October 28, 2015 through April 14, 2016 and shows that the negotiations for property needed for the Alabama Road to Homestead Road segment are scheduled to take place February 18, 2016 through June 29, 2017.

Stay tuned to our blog for further developments!

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As the late, great sports broadcaster, Harry Caray, used to say, “Holy cow!” It appears my observation in our September 12, 2013 post, that “a lot has happened on this topic since our July 29, 2013 post!,” was an understatement. This story has moved fast! Between the time we began preparation of the September 12 update and the time we posted the update, the hearing on the plaintiffs’ motion for a preliminary injunction and the defendants’ motion to dismiss in the Wells Fargo Bank v. City of Richmond, California and Mortgage Resolution Partners, LLC lawsuit had been moved from September 13 up to September 12 and the court had orally ruled at the hearing!

To break it down in slow-mo, let’s take a look at the replay:

  • As reported by Reuters, on September 12, 2013 “[a] federal judge . . . said a lawsuit to stop a plan by the [C]ity of Richmond, California, to use its power of eminent domain to protect homeowners from foreclosure should not be heard at this time.” According to Reuters, Judge Charles Breyer said, “‘I don’t believe it’s ripe for determination.'” Reuters reported that Judge Breyer “would rule by Monday on whether the lawsuit should be dismissed or put on hold.”
  •  On Monday, September 16, Judge Breyer dismissed the lawsuit, as reported by the San Francisco Chronicle. A copy of the Order Granting Defendants’ Motion to Dismiss and Denying Plaintiffs’ Motion for a Preliminary Injunction can be found here. The Judgment, which dismissed the Plaintiffs’ Complaint without prejudice, can be found here.

Around the same time, reports circulated about San Francisco and Seattle considering the use of eminent domain to acquire underwater mortgages. In Seattle, there have been some questions about the actual number of underwater mortgages. The report prepared for Seattle’s City Council by Cornell University Law School Professor Robert Hockett identified “‘about 42,000 underwater mortgaged homes.'” But according to Seattle Weekly, Professor “Hockett explained that he had used a number about half as big—24,000—in a draft report submitted to [Seattle’s City] [C]ouncil.” Seattle Weekly said “a working group providing input to the [City] [C]ouncil urged [Professor Hockett] to go with the 42,000 figure, which was contained in a previous report . . . .” According to Seattle Weekly, Professor Hockett said he was told “[t]he higher number would convey more urgency.”

Even PBS got in on the action, with PBS NewsHour reporting about Richmond’s plan to use eminent domain to acquire underwater mortgages.

http://www.youtube.com/watch?v=0Q_9W39YUoo

That’s it for the slow-mo replay!  Stay tuned to our blog for further developments!