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GCAAR 2006. Legislative Update Roy Kaufmann. Agent Recommends Home Inspector. Selling Agent recommends a particular home inspector Inspector gives favorable report Buyer removed inspection contingency and closes Rear Wall later collapses. Buyer Alleges 2 Claims.

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Gcaar 2006

GCAAR 2006

Legislative Update

Roy Kaufmann

Roy L. Kaufmann, Jackson & Campbell, P.C.


Agent recommends home inspector

Agent Recommends Home Inspector

  • Selling Agent recommends a particular home inspector

  • Inspector gives favorable report

  • Buyer removed inspection contingency and closes

  • Rear Wall later collapses

Roy L. Kaufmann, Jackson & Campbell, P.C. - 2


Buyer alleges 2 claims

Buyer Alleges 2 Claims

First: Violation of DC Consumer Protection Procedures Act by recommending the services of an inspector which proved to be of deficient quality.

(28 DC Code 3901): “It shall be a violation … for any person to: (d) represent that goods or services are of particular standard, quality, grade, style, or model, if in fact they are of another” 

Roy L. Kaufmann, Jackson & Campbell, P.C. - 3


Buyer s second claim

Buyer’s Second Claim

Agent violated DC law governing fiduciary duties of real estate agents to clients.

§ 47-2853.192 says: “a) A licensee engaged by a buyer shall: 2) Promote the interests of the buyer by: Disclosing to the buyer material facts related to the property [and] (4) Exercise ordinary care”

Roy L. Kaufmann, Jackson & Campbell, P.C. - 4


Proving negligence at trial

Proving Negligence at Trial

Expert Testimony:

to show the degree of learning and skill ordinarily possessed by an agent practicing in this geographic area

To use the care and skill ordinarily used in like cases by reputable agents under similar circumstances and to use reasonable discretion and best judgment.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 5


In this case

In this case

  • Plaintiff decided not to produce expert testimony. Instead, plaintiff relied upon the two laws we looked at:

  • Consumer Protection by participating in the “misrepresentation” of the qualifications of the inspector

  • Duty to exercise ordinary care.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 6


Court of appeals finds

Court of Appeals Finds:

  • Consumer Protection Act does not make a guarantor out of the person who recommends a service provider

Roy L. Kaufmann, Jackson & Campbell, P.C. - 7


Court also finds

Court Also Finds

  • DC Law governing fiduciary duty does NOT present a meaningful standard of care.

  • At trial, Buyer failed to present expert testimony about standard of care expected of agents and how the agent was supposed to have breached that standard.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 8


Agent prevails

Agent Prevails

  • Because the Court found that

  • A) a person who refers a service provider is not a guarantor and

  • B) no breach of standard of care shown

    Claims NOT proved against Agent

    901 A.2d 174

Roy L. Kaufmann, Jackson & Campbell, P.C. - 9


Word to the wise

Word to the Wise

  • Negligence is when you fail to maintain the standards of the industry

  • Standards Change

  • Resources Change

  • “I’ve always done it this way” won’t work

Roy L. Kaufmann, Jackson & Campbell, P.C. - 10


Gwu s expansion

GWU’s Expansion

  • GWU sought to expand its campus

  • DC Board of Zoning Adjustment (BZA) issues limitations which GWU ignores

  • Neighbors file suit to enforce BZA order

Roy L. Kaufmann, Jackson & Campbell, P.C. - 11


Court finds

Court Finds

  • Neighbors do not have a “property interest” in asking BZA to enforce its order

    441 F. Supp 2d 84 (2006)

Roy L. Kaufmann, Jackson & Campbell, P.C. - 12


Lis pendens

Lis Pendens

  • “Let’s file a lien against the property”

  • Latin for "a suit pending," a written notice that a lawsuit has been filed which concerns the title to real property or some interest in that real property.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 13


Lis pendens1

Lis Pendens

  • Suit has to be filed first

  • Title or Interest (not liability)

  • Recorded at Recorder of Deeds

  • Clouds Title

  • Suit for improper use

Roy L. Kaufmann, Jackson & Campbell, P.C. - 14


Foreclosures

Foreclosures

  • At time of a regular settlement, 2 documents executed

    • Note

    • Deed of Trust

  • Two Remedies available in event of default:

    • Sue on the note and forget about the property

    • Foreclose on the Deed of Trust

Roy L. Kaufmann, Jackson & Campbell, P.C. - 15


Foreclosure on deed of trust

Foreclosure on Deed of Trust

  • Non-judicial foreclosure (no one goes to court)

    • Advertisement, Auction, Right to redeem

  • Judicial Foreclosure

    • Go to Court and have the court supervise the foreclosure process

    • Rarely used in DC because more expensive and slower, but sometimes required

Roy L. Kaufmann, Jackson & Campbell, P.C. - 16


Tax sales

Tax Sales

  • July Auction

  • 5% must be in the kitty – must be augmented through auction

  • Bid starts with amount in newspaper ad: one year’s taxes

  • Increments are surplus (no interest earned)

Roy L. Kaufmann, Jackson & Campbell, P.C. - 17


Tax sales1

Tax Sales

  • It’s an Industry

  • Very specific statutory requirements

  • Title search

  • Suit filed within one year

  • File Lis Pendens

  • Posting

  • Service of Process

Roy L. Kaufmann, Jackson & Campbell, P.C. - 18


Tax sales2

Tax Sales

  • Owner and some interested parties have right to redeem until the end

  • The only effective way to stop a tax sale is to redeem.

  • Redemption = pay all taxes and costs of suit

  • Could be multiple foreclosure actions

  • New law versus old

Roy L. Kaufmann, Jackson & Campbell, P.C. - 19


Note that law requires filing the lis pendens

Note that Law Requires Filing the Lis Pendens

  • In olden days, if you filed a lawsuit in DC Superior Court and added the words “Real Property” or initials “RP”, there was imputed notice to the public that there is a lawsuit pending.

  • Common law “lis pendens”

  • Title Abstractors would search for these when doing title search

Roy L. Kaufmann, Jackson & Campbell, P.C. - 20


Lawsuit

Lawsuit

  • Tax Sale Foreclosure

  • Plaintiff relied upon old system and put “RP” on the Complaint, but did not record a Lis Pendens.

  • Property owner entered into a contract with a third party during foreclosure

  • Third party searched ROD (“Recorder of Deeds) records and found no Lis Pendens

Roy L. Kaufmann, Jackson & Campbell, P.C. - 21


Issue of case

Issue of Case

  • Was the filing of the lawsuit with the designation of “RP” enough to invoke the common law theory of Lis Pendens?

  • Answer: no: The statutes over-ride common law. The statute is clear that Lis Pendenses have to be filed at ROD to be effective. 905 A.2d 181 (D.C. 2006)

Roy L. Kaufmann, Jackson & Campbell, P.C. - 22


Us supreme court weighs in

US Supreme Court Weighs In

  • Notice of Tax Sale mailed to owner by certified mail

  • Returned to government as undelivered

  • Court holds that 14th Amendment (“Due Process”) requires the government to take additional reasonable steps to provide notice if the original notice is returned.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 23


Dc meets that standard

DC Meets That Standard

  • Government mails two notices

  • Newspaper advertisement

  • After suit is filed

    • Posting on property of the summons

    • Newspaper Order of Publication

    • Personal service

      • Court may consider Service by Publication

Roy L. Kaufmann, Jackson & Campbell, P.C. - 24


What is this document

What is this Document?

Roy L. Kaufmann, Jackson & Campbell, P.C. - 25


It s not a survey it s a location drawing

It’s Not a Survey, it’s a LOCATION DRAWING!

Roy L. Kaufmann, Jackson & Campbell, P.C. - 26


Title insurance wouldn t help the buyer with the shed

Title Insurance Wouldn’t Help the Buyer with the Shed

  • Exclusion: Encroachments, overlaps, boundary line disputes, variations in area, party walls, roads, ways, streams, easements … or other matters which would be disclosed by an accurate survey of the land and which are not shown by public records.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 27


Additional exclusion

Additional Exclusion

  • Rights of parties in possession (as to shed)

  • This should have been ascertainable upon visual inspection.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 28


Lesson to learn

Lesson to Learn

  • You and client should understand difference between a location drawing, survey and ALTA Survey

  • Reviewing the land with location drawing in hand.

  • Initialing drawing at closing

  • Requesting deletion of “survey exception”.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 29


Law change recordation transfer taxes

Law Change: Recordation & Transfer Taxes

  • 2.2% for residences under $400,000 (includes both taxes)

  • All other transfers: $2.9%

  • On non-exempt deeds of trust 1.45% (mostly applies to commercial or construction loans)

  • Effective this past October 1.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 30


Exemptions from recordation transfer taxes

Exemptions from Recordation/Transfer Taxes

  • Recordation: to RECORD the deed (usually paid by purchaser)

  • Transfer Tax: usually paid by Seller

  • 2 taxes are equal in dollars

  • Exemptions from these 2 taxes are found in different volumes of the DC Code and are not parallel (though, the dissimilarities are often ignored)

Roy L. Kaufmann, Jackson & Campbell, P.C. - 31


Exemption from recordation tax

Exemption from Recordation Tax

  • Between H & W/Domestic partners or between children IF no consideration paid

  • Between former H/Ws if incident to a divorce

  • Deeds from a Personal Representative under a will, distributing the property (if there is a sale, there will be a recordation tax).

Roy L. Kaufmann, Jackson & Campbell, P.C. - 32


Exemptions from recordation tax

Exemptions from Recordation Tax

  • Deeds involved with Lower Income Abatement Program

    • Application must accompany filing of deed

    • 3 benefits:

      • Buyer pays no recordation tax

      • Buyer pays no real estate taxes for 5 years

      • Buyer receives a CREDIT for the transfer tax

Roy L. Kaufmann, Jackson & Campbell, P.C. - 33


Exemptions from recordation tax1

Exemptions from Recordation Tax

  • No tax on a mortgage filed simultaneously with deed, unless the mortgage exceeds purchase price, i.e. construction to permanent

  • Deeds INTO a revocable trust

    • Deeds out of a revocable trust ARE taxed unless due to death of Grantor

  • From General Partnership to LLC

Roy L. Kaufmann, Jackson & Campbell, P.C. - 34


New dc tax credit

New DC Tax Credit

  • For installation of an alternative energy source or energy saving measures (i.e. 25% of the cost of substituting double-paned windows, caulking of windows, etc.). Effective this year.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 35


Percentages vary

Percentages Vary

  • High-efficiency hot water heater or heater or insulation of duct work, thermal windows: 25%

  • Insulation of walls, floors, ceiling: 20%

  • High-energy appliances or ceiling fans: 20%

  • Energy-efficient lighting: 15%

  • Programmable Thermostat: 10%

Roy L. Kaufmann, Jackson & Campbell, P.C. - 36


Tax credit is limited

Tax Credit is Limited

Annual credit cannot exceed $500 ($2,000 if new construction) BUT, you can carry forward any unused credit over 5 years.

47 DC Code 1806.11

Roy L. Kaufmann, Jackson & Campbell, P.C. - 37


Rent control ceilings abolished

Rent Control Ceilings Abolished

Roy L. Kaufmann, Jackson & Campbell, P.C. - 38


Rent control abolished

Rent Control Abolished

Roy L. Kaufmann, Jackson & Campbell, P.C. - 39


Non titled spouses and domestic partners

Non-Titled Spouses andDomestic Partners

  • Dower Abolished in 2001

  • Prior to that, spouses had to be found

  • Trouble, cost, inconvenience, delays

  • When dower was abolished this requirement was relaxed by the title industry

Roy L. Kaufmann, Jackson & Campbell, P.C. - 40


Requirements resurfaces

Requirements Resurfaces

  • 15 DC Code 502 reset the requirement of signatures on deeds of trust of spouses and domestic partners who may “reside” in the property.

  • Again, inconvenience

  • What does “reside” mean?

  • Dual residences, military, FSO

  • Intrusive questions

Roy L. Kaufmann, Jackson & Campbell, P.C. - 41


New law proposed write to your councilperson

New Law ProposedWrite to your Councilperson!

  • Bill 16-671 will fix this by correcting 15-502 to eliminate the need for spousal/domestic partner signatures unless s/he is on title.

  • Take a moment to write your councilmember to support Bill 16-671.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 42


New office of tenant advocate

New Office of Tenant Advocate

  • Provides Education to Tenants

  • Ambulance chasing

  • Represent interests of tenants in legislative, executive and judicial issues, including advocating changes and reviewing landlord petitions representing the tenants’ interests.

  • Advising Tenants on filing complaints against landlords, organize tenant participation in building-wide inspections

  • Representing tenants in court or administrative proceedings.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 43


The bear topa tenant opportunity to purchase act

The Bear: TOPA(“Tenant Opportunity to Purchase Act”)

  • 1980 Originates to address:

  • Housing crisis

  • Severe shortage of rental housing

  • Condo Conversion depletes rental housing stock

  • Lower Income, elderly most affected

Roy L. Kaufmann, Jackson & Campbell, P.C. - 44


Have the objectives been achieved

Have the Objectives Been Achieved?

  • Statistics seem to show that the law has not affected the rental housing stock at all.

  • When a tenant group partners with a developer, usually the units do not remain rental (elderly, disabled excepted)

  • Is purpose to retain rental stock or assist first-time buyers?

Roy L. Kaufmann, Jackson & Campbell, P.C. - 45


Practical results

Practical Results

  • Sellers have uncertainty and time delays: for 5 or more units, tenants have 420 days from date of notification to negotiate and close

  • For single family, it can be up to 195 days and 2-4 units, up to 277 days.

  • Even after these periods pass, the tenants may not be able to close and 3rd party contract is lost.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 46


2005 amendment

2005 Amendment

  • 95/5 tightened up, as the definition of “sale” was broadened.

  • Exemptions were developed to a “sale” that triggers TOPA rights

  • If the landlord/seller wants to claim an exemption, he generally has to fill out a special form available from DCRA

  • DCRA has no forms

Roy L. Kaufmann, Jackson & Campbell, P.C. - 47


Specifics definition of tenant

Specifics: Definition of “Tenant”

  • Definition of tenant: a tenant, subtenant, lessee, or other person entitled to the possession, occupancy or benefits of a rental unit.

  • Problem with definition: besides those who have a lease, who else is included? What are “benefits of a rental unit”?

Roy L. Kaufmann, Jackson & Campbell, P.C. - 48


Gcaar 2006

  • “If the names of 2 or more persons appear on a rental agreement, those persons shall determine which person may exercise a vote under this Act”.

  • Note: are we talking now about a rental agreement having to exist? What happens if there is a disagreement between the two people? With whom does seller have to negotiate?

Roy L. Kaufmann, Jackson & Campbell, P.C. - 49


Task force suggests

Task Force Suggests

  • “Tenant” is the “head of household” rather than waiting for a “vote” of the occupants

Roy L. Kaufmann, Jackson & Campbell, P.C. - 50


Conversion tax

Conversion Tax

  • 5% of sales price

  • Lien recorded at time of filing of condo declaration

  • DC has no form

  • Penalty for underestimating the 5%

  • If a unit has not closed within 2 years of filing of lien, you owe the tax anyway and must pay it.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 51


Definition of a housing accommodation

Definition of a “Housing Accommodation”

  • Current definition: any structure containing 1 or more rental units, excluding hotel, motel, rooming house IF the landlord has been paying the “hotel sales tax” IF the occupant has been there for less than 15 days.

  • Obvious problem

Roy L. Kaufmann, Jackson & Campbell, P.C. - 52


Task force suggestion

Task Force Suggestion

  • Delete the 15 days language

  • Add foreign government properties, nursing homes, hospitals, university dormitories, etc.

  • Task force decided to KEEP single family dwellings as subject to TOPA

Roy L. Kaufmann, Jackson & Campbell, P.C. - 53


Exclusions from sale

Exclusions from “Sale”

  • To decedent’s estate, even if for consideration (i.e. money paid by heirs), only if

    • To spouse, domestic partner, children or lineal descendants.

    • consideration is given to charity.

  • Query: What if no consideration is paid? Cannot leave property to my mother? My nieces? My death triggers TOPA rights?

Roy L. Kaufmann, Jackson & Campbell, P.C. - 54


Exclusions from definition of sale

Exclusions from definition of “Sale”

  • Life-time transfer without consideration to wife …. Parents, grandparents

  • Query: If I am alive, I can transfer to my mother without worrying about TOPA. If I die, that is a problem. Any transfer to nieces or lifelong friends triggers TOPA

Roy L. Kaufmann, Jackson & Campbell, P.C. - 55


Exclusions

Exclusions

  • Exempt if caused by change in the form of an entity owning the property, if without consideration

  • Partnership to LLC, etc.

  • Transfers in and out of a revocable trust

  • Transfer pursuant to court order

Roy L. Kaufmann, Jackson & Campbell, P.C. - 56


What is not excluded

What is NOT Excluded

  • Transfers among the existing owners (i.e. buying out another person’s interest)

  • Transfers to non-immediate family members

  • Transfers to charities

Roy L. Kaufmann, Jackson & Campbell, P.C. - 57


Task force recommends

Task Force Recommends

  • Exclude any transfers under a Will

  • Changes in form of entity only if operational control of the entity is not changed

  • Exclude charities (only 501-c-3’s), transfers among co-owners

Roy L. Kaufmann, Jackson & Campbell, P.C. - 58


How to claim exemption

How to Claim Exemption?

  • Must Send Special Notice on DCRA Form to tenants and to DCRA

  • DCRA has no forms

  • If you forget to send the forms (for example, if you are dead), there is a presumption that the transfer is not exempt. (I.e. that you are not dead.)

Roy L. Kaufmann, Jackson & Campbell, P.C. - 59


Title companies need certainty

Title Companies Need Certainty

  • Title insurance insures that no tenants have any rights (i.e. to purchase the property) and that the purchaser has clean title.

  • Need to know if tenants have exercised rights, or have rights lapsed because of deadlines.

  • DCRA supposed to issue a form signifying whether any notices from tenants have been received.

  • No forms designed by DCRA yet.

Roy L. Kaufmann, Jackson & Campbell, P.C. - 60


Time frames law versus task force 1 rental unit

Time Frames:Law versus Task force: 1 Rental Unit

Roy L. Kaufmann, Jackson & Campbell, P.C. - 61


Time frames law versus task force 2 4 units

Time Frames:Law versus Task force: 2-4 Units

Roy L. Kaufmann, Jackson & Campbell, P.C. - 62


Task force recommends1

Task Force Recommends

  • Single Unit Class

  • 2-4

  • 5-21

  • More than 21 units

Roy L. Kaufmann, Jackson & Campbell, P.C. - 63


Resources

Resources

  • dcgis.dc.gov

  • Then Real Property

Roy L. Kaufmann, Jackson & Campbell, P.C. - 64


Gcaar 2006

Roy L. Kaufmann, Jackson & Campbell, P.C. - 65


Gcaar 2006

Roy L. Kaufmann, Jackson & Campbell, P.C. - 66


Gcaar 2006

Roy L. Kaufmann, Jackson & Campbell, P.C. - 67


Dc site top vs google earth

DC Site (top) vs. Google Earth

Roy L. Kaufmann, Jackson & Campbell, P.C. - 68


Newsletter

Newsletter

  • www.JacksCamp.com

  • [email protected]

  • Roy Kaufmann

Roy L. Kaufmann, Jackson & Campbell, P.C. - 69


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