Proposed Law Would Allow Doctors/Physicians to File Mechanics Liens Against Real Estate in CT

While more people now have health insurance under the Affordable Care Act, many of their policies came with large deductibles. These deductibles are commonly between $2,500.00 and $6,000.00. Any deductible amount is due from the patient to the doctor or physician providing the healthcare services.

It is mandatory for the doctors to attempt to collect these fees, and necessary for them to so for the health of their business. For patient this creates financial strain beyond the monthly payments they are already making.

The Connecticut General Assembly is now considering a Bill which would greatly expand the range of materials and services for which a mechanic’s lien could be filed. Currently, the law allows a mechanic’s lien to be filed for materials and services in connection with site development of land or construction of a building.

The proposed law, SB887, would expand the services to include “any other service rendered to an owner of land.” Under this proposed law, a doctor rendering medical services to a person owning land could file a mechanic’s lien against the land if the doctor’s bill was not paid. The doctor would have 90 days after treating the patient to file the lien, and the lien would take priority over any mortgage or transfer which occurs within that 90-day period.

When buying a home or commercial property, it is common for the Seller to sign an “owners affidavit”, stating that no work had been performed on the property in the last 90 days that could lead to a claim against the property. This was done to provide the Buyer, and their Lender, with assurances that the no fresh liens would arise against their interest in the property once it was conveyed. Now, with doctors and other service providers being able to file mechanic’s liens, there would be no way to protect purchasers and mortgage lenders against claims by service providers for services that are not related to improvements on the property.

Title Insurance On Residential Bank Owned Real Estate – Buying Distressed Properties

Limits on Title Insurance Available to Buyers of Distressed Residential Real Estate Properties

Real Estate Owned properties, or REO properties, are real estate properties that are owned by a Bank or Lender following a foreclosure. A Lender can become the owner of property through foreclosure by sale (if the Lender is the only bid on the property at auction), strict foreclosure (if the owner does not redeem within 30 days) , or by deed in lieu of foreclosure (by agreement between owner and Lender).

Once the property is owned by the bank or lender, they want to sell it as fast as possible to get cash on hand. After all, the bank is in the business of lending money, not holding, leasing or selling real estate. Therefore, Buyers can get great deals on bank owned real estate. However, buying bank owned real estate does not come without risk. One of the considerations when buying bank owned real estate is the type of title insurance available.

When buying real estate, the buyer’s lender, in addition to a title search to show that Seller has proper title, will require the purchase of Title Insurance. Title insurance covers the unknown and undiscoverable defects which might eventually lead to another person making a claim against the buyers ownership of the property and therefore the lenders collateral on the loan. There is also an Expanded Title Insurance policy available only to owners which in addition to the standard policy also covers:

  • Cost of moving or repairing a house forced by zoning violations or lack of building permits;
  • Costs of removing structures because they encroach on neighbors;
  • Claims that the property is not properly zoned for single family residential use;
  • Expenses if neighbor builds structures on your property;
  • Expenses created by violation of restrictions on the property; and
  • Expenses if your house is not located on the property described in the title.

The purchase of an expanded policy requires the execution of an Owners’ Affidavit by the Seller as someone ‘who has personal knowledge of the property’. Since a bank or lender cannot have ‘personal knowledge’ of the property, and cannot provide Buyer with an Owners’ Affidavit, Expanded Title Insurance policies are NOT available for Buyers of bank owned real estate.

While Buyers of bank owned real estate might be getting a good deal, a safer bet is buying properties that are in pre-foreclosure, where a lis pendens has been filed but the title to the property has not yet passed to the lender, or buying property as a short sale, where the lender agrees to accept less than the full amount of the loan for the property. In both pre-foreclosure and short sale real estate transactions, the Seller is still the homeowner, and can satisfactorily execute an Owners’ Affidavit, allowing the Buyer to get Expanded Title Insurance protection.

Revised Residential Property Condition Disclosure Form

The Connecticut Department of Consumer Protection has finished revisions to the Residential Property Condition Disclosure Form as per Public Act 12-122 which was enacted in 2012.

The new disclosure form contains added provisions for the following:

  • Community and association fees if applicable;
  • The presence of or removal of underground storage tanks (namely oil);
  • Suggestion that prospective buyer should seek building permit and certificate of occupancy information;
  • Suggestion that property should be inspected;
  • Information regarding prior or pending litigation, governmental or administrative actions, orders or liens relating to hazardous substances;
  • Added information regarding smoke and carbon monoxide detectors;
  • Increased credit to Buyer from Seller from $300 to $500 for failure to provide the form.

Prospective Sellers can download a copy of the form by following he link below:

Residential Property Condition Disclosure Form

What Happened to The Connecticut Real Estate Market in 2012?

If you are trying to buy or sell a home in Connecticut right now, you might be having a hard time, and you are not the only one. The Multi-Indicator Market Index (MiMi), put out by Freddie Mac, illustrates the disturbing downturn in the Connecticut Real Estate Market.

The MiMi can be found at http://www.freddiemac.com/mimi/state.html. You will need to scroll the “Filter on State” down to Connecticut. The results will show a graph of the MiMi from 2001 to 2014.

From the MiMi graph, we can see that the Connecticut real estate market consistently outperformed the national average. In the dips of 2002-2004 and 2010 especially, when the national average was hit hard, the performance of the Connecticut real estate market was relatively impressive.

So what happened in 2012? The real estate market began to improve in Connecticut and Nationally, but why is the national average strongly outperforming Connecticut? Why are we so slow to recover?

Perhaps part of the answer is the employment rate. Connecticut has an employment rate of 83.8 points, while the national average is 99.1 points. Perhaps the answer is that Connecticut home owners are current on their mortgage 7.3 points less compared to the national average.

Whatever the reason, there is hope. While the Connecticut real estate market may not be improving quickly, the MiMi data shows a consistent improvement since 2013, just one that’s not as good as everywhere else. The increased Federal guidelines for real estate transactions, while they do have their downside, should further help to improve the overall health of the Connecticut real estate market.

What do we do to help? At The Law Office of Eugene Glouzgal, LLC, we offer our real estate expertise to assist buyers and sellers in this ever-changing real estate market. We especially enjoy helping our clients with “highly distressed” properties because it improves the overall Connecticut real estate landscape. Some clients are looking to sell highly distressed properties to pay off liens and get rid of headaches. Other clients are looking to buy highly distressed properties at friendly prices, invest their time and money, and get a greater return. That is how we need to repair this real estate market: one property at a time.

Increased Consumer Protection Brings Changes in Real Estate Closing Procedures

Upcoming Changes in Real Estate Closing Procedures

Closing Disclosure Form & ALTA Best Practices

The real estate mortgage bubble has brought some changes to the real estate arena, but it seems the biggest changes are yet to come. The Consumer Financial Protection Bureau is replacing the long used HUD-1 Settlement Form with the Closing Disclosure form effective August 1, 2015.

The HUD-1 was a 3 page document that outline the closing transaction and was prepared by the Buyers attorney for closing, and was usually approved by the bank the day before or day of the closing. The Closing Disclosure form will be a reported 7 pages, will be prepared by the bank, and delivered to the closing attorney 3 business days before closing.

The result here is that lenders and attorneys need to become involved in the real estate transaction much earlier in the purchase process, and closing dates will be further out from the date of contract signing. Further, if any issues arise that require changes in the Closing Disclosure form, it will be at the lenders discretion whether changes are needed, and if they are, closing will need to be delayed by at least 3 days!

Further, since the new protections are creating more responsibility, and therefore liability, for the lenders, the lenders are requiring closing settlement attorneys to follow stricter guidelines. Many lender will be requiring that attorneys form and execute an ALTA (American Land Trust Association) Best Practices compliance guide, and if they fail to do so, they will not be able to close on loans from that lender.

Real Estate attorneys can no longer rely on “the way it has always been done”. The real estate closing procedures are changing, and attorneys need to adapt with them in order to properly represent their clients. Clients need to understand that the newer protections remove some of the control from the hands of the attorney, but that ultimately those requirements are there to protect the client.

Building Wealth with a Property Holding LLC

Create a Property Holding LLC and Invest in Real Estate

Real Estate Wealth Building Strategy

Investing in real estate is nothing new. However, there are smarter ways than others to own property. One of the common services we offer to our clients is to create a property holding LLC.

An LLC, or limited liability company, can be organized under the Connecticut Limit Liability Company act for almost any legal purpose. A limited liability company shields it’s members from liabilities associated with the the actions of the LLC (with some exception). Therefore, instead of holding the property as an individual or individuals, and exposing themselves to liability, property investors can minimize liability by owning the property under an LLC.

Property can either by transferred directly into an LLC via Deed, or the LLC can be funded and then purchase property. The LLC can then sign leases with tenants to rent the property, creating income while paying off equity. Any fees such as taxes, sewer or water use, insurance, maintenance, etc., can all be paid out of the LLC as an expense of doing business. The LLC members can chose to reinvest any income, or pay themselves a salary from the LLC.

At any time, property from the LLC can be sold by the members. Also, the LLC can be sold in whole as a business entity, along with all of the property. If the LLC is creating income from it’s rentals the value of the LLC can be significant.

At the Law Office of Eugene Glouzgal we help our clients form and fund their LLCs, we can help draft and records deeds to transfer property into the LLC, we can handle all of their required filings with the State, we perform the closings on the properties they want to purchase or sell, we draft custom lease agreements, we can handle evictions for non-paying tenants, and we can handle the sale of the LLC when they ant to make their exit.

Contact us today for a free consultation on how we can help you build wealth by creating a property holdings LLC so you can invest in real estate while being protected from personal liability.

Short Sale as an Alternative to Foreclosure Defense

Being foreclosed on? Consider short sale as an alternative.

Being foreclosed on can be scary. You are already in financial hardship and now you stand the chance of losing your home. If you do not qualify for refinance, another alternative to foreclosure is the short sale of your home.

In a short sale, you put your house on the market, and ask the bank to allow you to sell it for a lower, previously agreed upon price (such as the actual Fair Market Value). The bank then promises to accept that sales amount, minus any fees they approve, in FULL satisfaction of your outstanding debt. Once the short sale closes, the foreclosure action becomes moot and is withdrawn.While it still results in the loss of the home a short sale has many advantages to the home owner over the foreclosure process.

The benefit of a short sale is that because the bank is accepting the amount in full satisfaction, there is no deficiency. A deficiency is the difference between the amount owed, and the value or sales price of the house. In a foreclosure, lenders generally seek a judgment for the deficiency against the home owner. You can lose your home AND owe the bank money after. However, in a short sale, any deficiency is forgiven and the home owner is free and clear of the lender.

The second benefit is that the attorney fees associated with defending against foreclosure can quickly accumulate, especially if your goal is to buy more time in the home. Going through short sale, where you stand a good chance of the bank covering the closing attorneys fees, can save you on some of those fees for court appearances and document prep associated with foreclosure.

Getting a lender to accept a monetary loss is never easy. the short sale process takes a lot of time. They will require documentation regarding the income of the home owner as well as the value of the property. Approval is not guaranteed in any way, as short sale approval is in the hands of the bank. Further, there are tax consequences associated with being forgiven debt, so a CPA or tax attorney should be consulted.

If you need representation for a foreclosure or a short sale, contact our law office today for a free consultation.

 

Buying a Condominium – Greater Danbury Area Real Estate Closings

Are you buying a condominium in Danbury or one of the surrounding towns such as Brookfield, Bethel, New Milford or New Fairfield?

I would like to point out two difference between buying a house and buying a condominium that some people do not consider.

The first difference is that condominiums have by laws. As opposed to a house, where you can pretty much do whatever you want (within reason), a condominium complex will have by laws, or rules, that every owner or tenant must follow. They can contain guidelines as to parking, noise, pets, and even where you can place a grill. Every condominium complex has it’s own by laws. Breaking by laws can result in fines. When you are buying your condominium, your real estate attorney will request these by laws and provide you with a copy.

The condominium complex will also have a master policy for hazard insurance and liability insurance on the property. This means that when you are buying your condominium, you will not need to buy additional insurance to satisfy your lender, as you would have to buy with a stand alone house. Also, you will be covered for any injuries suffered by guests that are visiting and hurt by defects in the property. When you are buying your condominium, your real estate attorney can request a declarations page and certificate of insurance contain the coverages of the master policy.

 

 

 

Connecticut DEP Prohibits Running Bamboo

Connecticut Law Creates Liability for Growing Running Bamboo

Do you have bamboo growing on your property? Is there bamboo growing on a property you are looking to purchase?

A new Connecticut law, Public Act 14-100, prohibits owners of real property from growing “running bamboo” (i.e., bamboo in the genus Phyllostachys, including yellow-groove bamboo) within 40 feet of adjacent property or a public right of way.  The new bamboo law came into effect on June 6, 2014 and created two forms of liability for property owners growing running bamboo.

The first liability makes the property owners subject to a $100 fine per occurrence with each day of a continuing violation as a separate occurrence. Either The Department of Energy and Environmental Protection, any duly authorized municipal constable, municipal tree warden, zoning enforcement officer, or inland wetlands and watercourses enforcement officer may enforce the 40-foot buffer zone.

Secondly, the law creates a civil liability for running bamboo that grows beyond a person’s property boundaries by considering it a nuisance. Therefore, any person who violates the statute is liable for any damages caused to any neighboring property.

Further, businesses who deal in bamboo must also become aware of this law. Retailers of running bamboo must provide a warning to potential consumers that discloses that running bamboo is a fast growing plant that may spread if not properly contained, and must provide recommendations on how to properly contain running bamboo.

This law creates considerations that must be addressed by current or potential property owners. Owning or buying property with running bamboo can potentially cost the property owner a lot of money. An experienced real estate attorney can help their clients avoid such pitfalls of owning property.

Download the complete act below:

What is a Mortgage Contingency?

What is a Mortgage Contingency?

Mortgage Contingency in a Real Estate Contract

For the purchase and sale of a property, it is necessary to have a written contract. The contract will contain many terms, but the binding nature of the contract will be dependent on a range of “contingencies” that may or may not be necessary for a particular transaction. The most common contingency is a mortgage contingency. A party to a real estate closing may ask: “What is a Mortgage Contingency?”

Unless the Buyer is paying cash, they will need to get a mortgage to pay for the real estate property. Most parties want to have the contract signed as soon as possible, so the contract is usually signed before a mortgage is acquired. However, the Buyer will not want to be stuck with having to purchase the property if they cannot get a mortgage. Therefore, the contract would contain a mortgage contingency, stating that the Buyer will not be forced to follow through with the purchase if they cannot acquire a suitable mortgage, of a certain amount, by a certain date.

A mortgage contingency is satisfied when the Buyer receives a Mortgage Commitment Letter from their lender. The Mortgage Commitment Letter might contain it’s own contingencies, so it is important to have a real estate attorney review the Mortgage Commitment Letter to make sure it really is a commitment.

If a mortgage cannot be obtained by the specified date, a reasonable extension may be requested. If an acceptable mortgage cannot be attained at all, the contract can be cancelled, but the Buyer may be forced to pay a fee to the Seller or the Seller’s Attorney for the preparation of the contract. it is the responsibility of the Buyer’s attorney to inform the Seller’s attorney of the inability to acquire the financing, or the contract will become binding.

A Mortgage Contingency is a wonderful tool in the hands of a Buyer. It allows them to make sure a property is theirs to buy before they go through the hassle of lining up financing, and allows them to avoid the purchase if they cannot get a mortgage. There are consequences to failing to meet a mortgage contingency, so it is important to act reasonably.